Unit 1.1

1. Unit 1.1 What do Businesses Do?

2. When people work together to achieve something they all want, this is called an organisation. For example, a swimming club is an organisation. A business is a particular type of organisation - one which involves people and resources in the making of an item or the providing of a service. 5 things businesses have in common: a name aims (or things they want to achieve) a set of rules or procedures the resources they need to achieve their aims (including people) an image Unit 1.1 What Do Businesses Do?

3. School – 5 things in common Aims: to provide the best possible education for every pupil in the school to give every pupil the chance to do the best he/she can Name: Braes High School Braes High School Resources: buildings, desks, computers, books, office staff, teachers, janitors, cleaners etc Image: ie how the school is viewed by pupils, parents and the local community(is it a good school and if so why?) Rules: school rules, timetables etc

4. Business – 5 things in common Aims: to provide a wide range of good value products throughout many areas of the country (and some overseas) Name: JJB Sports JJB Sports Resources: buildings used as stores and offices, display units, shelves, computers, people etc Image: ie reliable, good quality Rules: staff have agreed ‘start’ and ‘stop’ times; people doing the same work get paid on the same wages scale etc

5. Making GOODS eg shirt factory, shoe factory, furniture maker, jeans factory, computer manufacturer, boat builder, dairy farmer; Providing SERVICES eg banks, building societies, dentists, police, hospitals, insurance companies, charities, shops. What is Business Activity all About? Any business is involved in doing one of two things. These are: Many organisations sell goods or services in exchange for payment. However, others, such as charities provide their goods and services free of charge.

6. Influence by Businesses • Although we don’t often think about it, we work with, and are influenced by, business throughout our lives - day in, day out. • Think about a television • the TV is made by a company (business or organisation) • the programmes are provided by a TV company; • companies advertise on the TV

7. Durable Goods: Last of a long time eg stapler Non-Durable Goods: Used up quite quickly eg. staples Goods are tangible: they can be seen and touched Services are intangible: they cannot be seen and touched Classification of Goods/Services

8. Business can range from those which are very large to others which are very small (eg a man working on his own). Some businesses start out being small and never really grow too much and others can grow to become very big. Although not all businesses want to become bigger, those which wish to do so will need to be very good at what they do. Therefore Businesses can be classed as: Businesses Vary in Size Large Small Medium

9. SMALL BUSINESS • Often owned and run by one person - a sole trader • Or they may be run as a partnership - between 2 and 20 people • They employ less than 50 people • They usually sell their good and services locally Examples of small businesses ... • Opticians, solicitors, accountants • Tradespeople - plumbers, electricians, hairdressers • Small shops

10. MEDIUM BUSINESS • Usually owned and run by a group of people - these may be partners, directors or shareholders • They employ between 50 and 250 people • May have branches and sell goods nationally Examples of Medium-size businesses ... • Manufacturers of clothing, furniture • Car hire companies • Theatres • Insurance Companies

11. LARGE BUSINESS • Usually owned by a large number of people - the shareholders - and run on their behalf by directors • They employ more than 250 people • May produce and sell goods internationally Examples of Large Businesses • Car manufacturers eg Ford, Nissan • Chainstores eg Marks & Spencers • Finance companies eg Bank of Scotland • Oil companies eg Esso

12. Who is involved in Business Activity Since different businesses attempt to do different things, different types of people are responsible for starting them in the first place. In all, 3 main types of businesses (organisations) need to be considered. These are:  Public Sector Organisations  Private Sector Organisations  Voluntary Sector Organisations (eg Charities)

13. WHO IS INVOLVED Private Sector Business Ownership: Owned by one or more owners Purpose: Started in order to provide good or services Survival: A private business must earn more than it spends (i.e. MAKE A PROFIT!) Public Services Ownership: Funded by government (central and local). Tends to supply public services rather than produce goods Purpose: The public sector provides a large range of services, for example: Central Government - national health, police and defence Local Government - education, libraries and roads Voluntary Groups (Charities) Ownership: Not owned by any individual people. Someone will be responsible for ensuring targets and budgets are set and it does what it says Purpose : They try to help particular people eg, guide dogs for the blind and Oxfam Survival: They normally must at least break even (i.e. spend no more than they take in through fundraising, grants and donations)

14. Public Sector Public Sector – is owned and run by the state (Government) for the people. People pay taxes to the Government and this money is used to finance most of the public sector. • AIMS:- • To provide essential public services • To use resources well for the benefit of the community

15. The 2 most important parts of the State are:- Central Government Local Government

16. CENTRAL GOVERNMENT (London/Parliament) • Defence • National Health Service • Social Security • Prisons • Police • Roads • Universities

17. LOCAL GOVERNMENT (eg Falkirk) • Primary & Secondary Education • Refuse Collection • Libraries • Social Services • Council Housing • Roads • Parks and Sports Facilities

18. PUBLIC CORPORATIONS These are companies that are owned by central government. A government minister appoints a chairperson and board of directors to run the company on the governments behalf. Public corporations include the BBC and Royal Mail. Public corporations receive grants from the government and also raise finance from the public. The BBC charges the public for a TV licence.

19. Private Sector • Private Sector Businesses are owned and run by private individuals. Examples of Private Sector businesses are: • Sole Traders • Partnerships • Companies (Private and Public) • Franchises AIMS: Profit  Increased market share Growth  Maximise Sales

20. Where can private sector businesses get finance? Sole Traders & Partnerships Companies • Personal Savings • Bank Loans • Government Grants • Trade Credit • Sole Traders could form a partnership • Sell Shares in the company

21. Voluntary Groups OWNERSHIP Voluntary groups are not owned by any individual people. However, someone will be responsible for ensuring that it sets targets and budgets and does what it is set up to do. SURVIVAL PURPOSE In order to survive they normally must at least break-even (ie spend no more than they take in through fundraising, grants and donations In most instances they try to help particular types of people, eg guide dogs for the blind, Oxfam etc

22. Types of Business Activity Primary Production Companies Companies which harvest the raw materials provided by nature for example an oil extraction company such as Esso. Secondary Production Companies Companies who buy the output of primary producers and covert it into different products, in other words they manufacture goods. For example, businesses which process oil to produce petrol, chemicals and gas. These companies are involved in doing something to the output of the primary producers. Service Providers Businesses which provide a service to their customers are known as service providers and are involved in tertiary production, for example a petrol station. They don’t produce an item which we can see or pick up, instead they provide us with important services.

23. PRIMARY SECTOR This is the first stage of the production process where raw materials and natural resources are farmed or extracted from the land or sea. • oil • fishing • forestry • agriculture • quarrying • mining

24. SECONDARY SECTOR Deals with manufacturinggoods – turning the raw materials into finished products • car manufacturers • engineering • shipbuilding • “white goods” manufacturers (including fridges, freezers, dishwashers etc) • housebuilding

25. TERTIARY SECTOR Offers services rather than goods • insurance • banking • education • hairdressing • tourism & leisure • armed forces

26. Needs – What we need to survive Food Clothing Shelter Water Wants – Once we have met our basic needs we always want more Television Dvd’s X Box Porsche Needs and Wants

27. Product-led - businesses make/produce goods and provide services, basically because they are good at doing this. Market-led - businesses make/produce goods and provide services to meet consumers’ needs which have been identified. PRODUCT-LED AND MARKET-LED

28. Management Information Money Premises People PROCESS Manufacturing stage OUTPUT Finished Goods When thinking about “What do Businesses do?” we must examine the production function: INPUT Raw Materials Customers

29. The Farmer produces wheat The baker produces the cakes and adds the cream Mrs White’s daughter, Sue consumes the cake The miller produces flour The retailer sells the cake to Mrs White Production and Consumption Individuals and Organisations Consume Businesses Produce Production is the process of making goods so they can either be consumed or go on to another stage of production Consumption involves the purchasing of goods and services. In many cases it also involves using them up, e.g. services and non-durable goods (fresh food)

30. Creating Wealth Wealth is not moneyBUT money is obtained by creating wealth. At each stage of production value is added to a product. Each stage in the production of paper has a cost or price. Value is added to each cost or price which creates wealth. Logs Seed Tree Wood Pulp Newspapers Wallpapers Books Toilet Rolls!

31. At every stage in business activity value is added to a product. Concept of adding value (house example): extraction industry quarry £ manufacturer bricks ££ wholesaler builders’ merchant sells bricks £££ building company builds brick house on site ££££ estate agent sells the house which has been built £££££ HOW IS WEALTH CREATED?

32. In today’s competitive market, all firms must be as efficient as possible to ensure they meet their aims and objectives and survive. You must now be aware that business is dynamic (always changing) and in a number of ways can become very challenging. WHY IS IT IMPORTANT FOR BUSINESSES TO BE EFFICIENT?

33. it is satisfying its customers wants and needs it is achieving its aims and objectives HOW DO WE KNOW IF A BUSINESS IS BEING EFFICIENT?

34. How do Businesses Function The main functions upon which most companies depend are: Marketing – identifying, anticipating and satisfying consumer needs Operations – designing, producing and distributing goods Human Resources– recruiting, training and managing staff Finance – raising finance, budgeting and keeping company accounts Administration – deal with enquiries, communicate messages and produce paperwork Research & Development – develop, and adapt, new products or technology

35. All businesses need to carry out a number of basic functions in order for them to produce goods or provide services. Since these functions rely on staff with particular knowledge and skills and the use of specialist equipment, each one tends to be done by specialist teams. The main functions upon which most companies depend are: Marketing Operations Human Resources Finance Administration Research and Development HOW DO BUSINESSES FUNCTION?

36. Marketing involves collecting information on customers’ preferences for particular goods or services; collecting information on competing good; finding out what influences the public when deciding to buy a particular thing. Operations is the name given to describe how a business changes the raw materials it requires to make its product into the finished articles which it sells to customers. In other words operations is the term given to all of the processes which are actually involved directly in making something. Marketing & Operations

37. Human resources is the term used to describe the people who work in a business, ie the managers, the office staff, the engineers, the accountants, the labourers, cleaners, etc. The Human Resource function is to look after all the personnel of the firm. Finance: All businesses, large and small, need money to finance their operations. Money is needed to pay for: premises to work in; machinery to make their goods; wages for their staff; electricity; rates etc The Finance function is to control the money of the business. Human Resources & Finance

38. Administration: All businesses need to have an efficient flow of information to help them operate effectively. The administration function manages this flow of information by for example dealing with enquiries, communicating messages, producing paperwork. Research and Development (R&D) can be very expensive and therefore many businesses do not have their own R&D department but instead adapt new products or technology produced by other companies. Administration & R&D

39. Unit 1.1 Memory Map Chain of production Creating Wealth 5 things businesses have in common Small, Medium Large Businesses Functions of a business Local, National, Multi-national Unit 1.1 Needs and Wants Primary, Secondary, Tertiary Product Led/Market Led Goods and services