Monday 1 June 2015

Lesson 1 - Why do businesses exist?

Welcome year 10 GCSE Business Studies

Q. What is a business? 

Without business you would not be reading this blog page.

Businesses provide goods and services.
They vary from tiny one person operations - SOLE TRADERS to huge multinationals.
Needs are those things we require to survive and don't include ipods, fancy trainers or the latest Apple computer!  Not everyone in the world is as well of as we are in the UK.  Much of the world survives on what is  called a SUBSISTENCE level which means that they barely have enough to live on.  There 'needs' may be met but they have very little left over for any 'wants'

Why then do businesses exist? 
At some stage we all had a very simple life collecting wood, finding water and making clothes from animal skins after we had hunted the meat to eat.  This ensured that we survived. At some point we discovered that some of us were better at doing certain jobs than others.  By SPECIALISING in different jobs such as hunting, cooking farming or building a good shelter helped civilisation become more efficient. SWAPPING goods was the first type of TRADE and was known as BARTERING.  A company called BARTERCARD have recently introduced this a method to exchange goods without money transactions taking place.  It was popular at trading posts in America and in some countries it still takes place through the transfer of phone credit in return for goods !
Soon businesses realised that they could ADD VALUE by making products from RAW MATERIALS.  By putting these materials through a PROCESS you could produce an OUTPUT.  By adding up all the costs of the INPUTS they can set a PRICE which covers the costs and rewards them with a PROFIT for their efforts.
The money that they receive from their SALES is called REVENUE. If REVENUE is greater than COSTS this is called PROFIT
There are TWO main types of PRODUCTS one is a GOOD and the other is a SERVICE.  The process that sees these GOODS and SERVICES produced is called PRODUCTION.
PRODUCTION can be broken into three stages and most businesses are classified by them:
  • Primary production is the first stage when raw materials are farmed or extracted.  This includes industries like farming and mining fishing and companies like BP
  • Secondary production is when the raw materials are turned into finished products or component parts of products.  These businesses are called manufacturing.  BP also operates in this sector refining the oil that it extracts from under the sea.
  • Tertiary sector businesses offer services so that other businesses can operate efficiently.  In this sector you find companies that provide insurance, transport, distribution and banking, advertising. 
Now lets rank them in terms of importance?

Q. Would this group survive as a society?

Q.Many if not most businesses are set up for a profit.

Q. Why do businesses exist?

Q. Should a business always be set up to make a profit?

In a nutshell a business has to provides a GOOD or SERVICE or a combination of both that someone in a MARKET is willing to buy.

For those that would prefer to listen and not read click the class U-tube link here

Today the most important sectors for the UK economy are manufacturing and service.  One in five jobs in the UK are now in the financial and business sectors which is twice as many as ten years ago Sadly manufacturing businesses have been in decline for the last 20 years as competition form overseas has been able to make gods more efficiently and thus more cheaply.  The government is trying to balance this and grow manufacturing by keeping inflation and interest rates down in the hope that we can kick start the manufacturing side of our economy.  As people in India and China earn more money and there hourly rate grows they might not want to make these cheap goods so they may eventually come back to the UK for production!

Make a list of all the skills we have in the room, these could include writing, public speaking, drawing, sewing, painting, playing an instrument, cooking, working stuff out.

Q. Do you think you could swop skills with another group to survive?
Q. Are some skills more important than others - why?.
Q. What skills would we need / are missing to help us survive?

Social entrepreneur and businessman Duncan Goose quit his job in the city and road around the world on a motorbike.  On his travels he saw lots of people suffering because they had no fresh clean drinking water.  Over one billion people in the world still don't have the basic 'need' of clean water.  Two million die each year from dirty water related diseases. He set up a bottle water company called ONE and ploughed all the PROFIT into providing clean water into developing countries. His website can be found here and an interview with him here

Q Explain Duncan Gooses reason for setting up ONE. 
Q.How are these profits used?  
Q.What is a PlayPump?
Q. Do you think that a SOCIAL ENTERPRISE  is a better model than a profit based business, give a reason for your views?

Powerpoint for the first two lessons is here

Typical Exam 9m Question

Give three reasons why someone would want to set up in business.  Choose which you think is the best reason. Justify you choice?

Topic Test that you will need to have made good notes to revise
  • What is a need
  • What is a want? 
  • What is meant by specialisation
  • Why did we barter? 
  • What is the difference between a 'good' and a 'service'?
  • What do we mean by consumer durable?
  • What is the Primary Sector ? 
  • What is the Secondary Sector
  • What is the Tertiary sector ? 
  • What is a social enterprise

Extension 1
Enterprise - what is it ? click here

Extension exercise 2
Goods and services click here

Example of an exam nine mark question
Give three reasons why someone would want to set up in business.  Choose which you think is the best reason. Justify you choice?

Homework 10 out of 10

Revise the meaning of the following ten key terms for next lesson
  1. Business
  2. Entrepreneur
  3. Needs
  4. Wants
  5. Products
  6. Good
  7. Service
  8. Profit
  9. Social enterprise
  10. Specialisation
Enjoy and use this wisely and remember you are responsible for your own learning and I am just your coach

Mr T

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