1.1 Nature of Business Activity

Topics: Economics, Marketing, Consumer Pages: 4 (679 words) Published: March 12, 2012
1.1    Nature  of  Business  Activity  
  A  business  is  a  decision-­‐making  organisation  which  uses  a  combination  of  inputs,  processes   and  outputs.  

Inputs ideas,  money,   labour,   employees,   raw  materials,   equipment

Processes action  of   turning  inputs   into  outputs cooking,   delivery,   manufacturing Outputs final  products goods  or   services  


Businesses  exist  to  satisfy  the  needs  and  wants  of  people,  organisations  and  governments.     Small  Businesses    have  the  same  people  fulfilling  multiple  roles   Large  Businesses    Many  specialists  in  each  department     There  are  a  number  of  types  of  products  that  a  business  can  offer:   Consumer  goods   o Durable  goods  that  are  kept  for  a  number  of  years   o Non-­‐durable  goods  that  are  only  kept  in  the  short  term   Capital  or  Producer  goods   Services   Goods  are  tangible  and  visible,  whilst  services  are  intangible  and  cannot  be  seen.  Capital  or   producer  goods  are  provided  to  another  business,  whilst  consumer  goods  are  provided   directly  to  households  to  be  used.      




Adding  Value  
This  is  when  a  product  increases  in  value  through  the  processes,  allowing  the  business  to   sell  it  at  a  higher  price  than  production  costs.  This  is  found  by  subtracting  the  costs  from  the   selling  price.  This  can  happen  for  a  number  of  reasons:   Speed  or  quality  of  service   Prestige   Feel-­‐good  factor   Perceived  value-­‐for-­‐money   Quality  of  the  finished  product   Brand  image  and  loyalty   Taste  and  design   Inability  to  obtain  products  cheaper  elsewhere    

Opportunity  Cost  
This  is  the  best  alternative  decision  that  is  forgone  when  a  decision  is  made.  Whenever   there  are  two  choices  to  a  decision,  then  it  will  incur  an...
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