Unit 1
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Understand what business does,
Appreciate that most businesses are small,
Appreciate that a large number of businesses
are created and closed down each year
Understand the concept of production,
suppliers, customers and markets
Appreciate that there are many important
aspects to starting a business.
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There are over 4 million businesses in the UK
Only 33,000 employ over 50 people,
¾ of all businesses are Sole traders – one
person
An estimated 200,000 new businesses are
created each year in UK,
Only 1 in 10 will make it past the first year, 1
in 3 past 3 years, less than half will exist after
5 years
Spot the business
opportunity.
Finances to consider –
money to start, making
a profit
The Business
What do you need to
start the business?
Legal aspects, Health
and Safety, insurance,
tax liability
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Why do we need business? And why do
businesses exist?
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exist to provide goods
and services.
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Most businesses make services, about 70% of
all produced is a service in the UK, nearly 8
out of 10 people work in a service industry.
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There are 3 different areas that a business
can work in:-
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Primary Sector
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Secondary Sector
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Tertiary Sector
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Primary production: this involves acquiring
raw materials. For example, metals and coal
have to be mined, oil drilled from the ground,
rubber tapped from trees, foodstuffs farmed
and fish trawled. This is sometimes known as
extractive production.
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Secondary production: this is the
manufacturing and assembly process. It
involves converting raw materials into
components, for example, making plastics
from oil. It also involves assembling the
product, eg building houses, bridges and
roads.
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Tertiary production: this refers to the
commercial services that support the
production and distribution process, eg
insurance, transport, advertising,
warehousing and other services such as
teaching and health care.
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Businesses buy the
products they need
from suppliers – firms
selling products to
other businesses - and
sell to customers. The
individual who uses the
product is called a
consumer. Sometimes
the customer and
consumer are different
people - for example,
parents buy a pen for
their child to use at
school.
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Businesses sell to customers in markets. A
market is any place where buyers and sellers
meet to trade products - this can be a high
street shop or a website.
Businesses are likely to be in competition
with other firms offering similar products.
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In order to create goods and services, a business
buys or hires inputs such as raw materials,
equipment, buildings and staff. These inputs are
transformed into outputs called products. These
products are the goods and services used by
consumers. Production is the business activity of
using resources to make goods and services.
A business adds value when the selling price of an
item produced is higher than the cost of all the
resources used to make it. Think of a pair of designer
sunglasses which sell for £100. If the cost of the
materials, employees, marketing and all other inputs
used in making one set of sunglasses is just £20,
then £80 worth of value has been added by the firm
during production.
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Goods are physical things eg a can of beans,
pair of skis, a Nintendo DSi.
Services are non-physical things like a hair
cut, a lesson or a visit to the doctor
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Businesses make goods and services by
buying raw materials, labour and machines
and using them to make the products.
The products are then sold to the customer.
Padmore Bouncy castle Hire
Jack Padmore has just setup a business hiring
bouncy castles for parties etc
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List the resources would he use.
List the raw materials that he uses
List the labour that he uses
1.
2.
3.
Resources:- the bouncy castle, electric pump
to blow it up, a van to transport the castle
Raw materials:- Petrol for the van and
electricity to keep the castle up.
Labour:- his time to take and put the castle
up and take it down again
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Businesses buy the goods and services they
need from SUPPLIERS.
Businesses sell to CUSTOMERS, they are the
consumers of the product or service.
Businesses can also be consumers.
A market is where buyers and sellers
exchange goods and services.
A business can be in different markets.
Padmore Bouncy castle Hire
Jack Padmore has just setup a business hiring
bouncy castles for parties etc
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2.
3.
How is Jack a supplier, who to and why?
How is jack a customer and why?
What markets is Jack in?
Padmore Bouncy castle Hire
Jack Padmore has just setup a business hiring
bouncy castles for parties etc
1.
2.
3.
Supplier, supplies bouncy castles to his
customers
Customer and why? To the garage for his
fuel and his use of electricity
What markets is Jack in? The service sector,
in the Bouncy Castle hire market.
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What reasons can you think of
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Justify your answer please.
1.
The resources you would need,
2.
What markets would it be in as:1. A supplier
2. A customer.
3.
What would you have to consider for setting
up the business?