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What is a Business? A business is any organisation that is involved in the production of a good or the provision of a service. Businesses exist because people, firms and government have needs and wants for goods and services. A business aims to satisfy these needs and wants, thus making a profit itself, paying the workers and rewarding its owners. The difference between a need and a want: A need basic requirement for living e.g. food, water, warmth, security, shelter and clothing. A want a desire beyond our needs. Once a want has been satisfied, something more is then wanted, e.g. a better watch or faster computer. Business activity is a three-stage process INPUTS -> TRANSFORMATION PROCESSES -> OUTPUTS INPUTS the main types (also known as the factors of production) Land and natural resources the area where production takes place and the raw materials that are used (e.g. wood, fuel). Labour the people who transform the inputs (e.g. machine operators, bar staff). Capital the man made means of production (e.g. plant, machinery, computers, and vans). Entrepreneurship the people who are prepared to invest in and manage a business theyare the risk takers. The transformation process ADDS VALUE to inputs. This means that the value of the outputs is greater than the value of the original inputs. ADDED VALUE is therefore the difference between the price of the output and the cost of inputs. This is the way that a business makes a profit. OUTPUTS - goods and services produced. Main Functions in a Business A business has four main functions: Marketing and sales Accounts and finance Production and operations Human resource management They each have an important role to play in helping to make a business operate effectively to achieve its aims. They are known as the internal functions of the business. There are all interrelated, so if a change happens to one area, it will have some impact on all the other areas. |