Business Aims

A business gets started when somebody decides that they can earn a profit by making goods or providing a service and selling it to people who are willing to pay for it. All businesses have the same main objective: to make a profit. A business must make a profit in order to survive. If not, it will go bankrupt and have to close down.

Businesses may have other secondary objectives they also wish to achieve, such as:

• To be the largest in their market.
• Provide the highest quality product possible.
• Expand the business organizations to a good position.
• Maintain a high market share in the market .
• Maintain a high customer satisfaction level.
• Limit environmental damage they cause.

The Economy

An economy has two sectors:

The Public Sector

• The public sector includes everything that is owned by government.
• It includes things like the army, the police, and most schools and hospitals.
• Public sector businesses do not exist to make a profit. They exist for the benefit of everyone.

The Private Sector

• The private sector includes everything that is owned by private individuals.
• Most businesses are in the private sector.
• Private sector businesses exist to make a profit. They are run for the benefit of the people who own them.

Needs and Wants

• Businesses make a profit by providing things that people need and want.
• There is a difference between a need and a want. A need is something essential to survive. A want is something which we would like but do not need to survive.
• Humans have five basic needs: food, water, shelter, warmth, and clothing.
• Needs are only limited. Once we have these, we can think about other things we want. Wants are unlimited - we all have different ones, and we tend to want bigger and better things.
• Products are launched to fulfill the needs and wants of the consumers in the business's target market.
• A market is defined as a place where buyers and sellers meet.

Opportunity Cost

• The world's resources are divided into four groups:
  • Land - natural resources.
  • Labour - people.
  • Capital - equipment.
  • Enterprise - business owners and entrepreneurs.
• There aren't enough resources to meet all of our needs and wants. (This is termed scarcity.)
• This leads to an opportunity cost.
• Consumers and businesses have to make choices when they buy things, because they do not have enough money to buy everything they want.
• The opportunity cost is the cost of rejecting the alternatives when making a selection. For example, if you only have enough money to buy a video game or a CD, the opportunity cost of choosing the game is the CD. By buying the game, you give up the opportunity to buy the CD.
• Every business decision has an opportunity cost. There is a risk that the decision will be poor and the business will make a loss. Any profit is the owner's reward for taking that risk.

Goods and Services

• In most cases, businesses will either produce goods or provide a service.
• Goods and services can both be bought; however, goods are tangible (physical objects), and services are intangible (non-physical).
• Goods and services can be put into two groups:
  • Consumer goods and services are intended for the use of the ordinary public, e.g. televisions, hairdressers.
  • Producer goods and services are intended for the use of other businesses, e.g. machinery, advertising companies.
• In addition, there are two types of goods:
  • Durable goods can be used over and over again, e.g. fridges, trousers.
  • Single use goods can only be used once, e.g. a chocolate bar, a bottle of milk.