3.1.1 The purpose and nature of businesses
Worksheet
From AQA
• Purpose of business
• Reasons for starting a business
• Basic functions and types of business
• Business enterprise and
entrepreneurship
• Dynamic nature of business
Lesson objectives
Students should be able to:
1. understand what a business is and the reasons for starting a business (including
producing goods, supplying services, distributing products, fulfilling a business
opportunity and providing a good or service to benefit others)
2. understand the difference between goods and services, needs and wants
3. understand the meaning of factors of production – land, labour, capital, enterprise
4. define opportunity cost
5. define the three sectors of primary, secondary and tertiary and give examples of
types of business that operate in each sector
6. understand the term enterprise and what is meant by an entrepreneur
7. outline the characteristics of an entrepreneur, such as hard working, innovative,
organised and willingness to take a risk
8. outline the objectives of an entrepreneur, including to be their own boss, flexible
working hours, to pursue an interest, earn more money, identify a gap in the
market and dissatisfaction with current job
9. understand that businesses face a constantly changing business environment due
to changes in technology, economic situation, legislation and environmental
expectations
Starter
• What do you need? List items here:
• What do you want? List items here:
• Why are these different lists?
Needs vs wants
• There are some goods we (as
humans) need:
–
–
–
–
Water
Shelter
Heat / light
Food
• There are some goods we (as
consumers) want:
– Garden furniture
– A gold watch
• A business will need to work out
what customers need and want so
they can satisfy those needs
PURPOSE OF BUSINESS
What is a business?
• A business is an organisation
which trades to make money,
these come in all shapes and sizes
• The business could be one person
– an electrician for example, who
goes to customers’ houses and
fixes their electrics in return for
money
• The business could be a giant
supermarket chain, for example
ASDA, which sells food and other
goods for money
What is a product?
• A product is anything that is
capable of satisfying
customer needs, it is
tangible and can be
touched
• Examples:
–
–
–
–
–
Cars
Washing machines
Nail varnish
X box consoles
Mobile phones
Can you think of other examples of products?
What is a service?
• A service is an act that a business person carries
out for you in exchange for money, for example:
–
–
–
–
–
–
Dental treatment
Accountancy
Travel agents
Gardening
Cleaning
Hairdresser
• You cannot “touch” a service it is intangible
Can you think of other examples of services?
Identify the goods and services
A
B
C
D
Factors of production
• To produce goods and services 4 things are needed:
• Land – somewhere to produce the goods e.g. a farm
• Labour – people to work in the business e.g. farm
workers
• Capital – money to get the business started
• Enterprise – This is the drive or motivation from
the owners to start a business
• These are the 4 factors of production
Identify the factor of production
B
Opportunity cost
• The problem:
• Land, labour, capital and
enterprise are limited
resources
• However our wants are
unlimited
• This causes scarcity
• As business people we
need to decide how best to
use those scarce resources,
we make choices
When making
important
decisions in
business, the
cost of not
selecting an
alternative is
an opportunity
cost
REASONS FOR STARTING A BUSINESS
Reasons for starting a business
• To produce goods – for
example Duncan is an
accountant but in his spare
time he enjoys working with
wood, he decides he would
like to make furniture and sell
it. This way he can turn his
hobby into his job.
• He starts a business to
produce furniture
Reasons for starting a business
• To supply a service –
for example Sandrine works
as a cleaner in a school. She
decides to start her own
cleaning business so that she
can be her own boss and
keep the profit.
• She starts a business to
supply a cleaning service
Reasons for starting a business
• To distribute products –
Logan works in his Uncle’s cycle shop
at the weekends while he is at
college. When he finishes college he
decides to set up a business as a UK
distributor for recumbent cycles .
• The cycles are made in Ireland,
imported into the UK and Logan’s
business sells and delivers them to
the cycle shops to be sold on to
customers.
Reasons for starting a business
• To fulfil a business
opportunity – Ellen has
decided to start a café and
thinks it would be easier to
buy a franchise. She
considers the options and in
the end she chooses Muffin
break.
Reasons for starting a business
Providing a good or service to
benefit others – social
enterprise
• A social enterprise is a business which
has the objective of trading to help
people or the planet, rather than
making a profit
• Morgan has decided to start a social
enterprise. She has spend two years
volunteering at a homeless shelter and
now things she has found a way to
produce and trade goods made at the
shelter to help fund more craft
activities in the future.
Social enterprises can help people
•
•
•
•
•
•
Aim to tackle the effects of poverty
Provide jobs and tackle unemployment
Help children with a social need
Tackle the issue of an aging population
Help the homeless
Question:
you
Education and training initiatives Can
think of
other social
needs?
Social enterprises can help the planet
• To reduce pollution
• To tackle deforestation
• To halt climate change
Question:
Can you think
of other
environmental
needs?
BASIC FUNCTIONS AND TYPES OF
BUSINESS
Primary sector
The primary sector
extracts raw materials
from the planet
For example; mining
diamonds, coal or other
precious metals,
chopping down trees
for wood
In the primary sector
goods such as; wheat
and barley could be
grown on farms
Other goods could be
collected such as;
strawberry picking or
fishing
Secondary Sector
In the secondary
sector goods are
manufactured from raw
materials into finished
goods
For example plastic,
metal and other
materials are made into
cars
Eggs, butter and sugar
are made into cakes
Tertiary Sector
• The tertiary sector
also includes
shops, retail,
banking and
insurance
• The tertiary sector is
all the support services
for business
• Examples are lorries
and transport of goods
Name the sector
A
B
C
D
E
F
G
H
BUSINESS ENTERPRISE AND
ENTREPRENEURSHIP
Enterprise
• This can be defined as: A company or
business. It also can mean a complex project.
Entrepreneur
• An entrepreneur can be defined as: A person
who starts a business and takes on financial
risk in the hope of making a profit
This is Janice B Gordon, she
is an entrepreneur, listen to
her new business pitch here
and find out what her
business idea is:
VIDEO
ARTICLE
Characteristics of entrepreneurs:
Hard working
• Entrepreneurs may have to put many hours in
to make the business work
Nicki started Cake Hole in a
village in Derbyshire.
She is in her 3rd year at the
shop and works on her own.
She is currently working 120
hours a week to make a go of
the business.
Have a look at her amazing
cakes here: Website
Characteristics of entrepreneurs:
Initiative
• Initiative means;
inventiveness, ingenuity,
and resourcefulness.
• Many entrepreneurs may
start a business because
they have a good idea and
want to take it to market.
• Watch the Wand Company
present in the den: VIDEO
Have a look at
their website
and see what
they have made
now…
WEBSITE
Characteristics of entrepreneurs:
Organised
• Piccolo is a baby food company run by Cat
Gazzoli who also has to juggle the business
with bringing up a 3 year old.
• VIDEO ARTICLE
Characteristics of entrepreneurs:
Risk taker
• Many entrepreneurs stake
everything on their idea and
may lose their own savings in
their quest to start their own
business.
• Kirsty was a single mum who
worked two jobs and came up
with her dairy free ice cream:
• Watch her Dragons’ Den story
here: VIDEO
Could you be an entrepreneur?
Entrepreneur objectives:
To be your own boss
• A reward of setting up your
own business is that you could
be your own boss
• Being your own boss means
you get to make the major
decisions in the business
• You can also change the
business if you want to
• Many people would like to
have this degree of control in
their working lives, which
motivates them to start their
own business
Kath Kidston, she
started her empire
from a small shop in
London
Entrepreneur objectives:
Flexible hours
• One advantage of running a
business is that you could take
holidays when you want
• This means you could have
holidays out of peak times when
prices are cheaper
• You can work the hours that fit
in with you life – you get work
life balance
• VIDEO
Entrepreneur objectives:
To pursue an interest
• Opening a business can bring a great
sense of satisfaction to the owner
• If your work is something you love, it
will give clarity, drive, and happiness to
all aspects of your life.
• If your work is meaningful, you’ll be
more likely to stick with it in the long
run, which means you’re more likely to
be successful as a result
• If you are passionate about something
(football, horses, playing Xbox)
wouldn’t it be great to turn this into a
business?
Entrepreneur objectives:
To earn more money
• A reward of setting up your own business is you get to keep
all the profit that the business makes
• The limit of the profit that you could make is only held back
by you
• If you put the hard work in you will possibly make more
money than if you were on a fixed salary working for
someone else's business
Entrepreneur objectives:
To identify a gap in the market
• Kelli, 37, and Laura, 33, who have no previous experience of
business, created the refillable, roll-on, mess free sunscreen
applicator with product design students at Cardiff
Metropolitan University.
• And now Solar Buddies, a small roller-ball applicator which
retails at just over £8, has been snapped up by JoJo Maman
Bebe - loved by the Duchess of Cambridge and Victoria
Beckham - and also a few smaller retailers around the UK.
• VIDEO
Entrepreneur objectives:
Dissatisfaction with current job
• Alexis from Hackney, loves
cooking and
experimenting with food
• But desperate to make
ends meet she worked for
a year cleaning offices
• She then had a 'eureka'
moment and set up a
healthy food range
• LINK TO ARTICLE
• LINK TO WEBSITE
DYNAMIC NATURE OF BUSINESS
Dynamic business environment
• Business faces a constantly changing
environment – to which it must adapt
• This is due to:
– Changes in technology
– Changes in the economic situation
– Changes in legislation (laws)
– Changes in environmental expectations
Which of these do you think would have the biggest impact on a
small business?
Constantly changing business environment due to:
Changes in technology
Since the invention of the Internet in 1990
businesses have found a new cheaper way to
reach the consumer – online
Video on
Amazon
Have you ever bought anything from Amazon?
Constantly changing business environment due to:
Changes in technology
Changes in technology
• Small businesses are now able to set up and
sell virtually anything online due to websites
such as ebay, etsy and ebid
Video on
eBay
Have you ever bought anything from eBay?
Constantly changing business environment due to:
Changes in technology
New technology
advancements in
VR (virtual reality)
mean there are
lots of new
products on the
gaming market
Constantly changing business environment due to:
Changes in technology
Changes in technology
Advancements in robotics will mean dozens of new
products in the future
This may also have an impact on numbers of jobs
and job roles
Constantly changing business environment due to:
Changes in technology
Changes in technology
Businesses can use social media to find out what
consumers want and need so that they can
produce products and services to meet those
wants and needs
How many
social media
sites and
apps can you
name?
Constantly changing business environment due
to: Economic situation
Inflation rates
• Inflation is: The rate
of increase in prices
for goods and services
– If these go up in the
UK then raw materials
required to make
goods may increase
– This will increase the
costs of the business
– This will have an
impact on profit
What is the
current rate of
inflation?
Constantly changing business environment due
to: Economic situation
Interest rates
Interest rates are the cost of borrowing
UK interest rate: This is set by the Bank of England. When
this rises the cost of borrowing increases
A rise interest rates will impact a business because if they
have loans or overdrafts these will now cost them more
Also their customers may now have less money as the
cost of their borrowing has increased, so sales may suffer
What is the
current UK
interest rate?
Constantly changing business environment due
to: Economic situation
Unemployment rates
• The rate of unemployment in
the UK is those people without
a job who have been actively
seeking work in the past 4
weeks and are available to
start work in the next 2 weeks.
• More unemployed means that
a business will have more
applicants per job that they
advertise
• More unemployed also means
that many households will be
on lower incomes so sales and
profits may fall
What is the
current UK
unemployment
rate?
Constantly changing business environment due
to: Economic situation
Exchange rates
• Exchange rates are: the cost of one currency expressed in
terms of another e.g. $ to £
• Exchange rates change when the demand for a currency
goes up or down. Demand could change for many reasons,
such as increased business activity or rising interest rates in
a country
• If the pound is strong (increases) then a business that
imports will find that the goods become cheaper, however
if they export the goods will become dearer (SPICED)
What is the
current £ to Euro
exchange rate?
Constantly changing business environment due
to: Legislation
• Employment laws
• The National Living Wage is
higher than the National
Minimum Wage - workers
get it if they’re over 25.
• The Government's National
Living Wage was introduced
on 1 April 2016 for all
working people aged 25
and over, and is set at £7.20
per hour.
Constantly changing business environment due
to: Legislation
• Health and safety laws
• Health and Safety at work Act
1974
• All workers have a right to work in
places where risks to their health
and safety are properly controlled
• Health and safety is about
stopping you getting hurt at work
or ill through work
• The employer is responsible for
health and safety, but the
employees must help
Constantly changing business environment due
to: Legislation
• Consumer laws
Consumer Rights Act 2015
Goods must be; as
described, fit for purpose
and satisfactory quality
This will have an impact on
costs for a business as they
need to make sure the goods
are “satisfactory quality”
Constantly changing business environment due
to: Environmental expectations
Making environmentally friendly goods
• From Toyota’s Prius to Nissan’s Leaf to Tesla’s Model
S, car manufacturers are competing to produce ever
more fuel efficient, environmentally friendly models
Constantly changing business environment due
to: Environmental expectations
Saving trees by planting rainforests and
reducing paper waste
To halt deforestation and protect the rainforests of the
world, businesses are putting back what they take out
and being smarter with their paper usage.
For example; Since 2004, Sainsbury’s has planted 2.2
million trees, the equivalent of four Sherwood Forests.
Companies are monitoring closely their waste paper
and recycling as much as possible.
Sample questions
Sample question 1
Answer question 1
Sample Question 2
Answer question 2
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