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CAIE AS level Business studies notes- chapter 1

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Unit 1
Chapter 1 -> Enterprise
Consumer goods: the physical and tangible goods sold to the general public- durable consumer goods and non-durable
consumer goods.
Consumer services: the non-tangible products sold to the general public.
Capital goods: the physical goods used by industries to aid in the production of other goods and services.
Land (factor of production)raw materials & building site
Capital (Factor of production)finances, factories, offices &
machines
Government- law and
order, roads/rails/airport
& schools/colleges
Enterprise (Factor of
production)- risk takers,
decision makers &
coordinators
business
needs
customers
suppliers
Labour (Factor of producton)skilled, unskilled, temporary &
permanent
Creating value: increasing the difference between the cost of purchasing bought in materials and the price pf finished
goods.
Added value: the difference between the cost of purchasing bought in materials and the price of finished goods.
The economic activity and the problem of choice: o
o
Insufficient goods and services to satisfy all our needs and wants at any one time; this is known as ‘the economic
problem.’
Opportunity cost: the benefit of the next most desired option given up.
The role of the entrepreneur: Characteristic of successful entrepreneurs:
o
o
o
invested their savings &
skills pf
Innovation (original ideas, ability to do things differently).
accepted possible
capital
entrepreneurship
risk of failure.
Multiskilled
Committed and self-motivated (work hard, ambition, energy, and
focus)
accepted responsibility of
ideas for new business
managing business
o Risk taking
o Leadership skills
o Self confidence and ability to bounce back.
Major Challenges faced by entrepreneurs: o Identify successful business opportunities (identify market need sufficient to allow profitability)
 Sources of business ideas: own skills, or hobbies, previous employment experience, franchising
conferences & exhibits, small budget-market research.
o Sourcing capital (finance)- lack of sufficient own finances, lack of awareness of the financial support and grants
available, lack of any trading record as evidence to banks & poorly produced business plan that fails potential
investors.
o Determining location
o Competition
o Building a customer base
Why do new businesses often fail?
o Lack of record keeping
o Lack of cash and working capital – can be avoided by:
-Constructing a cash flow forecast and update regularly - sufficient start up capital
-good relations with the bank -effective credit control
o Poor management skills (some organizations exist to provide management support)
o Changes in the business environmental:
-new competition -legal changes -economic changes -technological changes
Impact of enterprise on a country’s economy: o Employment creation
o economic growth
o firm’s growth and survival
o innovation and technological change (add dynamism to the economy)
o exports (international competitiveness)
o personal development (catalyst for more business start-ups)
o increased social cohesion.
Social enterprise: Social enterprise: a business with mainly social objective that reinvests most of its profits into benefiting society rather
that maximizing returns to owners. Money is made by socially responsible ways and uses surplus to benefit society.
Common features:
o Directly produce goods or provide services.
o Social aims & ethical ways of achieving them.
o Survive on profit & surplus.
Triple bottom line: the three objectives of social enterprise:
o Economic: profit to reinvest & return to owners.
o Social: Jobs or support to local community.
o Environmental: protect environment and operate in sustainable way.
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