Golspie High School. Business Management National 5/Higher. Understanding Business. 1 Role of business in society

Transcription

1 Golspie High School Business Management National 5/Higher 1 Role of business in society

2 Role of business in society National 5 how businesses satisfy human needs and wants how business activity create wealth reasons for setting up in business how businesses operate in different sectors of industry primary, secondary, tertiary the different sectors of the economy private, public, third Sectors of Industry Higher Learners should be aware of how business activity adds value and helps satisfy the needs of customers in a changing competitive environment. Learners should be able to classify and describe the following: sectors of industry - business activity in the primary, secondary, tertiary and quaternary sectors sectors of the economy - organisations in the public, private and third sectors What is Business Activity? Everyone in our society has wants some are for things like food, clothing or shelter, others are for entertainment, leisure, travel etc. In order to satisfy these wants we have to consume (make use of) goods and services. It is through business activity that goods and services are provided. Therefore, a definition of business activity is any activity that provides us with goods and services to satisfy our wants. Needs and Wants As consumers, we buy the goods offered and the services provided by a range of organisations/ businesses. As consumers, we buy these goods and services to satisfy our needs and wants. NEEDS are things that everyone has. They are the essentials for survival food, water, warmth, shelter and clothing. 6 June

3 WANTS are things that make our lives better, nicer, easier. After our basic needs are satisfied, people often want more. Eg a holiday in the Bahamas, new clothes, a new mobile phone, etc. These items give consumer satisfaction. There is no limit to what we want! The more we have, generally, the more we want. Satisfaction of wants To survive, businesses must satisfy the needs and wants of consumers. Businesses use market research to identify consumer needs and wants, and this information is used to help decision-making with regard to the supply of new products/services, which may be developed to make sure businesses meet their objectives. Goods and Services Any business is involved in doing one of two things. These are: making goods providing services A good is an item that you can see and touch (tangible) such as a CD or a bar of chocolate. Goods sold to the general public are often referred to as consumer goods. A service is something that can t be touched (intangible) such a haircut, car insurance, visiting a doctor, etc. Goods can be further divided into 2 groups: Durable can be used regularly over and over again eg cars, washing machines, laptops, etc Non-durable can only be used once eg sweets, a can of juice, newspapers, etc 6 June

4 Wealth Creation Goods and services can be described as the outputs of business activity. Business activity creates wealth the more goods that are produced, the greater the amount of wealth. At every stage in business activity value is added to a product. If you consider, for example the basic part of a house bricks: Extraction industry Quarry Manufacturer Bricks Wholesaler Builders merchant sells bricks Building company Builds brick house on site Estate agent Sells house which has been built The above example can be displayed as follows: Input Output Value Added Quarry 0 100, ,000 Brickwork 100, , ,000 Builders Merchant 500,000 1,000, ,000 Builder 1,000,000 2,000,000 1,000,000 In this example it can be seen that each stage in the process adds value to the previous stage. All businesses from the quarry company to the estate agency attempt to satisfy needs and wants and aim to make a profit. It is also worth noting that along each stage from primary, through secondary and into tertiary people own firms, have invested in firms and are employed by firms. Each of these groups requires money in return for their investment or labour and in turn save/spend their money on goods and services provided by other firms operating in the country. Wealth is NOT money!!! It can end up that way, but money is obtained from creating wealth. Wealth includes property, shares, antiques, etc., any items of value. At each stage in the production chain, value is added to the cost (price). The wealth of a country is measured by how many goods and services the country can produce. In order to produce these outputs, business makes use of resources, also called factors of production. The Business Cycle All businesses provide us with goods or services or sometimes both. For example, Greggs the Bakers will sell us a sausage roll (providing a good) but if we ask for it, they will heat it up (providing a service). 6 June

5 Everyone buys and consumes goods and services in order to survive, for example, food, but people naturally want more than this the things people want are unlimited. However, most people can t have everything they want, they have to make choices about what they buy. In order to make a profit and survive, a business has to produce what people want. This creates the cycle of business. Consumers have needs and wants (UNLIMITED) Consumers buy these goods and services and consume them Business identify these wants by doing research Business produces goods and services to satisfy these needs and wants 6 June

6 The Factors of Production Goods and services are the outputs of business activity. In order to produce an output, the business has to use resources, or inputs people, buildings, machinery etc. These resources can also be called factors of production. These factors fall into four categories: 6 June

7 Enterprise and the Entrepreneur There are different types of business organisations in the UK today. All of them have one thing in common - they were started by a person who had an idea for a business. This person is called an ENTREPRENEUR. An entrepreneur has an idea for a new product or service and develops it once they know that people will buy it. This is called ENTERPRISE. An entrepreneur has good ideas. They are enthusiastic, hardworking and determined to succeed. They are risk takers. They get their ideas in a number of ways: Developing a hobby Listening to people and finding out what they want Finding out what firms do badly Spotting a gap in the market Solving problems for people Inventing something Why do people want to set up in business? To be their own boss They may have been made redundant they use this money to set up business They have an idea for a new product/service They hate their present job They are skilled workers who can t find a job so decide to set up on their own They may have a hobby which eventually grows into a business They bring together all the factors of production to produce goods and services. 6 June

8 Sectors of Industrial Activity There are 4 sectors of industry: Primary Sector Businesses that are involved in taking natural resources from the land by exploiting or extracting them (eg farming, mining, fishing and oil exploration). Secondary Sector Businesses that are involved in manufacturing and construction. They take the natural resources produced in the primary sector and change them into things we can use (eg car manufacture, building firms). Tertiary (Services) Sector Businesses that are involved in providing services rather than goods, such as banking and tourism. A service is performed for a customer, but no goods change hands. Quaternary Sector This is a relatively new sector of industry and includes businesses which provide information services. It can also be described as the support sector, and activity here is based around organisation which provide information, especially to businesses. Examples include information and communication technology (ICT) consultancy, research and development (R&D) and management consultancy. For example, management consultants such as Accenture operate in this sector of activity. (Colin Clark Sector Model) Countries tend to go through three stages of development. In the first they are dominated by the primary sector, as is the case in less developed countries (and was true of the UK up until the Industrial Revolution 200 years ago). In the second stage, experienced by the UK from around 1800 until the middle of the 20th century, secondary sector industries such as steel, car manufacturing and shipbuilding are the most important. 6 June

9 During the last 40 years the process of de-industrialisation (or decline in the importance of manufacturing) has gathered pace. Today in the UK, as in most industrialised nations, the tertiary and quaternary sectors are by far the largest and fastest growing ones, both in terms of output and employment. Sectors of Economy Private Private Sector Organisations owned and controlled by private individuals and investors. Their aims are to survive, maximise profits, maximise sales, gain market share, be socially responsible, etc. Third ECONOMY Public Public Sector Organisations owned and controlled by the government on behalf of the taxpayers. Controlled by Managers or Board of Directors. Their aims are to provide a service, use taxpayers money carefully, etc. Third (Voluntary) Sector Organisations set up to raise money for good causes or to provide facilities for their members. They are owned by the members of the organisation. They are controlled by Committees or paid professionals who act as Managers and Directors. Their aims are to survive, increase awareness, raise funds, provide assistance to those in need, fund research be socially responsible, etc. Charities and social enterprises fall under this category. 6 June

10 TASK 1 Sectors of Industry Draw up a table as shown below, and then list the names of everyone in your class. Find out what job/career they have in mind to follow and complete the table. Indicate which sector of industry primary, secondary or tertiary the career would be classed as. Name Career Sector of Industry Describe and justify your findings e.g. the number for each sector, explaining why there are so few, if any, in a specific category and why most people want to work in another category. TASK 2 Role of Business in Society (Source: Scholar Study Guide Question 31) Copy and complete the paragraph below using the following words. enterprise production capital economy objectives industry third tertiary The term "business" can be used to refer to any organisation which is set up to achieve a set of. Therefore a "business" can exist in any of the three sectors of economy - the private sector, the public sector or the sector. Business is vital to the of a country. Businesses use the four factors of in order to provide these goods and services for consumers. The factors of production are land, labour, and. As well as operating in a sector of the economy, business organisations are classified as operating in different sectors of. These are known as the primary, secondary, and quaternary sectors. From removing natural resources from the ground, to manufacturing them into useable products, then selling them to customers, and offering advice to organisations at all stages of this process, every business plays a role in this chain of production. 6 June

11 TASK 3 - Sectors (Source: Scholar Study Guide Questions 32-38) Decide which from the list of sectors below matches the following descriptions. Primary sector Secondary sector Tertiary sector Quaternary sector Private sector Public sector Third sector 1. Where raw materials are converted into useable products. 2. Governmental organisations funded by the tax payer. 3. Where the raw materials are extracted from the land/sea. 4. Non-profit organisations such as charities or social enterprises 5. Where a support service is offered to business. 6. Also known as the service industries, where goods and services are provided to the consumer. 7. Business organisations which exist to make a profit. TASK 4 Employment Trends (Source: Old Higher Activity 7) Employees in employment (000s) Agriculture, forestry, fishing Energy and water supply Other minerals and ore extraction Metal goods, engineering and vehicles Other manufacturing industry Construction Distribution, catering and repairs Transport and communication Banking, finance and insurance Other services Source: Employment Gazette (as shown in Intermediate Business by Barr et al) 1. Identify which of the above categories of employment could be classed as primary, which secondary and which tertiary industries. 2. What changes have occurred in the numbers employed in each sector? Suggest possible reasons for the changes you have identified. 6 June

12 TASK 5 Sectors of Industry Create a poster to show different businesses in each of the sectors of industry. TASK 6 Sectors of Economy Create a poster to show different businesses in each of the sectors of the economy. TASK 7 Revision Quizzes Complete the following quizzes by following the links below: June