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Understanding Business Activity

Topics covered in this Unit - Understanding Business Activity

1.1 Business activity

1.1.1 The purpose and nature of business activity:

  • Concepts of needs, wants, scarcity and opportunity cost
  • Importance of specialisation
  • Purpose of business activity
  • The concept of adding value and how added value can be increased

1.2 Classification of businesses

1.2.1 Business activity in terms of primary, secondary and tertiary sectors:

  • Basis of business classification, e.g. by using examples
  • Reasons for the changing importance of business classification, e.g. in developed and developing economies

1.2.2 Classify business enterprises between private sector and public sector in a mixed economy

1.3 Enterprise, business growth and size

1.3.1 Enterprise and entrepreneurship:

  • Characteristics of successful entrepreneurs
  • Contents of a business plan and how business plans assist entrepreneurs
  • Why and how governments support business start-ups, e.g. grants, training

1.3.2 The methods and problems of measuring business size:

  • Methods of measuring business size, e.g. number of people employed, value of output, capital employed (profit is not a method of measuring business size)
  • Limitations of methods of measuring business size

1.3.3 Why some businesses grow and others remain small:

  • Why the owners of a business may want to expand the business
  • Different ways in which businesses can grow
  • Problems linked to business growth and how these might be overcome
  • Why some businesses remain small

1.3.4 Why some (new or established) businesses fail:

  • Causes of business failure, e.g. lack of management skills, changes in the business environment
  • Why new businesses are at a greater risk of failing

1.4 Types of business organisation

1.4.1 The main features of different forms of business organisation:

  • Sole traders, partnerships, private and public limited companies, franchises and joint ventures
  • Differences between unincorporated businesses and limited companies
  • Concepts of risk, ownership and limited liability
  • Recommend and justify a suitable form of business organisation to owners/management in a given situation
  • Business organisations in the public sector, e.g. public corporations

1.5 Business objectives and stakeholder objectives

1.5.1 Businesses can have several objectives – and the importance of these can change:

  • Need for business objectives and the importance of them
  • Different business objectives, e.g. survival, growth, profit and market share
  • Objectives of social enterprises

1.5.2 The role of stakeholder groups involved in business activity:

  • Main internal and external stakeholder groups
  • Objectives of different stakeholder groups
  • Use examples to illustrate these objectives and how they might conflict

1.5.3 Demonstrate an awareness of the differences in the aims and objectives of private sector and public sector enterprises

Revision notes Article Count:  25
Revision quizzes Article Count:  40



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