THE NATURE OF BUSINESS ACTIVITY

1. What is a Business?

A business is an organization that uses resources to produce goods or services to satisfy consumer needs. Businesses add value by transforming raw materials into more desirable products, improving the standard of living.

consumer goods the physical and tangible goods sold to the general public. They include cars and washing machines, which are referred to as durable consumer goods. Non- durable consumer goods include food, drinks and sweets that can only be used once.

consumer services non-tangible products that are sold to the general public and include hotel accommodation, insurance services and train journeys

capital goods physical goods that are used by industry to aid in the production of other goods and services, such as machines and commercial vehicles

2. Factors of Production (Business Inputs)

Businesses require four key resources:

  • Land – this general term not only includes land itself but all of the renewable and non-renewable resources of nature, such as coal, crude oil and timber.

  • Labour – manual and skilled labour make up the work- force of the business. Some firms are labour intensive, that is they have a high proportion of labour inputs to other factors of production, e.g. house cleaning services.

  • Capital – this consists of the finance needed to set up a business and pay for its continuing operations as well as all of the man-made resources used in produc- tion. These include capital goods such as computers, machines, factories, offices and vehicles. Some firms are capital intensive, that is they have a high propor- tion of capital to other factors of production, e.g. power stations.

  • Enterprise – this is the driving force of business, provided by risk-taking individuals, which combines the other factors of production into a unit that is capable of producing goods and services. It provides a managing, decision-making and co-ordinating role. Without this essential input, even very high quality land, labour and capital inputs will fail to provide the goods and services that customers need.

3. Business Functions

Businesses operate through specialized departments:

  • Marketing – Identifies consumer needs, pricing, and promotion.

  • Finance – Manages money, funding, and cash flow.

  • Human Resources (HR) – Recruits, trains, and manages employees.

  • Operations Management – Oversees production and efficiency.

4. Sectors of Industry

Business activities are divided into three main sectors:

  • Primary Sector – Extraction of raw materials (farming, mining, forestry).

  • Secondary Sector – Processing and manufacturing (factories, construction).

  • Tertiary Sector – Services (retail, banking, tourism).

5. Economic Changes and Industrial Structure

  • Industrialization – Growth of the secondary sector in developing nations, increasing jobs and GDP.

  • Deindustrialization – Shift from manufacturing to services in developed economies due to rising wages and global competition.

Conclusion

Businesses play a crucial role in the economy by producing goods and services, utilizing resources efficiently, and adapting to changing economic structures. Understanding these concepts helps in analyzing how industries function and evolve.



(I took this from the IB business textbook and used AI to really slim it down to the main concepts– this is more of an introduction to business organization. this was my first lesson this year for the business club)

 

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