Need: A good or service that is essential for living. Want: A good or service that people would like to have, which gives them a better standard of living, but is not essential for living. Land: All natural resources (raw materials). Labour: The physical and mental efforts of people needed for production (Manpower). Capital: The finance, machinery, trucks and equipment needed to make a product. Enterprise: The skills and risk-taking ability of a person who combines all the factors of production together to produce goods and services. The Economic Problem: A problem which arises due to people having unlimited wants but limited resources and services to satisfy them. This creates scarcity. Scarcity: The lack of sufficient products to fulfill the total wants of the population. Opportunity Cost: The next best alternative that is forgone (abandoned) by choosing another item. Division of Labour (Specialisation): It is splitting the production process into different tasks and each worker performs each of these tasks. Stakeholders: Groups in society that have a direct interest in the activities of business.
Types of Business Activities Primary Sector: It involves the extraction and use of natural resources. Secondary Sector: It involves transforming the raw materials into finished or semi-finished goods. Tertiary Sector: It involves providing services: either directly to consumers or indirectly to business firms. Free Market Economy: A market economy based on supply and demand with little or no government control. Buyers and sellers are allowed to transact freely based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation. Command Economy: an economy in which production, investment, prices and incomes are determined centrally by the government. Free Market Economy: an economic system combining both private and public businesses. Public Sector: Businesses are owned and controlled by the government. Private Sector: Businesses are owned and controlled by private individuals. Privatisation: Sell publically owned businesses to the private sector. Internal Growth: Occurs when a business expands its existing operations. External Growth (Integration): Occurs when two or more firms join together. It can happen either through a Merger or a Take-over. Take-over (Acquisition): A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. Merger: When the owners of two businesses agree to join their firms together making one business. Labour Intensive Industries: These are businesses that use many workers and a little capital to produce a low output level. Capital Intensive Industries: These are business that use many capital equipment and a few workers to produce a high output level. Niche Market: a small segment in the market that is very specialised. Forms of Business Organisations Sole Trader: A business that is owned, financed and controlled by only one person. Partnership: A business that is owned, financed and controlled by the partners. Private Limited Company (Ltd.): A company that is owned by shareholders, financed by issuing shares to family members and friends, and controlled by the (B.O.D), which is usually the majority of the shareholders. Public Limited Company (Plc.): A company that is owned by shareholders from the general public, controlled by the (B.O.D) whom were elected in the AGM, and financed by issuing shares that are sold to general public in the stock exchange market. Unlimited Liability: The owner/s is/are held legally responsible for paying the business debts. Limited Liability: Shareholders are not legally responsible for paying the companys debts; they are only liable to the investments they made by buying shares in the company and may lose these shares if the company goes bankrupt. No separate legal identity: The owner/s and the business are one legal identity. Dividends: Payments made to shareholders, from the profits made by the company (after taxed are paid), as a return to their investment in the company. Annual General Meeting (AGM): It is a legal requirement for limited companies. All shareholders may attend it to elect the Board of Directors (B.O.D). They may also find it an opportunity to express their concerns over matters in the business. Multinational Companies: These are companies that produce and sell in more than one country. Joint Ventures: Two or more businesses, which agree on starting a new project together in order to share costs, profits, responsibilities and the risk of failure. Franchise: A business selling a product to retail shops to sell it to consumers. Municipal Enterprises: Local government authorities that offer free or low priced services to the public. Government and Economic Influence on Business Activities Inflation: is a sustained increase in the general price level of goods and services in an economy over a period of time. Unemployment: Happens when people who are willing and able to work cant find a job. Gross Domestic Product (GDP): The total value of goods and services produced in a country annually. Balance of Payments: The difference between a countrys imports and exports. Income Tax: Tax on peoples income. Profit/Corporation Tax: Tax on profits made by a business. Value Added Tax (VAT): Tax added to the prices of products and services. Import Duties and Tariffs: Tax added on imports from a country. Government Expenditure: Spending tax revenue on national projects, encouraging investment, and providing social goods and services. Monopoly: A business that controls the whole marker for a product or a service. Other External Influence on Business Activities Cost-Benefit Analysis: A process by which business decisions are analyzed. The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted. A project with higher social benefits than costs will be accepted and vice versa. Private/Internal Costs: Are financial costs of a business decision, which are paid for by the business. Private/Internal Benefits: Are the financial gains by a business as a result of its decision. Social/External Costs: Are the costs paid by the society as a result of a business decision. Social/External Benefits: Are the gains to a society resulting from a business decision. Home Working: Working from home using computers to link into offices. Pressure Groups: Are groups of people who seek to influence consumers, public opinion, business actions and government policy to achieve their interest. Boom: A period of time during which sales of a product or business activity increases very rapidly. Recession: Period of general economic decline, defined usually as a decrease in the GDP. Economic Growth: A rise in the real level of GDP as a result of an increase in the physical output of the goods and services in an economy.