Why Businesses Exist :: Business and Management Studies

Why Businesses Exist A business gets started when somebody decide that they can earn a profit by making a good or providing a service and selling it to people who are willing to pay for it. All Businesses have the same Main Objective An objective is anything that the business wants to achieve. The most important objective is to make a profit in order to survive. If a business does not make a profit it will go bankrupt and have to closedown. The Public Sector Owned by the Government: Army, Police, Schools and Hospitals. These are benefits for everyone. The Private Sector Owned by Private Individuals. Of Benefit to the people who own them. Key Terms Entrepreneurship: means being prepared to take risks and having the flair and skills needed to set up and run a business or other organization. Sole Owner: is an individual who runs a business and is personally responsible for any losses incurred. A Limited Company: is an organisation, which gives its owners or shareholders protection so that they can lose only the money that they have already put in. Innovation: is the introduction of the new ideas. It may affect products or the way in which they are made. Developing Relationships: is Architecture with customers, employees & businesses. Businesses, which look carefully at the way it works with customers, employees, and other businesses are more likely to be successful. Reputation: A reputation of a company can be achieved through developing a particular image:  · Low Prices  · Appealing to the affluent  · Ensuring top quality Competitive Advantage: Is a distinctive feature that makes a business successful. A business must carefully identify the people who will buy the product to gain an competitive advantage over others. A Market: Is any location or process that brings buyers and sellers together. Price: is the amount of money that is given in exchange for a product. Goods: are anything you buy which are natural or manufactured for a products. Services: involve buying the skills o another person. Profit: is the difference between the price and the cost of making a product available. Reward Revenue – Cost = Profit Profit is the difference between a firm’s revenues from its trading activities and its total costs. It is a reward for the risk and a return on capital invested. There are 3 factors of production:  · Land  · Capital  · Labour Entrepreneurs use these 3 factors to make a profit. Sole Traders Company Legal ----- No legal formalities. A legal structure with a separate identity from those who run it.