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