CHAPTER 1
BUSINESS ACTIVITY

Introduction…

We all have seen business everywhere in our life. From the morning to night time, we are using things made by businesses around the world. Food, clothes, transportation, water supply, electricity and many more.

 1.    Needs and Wants.
The main reason you may have given for not having all of our wants is you may not have enough money to buy them. Even if you are able to buy these wants in the future, you may have other wants. This is because our wants are unlimited.
Who can afford their basic needs, cannot afford to buy what they want. The cause of these problems is that consumers do not have enough money!

Needs is a good or services which are essential living.
Examples:
Ø  Water
Ø  Food
Ø  Shelter
Wants: Is a good or services which are people would like or want far more than they need.
Examples:
Ø  Cars
Ø  Smartphones
Ø  Holiday
Ø  Fashionable
Ø  Clothes

 2.   Factor Of Production.
there are not enough factors of production in the world to satisfied the wants of consumers. This is the problem of scarcity.
Scarcity: There are not enough goods and services to meet our needs and wants.
Because there are not enough resources to produce the goods/services to meet consumers' wants. So, a choice has to be made.
When making the choice you need to make sure that the product or services you choose are worth more to you than the one you give up.
Opportunity Cost: Something is what you have to give up to get it.

Factor of production are the resources of:
LAND: All things supplied by nature and used in the production of goods/services.
EXAMPLES: Farmland
  • Forests 
  • Rivers 
  • lakes
  • Seas
  • Minerals
  • Ores 
  • Fields 
  • Oils 
LABOUR: All human efforts which go into the production of goods/services.
CAPITAL: Anything made by man and used to produce goods/services.
EXAMPLES:
  • Machines
  • Equipment
  • Finance
ENTREPRISE: Initiative involved in organising land, labour and capital and which bears the risk involved.
(Production is a co-operative process and not a job of any single factor.)

The importance of Specialisation.
every person has different skills in their jobs. Specialisation reduces the costs of production.
SPECIALISATION: when a nation or individual concentrates its productive efforts on producing a limited variety of goods.
EXAMPLES: Microsoft, Nike, Adidas, Marlboro.
DIVISION OF LABOUR: Production is divided into each worker does just one of those tasks.

3.    Adding Value.
It is the difference between the price of the finished product/service and the cost of the inputs involved in making it.
Business can add value by:
  • . Branding 
Branding increases added value because people want or feel they should buy the item from this particular company.
the benefit are:
A. Charging a higher price
B. Creating a point of difference from the competition.
C. Protecting from competitors trying to steal customers by charging lower prices.
D. Focusing a business more closely on its target market segment.
  • Excellent Service Quality
The price of a made-to-measure suit will be higher than the price of a ready-made suit. The cost of the materials used will be very similar, but the personalised service increases the added value.
  • Product Features
A product that have more features and functions makes the price get higher. Consumers are prepared to pay a much higher price than they would pay for a product with fewer features or functions.
  • Convenience
customers will pay a higher price of goods to make them comfortable.