1.1.1

Why Businesses Exist

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Why do Businesses Exist?

Businesses provide goods and services for the market.

Supplier of goods and services

Supplier of goods and services

  • Businesses supply goods and services to consumers and businesses.
  • Goods are tangible products which can be physically held.
  • Services are intangible products.
Impact on the country and its residents

Impact on the country and its residents

  • Businesses provide employment which allows individuals to earn an income and purchase goods and services.
    • E.g. In 2019, Tesco employed around 300,000 staff.
  • Businesses create new goods and services which can enhance the lives of consumers.
    • E.g. pharmaceutical businesses like Pfizer have developed new medicines that cure illnesses and improve people’s quality of life.
  • Businesses can allow a country to improve and develop the country's reputation.
    • E.g. many financial service businesses in the UK provide their products to many countries around the world and this improves the UK’s reputation.
The transformation process

The transformation process

  • Businesses convert inputs (for example, raw materials) into outputs (finished goods) to satisfy the needs, and wants of other consumers and businesses.
  • This is called the transformation process and businesses will add value to their goods and services throughout this process.
B2C

B2C

  • Some businesses sell their goods and services directly to consumers and these businesses are known as business to consumer (or B2C) organisations.
    • For example, Spotify provides music streaming services and sells these to consumers. Spotify is, therefore, an example of a business to consumer organisation.
B2B

B2B

  • Other businesses sell their goods and services to other businesses and these are known as business to business (or B2B) organisations.
    • For example, Hootsuite sells social media management services to other businesses such as Virgin. Hootsuite is, therefore, an example of a business to business organisation.
Sectors

Sectors

  • Businesses can also be categorised according to the type of product they supply:
    • Primary sector businesses extract or grow raw materials including fishing, mining, and forestry.
    • Secondary businesses manufacture goods using raw materials such as clothing and mobile phones.
    • Tertiary businesses provide services such as hotels and cinemas.
Jump to other topics
1

What is Business?

1.1

Nature & Purpose of Business

1.1.1Why Businesses Exist1.1.2Business Aims & Objectives1.1.3End of Topic Test - The Nature of Business
1.2

Different Business Forms

1.2.1Key Business Terms1.2.2Sole Traders1.2.3Limited Liability1.2.4Non-Profit Organisations & Social Enterprises1.2.5Social Enterprises1.2.6Franchising1.2.7Shareholders1.2.8End of Topic Test - Different Businesses1.2.9A-A* (AO3/4) - Franchising at Blockbuster
1.3

Businesses Operate Within an External Environment

1.3.1External Environments1.3.2A-A* (AO3/4) - Interest Rates in the UK
2

Managers, Leadership & Decision Making

2.1

Management, Leadership & Decision Making

2.1.1Managers2.1.2Management Theories2.1.3Management vs Leadership2.1.4Leadership Styles2.1.5End of Topic Test - Management
2.2

Management Decision Making

2.2.1Scientific Decision Making2.2.2Influences on Decision Making2.2.3Intuition Decision Making2.2.4A-A* (AO3/4) - Cost Leadership2.2.5End of Topic Test - Management Decisions
2.3

Role & Importance of Stakeholders

2.3.1Stakeholders
3

Marketing Management

3.1

Setting Marketing Objectives

3.1.1Setting Marketing Objectives3.1.2Market Calculations
3.2

Understanding Markets & Customers

3.2.1Market Research3.2.2Methods of Market Research3.2.3Interpreting PED & YED
3.3

Segmentation, Targeting, Positioning

3.3.1Segmentation3.3.2Niche & Mass Markets3.3.3Market Mapping
3.4

Using the Marketing Mix

3.4.1Marketing Mix3.4.2Pricing Decisions & Price Skimming3.4.3Pricing Decisions & Price Penetration3.4.4Promotional Decisions3.4.5Promotional Decisions 23.4.6Promotional Decisions 33.4.7Distribution Decisions3.4.8Distribution Decisions 23.4.9Social Media & Influencers3.4.10Digital Marketing3.4.11Evaluating Digital Marketing3.4.12A-A* (AO3/4) - The Marketing Mix & Promotion3.4.13A-A* (AO3/4) - Pricing & Competition
4

Operational Management

4.1

Setting Operational Objectives

4.1.1Setting Operational Objectives
4.2

Analysing Operational Performance

4.2.1Operations Data4.2.2Capacity4.2.3A-A* (AO3/4) - The Problem with Operations Data
4.3

Increasing Efficiency & Productivity

4.3.1Productivity & Efficiency4.3.2Lean Production4.3.3Technology & Efficiency4.3.4A-A* (AO3/4) - Toyota Production System
4.4

Improving Quality

4.4.1Measuring & Identifying Quality4.4.2Total Quality Management4.4.3Evaluating Total Quality Management4.4.4Quality Assurance & Quality Control
4.5

Managing Inventory & Supply Chains

4.5.1Inventory4.5.2Improving the Supply Chain4.5.3Outsourcing
4.6

Business & The External Environment

4.6.1Business Considerations from Globalisation
5

Financial Management

5.1

Setting Financial Objectives

5.1.1Setting Financial Objectives5.1.2Influences on Financial Objectives5.1.3Profit5.1.4Revenue & Costs5.1.5Cash-Flow & Budgets
5.2

Analysing Financial Performance

5.2.1Break-Even & Profitability Analysis5.2.2A-A* (AO3/4) - Assessing Financial Performance
5.3

Sources of Finance

5.3.1Internal Sources of Finance5.3.2External Sources of Finance5.3.3Crowdfunding5.3.4Factors for Financing5.3.5A/A* (AO3/4) - Debt
5.4

Improving Cash Flow & Profits

5.4.1Improving Cash Flow & Profits
6

Human Resource Management

6.1

Setting Human Resource Objectives

6.1.1Setting Human Resource Objectives6.1.2Human Resource Management
6.2

Analysing Human Resource Performance

6.2.1Analysing Human Resource Performance6.2.2Analysing Human Resource Performance 2
6.3

Improving Org Design & Human Resource Flow

6.3.1Organisational Design6.3.2Human Resource Flow
6.4

Improving Motivation & Engagement

6.4.1Motivating & Engaging Employees6.4.2Different Incentives6.4.3Evaluating Incentives6.4.4Taylor's Theory6.4.5Maslow's Theory6.4.6Herzberg's Theory6.4.7A-A* (AO3/4) - Amazon & Netflix Org Design6.4.8A-A* (AO3/4) - Taylorism & Jack Welch
6.5

Improving Employer-Employee Relations

6.5.1Improving Employer-Employee Relations
7

Strategic Position of a Business (A Level Only)

7.1

Mission, Objectives, Strategy

7.1.1Business Mission & Corporate Objective7.1.2Mission, Corporate Objectives & Strategy7.1.3SWOT Analysis7.1.4A-A* (AO3/4) - SWOT Analysis
7.2

Financial Ratio Analysis

7.2.1Financial Ratios
7.3

Assessing Overall Performance

7.3.1Non-Financial Data7.3.2Core Competences7.3.3Assessing Business Performance
7.4

Assessing Political & Legal Change

7.4.1Political & Legal Change
7.5

Assessing Economic Change

7.5.1Economic Environment
7.6

Assessing Social & Technological Change

7.6.1Social & Technological Environment7.6.2Lifestyle & Technological Environment7.6.3Corporate Social Responsibility
7.7

The Competitive Environment

7.7.1Choosing Areas of Competition7.7.2Choosing How to Compete
7.8

Investment Appraisal

7.8.1Investment Appraisal
8

Choosing Strategic Direction (A Level Only)

8.1

Markets to Compete & Products to Offer

8.1.1Product Decisions
8.2

How to Compete

8.2.1Porter's Five Forces8.2.2A-A* (AO3/4) - The 5 Forces
9

Pursuing Strategies (A Level Only)

9.1

Assessing a Change in Scale

9.1.1Growth & Retrenchment9.1.2Challenges of Growth9.1.3Sourcing Resources & Entering Markets9.1.4A-A* (AO3/4) - Diversification9.1.5A-A* (AO3/4) - Diseconomies of Scale
9.2

Assessing Innovation

9.2.1Assessing Innovation
9.3

Globalisation & Internationalisation

9.3.1Internationalisation9.3.2Managing Internationalisation9.3.3Impact of Internationalisation9.3.4A-A* (AO3/4) - Internationalisation in Guatemala
9.4

Greater Use of Digital Technology

9.4.1Assessing Use of Digital Technology9.4.2Impact of Digital Technology
10

Managing Strategic Change

10.1

Managing Change

10.1.1Managing Change
10.2

Managing Organisational Culture

10.2.1Managing Organisational Culture10.2.2Organisational Structures
10.3

Managing Strategic Implementation

10.3.1Managing Strategic Implementation
10.4

Problems with Strategy & Why They Fail

10.4.1Problems with Strategy

Practice questions on Why Businesses Exist

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  1. 1
    Name three ways business impacts a country and its residents:Fill in the list
  2. 2
    Which of the following is an example of inputs?Multiple choice
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Business Aims & Objectives