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

Understanding the Nature of Business

1.1.1Why Businesses Exist1.1.2Business Aims & Objectives1.1.3Revenue & Costs1.1.4A-A* (AO3/4) - Cost Leadership1.1.5Profit1.1.6End of Topic Test - The Nature of Business
1.2

Understanding Different Business Forms

1.2.1Sole Traders1.2.2Limited Liability1.2.3Non-Profit1.2.4Franchising1.2.5A-A* (AO3/4) - Franchising at Blockbuster1.2.6Key Business Terms1.2.7Shareholders1.2.8End of Topic Test - Different Businesses
1.3

External Environments

1.3.1External Environments
2

Managers, Leadership & Decision Making

2.1

Understanding Management

2.1.1Managers2.1.2Management Theories2.1.3End of Topic Test - Management
2.2

Understanding Management Decision Making

2.2.1Scientific Decision Making2.2.2Intuition Decision Making2.2.3Influences on Decision Making2.2.4A-A* (AO3/4) - Taylorism & Jack Welch2.2.5End of Topic Test - Management Decisions
2.3

Understanding Stakeholders

2.3.1Stakeholders
3

Decision Making to Improve Marketing Performance

3.1

Decision Making to Improve Marketing Performance

3.1.1Setting Marketing Objectives
3.2

Understanding Markets & Customers

3.2.1Market Calculations3.2.2Market Research3.2.3Market Mapping3.2.4Methods of Market Research3.2.5Interpreting PED & YED
3.3

Market Segmentation, Targeting & Positioning

3.3.1Segmentation3.3.2Niche & Mass Markets
3.4

Marketing Mix

3.4.1Marketing Mix3.4.2Product Decisions3.4.3Pricing Decisions & Price Skimming3.4.4Pricing Decisions & Price Penetration3.4.5A-A* (AO3/4) - Pricing & Competition3.4.6Promotional Decisions3.4.7Promotional Decisions 23.4.8Promotional Decisions 33.4.9Distribution Decisions3.4.10Distribution Decisions 23.4.11Digital Marketing3.4.12Evaluating Digital Marketing3.4.13A-A* (AO3/4) - The Marketing Mix & Promotion
4

Decision Making to Improve Operational Performance

4.1

Setting Operational Objectives

4.1.1Setting Operational Objectives
4.2

Analysing Operational Performance

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

Increasing Efficiency & Productivity

4.3.1Capacity4.3.2Productivity & Efficiency4.3.3Technology & Efficiency
4.4

Improving Quality

4.4.1Importance of Quality4.4.2Measuring & Identifying Quality4.4.3Total Quality Management4.4.4Evaluating Total Quality Management4.4.5A-A* (AO3/4) - Toyota Production System
4.5

Managing Inventory & Supply Chains

4.5.1Improving the Supply Chain4.5.2Inventory4.5.3Outsourcing
5

Decision Making to Improve Financial Performance

5.1

Financial Objectives

5.1.1Setting Financial Objectives5.1.2Influences on Financial Objectives
5.2

Analysing Financial Performance

5.2.1Cash-Flow & Budgets5.2.2Break-Even & Profitability Analysis
5.3

Sources of Finance

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

Improving Cash Flow & Profit

5.4.1Improving Cash Flow & Profits
6

Improving Human Resource Performance

6.1

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 26.2.3Analysing Human Resource Performance 3
6.3

Improving Organisational Design

6.3.1Job Design6.3.2Organisational Design6.3.3Human Resource Flow6.3.4A-A* (AO3/4) - Amazon & Netflix Org Design
6.4

Improving Motivation & Engagement

6.4.1Motivating & Engaging Employees6.4.2Taylor's Theory6.4.3Maslow's Theory6.4.4Herzberg's Theory6.4.5Different Incentives6.4.6Evaluating Incentives
6.5

Improving Employer-Employee Relations

6.5.1Improving Employer-Employee Relations6.5.2A-A* (AO3/4) - The Winter of Discontent
7

Analysing the Strategic Position of a Business

7.1

Mission, Corporate 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

Overall Performance

7.3.1Non-Financial Data7.3.2Core Competences7.3.3Assessing Business Performance7.3.4A-A* (AO3/4) - Assessing Financial Performance
7.4

Political & Legal Change

7.4.1Political & Legal Change
7.5

Economic Change

7.5.1Economic Environment7.5.2Business Considerations from Globalisation7.5.3A-A* (AO3/4) - Interest Rates in the UK
7.6

Social & Technological Environment

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

Competitive Environment

7.7.1Porter's Five Forces7.7.2A-A* (AO3/4) - The 5 Forces
7.8

Investment Appraisal

7.8.1Investment Appraisal
8

Choosing Strategic Direction

8.1

Choosing Areas of Competition

8.1.1Choosing Areas of Competition8.1.2A-A* (AO3/4) - Diversification
8.2

Choosing How to Compete

8.2.1Choosing How to Compete
9

How to Pursue Strategies

9.1

Change in Scale

9.1.1Growth & Retrenchment9.1.2Challenges of Growth9.1.3A-A* (AO3/4) - Diseconomies of Scale
9.2

Assessing Innovation

9.2.1Assessing Innovation
9.3

Assessing Internationalisation

9.3.1Internationalisation9.3.2Sourcing Resources & Entering Markets9.3.3A-A* (AO3/4) - Internationalisation in Guatemala9.3.4Managing Internationalisation9.3.5Impact of Internationalisation
9.4

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

10.4.1Problems with Strategy10.4.2A-A* (AO3/4) - Divorce of Ownership from Control

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