Why Businesses Exist

Business: AQA A Level (2023 Specification), topic 1.1.1

Why do Businesses Exist?

Businesses provide goods and services for the market.

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.

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.

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.

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.

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.