Why are Businesses Set Up?
Business: Cambridge International GCSE (2027 Exams), topic 1.1.3
Why are Businesses Set Up?
We have seen that businesses exist to serve customers’ wants or needs and do so through supplying goods or services. Businesses are set up for a variety of reasons. They are not always set up to provide or increase someone’s income. A few key reasons include:
People want the good or service
- An entrepreneur starts to sell a good or service that they think people will want to buy.
Distribute goods
- Businesses may be set up to distribute goods – they buy products from manufacturers and then sell these goods to other businesses or to customers.
Benefit society
- Businesses may be set up to benefit other people or to benefit society as a whole. These businesses are often not-for-profit organisations.
- E.g. a business that is set up to provide malaria nets to people who can’t afford them in Africa.
Adding value
- Businesses are set up to add value to goods or services.
- Added value is the difference between the selling price and the cost of inputs.
- Value can be increased by: improving quality, branding, convenience, or offering better customer service.
- Example: Toms shoes adds value by combining the product with a social purpose
- For every pair sold, a pair is donated to someone in need.
Test yourself on Why are Businesses Set Up?
Why do people set businesses up?
Why is a company selling malaria nets in Africa likely to have been set up?