Syllabus Content

By the end of the chapter, you should be able to understand:

• the nature of business (AO1)
• the difference between the primary, secondary, tertiary and quaternary sectors (AO2)
• the challenges and opportunities for starting up a business (AO2).

The nature of business (AO1)

The transformation process in a business involves converting inputs into outputs.

Adding value occurs in a transformation process when outputs are produced that are worth more than the inputs brought in to provide them.

The factors of production are the inputs into the transformation process of a business; namely land, labour, capital and enterprise.

• Case Study: Dabbawalla
• Case Study: IKEA

Primary, secondary, tertiary and quaternary sectors (AO2)

Economic sectors:

• Primary sector is the first stage of production involving acquiring and extracting raw materials.
• Secondary sector is the second stage of production involving manufacturing and assembling products using raw materials.
• Tertiary sector refers to business providing services (intangible goods).
  • Quaternary sector represents organisations that are based on knowledge and the skills of employees and that provide information.

Businesses and economic activity:

• Important because they employ people and provide goods and services.
• They innovate which can improve the quality of our lives.

Basically, they drive the economy forward which is why they are supported by governments.

• Exam Practice 1.1.1
• Exam Practice 1.1.2
• Case Study: Lockdown

Challenges and opportunities for starting up a business (AO2)

Opportunities for starting up a business:

• Money – Motivation to earn profit.
• Autonomy – Owner(s) want to be the boss of the business.
• Challenges – Driven by personal challenges to succeed and achieve a sense of accomplishment.
• Passions - Turning personal passions into a business opportunity.
• Family ties – Part of a family tradition.
• Unfilled market opportunities - Unfilled gap and needs in the market is spotted.
• Making a difference – Making a difference for others.

Challenges of starting up a business:

• Lack of finance – May new businesses lack necessary finance to operate on a daily basis. Lack of sufficient finance can lead to bankruptcies.
• Lack of market research – Business ideas may not materialise.
• Poor marketing strategy – New businesses may have a limited marketing budget available, causing low selling points and, thus, fail to gain recognition.
• Limited human resources – Newly established businesses often find it difficult to attract suitable skilled and experienced staff.
• Long hours – Many new business owners tend to handle everything themselves, partly to keep costs low.
• Lack of knowledge, skills, and experiences – Eg. Lack of knowledge of the best suppliers, experience of making effective strategic decisions, etc.
• Exam Practice 1.1.3

Review Questions