Business Actvity
Why do businesses start-up?
- To make a profit
- To make a difference
- There is a gap in the market
- The owner is good at a certain skill
- The owner thinks of a good idea (a 'Eureka moment')
- To be their own boss
Types of activity a business may become involved in
There are 3 main types:
- Primary Sector - The extraction of raw materials (E.g. Fishing, mining)
- Secondary Sector - The manufacturing of products (E.g. A clothing manufacturer)
- Tertiary Sector - The sale of goods and services (E.g. Taxi service, corner shop)
Some businesses may fit into more than one sector
Changes to the external market
The external market is:
Anything that the business cannot control, for example:
· Interest rates
· Inflation (The average price of goods rising)
· Competitors
· Natural Disasters
It is very hard for companies to control these changes, but they do need to react to them effectively to stay ahead. Sometimes, these external changes can be used to the business’ advantage.
For example: the recession has made smaller, cheaper supermarkets like Aldi more profitable and competitive in today’s environment. Analysts suggests that Aldi will do brilliantly this Christmas season, meaning the big supermarkets will lose out!
Example: “How would the introduction of a new Subway impact Food@156?”
The impact on Food@156 would be a reduction of customers as they go to Subway instead. This would mean that the profit and revenue of the company will fall due to the reduction of customers. This would also lead to them having to consider reducing their prices to become more competitive and gain customers back (or retain existing, attract new). However, due to the franchise nature of Subway, they can buy in bulk and get their ingredients etc. for cheaper, meaning that their profit margins are larger, and they can charge less.