The Role of Business Enterprise (Edexcel GCSE Business) : Revision Note

The Purpose of Business Activity

• The purpose of business activity can be broadly defined as the activities that businesses engage in to produce goods or services that meet customer needs while adding value

The purpose of business activity is to take inputs, add value to them, and create products which meet customer needs

To produce goods or services

• The primary purpose of business activity is to produce goods or services that satisfy a need or demand in the market

  • Goods are physical products, such as bicycles and T-shirts

  • Services are non-physical items such as hairdressing, tourism and manicures

Meeting customer needs

• The ultimate goal is to create products that meet the needs and preferences of customers and provide value to them

• By meeting customer needs, businesses can build customer loyalty, increase brand awareness, and generate revenue  

To add value

• The third purpose of business activity is to add value to products or services 

• Value-added features can differentiate products from competitors, create a unique selling point, and increase customer satisfaction

  • E.g. a product that is easier to use, has a better design, or is of higher quality than competitors can create a competitive advantage for a business

Methods of Adding Value to Products/Services

• Adding value is the difference between the price that is charged to the customer and the cost of inputs required to create the product or service

  • E.g. customers are prepared to pay more for potatoes when they are packaged as oven chips than they would be willing to pay for a bag of potatoes

Some of the methods of adding value

• The methods of adding value overlap with some of the features of product differentiation

Real life Examples of how Businesses have Added Value

The role of Entrepreneurship

• An entrepreneur is a person who is willing and able to create a new business idea or invention and takes risks in pursuing success

  • Successful entrepreneurs can identify and pursue opportunities, create value for customers and build thriving businesses

• Entrepreneurs display three main characteristics

1. They organise resources

• An entrepreneur must be able to gather and coordinate the resources necessary to start and operate a business

  • E.g. When Michael Dell started his computer company from his garage, he had to organise resources such as space, computers, software tools, and employees, and manage the finances

2. They make business decisions

• Entrepreneurs must be able to make decisions that will determine the success or failure of their business

  • E.g. A restaurant owner may need to decide what type of food to serve, where to locate the restaurant, and what prices to charge. These decisions require a combination of market research, creativity, and business skill

  • Making the wrong decisions can lead to wasted resources, lost opportunities, and ultimately business failure

3. They take risks

• Entrepreneurship involves taking risks - financial, personal, or professional

  • E.g. An entrepreneur may invest their life savings into a new venture or quit a secure job to start their own business

  • They may also take risks by introducing new products or entering new markets

• These risks can pay off with great rewards, but they can also lead to failure and financial loss

• As a business grows an entrepreneur may make the decision to employ staff to help with its day to day operations

  • The entrepreneur may take on the role of mentor, supporting new staff members to carry out their tasks in a particular way