The Role of Business Enterprise (Edexcel GCSE Business)
Revision Note
Written by: Steve Vorster
Reviewed by: Jenna Quinn
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
Method | Example |
---|---|
Branding |
|
Convenience |
|
Quality |
|
Unique Selling Points (USPs) |
|
Design |
|
Examiner Tip
Businesses may use several methods of adding value. It's important to understand that adding value adds raises costs, but it is worth it if the increase in selling price outweighs the costs associated with the method e.g. if improving the packaging costs £1 per unit and the firm is able to raise its selling price by £1,40 per unit, then the firm can improve its profitability by changing the packaging.
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
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