The Purpose of Business Activity (OCR GCSE Business)

Why Businesses Exist

• Businesses exist to obtain and process inputs so that they can provide goods and/or services that meet the needs or wants of customers while adding value

Diagram: The Purpose of Business Activity

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

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

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

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

• Businesses aim 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

Developing a Business Idea

• Individuals develop ideas and establish businesses for several reasons, including:

  • Generating an income

    • Identifying an opportunity to produce a distinctive product and sell it to earn a living

    • E.g. Levi Roots identified an opportunity to produce his Reggae Reggae Sauce products on a large scale

  • Serving a gap in the market

    • Ensuring customers can purchase goods or services that they may otherwise be unable to obtain

    • E.g. Wing Yip Wholesale sells Chinese cooking ingredients to restaurants and small businesses in the Birmingham area

  • Pursuing a unique opportunity

    • Having a business idea that has the potential to make a profit

    • E.g. Elvis & Kresse's owners spotted the potential to turn used fire hose material into luxury accessories such as handbags, belts and wallets

  • Providing a good product to benefit others

    • Meeting a social need that is currently overlooked

    • E.g. Creed Outdoor Learning provides holiday adventure activities at an affordable price to families in Kent

Satisfying Customer Needs & Wants

• For most businesses, the ultimate goal is to create products that meet the needs, wants and preferences of customers and provide value to them

  • Needs are considered to be essential

    • E.g. shelter, warmth or food

    • Essential needs cover a range of goods and services that individuals expect to be able to afford themselves or access through the public sector

  • Wants are desires which are non-essential, even if consumers consider them to be essential

    • E.g. branded trainers, an overseas holiday, a wide-screen television

    • Whilst consumers do not need these products to survive, they improve their quality of life

Education and Healthcare: Examples of Needs and Wants

• Customers have needs and wants related to factors such as:

  • Value for money

  • Quality

  • Design

  • Effective customer service

  • Choice

  • Convenience

  • Reliability

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