WJEC GCSE Business

What a business is for

A business is an organisation that brings together people, money and resources to supply goods or services to customers. The goods are physical things, such as bread, phones or furniture. The services are things done for someone, such as a haircut, a bus ride or a lesson. People and societies have more wants than there are resources to satisfy them, so businesses exist to turn resources into things people are willing to pay for.

A need is something a person must have to live a reasonable life, such as food, shelter, clothing and warmth. A want is something a person would like but could manage without, such as a games console or a holiday. A business may satisfy either, and one product can be both: a coat is a need on a cold day, and a particular designer coat is a want.

Businesses also create prosperity. They employ people who earn wages and spend them, they pay taxes that fund public services, and the owners may earn profit. When a local business thrives, the money tends to circulate in the area, so the people living there are better off.

The business environment

Business activity takes place in an environment with three features.

• It is competitive: other businesses are trying to win the same customers, so a business must offer something at least as good in price, quality or service.
• It is dynamic: it keeps changing, because tastes, technology, laws and the economy change. A business that stays the same tends to fall behind.
• It is innovative: new products, processes and ideas appear all the time, and a business that introduces them can gain an advantage. Others then copy them, which starts the cycle again.

These three features are linked. Competition pushes businesses to innovate, innovation changes what customers expect, and that change makes the environment dynamic for everyone else.

Private and public sector

The private sector is made up of businesses owned by individuals or groups of individuals, which are normally run to make a profit. Sole traders, partnerships and companies all belong to it. The public sector is owned and run by the government, whether central, Welsh or local, and exists to provide services to the public, usually paid for through taxes rather than sold for profit.

Examples of public sector organisations are the NHS, state schools, local councils, the police and fire services, and the armed forces. A student should be able to recognise one when given it, and say that its main purpose is providing a service rather than making a profit for owners.

Businesses in the private sector depend on their customers for revenue. Public sector organisations depend mainly on government funding, so their priorities are set by decisions about how much to spend and where.

Business enterprise

Enterprise is the act of spotting an opportunity and taking the risk of setting up a business to exploit it. The person who does this is an entrepreneur: someone who organises the resources, takes the financial risk and hopes to earn a reward.

Reasons for starting a business

People start businesses for a mix of reasons, and the mix differs from person to person.

• To earn more than they would as an employee, or to earn an income at all after redundancy or a long period without work.
• To be their own boss, choosing what to do and when to do it.
• To turn a hobby, skill or passion into a living, such as baking or photography.
• To meet a need they have noticed in their local area that nobody else is serving.
• To create something that improves the lives of others or helps the environment.
• To build something that can be handed on or sold.

Why people become entrepreneurs

Behind these reasons are personal traits and circumstances. Some people are independent and enjoy decisions. Some have a new idea or a new technology that they believe in. Others see that existing businesses are poor, and think they can do better. Some are pushed into it, for example by losing a job, and others are pulled by a particular opportunity. The risk is real, because a new business can fail and the owner can lose their savings, so entrepreneurs have to weigh up the possible reward against it.

Identifying and responding to opportunities

A business opportunity usually arises from a gap in the market or from a change. A gap exists where customers want something that is missing, too expensive, or poorly supplied. A change might be new technology, a new law, a shift in tastes, a growing population in an area or a trend such as concern for the environment. An entrepreneur who notices the opportunity early and responds before competitors can build a loyal customer base.

Responding well means finding out whether enough customers really want the product, working out the costs and the price, and then being ready to adapt. An opportunity that is identified but not responded to, or responded to too slowly, brings no benefit. Businesses that fail to respond to changes in their market, such as a shop that ignored online selling, often lose customers to those who did.