Topic 1: Nature of business
THE IMPORTANCE OF BUSINESS
• The function of business in creating value/benefits and adding value to all the business processes (value chain)
o Function of business ( create/add value, raw materials ( intermediate/finished products ( production
o Intermediate products ( produced by business & then used as input by another
Value of production
=
Value of sales – value of intermediate products used in production
o Value adding ( raw material move along various stage of production & transformed into either intermediate or finished products, then extra value is created/added
o Value added ( diff between cost of raw materials bought from outside the business & amount received from customer when sold
o Finished product ( ready for customers to buy & use
o Production ( activities undertaken – satisfy customers’ N&W
o Profit ( income (revenue) > cost of production (expenses)
• Social and economic roles
o Wealth creation ( business grow their assets become more valuable & owners investment value increases – flows on positively to employees/consumers/society/economy
o Provide employment
o Innovation ( something already established – improved
o Research & development ( steps undertaken: improve existing product, create new products, and develop more efficient ways of distributing & marketing products.
o Quality Of Life ( overall wellbeing of an individual & combination of material & non-material benefits
o Choice ( business compete – more choice ( low price, better product
o Entrepreneurship ( starts operates assumes the risk of business venture in hope of making profit
• Identification of relevant stakeholders
o Stakeholders ( any group of individual who has an interest in or is affected by the activities of a business
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