Learn: The Purpose and Nature of Businesses

Welcome!I've reviewed your growth areas and created this lesson to help you strengthen your understanding of the purpose and nature of businesses. Let's explore what businesses do, why they exist, and how they operate!

What is the purpose of business?The main purpose of a business is to produce goods (physical products like furniture) and services (non-physical actions like haircuts). Businesses aim to satisfy customer needs (essential items like food and water) and wants (non-essential items like designer clothes or video games).

What is entrepreneurship?An entrepreneur is someone who sets up a business, taking on financial risks to make a profit. Entrepreneurs are typically risk-takers, organised, and creative. Their motivations include earning profit, gaining independence, and fulfilling their ambitions.

Types of businessesThere are different types of businesses based on ownership and structure:Sole trader: A business owned and run by one person. They keep all profits but are solely responsible for debts (unlimited liability).Partnership: A business owned by two or more people who share profits and responsibilities.Private limited company (Ltd): Owned by shareholders, with limited liability. Shares are not available to the public.Public limited company (Plc): Owned by shareholders, with shares traded publicly on the stock market.Not-for-profit organisation: Focused on non-commercial goals, like charities or community groups.

Business aims and objectivesBusinesses set aims (long-term goals) and objectives (specific targets) to measure their success. Common aims include profit, survival, growth, market share, customer satisfaction, and operating in an ethical way. For example, a new business may focus on survival, while an established business may aim for growth.

StakeholdersStakeholders are individuals or groups interested in the success of a business. Examples include owners, employees, customers, suppliers, and the local community. They may have different goals, which could lead to conflicts. For instance, owners may want profits, while employees may want higher wages.

Location factorsBusinesses choose their location based on several factors, including proximity to the market (customers), availability of labour (skilled workers), access to raw materials, level of competition, and costs (rent, utilities). For example, a factory may locate near raw materials to reduce transportation costs.

Business plansA business plan outlines the goals and strategies of a business. It includes sections like an executive summary, financial plans, target market, and marketing strategies. A good plan helps secure investment and ensures the business stays focused, but it may not always predict changes in the market.

Review Time!Great work! You've learned about the purpose and nature of businesses, types of businesses, aims and objectives, stakeholders, location factors, and business plans. Now let's test your understanding with a few questions.

Fantastic work!You've completed the lesson on the purpose and nature of businesses. Keep practising and reviewing to strengthen your understanding further. Well done!