Business in Contemporary Society
Business Information and ICT
Decision Making in Business
Section 1: Business in Contemporary Society
The role of business in society
Everyone in our society has ‘wants’. Some wants are for things like food, clothing and shelter while others are for entertainment, leisure, travel and so on. Taking everybody in society together, there are millions of wants. To satisfy these wants we make use of (or consume) goods and services. If suitable goods and services were not available, we would not be able to satisfy our wants. This is why business activity is important: because it is through business activity that goods and services are provided.
A definition of business activity is any kind of activity that results in the provision of goods and services which satisfy human wants.
Goods are tangible while services are intangible. Goods sold to the general public are often referred to as consumer goods. Consumer goods may be classified as durable goods like cars, washing machines, or personal computers; or non-durable goods like sweets, drinks, newspapers. Durable goods can be used regularly over a long period of time while non-durable goods are consumed over a short period, usually soon after they are bought. Examples of services are going to the hairdresser, being served in a restaurant, or visiting a doctor.
Goods and services can be described as the outputs of business activity. In order to produce these outputs, business makes use of resources, also called factors of production. Factors of production are classified into four categories:
• land (i.e. all natural resources, from mineral deposits to the site of a factory) • labour (i.e. all human resources)
• capital (i.e. all resources which have been made by labour, such as machinery and other equipment) • enterprise (i.e. organising the other factors of production and taking the risk of producing goods or services in advance of them being sold).
In summary, then, business activity involves using resources to produce goods and services which people require in order to satisfy their wants. Business activity can be described as ‘wealth-creating’. This is because the term ‘wealth’ is used to refer to the amount of goods and services, or output available – the more goods and services that exist the greater the amount of wealth. In this sense, then, wealth is not money as such but the total of goods and services which can be given a monetary value.
Finally, goods and services are sold in markets. These exist where goods and services are exchanged between consumers and producers. Examples of markets are the housing market, the market for snack foods, and the financial services market.
Cycle of business
This phrase is sometimes used to describe the various stages of business activity. These stages can be shown as follows:
|Wants | |People in society have wants which they wish to satisfy. | | | | | |Identification of wants | |Businesses recognise that there are wants which can be satisfied by | | | |the production of goods or services. | | | | | |Production | |Businesses combine inputs to produce an output of the required goods| | | |or services. | | | | |...
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