Business Studies
Business aims and activities
The UK economy is made up of many types of organisations which have different aims and perform different functions.
This Revision Bite will help you understand the aims and activities of the private sector in the UK economy.
Private sector aims
Independent shops are part of the private sector
The UK economy is a mixed economy [Mixed economy: An economy with both a public and private sector. ]. This means that it has a public sector [Public sector: Organisations controlled by the Government on behalf of the general population. ], and a private sector [Private sector: Businesses in this sector are owned by shareholders, individuals, sole traders or partnerships. ].
The aim of a business in the private sector is to survive by making a profit. This may be a sole-trader working alone, like a newsagent, or thousands of shareholders in a large Public Limited Company.
Businesses gain a larger market-share [Market-share: Percentage of overall sales in an industry. ] by increasing the sales of their products against competitors. This may involve reducing prices. To win the loyalty of customers and encourage repeat sales [Repeat sales/business: Customers returning to buy from the same business. ], businesses need to be reliable and provide a quality service to their customers.
Private sector activities
The activities of industry can be divided into stages - primary, secondary and tertiary production. These stages form the chain of production and provide consumers with the finished goods.
Primary production
This involves acquiring raw materials. For example, metals and coal have to be mined; oil drilled from the ground; rubber tapped from trees; foodstuffs farmed, and fish trawled. This is sometimes known as extractive production [Extractive production: Another term for primary production - farming, mining, fishing etc. ].
Secondary production
Is the manufacturing and assembly process. This involves converting raw materials into components, eg making plastics from oil, and assembling the product, eg building houses, bridges and roads.
Tertiary production
This refers to the commercial services [Commercial service: Support services for industry, eg banking. ] that support the production and distribution process, eg insurance, transport, advertising, warehousing and retail, teaching and health care.
Sample question
Most exam questions will bebased on a case study, which provides a setting for business theory. If you are asked a question about business aims, look carefully at the information you are given about the business and the individuals involved.
- Question
Jill and Chris decide to go into partnership together, and set up their own furniture making business. They don't have much business experience, but Jill is very good at designing and making furniture, and Chris has studied accounts.
Explain what you think their main aims should be and give your reasons.
When you have finished take a look at the sample answers on the next page.
Sample answers
- Answer 1
Alex wrote: They are just starting out in business, so I think they should just try to survive. Maybe they can try to make a profit and expand later, when they have more money.
Examiner's note
Alex has given a basic answer to this question. He has shown that he understands the basic principles, but he has not gone into enough detail. This answer would probably get an 'E' grade.
- Answer 2
Jesse wrote: I think they should try to survive first, because they probably don't have much money. They should make sure their furniture is good, so customers come back. If they make a profit, they can then try to expand their business.
Examiner's note
Jesse has answered the question quite well, and given good reasons. She has shown that she understands the subject. She could however, give better explanations, and use more business terms to get a higher grade. This answer would probably get a 'C' grade.
- Answer 3
Sanjay wrote: I think they should try to survive first, because they probably don't have the financial resources to produce a lot of furniture yet. They should also make sure they produce quality products, so that they get repeat sales, and a good reputation. If they start to make a profit, and sales go well, they might want to employ someone to help increase output. Then they might try to increase their market-share.
Examiner's note
Sanjay has given an excellent answer. He has shown that he knows the facts and understands the subject. He has also given good reasons, and used business terms like repeat sales and market-share. This answer would probably get an 'A' grade.
Now try a Test Bite