P1.1 The Role of Business 

Profit:

• Difference between sales and expenses (owners have right to keep the difference– which can be substantial)

• Reward for taking risk as business owner

• No guarantee of success (most fail)

Employment:

• Business provides / creates jobs (which provides income and quality of life)

• Number of employees depends upon size and functioning of the firm.

• 50% of jobs in SME (Small-Medium Enterprises)

Incomes:

• For employees; wages (hourly rate) and salary (fixed yearly income)

• Incomes can be spent on goods and services; generating string overall economy

• Income for owners is profit (depends on success of the business…)

Choice:

• Businesses generate alternatives for customers

• More competition / variety provides wider choice for customers (more value) and lowers overall prices

• Enormous range of goods and services in pursuit of making sales and profit.

Innovation:

• Incremental improvements made to final product or production processes leading to improved customer experience (more value)

• Linked to increased quality of life / choice / lower prices / new markets / more sales

• SMEs typically most innovative

Entrepreneurship:

• A person taking a risk to start a business; business provides the vehicle to turn an idea into a reality.

• Need resilience, optimism, drive, self-belief, communications skills, hard work...

Wealth Creation:

• Business generates wealth (owners and employees); higher wealth leads to higher quality of life. Australia GDP per capita: $70,000

• Economic growth; the increasing production and consumption of goods / services

Quality of Life:

• Business provides goods and services that improve the quality of life (save us time and effort by solving problems for low cost)

• More leisure time to relax, learn and think

• Provide opportunities for personal growth