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Study Notes

Why Businesses Exist

AS, A-Level
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 18 Sept 2019

What is a business and why do they exist?

What is a Business?

A business is an organisation that exists to provide goods and services on a commercial basis to customers.

  • Goods are physical or tangible products: e.g. consumer electronics, industrial components, cars
  • Services are intangible products: e.g. insurance, dental services, cleaning

Customers can be individuals (buying on their own behalf or for households), businesses or other organisations.

Why Businesses Exist

Businesses exist because they are formed by entrepreneurs and are subsequently developed if they manage to get beyond the survival stage.

Most businesses exist in order to earn a return for the business owners, and the potential for profit is a key motive for entrepreneurial activity. However, there are other potential business objectives, which are explored further during your studies.

Businesses play a key role in wider society. In particular they:

  • Create and sustain employment & develop the skills of people
  • Drive innovation through research & development (R&D) and new products
  • Contribute to the infrastructure of the country
  • Pay taxes on profits earned & collect taxes on behalf of government
  • Create wealth by providing returns on investment

Role of Entrepreneurs

Entrepreneurs (and the enterprise that they demonstrate) play a key role in the formation and development of businesses. In particular, entrepreneurs:

  • Spot business opportunities
  • Take (calculated) risks in order to gain possible future returns
  • Act a catalyst for the creation & growth of new business enterprises

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