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This lesson introduces the concept of enterprise and explains why businesses exist, how new business ideas come about, and what makes the business environment dynamic and constantly changing. Understanding enterprise is the foundation of GCSE Business Studies and will underpin everything you study in this course.
A business is an organisation that provides goods or services to customers in exchange for money. Businesses exist to satisfy the needs and wants of consumers.
| Term | Definition |
|---|---|
| Goods | Physical, tangible products (e.g. a smartphone, a loaf of bread) |
| Services | Non-physical, intangible activities performed for customers (e.g. hairdressing, banking) |
| Needs | Essential items required for survival (e.g. food, water, shelter) |
| Wants | Items that people desire but do not need to survive (e.g. designer clothing, holidays) |
| Enterprise | The process of identifying a business opportunity and taking the risk to set up a business |
New businesses are created for a variety of reasons:
Technology creates entirely new markets and products. The smartphone industry did not exist 20 years ago, yet Apple, Samsung, and other companies now generate hundreds of billions of pounds in revenue from mobile devices and apps.
Consumer tastes and preferences change over time. For example, growing awareness of health and fitness has led to a boom in businesses such as Gymshark, which was founded in 2012 by a teenager in his garage and is now valued at over £1 billion.
When existing products become outdated, opportunities arise for new businesses. Blockbuster Video collapsed because streaming services like Netflix made physical DVD rental obsolete.
Entrepreneurs spot unmet customer needs. For example, Innocent Drinks identified that many consumers wanted healthy, natural smoothies — a product that was not widely available in UK supermarkets at the time.
Some entrepreneurs invent entirely new products or services. James Dyson invented the bagless vacuum cleaner after becoming frustrated with traditional models that lost suction.
Exam Tip: When explaining why new business ideas come about, always link your answer to a real-world example. The examiner rewards application of knowledge to specific businesses.
The business environment is constantly changing. Businesses must adapt or risk failure. Key factors that make business dynamic include:
graph TD
A[Dynamic Business Environment] --> B[Technology changes]
A --> C[Consumer tastes shift]
A --> D[New competitors enter]
A --> E[Economic conditions change]
A --> F[Legislation changes]
A --> G[Globalisation increases]
B --> H[Businesses must adapt]
C --> H
D --> H
E --> H
F --> H
G --> H
Traditional high street retailers like Debenhams and Topshop went into administration because they failed to adapt quickly enough to the rise of online shopping. Meanwhile, businesses like ASOS and Boohoo thrived by building online-first models.
Businesses can be classified by what they provide:
| Type | Description | Examples |
|---|---|---|
| Goods | Physical products that can be touched and owned | Cars (BMW), food (Tesco), clothing (Primark) |
| Services | Intangible activities performed for customers | Banking (Barclays), streaming (Netflix), transport (Uber) |
Many modern businesses provide both goods and services. For example, Apple sells physical products (iPhones, MacBooks) and services (Apple Music, iCloud storage, Apple TV+).
Every business needs factors of production — the resources required to produce goods and services:
| Factor | Definition | Example |
|---|---|---|
| Land | Natural resources used in production | Farmland for agriculture, oil for energy |
| Labour | The human effort used in production | Factory workers, software engineers, shop staff |
| Capital | Man-made resources used to produce goods/services | Machinery, computers, factory buildings |
| Enterprise | The skill and risk-taking of the entrepreneur | The founder who starts and runs the business |
Exam Tip: Enterprise is a factor of production. The entrepreneur combines land, labour, and capital to create a business. Without enterprise, the other factors remain unused.