Introduction to Business Studies
What is business?
A business is any activity that produces or exchanges goods and services to satisfy human wants, normally for profit. In the Kenyan Senior School CBC (KICD) curriculum, Business Studies prepares learners to understand enterprise and to start small ventures.
Needs, wants and scarcity
- Needs are essentials for survival: food, water, shelter, clothing.
- Wants are desires beyond survival: a car, a television, a holiday.
Resources are limited, yet human wants are unlimited. This problem is called scarcity, and it forces people to make choices.
Goods and services
- Goods are tangible: maize flour, chairs, phones. They may be consumer goods (bought by households) or capital goods (used to make other goods, like machines).
- Services are intangible: teaching, transport, banking, hairdressing.
Types of business activities
- Extractive industries - take resources from nature: farming, fishing, mining, forestry.
- Manufacturing industries - convert raw materials into finished products, e.g. a sugar factory in Mumias.
- Construction - building roads, houses and bridges.
- Commerce - buying and selling to move goods from producer to consumer. It includes trade (wholesale and retail) and aids to trade (transport, banking, insurance, warehousing, advertising, communication).
Importance of business
- Provides goods and services to consumers
- Creates employment and incomes
- Earns the government revenue through taxes
- Encourages innovation and development
- Earns foreign exchange through exports such as tea, coffee and flowers
The business environment
Every business operates in an environment that includes:
- Economic (inflation, interest rates)
- Social (culture, population)
- Political and legal (licences, laws)
- Technological (mobile money such as M-Pesa)
- Natural (climate, resources)
Business motives
Besides profit, businesses may aim to serve the community, build a brand, or survive in competition.
Worked example 1
Wanjiru buys tomatoes at Wakulima market for KES 2,000 and sells them for KES 2,800. Find her profit.
Answer: Profit = 2,800 - 2,000 = KES 800.
Worked example 2
Classify a mobile phone repair shop.
Answer: It provides a service, so it is a business offering services within commerce.
Try it
- List five businesses in your town and classify each.
- Write three needs and three wants of your family.
- Explain how M-Pesa has changed the business environment.
- Identify one aid to trade used by a local shop and explain its role.