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PRODUCTION
What is business? The production buying and selling of goods and services for profit. Which goods or services?
- Needs : they are the basic requirement of life such as: food, water, houses.. - Wants : they are desires we have for non-essential objects such as: bags, mobile phones.. It’s no-important for our survival.
PRIMARY SECTOR: companies involved in obtaining natural resources (oil extraction, fishing, mining, farming, etc.)
SECONDARY SECTOR : companies that produce or assemble raw materials supplied by the primary sector companies, and trasform them into final products (cars, books, cans of coke, televisions)
TERTIARY SECTOR: companies that provide or sell goods and provide to business and people (superstores, bookshop, furniture shops, banks, insurance)
QUATERNARY SECTOR AND QUINARY
SECTOR : service activities such as: scientific research, quinary sector inclueds the highest levels of decisions making in a society or economy.
BUSINESS ACTIVITIES
Provide: GOODS : tangible items that can be durable (cars, computers, etc) or non- durable.
Provide: SERVICES : may include facilities in the form of transport, banking, marketing, education, insurance.
FOUR FACTORS:
LAND : includes all kinds of natural resources
LABOUR :
worker’s physical and mental efforts (skills)
CAPITAL : the money invested in production (financial capital) and capital goods.
ENTREPRISE :
the skills and risk-taking ability of people who set up in business
=LAND+ LABOUR+CAPITAL
ENTREPRENEUR : characteristics: good communicater, self-confident. resourceful., sociable, good leader, risk-taker, flexible and responsible
LIMITED COMPANIES : it is a company in which the shareholders will lose only what they invested if the company goes bankrupt and will not lose other property they own. The company is a legal body, separate in laws from the owners. There are 2 types:
- PRIVATE LIMITED COMPANIES (Ltd): S.r.l. (società a responsabilità limitata)
- PUBLIC COMPANIES (Plc): S.p. A (società per azioni)
FRANCHISING : It is the authorization given by the franchisor to the franchisee to sell his/her products in a given area in return for an initial FEE and a PERCENTAGE of the annual turnover. Nowdays it is widespread because there are a lot of ADVANTAGES on both sides.
- FRANCHISOR: concedente, affilitante
- FRANCHISEE: affiliato
COOPERATIVES : an organisation formed by people working for a common purpose or benefit and each of them owns an equal share, has limited liability and the same power. There are various types of cooperatives:
- Worker cooperatives
- Retailer cooperatives
- Producer cooperatives ADVANTAGES: ▪Easy to set up ▪Limited liability ▪It is stable ▪Tax benefits DISADVANTAGES : Each member has one vote: decision-making process can be slow
MULTINATIONALS : large companies which operate in more than one nation.
- Parent company : società madre o società di controllo - Subsidiaries : filiali Reasons to create a multinational:
- To increase market share
- Cheaper raw materials, land and labour in foreign nations
- To avoid takes
- To avoid trade barriers
When businesses grow inside, they begin to export their products so they move their production (the four factors of production are: capital, labour, entreprise and land) in other countries. A company has its headquarter in a country but produce in more countries which are called host-country.
MULTINATIONALS RELOCATION :
OFFSHORING = means the relocation of goods and services in an other country. There are two types of offshoring: -Production offshoring: involves the relocation of manufacturing process to a lower cost destination. For example: electronic components, toys or clothes -Service offshoring: it concerns the tertiary sector (provides services). Involves the relocation of support processes such as: Information Technology, customer service processes (call center).
REASONS OF OFFSHORING:
- Closer to markets
- Saves times
- Lower costs
- Access to expertise
- Companies can focus on core processes OUTSOURCING : it means contracting work out to an external organisation and this organisation can be in different country or not.
CHANNELS OF DISTRIBUTION
1. MANUFACTURER
(PRODUCER)
CONSUMER
MANUFACTURER
RETAILER
CONSUMER
3. MANUFACTURER
WHOLESALER
(grossista)
RETAILER (dettagliante)
CONSUMER
