Fundamentals of Business

Notes

From the definition of a Enterprise what is an enterprise? Any entity What does an enterprise do? Engage in an economic activity, irrespective of its legal form. Therefore, The keyword is economy.

Therefore there are two fundamentals of business:
From this point forward, the word
1."Enterprise" refers to a private enterpriseprivate individuals who hope to realize a profit from their activities.

2.Business is all about logic and commonsense, The entire book will focus on key business concepts and not general knowledge approach. How to use this book All key concepts are highlighted in red headings. Throughout this book wherever possible every heading is accompanied with real life examples in the form of extracts from various sources.

1.1 An enterprise and its consumers Consumer definitions
I. the actual end user, the last, in the distribution chain of goods or services.
II. the buyer of goods/services (customer).
An enterprise is born out of consumers demand for products or services. Enterprises produce products/services to specific consumer groups.

Consumer and demand

1. When a consumer is only the end user, last in distribution chain and not the buyer, demand is indirect.
For example
Baby food, baby's are the end users, yet, it is their parents/guardians that make decision to buy the products.
2. When a consumer is both the end user and buyer, demand is direct.
For example
A product aiming at 25 - 35 year olds
Most people in this age group, will be working, therefore, they have income and make decision to spend by themselves.
3. When a consumer is only the buyer and not the end user, demand is indirect.
The other word for a consumer who is only the buyer and not end user is strictly a Customer. For example

A supermarket will demand milk from dairy farmers,
They don't consume the milk, only buy and sell to consumers along the distribution chain.
Actual example

Price comparison site

The end users for this site are individuals, households that want to buy the services advertised on the site, available for free, Statistics 1 out of 8 people using the site services will end up buying the service, yet, their customers are those companies (insurance, travel, finance e.t.c) that are in their database, who pay moneysupermarket for the services, per click or per sale. The end users and customers have different needs, as illustrated in this example.

Note:
A product/service must always satisfy both the end user and the buyer. It is paramount to understand these three basic consumer types as they are the origin of any firm.