What is a Business?
The nature of business, economic sectors, entrepreneurship, and challenges and opportunities for starting up.
- Define a business and explain how businesses satisfy needs and wants
- Classify businesses into the four economic sectors with examples
- Distinguish between entrepreneurs and intrapreneurs
- Evaluate the challenges and opportunities involved in starting a business
The Nature of Business
A business is an organisation that combines resources (land, labour, capital, enterprise) to produce goods or services with the aim of satisfying customer needs and wants — usually to make a profit.
Needs vs Wants
| Needs | Wants | |
|---|---|---|
| Definition | Essentials required for survival | Desires beyond basic survival |
| Examples | Food, water, shelter, clothing | iPhone, designer clothes, holidays |
| Characteristics | Limited, universal, finite | Unlimited, varies by person, changes over time |
Businesses profit from wants as much as needs. Marketing often converts wants into perceived needs.
Goods vs Services
| Goods | Services | |
|---|---|---|
| Nature | Physical, tangible products | Intangible acts or experiences |
| Examples | Cars, food, clothing | Banking, healthcare, education |
| Storable? | Yes | No — consumed as produced |
The Four Business Functions
Every business, regardless of size, carries out four core functions:
| Function | Role |
|---|---|
| Human Resources (HR) | Recruit, train, manage and motivate employees |
| Finance | Manage money — budgeting, accounts, raising capital |
| Marketing | Identify customer needs, promote and sell products |
| Operations | Produce goods/services — purchasing, quality, logistics |
Economic Sectors
Businesses are classified into four sectors depending on what stage of production they operate in:
| Sector | Activity | Examples |
|---|---|---|
| Primary | Extraction of natural resources from the earth | Farming, fishing, mining, forestry, oil extraction |
| Secondary | Manufacturing and construction — turning raw materials into finished goods | Car factories, food processing, construction firms |
| Tertiary | Providing services to consumers and businesses | Retail, banking, transport, education, healthcare |
| Quaternary | Knowledge and information-based activities | Research & development, IT, consultancy, media |
As economies develop, they typically shift from primary → secondary → tertiary. Developed economies like NZ, the UK, and the USA are dominated by the tertiary and quaternary sectors. Primary industries shrink as a share of GDP even if they remain important exports.
Questions often give a business description and ask you to classify it. Be precise: a supermarket is tertiary (retailing a service), not secondary, even though it sells physical goods it did not manufacture.
Entrepreneurship
Entrepreneur: Someone who identifies a business opportunity, takes on the financial risk of starting a new venture, and organises resources to produce goods or services.
Intrapreneur: An employee who acts entrepreneurially within an existing organisation — developing new ideas, products or processes without bearing personal financial risk.
Characteristics of a Successful Entrepreneur
- Risk-taker — willing to invest own money and accept uncertainty
- Innovative — creates new products, services or ways of doing things
- Resilient — persists through setbacks and failure
- Organised — manages resources, time and people effectively
- Opportunistic — spots gaps in the market others have missed
Entrepreneur vs Intrapreneur
| Entrepreneur | Intrapreneur | |
|---|---|---|
| Works for | Their own new venture | An existing organisation |
| Financial risk | Bears personal risk | Company bears the risk |
| Resources | Must source their own | Uses company resources |
| Example | Elon Musk founding Tesla | Google employee developing Gmail |
Challenges and Opportunities for Starting a Business
Challenges
- Finance — raising enough capital to cover start-up costs; risk of running out of cash before break-even
- Competition — established competitors have brand recognition, economies of scale, and loyal customers
- Regulations — licences, health and safety requirements, employment law, tax registration
- Lack of experience — new entrepreneurs may lack business, financial or management skills
- Market research — insufficient understanding of target customers and their needs
- Risk and uncertainty — demand, costs, and competition are hard to predict
Opportunities
- Market gaps — unmet customer needs or underserved market segments
- Technological change — new technology creates entirely new industries and business models
- Social trends — shifting consumer values (e.g. sustainability, health) open new niches
- Government support — grants, loans, tax incentives, and incubators for new businesses
- Globalisation — digital tools allow even small businesses to reach international customers from day one
For a "discuss" or "evaluate" question on starting a business, don't just list challenges and opportunities — weigh them. The significance depends on the industry, the entrepreneur's background, and the economic environment.
Key Terms
- Businesses satisfy needs and wants by producing goods and services
- The four sectors are primary, secondary, tertiary, and quaternary
- Entrepreneurs bear personal risk; intrapreneurs work within existing organisations
- Starting a business involves both opportunities (market gaps, technology) and challenges (finance, competition)
(a) A New Zealand sheep farm
(b) A Toyota car manufacturing plant
(c) A law firm
(d) A pharmaceutical research company [8 marks]
Show answer
(a) Primary sector. Farming involves the extraction or production of raw natural resources (wool, meat) directly from the land.
(b) Secondary sector. A car plant manufactures finished products from raw materials and components — a classic example of manufacturing.
(c) Tertiary sector. A law firm provides a professional service; no physical good is produced.
(d) Quaternary sector. Pharmaceutical R&D is knowledge-based, focused on generating new information and innovations.
Show answer
An entrepreneur establishes and runs their own new business venture, bearing personal financial risk. For example, a person who opens a new café using their own savings is an entrepreneur.
An intrapreneur acts entrepreneurially within an existing company, developing new ideas or products using company resources — without carrying personal financial risk. For example, a Spotify engineer who develops a new podcast feature is an intrapreneur.
Award 1 mark for each definition + 1 mark for each valid example.
Show answer
Accept any two well-explained challenges, for example:
- Finance: The owner will need money to buy tools, spare parts, and a website before earning any revenue. As a school leaver with no trading history, securing a bank loan may be difficult, limiting how quickly the business can grow.
- Competition: Established repair shops and national chains benefit from walk-in footfall, trusted reputations, and warranties. A home-based sole trader will struggle to match their credibility initially.
- Lack of experience: Managing a business involves more than technical skill — the owner must handle customer service, accounts, marketing, and purchasing. Without prior experience, mistakes in any of these areas could damage the business.
Award 1 mark for identification + 1 mark for explanation with a logical consequence.
Show answer
- Tangibility: Goods are physical and tangible (e.g. a car), whereas services are intangible experiences or acts (e.g. a car wash). You can touch a good; you cannot touch a service.
- Storability: Goods can be produced, stored, and sold later (e.g. canned food). Services cannot be stored — a haircut is produced and consumed simultaneously.
Award 1 mark for each clearly stated difference + 1 mark for an appropriate example.
Show answer
Opportunities include:
- Low barriers to entry — software businesses can be started with relatively little capital compared to manufacturing.
- Global reach — digital products can be sold worldwide from day one, giving access to a huge market.
- Fast-growing sector — AI, cloud computing, and app development are expanding rapidly, creating many market gaps.
- Government support — many countries offer tax incentives, grants, and startup incubators for tech ventures.
However, challenges exist:
- Competition is intense — large tech companies (Google, Apple, Microsoft) can rapidly copy or acquire successful startups.
- Rapid change means products can become obsolete quickly, requiring continuous innovation.
- Access to skilled talent (developers, data scientists) can be expensive and competitive.
Conclusion: The technology sector offers significant opportunities, particularly due to low start-up costs and global markets. However, the degree of competition and pace of change means that success depends heavily on the entrepreneur's ability to innovate continuously and differentiate their product.
For top marks: state a supported judgement weighing the opportunities against the challenges. Avoid simply listing both sides without a conclusion.