In 2015, Tharanga Perera opened a second-hand bicycle shop in the city
of Kandy in Sri Lanka. He had always wanted to run his own business
because he wanted to be his own boss. He worked for 12 years in a tea
factory and saved LKR 100 000. Tharanga had a passion for bicycles and
spent a lot of his spare time as a hobby restoring old bicycles and selling
them to local people. The shop, located in a Kandy backstreet, had a
small garage at the rear where he carried out repairs. Tharanga employed
his younger brother as a shop assistant while he spent most of the time
repairing, maintaining and restoring old bicycles. Before the shop was
opened Tharanga had to:
◼ obtain a LKR 300 000 loan from his grandmother
◼ buy some new tools and equipment
◼ find suitable premises, ideally with somewhere to carry out repair work
◼ refurbish the premises
◼ find a reliable supplier of spare parts for his repair and restoration work
◼ learn how to keep financial records
◼ advertise the shop.
Tharanga worked very hard. However, it was worth it because in 2016 the
Kandy Cycle Shop made a profit of LKR 900 600. Tharanga thought he
might start to sell new bicycles in the future if he could get a bank loan to
buy some stock.
In groups, discuss the following:
1 Why do you think Tharanga opened a second-hand bicycle shop?
2 What are three resources used by Tharanga when setting up his business?
3 Why do you think businesses exist?
Some people try to make money by setting up a business. They
might do this because they want to work for themselves. Or they
think they can make more money than working for someone
else. Or perhaps they have been made redundant and cannot find
another job. Running a business is hard work but the rewards can
be worth it. Look at the example below.
GETTING STARTED
CASE STUDY: THE KANDY CYCLE SHOP
GENERAL VOCABULARY
tool a piece of equipment that is useful for
doing your job
premises buildings and land used by a
shop or business
SUBJECT VOCABULARY
Uncorrected proof, all content subject to change at publisher discretion. Not for resale, circulation or
distribution in whole or in part. ©Pearson 2019
BUSINESS ACTIVITY WHAT IS BUSINESS ACTIVITY? 5
▶ Table 1.1 Consumer and producer goods
BUSINESS ACTIVITY
GOODS AND SERVICES
SATISFYING NEEDS AND WANTS
A business is an organisation that provides goods and services. The Kandy
Cycle Shop example illustrates many features of business activity.
1 Business activity produces an output – a good or service. Tharanga is
selling second-hand bicycles (goods) and offering a repair and maintenance
service.
2 Goods and services are consumed. Customers buy the second-hand
bicycles or consume the repair and maintenance service provided by
Tharanga.
3 Resources are used. Spare parts (such as tyres, wheels and chains),
oil, tools, equipment and electricity are just a few of the resources used
by the Kandy Cycle Shop. Money, such as the LKR 300 000 loan from
his grandmother and his LKR 100 000 savings, is also a resource. The
resources used by businesses are often called the four factors of production
– these are explained in Chapter 44, pages 368-374.
4 A number of business functions may be carried out. Production, marketing,
human resources and financial control are examples of these functions.
Production in the case of the Kandy Cycle Shop involved the sale of
second-hand bicycles and a repair and maintenance service. Marketing
involved advertising the shop in the local area.
5 External factors affect businesses. Things that they cannot control have
an impact on businesses, such as government laws, changes in consumer
tastes and the actions of competitors. The Kandy Cycle Shop has to
compete with similar shops in the area.
6 Businesses aim to make a profit. Most people setting up a business do so
as they wish to make money for themselves. In this case, the Kandy Cycle
Shop made a profit of LKR 900 600 for Tharanga in 2016.
