Business Management Introduction Unit 1.1

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Questions and Answers

What is the primary purpose of a business?

To meet the needs or wants of customers by providing a product or service.

List the four main business functions.

Human resources, finance, marketing, and operations.

What distinguishes capital goods from consumer goods?

Capital goods are used to create other products, while consumer goods are not.

Describe the relationship between inputs, processes, and outputs in a business.

Businesses combine inputs, undergo a production process to add value, and produce outputs. Signup and view all the answers

What impact does sectoral change have on business activity?

Sectoral change can create new opportunities or challenges for businesses depending on shifts in demand. Signup and view all the answers

What sectors do developing economies primarily focus on?

Developing economies primarily focus on primary and secondary sectors. Signup and view all the answers

What are two key types of businesses that developed economies rely on?

Developed economies rely on tertiary and quaternary sector businesses. Signup and view all the answers

Name two reasons why individuals might start a business.

Individuals might start a business for creativity or to meet market demands. Signup and view all the answers

List the first two steps in starting a business.

The first two steps are organizing the basics and researching the market. Signup and view all the answers

What is the importance of creating a business plan?

A business plan is crucial because it documents all issues that need to be planned before operations begin. Signup and view all the answers

What should be considered when establishing legal requirements for a business?

One should consider laws, licenses, and employee wages. Signup and view all the answers

What is one method to raise finance for starting a business?

One method to raise finance is through personal funds. Signup and view all the answers

Why is market research essential for a new business?

Market research is essential to identify unique selling propositions and target markets. Signup and view all the answers

What defines a capital-intensive production process?

A capital-intensive production process primarily relies on machinery and equipment rather than human labor. Signup and view all the answers

What are the four key business functions or departments in a business?

The four key business functions are Human Resources, Finance, Marketing, and Operations. Signup and view all the answers

Explain the role of the Marketing Department in a business.

The Marketing Department is responsible for making the right product and promoting it to the target market. Signup and view all the answers

How does the role of an entrepreneur differ from that of an intrapreneur?

An entrepreneur operates independently to create a business, while an intrapreneur works within a corporation to innovate and develop new products or services. Signup and view all the answers

What does the primary sector of the economy involve?

The primary sector involves activities related to the extraction of raw materials, such as farming, fishing, and mining. Signup and view all the answers

Identify the main function of the Operations Department in a business.

The Operations Department ensures that products are produced in the right way and manages the day-to-day activities of production. Signup and view all the answers

What is the significance of aligning the business functions within an organization?

Aligning business functions is essential for strong organizational performance and achieving strategic goals. Signup and view all the answers

Describe the quaternary sector and its importance in the economy.

The quaternary sector involves knowledge-based services such as research and development, information technology, and education. Signup and view all the answers

What is the purpose of the production chain?

The production chain is used to turn raw materials into consumer goods through various sectors. Signup and view all the answers

Identify the four sectors of the production chain.

The four sectors are the primary sector, secondary sector, tertiary sector, and quaternary sector. Signup and view all the answers

How does sectoral change affect economies as they develop?

As economies develop, they shift from relying on the primary sector to increasingly engaging with secondary and tertiary sectors. Signup and view all the answers

Why might underdeveloped economies face challenges with sectoral changes?

Underdeveloped economies often rely heavily on the primary sector, which can limit their growth and diversification. Signup and view all the answers

Provide an example of a product and identify its sectors in the production chain.

For a smartphone, the primary sector involves raw material extraction, the secondary sector involves manufacturing, the tertiary sector involves distribution, and the quaternary sector includes research and development. Signup and view all the answers

How does employment affect the measurement of each economic sector?

The size of each economic sector is measured by the number of people employed within those industries. Signup and view all the answers

In developing economies, what sectors are predominant?

Developing economies predominantly rely on the secondary sector while still having a significant primary sector. Signup and view all the answers

What key issues might arise due to sectoral change in economies?

Sectoral change can lead to resource strains, particularly in human resources, as industries transition. Signup and view all the answers

What are two key reasons why many businesses fail?

Poor market research and legal requirements not being addressed are two key reasons. Signup and view all the answers

In what ways can testing the market contribute to a business's success?

Testing the market can provide feedback through pilot programs and help identify consumer preferences. Signup and view all the answers

What are the four main functions covered in a business plan?

The four main functions are Human Resource, Finance, Marketing, and Operations. Signup and view all the answers

Why is it important to address legal requirements when starting a business?

Addressing legal requirements helps avoid potential fines and ensures the business operates within the law. Signup and view all the answers

What can be inferred about the impact of an inappropriate target market on a business?

An inappropriate target market can lead to poor sales and ultimately contribute to the business's failure. Signup and view all the answers

How can raising finance be a challenge for new businesses?

New businesses may face cash flow problems and may be incapable of securing medium to long-term finance. Signup and view all the answers

How does having vague goals affect a business plan?

Vague goals can lead to unclear strategies, making it difficult for the business to measure progress or success. Signup and view all the answers

What factors should entrepreneurs consider when planning to launch their business?

Entrepreneurs should consider market research, financial planning, and testing their products or services. Signup and view all the answers

What factors should be considered when determining the core idea of a business?

The core idea should consider the product's function, target market, potential for success, and the development cycle. Signup and view all the answers

In finance, why is it crucial to predict the source of income?

Predicting the source of income is essential for budgeting and ensuring the business can cover its operational costs. Signup and view all the answers

What are some legal requirements to consider before launching a business?

Legal requirements may include obtaining necessary licenses, adhering to zoning laws, and complying with health and safety regulations. Signup and view all the answers

How can market research influence a marketing strategy?

Market research helps identify target customers and informs effective advertising and distribution strategies. Signup and view all the answers

What roles should a business define within its human resources plan?

A business should define roles for responsibility allocation, including management, production, and customer service personnel. Signup and view all the answers

Why is it important to analyze production needs in the operations plan?

Analyzing production needs determines the number of units to produce and helps streamline the manufacturing process. Signup and view all the answers

What opportunities might arise when opening a Local Delicatessen and Café?

Opportunities could include forming community partnerships, catering services, and creating a loyal customer base. Signup and view all the answers

What is the significance of opportunity cost in finance?

Opportunity cost represents the potential benefits lost when choosing one alternative over another, influencing financial decisions. Signup and view all the answers

Study Notes

Unit 1.1: Introduction to Business Management

The unit covers the nature of business and all four business functions.
It defines primary, secondary, tertiary, and quaternary sectors.
It outlines business activity in each sector and the impact of sectoral change on business activity.
It examines challenges and opportunities for starting a business (using the Business Plan toolkit).

The Nature of Business

A business is any organisation using resources to satisfy customer needs and wants by providing products or services.
Business activity involves combining inputs (factors of production) to add value and create outputs (goods or services).

Factors of Production

Human resources/labour: Employees involved in the process.
Physical resources/land: Raw materials and facilities used.
Financial resources/capital: Money needed for operations.
Enterprise/entrepreneurship: Organising and managing resources.

Production Processes

Production processes can be capital-intensive (using machinery) or labour-intensive (relying on workers).

The Business Functions

Businesses are divided into key functions (departments):
- Human Resource Department (HR): Managing employees.
- Finance Department: Managing money and finances.
- Marketing Department: Promoting and selling products.
- Operations Department: Actual production process.
These functions are interdependent.

Capital Goods vs Consumer Goods

Capital goods are items used to create other products, including tools, buildings, machinery, equipment, and vehicles.
Consumer goods are not used to create other products.

Sectors of Activity

Primary sector: Includes extraction of raw materials (e.g., farming, fishing, mining).
Secondary sector: Involves manufacturing finished goods.
Tertiary sector: Provides services (e.g., banking, tourism, healthcare).
Quaternary sector: Focuses on information, research, and technology.
Sectors are linked in a production chain/chain of production.

Starting a Business - Reasons, Steps, and Challenges/ Opportunities

Reasons: Rewards, interest, necessity, independence, challenge, sharing gaps.
Steps:
- Organizing the basics (location, legal structure, feasibility).
- Researching the Market (unique selling proposition, target market, marketing).
- Planning the business (creating a business plan).
- Establishing Legal Requirements (laws, licenses, wages).
- Raising the Finance (investors, personal funds, lending terms).
- Testing the market (launching, pilot programmes, feedback).
Why business fail:
- Inappropriate location, weak business structure, unreliable suppliers, poor market research, inappropriate target market, testing was too optimistic, business plan not convincing, vague goals, legal requirements not addressed, registration was too difficult, tax obligations not addressed, cash flow problems, inappropriate accounting, incapable of raising finance, launch failed, limited success (product disliked)

Entrepreneurs and Intrapreneurs

Entrepreneurs are individuals who start businesses for profit.
Intrapreneurs work within a large organisation to develop new products or services.

Sectoral Change

Sectoral change refers to shifts in the proportion of the economy in each sector as economies develop.
The dominant sector in less developed economies is primary, in developing economies it's secondary, and in developed economies tertiary and quaternary sectors dominate.

TOK Discussion

Key questions for discussion:
- Is Business Management an art or a science?
- Why these sectors categories?
- Entrepreneurs: How do they predict and mitigate challenges?

Assignment

Research and evaluate 3 compelling businesses on KIVA.
Consider business plans, choices of sectors to operate in, and factors to consider when opening a business.
Discuss challenges and opportunities when starting businesses involving:
- Local delicatessen and café
- Manufacturer of a new energy drink
- Travelling hairdresser
- After-school sports club

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Description

Explore the fundamentals of business management in Unit 1.1. This quiz covers the nature of business, various sectors, and the factors of production essential to creating value. Dive into the challenges and opportunities in starting a business with practical insights from the Business Plan toolkit.