Business Management Unit 1

Business: Definition and Scope

• A business is an entity that aims to satisfy the needs or wants of individuals by acquiring, producing, delivering, or informing them through goods or services.
• Key components of a business include:
  • Resource inputs: factors of production required to produce goods or services.
  • Product outputs: results of processing and manufacturing goods or services.
  • Human inputs: right quantity and quality of people required to produce a good or service.
  • Physical inputs: right quantity and quality of land, machinery, or technology used to produce a good or service.
  • Financial inputs: right amount of cash or other financial resources required to produce a good or service.

Types of Businesses

• Enterprise: a concept that includes the people and activities involved in running a business, including their skills, experience, and knowledge.
• Capital-intensive businesses: processes that use a large portion of land or machinery to produce goods and services.
• Labour-intensive businesses: processes that use a large number of people to produce goods and services, often related to land or machinery.

Business Functions

• Human resources: sector responsible for managing human relationships, employee training, payment, and sometimes firing.
• Finance and accounts: sector responsible for managing an organisation's financial resources, including budgeting, financial reporting, and strategic planning.
• Marketing: sector responsible for promoting products or services to attract customers.
• Operations management: sector responsible for ensuring resources are applied effectively during the production of goods and services.

Sectors of the Economy

• Primary sector: sector involved in the acquisition of goods, such as fishing, hunting, and farming.
• Secondary sector: sector involved in the processing of goods, such as manufacturing and construction.
• Tertiary sector: sector involved in the provision of services, such as wholesale, retail, and healthcare.
• Quaternary sector: sector involved in informing, such as education, media, and web-based services.

Starting a Business

• Reasons to start a business:
  • Rewards for profits
  • Independence
  • Necessity
  • Challenge and skill development
  • Interests
  • Finding a gap in the market
• Steps to start a business:
  • Organising the basics
  • Refining the business idea
  • Planning the business
  • Establishing legal requirements
  • Raising finance
  • Testing the market

Types of Ownership

• Private sector: portion of the economy not owned or controlled by the government.
• Public sector: portion of the economy owned or controlled by the government.
• Profit-based (commercial) organisations: entities that aim to make a profit.
• Sole trader (sole proprietor): a business owned and run by one person, with unlimited liability.
• Partnerships: a business owned and operated by two or more people, with unlimited liability.
• Companies or corporations: a type of business where owners (shareholders) have limited liability over the business and are recognised with a legal distinction.

Advantages and Disadvantages of Each Type of Ownership

• Sole trader: advantages include profits for the owner, complete control, flexibility, and minimal legal formalities; disadvantages include unlimited liability, stress, and lack of continuity.
• Partnerships: advantages include skills and qualities of multiple partners, greater stability, and mutual help; disadvantages include unlimited liability, disagreements, and loss of control.
• Companies: advantages include limited liability, higher stability, and access to loans; disadvantages include loss of control, less access to loans, and higher legal requirements.

Social Enterprises

• A form of business that aims to improve human, social, or environmental wellbeing, with a financially sustainable approach.
• Types of social enterprises include:
  • Cooperatives: business organisations owned and operated by members, aiming to improve wellbeing.
  • Non-profit social enterprises: organisations that aim to provide a social service, with a focus on serving the community rather than earning profits.

Other Business Concepts

• Intrapreneurs: people who design new products or services within a business.
• Entrepreneurs: people who start their own businesses.
• Initial Public Offering (IPO): shares sold to the public for the first time by a business.
• Patent: a set of exclusive rights granted to the inventor of a product.### Types of Organizations
• Non-Governmental Organizations (NGOs):
  • Support a socially desirable cause
  • Focus on a single issue or a broader spectrum
  • May not have political affiliation or agenda
  • May have a philanthropic focus
• Charities:
  • A specific type of NGO
  • Provide relief to those in need
  • Have a philanthropic focus
  • Exempt from taxes
  • May have single-event or single-issue focus

Vision and Mission Statements

• Vision statement:
  • Establishes a future view of what the company wants to achieve
  • Speaks to long-term aims and highest aspirations
  • Inspiring and motivating
  • Brief
• Mission statement:
  • Establishes the company's purpose of existence
  • Includes aims and important values
  • Helps to accomplish objectives
  • Communicates what needs to be done to achieve the vision
  • Longer than vision statements

Business Objectives

• Business objectives:
  • Articulated, specific, and measurable targets
  • Must be met to achieve the company's aims
  • Include growth, gaining market share, increasing sales, etc.
• Strategic objectives:
  • Long to medium-term goals
  • Set by the CEO, board of directors, and senior managers
  • Indicate how the company intends to fulfill its mission
  • Include performance goals
• Tactical objectives:
  • Medium to short-term goals
  • Set by executive managers and middle-level managers
  • Help to reach strategic objectives
• Operational objectives:
  • Short-term goals
  • Set by middle-level managers, floor managers, and employees
  • Help to reach tactical objectives

Corporate Social Responsibility (CSR)

• CSR:
  • View that businesses should contribute to the economic, social, and environmental wellbeing of society
  • Focus on philanthropy, generous salaries, benefits, and environmental support
• Ethical objectives:
  • Objectives based on moral principles
  • Include building customer loyalty, creating a positive image, and reducing the risk of legal redress
  • Impact the business itself, competitors, suppliers, customers, and the local community

SWOT Analysis and Ansoff Matrix

• SWOT Analysis:
  • Classifies a business' strengths, weaknesses, opportunities, and threats
  • Helps with strategic planning
  • Strengths and weaknesses arise from the business itself, while opportunities and threats arise from the external environment
• Ansoff Matrix:
  • Evaluates strategies for growth in regards to the product and market
  • Includes market penetration, product development, market development, and diversification

Stakeholders and Stakeholder Analysis

• Stakeholders:
  • Any individual or group with an interest in a business
  • Can affect or be affected by the business
  • Include market stakeholders, non-market stakeholders, primary stakeholders, and secondary stakeholders
• Stakeholder analysis:
  • Classifies stakeholders according to their importance within a business
  • Includes stakeholder mapping, which classifies stakeholders according to their level of interest and degree of power

PESTLE and STEEPLE Analysis

• PESTLE Analysis:
  • Includes political, economic, social, technological, legal, and ecological factors
  • Helps to analyze the external environment
• STEEPLE Analysis:
  • Includes social, technological, economic, ethical, political, legal, and ecological factors
  • Helps to analyze the external environment

Economies and Diseconomies of Scale

• Economies of scale:
  • Decrease in per unit cost production as output or activity increases
  • Conditions include capacity, less average costs, more productivity, and more demands
  • Internal economies of scale include technical, managerial, risk-bearing, purchasing, and marketing efficiencies
  • External economies of scale include efficiencies due to external factors
• Diseconomies of scale:
  • Increase in per unit cost production as output or activity increases
  • Internal diseconomies of scale include technical, managerial, risk-bearing, purchasing, and marketing inefficiencies
  • External diseconomies of scale include inefficiencies due to external factors

Growth Strategies

• Internal growth:
  • Growth by using a business' own capabilities and resources
  • Happens slowly, steadily, and is less risky
• External growth:
  • Growth with the aid of external factors
  • Types include merger, acquisition, takeover, and joint venture
  • Can be horizontal, vertical, or conglomerate
• Decision trees:
  • A diagram that helps businesses decide on whether to grow or stay small
  • Includes square nodes, round nodes, and probabilities

Globalization and Multinational Businesses

• Globalization:
  • Process of integrating the world in economic, social, cultural, political, technological, and other aspects
  • Impact on domestic businesses' growth includes increased competition, greater brand awareness, skills transfer, and closer collaborations
• Multinational businesses (MNCs):
  • Companies that are legally registered and operate in two or more countries
  • Considered the biggest type of business
  • Factors of rapid growth include improved communications, dismantling of trade barriers, and increasing economic and political power
  • Impact on host countries includes economic growth, new ideas, skills transfer, and greater choice of products, but also profits being repatriated, loss of cultural identity, brain drain, and loss of market share

Learn about the basics of business, including the definition of business, resource inputs, product outputs, and human inputs. Understand the fundamental concepts of business management.