Business Partnerships vs. MNCs Impact

Business Organization and Environment

• Business is any organization involved in producing goods and services
• Business activity involves transforming inputs (e.g., land, labor, capital, enterprise) into outputs (finished goods and services) to meet customer needs.
• Factors of production include:
  • Land: natural resources (renewable and non-renewable)
  • Labour: human effort/human resources
  • Capital: manufactured resources (machinery, equipment, finance)
  • Enterprise: knowledge, skills, and experiences of individuals managing the production process (entrepreneurs)
• Scarcity: limited resources and unlimited wants
• Opportunity cost: value of the next best alternative foregone when choosing an option
• Goods are tangible, while services are intangible experiences
• Services are inseparable from the provider, perishable, and heterogeneous
• Business functions include: Human resources (HR) managing the workforce, Finance & Accounts (managing finances), Marketing (meeting customer needs), Operations (producing goods & services)

Business Functions

• Human resources: Manage the workforce & employees and is responsible for dealing with recruitment, wages, communication, and motivation.
• Finance and accounts: Responsible for the organization's financial transactions and assets

Specialisation and Division of Labour

• Specialization focuses on doing what one does best
• Division of labour divides production into smaller tasks for different employees, increasing efficiency

Economic Sectors

• Primary Activities: extracting raw materials (farming, fishing, mining)
• Secondary Activities: manufacturing and construction
• Tertiary Activities: provision of services (travel, banking, retail)
• Quaternary Activities : knowledge-based activities (research, development, management consulting)

Economic Business Entities

• Private Sector – part of the economy owned and controlled by individuals and companies for profit
• Public Sector – part of the economy or a business owned and controlled by the state or government (education, healthcare, etc)
• Private Limited Company – limited liability, shares are not sold to the general public
• Public Limited Company – limited liability, shares are traded publicly

Types of Organisations

• Unincorporated businesses - Do not have a separate legal identity from its owners. Owners have unlimited liability for business debts. Examples include Sole Proprietorship and Partnerships.
• Incorporated business - a separate legal identity from its owners. Owners have limited liability for business debts. Examples include Private Limited Company and Public Limited Company.

Entrepreneurship

• Entrepreneur – individuals who plan and organize a business & take the financial risk of starting a business

Challenges and opportunities for starting a business

• Challenges: lack of finance, poor marketing, unestablished customer base, lack of knowledge and experience
• Opportunities: ambition for profits, autonomy, family ties, unfilled market opportunities, making a difference, not being able to find employment

Private and Public Sector

• Private sector is part of the economy that is owned and controlled by individuals & companies for profit
• Public sector is part of the economy that is owned and controlled by governments for their constituents e.g., education, healthcare

Business Objectives

• Objectives are clear, measurable targets for organizations, essential for achieving overall goals
• Key criteria of a successful objective is SMART (Specific, Measurable, Achievable, Relevant, Time-bound)
• Businesses use objectives such as profit, growth, and market share.

Stakeholder analysis

• A stakeholder is an individual or group that has an interest in or involvement with a business.
• Businesses need to consider both internal stakeholders (employees, managers, directors) and external stakeholders (customers, suppliers, governments, competitors, pressure groups).
• Each stakeholder group will have differing objectives and these objectives can clash with others.

Growth and Evolution

• Economies of scale - average cost of production decreases as the organization grows
• Internal economies of scale - reductions in costs due to increased output, experienced inside a company
• External economies of scale - reductions in costs due to industry-wide developments
• Diseconomies of scale – average costs of production increases as organization grows excessively, causing loss of efficiency or control, often due to bureaucracy
• Growth strategies can be internal or external – internal through organic growth, external through mergers and acquisitions

Types of Organisations

• Sole traders (unincorporated)- a business owned and run by one person.
• Partnerships (unincorporated) - two or more people who agree to run a business together; they share the profits but face unlimited liability for business debts.
• Private limited companies (incorporated)- a corporation privately owned by a few shareholders who are not permitted to sell their shares publicly.
• Public limited companies (incorporated)- a corporation, similar to a limited company, except shares are traded on the stock market. Shareholders' liability is limited to the amount invested.

Sources of Finance

• Internal sources - Retained profit - profits that are kept in the business after paying all debts and dividends to shareholders
• Internal sources - Personal funds/owners' capital - money invested by the business owners
• Internal sources - Sales of assets - selling off assets such as obsolete equipment
• External sources - Shares capital - money raised from selling shares to the public
• External sources- Bank loans - funds borrowed from banks
• External sources- Debt Factoring – the sale of accounts receivable to financial institutions

Production Planning

• Production/operations planning – ensures sufficient resources available to meet a company's production target, ensuring the organization can meet the demands of the market.

International Marketing

• The process of extending business operations to overseas markets.
• MNCs multinational companies - companies that operate in multiple countries.

Leadership and Management

• Autocratic
• Democratic
• Laissez-faire
• Situational

Motivation

• Money (Taylor)
• Motivation factors (Herzberg) - factors that motivate workers (e.g. responsibility, recognition, challenging work).
• Need for achievement /affiliation/power (McClelland)

Organizational Structure

• A hierarchical structure showing responsibility and accountability for each task/job in an organization.
• Centralized or decentralized organizational structure.

Cost and Revenue

• Cost centre - a department within an organization that incurs costs but does not generate income
• Profit centre - a department that incurs both cost and revenue

Financial Performance

• Ratio analysis – examines profitability and liquidity. Different financial ratios (e.g., gross profit margin, return on capital employed) are used to assess an organization's financial performance.
• Break-even analysis – analyzes the point at which total revenue equals total costs.
• Cash flow – tracks the movement of cash into and out of a business over a given time period.
• Income statement - summary of a business's income and outlays.
• Balance sheet - financial summary of position at a particular point in time (statement of assets, liabilities and equity)

Marketing

• Marketing audit - an organized analysis of a company's current marketing position and planning to achieve organizational goals.
• Market share - the portion of a particular market that a specific company controls.
• Segmentation – identification of distinct customer groups with shared needs and characteristics.
• Targeting – selecting particular segments to focus on.

Product strategy

• Product life cycle - development, introduction, growth, maturity, decline
• Extension strategies - methods or activities used to extend the life cycle of a product or to increase demand, such as by changing the product or its marketing, as it moves into the maturity or decline stage of the life cycle.
• Product portfolio – collection of products owned by a business at a point in time
• BCG matrix (HL) - graphic tool for evaluating a product's position in the market
• Niche or mass market approach: Niche markets focus on small, well-defined customer segments, while mass markets aim to reach the wider market.

Operations management

• Methods include: job production, batch production, flow/mass/continuous production, and mass customization.
• Production planning and quality management: quality control, quality assurance, lean production, just-in-time inventory systems.

Crisis management

• Crisis management - the process of dealing with unexpected events that threaten or impact the business.
• Contingency planning - proactive approach to create a plan to prevent crisis and /or deal with them if they occur.

Business Information Systems

• Data analytics- process of analyzing data to extract useful insights.

Recruitment

• Internal recruitment – sourcing employees from within the organisation.
• External recruitment – sourcing employees from outside the organization.

Other study points

• Understanding business functions is necessary to understand how a business works and how it interacts with the economy.
• Understanding the impact of the international environment is important because it affects most decisions made by companies.