POB Unit 1 & 3

Principles of Business

• Students completing the module should grasp core business concepts.
• Students should relate political, economic, social, and technological factors' effects on business.
• The book contains course materials for theory tests and practical assessments.
• The book contains questions for learning checkpoints.

Business Activities of the Economy

• Business uses resources and activities to produce goods or services to meet societal needs.

Objectives of a Business

• For the Owner: To provide profit and give personal satisfaction.
• For the Employee: To provide work, and therefore income.
• For Society: To provide economic goods and services.
• Profit motivates efficiency and production.
• Business contributes to society through work and wealth.

Factors of Production

• Factors of production are resources used by businesses to generate outputs for society.
• These include land/material, labour, capital, and entrepreneurship.

Land/Material

• Refers to all natural resources or tangible inputs used in production.
• May be in natural state (land for agriculture, mineral deposits) or industrial materials (raw materials, tools).
• Examples of raw include oil and rubber.

Labour

• Refers to the physical and mental input of people who work for the business to produce goods and services.
• This includes people in distribution and professional services, such as machine operators, supervisors, salesmen and office clerks.

Capital

• Refers to the funds to finance business operations which may be shareholder investment, loans, or retained earnings.
• The money is used to buy raw materials, pay workers, purchase machinery, or expand the factory.

Entrepreneurship

• Refers to the risk-taking by the business owner.
• The entrepreneur organizes production factors to provide goods/services.
• The entrepreneur profits if products/services are in demand and income exceeds expenses.
• A business venture comes with inherent financial risk.

Relationships Between Businesses and Stakeholders

• Workers rely on a business's financial success for careers and income.
• They need business-provided training for effective job performance.
• Workers should prioritize safety to prevent workplace accidents and health hazards.
• Employers must comply with industrial health and safety laws to avoid unnecessary hazards.
• This includes working with the Ministry of Manpower and following the Workplace Safety and Health Act.

Workers' Unions

• Businesses should maintain a cooperative relationship between workers and management to boost productivity.
• This leads to increased openness to change, reduced conflict/absenteeism, higher morale, and improved job security and corporate reputation.

Suppliers

• Suppliers must be assured of the business's payment ability.
• Staying current with market offerings allows suppliers to introduce new products/services to businesses.

Customers

• Customers must be confident in the business's ability to meet their needs for goods/services.
• Businesses must innovate to adapt to changing customer needs.

Government/Economy

• Businesses produce goods and provide services using resources.
• A successful business enhances economic growth and provides tax revenue for social policies.
• A business co-exists with other members in the economic system.

Welfare Organizations

• Welfare organizations can provide channels for businesses to show social responsibility.
• Businesses can offer donations or volunteerism and professional services.
• Businesses can sponsor gifts, offer scholarships and provide auditing services to welfare groups.

Impact of Environmental Factors on Business Activities

Positive Effects of Globalization

• Better Products: Enhanced product equality because businesses compete in global arena.
• Security: Improved worldwide security as countries are less likely to attack each other if they have trade and economic ties.

Negative Effects of Globalisation

• Environmental Damage: Increased utilization of natural resources leads to more pollution and climate change.
• Fluctuation in Prices: Market competition leads to price fluctuations (developed countries reduce prices to compete with cheaper countries).
• Job Insecurity: Companies in developed countries outsource their manufacturing jobs for cheaper labor in other countries.

Internal Environment of Business

• Includes elements that exist within the organization: Owners and shareholders, employees, resources, and image or goodwill.
• These enable the organization to create customer value.

External Environment of Business

• Includes external the organization that are less predictable or controllable.
• External factors include changes to the economy, competitors, or regulations.

The SWOT Analysis

• The SWOT analysis evaluates a business's Strengths, Weaknesses, Opportunities, and Threats.
• SWOT analysis is sometimes called the Internal-External Analysis.
• This process provides a grid comprising 4 segments. SWOT can be broken into 2 distinct parts:
  • Internal Environmental Factors: Strengths and Weaknesses
  • External Environmental Factors: Opportunities and Threats

Internal Factors

• Strengths are things a company does well, like having a unique selling point or experienced staff.
• Strengths give the company a comparative advantage.
• Weaknesses are areas for improvement, like customer service, cash flow, or poor management.
• Weakness are the perspective from both internal and external customers.

External Factors

• Opportunities are possible company growth, such as government policies, technology changes or social changes.
• Threats are external factors that negatively affect the company through new competitors or slow market growth.

External Environment of A Business Using a PEST Analysis

• PEST is widely used by companies to understand Political, Economic, Social and Technological environments.
• Political factors include government regulations and legal factors affecting the business environment.
• Economic factors include economic issues affecting the company, such as inflation, interest rates, economic growth, GDP, and unemployment.
• Social factors include examining socio-economic environments, to better understand needs (customer demographics, population growth, lifestyle).
• Technological factors either positively or negatively affect introduction of new products and services.

Role of Accounting and Corporate Regulatory Authority (ACRA)

• ACRA regulates business registration, financial reporting, and public accountants/corporate service providers.
• Some of ACRA’s functions are:
  • Administer business regulations (Accounting Authority Act, Business Names Registration Act 2014, and the Companies Act).
  • Report to the Government on matters related to registration and regulation of business, public accountants and service providers.
  • Administer a database of business entities, public accountants and corporate service providers.

Role of Ministry of Manpower (MOM)

• MOM’s vision is to develop a productive workforce and progressive workplaces, for better jobs and a secure lifestyle.
• To reach this goal the MOM builds Singaporean core in workforce, creates job opportunities, sustains wage growth, and develops fair workplaces.

Role of Enterprise Singapore

• Enterprise Singapore is the government agency championing enterprise development.
• ESG works with companies to build capabilities, innovate and internationalize and provides programmes for company support at every stage of growth and industry.
• ESG captures new market share through upgrading/innovation, new technology, improving productivity/overseas markets.

Relationship Between Demand and Supply

• Demand is how much of a product or service is desired by buyer’s, and how much customers are willing to buy at a certain price.
• This is known as demand relationship. The law of demand is if all other factor remains equal, the higher the price, the lower the quantity demanded.
• Supply represents how much the market can offer, when receiving a certain price.
• Supply can be seen as the how much of products are supplied to the market known as “supply relationship”.
• Supply demonstrates the quantities sold at a certain price, which increases when product prices increase.

Factors Affecting Business Operations

• Economic Growth: This is how the state of the economy fluctuates, and includes recession/slump/ boom cycles.
• During a recession the following things may happen: output/quantity of goods available falls, Companies layout of their production workers, unemployment increases and businesses do badly.

Interest Rate

• Refers to the amount a leader charges a borrower for using an asset.
• Assets can include: cash, consumer goods, vehicles, and property. This can apply to money earned.
• Interest rate can be displayed as loans (interest rate) is applied to the principal (loan amount), which is the cost of debt.
• Charged by banks determined by factors from state of economy, and a country’s central bank/ government sets the interest rate.
• The government deters savings during a recession, and deters spending a boom.

Exchange Rate

• Rate - Value of dollar in terms of other currencies. Currency concerns for businesses can impact raw materials from abroad, sale of goods etc
• Fluctuation can make a difference in production cost.
• A strong dollar means you need more currencies to exchange for one dollar but are very attractive to foreigners.
• If Singapore dollar strengthens Singapore’s exports decrease.

Inflation

• Inflation occurs when a price increases of a basket of goods/ services over a period of time, means cost of living increase.
• Both Businesses and Individuals can occur these increased costs.
• Businesses have problems with costs and labor leading to workers increasing wage.

Social Environment Affecting Business Operations

• Demographic changes segment people according to their population (age, size, location, etc.)
• A rising population lead stores creating more products needed or catering to their identity (example: more males, more products catered to a population)
• Changing Trends: a growing population leads to a demand for more businesses for services, but creates lack of the people in the job space.

Impact of Advances in Technology on Business

• The use of Technology has a major impact to a business’ operations.

Digitalization

• Digitalization is the use of digital technologies to create new business model.
• With digital, data is stored in the cloud which allows companies to gain a compete and constant innovation to ways to provide it services.
• A study has shown that 81% of people go online to search for products to purchase. With digital customers can level online experience.

Cybersecurity

• Security of computer system against access and or issues (malicious act).
• Digital has increased cloud computing, so Cybersecurity solution will also become a need for every business.
• The use of common mal wares can be through Virus (modifies other legit hosts).

Personal Data Protection Act (PDPA)

• This act provides standard of protection for data in Singapore (collection, care, use, disclosure).
• The goal is to help businesses so they don’t have to worry about unauthorised data usage.
• Created a Registry for call and business and its application.
• Applies to protection of data with individuals and organizations only.

Corporate Social Responsibility (CSR)

• It is a concept of showing responsibility to the company, stakeholder and publics.
• Practicing corporate social responsibility is an ethical way for companies to be conscious.
• It is broken down in: environmental, ethical, philanthropic and economic responsibility.
• Economic responsibility is the practice of a firm making financial decisions that support its commitment to impact the economy.

Unit 1 & 3 of Principles Of Business