Introduction to Business Concepts

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Questions and Answers

Which of the following factors is considered part of a company's internal environment?

  • Suppliers
  • Competitors
  • Financial resources (correct)
  • Marketing intermediaries

Technological factors in the macro environment primarily affect manufacturing but have little impact on service industries.

False (B)

Name three demographic factors that can significantly impact a business's marketing strategy.

Population size, age distribution, income/wealth distribution

Changes in consumer values and lifestyles are part of the __________ environment that businesses must consider.

<p>social cultural</p>
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Match the following environmental factors with their corresponding characteristics:

<p>Political Factors = Government's policy influence laws that regulate business. Economic Factors = The level of inflation. Technological Factors = Products and services to be made more cheaply and to a better standard of quality. Social Cultural Factors = What are attitudes to foreign products.</p>
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Which of the following macro environmental factors is most closely related with interest rates and business cycles?

<p>Economic factors (B)</p>
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Which of the following activities falls under the category of primary industries?

<p>Extracting minerals from the earth (D)</p>
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A company's purchasing policies are considered part of its macro environment.

<p>False (B)</p>
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List three components of the micro environment

<p>Suppliers, Customers, Competitors</p>
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Secondary industries are primarily focused on providing support services to primary industries.

<p>False (B)</p>
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What is the primary rationale for a business to exist, according to the content?

<p>profit maximization</p>
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Business risks can lead to inadequate profits or even ______ due to uncertainties.

<p>losses</p>
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Which characteristic of business risk is correctly stated?

<p>Business risk is an essential part of every business. (B)</p>
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Identifying a developing market falls under which category of environmental scanning?

<p>Identifying opportunities (D)</p>
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A firm's marketing expertise is considered a weakness when scanning the environment.

<p>False (B)</p>
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Match the following causes of business risks with their descriptions:

<p>Natural causes = Risks arising from events like floods, earthquakes or famines (beyond human control). Human causes = Risks due to actions such as theft, strikes, or accidents (controllable by humans). Economic causes = Risks due to changes in market conditions, competition, or consumer preferences (related to economic factors).</p>
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Which of the following best describes the primary motive behind engaging in business activities, according to the definition provided?

<p>Earning profit by satisfying human needs in society. (D)</p>
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Commerce only involves the physical transportation of goods from one place to another.

<p>False (B)</p>
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Briefly explain how trade facilitates the distribution of goods to the end consumer.

<p>Trade involves the sale, transfer, or exchange of goods, making products available to consumers or users.</p>
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Activities that directly support and facilitate trade are known as _________ to trade.

<p>auxiliaries</p>
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Why is profit considered an essential objective of business?

<p>It acts as a source of income, a means for expansion, an indicator of efficiency, and a builder of reputation. (D)</p>
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Which of the options is NOT considered a multiple objective of a business?

<p>Maximizing personal gains of the CEO (D)</p>
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Match the following characteristics with their descriptions:

<p>Economic activity = Involvement in production and sale of goods or services Regular dealings = Consistent engagement in buying and selling activities Uncertainty of return = Possibility of losses or lower than expected profits Risk element = Potential for unforeseen events to negatively impact business</p>
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Which of the following best encapsulates the concept of 'business'?

<p>An economic activity involving production, sales, and profit-seeking. (D)</p>
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Flashcards

Business

An occupation, trade, or profession; operations of trade or industry; a commercial enterprise or establishment.

Definition of Business

An economic activity involving production and sale of goods/services to earn profit by satisfying human needs.

Commerce

Activities removing hindrances of person, place, time, risk, finance, and information in the exchange of goods/services.

Trade

Sale, transfer, or exchange of goods, making products available to ultimate consumers or users.

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Auxiliaries to Trade

Activities assisting trade, like transportation and warehousing.

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Profit Objective

Source of income, finance for expansion, indicator of efficiency, and builder of reputation.

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Multiple Objectives

Market standing, innovation, productivity, resources, profit, management, worker performance, and social responsibility.

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Characteristics

Economic activity with production/procurement, regular dealings, profit earning, uncertainty, and element of risks.

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Primary Industries

Activities extracting natural resources (e.g., farming, mining).

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Secondary Industries

Industries using materials from primary industries (e.g., manufacturing).

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Tertiary Industries

Industries supporting primary and secondary industries (e.g., banking, transport).

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Rationale for Business

The basic reason a business exists is to generate profits. Revenue must be higher than costs.

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Business Risk

Possible losses or inadequate profits due to uncertainties.

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Causes of Business Risks

Unpredictable events that cause business risks. Examples include: natural disasters, economic downturns, or human error.

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Business Environment

External factors affecting a business' ability to form relationships with customers.

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Environmental Scanning

Examining the business environment to anticipate opportunities, threats, strengths, and weaknesses.

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Causes of Business Failure

Shortcomings like poor product quality or lack of planning.

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Micro Environment

The immediate factors impacting a company, such as customers and competitors.

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Macro Environment

The broad societal forces that affect a company, like economic or political factors.

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Micro Environment Components

Internal elements like resources and programs, and external elements like suppliers.

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Demographic Factors

Factors like population size, age distribution, and income levels.

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Political Factors

Factors such as government stability, policies, and trade agreements.

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Economic Factors

Factors that can affect businesses like interest rates, inflation and business cycles.

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Technological Factors

Innovation affecting business.

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Study Notes

  • Business means different things to different people.

Aspects of Business

  • Business refers to occupation, trade, or profession
  • Business includes operations of trade or industry
  • Business includes a commercial enterprise or establishment

Definition of Business

  • Business involves the production and sale of goods and services
  • The objective of business is to earn profit by satisfying human needs in society
  • Kibera (1996) defines business as an economic activity organized to manufacture or produce goods and services at a profit.

Important Business Terminologies

  • Commerce consists of activities removing hindrances related to person, place, time, risk, finance and information in the exchange of goods and services
  • Trade involves the sale, transfer, or exchange of goods and is essential to commerce, making produced goods available to consumers or users
  • Auxiliaries to trade are activities that assist trade

Objective of Business

  • Profit is seen as an essential objective for business
  • Profit is a source of income for the business person
  • Profit is a source of finance for meeting expansion requirements of business
  • Profit indicates the efficient working of business
  • Profit builds up the reputation of a business enterprises

Multiple Objectives of Business

  • Business objectives define what the business is going to do in concrete terms

  • Business objectives enable the business to analyze their own experiences to improve their performance

  • Specific multiple objectives

    • Market standing
    • Innovation
    • Productivity
    • Physical and financial resources
    • Earning profit
    • Manager performance and development
    • Worker performance attitude
    • Social responsibility

Characteristics of Business Activities

  • Business is an economic activity
  • Relates to the production or procurement of goods and services
  • Involves the sale or exchange of goods and services to satisfy human needs
  • Dealings in goods and services happen on a regular basis
  • Includes profit earning
  • A business has uncertainty of return
  • There are elements of risks

Industry

  • Primary industries are connected with:
    • The extraction and production of natural resources
    • The reproduction and development of living organisms
    • Plant development
  • Secondary industries:
    • Use materials extracted at the primary stage
  • Tertiary industries:
    • Provide support services to primary and secondary industries
    • Deal with activities relating to trade

Rationale for the Existence of Business

  • Profit maximization forms the greatest rationale for the existence of business
  • Businesses must gain revenue that exceeds costs to make a profit
  • This is achievable through production and marketing of goods and services that satisfy human needs and wants

Business Risks

  • Risk refers to the responsibility for inadequate profits or losses due to uncertainties or unexpected events
  • Business risks arise due to uncertainties
  • Risk is an essential part of business
  • Degree of risk relies on the nature and size of the business

Causes of Business Risks

  • Natural causes
  • Human causes
  • Economic causes

Business Environment

  • A company's business environment consists of actors that affect its ability to develop and maintain good relationships with its customers
  • Scanning is the process of identifying and interpreting environmental factors

Why Scan the Environment

  • Identify opportunities
    • A developing market
    • Strategic partners
    • New market
  • To identify threats
    • A new competitor
    • Price wars with competitors
    • Competitors new product or innovation
    • New taxes
    • New government regulations
  • To identify a firms strengths
    • Competitiveness
    • Marketing expertise
    • New innovations and process
    • New products
  • To identify a firms weaknesses
    • Lack of information
    • Poor product quality
    • Undifferentiated products
    • Lack of good planning

Components of Business Environment

  • The business environment is divided into two main groups: micro environment and macro environment

Micro Environment

  • Micro environment is divided into:
    • Internal environment
    • External environment

Internal Environment

  • Marketing programs
  • Financial resources
  • Research & Development
  • Manufacturing
  • Purchasing policies
  • Human resources

External Environment

  • Suppliers
  • Marketing intermediaries
  • Customers
  • Competitors
  • Publics
  • Institutions
  • Distributors

Macro Environment

  • Demographic factors
  • Political factors
  • Legal factors
  • Economic factors
  • Social-cultural factors
  • Technological factors
  • Natural environment

Demographic Factors

  • Population Size
  • Geographical distribution
  • Mobility trends
  • Age distribution
  • Life expectancy
  • Household/family size, makeup
  • Income/wealth distribution

Political Factors

  • Stability of the political environment
  • Government policy influence on laws and regulations
  • Government's position on marketing ethics
  • Government's policy on the economy
  • Views of the government on culture and religion
  • Involvement of the government in trade agreements
  • Legislations
  • Legal systems
  • Fiscal and monetary policies
  • Employment legislation
  • Consumer protection law
  • Foreign trade regulations
  • Environment protection regulation

Economic Factors

  • Interest rates
  • Business Cycles
  • Money supply
  • Investment levels
  • Balance of Payment
  • The level of inflation

Technological Factors

  • Whether technology cheapens products and services, improving their quality
  • How technologies offer more innovative products in banking or mobile telephones for consumers and business
  • How distribution is changed by new technologies e.g. books via the Internet, flight tickets options etc.

Social Cultural Factors

  • Dominant religion?
  • Attitudes to foreign products
  • Roles of men and women within society?
  • How long the population is living
  • Opinion of the population about green or environmental issues
  • Changes in consumer values and lifestyles

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