Role and Functions of Business

The Role of Business

• Businesses are decision-making organizations involved in producing goods and services.
• Inputs are the resources used in production, while outputs are the products generated.
• Goods are tangible, and services are intangible.
• Needs are basic necessities for survival.
• Wants are desires beyond necessities.
• Consumer goods/services cater to the public.
• Capital goods/services are from businesses to businesses, such as raw materials and machinery.

Main Functions of a Business

• Human Resources manages personnel, workforce planning, recruitment, and training.
• Finance and Accounting handles money, tracks finances, reports legal documentation, and informs on the financial position.
• Marketing identifies and satisfies customer needs through market research, advertising, and branding.
  • Product relates to goods/services meeting customer requirements.
  • Price involves pricing strategies.
  • Promotion makes customers aware of a product.
  • Place ensures convenient availability of goods/services.
• Operations converts raw materials into finished goods.

Business Sectors

• The Primary Sector involves natural resource cultivation/extraction.
  • A large percentage of output and employment is in less economically developed countries(LEDCs).
  • There is little value is added during primary production.
• The Secondary Sector focuses on construction and manufacturing industries.
  • Wealth creation occurs through the export of manufactured goods.
  • Value increases to natural resources during production.
• The Tertiary Sector provides services like retail, transportation, healthcare, leisure, etc.
  • The most substantial employment and GDP percentage in more economically developed countries (MEDCs) is in this sector.
• The Quaternary Sector, a subcategory of the tertiary, involves knowledge-based activities like ICT and R&D
  • A highly educated workforce is needed.

Chain of Production and Sectoral Change

• The chain of production tracks the stages of an item's production across business sectors.
• All sectors are interdependent.
• Sectoral change is is a shift in national output and employment across sectors.

Four Factors of Production

• Land represents any natural resource.
• Labour is human input or workers.
• Capital represents products made to produce other goods.
• Enterprise involves people with ideas who take risks and manage the other three factors.

Entrepreneurship and Intrapreneurship

• Entrepreneurs own/operate organizations, managing production factors and exploiting opportunities for profit.
• Intrapreneurship is when an employee acts like an entrepreneur within a business.

Reasons for Starting a Business - GET CASH

• Growth involves increasing the the value of the business.
• Earnings mean that an owner can can control their income.
• Transference allows family businesses to be inherited.
• Challenge means that a business can allow people a challenge.
• Autonomy allows control over ones own life.
• Security is a feeling of job security that can come with being your own boss.
• Hobby allows people the lifestyle choice to follow their interests.

Steps to Starting a Business

• Write a business plan with goals, objectives, and strategies, using the four factors of production.
• Obtain startup capital from internal and external sources.
• Register the business to establish legal status and licenses.
• Open a bank account to manage income and expenditure.
• Implement marketing strategies, including market research and the 4Ps.

Problems That New Businesses May Face

• Lack of Finance
• Cash flow problems
• Marketing problems
• Unestablished customer base
• People management problems
• Legalities
• Production problems
• High production costs
• Poor location
• External influences

Elements of a Business Plan

• A business plan details how a business achieves its objectives so to assess opportunities and risks, for financiers and stakeholders.
• It contains legal details, costs, entrepreneur track records, business org type, aims, of the business.
• Details and success metrics of products, suppliers, costs and pricing strategies form the product portion.
• The market section covers number of consumers, sales forecasts, profiles, segments, growth, competition.
• Financial aspects include sources, security, cash flow forecasts, financial health, and return rate
• Human Resource details contain the number and type of employees, organizational structure, HR, and payment systems.
• The marketing section covers market research, 4Ps, and unique selling points (USPs).

Private and Public Sectors

• Private sector organizations are owned and controlled by non-government entities with the primary motive to make profit
• Public sector organizations are government owned, giving essential underprovided services
• State-owned enterprises are those owned entirely by the government

Profit-Based Organizations

• A business survives in the long term if it profits.
• Sole traders are self-employed people who run businesses with unlimited liability.
  • Start-up funding comes from savings or borrowings.
  • The business is unincorporated, meaning the owner and business are legally the same.
  • They are fully legally responsible for debts.

Sole Trader: Advantages and Disadvantages

• Advantages: Few formalities, full profit, boss, personalized, privacy.
• Disadvantages: Unlimited liability, limited finance, high risks, stress, lack of continuity.

Partnerships

• Partnerships are profit-seeking businesses shared by multiple individuals (partners).
• Partners share responsibilities, burdens, and financing for the business.
  • Silent partners contribute capital but don't manage the business.
  • In the absense of a contract, profits/losses are shared equally among partners.
  • All partners have unlimited liability.

Partnerships: Advantages and Disadvantages

• Advantages: Financial strength, specialization, financial privacy, and cost-effective productivity.
• Disadvantages: Unlimited liability, disharmony, lack of continuity, and slow decision making.

Corporations (INC)

• They are businesses that are owned by shareholders.
• Corporations are incorporated, creating a legal distinction between owners and the business.
• Shareholders have limited liability.
• A board of directors (BOD) runs the corporation on behalf of shareholders.

Limited Liability Companies

• Private (LTD): owned by at least two shareholders whose shares are sold privately, and dividends paid in return
• Public (PLC): It advertises and sells shares publicly.

Flotation and AGM

• Flotation happens when a company IPOs, selling to investors.
• All companies must hold an annual general meeting (AGM).

Limited Companies: Advantages And Disadvantages

• Advantages: finance through shares, limited liability, tax benefits, manager productivity, economies of scale.
• Disadvantages: communication problems, bureaucracy, compliance costs, disclosure, loss of control.

Social Enterprises

• Social enterprises are revenue-generating businesses with social goals at their core, operating as non-profits or for-profits.
• The goals are to achieve social objectives and exceed revenues to costs.

Types of Social Enterprises: Cooperatives

• Cooperatives are run by members, such as employees or customers, focusing on value creation in a socially responsible manner.
  • All employees can vote in decision making.
  • Consumer cooperatives are owned by customers for personal services like childcare or healthcare.
  • Worker cooperatives setup, are organised and are owned by their employees (cafes, etc.)
  • Producer cooperatives process or market their products.

Cooperatives: Advantages and Disadvantages

• Advantages: Stake in success, employee voice, social benefits, public support.
• Disadvantages: Low salaries, limited finance, slow decisions, limited promotion.

Microfinance Providers

• They are financial services aimed at entrepreneurs with low incomes, enabling access to financial services.

Microfinance: Advantages and Disadvantages

• Advantages: Alleviates poverty, independence, job creation, wellbeing.
• Disadvantages: Immorality, limited finance/eligibility.

Public-Private Partnerships (PPP)

• Occurs when the government works with the private sector to provide certain goods/services.

Non-Profit Social Enterprises

• They operate without profit being the main goal and use surplus revenues to achieve their social goals. - Includes Non-governmental organizations (NGOs)

Non-Governmental Organizations (NGOs)

• These are the Non-profit social enterprises operating in the private sector for the benefit of others.
  • Operational NGOs execute objectives or purposes.
  • Advocacy NGOs take action to improve the public awareness of a cause.

Charities

• Charities support causes and raise funds, benefiting society.

Charities: Advantages and Disadvantages

• Advantages: Social benefits, free of corporate taxes.
• Disadvantages: Registration needed, possible fraud

Organizational Objectives: Vision and Mission Statements

• Vision statements outline an organization's future aspirations.
• Mission statements declare an organization's purpose, framing business goals.

Vision vs. Mission Statement

• Vision: "What do we want to become?"
  • Focused on long term.
• Mission: "What is our business?"
  • Focused on medium/long term.

Organizational Objectives - Aims and Objectives

• Aims are vague and long-term organizational goals.
• Objectives are measurable targets an organization sets to achieve its aims.
• Clear aims/objectives give an organization direction, boundaries, and motivation.

Strategies and Tactics

• Strategies are long-term plans to achieve strategic objectives.
• Tactics are short-term methods used to achieve tactical objectives.

Levels of Business Strategy

• Operational: day-to-day methods for efficiency.
• Generic: strategies affecting the entire business.
• Corporate: strategies for long-term goals.

Aims vs. Objectives

• Aims: What the business wants, not time-bound, vague, set by leaders.
• Objectives: Actions for aims, time-bound, target, needs, set by managers.

Tactical Objectives

• They are short-term goals affecting specific sections of the organization such as survival and revenue.

Strategic Objectives

• These include profit maximization, growth, market standing, and reputation.

Changing Objectives

• Internal/external factors can cause objectives to change.

Ethical Objectives

• Ethics are the moral principles guiding decision-making and strategy.
• Socially responsible businesses act morally toward stakeholders.
• Corporate Social Responsibility (CSR) encompasses obligations.

Views of CSR

• Self-interest: Generate profits.
• Altruistic: Humanitarian and unselfish behavior.
• Strategic: Social responsibility if actions lead to profit.

Ethical Practices

• Ethical aims are achieved with an ethical code of practice.
• It involves accurate labeling, fair employment, environmental consideration, and community work.
• A good reputation creates a firm's competitive edge.
• Social responsible factors: stakeholder involvement, influence, CSR, social, media, costs, regulation, and experience.

Advantages and Disadvantages of Aiming Towards CSR

• Advantages: Better image and loyalty, potential for cost-cutting, and improved staff.
• Disadvantages: High costs, lower profits, may conflict with stakeholders.

SWOT Analysis

• Used to assess a product, brand, business, or decision's current/future situation.
  • Strengths, Weaknesses, Opportunities, and Threats

SWOT details

• Strengths are internal and favorable.
• Weaknesses are internal and unfavorable.
• Opportunities are external and positive.
• Threats are external and negative.
• SWOT provides a framework for competitor analysis, assessing opportunities, risk, strategies, and planning.

The Ansoff Matrix

• Market Penetration - the existing products in existing markets with low-risk, pricing or advertising.
• Product Development - new products in existing markets with strategies like extension and branding.
• Market Development - the existing products in new markets with new channels
• Diversification is new products in new markets, may include related or unrelated diversification.

Stakeholders

• They are any organization that has a direct interest in the activities and performance of a business.
• Shareholders (or stockholders) are the individuals/ organizations that own a limited liability company.

Internal Stakeholders

• They are members within the organization.
  • Owners/shareholders seek profits, growth, increase in busines value
  • Managers/directors are interested in salary, benefits, promotion
  • Staffs / employees are interested in security of work, pay, and conditions

External Stakeholders

• They maintain a direct interest/involvement but are not part of the business organization.
  • Customers want customer service, price, quality.
  • Competitors want rivalry for better benchmark
  • government wants taxes, wealth and employment
  • pressure groups wants the business to operate well.
  • suppliers want good realtionships and on-time payments

Stakeholder Conflict

• Can happen because a business cannot simultaneously meet all interests: - employees versus managements - owners versus pressure groups / governments
• In resolving conflicts, it is important to look at type, objectives and the source of power.

Mutual Benefit -

• Can exist in meeting the needs of stakeholders
  • By addressing employees and customers will lead to better employee motivation and improved output in the workplace.

STEEPLE Analysis

• STEEPLE is an acronym for the Social, Technological, Economic, Environmental, Political, Legal, and Ethical opportunities and threats that constitute the external business environment.
• These variables are beyond control for an individual company.

Social Opportunities and Threats

• Attitudes & values can present both.
• Technological advances improve efficiency but can be costly.
• It can also introduce risks to the business in the short term.
• The external economic climate refers to the national state of the economy.
• The government achieves the economic objectives
  • to control inflation, employment to promote growth and a healthy trade balance.
• Firms must respect the environment or they risk ruining their reputation.
• A country’s political state can create threats / opportunities.
• Laissez-faire adopts a free market approach.
• Policy involves fiscal & monetary that will influence business.
• It is the government imposes laws/regulations.
• The government will protect business
• Ethical threats / threats are the morals during decision-making.
• Large businesses and Small, there are 4 ways in which you can determine the size.
  • value, sale, market share, workforce