Types and Nature of Business

Nature of Business

• Businesses produce goods and services to satisfy customer needs.
• Key roles of business include generating profit, employment, incomes, choice, innovation, entrepreneurship, and risk.
• Businesses contribute to wealth and quality of life.

Types of Businesses

• Classification by size:
  • Small to medium enterprise (SMEs)
  • Large
• Classification by geographical spread:
  • Local
  • National
  • Global
• Classification by industry:
  • Primary (extracting raw materials)
  • Secondary (manufacturing)
  • Tertiary (service-based)
  • Quaternary (information-based)
  • Quinary (high-level decision-making)
• Classification by legal structure:
  • Sole trader
  • Partnership
  • Private company
  • Public company
  • Government enterprises

Factors Influencing Choice of Legal Structure

• Size: larger businesses often require more complex structures
• Ownership: sole traders have full ownership, while partnerships and companies have shared ownership
• Finance: businesses require funding, which can influence the choice of legal structure

Influences in the Business Environment

External Influences

• Economic: changes in interest rates, inflation, and economic growth
• Financial: access to funding and financial markets
• Geographic: location and climate
• Social: demographic changes and social trends
• Legal: laws and regulations affecting business
• Political: government policies and stability
• Institutional: trade unions and business associations
• Technological: advancements in technology
• Competitive situation: market competition and rivalry
• Markets: changes in supply and demand

Internal Influences

• Products: goods and services offered by the business
• Location: physical location and accessibility
• Resources: human, physical, and financial resources
• Management: leadership style and decision-making
• Business culture: values and beliefs within the organization

Stakeholders

• Owners/shareholders: individuals with a financial interest in the business
• Managers: responsible for day-to-day operations
• Employees: individuals working for the business
• Customers: individuals or organizations purchasing goods and services
• Society: the broader community affected by the business
• Environment: the natural environment impacted by business operations

Business Growth and Decline

• Stages of the business lifecycle:
  • Establishment
  • Growth
  • Maturity
  • Post-maturity
• Factors contributing to business decline:
  • Poor management
  • Lack of innovation
  • Increased competition
• Voluntary and involuntary cessation:
  • Liquidation: the process of closing a business and distributing assets

Nature of Management

• Features of effective management:
  • Planning
  • Organizing
  • Controlling
• Skills of management:
  • Interpersonal skills
  • Strategic thinking
  • Vision
  • Problem-solving
  • Decision-making
  • Flexibility
  • Adaptability to change
  • Reconciling conflicting interests of stakeholders

Achieving Business Goals

• Types of business goals:
  • Profits
  • Market share
  • Growth
  • Share price
  • Social goals
  • Environmental goals
• Achieving a mix of business goals:
  • Balancing competing objectives
• Staff involvement:
  • Innovation
  • Motivation
  • Mentoring and training

Management Approaches

Classical Approach

• Management as planning, organizing, and controlling
• Hierarchical organizational structure
• Autocratic leadership style

Behavioural Approach

• Management as leading, motivating, and communicating
• Teams
• Participative/democratic leadership style

Contingency Approach

• Adapting to changing circumstances

Levels of Planning

• Strategic Planning: Long-term planning spanning 3-5 years.
• Tactical Planning: Medium-term, flexible planning lasting 1-2 years.
• Operational Planning: Focuses on daily operations and activities.

Management as Organising

• Organising involves arranging business resources to meet objectives, enhancing productivity and efficiency.
• Old Fashion School employs a strict hierarchical structure for control.
• Key Steps in Organising:
  • Determining Work Activities: Breaking down tasks into smaller, manageable steps.
  • Classifying and Grouping Activities: Similar tasks are clustered for efficiency.
  • Assigning Work and Delegating Authority: Clearly defining who performs each task.

Management as Controlling

• Controlling evaluates and adjusts tasks to meet set goals, modifying procedures if necessary.
• Emphasizes team cohesion and unity among members.
• A transition from hierarchical to team-oriented structure promotes greater responsibility for individuals.
• Managers act as facilitators, balancing team needs with business goals, fostering trust, and creating a common vision.

Participative/Democratic Leadership Style

• Involves consulting employees, valuing their input in decision-making.
• Advantages:
  • Increased employee empowerment and recognition.
  • Strengthened relationships between staff and management.
• Disadvantages:
  • Potential for lack of control.
  • Risk of decreased employee behavior.

Contingency Approach

• Focuses on adaptability to changing circumstances and flexibility in management styles based on business needs.
• Organisational structures can shift from flat to hierarchical depending on requirements.

Key Business Functions

• Coordination of core functions is essential in management.
• Four key functions:
  • Operations: Strategies for improving production processes.
  • Leading: Influencing and motivating employees to achieve goals.
    • Good leaders communicate goals, empower workers, demonstrate flexibility, and have confidence in their teams.
  • Motivating: Targeting motivation through fair policies, training, and safe environments.
  • Communicating: Open communication ensures information flow regarding goals, plans, and financial results.

Teams and Flat Organisational Structure

• Teamwork involves regular interaction and collaboration towards shared objectives, supported by a flat organisational structure.