Introduction to Business PDF

# Business Organisations ## Assessments: - Assignments (2 case studies) to analyse - Group project (evaluating business environments) - Mid term - Final exam (multiple choice, SAQs, evaluation (ERQ) ## General Notes: - No paganism. - Can only miss 3 classes per semester. - Participation is assesse...

# Business Organisations ## Assessments: - Assignments (2 case studies) to analyse - Group project (evaluating business environments) - Mid term - Final exam (multiple choice, SAQs, evaluation (ERQ) ## General Notes: - No paganism. - Can only miss 3 classes per semester. - Participation is assessed. ## Business Organisations: Business organisations include the transformation of inputs into outputs leading to the creation of value. **Business activity** transforming inputs into outputs for consumption purposes. ### Transformation System: | Inputs | Business Organisations | Outputs | Consumption | |---|---|---|---| | Land | | Services | ✔️ | | Materials | ➡️ | Goods | ✔️ | | Finance | | | | | Labour | | | | | Technology | | | | ## External Environment and Internal Environment: ### External Environment: - Includes indirect factors that influence business activities. - Can impact: 1. Transformation process 2. Process of resource possession 3. Creation and consumption of output ### Types of External Environment: **General/Contextual (PESTLE)** - Can come from national/ international sources. | PESTLE | | |---|---| | Political | ✔️ | | Economic | ✔️ | | Social | ✔️ | | Technological | ✔️ | | Legal | ✔️ | | Environmental | ✔️ | #### Immediate/Operational: - Have direct relations with the firm. | | | |---|---| | Suppliers | ✔️ | | Competitors | ✔️ | | Financial institutions | ✔️ | | Labour market | ✔️ | ## PESTLE: - Used to analyse firms’ current and future environment as part of a strategic management process. * **P**olitical * **E**conomical * **S**ociocultural * **T**echnological * **L**egal * **E**nvironmental ## Internal Environment: ### 1) Management: - System of roles done by individuals who manage the organization. - A process that enables an organization to achieve its objective - Aims to make the organization able to adapt to change and have a clear direction. ### 2) Organisation Structures: - **Function of organization and not a controlling element** - The pattern of relationships between individuals and roles. - Characterised by a division of labor, allowing specialisation in specific roles. - **Enhances communication** - Organizations need structures to ensure the achievements are met, this is done through: - Providing opportunities for monitoring performance. - Adapt to changing situations. - Effective and efficient form of communication. - Ensure the accountability. - Create job satisfaction. - Achieving efficiency. ## Organizations: - **Organization** is when two or more people work together to achieve a specific goal/s. ### Broad Organisational Structures: | Type | | |---|---| | Private Sector | Private individuals/groups -> Profit seeking is the central goal. | | Public Sector | Government controlled -> To serve population. | | Voluntary Structure | Charities/Voluntary bodies -> Not for profit.| ### Features Shared By Organisations: - **People** - **Structure** - **Objectives** (what wants to be achieved) - **Management** (directing and controlling) ## Relationships Within Organisations: - **Line relationships:** Authority flows vertically downward (superior to subordinate). - **Staff relationships:** Senior personnel appoint assistants who have no authority over other staff but act as an extension of their superior. - **Functional relationships:** Specialists and line managers and their subordinates. - **Lateral relationships:** Exists across the organization (same positions, different departments). ## Types of Organisational Structures: ### By Function/Major Purpose: - Associated with departmental structures. - **Only provide one good/service** ### By Product/Service: - Individuals responsible for a particular product/service are grouped together. - **Provide more than one good/service.** ### By Location - Based geographical area. ### By Common Process - Particular skill/method of operation. ### By Client Group - **By Function:** Activities are grouped together depending on how common the purpose or function is. - **e.g.** All marketing activities would be grouped together. - **+** Allows individuals to be grouped based on specialism and expertise. - **+** Can improve skills of employees. - **+** Provides clear path for promotions and development. - **-** Can create sectional interests. - **-** Inter-function rivalry caused by inequalities in resource allocations between functions. - **-** Not suitable from companies with more than one product. ### CEO (Diagram) #### By Function * Marketing * Sales * Custom Support ### By Product/Service * **Grouping of activities occur through product/service provided.** * **e.g.** Each group is responsible for a particular output provided. * **+** Increases availability of diversified range of products. * **-** Separating units within firm can cause enterprise to become too autonomous (no connection). * **-** Rise of control and coordination issues. ### CEO (Diagram) #### By Product/Service * Home Furnishing * Marketing * Sales * Services * Electronics * Marketing * Sales * Services * Foods * Marketing * Sales * Services ### By Division - **Organisation** is split up into a number of self-contained business units. - It operates as its own profit-generating centre = each division is its own 'separate' company, controlled separately. - Can be by product, location, client group. - **+** Allows each part to operate semi-independently (producing and marketing) - **+** Each product can be targeted to a different market. - **+** Can aid in operating multinational organizations. - **-** Can be a cause of tension. ### CEO (Diagram) #### By Division * Region 1 * Sales and Marketing * Product Development * Logistics * Region 2 * Sales and Marketing * Product Development * Logistics * Region 3 * Sales and Marketing * Product Development * Logistics * Shared Services * Human Resources * Finance * Procurement ### Matrix Structure: - Combines functional specialisation with other structures. - **e.g** Products, projects, programmes. - **Results in a two-way flow of authority and responsibility.** * **+** Offers flexibility. * **+** Opportunities for development. * **+** Enhanced sense of ownership. * **-** Conflicting loyalties for staff (authority is uncertain). ## Globalization - If businesses do not trade globally, they can be affected by: 1. Shortage of skilled labor 2. Developments occurring in global financial markets - **Globalization and internationalisation help prevent these from occurring.** ### Globalization: - The process of integration on a worldwide scale of markets and production. - **+** Free movement of capital. - Increasing interconnectedness and integration of economies, societies and cultures. - ***Focused on exchanging products from interaction of local markets in one global market*** ### Pros: 1. Greater specialisation -> All countries involved benefit from increased international trade. 2. Extreme growth when exposed to international trade. 3. Decrease of global market trade barriers. 4. Small/medium firms engage in global production and marketing. ### Cons: 1. Not shared equitably throughout the world. 2. Promoting free trade is done secretly and they are not democratically chosen.. 3. Policies are only aimed at trade -> Human/environmental rights are ignored. ## Internationalisation: - Increased links between national states with respect to trade and the movement of resources. - Making products ready to operate in different countries. - ***Focused on expansion of client base of local business*** - ***Results in increased influence of enterprise of local market + influences globalization*** ## Hyperglobalization (extreme view of globalization): - World market is seen as borderless marketplace consisting of powerless nations and powerful MNCs. - Intensified level of interconnectedness (done by advanced technology and communication). - **E.g.** Digital economy's rapid growth. ## Transformationalism: - Process of globalization as bringing about changes both in power of countries and companies and in national characteristics and culture. - Globalization is an ongoing process that reshapes companies, meaning companies must adapt and increase global connection as well as responding to external changes (firm must be flexible and innovative). - **E.g** Netflix adapting to by producing content in different languages while using global streaming technology. ### Categorisation of OECD: - **High income countries:** EU, North America, Australasia - **Middle income countries:** East Asia, Pacific rim. - **Low income countries:** South Asia, Africa ## International Trade: - Consists of trade within and outside ones regions. ## Capital Market Flows: - Flows of money from private savers wanting to include foreign assets in their portfolio. - **Enables diversification to bring short-term capital.** - **Unstable and risky** ## Foreign Direct Investment (FDI): - Establishment of production facilities in overseas countries and represent a more direct involvement in the local economy. - **Represents largest form of private capital inflow into the developing countries.** - **Stable -> Favoured by international organisations** ## Multinational Enterprises (MNCs): - Enterprises operating in different countries -> having production/service facilities outside of home country. ### Pros: - Locate activities in countries best suited to them. - Risk involved in production is spread, not only over markets but over different nations. - Can avoid tax by negotiating special tax arrangements in host countries. - Can take advantages of subsidies (money granted by public body to help keep product/service low) and tax exceptions offered by governments. ### Con: - Exploitation of less developed countries ## Transnationality: - Gives a measure of an MNC's involvement abroad, it looks at; foreign employment, foreign assets, foreign sales. - The index captures the importance of foreign activities in the activities of MNCs. - **Increased growth of MNCs occur due to:** 1. Relaxation of exchange controls (easier to move money) 2. Improvement in communication ## Globalization and Firms: ### Strategic Alliance: - Collaborative agreement between firms to achieve a common aim. - **They remain independent** - **Can share resources** ### Franchising: - Agreement where one party (franchiser) sells the rights to another party (franchise) to market its product. ### Licensing: - A company (licensor) authorizes a company in another country (licensee) to use its intellectual property in return for royalties. - **Getting permission to create a product that belongs to another company.** ### Joint Venture: - Two or more firms join to create a new business. ## Demography - **This is the study of population.** - In terms of overall size and structural characteristics. - **Firms should aim to focus on:** 1. Age 2. Gender balance 3. Geographic distribution (location) 4. Size and structural change in the future ## Population Change: - **Birth rate:** Number of live birthdays per thousand in a specific year. - **Decreasing birth rates occur due to;:** - Trend of smaller families since health care in improving -> Decreased death rates. - Increased availability of contraception. - Declining fertility rates. - Attitudes towards women and work is changing - **Death rate:** Number of deaths per thousand in a specific year. - **Decreasing death rates occur due to;:** - Rising living standards. - Developments in medical technology. - Improved working conditions. - Better education - **Natural population change = birth rates - death rates.** ## Ageing Population: - Increasing % of population in the over 65 age group and decreasing % in under 16 age group. - This trend (increasing in over 65 age, decreasing in the 16 age) can be called the demographic time bomb. ## Net Migration: - Balance between emigrants and immigrants over a given period. - **Emigrants:** Those leaving. - **Immigrants:** Those entering ## Influences on the Rate of Migration: - Legal barriers - Government policy - Fleeing persecution (discrimination) - Political developments ## Size of Population Can impact The Economy Through: - Potential market size - Workforce availability. - Public expenditure (spending made my government) - *Ethnicity and geographical distribution also play a role in what is provided by the market.* ## Demographic Change Influencing The Market: - **Growing population size -> Demand will increase (outputs).** - **Growing population = larger workforce (inputs).** - **Ageing population -> Increases demand for public, private and voluntary sector goods/services (healthcare).** - **Ageing population = dependent population.** - **Decreased birth rates -> Influencing demand for education and additional children based goods/services (outputs)** - **Decreased birth rate = decreased workforce availability (inputs).** - **Diverse ethnic make-up -> Affects demand for specific goods/services linked to own culture (output)** - **Diversity in workforce = improved organisation performance (input)** - **Regional distribution -> Affecting consumption** - **May influence price and local labour market** ## Lifestyle: - Concerned with how people live and spend their money. - **Influences their decision making** - **What influences your behavior?** ## Culture: - A set of values, norms, beliefs, and attitudes which are spread amongst generations through socialization -> **Influencing ones perspective** ## Elements of Culture: 1. Contains material (buildings, art, music) and abstract (rituals, symbols, values) elements. 2. Socially learned and transmitted. 3. Influences human behavior. ## Market Segmentation: - Dividing a market into distinct groups who share similar characteristics (attitudes and patterns of behavior) ensuring their specific needs are met. ## Benefit of Market Segmentation: - **Focus is on main customers.** - **Power new product development** - **Customer centric culture is developed.** - **Design more effective marketing** - **Resources used more efficiently** - **Superior experience created** ## Type of Segmentation: | Type of Segmentation | Key Segmentation Variables | Examples | |---|---|---| | Demographic | Age, gender, religion, ethnic group, family size, family life cycle stage | Children's products, ethnic foods, 18-30 holidays, retirement homes, cars | | Socio-economic | Social class, income, occupation | Luxury products, convenience services, discount goods | | Geographic | Country, region, urban/suburban/rural, town/city, climate | Country clothing, air conditioning, regional specialities | | Geo-demographic | House type and location | Conservatories, lawn mowers | | Psychographic | Lifestyles, values, personality | Health/healthier products, cosmetics, cigarettes | | Mediagraphic | Media habits (e.g. papers read) | Specialist magazines, eco-friendly holidays | | Behavioural | Behavioural characteristics including time/occasion of purchase, loyalty, user status, benefits sought, attitude to product, etc. | Mother's day products, disposable cameras, toothpaste |