Introduction to Business Management PDF

Introduction to Business Management Created @December 26, 2024 12:21 PM Tags What is a businesses? Key topics Exam topics 1. Business as a system 1. The...

Introduction to Business Management Created @December 26, 2024 12:21 PM Tags What is a businesses? Key topics Exam topics 1. Business as a system 1. The nature of business (AO1) 2. Business Inputs 2. Primary, secondary, tertiary, quaternary sectors (AO2) 3. Business Processes 3. Entrepreneurship (AO2) 4. Feedback 4. Challenges and opportunities for 5. Sectors of the economy starting a business (AO2) 6. Starting a business 7. SWOT analysis 8. STEEPLE analysis 9. Nature of a business Business as a system A system is a set of interconnected parts that work together to make a more complex whole to achieve a purpose. Systems have inputs, processes, outputs and feedback. Introduction to Business Management 1  Business Inputs Inputs of a business are all resources needed to create a product. Categories of inputs: 1. Physical inputs These include raw and semi-finished goods, which have processed in some way, but are not a consumer product, that a business needs in order to produce its product. This also includes capital goods. Capital goods - tangible assets such as buildings, machinery and equipment used to produce consumers goods and services. 2. Financial inputs This is the funding needed to start a business, as well as to grow the business and keep it running. Long-term financing - large-scale funds needed to finance expensive equipment and facilities that a business needs to operate. Short-term financing - small-scale funds needed to pay for inputs that will soon be processed and sold by the business; used to cover short-term Introduction to Business Management 2  working capital needs. For example for buying stock or paying for electricity and other expenses. 3. Human resources People needed to run the business. This includes managers and employees. Business Processes Main business processes: 1. Human resource management - process that ensures a correct number of skilled individuals is employed to produce and deliver its product and are treated fairly by the law. 2. Finance and accounts - ensuring business has enough money to runs its operations. 3. Marketing - the process of selling the right products, at the right time, to the right customers. 4. Operations - running of the core business process (e.g. product production) Feedback Feedback - process by which the output of a system becomes an input to the same system. Types of feedback: 1. Negative feedback occurs when the output feeds back into the inputs in a way that moves the system in the opposite direction. 2. Positive feedback occurs when the output feeds back into the inputs in a way that moves systems and processes in the same direction. Sectors of the economy Economy - a system for producing and provisioning or distributing goods and services among a group of people. Sectors - an area of the economy. Main sectors of the economy: Introduction to Business Management 3  1. Primary sector A section of an economy that extracts materials (minerals, oil, etc.) or harvests products from the Earth. This includes agriculture, fishing, forestry, mining and drilling. 2. Secondary sector The area of economic activity that produces finished goods through manufacturing. This is where raw materials are made into products for sale. This can include carmakers, food processing, electronic makers, defence. 3. Tertiary sector The area of economic activity that provides services. This includes businesses that sell clothing and food, education, healthcare, legal services, travel and transportation. 4. Quaternary sector The area of economic activity involved with knowledge and the movement of information. Most commonly refers to services that focus on knowledge such as social media or digital data collection. Supply chain - the steps involved in creating finished goods. Integrated businesses - businesses whose activity spans two or more sectors. Sectoral change occurs when large numbers of firms change their sector of operations as the economy in which they operate grows and develops. Digital service economy - the provision of services through online platform, often replacing traditional brick-and-mortar businesses. Starting a business A business has a good chance of success when: there is a skilled and collaborative Entrepreneur - a person who team of employees in place; organises human, physical and financial resources to start a business. there is enough funding to run the business; Enterprise - the process of taking risks to combine the other resources Introduction to Business Management 4  the marketing has been to create a good or a service. researched well; Entrepreneurs manage business the operations are efficient and systems and learn how to operate and resilient. enterprise effectively in order to meet demand, and potentially drive Reasons for starting a new business: innovation, as well as meeting financial New business idea revenue goals. Passion to make a change Profit satisficing occurs when the Market need entrepreneur is focused on achieving a satisfactory level of profit, rather than Earning a living making as much profit as possible. Greater financial reward Working capital - money available to Control fund day-to-day operations of a business. Work-life balance Redundancy occurs when workers Challenges in starting a new lose their job because it is no longer business: required, usually receiving Lack of funds compensation. Strong competition Crowdfunding - a method of raising finance by asking a large number of Market too small/no market people to invest a small amount of Unskilled employees/lack of money in a business idea. collaboration Business plan - a detailed document Poor management skills that sets out the objectives of a business, its planned strategy and Economic, environmental or tactics and the expected cash flows political shocks. and profits over a period of time. SWOT analysis SWOT is a simple tool for a business to analyse its internal strengths and weaknesses, and external opportunities and threats. A SWOT analysis can help a business understand its current position and identify strategies to improve the business. Introduction to Business Management 5  A business’s Strengths and Weaknesses often centre around the four key functions. External Opportunities and Threats refer to factors that are outside the organisation that it cannot control. Usually, external factors will be the same for a business and its competitors in the same industry and location. STEEPLE analysis STEEPLE is a business management tool that analyses the external conditions that may be opportunities or threats for a business. It stands for the following factors: Sociocultural - all the social or cultural characteristics that affect the market for a product or the operations of a business. Technological - the state of technology and infrastructure in a country or industry. Economic - factors such as inflation, unemployment levels and the level and growth of incomes in the population. Environmental - everything related to planetary boundaries (such as water, land, biodiversity, climate change) and the availability of natural resources for the business. Political - the state of the political systems in the country, including the stability of the government, who is in power and what their interests are. Legal - all laws that might affect the business. These could include labour laws, regulations on business processes and environmental protections. Introduction to Business Management 6  Ethical - business behaviours that are considered to be ‘good’ or ‘bad’ in the national or global context. Nature of a business The purpose of business activity can be broadly defined as the organisation of human, physical and financial resources to produce goods or services that meet customer needs while adding value 1. Produce goods or services The primary purpose of business activity is to produce goods or services that satisfy a need or demand in the market Goods are tangible physical items capable of being stored such as cars or games consoles Services such as insurance or hairdressing are intangible, cannot be stored and are provided to customers when they are needed 2. Meet customer needs The ultimate goal is to create products that meet the needs and preferences of customers and provide value to them By meeting customer needs, businesses can build customer loyalty, increase brand awareness, and generate revenue 3. Add value The third purpose of business activity is to add value to products or services Value-added features can differentiate products from competitors, create a unique selling proposition, and increase customer satisfaction Vocabulary Introduction to Business Management 7  Word Definition Unit, topic and subtopic Knowledge A system is a set of interconnected parts that work together to make a more complex Business as a System whole to achieve System Introduction to Business Management a purpose. Systems have What is a business? inputs, processes, outputs and feedback. Inputs of a Business Inputs business are all Inputs resources Introduction to Business Management needed to create What is a business? a product. These include raw and semi- finished goods, which have processed in some way, but Business Inputs are not a Physical consumer Introduction to Business Management inputs product, that a What is a business? business needs in order to produce its product. This also includes capital goods. Capital goods Tangible assets Business Inputs such as Introduction to Business Management buildings, machinery and What is a business? equipment used Introduction to Business Management 8  Word Definition Unit, topic and subtopic Knowledge to produce consumers goods and services. This is the funding needed Business Inputs to start a Financial business, as well Introduction to Business Management inputs as to grow the What is a business? business and keep it running. large-scale funds needed to finance Business Inputs Long-term expensive Introduction to Business Management financing equipment and facilities that a What is a business? business needs to operate. small-scale funds needed to pay for inputs that will soon be processed and sold by the Business Inputs business; used to Short-term cover short-term Introduction to Business Management financing working capital What is a business? needs. For example for buying stock or paying for electricity and other expenses. Human People needed to Business Inputs resources run the business. Introduction to Business Management This includes Introduction to Business Management 9  Word Definition Unit, topic and subtopic Knowledge managers and What is a business? employees. Process by which Feedback the output of a Feedback system becomes Introduction to Business Management an input to the What is a business? same system. Positive feedback occurs when the output feeds Feedback back into the Positive inputs in a way Introduction to Business Management feedback that moves What is a business? systems and processes in the same direction. Negative feedback occurs when the output Feedback feeds back into Negative the inputs in a Introduction to Business Management feedback way that moves What is a business? the system in the opposite direction. A system for producing and Economy provisioning or Economy distributing Introduction to Business Management goods and What is a business? services among a group of people. Economy an area of the Sectors Introduction to Business Management economy. What is a business? Introduction to Business Management 10  Word Definition Unit, topic and subtopic Knowledge A section of an economy that extracts materials (minerals, oil, etc.) or harvests Economy Primary products from Introduction to Business Management sector the Earth. This includes What is a business? agriculture, fishing, forestry, mining and drilling. The area of economic activity that produces finished goods through manufacturing. Economy This is where raw Secondary materials are Introduction to Business Management sector made into What is a business? products for sale. This can include carmakers, food processing, electronic makers, defence. Tertiary The area of Economy sector economic activity Introduction to Business Management that provides services. This What is a business? includes businesses that sell clothing and food, education, healthcare, legal services, travel Introduction to Business Management 11  Word Definition Unit, topic and subtopic Knowledge and transportation. The area of economic activity involved with knowledge and the movement of Economy information. Most Quaternary commonly refers Introduction to Business Management sector to services that What is a business? focus on knowledge such as social media or digital data collection. the steps Economy involved in Supply chain Introduction to Business Management creating finished goods. What is a business? businesses Economy Integrated whose activity Introduction to Business Management business spans two or more sectors. What is a business? occurs when large numbers of firms change Economy their sector of Sectoral operations as the Introduction to Business Management change economy in What is a business? which they operate grows and develops. Digital service the provision of Economy economy services through Introduction to Business Management online platform, often replacing What is a business? Introduction to Business Management 12  Word Definition Unit, topic and subtopic Knowledge traditional brick- and-mortar businesses. a person who organises human, Introduction to Business Management physical and Entrepreneur Starting a business financial resources to start What is a business? a business. the process of taking risks to Introduction to Business Management combine the Enterprise Starting a business other resources to create a good What is a business? or a service. occurs when the entrepreneur is focused on Introduction to Business Management achieving a Profit satisfactory level Starting a business satisficing of profit, rather What is a business? than making as much profit as possible. money available Introduction to Business Management Working to fund day-to- Starting a business capital day operations of a business. What is a business? occurs when workers lose their Introduction to Business Management job because it is Redundancy no longer Starting a business required, usually What is a business? receiving compensation. Introduction to Business Management 13  Word Definition Unit, topic and subtopic Knowledge a method of raising finance by asking a large Introduction to Business Management number of people Crowdfunding Starting a business to invest a small amount of money What is a business? in a business idea. a detailed document that sets out the objectives of a Introduction to Business Management business, its Business plan planned strategy Starting a business and tactics and What is a business? the expected cash flows and profits over a period of time. Types of business entities Key topics Exam topics 1. Private and public sectors 1. Distinction between private and public sectors (AO2) 2. For-profit commercial enterprise 2. The main features of the following 3. For-profit social enterprise types of organisations (AO3) 4. Non-profit social enterprise a. Sole trader Introduction to Business Management 14  b. Partnership c. Private limited company d. Public limited company 3. The main features of the following types of for-profit social enterprises. (AO3) a. Private sector companies b. Public sector companies c. Cooperatives 4. The main features of non- governmental organisations (AO3) Private and public sectors Private sector - the portion of an economy not owned or directed by the government. Decisions about the business are taken by its owners; the government rarely takes part in decision-making. Private sector businesses provide many goods and services that people need (such as cars, mobile phones, food or insurance) at a market price. These goods and services can only be accessed by people who are willing and able to buy these products. Features of the private sector: 1. Private ownership and control 2. Profit can be earned by owners 3. Little to no government involvement 4. Largely privately funded Public sector - the portion of the economy controlled or owned by the government such as government services, schools and state-owned businesses. These services are underprovided by the private sector since they are not profitable to provide, or are unaffordable (inaccessible) to some members in society. The government uses tax revenue to provide these services to the public. Introduction to Business Management 15  Features of the private sector: 1. Owned and controlled by the government 2. Provides essential goods and services to citizens 3. Financed by the government through taxes and other public funds 4. Answerable to the public for any decision taken. Privatisation - when a public sector firm is sold to the private sector. Nationalisation - when the government takes over ownership of firms that previously operated in the private sector. Merit goods - beneficial for society but are not provided in sufficient quantities by private businesses, such as education or health services. Governments often provide them to make up the shortfall. Partial privatisation - when a government retains a share in a privatised firm so they can influence decision making and receive a share of the profits. For-profit commercial enterprise For-profit commercial enterprise - a type of business that earns profits, which are distributed to owners or shareholders; profits may have priority over other objectives. Sole traders - A business owned and run by one person; there is no legal separation between the owner and the business. Personal savings are normally used to start this business. Advantages Disadvantages Easy to set up All the responsibilities fall on the sole trader Keeping all the profits Unlimited liability Lack of continuity, as the business cannot Can run the business as the trader seems fit. be inherited All profits go to the owner Difficult to finance Financial records remain private High risk of failure High workload Introduction to Business Management 16  Partnership - a business owned and run by two or more people who share the responsibility for the business and the profits; there is no legal separation between the business and the owners. Advantages Disadvantages Easy to set up Unlimited liability Lengthier decision making and potential for Greater access to finance disagreement. Greater efficiency and productivity Legal and financial responsibility Financial records remain private Lack of continuity Companies - a business owned by multiple shareholders who have limited liability; can be privately held or publicly held. Shareholders - someone who owns part of a business. There is a complete separation between shareholders’ personal assets and their ownership interest in the business CEO (Chief executive officer) - the highest-ranking person in a company, ultimately responsible for making managerial decisions. Types of companies: 1. Privately held companies - a company that is privately owned and often has family or friends as the shareholders; the shares are not sold to the wider public and are not traded on a stock exchange. Advantages Disadvantages Profits are distributed amongst Control and ownership shareholders Greater access to finance Lengthier decision making Shares cannot be traded publicly to raise Limited liability finances Financial records remain private Expensive 2. Publicly held companies - a company that is publicly owned and and has many shareholders who can buy and sell their shares through a stock exchange. Introduction to Business Management 17  IPO (initial public offering) - a situation where a company sells all or part of the business to external shareholders for the first time. Advantages Disadvantages Finances can be raised through selling Profits are distributed amongst shares shareholders Risk is distributed amongst a large number High costs of shareholders Separate legal identity Loss of control Limited liability Financial records are made public For-profit social enterprise Social enterprise - any organisation that has a social and/or environmental purpose at its core; it describes the primary purpose of a business, not its legal form. For-profit social enterprise - a type of social enterprise that earns revenue and profits, but integrates social and/or environmental impact directly into its business model. Unlike many for-profit commercial enterprises, for- profit social enterprises are judged less on their profits and more on their multi-stakeholder impact. Most profits earned are reinvested in the business, to expand its positive impacts and distribute value further. Types of for-profit social enterprises: 1. Private sector for-profit social enterprise - a type of social enterprise that produces goods and services that are typically sold in markets for a price by Introduction to Business Management 18  for-profit businesses. 2. Public sector for-profit social enterprise - a type of social enterprise that produces goods and services that are typically provided by the public sector. These social enterprises bid for contracts with regional or local governments, who outsource some essential services to for-profit businesses. By making such arrangements with for-profit companies, governments may be able to lower their costs and focus on other areas of public services. For their part, the businesses can look forward to consistent demand for the essential services they provide. 3. Cooperatives - a business owned and operated by its members, who share the profits. All members participate in decision-making either directly by voting on important decisions or through representation, where members elect representatives to make decisions for them. Each member owns one share and has one vote on key decisions. Profits are either shared equally between members or reinvested for their benefit Employee Cooperative Community Cooperative Retail Cooperative Owned by members of A group of a local community independent retailers Owned equally by come together workers within the business Members usually and operate under one Each employee has a vote contribute time as well as brand name in business decisions finance to the cooperative Profit is commonly Buying power is Profit is shared reinvested to continue increased and marketing equally between employees providing socially valuable costs are shared products Producer Cooperative Financial Cooperative Housing Cooperative Groups of Organisations that provide Organisations manufacturers work financial services to that provide housing for together during the individuals that may not members production process otherwise qualify for Members collectively Sharing and standard banking products own and benefit from maximising the use of Often socially cohesive and expensive capital focused on a particular lower cost dwellings equipment is often a key aim community Introduction to Business Management 19  Producer cooperatives are Social aims take common in agriculture precedence over profits Aspects to be considered when evaluating for-profit social enterprises: 1. Financing may be challenging, especially if the business yields smaller returns due to its positive impact. 2. Credibility can be tough to ensure as people may be wary of the untraditional business model or fear greenwashing and social washing. 3. Measuring impact 4. Managing complex supply chains that align with the company’s values. 5. Remaining true to its purpose. Non-profit social enterprise Non-profit social enterprise - a type of social enterprise that produces goods and services to meet human needs, but where any surpluses earned must, by law, be reinvested back into the business. To qualify for non-profit status, organisations typically need to prove their social or environmental purpose to the government. They may receive all funding through grants and donations, or they may be involved in additional revenue-generating activities such as selling goods or services. Advantages Disadvantages Limited liability Funding difficulties No taxes on the revenues as all of it is Limited salaries and recruitment reinvested back into the entitiy Can rely on the help of volunteers Significant paperwork Eligible for grants and donations Non-governmental organisations (NGO) - group or institution that operates independently from a Government and has humanitarian or development objectives. Introduction to Business Management 20  Vocabulary Word Definition Unit, topic and subtopic Knowledge The portion of Introduction to Business Management an economy not Private sector owned or Private and public sectors directed by the Types of business entities government. A company that operates in at Introduction to Business Management least two Multinational countries, one Private and public sectors company of which is not Types of business entities the company's home country. The portion of the economy controlled or owned by the Introduction to Business Management government Public sector such as Private and public sectors government Types of business entities services, schools and state-owned businesses. When a public Introduction to Business Management sector firm is Privatisation Private and public sectors sold to the private sector. Types of business entities Nationalisation When the Introduction to Business Management government Private and public sectors takes over ownership of Types of business entities firms that previously Introduction to Business Management 21  Word Definition Unit, topic and subtopic Knowledge operated in the private sector beneficial for society but are not provided in sufficient quantities by private Introduction to Business Management businesses, Merit goods Private and public sectors such as education or Types of business entities health services. Governments often provide them to make up the shortfall. when a government retains a share in a privatised Introduction to Business Management Partial firm so they can Private and public sectors privatisation influence decision making Types of business entities and receive a share of the profits. a type of business that earns profits, which are For-profit commercial enterprise For-profit distributed to commercial Introduction to Business Management owners or enterprise shareholders; Types of business entities profits may have prioritity over other objectives. Introduction to Business Management 22  Word Definition Unit, topic and subtopic Knowledge A business owned and run by one person; For-profit commercial enterprise there is no legal Sole trader Introduction to Business Management separation between the Types of business entities owner and the business. A situation where the owners of a business are personally For-profit commercial enterprise responsible for Unlimited all the debts of Introduction to Business Management liability the business if it Types of business entities fails; the owners and the business are not legally separated. A business owned and run by two or more people who share the For-profit commercial enterprise responsibility for Partnership the business Introduction to Business Management and the profits; Types of business entities there is no legal separation between the business and the owners. Company A business For-profit commercial enterprise owned by Introduction to Business Management multiple Introduction to Business Management 23  Word Definition Unit, topic and subtopic Knowledge shareholders Types of business entities who have limited liability; can be privately held or publicly held. For-profit commercial enterprise Someone who Shareholders owns part of a Introduction to Business Management business. Types of business entities A situation where the owners of a business are not personally For-profit commercial enterprise responsible for Limited liability the debts of the Introduction to Business Management business if it Types of business entities fails; the owners and the business are legally separated. A company that is privately owned and often has family or friends as the For-profit commercial enterprise Privately held shareholders; Introduction to Business Management company the shares are not sold to the Types of business entities wider public and are not traded on a stock exchange. Introduction to Business Management 24  Word Definition Unit, topic and subtopic Knowledge A company that is publicly owned and and has many For-profit commercial enterprise Publicly held shareholders Introduction to Business Management company who can buy and sell their Types of business entities shares through a stock exchange. a situation where a company sells For-profit commercial enterprise IPO (initial all or part of the public Introduction to Business Management business to offering) external Types of business entities shareholders for the first time. the highest- ranking person in a company, For-profit commercial enterprise CEO (Chief ultimately executive Introduction to Business Management responsible for officer) making Types of business entities managerial decisions. Social Any For-profit social enterprise enterprise organisation that Introduction to Business Management has a social and/or Types of business entities environmental purpose at its core; it describes the primary purpose of a business, Introduction to Business Management 25  Word Definition Unit, topic and subtopic Knowledge not its legal form. A type of social enterprise that earns revenue and profits, but For-profit social enterprise For-profit integrates social social Introduction to Business Management and/or enterprise environmental Types of business entities impact directly into its business model. A type of social enterprise that produces goods Private sector For-profit social enterprise and services for-profit that are typically Introduction to Business Management social sold in markets enterprise Types of business entities for a price by for-profit businesses. A type of social enterprise that Public sector For-profit social enterprise produces goods for-profit and services Introduction to Business Management social that are typically enterprise Types of business entities provided by the public sector. A business owned and For-profit social enterprise operated by its Cooperative Introduction to Business Management members, who share the Types of business entities profits. Introduction to Business Management 26  Word Definition Unit, topic and subtopic Knowledge A type of social enterprise that produces goods and services to meet human Introduction to Business Management Non-profit needs, but social where any Non-profit social enterprise enterprise surpluses Types of business entities earned must, by law, be reinvested back into the business. group or institution that operates independently Introduction to Business Management from a NGO Non-profit social enterprise Government and has Types of business entities humanitarian or development objectives. Business objectives Key topics Exam topics 1. Vision and mission statements 1. Vision statement and mission statement (AO2) 2. Business objectives and value Introduction to Business Management 27  3. Ethical objectives and CSR 2. Common business objectives including growth, profit, protecting 4. Strategies and tactics shareholder value and ethical objectives (AO2) 3. Strategic and tactical objectives (AO3) 4. Corporate social responsibility (CSR) (AO3) Vision and mission statements Vision statement - a long term goal, a dream or understanding of what the future should look like. The vision statement expresses that goal or dream in order to inspire and motivate everyone involved with the company. Mission statement - a short statement that defines what the organisation does, right now, in order to achieve its vision. If the vision statement expresses what the company would like to accomplish, the mission statement describes what it actually does. Purpose of vision and mission statements: 1. Motivate and give a very general direction to the employees 2. To help understand the organisation’s purpose and priorities to interested parties Retrenchment occurs when a business decides to significantly cut or scale back its activities and, as a result, has to let some staff go. Business objectives and value Value - all the benefits that a business creates for the stakeholders involved. Objectives - a stated outcome that a business aims to achieve; can be broadly stated in vision and mission statements, or more narrowly stated with measurable outcomes. Introduction to Business Management 28  Ethical objectives and CSR Corporate Social Responsibility (CSR) - businesses actively seeking ways to improve society and the environment through core business activities and business designs. (Re)generative businesses - a business that aims to strengthen its social and environmental ecosystems by creating opportunities for other businesses and communities to develop, and by restoring the natural environment. The business enjoys a network of mutual benefits and increased resiliency. CSR asks businesses to evaluate its impact from a local and global social perspective, as well as local and global environmental perspective. Advantages Disadvantages Changing to a CSR model may require time Potential to earn higher revenues as and additional training from the staff and consumers see their inner values being met management. A particular type of purpose- led motivation is necessary. Consumers are more likely to stay loyal, Implementing CSR may increase short term promote and pay premium pricing for costs through insurance of responsible purpose-led products supply chains and staff training. Reputational risks if the business cannot More likely to retain and recruit purpose-led follow through with their initiatives and employees promises. Reduce risk in the future (for example from a legislative perspective) and ensure a better reputation Strategies and tactics Product portfolio - all of the goods and services that a business offers. Strategy - a plan that an organisation creates in order to reach a specific goal. Business strategies usually refer to significant decisions and actions and involve senior management. Linear production - taking resources from the Earth, making products with them and then disposing of the products. Introduction to Business Management 29  Circular production - a production model that reduces waste by ensuring outputs of the production system feed back into the system as inputs. Circular business models - a business model that aims to work more like nature, by designing systems that feed back outputs as inputs, and by designing out waste from the start. Types of circular business models: 1. Circular supply models - a business model that enables businesses to reduce new material inputs, replacing them with recovered or bio-based materials. 2. Resource recovery models - business models that are focused on collecting, sorting and processing waste materials to be used as inputs in the production process. 3. Product life extension models - business models that focus on extending the time that a consumer uses products. 4. Sharing models - a business model that allows consumers to share the use of products with strangers, reducing the new inputs needed for products that might be underutilised by the consumer. 5. Product service system models - business models that involve selling the service for using a product rather than selling the product itself. Tactics - A small action that a business takes to reach its goals. Tactics involve approaches that are somewhat less important, smaller in scale, and involve shorter timeframes than strategies. Vocabulary Word Definition Unit, topic and subtopic Knowledge A long term goal, Business Objectives a dream or Vision understanding of Introduction to Business Management statement what the future Vision and mission statements should look like. Mission A short Business Objectives statement statement that Introduction to Business Management Introduction to Business Management 30  Word Definition Knowledge Unit, topic and subtopic defines what the Vision and mission statements organisation does, right now, in order to achieve its vision. occurs when a business decides to significantly cut Business Objectives or Retrenchment Introduction to Business Management scale back its activities and, Vision and mission statements as a result, has to let some staff go. All the benefits Business Objectives that a business Value creates for the Business objectives and value stakeholders Introduction to Business Management involved. a stated outcome that a business aims to achieve; can be broadly stated in Business Objectives vision and Objectives Business objectives and value mission statements, or Introduction to Business Management more narrowly stated with measurable outcomes. Corporate Businesses Business Objectives Social actively seeking Ethical objectives and CSR Responsibility ways to improve society and the Introduction to Business Management Introduction to Business Management 31  Word Definition Unit, topic and subtopic Knowledge environment through core business activities and business designs. A business that aims to strengthen its social and environmental ecosystems by creating opportunities for other businesses Business Objectives (Re)generative and communities Ethical objectives and CSR businesses to develop, and by restoring the Introduction to Business Management natural environment. The business enjoys a network of mutual benefits and increased resiliency. All of the goods Business Objectives Product and services that Introduction to Business Management portfolio a business offers. Strategies and tactics A plan that an Business Objectives organisation Strategy creates in order Introduction to Business Management to reach a Strategies and tactics specific goal. Introduction to Business Management 32  Word Definition Knowledge Unit, topic and subtopic Taking resources from the Earth, Business Objectives Linear making products Introduction to Business Management production with them and then disposing of Strategies and tactics the products. A production model that reduces waste by ensuring Business Objectives Circular outputs of the Introduction to Business Management production production system feed Strategies and tactics back into the system as inputs. A small action Business Objectives that a business Tactics Introduction to Business Management takes to reach its goals. Strategies and tactics A business model that aims to work more like nature, by designing Business Objectives Circular systems that business Introduction to Business Management feed back models outputs as Strategies and tactics inputs, and by designing out waste from the start. Introduction to Business Management 33  Stakeholders Key topics Exam topics 1. Internal stakeholders 1. Internal and external stakeholders (AO2) 2. External stakeholders 2. Conflict between stakeholders (AO2) Internal stakeholders Stakeholder - any individual or group that affects, or is affected by, an organisation. Internal stakeholders - an individual or group that affects, or is affected by, an organisation and is directly involved inside the organisation. Examples of internal stakeholders: 1. Employees 2. Owners/shareholders 3. Managers External stakeholders External stakeholders - an individual or group that affects, or is affected by, an organisation, but who is not directly involved inside the organisation. Examples of internal stakeholders: 1. Customers 2. Suppliers Introduction to Business Management 34  3. Governments regulate organisations in order to protect the public interest. They also enforce laws and reprimand businesses when necessary. In addition, governments, particularly local governments, are dependent upon businesses to provide tax revenues and employment. 4. Banks lend organisations money so they can invest and carry out their operations. Banks want to be sure that these loans are paid back, with interest, on time. They will therefore monitor the organisation's financial health closely using final accounts 5. Society 6. Labour unions exist to protect the livelihoods and rights of employees; they are important stakeholders for many organisations. Unions usually represent employees in many different companies; that way they have more resources to defend employees’ interests than the employees in a single company acting alone. 7. Pressure groups are organisations that seek to influence the policies and actions of businesses or governments. Vocabulary Word Definition Unit, topic and subtopic Knowledge any individual or Internal stakeholders group that Stakeholder affects, or is Introduction to Business Management affected by, an Stakeholders organisation. an individual or group that affects, or is Internal stakeholders Internal affected by, an Introduction to Business Management stakeholders organisation and is directly Stakeholders involved inside the organisation. Introduction to Business Management 35  Word Definition Unit, topic and subtopic Knowledge an individual or group that affects, or is External stakeholders affected by, an External organisation, but Introduction to Business Management stakeholders who is not Stakeholders directly involved inside the organisation. Growth and evolution Key topics Exam topics 1. Reasons for growing 1. Internal and external economies and diseconomies of scale (AO2) 2. (Dis)economies of scale 2. The difference between internal 3. Internal growth and external growth (AO2) 4. External growth 3. Reasons for businesses to grow 5. Small businesses (AO3) 6. Ansoff matric 4. Reasons for businesses to stay 7. Forcefield analysis small (AO3) 5. External growth method (AO3) a. Mergers and acquisitions (M&As) b. Takeovers Introduction to Business Management 36  c. Joint ventures d. Strategic alliances e. Franchising Reasons for growing Ways is which to measure business growth: Growth in sales revenue: increasing the money earned from selling the product; this is calculated by multiplying the prices of products by the number of products sold. Growth in profit: increasing the amount of money left over after costs of production have been subtracted from revenues. Growth in market share: increasing the percentage of a given market represented by a business’s sales. Growing impact: increasing the positive social and environmental consequences of the actions of the business. Growing a resilient business ecosystem: generating opportunities for other businesses to grow and to strengthen their relationships with a wide range of stakeholders, distributing more of the value of the business to them. Advantages of business growth Disadvantages of business growth Achieving economies of scale Problems with cash flow and long-term debt Reaching new customers and markets, Increased output, particularly if not well increasing market share, sales revenue and planned, can impact the quality of the profits. product negatively. Influencing the prices within a market Loss of control of the business Being able to influence competitors and May face higher labour turnover if human adapt to changes. Reduce risk and increase resources are not managed well stability. Businesses that are growing often attract talented employees because they can offer good salaries, diverse experiences and opportunities for professional growth. Introduction to Business Management 37  (Dis)economies of scale Economies of scale - the reduction in per-unit production cost as a business grows. unit cost - the cost of producing a single unit of output. Internal economies of scale - cost Types of internal economies of scale: reductions experienced by a business 1. Purchasing economies of scale - when it expands its output. lower costs of production that occur when a business is able to buy large quantities of inputs and negotiate lower prices for the inputs. 2. Marketing economies of scale - lower costs of production that occur when the cost of a marketing campaign is spread over a larger quantity of output, thus lowering the average cost of the campaign. 3. Managerial economies of scale - lower costs of production that occur when the cost of hiring a manager is spread over a larger output. Lower costs of production also occur because businesses are able to hire specialists who are more efficient at completing their work. 4. Technical economies of scale - lower costs of production that occur when a large business is able to purchase equipment that makes the business more efficient. Introduction to Business Management 38  5. Financial economies of scale - lower costs of production that occur when a large business takes out a larger loan, with a lower interest rate, for investment. External economies of scale - cost-saving benefits of large businesses in their region or industry that are not under the control of the business. This may take place due to innovation, effective infrastructure, or specialisation. Diseconomies of scale - the increase in the per-unit production cost as a business grows. Internal diseconomies of scale - the Types of internal diseconomies of increase in per-unit production cost as scale: a business grows, usually explained by 1. Managerial issues as It can be the difficulty of managing internally difficult to efficiently run an large operations. enterprise once it gets too big. A lack of coordination and cooperation can create inefficiencies and increase costs. 2. Increased size of the workforce as it can be challenging to control a large workforce. The growing size of the company may necessitate the creation of a complicated organisational structure 3. Communication as organisations grow and become more complex, there may be several layers of management between the CEO and employees, making efficient communication more difficult. Introduction to Business Management 39  External diseconomies of scale - the Types of external diseconomies of increased unit cost of production for a scale: business due to the expansion of the 1. Limited natural resources: When industry in which the business businesses grow their output, they operates. need more inputs of natural resources. When this happens on an industry-wide scale, demand for raw materials may increase. 2. Limited infrastructure: When an industry expands, businesses will use infrastructure more often. This increased use of limited infrastructure can slow down deliveries and raise costs of production. 3. Increased regulation: When an industry expands and has more power, governments will pay more attention to the businesses in that industry. Laws and regulations related to the industry may increase, which could increase costs of production. 4. Pollution: Droughts, floods, storms and fires cost human lives and damage natural resources and