Introduction to Business Studies PDF

COM 1104: BUSINESS STUDIES\ **TOPIC ONE: INTRODUCTION TO BUSINESS STUDIES** What is a business?\ It is all of the activities that an individual or group of individuals engage in involving the production and distribution of goods and services to customers for a profit through the satisfaction of the...

COM 1104: BUSINESS STUDIES\ **TOPIC ONE: INTRODUCTION TO BUSINESS STUDIES** What is a business?\ It is all of the activities that an individual or group of individuals engage in involving the production and distribution of goods and services to customers for a profit through the satisfaction of their needs and wants. OR Business refers to any human activity undertaken on a regular basis with the main objective of earning profit through production, distribution, sale or purchase of goods and services. Characteristics of Business The main characteristics of business are as follow: 1\. Deals in goods and services\ Business people engage in production of goods and services. Goods are items you can see and touch, such as a floor, cooking fat, sugar, tea, plant, machinery, equipment, computers etc. Services are intangible products that are not goods. Services are provided for you by other people, such as; doctor, a lawn mower worker, a dentist, hairdresser. The services may be in the form of shipping, banking, insurance, warehousing, advertising and etc. 2\. Sale or exchange of goods and services\ When people produce goods for their own -consumption or if they give a gift to others, they are not engaged in business. But when they produce good to sell it to others, they are engaged in business. The goods and services produced must be exchanged for money or without this exchange the activities cannot be treated as a business. 3\. Regular exchange of goods and services\ The production or buying and selling activities must be carried out on a regular basis. Normally, a single transaction is not treated as business. For example, if Rosa sold her piece of land to Juma it cannot be considered as business, unless she continues to buys and sell land on a regular basis. 4\. Requires investment\ Every business activity requires some amount of investment in terms of land, labour or capital. These resources are utilized to produce a variety of goods and services for distribution and consumption 5\. Aims at earning profit\ Businesses are started to satisfy customer wants or needs with the primary objective of making profit. Profit is the positive gain from a business after subtracting all costs, the opposite of is a loss Profit = Sales -- Costs (Profit is the money that's left from sales revenue after all costs have been paid) 6\. Involves risk and uncertainty of income.\ Every business aims at making profits. Business people take risks they invest in a business. They take risks that the business idea might be successful but also that it might not be the successful as they hoped it would be. Despite their efforts the reward they get is always uncertain **BUSINESS OBJECTIVES** Business Objectives-- Meaning An objective is what you want to accomplish over a period of time. Business objectives are something which a business organization wants to achieve or accomplish over a specified period of time. These may be to earn profit for its growth and development, to provide quality goods to its customers, to provide community services etc. Setting objectives are important; it focuses the company on specific aims over a period of time and can motivate staff to meet the objectives set. Business objectives must meet the following standard: they must be 1. Specific -- Objectives should state what they want to accomplish and aimed at what the business does, e.g. a super market objective might have an objective of increasing sales by 10% during the festive season 2. Measurable -- they should be quantifiable. The business can put a value to the objective, e.g. to generate revenue of Kshs. 100,000 profits in the month of July 2009. 3. Achievable - the objectives you set, should be achievable and attainable? 4. Realistic -- The objective should be challenging, but it should also be able 5. Time specific -- They should have a time limit of when the objective should be achieved, e.g. by the end of the stated period. Most businesses are started with an aim of making profits, this cannot be the only objective of a business, by generating profit the owner's interests are full filled but businesses cannot ignore the interest of other stakeholders that is employees, customers, the community as well as the society at large. For instance, no business can prosper unless customer wants and needs are satisfied and are given due importance or employees are well motivated. A business unit cannot prosper without the support and good will of the surrounding society. Good business objectives should contribute to national goals and as well as towards international welfare. ORGANIC OBJECTIVES 1\. Survival, for existence and stability survival is the most important motive. It concerns maintaining earning capacity, competitive position and market share. 2\. Growth and Diversification 3\. Organisation Efficiency\ 4. Stabiltiy\ 5. High Productivity 6\. Increasing Market Share 7\. Research Leadership **SOCIAL OBJECTIVE** A business is not only an economic unit, but it is also a social institution. So, a business must set its social objectives. There are some social obligations that a business must try to fulfil. 1\. Supply of Quality Products at a Fair Price\ 2. Creation of Employment Opportunity\ 3. Refrain from Anti-social practices like speculation, hoarding adulteration, etc. 4\. Environmental Conservation\ 5. Community and Social Service **Human Objectives** A business is also a human organization where numbers of people are directly or indirectly involved in it to pursue their individual goals 1\. Fair return to owners 2\. Fair Compensation\ 4. Job Satisfaction\ 5. Workers Participation 6\. Satisfaction of Consumers **NATIONAL OBJECTIVES** Business is an integral part of the nation. So, it must have some objectives to pursue in the interest of the nation of which it is a part. A business must act as an instrument for implementing the national plan\'s programs and policies for fulfilling national interests. 1\. Utilization of Natural Resources\ 2. Ensuring Employment\ 3. Development of Enterprises\ 4. Production as per National Priorities\ 5. National Self-sufficiency and Export Promotion 6\. Balanced Regional Development N/B - Changing Objectives A business may change its objectives over time due to the following reasons: after achieving an objective a business moves onto another one e.g. survival in the first year may lead to an objective of increasing profit in the second year, the competitive environment might change, with the launch of new products from competitors, Technology might change product designs, so sales and production targets might need to change. Generally business objectives are changed to suit the dynamic business environment. **Pillars of Business** Business carries out its mandate based on four pillars;  Customer  Competitionpage6image1131213120  €Company/organization.  €Collaborators.  Customers\ Businesses provide goods and services based on what customers need and want. Different customers have different needs, and their needs and wants change as time passes. Businesses should be aware of customers changing wants and needs. New businesses often come into being because of these changing wants and needs.  Competition.\ Competition is the contest between businesses to win customers. Competition ensures that businesses progress in search of solutions to human problems. The firm is not alone in the industry, several other players are also in competition for the same clients and customers the firm is interested in and therefore the firm has to ensure it remains competitive in its product and service offering.  Company/organization\ The company provides the environment and resources that enables the attainment of the business objectives. The company organizes the people and finances and machinery to provide the product and services. Within the company, business people manage the company's human, financial and production resources and produce the product and services.  Collaborators\ These are the other players such as the suppliers, creditors, bankers, lawyers, and shareholders who necessitate the operation of the business. They help provide the needed capital and human resources from a far.