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the four key concepts: Change: Change refers to modification or transformation from one form. In BusinessManagement, change is usually the result of internal or external influences. For example, externally, new competitors and new trends lead an organization to adapt its objec...

the four key concepts: Change: Change refers to modification or transformation from one form. In BusinessManagement, change is usually the result of internal or external influences. For example, externally, new competitors and new trends lead an organization to adapt its objectives and operations; internally, the arrival of a new CEO may lead to a shift in the priorities and planing. Ethics: Ethics refer to the moral principles and values that form the basis of an organization conducts their activities. In BusinessManagement, every decision may have moral implications, impacting on internal and external stakeholders and the natural environment. Ethics is present throughout the organization. Creativity: the process of generating new ideas and refiing new perspectives. It includes the ability to recognize the value of ideas when developing innovation. Creativity may lead to a radical improvement in a business. For many organizations, a key challenge is bringing innovation and managing the process of improvement in a sustainable way that does not create conflict. Sustainability: ensuring that our current needs are met without harming the ability of future generations to meet their own needs. This can be improved by conserving resources, finding more efficient production methods, or discovering new resources. When making decisions, we consider the triple bottom line: the impacts on people, the planet, and profit. This approach looks at more than just financial outcomes; it also considers the effects on communities and the environment. Info: ❖ A business can be defined as a decision-making organization established to produce goods and/or provide services. ❖ Businesses exist to produce goods and services to satisfy the needs and wants of their customers (individuals, other businesses and/or governments), usually in return for a profit. ❖ A market is simply a place or process whereby buyers (customers) and sellers (businesses) meet to trade. ❖ Customer vs consumer: Customer: A customer is an individual or entity who purchases a product or service, completing a monetary transaction. For example, a parent buying a toy for their child is the customer in this situation. Purchases the product. Can resell the product for profit. A monetary transaction is necessary to buy the product. Consumer: A consumer, on the other hand, is the person who directly uses or consumes the product or service. In the same example, the child playing with the toy would be considered the consumer. May or may not purchase the product but is the end-user. Cannot resell the product for profit. A monetary transaction is optional. ❖ An entrepreneur is someone who, through his or her skills and passion, creates a business and is willing to take full accountability for its success or failure.  ❖ An intrapreneur, on the other hand, is someone who utilizes his or her skill, passion and innovation to manage or create something useful for someone else’s business The nature of business A business aims to meet the needs and wants of individuals or organizations through any of the following activities: Producing crops or extracting raw materials from the earth Creating a product Providing a service Businesses transform resources into valuable products or services, creating added value—the extra worth beyond the initial cost. For instance, if raw materials costing $10 are turned into a $30 product, the added value is $20. This enhancement through business processes justifies higher prices, generates profit, and rewards the business with revenue and recognition for meeting consumer needs or wants. Business Activity 1. Input a. Human: the right quality and quantity of people required to make the product or provide the service. b. Physical: the right quality and quantity of materials, machinery, and land space required to make the product or service. c. Enterprise: In business management, enterprise refers to the innovative business idea and the determination to transform that idea into a functioning, and ideally, thriving business. It involves entrepreneurial drive, leadership, and strategic decision-making to turn concepts into successful ventures. enterprise is crucial across all types of businesses, from everyday services like lawn care. Enterprise also encompasses creating a robust business social structure, fostering effective teams, and upholding ideals, morals, and ethical principles. d. Financial: the right quantity of cash and other forms of nance required to make the product or service. 2. Process: Production processes are the activities to add value that can vary widely in their approach: a. Capital-intensive processes: i. Definition: Capital-intensive processes rely heavily on physical assets like machinery, equipment, or land, and use relatively less labor. This means that a significant amount of money is invested in these assets rather than in hiring a large workforce. ii. Characteristics 1. High Investment in Machinery or Equipment: The process involves significant investment in specialized machinery or equipment. 2. Scale of Operation: Large-scale operations often require expensive equipment. For instance, a car manufacturing plant uses highly sophisticated and costly machinery to assemble vehicles. iii. Examples: Oil Extraction: Extracting oil from the ground requires expensive drilling rigs and equipment. The land used may be rich in oil, but the cost of the machinery and technology is very high.  b. Labor-intensive processes: i. Definition: Labour-intensive processes rely more on human work rather than on machinery or capital. This means that a significant portion of the production process involves manual work from people. ii. Characteristics: 1. High Dependency on Labor: The production process requires a lot of human effort. This can involve a large number of workers performing various tasks. 2. Skill Level of Workers: The workers may be low-skilled (doing repetitive, simple tasks) or highly skilled (performing complex tasks). iii. Examples: Agricultural Farming 3. Output a. Goods: these are tangible products that we can physically take home. b. Services: these are intangible and the buyer does not physically take them home. ❖ Intangible: Services are not physical and cannot be touched or owned. ❖ Inseparable: The delivery of the service is closely tied to the people and processes involved, meaning it cannot be separated from its provider. ❖ Perishable: Services cannot be stored or saved for later; they are typically consumed at the point of purchase. ❖ Variable: Each service experience is unique, as it may vary depending on the customer and situation, making services heterogeneous. ❖ The resources needed to produce goods and services - Factors of production Land Labor Capital Entrepreneurship Business functions and their role Human resources (HR): Ensuring that appropriate people are employed to make the product or service and are suitable for the working environment. To accomplish these goals, the HR department must recruit people, train them, at times dismiss them, and determine appropriate compensation. Marketing: Marketing aims to ensure the business offers products or services that meet market demand and drive profitability by using strategies. This involves ○ promotion to effectively communicate value ○ pricing to balance competitiveness and profitability ○ packaging to enhance appeal and functionality ○ distribution to efficiently reach customers Finance and Accounting: The role in ensuring necessary funds are available for producing and delivering products or services. This involves several key functions: ○ forecasting financial needs to determine how much funding will be required ○ maintaining accurate financial records to track all transactions and expenditures  ○ securing financial resources from various sources, such as loans or investments ○ managing payments for goods and services acquired. Operations management or production: Operations management is pivotal in ensuring that a business’s products or services meet quality standards while operating efficiently. This involves a continuous cycle of planning, implementing, evaluating, and improving processes, with a strategic focus on aligning operations with overall business goals and leveraging data-driven insights for ongoing success. ○ Managing Stock Flow: Objective: Ensure that the right amount of stock is available at the right time. This involves monitoring inventory to avoid shortages (which can halt production) or surpluses (which can lead to excess costs). Example: In a retail business, effective inventory management might involve using software to track sales and automatically reorder stock when it reaches a predefined threshold, preventing out-of-stock scenarios. Cycle: This includes regularly reviewing stock levels, forecasting demand based on sales data, and adjusting orders to align with expected sales. ○ Selecting and Implementing Production Methods: Objective: Choose the most efficient and effective methods for producing goods or services that meet quality standards. This includes decisions about technology, equipment, and processes. Cycle: This involves researching and evaluating different production methods, implementing chosen methods, and regularly assessing their effectiveness through performance metrics and quality control. ○ ways to produce more efficiently.: Objective: Find ways to enhance production efficiency and product quality to stay competitive. This includes streamlining processes, adopting new technologies, and reducing waste. Example: A tech company might invest in advanced machinery to speed up production and reduce errors, or a food manufacturer might implement lean manufacturing techniques to minimize waste and cut costs. Cycle: The improvement cycle involves identifying areas for enhancement, experimenting with new techniques or technologies, measuring their impact, and refining processes based on feedback and performance data. Business functions are interconnected. For instance, if marketing identifies a shift in consumer preferences necessitating a change in product design, operations management must adjust its production processes accordingly. This change may require additional financial resources, which the finance department needs to secure. Furthermore, the redesign might impact staffing requirements, necessitating coordination with HR to manage the changes effectively. As a business evolves, its functions shift from focusing on survival to growth and diversification. Initially, all departments work to sustain operations. As the business matures, priorities shift to expansion, requiring finance to fund new ventures, operations to adapt production, marketing to support new products, and HR to manage staffing needs. A business’s success hinges on the effective alignment of its functions. The key is ensuring that the business produces that meets market demands, has the right people and processes in place, and appropriately rewards its employees. Sectors of Business Activity: Goods: ○ Primary: The primary sector involves the extraction and production of raw materials, including mining, farming, fishing, forestry, and livestock raising. This sector is essential for acquiring natural resources, such as minerals and agricultural products. For example, BHP is a major company in the primary sector, focusing on mining iron ore and other minerals. Due to resource scarcity and environmental concerns, governments closely regulate activities in this sector to ensure sustainability and minimize ecological impact. ○ Secondary: The secondary sector is crucial for converting raw materials into finished goods through various manufacturing processes. This sector includes producing consumer durables (e.g., automobiles, electronics), non-durable goods (e.g., food, clothing), and capital equipment (e.g., machinery, tools). Historically, developed countries led in this sector, with companies like Standard Oil refining crude oil into products such as gasoline and kerosene. Over time, many manufacturing jobs have moved to developing and emerging markets. These regions are attractive because they have lower labor costs and advanced technologies. As a result, they now make a large portion of the world’s manufactured goods. This shift has led to more competition for established manufacturing countries that were once dominant. Services: ○ Tertiary: also known as the service sector, involves the provision of services rather than tangible goods. It encompasses a broad range of activities aimed at supporting, facilitating, and enhancing the functions of the primary and secondary sectors, such as transportation, financial services, healthcare, education, and retail. This sector plays a critical role in meeting consumer demands and improving quality of life by offering non-material support and services that underpin everyday operations and economic activities. It is essential for the smooth functioning of the economy and addressing various societal needs. Key areas include financial services (e.g., JPMorgan Chase), healthcare (e.g., Mayo Clinic), education (e.g., Harvard University), retail (e.g., Walmart), transportation (e.g., Uber), hospitality (e.g., Marriott Hotels), and professional services (e.g., Deloitte). As economies advance, they shift from manufacturing to services - as it helps make far greater money and can influence more, making the tertiary sector crucial for employment and consumer spending. ○ Quaternary: a segment of the modern economy focused on knowledge-based services-intangible serivices. It encompasses activities related to the production, processing, and dissemination of information and knowledge. This sector is a subcategory of the tertiary sector. However, the quaternary sector is distinguished and heavily influenced on technology and intellectual services. This sector drives innovation and economic growth by creating high-value jobs and advancing technology. The quaternary sector encompasses various key components. Information Technology (IT) Services include companies like Microsoft and Apple, which offer software, hardware, and IT consulting, handling data processing, cybersecurity, and cloud computing. Consultancy firms  such as McKinsey & Company provide strategic advice and solutions based on extensive industry knowledge and data analysis. Research and Development (R&D) involves companies like Pfizer innovating new medications and technologies. E-Services and Web-Based Services are exemplified by Amazon Web Services (AWS), which offers cloud computing solutions for data storage and web hosting. Media and Communications are represented by Netflix, which streams and distributes digital content. Economic Development: The quaternary sector, dominant in post-industrial economies, focuses on knowledge-based industries. Developed countries like the U.S. and Germany excel here, showcasing their advanced technology and education. Production Chain The production chain, or chain of production, describes the steps required through diffrent sectors to transform raw materials into finished consumer goods. The production chain begins with the primary sector, which extracts raw materials like metals and rubber. These materials are then processed into intermediate products by the secondary sector, such as turning raw materials into car parts. These car parts are assembled into vehicles by manufacturers in the secondary sector. The completed cars are distributed and sold by the tertiary sector, which includes dealerships that handle both sales and after-sale services like repairs and maintenance. The quaternary sector supports this entire process by providing essential information and technology, such as market research and consumer insights. This interplay ensures that advancements and efficiencies in one sector drive improvements and innovations across the entire chain. Dynamic Relationships Each sector adapts to developments in the others, demonstrating a dynamic and interdependent economic system. For instance, advancements in IT and research (quaternary sector) lead to enhanced manufacturing processes (secondary sector), impacting retail strategies and consumer demand (tertiary sector). These changes, in turn, affect the extraction and use of raw materials (primary sector). This continuous interaction reflects how advancements and demands are reshaping the production and service landscape, highlighting the interconnected nature of the economic sectors. Sectoral change Sectoral change refers to the evolving importance of different sectors within an economy as it grows and develops. These sectors are classified as follows: 1. Primary sector: Extraction of raw materials (agriculture, mining). 2. Secondary sector: Manufacturing and industrial production. 3. Tertiary sector: Services (banking, retail, education). 4. Quaternary sector: Knowledge-based activities (R&D, IT services). Why Do Economies Change Sectoral Composition? Sectoral change is a dynamic process influenced by various factors, and it reshapes economies by shifting the dominance from one sector to another. As economies grow and develop, the workforce and resources move from agriculture (primary sector) to manufacturing (secondary sector), then to services (tertiary sector), and eventually to research and innovation (quaternary sector). This evolution is not without its challenges, but it presents opportunities for businesses that can adapt to these changes. Influences on Sectoral Change: Technological progress: Innovations such as the internet and artificial intelligence have created jobs in the quaternary sector while making roles like typists and telephone operators obsolete. Government policies: Support for education and innovation leads to the growth of tertiary and quaternary sectors. For instance, Germany’s subsidies for renewable energy pushed the economy toward sustainable industries. International trade and competition: As global trade networks expand, economies are pushed to move from low-value primary goods to high-value tertiary and quaternary services. The rise of U.S. tech companies like Google and Apple reflects this trend. Strains of Sectoral Change: Human resources: Transitioning from primary to secondary or tertiary sectors requires a skilled workforce, which can be a challenge for developing countries. Without proper education and training, workers may face unemployment during this shift. Resource allocation: Moving from manufacturing to services reduces the need for physical resources but increases the demand for infrastructure like office spaces and IT systems. This reallocation puts financial strain on businesses and governments. Examples of Sectoral Change and Business Impact: Germany: A developed economy that excels in both the secondary (automotive and engineering) and quaternary sectors (research and innovation). German businesses have adapted by maintaining their strengths in traditional industries while embracing new innovations. Impact of Sectoral Change on Business Activity The impact of sectoral change on business activity is complex and multi-faceted, requiring companies to adapt their strategies, workforce, and resource management to remain competitive. As economies shift from one sector to another, businesses face a series of challenges and opportunities that can significantly alter their operations. To understand this impact, we need to focus on how businesses respond to the changing demands of labor, resource allocation, competition, and environmental concerns, while also looking at the strategic changes they must adopt to thrive in evolving industries. Key Impacts of Sectoral Change on Business Activity: Long-term Business Strategy and lfexibilty is the basis To remain competitive, and win.  Shifts in Labor Demand: As economies transition from the primary sector (agriculture) to the secondary (manufacturing) and tertiary sectors (services), businesses must adjust to the changing needs of the workforce. ○ In developing economies, manufacturing businesses might need to upskill workers, adopt automation, and enhance productivity. For example, a garment factory moving toward automation needs to invest in technology. ○ In developed economies, businesses in the quaternary sector (research, innovation) require highly specialized talent in areas like artificial intelligence, cybersecurity, and biotechnology. therefore companies invest in talent acquisition and training programs to stay competitive. Changes in Business Strategy: As market conditions evolve due to technological advancements, regulatory changes, and shifting consumer preferences, businesses must adapt and be flexible and open-minded in their strategies to remain competitive. ○ A good example is Netflix who successfully transitioned from a DVD rental company to a global streaming platform, capitalizing on the shift towards digital content consumption. ○ Failure to foresee and adapt to sectoral changes can lead to business obsolescence. For instance, blackberry refused to change the processor and make a non-keyboard phone Competition for Skilled Talent: With the rise of the tertiary and quaternary sectors, businesses must compete for a highly skilled workforce. ○ For example, the demand for data scientists and cybersecurity experts has skyrocketed. ○ This competition can create wage inflation, as businesses offer higher salaries to attract the limited pool of qualified professionals. Resource Allocation: The allocation of resources shifts as economies evolve from one sector to another, requiring businesses to manage capital differently. Environmental and Sustainability Implications: Sectoral changes, especially industrialization, can have environmental impacts that businesses must manage carefully. Challenges and opportunities for starting up a business Why people start businesses: Rewards Independence Necessity: Some businesses are started by people who lost their jobs and needed a new source of income. Challenge: Some people start businesses to see if they can succeed on their own. Initially, they often handle all aspects of the business. As the business grows, they must learn new skills to manage a larger and more complex operation. Interest: Some businesses are started by people who love what they do. For example, the Hawaiian Tropic suntan lotion company was founded by a chemistry teacher who enjoyed spending time at the beach. Many specialty shops, like guitar or ballet clothing stores  Finding a gap: Businesses often look for untapped opportunities to gain a competitive advantage. Sometimes, they accidentally discover these opportunities. For example, Dr. Spender Silver at 3M accidentally invented Post-its, a product that revolutionized office communications. Sharing an idea: People who are passionate about something may start businesses to share their ideas with others. Yoga studios, for example, are often owned by people who love yoga and want to promote its benefits. While promoting the idea helps their business, their primary motivation is often to spread the word about yoga. The process of starting up a business The business idea Planning The business idea refers to the fundamental activity that the business will do – that is, determined by the needs of the market or product – or service-driven, Steps for starting up a business 1. Organizing the basics: a. The entrepreneur starting a new business must address several basic questions: b. Where is the business going to be based? c. What will the entrepreneur call the business? d. What will be its legal structure? e. What will be its operational structure? f. Is there a sufcient business infrastructure to make the business feasible – suppliers, potential customers, and government services? 2. Researching the market: Once an entrepreneur outlines a feasible business concept, conducting thorough market research is crucial. Identifying a clear market gap is rare, and new businesses often fail, with U.S. failure rates between 50-80% in the first four years. After determining the basic idea, entrepreneurs must refine their target market and unique selling proposition (USP). For example, a grocery business idea could evolve into a niche market like organic products or specialized meats after research reveals a saturated general market. By narrowing focus, the entrepreneur strengthens their competitive edge and potential for success. 3. Planing the business: The entrepreneur should write a business plan. This document outlines key operational details and is crucial for stakeholders like potential owners and financial institutions that may provide capital. The business plan demonstrates that the entrepreneur has thoughtfully considered how the business will operate, helping to build confidence among investors and lenders by addressing potential challenges in advance. This careful planning ensures that the business is prepared for operational and financial hurdles. 4. Establishing legal requirements: All businesses must comply with laws regarding their legal structure, labor practices, and operational standards, which also define tax obligations. Even sole traders, who are not separate from the business operator, must register. Corporations, on the other hand, are legal entities subject to more complex regulations. Many businesses require licenses or inspections to operate. Additionally, they must account for income taxes and payroll taxes, which can cover employee benefits such as pensions, unemployment, and health insurance. These legal and tax requirements can be extensive and expensive for businesses to navigate. 5. Raising the finances  6. Testing the market: The final stage is launching the business, possibly starting small to test consumer reactions. Capital-intensive businesses face costly launches with slow adjustments, while flexible businesses, like restaurants, can adapt quickly. Market testing confirms if the business idea has potential based on consumer response. Challenges a new business might face Even with thorough planning, start-ups still face a high risk of failure. Issues often arise before the business even opens, such as poor organization, inadequate market research, insufficient planning, or inability to meet legal requirements. Financial mismanagement or unsuccessful launches can also contribute to failure. Even with a solid business plan, challenges like low brand recognition, difficulty in recruiting skilled labor, unforeseen competitor reactions, or economic downturns can destabilize a start-up. Limited capital during tough economic times or internal conflicts among managers can further increase the likelihood of failure. Organization ○ The location of the business was inappropriate. ○ The structure of the business did not work. ○ Supplies were unreliable. Market Research The market research was poor. The target market wasn’t appropriate. The test was too optimistic. Channels of communication were weak. Business Plan The business plan did not convince. Goals were too vague or contradictory. Legal Requirements ○ Labour laws were not addressed. ○ Registration was too difficult. ○ Tax obligations were not addressed. Finance ○ The accounts were not kept properly – cash flow, in particular, was a problem. ○ Raising start-up capital was too difficult. ○ Raising medium-term to long-term finance was difficult. The Market ○ The launch failed. ○ The pilot was inconclusive. ○ Success was limited – the product failed to inspire.