Introduction to Business Management

Introduction


Business: an organization/entity which uses (natural) resources to produce desirable goods/services to meet the demands of its customers.

 

Inputs of the business/Factors of Production: resources required to produce the desirable output that satisfy consumers' needs. This can be classified into 4 main types:

 

Basic inputs: 

Input

Definition/Examples

Land

- site of the building

- all the natural resources used (For e.g. coal, steel, if you're operating in the manufacturing industry)

Labour

manual and skilled labour who make up the workforce

Capital

- finance required (to set up business + pay for its continuing operation)

- man-made resources used (machinery, factories)

Enterprise

provided by risk-taking individuals who combine all the factors of production into a unit that is capable of producing services/goods.

Additional inputs:

 

Consumer goods: physical and tangible goods sold to the general public. Durable means can be used repeatedly e.g. washing machine, cars whereas non-durable is usable only once e.g. food, drinks.

 

Consumer services: non-tangible products sold to the general public. E.g. hotels, Insurance services.

 

Capitals goods: physical goods that are sold to another business rather than to the general public to aid in the production of other finished goods/services (which can later be sold to consumers) E.g. capitals goods such as machinery and equipment will be sold to automobile company to produce commercial vehicles.

 

Business Functions

 

Human resource management: identifies workforce needs such as recruitment, training, deployment or redundancy to help a business achieve its overall objectives. 

 

Finance and accounts:

 

Marketing: 

 

Operations management:

 

Economic Structure/Business Activity

Businesses classified into 4 sectors based on its production:

 

Primary sector: firms involved in extraction of natural resources which can be sold to other businesses for processing. E.g. Fishing, mining.

 

Secondary sector: firms that turn raw materials obtained from natural resources into processed products. Eg: computers, clothing, baking

 

Tertiary sector: firms that provide services to consumers/other businesses. Eg: banking, tourism

 

Quaternary sector: "knowledge based" support services such as IT businesses and information service providers. Eg: research and development, business consultancy.

 

Economic structure: the balance between the 4 economic sectors of a particular country.

 

Changes in Economic Structure

 

Gross Domestic Product (GDP): market value of all the finished goods/services produced in a country at a specific time period.

 

Industrialization: describes the growing importance of manufacturing companies in the secondary sector in a developing country.

 

Benefits:

Problems:

 

Deindustrialization: general decline in the importance of secondary sector activity and an increase in the tertiary sector in developed countries.

 

Causes:

Results:

Competitive advantage: factors that allow a business to outperform its competitors. Eg: producing cheaply or higher sales.

Starting a Business

Entrepreneurship Vs Intrapreneurship

Entrepreneur

Intrapreneur

Takes a financial risk of starting and managing a new business venture

financial risk is accepted by the organization one works for

accepts the risks of failure

risks of failure accepted by the organization; except the risk of losing the job

accepts the responsibility of managing a business

accepts the responsibility of turning an idea into a "finished product" through "entrepreneurial talents" like innovation and risk taking.

has a novel idea for a new business

has a novel idea for a product that is developed within an organization

 

Qualities of an Entrepreneur

 

Impact of enterprise (and intrapreneurship) on business activity

 

 

Reasons to start a business

 

Steps in starting a business

 

1. Identify a market opportunity that could generate sufficient demand from customers in order to be profitable.

 

2. Sourcing Capital (finance): one's own savings, family, friends, banks, government grants or venture capitalists. 

 

3. Determining a location: renting a building (raises cost issues), visit customers at their home (e.g. hairdressing) or set up at home which may cause:

 

4. Building a customer base: new, small businesses tend to overcome cost and pricing advantages of its larger competitors by offering better service like:

 

Problems faced by start ups

1. Competition: from established larger business unless the idea is unique

 

2. Lack of finance/working capital: 

Causes:

Solution:

 

3. Lack of record keeping: useful to pay taxes, bills and chase up debtors

 

4. Poor management skills

 

5. change in the business environment: new competitors, legal changes, economic recession, technological change 

 

Liquidity: determines how quickly a business can convert an asset into cash without affecting its market price. Cash is the most liquid of assets while tangible items are less liquid.

 

Trade credit: an agreement where the customer is allowed to pay the supplier at a later date.

 

Overdraft:  a financial facility that enables you to withdraw money from your bank account (savings or current), even if you do not have any account balance.

Break-even: a level of output where total costs and revenue are the same; a business is neither making a profit nor a loss.  

Business Plans

Business plans: A written document that describes a business, its objectives and strategies, the market it aims for and its financial forecasts. 

 

Headline

Contents

executive summary

overview of the business and its objectives

description of the business opportunity

details of the entrepreneur, what is sold, why, to whom

marketing strategy

what and how a product will be sold

management team and personnel

skills and experience of entrepreneur and the staff

operations

premises, production facilities, IT systems

financial forecasts

profit and cash flow, future projection of sales

 

Importance of business plans to different users: 

- Banks, investors: uses it to judge the viability of the idea in order to provide a loan

 

- Employees, Managers: Helps identify objectives and targets which provides a clear sense of purpose and directions. Financial and other forecasts can act as budgets and control benchmarks.

 

- Suppliers: can use it to decide whether to establish a long-term relationship with a business

 

Stock market flotation: conversion of a private company to a public one by selling shares to the public.

 

 

https://www.investopedia.com/terms/l/liquidity.asp#:~:text=Key%20Takeaways-,Liquidity%20refers%20to%20the%20ease%20with%20which%20an%20asset%2C%20or,market%20liquidity%20and%20accounting%20liquidity.

 

https://www.realbusinessrescue.co.uk/articles/directors-advice/what-does-business-liquidity-mean

https://www.bankofbaroda.in/banking-mantra/loansborrowings/blogdetail.htm?72/what-is-overdraft-facility-all-you-need

https://www.thebalance.com/structural-unemployment-3306202#:~:text=Structural%20unemployment%20refers%20to%20a,some%20people%20to%20find%20jobs.

 

 

 

Editors

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