INTRODUCTION TO BUSINESS MANAGEMENT
CHAPTER 1: The Business World and Business Management
• Products and services must meet the needs of people in exchange for a profit.
• The description of business emphasises four different elements:
Human activities – managed & operated by people
Production – transform resources into products & services
Exchange – products & services for money or other goods/services
Profit – reward for meeting people’s needs
• The ultimate business goal is to make a profit.
Predominantly products: bread, cars, houses
Predominantly services: entertainment, insurance
Market Economy / Market System: This system, in which individuals themselves decide what to produce, how to
produce it and at which price to sell their product. (A prevailing economic system in South Africa.)
Industries: The market economy is a complex system comprising various types of small and large business organisations
that collectively mobilise the resources of a country to satisfy the needs of its inhabitants.
Informal Sector: They are not part of the formal economy because they are not registered
• Do not contribute to rates and taxes
• Estimate contribution to GDP = 5-6%
Businesses serves community indirectly:
• Technology innovation
• Research
• Development
• Improvements to infrastructure
Corporate Social Responsibility: The voluntary compliance of businesses with practices that are sustainable.
Customer Protection Act (No 68 of 2008): Prohibit unfair business practices and promote a consistent legislative and
enforcement framework to protect consumers.
,Sustainability (5 themes)
1. Social Responsibility:
• Originated in media revelations of malpractice by businesses and the resultant insistence of society on
restricting such a malpractice through regulation.
• Previous social responsibility of a business has been measures by its contribution towards employment
opportunities and by its contribution to the economy.
• Business are under more pressure than ever to behave as responsible citizens:
o The provision of a responsible and safe workplace.
o Provision of housing
o Concern about health issues
o Involvement with community issues
o Environmental awareness
o Empowerment of previously disadvantage individuals, both economically and managerially.
• Businesses often contribute voluntarily and directly to social causes and community upliftment by way of
corporate social investment.
2. Employment equity:
• Notion that the composition of the workforce at all levels should reflect the composition of the community.
• Aim = create equal employment opportunities for all and redress inequalities of the past by ensuring that
workforces are composed in roughly the same proportions as the groups that make up the population.
• Employment equity act become law in 1998 to eliminate unfair discrimination, ensure employment equity and
achieve a divers workplace that is broadly representative of the country’s demographic realities.
• Employment equity is crutual to South Africa’s economic growth.
• Inclusion of PDI and other designated groups at management level. To ensure that the government growth
targets can be achieved.
• For the South African economy to grow at a much-needed level of 4,5% or higher, there must be enough skilled
managers to drive the economy.
• Traditional source of managers (white males) has been decreasing, most of the required will have to come from
the black population.
3. Business ethics:
• Close to social responsibility.
• Focus = ethical behaviour of managers and executives in the business world.
• Managers are expected to maintain high ethical standards; they are in a position where they can abuse their
power.
• To make Business Ethics practical, there are a code of business conduct to provide a clear guideline to managers
on what is ethical and what is not.
4. Consumerism:
• A social force that protects consumers against unsafe products and malpractice by exerting moral and economic
pressure on business.
• South African National Consumer Union acts as watchdog for consumers and many avenues for consumer
protection have been already been instituted.
• Forces the producers of goods and services to take full responsibility for ensuring that their products and
services comply with standards, and the Act enforces certain minimum warranties and indemnities to protect
the buyers of goods and services.
Environmental Sustainability:
• Businesses are frequently responsible for air, water and soil pollution, and for the resultant detrimental effects
on fauna and flora.
• Greenpeace is the best-known environmental pressure group globally.
,Needs and need satisfaction:
The multiplicity of human needs:
• The continued existence of humans depends upon the constant satisfaction of numerous needs (Physical;
Phycological)
• Maslow’s hierarch of needs = human needs range in a definite order, from the most essential for survival to the
least necessary.
• Humans are social beings who lives in communities – they have collective needs; i.e. protection and education.
• First the most urgent needs get satisfied, and then desire more.
• As society satisfies a need, a new one comes into existence. (no end to the constantly increasing number of
human needs)
Society’s limited resources:
• Limited resources available to satisfy all the needs.
• A country has only a certain number of people in its workforce to operate a certain number of machined, and a
certain number of factories, hospitals and offices to produce a certain quantity of products and services.
• Resources are the basic input in the production of products and services and they are also known as production
factors.
Natural Resources:
• Also known as the production factor of land, including:
o Agricultural land
o Industrial sites
o Residential stands
o Minerals and metals
o Forest
o Water
o All resources that nature puts at disposal of human kind.
• Most important characteristic of natural resources is that the supply cannot be increased (scarce).
• Human efforts are necessary to process these resources into need-satisfying products. ‘
Human resources:
• Known as production factor of labour.
• Physical and mental talents and skills.
• People receive wages for their labour.
• Labour force size – size of population, level of education/training, proportion of women, retirement age.
• Manufacturing processes value – labour force has to be trained for certain periods and to certain levels of skill to
be able to produce the products and services required.
• South Africa = we have an oversupply of unskilled labour and a shortage of certain types of highly skilled labour.
Capital:
• Buildings, machinery, cash registers, computers and other products, produce not for final human consumption.
• Usually have a long working life.
• Scarce – takes years to build up its stock of capital.
• Spends a certain amount on things such as roads, bridges etc. every year.
• Always a shortage – owners or suppliers of Capital are usually remunerated in the form of interest or rent.
Entrepreneurship:
• Fourth factor of production
• Collective capacity of entrepreneurs, who are involved in providing products and services for their society.
• Contemporary focus on entrepreneurship is mainly on small to medium businesses, entrepreneurs are not
limited to these.
, Need satisfaction: A Cycle:
• how to satisfy needs of community? Entrepreneurs have to utilise scarce resources in certain combinations to
produce products and services.
• Economic value = created in the production process by combining production factors in such a way that final
products are produces for consumers.
• A nation’s survival depends on the satisfaction of its people’s needs.
• Striving for need satisfaction with the limited resources available is an incentive for economic progress.
• Unlimited needs, but limited resources = economic problem.
• Economic problem = how to ensure the highest possible satisfaction of needs with scarce resources.
• Society cannot always get what it wants, so it must choose how it will use its scarce resources to the max effect
to satisfy its needs.
• Has to make a decision about solving the following economic issue:
o Which products/services should be producing, and in what quantities?
o Who should produce these products? (state/private individuals)
o How should these products/services be produced? And which resources should be used?
o For whom are these products/services to be produce? (rich/poor; business/families)
• Answers to be given by the community.
• Community decides which institutions should be responsible for the production and distribution of products and
services, as well as the role that each institution has to play.
• Government = nationalised.
• Private investors = privatisations.
• In a market economy = need satisfying institutions, including business organisations and government
organisations offer products/services on the market in return for profit.
• When community is not satisfied, it will change the economic system or choose a new need-satisfying system.
CHAPTER 1: The Business World and Business Management
• Products and services must meet the needs of people in exchange for a profit.
• The description of business emphasises four different elements:
Human activities – managed & operated by people
Production – transform resources into products & services
Exchange – products & services for money or other goods/services
Profit – reward for meeting people’s needs
• The ultimate business goal is to make a profit.
Predominantly products: bread, cars, houses
Predominantly services: entertainment, insurance
Market Economy / Market System: This system, in which individuals themselves decide what to produce, how to
produce it and at which price to sell their product. (A prevailing economic system in South Africa.)
Industries: The market economy is a complex system comprising various types of small and large business organisations
that collectively mobilise the resources of a country to satisfy the needs of its inhabitants.
Informal Sector: They are not part of the formal economy because they are not registered
• Do not contribute to rates and taxes
• Estimate contribution to GDP = 5-6%
Businesses serves community indirectly:
• Technology innovation
• Research
• Development
• Improvements to infrastructure
Corporate Social Responsibility: The voluntary compliance of businesses with practices that are sustainable.
Customer Protection Act (No 68 of 2008): Prohibit unfair business practices and promote a consistent legislative and
enforcement framework to protect consumers.
,Sustainability (5 themes)
1. Social Responsibility:
• Originated in media revelations of malpractice by businesses and the resultant insistence of society on
restricting such a malpractice through regulation.
• Previous social responsibility of a business has been measures by its contribution towards employment
opportunities and by its contribution to the economy.
• Business are under more pressure than ever to behave as responsible citizens:
o The provision of a responsible and safe workplace.
o Provision of housing
o Concern about health issues
o Involvement with community issues
o Environmental awareness
o Empowerment of previously disadvantage individuals, both economically and managerially.
• Businesses often contribute voluntarily and directly to social causes and community upliftment by way of
corporate social investment.
2. Employment equity:
• Notion that the composition of the workforce at all levels should reflect the composition of the community.
• Aim = create equal employment opportunities for all and redress inequalities of the past by ensuring that
workforces are composed in roughly the same proportions as the groups that make up the population.
• Employment equity act become law in 1998 to eliminate unfair discrimination, ensure employment equity and
achieve a divers workplace that is broadly representative of the country’s demographic realities.
• Employment equity is crutual to South Africa’s economic growth.
• Inclusion of PDI and other designated groups at management level. To ensure that the government growth
targets can be achieved.
• For the South African economy to grow at a much-needed level of 4,5% or higher, there must be enough skilled
managers to drive the economy.
• Traditional source of managers (white males) has been decreasing, most of the required will have to come from
the black population.
3. Business ethics:
• Close to social responsibility.
• Focus = ethical behaviour of managers and executives in the business world.
• Managers are expected to maintain high ethical standards; they are in a position where they can abuse their
power.
• To make Business Ethics practical, there are a code of business conduct to provide a clear guideline to managers
on what is ethical and what is not.
4. Consumerism:
• A social force that protects consumers against unsafe products and malpractice by exerting moral and economic
pressure on business.
• South African National Consumer Union acts as watchdog for consumers and many avenues for consumer
protection have been already been instituted.
• Forces the producers of goods and services to take full responsibility for ensuring that their products and
services comply with standards, and the Act enforces certain minimum warranties and indemnities to protect
the buyers of goods and services.
Environmental Sustainability:
• Businesses are frequently responsible for air, water and soil pollution, and for the resultant detrimental effects
on fauna and flora.
• Greenpeace is the best-known environmental pressure group globally.
,Needs and need satisfaction:
The multiplicity of human needs:
• The continued existence of humans depends upon the constant satisfaction of numerous needs (Physical;
Phycological)
• Maslow’s hierarch of needs = human needs range in a definite order, from the most essential for survival to the
least necessary.
• Humans are social beings who lives in communities – they have collective needs; i.e. protection and education.
• First the most urgent needs get satisfied, and then desire more.
• As society satisfies a need, a new one comes into existence. (no end to the constantly increasing number of
human needs)
Society’s limited resources:
• Limited resources available to satisfy all the needs.
• A country has only a certain number of people in its workforce to operate a certain number of machined, and a
certain number of factories, hospitals and offices to produce a certain quantity of products and services.
• Resources are the basic input in the production of products and services and they are also known as production
factors.
Natural Resources:
• Also known as the production factor of land, including:
o Agricultural land
o Industrial sites
o Residential stands
o Minerals and metals
o Forest
o Water
o All resources that nature puts at disposal of human kind.
• Most important characteristic of natural resources is that the supply cannot be increased (scarce).
• Human efforts are necessary to process these resources into need-satisfying products. ‘
Human resources:
• Known as production factor of labour.
• Physical and mental talents and skills.
• People receive wages for their labour.
• Labour force size – size of population, level of education/training, proportion of women, retirement age.
• Manufacturing processes value – labour force has to be trained for certain periods and to certain levels of skill to
be able to produce the products and services required.
• South Africa = we have an oversupply of unskilled labour and a shortage of certain types of highly skilled labour.
Capital:
• Buildings, machinery, cash registers, computers and other products, produce not for final human consumption.
• Usually have a long working life.
• Scarce – takes years to build up its stock of capital.
• Spends a certain amount on things such as roads, bridges etc. every year.
• Always a shortage – owners or suppliers of Capital are usually remunerated in the form of interest or rent.
Entrepreneurship:
• Fourth factor of production
• Collective capacity of entrepreneurs, who are involved in providing products and services for their society.
• Contemporary focus on entrepreneurship is mainly on small to medium businesses, entrepreneurs are not
limited to these.
, Need satisfaction: A Cycle:
• how to satisfy needs of community? Entrepreneurs have to utilise scarce resources in certain combinations to
produce products and services.
• Economic value = created in the production process by combining production factors in such a way that final
products are produces for consumers.
• A nation’s survival depends on the satisfaction of its people’s needs.
• Striving for need satisfaction with the limited resources available is an incentive for economic progress.
• Unlimited needs, but limited resources = economic problem.
• Economic problem = how to ensure the highest possible satisfaction of needs with scarce resources.
• Society cannot always get what it wants, so it must choose how it will use its scarce resources to the max effect
to satisfy its needs.
• Has to make a decision about solving the following economic issue:
o Which products/services should be producing, and in what quantities?
o Who should produce these products? (state/private individuals)
o How should these products/services be produced? And which resources should be used?
o For whom are these products/services to be produce? (rich/poor; business/families)
• Answers to be given by the community.
• Community decides which institutions should be responsible for the production and distribution of products and
services, as well as the role that each institution has to play.
• Government = nationalised.
• Private investors = privatisations.
• In a market economy = need satisfying institutions, including business organisations and government
organisations offer products/services on the market in return for profit.
• When community is not satisfied, it will change the economic system or choose a new need-satisfying system.
