1.1 Introduction to Business Management
Objectives
Explain the role of businesses in combining human, physical and financial resources to create goods and
services.
Understand the main business functions and their roles (human resources, finance and accounts,
marketing, and operations).
Define primary, secondary, tertiary and quaternary sectors.
Outline the nature of business activity in each sector and the impact of sectoral change on business
activity.
Explain the role of entrepreneurship (and entrepreneur) and intrapreneurship (and intrapreneur) in overall
business activity.
Identify reasons for starting up a business or an enterprise.
Outline common steps in the process of starting up a business or an enterprise.
Examine problems that a new business or enterprise may face.
Outline the elements of a business plan.
THE ROLE OF BUSINESS
Explain the role of businesses in combining human, physical and financial resources to create goods and services.
Abusinessis any organisation set up to meet the needs and wants of other individuals or organisations by:
producing crops or extracting raw materials from the earth, or
creating a product, or
providing a service.
Inputs
Resources used by businesses.
Human: quality and quantity of people required to make the product or provide the service.
managers, employees, entrepreneurs, etc.
Physical: materials, machinery, and land space required to make the product or service.
raw materials e.g. agricultural products, lumber, minerals, metals, and crude oil.
semi-finished goods that a business may purchase in order to begin production.
capital goods e.g. equipment and machines that will be used to produce other goods.
, Financial: funds needed to set up and invest in a business for operations and production.
medium or long term financing: purchase business’s locale or capital equipment.
short-term financing: pay for inputs that will soon be used and sold by the business.
Enterprise: business idea to manage business functions and elements (least tangible input).
also known asfactors of production:
Land
Labour
Capital
Enterprise
Production processes
Capital-intensive:use a large proportion of land or machinery relative to other inputs, especially labour.
Adv:
better consistency and accuracy.
no skill shortage.
long term financial benefits.
machines do not require pay.
Disadv:
expensive machines.
less competitiveness.
machines may become obsolete.
goods may be devalued by customers.
Labour-intensive:use a large proportion of labour relative to other inputs, especially land or machinery.
Adv:
‘hand crafted’ goods often have higher value.
generally better quality.
labour costs are lower than machinery costs.
, staff flexibility.
Disadv:
higher long-term costs.
inconsistent levels of effort.
low-skilled workers.
Outputs
Businesses aim to satisfy the needs and desires of their customers by selling either:
Goods: physical products that are tangible.
Services: intangible products in the form of an action.
Customers can be:
B2C: business to consumer.
B2B: business to business.
BUSINESS FUNCTIONS
Understand the main business functions and their roles (human resources, finance and accounts, marketing, and
operations).
Human resources (HR)
ensure that appropriate people are employed to make the product.
recruit people, train them, at times dismiss them.
determine suitable salaries and compensation.
Finance and accounts
ensure that appropriate funds are made available to make the product.
forecast requirements, keep accurate records.
obtain financial resources from various providers.
payments for bills and production budget.
prepares final accounts e.g. income statements and balance sheets.
Marketing
ensure that the business offers a product that is desired by sufficient customers.
satisfies the demand of customers for profitable operations.
conduct market research and advertising.
promote, price, package, and distribute the product.
Operations / Production
ensure the product is of the desired quality.
control the quantity and flow of stock.
determine appropriate methods of production.
, look for ways to produce the good/service more efficiently.
meeting production targets and deadlines
research and development for products.
SECTORS OF BUSINESS ACTIVITY
Define primary, secondary, tertiary and quaternary sectors.
1. Primary
extraction or production of raw materials.
low value added.
e.g. extraction, mining, farming, fishing, hunting, etc.
underdeveloped economies.
2. Secondary
raw materials are processed into products for sale, usually by manufacturing.
goods can take many forms: consumer durables, non-durable goods, and capital goods.
decreased in many countries due to the use of mechanisation and automation.
developing economies.
3. Tertiary
provides services, sometimes using manufactured products.
high value added.
e.g. financial, leisure, healthcare, education, transport, security services, etc.
developed economies (largest sector in terms of employment).
4. Quaternary
a subgroup of the tertiary sector.
provides services that are especially focused on knowledge.
development and use of data and information.
high value added.
e.g. e-services involving IT, the media, web-based services, etc.
developed economies.
These sectors are linked in the production chain orchain of production.
the steps through the different sectors to turn raw materials into a consumer good that is marketed.
companies whose activities span two or more sectors are integrated companies.
Integration
Horizontal:refers to a business acquiring or merging with another business engaged in the same activity.
increase market share and market power.
take advantage of economies of scale.
Objectives
Explain the role of businesses in combining human, physical and financial resources to create goods and
services.
Understand the main business functions and their roles (human resources, finance and accounts,
marketing, and operations).
Define primary, secondary, tertiary and quaternary sectors.
Outline the nature of business activity in each sector and the impact of sectoral change on business
activity.
Explain the role of entrepreneurship (and entrepreneur) and intrapreneurship (and intrapreneur) in overall
business activity.
Identify reasons for starting up a business or an enterprise.
Outline common steps in the process of starting up a business or an enterprise.
Examine problems that a new business or enterprise may face.
Outline the elements of a business plan.
THE ROLE OF BUSINESS
Explain the role of businesses in combining human, physical and financial resources to create goods and services.
Abusinessis any organisation set up to meet the needs and wants of other individuals or organisations by:
producing crops or extracting raw materials from the earth, or
creating a product, or
providing a service.
Inputs
Resources used by businesses.
Human: quality and quantity of people required to make the product or provide the service.
managers, employees, entrepreneurs, etc.
Physical: materials, machinery, and land space required to make the product or service.
raw materials e.g. agricultural products, lumber, minerals, metals, and crude oil.
semi-finished goods that a business may purchase in order to begin production.
capital goods e.g. equipment and machines that will be used to produce other goods.
, Financial: funds needed to set up and invest in a business for operations and production.
medium or long term financing: purchase business’s locale or capital equipment.
short-term financing: pay for inputs that will soon be used and sold by the business.
Enterprise: business idea to manage business functions and elements (least tangible input).
also known asfactors of production:
Land
Labour
Capital
Enterprise
Production processes
Capital-intensive:use a large proportion of land or machinery relative to other inputs, especially labour.
Adv:
better consistency and accuracy.
no skill shortage.
long term financial benefits.
machines do not require pay.
Disadv:
expensive machines.
less competitiveness.
machines may become obsolete.
goods may be devalued by customers.
Labour-intensive:use a large proportion of labour relative to other inputs, especially land or machinery.
Adv:
‘hand crafted’ goods often have higher value.
generally better quality.
labour costs are lower than machinery costs.
, staff flexibility.
Disadv:
higher long-term costs.
inconsistent levels of effort.
low-skilled workers.
Outputs
Businesses aim to satisfy the needs and desires of their customers by selling either:
Goods: physical products that are tangible.
Services: intangible products in the form of an action.
Customers can be:
B2C: business to consumer.
B2B: business to business.
BUSINESS FUNCTIONS
Understand the main business functions and their roles (human resources, finance and accounts, marketing, and
operations).
Human resources (HR)
ensure that appropriate people are employed to make the product.
recruit people, train them, at times dismiss them.
determine suitable salaries and compensation.
Finance and accounts
ensure that appropriate funds are made available to make the product.
forecast requirements, keep accurate records.
obtain financial resources from various providers.
payments for bills and production budget.
prepares final accounts e.g. income statements and balance sheets.
Marketing
ensure that the business offers a product that is desired by sufficient customers.
satisfies the demand of customers for profitable operations.
conduct market research and advertising.
promote, price, package, and distribute the product.
Operations / Production
ensure the product is of the desired quality.
control the quantity and flow of stock.
determine appropriate methods of production.
, look for ways to produce the good/service more efficiently.
meeting production targets and deadlines
research and development for products.
SECTORS OF BUSINESS ACTIVITY
Define primary, secondary, tertiary and quaternary sectors.
1. Primary
extraction or production of raw materials.
low value added.
e.g. extraction, mining, farming, fishing, hunting, etc.
underdeveloped economies.
2. Secondary
raw materials are processed into products for sale, usually by manufacturing.
goods can take many forms: consumer durables, non-durable goods, and capital goods.
decreased in many countries due to the use of mechanisation and automation.
developing economies.
3. Tertiary
provides services, sometimes using manufactured products.
high value added.
e.g. financial, leisure, healthcare, education, transport, security services, etc.
developed economies (largest sector in terms of employment).
4. Quaternary
a subgroup of the tertiary sector.
provides services that are especially focused on knowledge.
development and use of data and information.
high value added.
e.g. e-services involving IT, the media, web-based services, etc.
developed economies.
These sectors are linked in the production chain orchain of production.
the steps through the different sectors to turn raw materials into a consumer good that is marketed.
companies whose activities span two or more sectors are integrated companies.
Integration
Horizontal:refers to a business acquiring or merging with another business engaged in the same activity.
increase market share and market power.
take advantage of economies of scale.
