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BUSINESS STUDIES FORM ONE FREE NOTES FOR ALL TOPICS. READ NOW.

BUSINESS STUDIES FORM ONE NOTES FREE

Posted on June 12, 2024 by Media Team @Educationnewshub.co.ke

BUSINESS STUDIES FORM ONE NOTES

INTRODUCTION TO BUSINESS STUDIES

Objectives: By the end of the topic, the learner should be able to:

Explain the meaning of Business studies

Explain the importance of Business studies in society.

Business: Any activity that is carried out by an individual or an organization concerning provision of
goods and services with a view to making profit.

Business studies: Is the study/examination of the business activities in society. These activities are
related to the production of goods and provision of services.

–It can also be defined as the study of activities that are carried out in and around production,
distribution and consumption of goods and services.

iii) Goods: These are items that are tangible .i.e. they can be touched and felt.

Activity 1: The students to list items in the classroom that can be touched and felt
–Furniture, buildings, books, vehicles e.t.c

iv) Services: These are efforts or acts/actions or activities that may be sold and are intangible (cannot be
touched nor felt).

Activity 2: The students to list items that money is paid to get but they cannot touch.

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v) Production: Refers to the creation of goods and services or increasing their usefulness through
activities such as transporting them to where they are required. People who are involved in production
of goods and services are referred to as

Activity 3: Using the lists of goods and services above, the students to name those involved in their
production.

vi) Distribution: Refers to the movement of goods and services from producers to the users. Some
activities that take place as goods and services all moved include transportation, storage, insurance,
communication, advertising.e.t.c

vii) Consumption: Refers to the act of using the goods or services produced consumption is the ultimate
goal of production. The persons who uses a good or a service is referred to as a consumer.

Activity 4: The students to list the consumers of the goods and services listed in activity (1) and (2)
above.

Business studies as a subject is composed of topics drawn from various disciplines such as:
Commerce

Accounting

Economics

Office practice

Entrepreneurship

Commerce

This is the study of trade and aids to trade. Trade refers to the exchange of goods and services for other
goods and services or money.

Aids to trade are human activities (services) that assist trade to take place.

Economics

This is the study of how human beings strive to satisfy their endless wants using the available scarce
resources.

Accounting

This refers to a systematic way of recording business activities which all used for decision making.

Office practice

This refers to all activities that are carried out in an office e.g. communication, filling, clerical work,
reproduction of documents e.t.c

Entrepreneurship
This is the study of activities involved in the process of identifying a business opportunity and acquiring
the necessary resources to start and run a business. The person who carries out these activities is
refered to as an entrepreneur.

Importance of Business studies in society

Business studies is meant to prepare learners to function as informed consumers, producers and
workers in the society.

Some of the benefits of learning business studies include:

Assists the learners/members of the society to acquire knowledge and awareness of business
terminologies which are necessary when discussing business issues such as profit and loss.

Assists the individuals in appreciating the role of business in society/in provision of goods and services.

It enables the learners to acquire basic knowledge, skills and attitudes necessary for the development of
self and the nation by starting and operating business.

Equips the members of society with knowledge and skills necessary to start and run a business
comfortably.

Makes the members of society to appreciate the need for good business management practices

Assists individual to acquire self-discipline and positive attitude towards work

Equips individual with abilities to promote co-operation in society through trade

Enables the individual to understand the role of government in business activities

Equips individuals with abilities to understand the role of communication and information technology in
modern business management

Helps the individuals to develop positive attitudes towards the environment

Equips the individual with knowledge and skills required to evaluate business performance

It helps individual to develop various intellectual abilities such as inquiry, critical thinking, analysis,
interpretation, rational judgement, innovation and creativity.
It enables learners to acquire skills for wise buying and selling.

It creates a firm foundation for further education and training in business and other related fields.

It enables one to understand and appreciate the basic economic issues that affect the society such as
increase in prices of goods and services.

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BUSINESS AND ITS ENVIRONMENT

By the end of the topic, the learner should be able to:

Explain the meaning and purpose of a business

Identify various business activities

Identify various types of business environments

Explain how the various business environments influence a business.

Meaning of a business

This refers to any activity carried out by an individual or by an organization with the aim of making a
profit.

Profit is what the business earns above what it spends in providing goods and services to the people
who need them.

The term business also refers to firms or organizations that provide goods and services to make a profit.

Purpose of business (Reasons for the existence of businesses)

Business is important in any society because it is not possible for people to provide themselves with all
what they need without direct or indirect aid from others. Some of the main reasons why businesses
exist are:

To provide goods and services-Businesses exist to satisfy the needs and wants of buyers by providing
them with goods and services. Buyers include individual consumers, other businesses and the
government.

To create employment-Businesses provide job opportunities through which members of society can
earn money, which can be used to buy goods and services for the satisfaction of their needs.

To earn profit-Profit is the primary goal of carrying out business operations. It is earned by the people
who put their resources and effort in business

As an outlet of new innovation-Some businesses provide unique goods and services which may not be
existing in society e.g. plastic fencing poles that are now replacing wooden poles.

To be as own boss-Some people run businesses so as to be in full control of the operations and make all
the decisions regarding the business without need of reference to people.
To utilize extra resources-Some people go into business to make use of money or property which is not
being put to profitably use at a given time.

To offer special services-Some businesses provide services that raise the living standard of people e.g.
government enterprises that provide public utilities such as health care and water.

To utilize spare time-Some people run businesses in order to make use of extra time at their disposal
and in the process make some extra money. A large number of formally employed people have small
business which they run during their free time in order to earn more money.

NB: Whatever purpose a business fulfills, it has to earn a reasonable return on the invested money to
survive.

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TYPES OF BUSINESS ACTIVITIES

People carry out different business activities in order to earn income. Business activities are activities
which involve the provision of goods or services with an aim of earning a profit.

Activities done without the intention of making profit are referred to as non-business activities. Business
activities may be grouped into the following seven categories:

Extraction

This involves obtaining goods from their natural setting e.g. mining, farming, lumbering, fishing,
quarrying e.t.c

Processing-This involves the conversion of raw materials into more useful products without combining it
with other goods. Examples here include milling/grinding flour, refining oil, tanning of skins and hides,
conversion of iron into steel e.t.c

Manufacturing-This involves combining different raw materials to come up with one final product. Such
activities include bread baking, making a table e.t.c

Construction-This involves building of structures such as bridges,ships,aeroplanes,houses,roads,railways

e.t.c

Distribution of goods-This refers to the activities involved in moving goods from where they are
produced to where they are needed. People who carry out distribution are called distributors. Examples
of distributors are wholesalers and retailers.

Trade-Activities in this category involve the buying and selling of goods with a view of making a profit.
People involved in trade are called

Provisions of services-Activities in this category involve human acts which could be mental or physical.
These include activities such as hair-cutting, hair styling, car-washing, nursing, teaching, driving, and
entertaining e.t.c.

NOTE: Students to give examples of activities they pay money for which are not goods.
BUSINESS ENVIRONMENTS AND THEIR EFFECTS ON THE BUSINESS

Business environment refers to conditions or factors which surround and affect business operations.
These factors could be within the business (internal environment) or from outside the business (external
environment).

These factors affect the decisions, strategies, processes and overall performance of the business.

Activity: Discuss some factors that have a strong influence on businesses within the immediate
environment.

Internal Business Environment

This comprises factors that are within the business unit itself. These factors can be controlled fully by
the business. Internal environmental conditions could be either strength or weaknesses. The strengths
tend to improve the performance of the firm while weaknesses tend to affect the operations of the
business negatively.

Internal environment is also referred to as: micro-environment. Micro environmental factors include:

Objectives of the business

These ate targets or goals that are set by the owners or managers of a business to be achieved. The
objectives will influence the following;

The strategies of a business-This is a plan of action which a business intends to follow so as to achieve its
goals.
The resources required-By studying the objectives set; a business can determine the resources required
for its effective operation. These resources may be physical,financial,human e.t.c

Management policies and style

The management refers to the people who are responsible for directing the day-to-day operations of a
business. It is the management that sets the objectives and policies of an organization.

A policy is a course of action of action for achieving set objectives, which is adopted by a business.(it is
the established way of doing things in a business.

The policies of a business-The policies adopted by a business may boost or hinder its growth and survival
e.g. the management may decide that workers will not be allowed to join trade unions. This may make
the workers feel locked out of the decision-making process, resulting in tension. This tension may
interfere with the performance of the employees and result in inefficiency.

The activities of a business – Management policies will determine the activities of a business i.e. the
goods and services provided, location of business e.t.c.

Management style-This refers to how managers conduct the daily operations of the business. This will
determine how workers relate with their managers. The style adopted by the management will
influence the workers performance positively or negatively thus affecting the overall performance of the
business.

Business structure

This is the formal arrangement of activities that are carried out at various levels of the organization so
that objectives of the business can be achieved.

Duties and responsibilities of all the workers are defined in the business structure. Their
interrelationships are also defined.

A well laid out business structure is likely to lead to success of the business since:
Each of the employees know what is expected from them

There will be no conflicts or confusion among the workers

Team work is enhanced

Ensures proper control which is turn promotes efficiency.

A poor business structure leads to business failure.

Business Resources

A resource refers to anything that can be used to achieve an objective. These resources include;

Human resource-Human resource (personnel) refers to the employees working in an organization.

Employees will only be useful if they have the necessary knowledge and skills to successfully carry out
the assigned tasks. It is therefore necessary for the management to match the correct people with the
correct job activities; this will ensure success for the business.

Financial resource-Money is required in order to start and operate a business.A business with adequate
finances that are property allocated to various activities and also monitored is likely to do better than
the one lacking such aspects.

Physical resources-These include tangible facilities which belong to the business such as buildings,
machinery, furniture and stock. Availability of such facilities enables the business to operate.

Technology-This refers to skills and methods used in production. Use of modern technology enhances
production of goods and services.

5.) Research and development

Research and development is an important factor for the success of a business. Research generates new
ideas, skills and better methods of doing things.

A business has to do market and consumer research regularly to find out how the consumers perceive
its goods and services, and how they can improve in order to outdo their competitors.
Research also assists in the development of new and unique goods and services that may attract new
consumers or maintain the loyalty of the existing ones.

6.) Business culture

This is a combination of employees expectations, beliefs and values within the business. It is normally
passed on from one generation of employees to the next. Employees acquire norms and code of
conduct that is acceptable to all from the general manager down to the sweeper. A business that has a
culture of involving employees in decision-making may perform better than one that does not involve its
employees.

Owners

The owners of the business provide finances/resources to start and run the business. They also make
decisions concerning operations of the business.

Appropriate decisions are likely to lead to well being of the business while poor decisions may adversely
affect the business.

External Business Environment

This environment consists of all the factors which affect the operations of the business from the outside.
Some of these factors offer business opportunities while others may create problems (threats).

Business have limited or no control over external environmental factors and should therefore try to do
adjust in order to cope with them.

External environmental factors are also referred to as macro-environment i.e. environment that is in
large scale.
External business environment can further be sub-divided into operating environment and remote
environment, depending on whether the factors can be influenced to some extent or not. Those
environments that can be influenced are referred to as operating environment while those that cannot
be influenced are known as remote environment.

ENTREPRENEURSHIP

By the end of the topic, the learner should be able to:

Explain the meaning of entrepreneurship

Discuss the importance of entrepreneurship to an economy

Describe characteristics of an entrepreneur

Generate business ideas

Identify a business opportunity

Evaluate a business opportunity

Explain the need for a business plan

Discuss factors that influence entrepreneurship practices in Kenya

Discuss the causes of business success

Recognize the need for ethical practices in business

Meaning of entrepreneurship

This is the process of identifying business opportunities and gathering the necessary resources to start
and run a business.
An entrepreneur who identifies business opportunities and gets the necessary resources in order to start
and run a business. The entrepreneur therefore creates new businesses or transform the existing ones
in the face of risks and uncertainties in order to make profits.

An entrepreneur is therefore a business owner; he starts and organizes the business (the factors of
production in appropriate combination)

Importance of entrepreneurship to an economy

Creation of employment-Through entrepreneurship, jobs are created which help in absorbing people
who would otherwise have been jobless e.g. people employed in the jua kali sector.

Formation of capital-Profit earned by entrepreneurs may be used to expand the business or even to
start other businesses. Wages and salaries paid to the employees is a source of capital to them.

Raising standards of living-Entrepreneurs pay wages and salaries to their employees which enable them
to acquire goods and services they need to live comfortable lives. Entrepreneurs also provide a wide
variety of goods and services to consumers hence leading to improved living standards.

Encourages the use of local resources-Entrepreneurship makes it possible to use/exploit local resources.
Idle resources such as scrap metal may be used to make jikos.

Encourages the use of local resources-Entrepreneurship makes it possible to use/exploit local resources.
Idle resources such as scrap metal may be used to make jikos.

Improving infrastructure-The existence of businesses in the economy makes the government establish
or improve infrastructure such as roads, communication facilities and water. At other times,
entrepreneurs may combine forces to improve infrastructure in their area of operation.

Savings on imports-Local entrepreneurs are able to produce goods and services that are a substitute to
imports. This helps the country to reduce the amount of money required to pay for such imports.

Reducing foreign dominance of the economy-Participation of local entrepreneurs in various business

activities helps in reducing investments by foreigners in the particular area.

Promotion of technology/promotion of innovation, research and development-Entrepreneurs are

creative and they come up with new and better ways of accomplishing tasks. Most of the inventions and
innovations in our society have been developed by entrepreneurs.
Promotion of entrepreneurial culture/helps in the creation of role models- Successful
entrepreneurs/entrepreneurial ventures encourage other members of society to initiate their own
businesses and hence act as role models in the business world.

It contributes to government revenue-Taxes and fees paid by entrepreneurial ventures constitute part
of government revenue / income that helps it to facilitate its operations.

It promotes economic growth-Entrepreneurs produce goods and services. This increases the volume of
goods and services in the economy leading to expansion of the economy.

It may promote self-actualization and esteem-By initiating busine-sses in which they are their own
bosses, entrepreneurs pride is boosted and this may promote the overall productivity of the economy.

Characteristics of an entrepreneur

A good entrepreneur should have the following characteristics:

Desire to achieve-An entrepreneur is a person who wishes to excel and has the drive to succeed while
competing with others. He/she always tries to accomplish something new.

Ability to solve problems-An entrepreneur is expected to struggle with determination to get solutions
even under difficult situation so that the business can succeed.

Risk taker-Entrepreneurs take viable business ventures even when they are not sure of the returns. They
assess situations and take calculated risks.

Initiative –An entrepreneur should be aggressive in implementing ideas well ahead of other businesses
so that he/she can be ahead of them.

Time consciousness-An entrepreneur should be able to use time wisely and avoid wasting it. A wise and
quickly implemented decision may mean success in business whereas time lost may mean failure.

Creativity and innovation-An entrepreneur should be able to generate new ideas as well as think of the
best ways of putting them into practice.

Independence and self confidence-Entrepreneurs are their own bosses and should believe in their ability
to do things and succeed.

Persistence and patience-An entrepreneur should not give up when challenges arise. Sometimes, he/she
takes time and make a repeated action or adopts a different course of action in order to overcome such
challenges so as to reach the target
Decisive-Entrepreneurs have strong problem, solving and decision making skills. The business
environment is such that decision has to be made quickly to respond to any situation that may arise.

Persuasive-Convincing people to believe in their ideas and buy their products keeps entrepreneurs in
business

Goal-oriented-Entrepreneurs are achievers who work towards set goals. They continually monitor
progress to determine whether they are achieving the goals they have set and where improvements
need to be made.

Seek information-Entrepreneurs use various methods to get the relevant information that is necessary
for the success of the business.

Concern for high quality products-An entrepreneur should strive to cope or beat the existing standards
of quality. This will enable him/her succeed in a competitive market.

Commitment to work-An entrepreneur places priority on getting tasks accomplished. To achieve this
he/she may make extra ordinary personal sacrifice e.g. working until very late.

Concern for customer satisfaction-An entrepreneur should ensure that customers are satisfied so as to
continue being/remain loyal to the business.

Desire to feedback-An entrepreneur should be interested in knowing how the business is performing.

Generating Business Ideas

For an entrepreneur, the first step in starting a business begins with an idea (business idea).

Business ideas are all about thoughts on possible businesses an entrepreneur can start or improve. It
indicates among other things;

The products to produce/sell

Who the business will sell to (market)

Where the business will be located

How the will be run (management)

Why the business is needed (objectives)

Sources of Business Ideas

Newspapers-Local newspapers like the Daily Nation, East African e.t.c especially in the business and
advertising sections have a lot of information about commercial opportunities as well as personal
services.

Shows and exhibition-Visiting shows and exhibitions organized by manufactures and distributors and
asking questions from the sales persons. Entrepreneurs can also get business ideas from products
displayed in such shows.

iii. Magazines and journals-Reading magazines and journals with business information may equip an
entrepreneur with new business ideas.

Hobbies –These are activities pursued for pleasure but they can also serve as a source of business ideas
e.g. photography.

Vocational training and experience-A business idea may be developed from one’s own area of training
or experience e.g. a teacher may use ideas from his/her training to start a private school.

Surveys and market research-This involves conducting an investigation to gather information from
consumers on what products they require.

vii. Recycling/using waste products-Some waste products could be converted into useful products e.g.
scrap metal for making jikos,old tyres for making sandals e.t.c

viii. Listening to what people say-By listening keenly to what people say, one can identify unsatisfied
needs e.g. complaints about goods and services in the market. These complaints may form a basis of a
business idea for an entrepreneur.
Identifying a market gap (niche)-An entrepreneur may try to identify/spot the needs of consumers which
are not being met by the existing goods and services.

Brain storming-An entrepreneur can engage other people in a discussion on how best to develop
businesses.

Listing attributes of a product-By listing the attributes of a product that is already existing in the market,
one can find new use for the product.

xii. Copying/improving an existing business-This involves identifying the weaknesses of a business and
trying to come up with solutions.

Business Opportunity

A good business plan is not necessarily a business opportunity. A business idea becomes a business
opportunity if it is viable i.e. it can be developed into a successful/profitable business enterprise

A business opportunity is a favourable chance that an entrepreneur accepts for investment. It exists
where there is a gap to be filled in the needs of the market. Examples of such gaps include:

In availability of products-This is where goods and services needed by the consumers are not available at
all in the market.

Poor quality products-A business opportunity exists if one offers better quality goods and services than
those of the existing businesses.

Insufficient quantities-This is where the goods supplied are not enough to meet the demand/need of the
consumers.

Unaffordable prices-A business opportunity exists where one would charge affordable prices.

Poor services-A business opportunity exists where customers are not served well.

Evaluating a business opportunity

This means assessing whether the identified opportunity is viable or not. This helps in arriving at the
best decision concerning the business idea to implement
Evaluation should be done carefully, systematically and without emotions. Evaluation is necessary even
where there is only one business idea. This will help in avoiding starting a business that cannot succeed.

Factors to consider when evaluating a business opportunity

The following are the factors to consider when evaluating a business opportunity.

Personal consideration-These are the abilities and expectations of an entrepreneur. They include the
following;

Objectives-The entrepreneur should evaluate the business idea to find out whether it is in line with
his/her objectives.

Skills-Where a business requires certain specialized skills and those skills are lacking the idea may be
dropped.

Commitments-Where the business is likely to interfere with the entrepreneurs other commitments it
may fail.

Interest-It is necessary to check whether the intended business will interest the entrepreneur or not. If
the entrepreneur will not enjoy running the business, the idea should be dropped.

Business consideration-These are external factors that are likely to affect the operations of the business
and they include;

Availability of market for the product-An entrepreneur should assess the availability of customers before
starting a business. Customers exist where there is a gap/nich in the market.

Technology-The business should be evaluated in terms of whether there is an appropriate technology

that can be used in production. Factors to be looked into include;

-Appropriateness of the technology

-The cost of the technology

-The possibility of the business suffering in case the technology becomes outdated/obsolete.

Availability of raw materials and other resources-The raw materials and resources required should be
within the reach and affordable to the entrepreneur.
Government policy-An entrepreneur should consider the requirements of the government before
starting a business e.g. the government may require certain businesses to be located in certain areas
only.

Amount of capital required-The capital required to run and maintain the business should be considered
i.e the source of capital.

Profitability of the business-Within a certain duration of time.

The break-even period-How long the business can take to support itself.

Possibility of expansion i.e. the potential for growth of the business.

Impact of the business operations on the environments; some businesses lead to environmental
degradation and should be located in appropriate places/effect on community and environmental
health.

Security-Availability of security should be considered.

Level of competition-This will help determine whether the business will survive or not.

BUSINESS PLAN

This is a written document that highlights the objectives of the business and steps to be followed in
order to achieve these objectives. It indicates where the business is, where it wants to move to, how and
when.

Contents of a good business plan

Name of the business

The product to be sold or produced

Personnel to manage the business

Amount of finance and other resources required

The market to be served (customers)

Types of employees required

Projection (level of achievement in future in terms of profit)

Summary of the plan.

Need for the business plan

A business plan is necessary to an entrepreneur for the following reasons:

Avoiding mistakes-in the process of drawing a plan; mistakes that would take place in the business are
identified and corrected in the plan. This helps in avoiding the occurrence of such mistakes in the
business.

Identifying strength and weaknesses-A business plan helps in identifying strengths or weaknesses and
where weaknesses are detected, remedial actions may be taken early enough.

Requirement by financiers-Financial institutions such as banks may require a business plan before they
can accept to finance the activities of the business.

Allocation of resources-It helps to determine the resources required and plan on how and where to use
them. This ensures that resources are neither underutilized nor used for the wrong purpose.

Facilitates business evaluation-A business plan helps an entrepreneur to assess the progress of the
business and any deviation (difference) from the intended plan can be corrected in good time.

It helps an entrepreneur outline competition-It helps the entrepreneur to be fully aware of the market
she or he plans to operate in, understand important trends and know who her/his competitors are and
their strengths and weaknesses. This information aids the entrepreneur to develop products that are
better than those of the competitors.

A motivating factor-A business plan is communicated to all employees in the business. This makes them
aware of the direction to be taken by the business. This motivates them to work towards that direction.

Adaptability-Normally, not all events occur as predicted in the business plan. However, a well drawn
business plan should give room to accommodate any changes that might occur in the future.

Tool for control-Planning involves setting of standards against which performances can be assessed. In
case of deviation corrective measures can be taken.

Factors that influence entrepreneurship practices

There are many conditions or factors which may encourage or discourage entrepreneurship. Some of
these factors are:
Government policy-Some government policies are favourable to the operations of the business and thus
encourage people to go into business while other policies may be unfavourable and will discourage
people from going into business. E.g. higher taxes are unfavourable hence discouraging.

Infrastructure-infrastructure includes transport and communication networks, water, security e.t.c.

Availability of good infrastructure in an area tends to encourage people to set up businesses while poor
infrastructure tends to discourage them

Levels of education and skills-Relevant and appropriate knowledge and skills are necessary if the
business has to succeed. These are acquired through education, training or experience.

Availability of markets-Adequate markets encourages existing entrepreneurs to continue producing and

also encourage/attract new ones to venture into business.

Availability of resources-Appropriate resources are necessary for starting and smooth running of a
business. These resources include physical, human, capital and technology.

Cultural and social beliefs and attitudes-These are norms, values and beliefs of a given community.
Culture helps determine the kind of goods and services that people consume. this in turn, dictates the
type of businesses to be established in such communities.e.g Muslims do not take pork therefore
businesses selling pork will not do well in such communities.

Competition-Businesses will do well if they are able to complete favourably. Others will avoid
competition by establishing businesses where there is no competition.

Political stability-political stability gives conducive atmosphere for businesses to start and thrive on the
other hands, where there is no political instability, businesses may not do well and entrepreneurs may
close down businesses or new ones may not come up.

Natural factors-natural factors such as rainfall, temperatures, earthquakes, pests, drought e.t.c. may
influence the type of businesses that are carried out in an area, especially agricultural businesses.

Presence of role models in the society-The presence of successful entrepreneurs acts as an

encouragement to aspiring entrepreneurs.

Causes of Business success

A business is considered as being successful if it makes consistent profit and experiences progressive
growth in the scale of its operations.

Some of the factors that lead to the success of business may include:
Right choice of business-A good business opportunity needs to be evaluated on the basis of ability to
capture many customers, make reasonable profit for the owner(s) and provide an opportunity for
growth. Making the right choice of a business or product ultimately contributes to the success of a
business.

Proper managerial skills-An entrepreneur should be able to carry out management roles effectively. A
good manager will carry out roles such as;

Hiring staff-The process of acquiring new employees to take up new positions or to replace employees
who have left the business.

Assigning duties-Allocating employees duties according to their qualifications.

Supervising-Ensuring that employees carry out tasks that are assigned to them

Training-Enabling employees to acquire knowledge and skills necessary to perform duties assigned to
them.

Motivating-giving employees inducement to perform their duties.

Proper location/availability of customers-The business should be situated in a place convenient for its
operations e.g. where customers are easily available.

Adequate finance/capital-Money is needed to acquire other resources that are required by the business.
A business that has adequate capital is likely to do well as it is able to finance all its operations.

Lack of competition-Most businesses are put out of operation by stiff competition. Therefore, a business
operating in an area where there is little or no competition is likely to succeed.

Commitment to business

Proper financial management-Proper management of finances is necessary for the success of the
business. It ensures that money is available and is used for the intended purpose.

Management of finances includes:

Acquisition of finances-This involves raising of the required amounts of money. This can be done
through a variety of ways such as loans from financial institutions and owner’s contributions.

Managing cash-This ensures that the available money is only used for the activities that are beneficial to
the well being of the business.

Proper record keeping-This involves having a record of finances raised and how they are used.
Proper debt management-Care should be taken to ensure that credit is only extended to credit worthy
customers (credit worthy customers are those whose chances of paying are high).Debt collection should
also be carefully planned to ensure that they are collected when due.

Good public relations-This involves creating and improving a good relationship between the business
and other people. Good relations are necessary for attracting and retention of customers.

Being creative and innovative-This involves finding new uses of a product, new channels of
communication and new ways of doing things. This enables the entrepreneur to be ahead of others.

Proper market research-The business environment usually changes at a high rate. This makes it
necessary for an entrepreneur to study his/her customer’s preferences, tastes, spending patterns,
income levels, competitions, and behavior and substitute products.

Good/proper time management-Time management is the ability to carry out planned activities within
the allocated period.

Proper skills and attitudes of employees-Employing qualified staff results in work being done in a
professional manner. This enhances the performance of the business.

Proper pricing of goods and services-Pricing should be done appropriately. If the prices for the products
are too high, the business will lose customers. Very low prices may attract customers but kill the
business. It is therefore important to create a balance between price to charge and the profit margin to
realize.

ETHICAL ISSUES IN BUSINESS

Ethics -refers to a set of values, principles and rules of acceptable behavior which influence how
individuals, groups of people and the society in general behave.

Business ethics-refers to acceptable behavior that should be displayed by business people. Business
ethics helps businesses in deciding what actions are right or wrong depending on circumstances.

Ethical issues-are the moral concerns that arise in the course of carrying out business.

Need for Ethical issues in Business

The need for ethical issues in business includes the following;

Ensures no discrimination in business-Business ethics ensures there is no discrimination in areas such as
recruitment (hiring), promotion, training, remuneration and assignment of duties. These processes
should be objective and based on merit, qualification, experience and ability.

-It ensures that everybody is given an equal opportunity (has equal chance) and is not discriminated
against because of their sex, religion, ethnicity, social background e.t.c.

Ensures protection of the environment/Helps in avoiding environmental pollution-Business ethics

prohibits business units from carrying out activities that may cause pollution and degradation of the
environment. Environmental degradation may be caused by human activities such as logging and
unplanned cultivation. Pollution may be caused by activities such as:

Damping effluents from production units into water masses thereby causing water pollution. Water
pollution is disastrous to human health and also to aquatic animals.

Emitting carbon dioxide and other gases into the atmosphere causing air pollution

Damping of waste material on the land surface causing solid waste pollution This creates terrible sites to
watch and also breeding places for dangerous insects such as flies.

Ensures fair play in competition-Ethics ensures that businesses do not engage in unfair practices while
competing with others. These practices may include:

Destroying a competitor’s product or promotional tools such as billboards

Buying and destroying competitor’s products before they reach the market

Giving false information about a competitor’s product

Helps in avoiding environmental degradation-Ethics ensures that the physical environment is not
degraded through business activities. Such activities may include:

Deforestation through logging

Unplanned cultivation

Helps in avoiding environmental pollution-Environmental pollution may be caused by activities such as:

Releasing carbon dioxide and other gases into the atmosphere thereby causing air pollution

Channeling effluents from factories to water masses thereby causing water pollution. Such pollution can
be harmful to human health and aquatic animals.
Disposing of waste material such as paper and scrap metal on the land surface thereby causing solid
waste pollution.

Producing too loud noise which might be harmful to human beings hearings

Emitting too strong light that may be harmful to our eyesight

Ensures rights of employees are upheld-Ethics ensures that the employer does not violate the rights of
employees especially as laid out in their terms and conditions of employment. Such rights include
payment of dues in time.

Eliminates use of unfair means of achieving business objectives-Ethics ensures that the business
operations are carried out in a professional way e.g. it is unethical to give or receive a bribe in order to
win a business contract. Similarly, it is not ethical to hoard goods awaiting their prices to go up.

Avoids consumer exploitation-Ethics ensures that consumers are not exploited by the business.
Consumers may be exploited through practices such as:

Overcharging them

False advertisement

Selling poor quality goods and services

Selling wrong quantities

Selling harmful commodities