Unit 1- Introduction to Business

What is a business?
Ans) Business is there is satisfy the needs and wants of the customer by selling
goods and services in return for a profit
Purpose of business?
Ans) The main purpose of the business is to combine human, physical, and
financial resources to produce goods and services that meet customer needs
with adding value.
Tangible good: A physical good that could be touched hold, or could be stored
very easily, e.g mobile phone
In-tangible good: Service action or activity that one person performs for
another person, e.g. carwash.
Business as a transformation process
Businesses take inputs and transform them in order to produce outputs that
customers will want to buy

Needs and wants?

Ans) Needs are a necessity which a person cannot live without where whereas
wants are not a necessity but a desire
4 main functions of the business?
HR(Human Resource) : Is responsible for managing the personnel of the
organization. Deals will the complex processes such as hiring, redundancy,
induction-training, dismissal, training appraisal, and workforce planning.
Finance and accounts: Manages the organization's money. Deals with
processes such as reporting, recording the financial records, complying with
legal requirements, and lastly producing final account
Marketing: Identifying and satisfying the needs and wants of the customer,
ensuring the firm sells their goods, deals with market research, branding, and
advertising.
Operations: Also known as operations management, converting raw materials
and components into finished goods

Different business sectors?

Primary sector
• The extraction, harvesting, and conversion of natural resources.
• Most prevalent in LEDCs. Primary sectors in MEDCs use more automated
methods.
• The primary sector has little added value and less resilience in terms of
employment.
Secondary sector
• Changes the raw material into a finished good by creating a value-added
product that could be sold for a higher price.
• Economically developing countries tend to dominate this sector.
• Examples: clothing production, car manufacturing.
Tertiary sector
• Provides services to the general population.
• Tend to be dominant in MEDCs.
• Examples: haircuts, taxi service.
Quaternary sector
• A subcategory of the tertiary sector.
• Provide knowledge-based activities that generate and shared information.
• Requires a highly educated workforce, and therefore is most prominent in
MEDCs.
• Covers most of the IT Sector
• Example: law firms, training and development firms
What is sectoral change?
Ans) A shift in the relative share of the national output and employment that
is allocated to each sector over time. Every economy starts with the primary
sector, gets more economically developed, and moves to secondary industry
and eventually to the tertiary industry, and lastly to the quaternary sector. As
primary sector producers less added value goods as compared to the
secondary sector.
Reasons for Sectoral change?
. Higher household income
. more leisure time
. A greater focus on customer service

Entrepreneurship and Intrapreneurship

Entrepreneurship: Is a owner of the company who takes up the risk to startup
up his own company. An individual who plans, organize, and manages the
company and continues to take up financial risk in doing so.
Intrapreneurship: is an act of being an entrepreneur but as an employee
within a larger organization
Reasons for starting up a Business:
Ans) There are multiple reasons why an individual will look forward to starting
up his own company, Firstly, growth as an asset will grow over time, leading
the individual to be interested, secondly the automy gained by the individual
you are your boss no answer to anybody, thirdly you are easy able to transfer
or inherit the business easily could be passed on from one generation to
another, fourthly the security no one can kick you from the business, fifthly
you are following your passion and continue that in life and lastly earning can
easily sustain a nice lifestyle from the revenue collected by the selling of goods
and services.
Steps to start your business:
1-Write up a business plan
2-Obtain the startup capital
3-Obtain business registration (trademark)
4- Open a business account
5-Marketing
Problems that a new business might face:
1-Lack of finances
2-cash flow problem
3-Lack of marketing
4-high production cost
5-poor location
6-external influence
7-untrained skilled Labor
Types of Organization:
Private sector: It is owned and controlled by private individuals and
businesses. May vary in sizes and number of people owning them, the main
aim of them is to make profits.
Public sector: As it is under the control and ownership of the government,
they provide essential goods and services that the private sector may not be
able to provide
🏪 Unincorporated Business: A business that does not have a separate legal
identity from its owner(s). The owner is personally responsible for the
business’s debts and legal actions. E.g, sole traders and partnerships.
🏢 Incorporated Business: A business that has a separate legal identity from its
owners. The business itself can own property, be sued, and take on debt. E.g,
private limited and public limited companies.
Sole Traders: Are a kind of business where the ownership belongs to a single
individual, e.g, plumbers, photographers, freelancers.
Advantages: Disadvantages:
Privacy unlimited liability
Lesser legal formalities High risk
Autonomy workload, and stress
More Share in profit taking limited sources of finance
Partnerships: Is a profit-seeking business where the ownership is held by a
minimum of two or a maximum of 20 people.
. Partners use their personal funds to start the business
. In some cases, one partner works for the company, whereas the other
provides financial capital, also known as a silent or sleeping partner. One
partner must have unlimited liability.
Advantages Disadvantages
Setting up cost is inexpensive unlimited liability
More sources of finance profit taking share is decreased
Financial privacy decisions are prolonged
Specialisation and division of labour lesser harmony
Private limited companies: Owned by the private sector, and shares can only
be sold to friends and family
Public limited companies: Owned by the private sector, companies can sell
their shares to anyone and is also listed in the stock exchange.
Flotation: refers to the process of a company selling its shares to the public for
the first time by listing on a stock exchange.
A company is owned by the shareholders, which means that they have
invested the money in the company.

Social enterprises: A social enterprise is a business that aims to make a profit,

but its main goal is to help society or the environment, not just to make money
for owners. Their surpluses from trading may be shared with employees and
customers, passed on to a third party.
Cooperatives: A group of people get together and wanna create their own
organization that works for their benefit. They work and own the organization,
and the main goal of the organization is to provide benefits to its own
members.

💸 Microfinance Provider – Definition:

A microfinance provider is a financial institution or organization that gives
small loans and financial services to poor or low-income individuals or small
businesses who cannot access traditional banks.

Non-profit social enterprises: businesses run in a commercial manner but

without profit being the main goal. These companies use surplus
revenues to achieve social goals.
Non-Governmental Organisations (NGOs): non-profit social enterprise
that operates in the private sector, set up to benefit society. E.g., UNICEF.
 Charities: provide voluntary support for good causes such as the protection of
children, animals, and the natural environment. Reliant on donors,
endorsements, promotion, etc. E.g., WWF
Mission Statement: is the declaration of the purpose of the organization,
which includes its function and objectives.
Vision statement: specifies the long-term goal of a business, where it
ultimately wants to be.
3 types of objectives:
Strategic objectives: The senior leadership sets the long-term goals,
determines the actions necessary to achieve the goals.
Tactical objectives: Middle management develops medium-term action plans
to achieve the strategic objectives of an organisation.
Operational objectives: Lower management develops short-term, day-to-day
action plans to achieve the tactical objectives of the organisation as efficiently
🔄 The Need for Change in Business Objectives:
1 business growth
2 private vs public organisations
3 types and sizes of the business
4 new technologies
5 Finance available
6 age of the business.
Public and private partnership: When the government sector works together
with the private sector to provide a good or a service.
Corporate social responsibility (CSR): When the company is acting responsibly,
and considers the ethical and environmental issues of the people who are
affected internally or externally by their business activity.
CSR aims to:
• Treat customers and suppliers fair and equally.
• Compete fairly.
• Treat the workforce with dignity and listen carefully to their needs.
✅ Types of Attitudes Toward Social Responsibility:
Altruistic Attitude
The company truly cares about helping people or the environment and takes
action just to do good, not for profit.
Strategic Attitude
The company acts responsibly only when it helps them make more money or
improves their public image.
Self-Interest Attitude
The company believes that it’s not their job to help society — they think the
government should take care of social and environmental issues.
SWOT analysis: aims to identify the key internal strengths & weaknesses and
external opportunities & threats, seen as important to achieving an objective.
The analysis of the internal strengths & weaknesses helps business owners
determine their current market position, which is crucial to know before
planning.
Ansoff matrix

Market penetration: selling an existing product

in an existing market, with the aim of increasing
the market share of said product (e.g.,
promotions).
Product development: changing or creating new
products for the same market.
Market development: selling the same products
to a new market.
Diversification: selling new products to new
markets.

Stakeholders: Individuals or groups that may hold an interest in the business

and may be affected by its decisions
2 Types of stakeholders:
Internal stakeholders: who are directly involved in the running of the business
External stakeholders: who are indirectly involved in the running of the
business or are simply affected/interested in its activity.
Internal External
Owners (shareholders) Suppliers
Employees Customers
Management Communities
Pressure Groups
Competitors
Government
External factors outside influences that can impact a business such as laws,
market trends, or political changes.
Internal factors are things within the business that can impact how well it
performs. Such as management style, Employees, innovation, business
objectives, and company culture.
Economics of scale: as the production size increases, the cost of production
declines.
Diseconomies of scale: As the production size increases, the cost of production
increases.
Globalisation is defined as the integration and interdependence of the world's
economies.
Internal/organic growth a business grows using its resources to increase the
scale of its operations and sales revenue.
External growth a business grows by collaborating with, buying up, or merging
with another firm.
External growth methods:
Equisition: When the company buys a majority stake in another company and
get control of the ownership. The company is obtained through a proper way,
and the name is changed in most cases.
Merges: When two or more companies agree to form a single larger company
to benefit from its operations.
Takeovers: Purchasing companies by buying most shares, but it is done in a
hostile manner.
Joint venture: Two or more organizations agreeing to make a new single
business while keeping their names. E.g, Hong Kong Disneyland.
Strategic alliances: Two or more companies trying to benefit from each other's
external growth without trying to set up a new company business, but by
making changes in their business model. E.g., Apple and Mastercard.
Franchising: Where two parties, one being the franchiser and the other being
the franchiseer, go under an agreement to give licensing rights and to sell their
goods and services under the company name.
Multinational company: That operates in more than one country.