Full SL Business

Business

A business is a decision making organisation involved in the process of using inputs to produce goods and services (outputs)

Inputs

Inputs are resources that a business uses in the production process such as labour, raw materials, etc

Outputs

Generated by the business by adding value to the inputs 

Products / goods / services 

Products refer to goods and services; goods are tangible ; services are intangible 

entrepreneur

An entrepreneur is an individual who plans, organizes and manages a business and its operations. Successful entrepreneurs are creative, innovative and highly passionate. they search for and exploit business opportunities.

Needs

Basic necessities that people must have in order to survive, eg: water, shelter, etc

Wants 

Peoples desires , eg, new phone, vacation, etc

Business functions

• HR

• Finance

• Marketing

• Operations

HR (Business function)

Responsible for managing the personnel of the business

Finance (Business function)

Responsible for managing, organizing and ensuring compliance with legal requirements and informing those interested in the fanatical position of the business

Marketing (Business function)

Identifying and responding to the needs and wants of the customers to ensure the organization’s products sell

Operations Management (Business function)

Converting raw inputs into processes and polished outputs 

Primary sector

Extracting, harvesting and conservation of natural resources ; account for a large part of low income countries.

Eg; Fishing, mining, agriculture,

Secondary Sector

Manufacturing or construction; outputs are sold to customer, value is added to the raw materials; medium income countries

Eg; Clothes manufacturing

Tertiary sector

Providing services to the general population; high income countries 

Eg; vacation planning, banking, etc.

Quantenary Sector

RnD , information management; high income

Eg; Pharma companies need a lot of RnD

Chain of production

Primary Production - Manufacturing - services - consumers

Entrepreneurship 

describes the traits of business leaders who tend to be distinctive in their temperament, attitude and outlook , who drive the business.

Challenges to start a business

1) Lack of finance

2) Unestablished customer base

3) Cash flow problems

4) Marketing problems

5) people management problems

6) production problems

7) legalities

8) High production costs

9) poor location

10) external factors

Lack of finance (challenges to start a business)

need money for fixed assets and variable costs but banks are not willing to lend - personal assets as collateral

Unestablished customer base (challenges to start a business)

attaching customers - high marking and large amount of money - competitors are already established 

Cash flow problems (challenges to start a business)

working capital - stock can’t easily be turned into cash - businesses need to pay off fixed expenses

Marketing Problems (challenges to start a business)

Business is unable to satisfy the needs of customers, leading to low sales and profitability. SMBs lack experience and know-how to duo so. Solution is to identify a niche in the market

People management problems (challenges to start a business)

lack of experience for hiring right staff - low labour productivity and low labour turnover; Owners don’t know appropriate organizational models.

Production Problems (challenges to start a business)

Overproduction and underproduction - hard to predict demand

legalities (challenges to start a business)

comply with regulations, COPPA and consumer protection, confusion and overwhelming - oversight can lead to large compensation to be paid

High production costs (challenges to start a business)

large start-up costs and cannot take advantage of economies of scale

poor location (challenges to start a business)

cheapest rent is not the best place for consumer attraction

external influences (challenges to start a business)

exogenous shocks - harmful trading environment - SMBs are more susceptible to failure 

Opportunities for small businesses

GET CASH

• Growth

• Earning

• Transference and inheritance

• Challenge

• Autonomy

• Security

• Hobbies

Private sector

owned and operated by private individuals and businesses rather than the government 

Public sector

owned by gov to provide essential goods/services that would be underprovided by private sector.

Reasons for public sector activities (5)

• ensure everyone has access 

• avoid wasteful competiton’

• protect citizens and businesses 

• create employment opportunities 

• stabilize the economy

Sole Trader 

an Individual who owns their personal business, runs and operates all the business functions. 

Advantages of sole trader (6)

• few legal formalities

• profit taking

• being your own boss

• personalized service

• privacy of business

• quicker decision making

Disadvantages of sole trader

• unlimited liability

• limited sources of finance

• high risks

• workload and stress

• limited economies of scale

  • lack of continuity

Partnership 

for profit private sector business owned business owned by 2 to 20 people.

Silent/ sleeping partners

only financially involved

Deed of partnership (6)

• Amount of finances contributed by each

• roles, obligations and responcibilities

• profit distribution

• conditions for intro new partners

• withdrawal of a partner

• procedures foe ending a partnership

Advantages of partnership (5)

• Financial strength 

• Specialization and division of labour 

• financial privacy 

• cost effective cuz specialization 

• high labour productivity 

Disadvantages of partnership (4)

• unlimited liability 

• lack of continuity 

• prolonged decision making 

• lack of harmony 

Privately held companies

owned by shareholders, incorporated but cannot sell stocks on exchange

Publicly held companies

sell shares on stock exchange, owned by general publicL

limited liability companies

Owned my shareholders, incorporated so separate legal entity , limited liability

Advantages of LLMs

• Raising finance

• Limited liability

• continuity

• economies of scale

• productivity

• tax benefits

Disadvantages of LLCs (6)

• Communication problems 

• Added complexities 

• Compliance costs 

• Discloser of info 

• Bureaucracy

• loss of control 

Social enterprises

Are revenue generating businesses with social objectives at the core of their operations. they use their surplus for social good rather than personal gain

for profit Social enterprises goals

• to achieve social objectives

• To earn a revenue in excess of their costs

For profit social enterprises benefits (3)

• financial surplus to benefit society 

• employment opportunities 

• transparent and clean corporate conscience 

For-Profit social enterprises - private sector

• reinvest or donate surplus

• ethical business practisers

• need to earn a profit to survive

For-Profit social enterprises - private sector AIMS

Economic ; social ; environmental

Economic Aims

earn a profit and reinvest back into business

Social aims

benefit people in society and support less advantaged members

Environmental Aims 

Protect planet by operating in a sustainable way 

For-Profit social enterprises - Public sector

State owned and run in a commercial way to raise funds and provide services that may be insufficient if left to private.

Cooperatives

Owned and run by members with the common goal of creating value for themselves in a socially responsible way.

Consumer Cooperatives 

Owned my customers who buy goods/services from cooperatives for personal use usually at a lower price. 

Worker cooperatives

Set up, owned and organized by their employees

Producer cooperatives

Cooperatives that join and support each other to process or market their products.

Advantages of cooperatives (4)

• Incentives to work 

• decision making power 

• social benefits 

• public support 

Disadvantages of cooperatives (4)

• disincentive effect like no high salaries or benefits

• limited sources of finance

• slower decision making

• limited promotional opportunities

Not for profit social enterprise

are businesses that run in a commercial manner but without profit being the main goal.

NGO

• independent of the government

• not for profit

2 types of NGO

Operational and Advocacy 

Operational NGO

Established from a given objective

Advocacy NGO

more aggressive approach to promote or defence a cause, striving to raise awareness and support through direct action

Vision Statement

Outline of organization’s aspirations in the future, very long term,

Mission Statement

Underlying purpose of an organization, its core values. Clearly defines and realistically achievable.

Importance of business objectives 

• to measure and control 

• to motivate 

• to direct 

Growth (Business Objective)

Increase in sales revenue or market share; adapt to changing business environment 

Profit (Business Objective)

Profit maximization is the main objective for most businesses

Protecting Shareholder Value (Business Objective)

Earning a profitable return for shareholders in a sustainable way

Ethical  (Business Objective)

A business actions should inherently be considered morally correct ; ethical code of practice 

Ethics

Moral principles that guide decision making strategies, considering right and wrong from society’s point of view

Advantages of Ethics (4)

• Improves corporate image

• increases customer loyalty

• cost-cutting

• Improved sales morale and motivation

Disadvantages of Ethics (4)

• compliance costs 

• Lower profits 

• Stakeholder conflict 

• Subjective nature 

Strategies

Plans of actions to achieve the strategic objectives ; allows business to reach objectives

Tactics

Short term methods to achieve organisation’s tactical objectives

Tactical Objectives (2)

• Survival

• Sales revenue maximization

Strategic Objectives (3)

• Market standing 

• Image and reputation 

• Market share

Market standing (strategic objectives )

Presence within industry

Market share (strategic objectives )

Sales revenue as a percentage of industry’s total sales

Image and reputation  (strategic objectives )

customers beliefs and perceptions 

Stakeholder

Any individual , group of organization with direct interest or involvement in the operations and performance of a business.

List internal stakeholders (3)

• Employees

• Managers and Directors

• Shareholders

Employees (Internal Stakeholders)

Strive to improve pay, working conditions, job security and career progression

Managers and Directors (Internal Stakeholders)

aim is to maximize their own benefits and other financial rewards while focusing on the long

Managers

Oversee daily operations of a business 

Directors

Senior executives who have been elected by shareholders

Shareholders (Internal Stakeholders)

Have a say in how the company runs; maximize dividends and achieve capital gain

External Stakeholders (6)

• Customers 

• Suppliers 

• Financiers 

• Pressure Groups 

• Competitors 

  • Government 

Customers (External Stakeholders)

Can simply choose to spend money elsewhere, want greater choice, quality and more competitive prices

Suppliers (External Stakeholders)

Regular contact with client at competitive price ; businesses try to establish good working relationships

Financiers  (External Stakeholders)

Financial institutions and individual investors; generate enough profit to pay them back

Pressure Groups (External Stakeholders)

Common interest to place demands on organization to act in a certain way or make a desired change

Competitors (External Stakeholders)

Remain competitive; Benchmark performance; Be creative and innovative

Government  (External Stakeholders)

Businesses act in a way that is good for the general public 

Stakeholder Conflict

Reflects the differences in the varying needs and priorities of various stakeholder groups.

Remuneration

Division of profits within a business

Issues in dealing with stakeholder conflict 

• Type of business entity 

• Goals and objectives 

• Source and degree of power of stakeholder groups