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Purpose of Business Activity
Involves organizing human, physical, and financial resources to produce goods or services that meet customer needs and add value.
Produce Goods or Services
Primary goal of business activity to create tangible goods or intangible services that fulfill market demands.
Meet Customer Needs
Aim to develop products that satisfy customer preferences, leading to loyalty, brand awareness, and revenue generation.
Add Value
Enhancing products or services to differentiate from competitors, create unique selling points, and increase customer satisfaction.
Business Transformation Process
Businesses convert inputs like raw materials into outputs like finished goods or services to add value and make a profit.
Resource Inputs
Include financial (capital), human (employees), physical (materials), and enterprise (business idea) resources used in creating goods or services.
Business Functions
Key functions like Human Resources, Marketing, Finance & Accounts, and Operations are essential for business operations and success.
Interdependence of Functions
Different business functions work together towards achieving overall business objectives, showing interdependence.
Business Sectors
Businesses operate in primary (raw materials), secondary (processing), tertiary (services), or quaternary (knowledge-focused) sectors based on their activities.
Chain of Production
Series of steps from raw materials to finished products in the four sectors of industry (primary, secondary, tertiary, quaternary).
Entrepreneurship Role
Entrepreneurs organize resources, make business decisions, take risks, and drive innovation in starting and expanding businesses.
Intrapreneurship
Encourages entrepreneurial behavior within existing businesses, empowering employees to innovate and drive growth.
Characteristics of Entrepreneurs
Entrepreneurs need unique skills like communication, innovation, risk-taking, and leadership to succeed in business ventures.
Reasons for Starting a Business
Individuals start businesses for financial reasons like necessity, profit maximization, or profit satisficing, as illustrated by examples.
Non-financial Reasons
Entrepreneurs may start a business driven by factors other than financial gain, such as pursuing interests, passions, or ethical stances.
Gap in the Market
Some entrepreneurs identify unmet customer needs as a motivation to start a business, aiming to fill a void in the market.
Ethical Stance
Entrepreneurs may build their businesses around specific ethical values like environmental sustainability or social justice.
Social Entrepreneurship
Entrepreneurs create businesses to address social or environmental issues while sustaining themselves financially.
Independence & Personal Challenge
Many individuals start businesses to be their own boss, seeking freedom and flexibility in their work.
Home Working
With technological advancements, starting a business from home offers flexibility and a better work-life balance.
Steps to Successfully Launch a Business
Essential steps include identifying elements, conducting market research, constructing a business plan, checking legal constraints, raising finance, and testing the market.
Problems Faced by New Businesses
Challenges include lack of funding, market demand, competition, hiring talent, legal issues, operational challenges, and scaling.
Public Sector Firms
Owned and controlled by the government, public sector firms aim to provide services and merit goods not adequately supplied by the private sector.
Private Sector Firms
Owned and controlled by private individuals or firms, private sector firms focus on profit maximization and often exhibit higher efficiency levels than public sector firms.
Detailed annual accounts
Financial statements that must be made publicly available, including strategy, major decisions, and changes in executive structure.
Initial Public Offerings (IPOs)
First sale of stock by a company to the public, like Saudi Aramco, Alibaba Group, and SoftBank Corp.
Social enterprise
Business aiming to generate revenue while achieving social, environmental, or cultural objectives.
For-profit social enterprises
Private sector enterprises aiming to make a profit while improving societal aspects like environment, education, or health.
Cooperatives
For-profit enterprises owned and run by members, like employee, community, retail, producer, financial, and housing cooperatives.
Non-profit social enterprises
Organizations combining non-profit characteristics with social enterprise strategies to pursue social or environmental missions.
NGOs and Charities
Non-profit organizations like NGOs and charities that operate independently of the government and rely on donations.
Business aims and objectives
Long-term aspirations (aims) and specific, measurable, achievable, relevant, and time-bound targets (objectives) guiding a business's strategy.
Vision and Mission Statements
Mission statements describe the present purpose, while vision statements outline long-term aspirations and future goals of an organization.
SMART objectives
Objectives that are Specific, Measurable, Agreed, Realistic, and Time-bound, aiding in assessing progress effectively.
Growth
Some firms aim to expand their sales revenue or market share to achieve growth objectives.
Survival
Strategic objective focused on sustaining the business, especially during challenging market conditions or crises.
Protecting Shareholder Value
Objective commonly seen in public limited companies to safeguard share value and dividends.
Changing Objectives in a Dynamic Environment
Businesses adapt objectives due to internal and external factors to stay competitive and compliant.
Corporate Social Responsibility (CSR)
Businesses voluntarily integrate social and environmental concerns into operations and stakeholder interactions.
Ethics
Beyond legal requirements, ethics guide decision-making in line with corporate social responsibility principles.
Stakeholders
Individuals or groups affecting or affected by business actions, with internal and external stakeholders having different objectives.
Internal Stakeholders
Owners, employees, and management with distinct objectives within the business.
External Stakeholders
Customers, shareholders, creditors, suppliers, local community, government, and pressure groups with varied objectives outside the business.
Stakeholder conflicts
Challenges faced by businesses in balancing the demands of different stakeholder groups, leading to potential disruptions and tensions.
Stakeholder mapping
A strategy to identify and manage relationships with stakeholders based on their level of interest and power, aiding in prioritizing stakeholder strategies.
Economies of scale
Efficiencies gained by a business as it increases its scale of output, resulting in lower average costs per unit and competitive advantages.
Diseconomies of scale
Occur when a firm's average costs per unit increase as it continues to expand, leading to inefficiencies and higher production costs.
Internal economies of scale
Cost advantages resulting from the growth of production within a business, such as financial, managerial, marketing, purchasing, technical, and risk-bearing economies.
External economies of scale
Cost advantages arising from external factors like industry growth, geographic clusters, transport links, skilled labor, and favorable legislation.
Reasons for growth
Factors driving businesses to expand, including the desire for market share, profitability, market power, cost reduction, product diversification, and access to finance.
Reasons to remain small
Factors influencing firms to stay small, such as personalized service, niche markets, quick responsiveness, avoidance of diseconomies of scale, and lifestyle preferences.
Internal (organic) & External (inorganic) growth
Different approaches to firm growth, where internal growth involves market share increase, product diversification, and external growth includes mergers and acquisitions.
Mergers & Acquisitions (M&As)
Processes where two or more businesses combine to form a single entity (merger) or one company takes control over another (acquisition), with examples of friendly and hostile takeovers.
Forward Integration
Process of assimilating the profits from the next stage of production by controlling more stages of the supply chain.
Diseconomies of Scale
Occur when costs increase due to inefficiencies like unnecessary duplication of management roles.
Horizontal Integration
Rapid increase in market share by merging with competitors to reduce costs and competition.
Conglomerate Integration
Reducing overall risk by diversifying into new industries and selling duplicated parts for profit.
Joint Ventures
Collaboration between two businesses to form a separate entity for a specified period, sharing resources and skills.
Franchising
Business model where a franchisee buys rights to operate under a franchisor's brand in exchange for fees and support.
Strategic Alliances
Collaborative agreements between businesses for mutual benefit without forming a new legal entity.
Globalisation
Economic integration of countries through increased cross-border movement of people, goods, services, technology, and finance.
Multinational Corporations (MNCs)
Companies registered in one country with operations in multiple countries, benefiting from globalisation and deregulation.
Advantages & Disadvantages of MNCs
Impact on host countries in terms of employment, wages, local businesses, community, environment, and national economy.
Business Culture
Refers to the values, beliefs, and practices that shape the behavior and interactions within a multinational corporation (MNC).
Kaizen
A Japanese business philosophy of continuous improvement involving all employees in the organization.
Cost Advantages
The benefits gained by MNCs that allow them to produce goods or services at a lower cost compared to local businesses.
Exploitation
The unethical or unfair treatment of local workers by MNCs, often due to weak employment regulations or enforcement.
Offshoring
The practice of relocating a company's business processes, such as production or services, to another country.
Transfer Pricing
A strategy used by MNCs to shift profits from high-tax countries to low-tax countries to reduce tax liabilities.
Environmental Impact
The potential harm caused to the local environment by MNCs during and after the production process.
Asset Ownership
The ownership of assets from the home country by foreign businesses, which may lead to capital outflows and reduced reinvestment in the local economy.
