ch1 business organization

primary sector

primary sector

businesses which are involved with the extraction and harvesting of natural resources

secondary sector

businesses which are involved with the manufacturing and construction of products

tertiary sector

businesses which provide services to general public

quaternary sector

businesses involved with intellectual based activities

reasons for starting up a business

• Growth

• Earning

• Transference

• Challenge

• Autonomy

• Security

• Hobbies

steps of starting up a business

1. write business plan

2. obtain start-up capital

3. obtain business registration

4. obtain bank account

5. marketing

elements of business plan

• business

• products

• market

• finance

• personnel

• marketing

private sector

businesses which are owned and controlled by private individual

public sector

businesses which are owned and controlled by the government

cooperatives

for-profit social enterprise owned by their members

pros of cooperatives

• decision making power

• public support

cons of cooperatives

• slower decision making

• cannot raise funds on stock exchange

NGO

non-profit social enterprise in the private sector

charities

non-profit social enterprise providing voluntary support for good causes

vision statement

outlines organization’s aspirations in the distant future

mission statement

outlines organization’s purpose and core values

CSR

idea that firms should play positive role in their community by considering social and environmental issues

what is STEEPLE

• Social

• Technological

• Economics

• Environmental

• Politics

• Legal

• Ethics

economies of scale

lower average cost of production as firm operates on larger scale

diseconomies of scale

higher cost of production as business continues to grow

types of economies of scale

• technical economies

  • machinery is spread over huge scale of output

• purchasing economies

  • buying resources in bulk

• financial economies

  • borrow massive sum of money at lower interest rates

internal growth

business grows organically using own resources

internal growth methods

• improved products

• changing price

• effective promotion

external growth methods

• takeover

• mergers

• joint ventures

horizontal integration

M&A between firms coperating in same industry

vertical integration

M&A between firms between businesses at different stages of production

lateral integration

M&A between firms that have similar operations

conglomerate M&A

between businesses in completely different markets