Business Management Unit 1

Consumer

People or organisations that actually use the product

Customer

People or organisations that buy the products

Product

Both goods (tangible products) and services (intangible products)

Entrepreneur

An individual who demonstrates enterprise and initiative in order to make a profit

Intrapreneur

An individual employed by a large organization who demonstrates entrepreneurial thinking in the development of new products or services

Business

A decision making organisation involved in the process of using inputs to produce goods and/or services’ to satisfy consumers needs and wants

Inputs

Land, labour, capital and entrepreneurship

Processes (the business functions)

Turning inputs into the provision of services or the manufacture of goods

Output

The output or provision of final goods and services

Land

Any natural resources consisting of both renewable resources and non-renewable resources used in the production of goods and services. Reward = rent.

Labour

The human effort, both physical and mental, used in the production of goods and services (employment). Reward = wage

Capital

Machinery, equipment, and buildings used in the production of goods and services, reward = interest.

Enterprise

The skills, ideas, initiative and risks used to create and organize a business. Reward = profit.

Consumer goods

Goods sold to the general public (durable goods and non-durable goods)

Capital goods

Physical goods bought by other businesses to produce other goods and services

Primary sector

Businesses engaged in farming, fishing, oil extraction and all other industries that extract natural resources to be used and processed by other firms

Secondary sector

Businesses that manufacture and process products from natural resources, including furniture, brewing, baking, clothing, and construction

Tertiary sector

Businesses that provide services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels, tourism and telecommunications

Quartenary sector

This focuses on information technology (IT) businesses and information service providers such as research and development, business consulting, and information gathering

Human resource manegment

Identifies the workforce needs of the business

Finance and accounts

Responsible for monitoring the flow of finance into and out the business

Marketing

Responsible for market research and for analysing the results of such research so that consumer wants can be correctly identified

Operations management

Responsible for ensuring adequate resources are available for production

Personal skills and qualities of a entrepreneur

Innovation, commitment and self-motivation, risk-taker, decisive and adaptable.

Opportunities of starting a business

Overcoming unemployment, being independent, and improving standard of living by earning more money

Challenges of starting a business

Lack of financial capital (fixed assets), Cash flow problems (working capital), Marketing problems (meet customers needs), Unestablished customer base (reputation), People management problems (leaderships skills), Legalities (laws, rules), Production problems (level of production), High production costs (new machines), Poor location (home is office), External influences (oil crisis, recession)

Business Plan

A written document that describes a business, its objectives and its strategies, the market it is in and its financial forecasts.

Private sector

Comprises business owned and controlled by individuals or groups of individuals. Produce: private goods, such as cars/phones/hair cut, food, etc.

Public sector

Comprises organisations accountable to and controlled by central or local government (the state). Produce: public goods, such as national defense, roads, streetlights, etc.

Mixed economies

Economic resources are controlled by both the public and private sector

Free-market economies

Economic resources are owned largely by the private sector, with little to no state intervention

Command economies

Economic resources are owned, planned and controlled by the state

Privatisation

The sale of public sector organisations to the private sector

Nationalisation

Government takes ownership of a business from the private sector into the public sector

Sole trader

A business that is exclusively owned by one person who has full control if it and is entitled to all of the profit (after tax), (unlimited liability)

Partnership

A business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities, (unlimited liability)

Corporations (limited companies)

A corporation or company is a for-profit business owned by numerous shareholders who enjoy limited liability. That is, individual shareholders are not responsible for the debts of the business.

Limited liability

The only liability – or potential loss – a shareholder (or partner in a limited liability partnership) has if the company fails is the amount invested in the company, not the total wealth of the shareholder

Privately held company (LTD)

The company owners decide who can sell shares; usually only people they trust, such as family members or friends.

Publicly held company (PLC)

The company owners can advertise and sell shares to the general public via the stock exchange. Everyone is allowed to buy shares.

Social enterprises

A business with social and/or environmental objectives that reinvests most of its profits into benefiting society rather than maximising return to owners

Social entrepreneur

A person who establishes an enterprise with the aim of solving social problems or achieving social change.

Triple bottom line

The three objectives of social enterprises: economic, social, and environmental

Public corporations

A business enterprise owned and controlled by the state - also known as nationalised industry or public sector enterprise

Cooperatives

A group of people acting together to meet the common needs and aspirations of the members, sharing ownership and making decisions democratically, e.g. healthcare, housing, education, insurance, agriculture and more

Non-profit organisations

Any organisation that has aims other than making and distributing profit and which is usually governed by a voluntary board

Non-governmental organisations (NGOs)

A legally constituted body that functions independently of any government and that has a specific humanitarian or social aim/purpose, e.g. supporting disadvantaged groups in developing countries or advocating the protection of human rights

Vision statement

A statement of what the organisation would like to achieve or accomplish in the long term.

Mission statements

A statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest from outside groups. It sets out the overall purpose of the business.

SMART objectives

Effective business objectives should be specific, measurable, achievable, realistic/relevant, and time-specific

Market share

Sales of the business as a proportion of total market size, in a given period

Shareholder value

The financial gains received by the owners a company’s shares

Strategic objectives

A long-term target for the whole organisation, designed to achieve the corporate aim

Tactical objectives

A short-term target aimed at resolving a particular problem or meeting a specific part of a longer-term strategic objectives

Corporate social responsibility (CSR)

This concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities, and the environment.

Business objectives

Can be focused on profit, growth, shareholder value, and ethics

Stakeholders

People or groups of people who can be affected by, and therefore have an interest, in action of taken by an organisation

Areas for CSR

Labour relations, environment, supplier relations, and community

Disadvantages of CSR

Compliance costs (higher operating expenses), lower profit, and stakeholder conflict

Social audit

Independent report on the impact a business has on society. This can cover pollution levels, health and safety record, sources of supplies, customer satisfaction and contribution to the community

Changes in CSR

Increase in publicity, climate change, legal changes on all levels, refraining businesses from certain practices

Stakeholder concept

The view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders

Internal stakeholders

Employees, managers, shareholders

External stakeholders

Customers, suppliers, government, creditors, competitors

Stakeholder conflict

A situation in which the interests or goals of different stakeholders in an organization are in conflict with one another

Arbritration