Business Managemnt

What is Business Management?

A business is a “place” or an organisation where people interact and where products or services are exchanged for money.

Management refers to the planning, organising, leading and control of all the activities that the organisation needs to do, to provide goods or services to the customers

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What drives a Business?

A business is driven by the customers’ needs and the business responding to those needs by providing the desired product or service

The Four Elements of Business:

Each business includes human and human activities.

Each business provides goods and services and uses processes to change resources into these goods and services.

Each business aims to make a profit or surplus.

Each business is established on the concept of exchange.

Understanding Needs and Wants of the Role Players

A need is something that the customer cannot live without, e.g. food, water or fresh air.

A want refers to something that people desire to have, that they may, or may not, be able to obtain.

Maslow’s Hierarchy of Needs

Physiological needs are basic needs that are necessary for survival, e.g. food, clothing, shelter, fresh air, sleep. In modern terms “basic” needs could also include sanitation, healthcare and basic education.

Safety needs are needs for security and protection against danger, e.g. personal safety, secure job/stability or protection against pain.

Social needs refer to our need for love and belonging, friendship and social acceptance in our interpersonal relationships.

Esteem needs refer to our need for respect, self-esteem and self-confidence.

Self-actualisation needs refer to the need to grow yourself, better understand yourself, fulfil yourself by being the best ‘you’ that you can be.

Hence, Maslow's theory of needs is based on three assumptions:

All people have needs that have to be satisfied.

Once a lower-level need has been satisfied, it no longer serves as a motivator for the next level of needs.

Needs are satisfied in order of priority from a lower to higher level, i.e. there is a hierarchy of needs.

Products and Services

Products are tangible, in other words, you can touch, see and feel them. Products or goods are items such as clothes, pencils, bricks or shoes.

A service is intangible. You cannot touch it and it is usually an activity that someone provides, e.g. hairdressers, doctors, bankers or waiters.

Businesses Interact with Communities

We have already identified that there are two role players to make a business work; the business itself and the customers. The two-way relationship between the business and the community can be explained as follows:

Businesses employ managers and workers from the community to assist them in their business. The business then pays these employees a salary or a wage for the work that they do. These salaries or wages provide an income for the workers and they can use it to pay for the satisfaction of their needs and wants.

Businesses quite often also help communities to improve infrastructure or services or other facilities in the community, such as electricity or water supply, roads and communication networks. This happens partly through the taxes that businesses pay to local government. In this regard local government is responsive to the needs of business as it can have an impact on the local economy.

Factors of Production

Natural resources

The term describes the basic materials and resources that are produced through the earth’s own inherent natural processes and systems. It includes resources such as water, land, gold, iron, soil, wind energy, etc.

Capital

Capital refers to both money and assets. Quite often people make the mistake by thinking that capital is only money, but it is not. Capital includes other assets such as equipment, buildings, machines, furniture or fixtures of the business.

Labour

Labour refers to the human effort or work that is performed with help of mental or physical inputs in the production process for the business to earn an income. Every organisation needs human resources for their knowledge and skills and needs to provide training and development to these workers.

Entrepreneurship

This refers to the process of combining the other factors of production to form the business. Managerial skills is required. Entrepreneurship is taking all the factors of production and with innovation and creative thinking putting it together to form a successful business.

The Business Environment

A business is reliant on the people in the community to buy from it and the people in the community are reliant on the business to provide them with products and services to satisfy their needs. Business takes place in an environment where change is the only constant and the business environment is never stagnant.

The business environment can be divided into three components: the micro, market and the macro environment:

The macro and market environment form part of the external environment and have a major influence on the micro environment.

The micro environment forms part of the internal business environment. It can influence the market environment to an extent but has no influence on the macro environment.

Internal or Micro Environment

The internal environment is also called the micro or decision-making environment and refers to the business itself. It includes all the support functions of the business and elements such as the vision, mission, ethics, diversity, culture, etc. in the business. The functions of the business include the following:

General management

Purchasing

Operations and logistics

Marketing

Finance

Human resources

Public relations

Administration

Market or Task Environment

The market or task environment is part of the external environment and includes all the role players that interact with the business. This includes consumers, suppliers, competitors, intermediaries, special interest groups and the labour market.

Macro Environment

The macro environment is part of the external environment and is also referred to as the general environment. It includes the economic, political-legal, socio-cultural, technological, ecosystem and international factors that could influence the business from the outside.

Traditional System

In the traditional system, people use the resources that they have available to produce for their needs and wants, e.g. they plant and harvest their own food to sustain themselves.

Market system

Mixed system

Ownership of factors of production

Private individuals own the factors of production.

Profit

Everyone has a right to make a profit.