Business in the Real World

business

an organization that produces goods or provides services to meet the needs and wants of customers, with the aim of making a profit

Business Objectives

Profit Maximization, Survival, Growth, Market Share, Customer Satisfaction, Ethical and Environmental Goals

Profit Maximization

The primary goal for most businesses, aiming to generate the highest possible profit

Survival

Especially important for new businesses or those facing economic downturns

Entrepreneurs

individuals who start and run businesses, taking on financial risks in the hope of profit.

Sole Traders, Partnerships, Private Limited Companies (Ltd), Public Limited Companies (PLC), Not-for-Profit Organizations

Types of Business Ownership

Sole Traders

A business owned and operated by one person.

Partnerships

A business owned by two or more people who share profits and responsibilities

Private Limited Companies (Ltd)

A business owned by shareholders with limited liability, but shares are not publicly traded.

Public Limited Companies (PLC)

A business owned by shareholders with limited liability, and shares can be traded publicly on the stock exchange

Not-for-Profit Organizations

Organizations that operate for social, educational, or charitable purposes rather than profit

Not-for-Profit Organizations

Example: Oxfam, local community groups

Partnerships

Example: Law firms, medical practices

Sole Traders

Example: Local hairdresser, freelance graphic designer

Private Limited Companies (Ltd)

Example: Local construction companies, family-owned businesses

Primary Sector, Secondary Sector, Tertiary Sector

Sectors of Industry

Primary Sector

Involves the extraction and harvesting of natural resources

Secondary Sector

Involves the manufacturing and processing of raw materials into finished goods

Tertiary Sector

Involves the provision of services rather than goods.

Retail, healthcare, education

Examples of Tertiary Sector

Agriculture, mining, fishing

Examples of Primary Sector

Factories, construction, food processing

Examples of Secondary Sector

Operations, Marketing, Finance, Human Resources (HR),

Business Functions

Operations

The activities involved in the production of goods and services

Marketing

The activities aimed at promoting and selling products or services

Finance

The management of money and other financial resources

Human Resources (HR)

The management of people within an organization

Production planning, quality control, inventory management

Key Activities of Operations

Market research, advertising, sales promotion

Key Activities of Marketing

Budgeting, accounting, financial planning

Key Activities of Finance

Recruitment, training, employee relations

Key Activities Human Resources

Economic Factors

Legal Factors

Social Factors

Technological Factors

Ethical Factors

External Influences on Business

Economic Growth, Interest Rates, Exchange Rates, Inflation

Economic Factors

Economic Growth

An increase in the production of goods and services in an economy over time

Interest Rates

The cost of borrowing money or the reward for saving.

Exchange Rates

The value of one currency in terms of another

Inflation

The rate at which the general level of prices for goods and services rises

Consumer Protection Laws

Employment Laws

Environmental Laws

Legal Factors

Consumer Protection Laws

Purpose: To ensure businesses provide safe and accurate products and services.

Examples: Sale of Goods Act, Consumer Rights Act.

Impact on Business: Requires compliance, potential costs for rectification

Employment Laws

Purpose: To protect the rights of employees.

Examples: Minimum wage laws, health and safety regulations.

Impact on Business: Affects hiring practices, working conditions, and compliance costs

Environmental Laws

Purpose: To minimize the environmental impact of business activities.

Examples: Pollution controls, waste management regulations.

Impact on Business: Encourages sustainable practices, potential fines for non-compliance.

Changing Demographics

Consumer Lifestyles

Cultural Trends

Social Factors

Changing Demographics

changes in the structure of the population.

Impact on Business: Affects market demand, labor supply

Consumer Lifestyles

Changes in how people live and what they value.

Impact on Business: Influences product development, marketing strategies

Cultural Trends

Changes in societal norms and values.

Impact on Business: Affects branding, product offerings.

Innovation, Automation, E-commerce

Technological Factors

Innovation

The introduction of new ideas, products, or processes.

Impact on Business: Drives growth, improves efficiency, creates new markets

Automation

The use of technology to perform tasks without human intervention.

Impact on Business: Reduces costs, increases productivity, may lead to job displacement

E-commerce

Buying and selling goods or services over the internet.

Impact on Business: Expands market reach, changes retail dynamics.

Corporate Social Responsibility (CSR)

Ethical Marketing

Ethical Factors

Corporate Social Responsibility (CSR)

Businesses taking responsibility for their impact on society and the environment.

Impact on Business: Enhances reputation, attracts customers, may increase costs

Ethical Marketing

Promoting products in a way that is honest and socially responsible.

Impact on Business: Builds trust, avoids misleading claims

Internal (Organic) Growth

External (Inorganic) Growth

Methods of Business Growth

Internal (Organic) Growth

Expansion from within the business using its own resources.

Methods: Increasing production capacity, launching new products, expanding into new markets.

Advantages: Control over growth, gradual expansion, retains company culture.

Disadvantages: Slow process, limited by internal resources.

External (Inorganic) Growth

Expansion by merging with or acquiring other businesses.

Methods: Mergers, acquisitions, strategic alliances.

Advantages: Rapid growth, access to new markets and technologies.

Disadvantages: High costs, potential for cultural clashes, regulatory challenges

Economies of Scale

Cost advantages reaped by companies when production becomes efficient

Technical, Managerial, Purchasing, Financial

Types of Economies of Scale

Diseconomies of Scale

The cost disadvantages that firms experience when production becomes inefficient

Communication Issues, Coordination Problems, Bureaucracy

Causes of Diseconomies of Scale