Business Management Chapter 1

the business world and management

list and brief explain the 4 main elements of a business

1. Human activities - people operate and manage businesses 

2. Production - transformation of certain resources into products and services

3. Exchange - finished goods/services are exchanged for money or battered 

4. Profit - reward for meeting societies needs, allowing businesses to pay for resources and to make a living. Profits has to be earned in a way that is fair and sustainable

list 3 diffreneces between the formal vs informal sector

Formal sector	Informal sector
business listed in the JSE	Micro enterprises that do not contribute to rates and taxes
68% large businesses	Unregistered, survivalist micro business
32% SMME’s (small,medium and micro enterprises)	Many exist in south africa - difficult to measure

name and briefly explain the 5 themes of sustainability

1. Social Responsibility - uplift community by pproviding employment opportunities and empowerment/CSI (corporate social investment)

2. Employment Equity - create fairness. The Employment Equity Act (1998) aims to eliminate unfair discrimination and achieve a diverse, representative workplace

3. Business ethics - Focuses on the ethical behavior of managers and executives. Many companies implement a code of conduct to provide clear guidelines on ethical issues, such as accepting gifts

4. Consumerism - protects consumers from unsafe products and malpractice by putting moral and economic pressure on businesses. The Consumer Protection Act (2008) holds producers responsible for their products and enforces minimum warranties

5. Environmental sustainability - Growing societal concern is forcing businesses to consider their environmental impact. Stakeholder activism through protests and pressure groups call for protection against pollution and other practices that harm the environment

what are the 5 levels of maslows hierachy of needs and give a brief overview

1. Physical needs 

• Basic biological requirements for human survival

Examples:

• Food and water

• Air and breathing

• Sleep and rest

• Shelter and warmth

• Homeostasis (body temperature)

2. Safety needs 

Definition: Security, stability, and freedom from fear

Examples:

• Personal security and safety

• Financial security and employment

• Health and well-being

• Property ownership

• Stable family environment

3. Love and belonging 

Social connections, relationships, and sense of belonging

Examples:

• Friendships and romantic relationships

• Family connections

• Social groups and communities

• Religious or spiritual communities

• Team membership

4. Esteem needs 

Recognition, respect, status, and confidence

Examples:

• Self-respect and confidence

• Recognition from others

• Status and prestige

• Achievement and mastery

• Independence and freedom

5. Self actualisation 

Realizing personal potential, creativity, and purpose.

Examples:

• Creative expression and art

• Personal growth and development

• Pursuing meaningful work

• Spiritual fulfillment

• Making a positive impact

what are the 4 factors of production?

1. natural resources - land/nature, fixed amount,huamns must transform into something useful

2. human resources - the physical and mental talents and skills of people employed to create products and services

3. capital -Man-made tools/assets such as machinery and factories used to produce other goods and services

4. entrpreneurship - People who are willing and able to combine the other three factors of production to start and manage a business and provide products/services to society

what are the 5 key entrepreneurial functions

• Combine resources:

• Make decisions:

• Bear risks:

• Drive innovation:

• Create value:

define market economy

• Market economy is a system where most products and services are supplied by private organisations seeking profit, they use the limited resources to make products that respond to consumer tastes, preferences, and demands.  

what are the 4 key characteristics of the market economy

1. Private property rights 

People have the right to own assets (land,buildings,equipment) and earn an income from them. This is the primary driving force for the market economy

2. Distribution of resources via free markets 

The people who are in the possession of capital are those who have the most influence as they decide on what to produce and how to produce the products based on market forces not a central body

3. Freedom of choice 

Producers can choose what to produce and who to employ. Consumers can choose what to buy, where to live, and their career path. Workers own their labour and can choose how to use it

4. Minimum state interference 

States role is to maintain the system without excessive relegation or participation in the business world

define command economy

• A command economy is a system where the state owns and controls all of a nation's resources and decides what and how to produce to meet the needs of society

• Communism

what are the 4 characteristics of the command economy

1. state/communal ownership 

The state owns and controls all major resources. Individuals may own personal domestic assets 

2. Centralised control 

All decisions on what,how and who produces products are made by central government  

3. Absence of consumer choice 

The choices available to consumers are limited to what the state decides to produce and offer. Product design is also state-controlled 

4. No profit motive or competition 

State owns all production and sets needs it therefore eliminates competition and the motive to make profits

define socialism

• Compromise between market and command 

• Businesses and consumers operate within free markets in which they can make decisions without restrictions 

• Consumers have freedom of choice

what are the 3 characteristics of socialism

1. State ownership of strategic industries 

The state owns and controls key,strategic sectors such as steel manufacturing,transportation,communications,health services and energy

2. Private initiative in less strategic sectors 

Smaller, less critical industries such as trade and construction are left to private businesses and market forces. Consumers and businesses have more freedom of choice than in a pure command economy

3. Mixed operation 

The economy operates with a blend of state control in core areas and free markets in non-core areas

define mixed economies

• None of the 3 main systems occur in pure form but rather occur as mixed economies 

• High - income countries are usually free market economies 

•  the poorer countries are mostly economies that are not free (such as North Korea) or were only just emerging from command economies

define business organisations

• Business organisations may be defined as those private need-satisfying institutions of a market economy that accept risks in pursuit of profit by offering products and services on the market to the consumer. 

• variety of forms: a sole proprietorship, a partnership, a close corporation, a private company or a public company

define goverment organisations

Need satisfying institutions where the states creates products/ services believed to be of strategic, economic or political importance

what are the 2 types of goverment involvement

1. Public Administration: Provides collective, non-profit services (e.g., healthcare, education, justice, defence). The profit motive is absent.

2. State-Owned Enterprises (SOEs)/Parastatals: Public corporations (e.g., Eskom, Transnet) that operate for profit, sometimes in competition with private businesses. They are owned and controlled by the state. They are created to provide products/services deemed of strategic, economic, or political importance (e.g. energy, transport, military equipment). However they are often inefficient, requiring bailouts, e.g. Eskom, and the SABC

define non-profit seeking organisations

• Need satisfying institutions that offer services and products not provided by private enterprise oe government organisation

• They provide their services without seeking a profit and depend on financial support from members of the community or charitable contributions

explain the relationship between business managmenet and economics

• Economics is a social science that studies how humans choose different ways of using their scarce resources to produce products services 

• It is the study of the economic problem itself

• Business management is an applied science concerned with the study of those institutions in a particular economic system that satisfy the needs of a community 

• Main area of study is private organisations

• While economic examines the entire economic system of a country business management limits its studies to one component of the economic system