introduction to business management

product

product

services and good

input

CELL: capital, enterprise, land, labour

7 P’s of marketing

product, price, place ,promotion, people, processes, physical evidence

entrepreneur

individual who plans, organises and manages a business. they are successful by responding to and predicting to changes in the marketplace

chain of production

extraction → manufacturing → services → consumers. value increases as product moves through

added value

a positive difference between the selling price and cost of production

customer

whoever buys the product

consumer

whoever actually uses the product

types of product:

• consumer goods: products ssold to the general public

• capital goods: products bought by businesses to produce other goods/services

• services

departments

• HR (human resource management): manage personnel. planning, organisation, management, leadership, motivation, industrial/employee relations, etc.

• finance and accounts: managing money, compliance with legalities, informing others about finances

• marketing: identifying and satisfying customer needs. research, promotion, pricing, branding, distribution

• operations management: converting raw material and components into finished goods

revenue

money that comes in

primary sector

extraction, harvesting and conversion of natural resources. large part of low income communities. as countries grow economically, there is less reliance on the primary sector

secondary sector

manufacturing and production of goods. dominant in medium-income countries. this is considered the wealth increasing sector due to export. automation has resulted in a decline of employment in this sector

tertiary sector

providing services, such as transportation, healthcare, finance, tourism, etc. most prominent in high income countries. ex. apple receives a flow of revenue from after sales services, such as maintenance

quaternary sector

sub-category of tertiary. businesses involved in the generation and sharing of information. ex. communications tech, research and development, scientific research

challenges when starting a new business

• lack of finance

• unestablished customer base

• financing working capital (daily running)

• marketing problems

• staff problems (motivation, organisation, choice, etc.)

• production problems

• legalities

• high production costs

• poor location choice

• external influences, such as financial crises

opportunities for starting a business: GET CASH:

• growth (capital growth, when the value increases over time)

• earnings (potential of remuneration)

• transference and inheritance

• challenge (drives one to perform and is a reward)

• autonomy (freedom, independence, flexibility as your own boss)

• security

• hobbies (turning a hobby into your work)

adding value

producing a good/service worth more than the cost of resources

private sector

controlled by private individuals and businesses, goal is to earn profit

public sector

partially or wholly owned by the government for many reasons (basic services, protecting citizens, creating employment opportunities, etc.)

sole traders (and pros and cons)

• individual who owns their own business. unincorporated, which means their is no legal difference between the business and the owner.

  • pros: few legal formalities, profit taking, being one’s own boss, personalised service, privacy, speed

  • cons: liability, limited finance, high risk, workload, lack of continuity

partnership

private sector business owned by 2 or more people. 1 or more people have unlimited liability

• pros: finance, division of labour, no publicising of finances

• cons: unlimited liability, lack of continuity, less speed, conflicts

ordinary partnerships

20 or more people

silent partners

investors eligible for a portion of profit

deed of partnership

legal contract, includes finance control, responsibilities, conditions for new partners and procedures for partnership withdrawal/partnership

privately held companies

shares are held by multiple entities, limited liability because they are incorporated. may participate in stock exchange under certain rules. may have a board of directors elected by shareholders (those that invested money) for daily running. more shares = more voting power

companies

always owned by shareholders, not the same as businesses, which are any business entity

privately held company

limited liability company, no stock exchange, shares are sold privately with agreement from the BOD. ex. Mars, IKEA, LEGO.

• pros: finance, limited liability, continuity, scale, productivity, tax benefits (corp tax instead of income tax)

• cons: communication, information disclosure, loss of control, conflict

annual general meeting

allowing owners to have a say in the running of the business

documents for limited liability company trading (separating a company to become limited liability):

• memorandum of association: document outlining basic company details

• articles of association: internal regulations and procedures of the company and administrative issues

publicly held company

can have stock exchange

flotation

• selling of business to shareholders. initial public offering→ flotation→ additional source of finance.

  • cons: share price can fall, conflict, etc.

social enterprises

• business with social objectives at their core (benefiting society and communities, transparently run, etc.)

  • can be private, public or cooperatives (run by all the members, including employees, with profits shared)

  • consumer cooperatives: owned by customers (memberships)

  • also worker and producer cooperatives

  • pros: incentive to work, power, benefits

  • cons: slow decisions, limited finance, disincentive, limited promotion

  • can be nonprofit

NGO

non governmental organisation that seeks societal improvement

factors that affect choice of business entity:

finance, size, liability, degree of ownership, nature of business, change