Business Management - Unit 1: Introduction to business management

Goods

Tangible products. They are from the primary and/or secondary sector

Services

Intangible products that the buyer does not take “physically” home. They are from the tertiary and/or quarternary sector.

Business Functions

The way in which all businesses are organized

Financial resources

making sure that the business has sufficient funds to carry out its business activity - to make the product or to deliver the service.

Human resources

is the function that makes sure the business employs the correct number of appropiriately skilled employees in order to produce its products or deliver its services

Marketing

involves selling the right product, at the right price, at the right time, to the right customers

Operations

plan how goods and services are to be produced and make sure that the correct quantity is produced

Research and Development

includes activities that companies undertake to innovate and introduce new products and services

Primary Sector

All raw materials are acquired by extraction, mining, etc. Government monitors this sector.

Secondary Sector

Raw materials are processed, normally by manufacturing

Tertiary Sector

All services are provided using manufactured products. Services can be education, financial, leisure, healthcare, etc.

Quarternary Sector

Provides services that are more focused on knowledge

Entrepreneurs

Individuals that demonstrate enterprise and initiative in order to make a profit. Are typically self-employed

Intrapreneurs

Individuals employed by a large organization who demonstrate entrepreneurial thinking.

Business plan

Sets out how the organization will meet its business objective

Private sector

all organizations owned by individuals or groups of individuals

Public sector

organizations generally created by governments in order to provide public goods. They do not function under the same profit-making imperative

For profit organizations

A business or other organization whose primary goal is making money (profit) for the company and its inverstors

Non-profit organizations

They have no owners which makes them primarily accountable to themselves allowing them to receive donations, charge fees, etc.

Sole trader

a for-profit business owned by a single individual. There is little legal distinction between the business and its owner and the owner is personally responsible for the debts of the business.

Partnership

a for-profit business owned by two or more individuals who are each personally responsible for the debts of the business.

Company

A voluntary association formed and organized to carry on a business

Corporations

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.

Private limited company:

a corporation where owners are shareholders and own shares in the business that represent their ownership percentage of the business

Public limited company

a corporation where shares are freely traded in the stock exchange and initially released through an IPO - Initial Public Offering

Non-Governmental Organizations (NGOs)

non-profit organization that usually satte their purpose or mission as benefiting society or the environment

Charities

non-profit organizations that exist to benefit the public

Social enterprises

organizations that engage in business activity but that have also set themselves important goals in terms of improving society or protecting the environment.

Cooperative

organization that is owned by its members who come together to work towards a common interest. These are run democratically, with members having a say in important decisions.

Microfinance provider

make financial services available to individuals whose needs would otherwise not be met by traditional financial institutions like banks

Vision

Written expression of an organization’s long-term ambitions that it hopes to realize in the future. It is often an optimistic view of what the organization hopes to accomplish in the future.

Mission

a written expression of an organization’s purpose and reason of being

Aims

They are goals an organization would like to achieve. They may be somewhat broad, optimistic and imprecise.

Objectives

More concrete than aims. Are often measurable and time-specific, making it easy to evaluate whether they have been attained or not.

SMART

Acronym for Specific, Measurable, Achievable, Relevant, Time Specific

Strategies

Plan for achieving an aim or objective, involve important decisions

Tactics

Specific day to day actions that support the strategy

Ethical objectives

The goals set by an organization that fall within an established set of moral guidelines or fair business practices.

Corporate Social Responsibility (CSR)

Refers to corporations’ obligations to society at large as well as the environment

SWOT Analysis

Strategy used by businesses to analyze and identify different factors of it: strengths, weaknesses, opportunities and threats.

Ansoff Matrix

It is a growth strategy for businesses that is based on two criteria: market and products. It includes: product development, market development, market penetration and diversification.

Stakeholders

any individual or group that affects an organization or is affected by it. The very definition is that they have an interest in the company and usually are affected by the company’s growth and development.

External stakeholders

Are individuals or groups that have an impact on a business but do not work there and do not form part of the decision-making of the business.

Internal stakeholders

Are part of the company. They may affect or be affected by it.

STEEPLE(D) Analysis

Tool or framework that is useful in eximining a firm’s external environment

Social

factors that considers lifestyles, beliefs, and values.

Technological

Factor that includes infrastructure, advances, tools, innovations, ICT.

Economic

Factors that consider the economic activity of the country. “Business cycle”: recessions, depression, GDP, peak, trough, recovery, etc. Economic indicators such as Demand and supply, inflation, unemployment.

Environmental

Considers climate change, pollution, water sources, wastes, air pollution, recycling, animal habitats, etc.

Political

Refers to the political situation or regime, government of a nation.

Legal

Factor that considers laws and regulations of a country, it is related to politics but on practical application of the law.

Ethical

Factor that considers the moral guidelines or corporate behavior.

Demographic

Includes statistics and data of different features of the population such as religion, ethnicity, age, integration, and tolerance of people.

Economies of scale

The average unit cost of production decreases as the level of output increases

Unit cost

cost of producting a single unit of output

Diseconomies of scale

The situation when the average unit cost of production increases as the level of output increases

Internal growth

Organic growth

refers to expansion that is carried out by the organization itself (internally)

External growth

Involves the type of growth when a company considers another organization in order to expand

Merger

A form of external growth that usually results in two firms combining to form a third entity

Acquisition

A form of external growth. This terms implies that one firm purchases another firm.

Takeover

A term often used to describe the process that results in either a merger or acquisition. This usually involves one firm offering to buy the shares from the shareholders of another firm, usually at a price that exceeds theier value in the stock market.

Joint ventures

The creation of a new company by two or more “parent” companies. Usually for a specific time period.

Strategic alliances

Involves two or sometimes more organizations working together to realize a set of common objectives

Globalization

The increasing interconnectedness of countries across the world in terms of communication, culture, trade, and the movement of people.

Franchise

Legal agreement whereby a franchisee buys the rights to use the name and business model of a franchisor.

Franchisor

an individual or company that sells or grants a franchise for the sale of goods or the operation of a service

Franchisee

an individual or company that holds a franchise for the sale of goods or the operation of a service.

Multinational companies (MNCs)

corporations that operate in at least two countries, one of which is outside the corporation’s “home” country.