1.1 What is a Business

Business

A decision-making organization established to produce goods and/or provide services.

Goods

Physical products produced by a business.

Services

Intangible products provided by a business (e.g., haircuts, tourism).

Factors of Production

Inputs used in the process of transforming into output, including land, labor, capital, and entrepreneurship.

Human Resource Management (HRM)

A fundamental function of a business in regard of the process of efficiently using an organization's employees

For example:) recruitment, training, motivation, and reward.

Finance and Accounts

A fundamental function of a business in regard of the management of money (capital) needed for a business to survive, expand, pay, and meet its legal obligations.

Marketing

A fundamental function of a business in regard of understanding the markets & customers to link customers and production.

Tasks for Marketing

Plan/Produce:

• promotions

• products

• sales

• pricing

Operations Management

A fundamental function of a business in regard of control on all the transformation process for the operational achievements/the business wants.

Task of Operations Management

Planning, organizing, coordinating, and controlling the transformation of inputs into outputs.

Primary Sector

Extraction, harvesting, and conversion of natural resources (land) for use by firms.

Secondary Sector

Manufacture and production of products from raw materials.

Tertiary Sector

Service industry (e.g., banking, insurance, education, tourism).

Quaternary Sector

Businesses involved in intellectual, knowledge-based activities regarding information (e.g., R&D, ICT).

Sectoral Change

A shift in the relative share of GDP and employment in each sector of the economy.

Industrialisation

Movement from the Primary to the Secondary sector.

Deindustrialisation

Movement from the Secondary to the Tertiary sector.

Entrepreneurship

Traits of individuals as business owners, willing to take calculated risks.

Visionary

An entrepreneur who has foresight and driving force behind organizational growth.

Challenges for starting a new business

• A lack of experience of all the different aspects of business

  a. Difficulties in raising money to set up and expand a business (Finances)

  b. The difficulties building brand awareness (Marketing)

  c. Hiring the wrong people (HRM)

  d.High Production costs (FInances)

  e. Lack of cash flows

• External factors (e.g. external influences - oil criticism economic recession, COVID-19)

• Legalities - is it legal?

• Copyright and patent

• Strong competition / A lack of market power 

• Lacking human resources

Opportunities for starting a new business

• Social changes:

e.g.) ageing population → services/ products focusing on the elderly

• Technological change

e.g.) electric vehicles → suppliers like battery producers, gas stations with chargers

• Economic change

e.g.) Growth in economy → more expensive product-based businesses like 

• Environmental change

• Political change

• Legal change

• Ethical change

STEEPLE analysis

A framework used to analyze the external factors (Social, Technological, Economic, Environmental, Political, Legal, Ethical) that can affect a business.