(Unit 1) Business Management

Factors of Production

Land, labour, capital, enterprise

What causes economic issues?

Scarcity

Economize

to manage your resources

Opportunity Cost

the next best alternative that you sacrifice by choosing another item

physical capital

man-made tools

human capital

knowledge and skillsWhat

What factors provide human capital?

labor and enterprise

What does the “coffee shop” model represent?

Factors of production

Why is business activity needed?

There are unlimited wants.

What is a business?

A business is an entity which tries to combine factors of production to make products to respond to and satisfy the needs and wants of customers.

Private Sector

Business owned by an individual

Public Sector

Business owned by the government

Primary Sector

Businesses that extracts, harvests, or converts land.

Industry

Businesses that sell similar products

Secondary Sector

Businesses that use raw materials to manufacture products. Also do packaging and processing.

Tertiary Sector

Businesses that provide services to private and corporate customers.

Quaternary Sector

Business that provide services related to data and information

What are the 4 vital functions of a business?

Production, Human Resources, Finance/Accounting, Marketing

Role of Production

converts raw materials into finished products

Role of Human Resources

managing employees (ex: recruitment, pay & benefits)

Role of Finance

manages an organization’s money, assures the recording and reporting of documentation take place

Role of Marketing

makign sure products sell

The Four P’s of Marketing

Promote, Price, Place, Product

Examples of Primary Sector

fishing, forestry, mining

Examples of Secondary Sector

clothing manufacturers, construction, publishing houses

Examples of Tertiary Sector

retail, travelling, healthcare, education, finance, entertainment

Examples of Quaternary Sector

It jobs, teachers, researchers

STEEPLE

social, technological, ecological, economic, political, legal, ethical

ICT

information, communication, and technology

Limited Liability

the owners of a business can only lose when they’ve invested in the business

unlimited liability

owners can lose more than what they invested in the business

Types of Profit-Based Businesses

corporations, sole traders, partnerships

Sole Trader

a person who owns and runs their own business and has complete control over decisions

Advantages of Sole Tradership

easy to startup, owner keeps all profits, be your own boss, personalized services, financial privacy

Personalized Services

using close interactions with customers to make them customized products

Disadvantages of Sole Tradership

unlimited liability, limited sources of finance, high risks, high workload and stress, limited economies of scale, no continuity

Economies of Scale

the cost advantage resulting from producing in bulk. the average price per unit is lower the more resources a producer buys

Partnership

a business owned and controlled by two or more people who share responsibility and decision making power

Deed of Partnership

a legal contract that partners in a business must respect

Advantages of Partnership

greater access to finance, more efficiency and productivity due to specialization and division of labor, easy to set up (few legal formalities)

Disadvantages of Partnerships

unlimited liability, lack of continuity, prolonged decision-making, potential for disagreement

Corporation

a legal entity established for a specific purpose and registered according to legal and national legislation

Types of Companies

Privately Held Company (LTD) and Publicly Held Company (PLC)

Shareholders

people who own shares of a company

share

a certificate of partial ownership

Board of Directors

a group of shareholders elected to run a corporation on behalf of all shareholders

Annual General Meeting (AGM)

meeting for owners to vote on who runs their corporation

Advantages of Privately Held Companies

controlled by a small group, great access to finance, limited liability, financial privacy

Disadvantages of Privately Held Companies

profits shared with the few shareholders, longer decision making, can’t sell shares to raise money, can’t get criticism, expensive

Advantages of Publicly Held Companies

capital can be raised by selling shares, risks shared among shareholder, continuity, limited liability

Disadvantages of Publicly Held Companies

share profits with shareholders, high costs, loss of control because outsiders can get control by buying shares, accounts can be viewed publicly.

For-profit Social Enterprise

a revenue and profit making business that includes social and/or environmental impacts into its business model

Actions of Private Sector For-Profit Enterprise

produces products sold in market. are not run by the government

Public Sector For-Profit Enterprise

makes products typically provided by public sector

Cooperative For-Profit Enterprise

businesses run democratically or republically

Challenges in For-Profit Social Enterprises

funding, lower returns than a commercial enterprise, credibility, measuring impact, managing supply chains, keeping its purpose

Non-Profit Social Enterprise

Manufactures products to meet human needs, but reinvest any surplus profits back into the business by law

Non-Governmental Organization

A non profit social enterprise that works a beneficial purpose at a broad scale separate from the government