Peter BS notes_merged (1)

Understanding Business Activity

• Business activity aims to satisfy consumer needs and wants.
• Key concepts: needs, wants, scarcity, opportunity cost.
• Economic problem: unlimited wants vs. limited resources, leading to scarcity.
• Factors of Production: land, labor, capital, enterprise.
• Scarcity leads to choices and opportunity cost.
• Opportunity Cost: the next best alternative forgone.

Specialization

• Focus on what people/businesses do best, minimizing waste.
• Benefits: efficiency, reduced costs, higher quality, larger supply, lower prices.
• Division of Labor: separates production into individual tasks.
• Without business activity, no products or services exist.
• Types of goods/services: consumer goods (durable/non-durable), consumer services, capital goods.

Added Value

• The difference between selling price and raw material costs.
• Enhancing value: branding, service quality, product features, convenience, cost reduction.

Business Classification

• Primary Sector: Extracts raw materials (e.g., farming, mining).
• Secondary Sector: manufactures goods (e.g., refining, construction).
• Tertiary Sector: provides services (e.g., shops, banks).
• Chain of Production connects primary, secondary, and tertiary sectors.
• Industrialization: growing secondary sector, decreasing primary sector.
• De-industrialization: growing tertiary sector, decreasing secondary sector.
• Changing customer behavior: higher incomes, better education, more leisure time.
• Change in Business Behaviour : Need for finance to fund expansion, communicate quickly and cheaply, and provide better services.

Private vs. Public Sector

• Mixed Economy: both sectors own/control resources.
• Private Sector: owned/controlled by individuals/companies for profit (e.g., sole traders, partnerships, companies).
• Public Sector: controlled by the government (e.g., government departments, public corporations).
• Production decisions differ: private sector driven by consumer choice/profit, public sector by public need/quality.

Enterprise and Entrepreneurship

• Entrepreneurs take financial risks to start/manage a business.
• Characteristics: innovative, self-motivated, confident, multi-skilled, leaders, risk-takers, good at networking.
• Business Plan: detailed document used to persuade lenders/investors.
• Business Plan Contents: business details, opportunity, market analysis, objectives, financial forecasts.
• Business Plan Assistance: attracts finance, provides direction, sets targets.

Government Support for Start-ups

• Why: job creation, variety of products, increased competition, specialist goods, potential growth, lower costs.
• How: grants, low-interest loans, tax breaks, rent-free premises, training, advice.

Measuring Business Size

• Methods: capital employed, value of output, number of employees, market share.
• Problems: Varying capital needs per industry, skewed output values.

Business Growth

• Owners expand for profits, market share, economies of scale, market control, takeover protection.
• Internal Growth: increasing output, new products/markets, growing customer base.
• External Growth: mergers or takeovers (integration).
• Horizontal Integration: same industry, same sector.
• Vertical Integration: same industry, different sector (forward/backward).
• Conglomerate Integration: different industries.
• Business Growth Problems: slow internal growth, job losses, diseconomies of scale, management conflicts, loss of control.
• Business Growth Solutions: careful planning, resource allocation, worker awareness.

Small Businesses

• Remain small due to owner's choice, market size, limited capital, market domination by large firms.

Business Failure

• Causes: Poor planning, cash management, location, management, failure to invest in new technologies.
• Poor Marketing: Inadequate market research, size of potential market, level of competition, and finding out what consumers want.
• Also caused by lack of finance, competition, economic influences (unemployment, interest rates, taxation).

Types of Business Organizations

• Sole Trader: owned/controlled by one person, unlimited liability. Easy to set up, but difficult to raise funds.
• Partnerships: owned by two or more, shared responsibility, unlimited liability. More access to finance but shared decision-making.
• Unincorporated Business: no separate legal identity, unlimited liability.
• Limited Companies (Private/Public): owned by shareholders, limited liability. Requires legal documents.
  *Private Limited: name ends with LTD, shares sold to friends and family, small no. of shareholders, sell shares privately.
  *Public Limited: name ends with PLC, shares sold to general public, Large no. of shareholders, sell shares to general public and other organizations.
• Franchise: buys right to use name/system. Less risk, but expensive and strict controls.
• Joint Venture: businesses work together on a project. Reduced risk, but potential conflicts.
• Choosing Type of Business depends on number of owners, owner's role, risk attitude, operation speed, potential size.
• Public Sector: state-owned, social objectives, often free services (e.g., Air India, ONGC, LIC).

Business Objectives

• Objectives give purpose/direction, vital for long-term growth.
• SMART Objectives: Specific, Measurable, Achievable, Realistic, Time-specific.
• Different Objectives: survival, growth, market share, corporate social responsibility.
• Social Enterprises: reinvest profits for social benefit.

Stakeholders

• Stakeholder: individual/group with an interest in a business.
• Internal Stakeholders: owners/shareholders, managers, employees.
• External Stakeholders: lenders, suppliers, customers, government, local community.
• Stakeholder Objectives: Owners seek high returns; managers want job satisfaction; employees seek job security; lenders want repayment; communities want local benefits.
• Stakeholder Difference in the aims and objectives Private Sector Businesses focus on profits and Public Sector Businesses focus on community help.

Motivating Workers

• Motivation: factors influencing worker behavior toward goals.
• Benefits of Well-motivated Workforce:More competitive, productivity, absenteeism, low rate of labour turnover, and better quality goods.
  Labour Productivity: output No. of worker
  Absenteeism: Worker’s non-attendance at work without a good reason.
  Labour Turnover: The rate at which workers leave the business.
• Maslow’s Hierarchy: physiological, security, social, esteem, self-actualization needs.
  Some levels are not present in some jobs.
  Some rewards belong to more than one level.
  Managers need to identify the levels of motivation in any job before using it to motivate employees.
• Theory X (Taylor): money is the main motivator. (Relate to Piece Rate method of payment to workers)
  Money is the main motivator.
  If employees are paid more, they work more.
  Work is broken down into simple processes, and more money is paid which will increase the level of productivity an employee will achieve.
  The extra pay is less than the increased productivity.
  Workers are seen rather like machines, and this theory does not take into account nonfinancial motivators.
  Even if you pay more, there is no guarantee of a productivity rise.
  It is difficult to measure an employees output.
• Herzberg’s Two-Factor Theory: hygiene factors (working conditions, relationships, supervision, policy) and motivators (responsibility, advancement, achievement, recognition).
  Hygiene Factors: The factors that must be present in the workplace to prevent job dissatisfaction.
  Working Conditions: Includes things such as how clean and safe a workplace is.
  Availability of facilities: washrooms, canteens, drink machines.
  Relationship with others: Worker having good relationship with other workers need of friendship good relationship with managers treated fairly with respect.
  Supervision: Factor considers the importance of the leadership style and how closely workers are supervised in a good way.
  Company Policy and Administration: Rules and procedures which affect the way the workers work. Rules that are worker friendly.
  Motivators: The factors that influence a person to increase their efforts.
  Responsibility: Giving workers more responsibility, shows the how managers trust their employees and value their contribution.
  Advancement: Workers have opportunity for promotion and move up the ladder in terms of position.
  Achievement: Workers need to feel they have reached challenging goals
  Recognition of Achievement: Workers motivated by their achievements recognised by management and other people whose they work with e.g. employee of the year/month awards.
  True motivators are Herzberg's motivational factors.
  Job Dissatisfaction: How unhappy and discontent a person is with the job.

Methods of Motivation

• Financial Rewards: hourly wage, salary, piece rate, commission, bonus, performance-related pay, fringe benefits, profit sharing (non-cash ex.Children's education).
• Non-financial Rewards: job rotation, enlargement, enrichment, satisfaction, redesign, quality circles, team-working, delegation.
  Cost to business can be costly or helpful.
  Types of Workers is only certain things that can affect certain types of workers.
  The same method of motivation would not work for all, some workers may be attracted by higher pay.

Organization and Management

• Organizational Structure: framework showing management/responsibilities.
  *Functional Departments: The main activities of a business: finance, marketing, operations, human resources, and research & development.
• Hierarchy: Tall vs. Flat, Levels in organizational structure. Hierarchy, Higher number of levels longer chain of command narrow span of control: Flat Lower number of levels, shorter chain of command wider span of control.
• Chain of Command: Instructions are passed down the chain of command Information and performance are passed up the chain of command.
• Span of Control: subordinates reporting to a supervisor. Difficult of task, The experience and skills of workers, Size of business,
  Levels of Hierarchy, Management Style
  Wider Span of Control Advantages Less expensive as fewer managers are needed Less supervision improves worker motivation
  Narrow Span of Control Disadvantages More supervision may reduce worker motivation
• Delayering: Removing management layers. reduces costs, quick decision making increases opportunity of delegation. costs with managers who lose jobs. Senior managers are more closer in touch with what is happening in business, Reduces chain of command, so communication and decision making is quicker and more effective.
  Centralization one where an organization is important decision making that takes a position in Head office.
  Decentralization decision making powers are passed down the organization to lower levels.
  Decision making is often quicker and based on local needs.
  Roles -Directors: 1. Setting Strategy (long term plans), 2. Making sure resources are available to achieve objectives, Manager, 3. reviewing performance of managers, supervisors, Chief Executive Officer (CEO), and any other worker.
• Delegation advantages and disadvantages to a supervisor. If delegation occurs then work becomes more interesting and rewarding increasing job satisfaction for the employee and if it doesn't advantages are they can do what they could do when they cant complete do all work by themselves and measure the efficiency and effectiveness of their subordinates work.
• H.R. (Human Resource) department is involved in recruitment and selection, Wages and salaries, Industrial relations, Training programs, Health and safety, Redundancy and dismissal.
• There are mainly three styles you need to learn Autocratic the managers expect to be in charge of the business and have their orders followed: Democratic style is where managers involve employees in the decision-making: laissez- faire style (French phrase for ‘leave to do’ ) makes the broad objectives of the business known to employees and leaves them to do their own decision-making.
  The Skills and Experience of Workforce: Time available to take a decision, Personality of Manager and Task to be completed should be taken into consideration to properly manage the workers.
• Trade Unions:
  Negotiating pay and working conditions with employers (collective bargaining)
  Resolving Conflicts
  Providing legal support and advice
  Providing services for members: pension schemes, insurance schemes, holiday schemes etc.
  strength in number- a sense of belonging and unity
  improved conditions of employment, for example, better pay, holidays, hours of work etc
  improved working conditions, foe example, health and safety
  improved benefits for workers who are not working, because they’re sick, retired or made redundant (dismissed not because of any fault of their own)
  financial support if a member thinks he/she has been unfairly dismissed or treated
  benefits that have been negotiated for union member such as discounts on firm’s products, provision of health services
  CIE IGCSE (0450)

Internal and External Recruitment

• Internal recruitment: Filling a vacant post with someone already employed in the business.
  *The strengths of using this include the worker can fill this vacancy quickly, Applicants already know how business works, workers can also become more motivated knowing chance of promotion, applicant also knows weaknesses. Limitations is having a candidate from outside business isn't always the best option and more, businesss may cause conflict with the other candidates that apply, the business can still fill a previous workers job and unless workers job has become redundant . External Recruitment: Filling a vacant post with somebody not already employed in business. Benefits Limitations External applicants bring in new ideas which improve effectiveness and efficiency of business Wider choice of applicants
  It takes longer to fill the vacancy because recruits will need induction training increasing expenses. It is more expensive mainly coming from advertising costs.
  Job Analysis, Job Description, Person Specification, Advertising a Job, sending the details to the workers, shorting applying through, Interviews, Select the candidate. BENEFITS AND LIMITATIONS OF PART-TIME AND FULL TIME WORKERSBenefits of Part time workers/Limitations of Full time workers: Attract well-qualified workers, providing higher flexibility than workers, giving bigger work forces that share bigger skills.BENEFITS AND LIMITATIONS OF FULL TIME WORKERS Increase in induction and training costs for PT workers, while FT workers only trained once, could be communication problems with PT workers, decreasing the quality of after sells.

The Importance of Training

*Trained production workers are more efficient (improved productivity and quality)
*Management training improves quality of decision making, reduces risk of costly mistakes.
*Helps workers develop their abilities to reach their potential; improves motivation and morale.
*Easier to recruit new workers and keep existing workers
Improves customer service; improves customer relationships and brand loyalty.
Health and safety training helps reduce accidents
*Improves business’s competitiveness
*Induction Training, On-the-job,Off-the-job.
Benefits helps workers feel like they are apart of of the business but the costs do increase. Workers can perform more effectively also but during that induction period the workers aren't adding output, but still get salary.
To avoid the workers picking up mad habit, you need to make sure the workers know how it runs to do the most up-to-date and new things, other wise will be very ineffective . Workers might make more mistakes with that leading to increases waste as well.

Reducing the Size

*Resignation: Termination of employment by the worker, perhaps because they have found a job with a different employer. Retirement: Termination of employment due to the worker reaching an age beyond which they do not need to work. Redundancy: Termination of the employment by the employer, because the job isn't necessarily needed. Incompetence: Worker doesn’t perform their task to required standard. Poor Conduct: Worker breaks rules, Ex. often late for work.Last in-First out Method, Workers who have been employed for least amount of time are made redundant first. How productive workers are, If the workers have not been performing well this will influence the decisions and more things.
Contract of Employment: Legal binding agreement between employer and employee. Worker can take legal action, if employer doesn’t follow contract, Employer can dismiss worker if he breaks rules of agreement.Unfair Dismissal: Workers are dismissed by employer without any good reason Worker and take legal action.There laws that must be controlled from discriminating while they are recruiting the workers. laws for them for health and safety must be met that protects them with getting injured or physical discomfort, Legal Minimum wage that prevents them by making you pay less then what is per hour.

Internal and External Communication

• Communication media: The methods used to communicate a message
  Internal Communication with people and organizations outside the business Effective that brings better communication and relationship
  Communication that is passed with two or more people or groups that are being shared back and forth bring good benefits for better performance, faster making decisions and etc.
  Advantages would include personal contact, Allows immediate feedback, Can change needs to receiver, expression benefits.
  Written provides are more permanent and record and cant get looked at more then one. It's more expensive
  Electronic Provides permanent faster records and can be sent very fast and the equipment can more quick and more often.
  Easy to create interning messages than easy and cheap with having no contact and not having permission.
  visual makes it easy to understand.Creates interests and grabs attention. and some can be lost some might interpret wrong.
  How urgent the message is How many people need to receive a message How far away the receiver s from the sender., message requires discussion