Business Management Unit 1

1.1 What is a Business?

Definition & Purpose

• A business provides goods and services to satisfy consumer needs and wants.

• Profit vs. Non-Profit: Some businesses aim for profit, while others (e.g., charities) focus on social goals.

Inputs & Outputs

• Inputs: Land, labor, capital, and enterprise.

• Outputs: Goods (tangible) and services (intangible).

• Value Added: Businesses create value by making products more desirable than raw materials.

Business Sectors

1. Primary – Extraction of natural resources (e.g., farming, fishing).

2. Secondary – Manufacturing and construction.

3. Tertiary – Services (e.g., retail, banking, healthcare).

4. Quaternary – Knowledge-based services (e.g., IT, R&D).

External Factors Affecting Businesses (STEEPLE Analysis)

• Social, Technological, Economic, Environmental, Political, Legal, Ethical factors impact business decisions.

1.2 Types of Business Entities

Private Sector vs. Public Sector

• Private Sector: Owned by individuals or shareholders.

• Public Sector: Government-controlled organizations.

Types of Business Ownership

1. Sole Trader – One person owns and runs the business.

2. Partnership – Two or more people share ownership.

3. Private Limited Company (Ltd) – Shares owned privately.

4. Public Limited Company (PLC) – Shares traded on stock exchanges.

5. Cooperatives – Owned and run by members.

6. Non-Profit Organizations – Focus on social causes, not profit.

7. Social Enterprises – Aim for social good while making profits.

1.3 Business Objectives

Common Business Objectives

• Profit Maximization – Aim to maximize revenue over costs.

• Growth – Expanding operations, market share, or sales.

• Survival – Especially crucial for startups and during crises.

• Market Share – Increasing percentage of total industry sales.

• Customer Satisfaction – Providing high-quality goods/services.

• Employee Well-being – Ensuring job satisfaction and fair treatment.

• Sustainability – Long-term environmental and financial viability.

SMART Objectives

• Specific

• Measurable

• Achievable

• Relevant

• Time-bound

1.4 Stakeholders

Internal Stakeholders (Inside the business)

1. Owners/Shareholders – Expect profit and business growth.

2. Managers – Want business success and job security.

3. Employees – Expect fair wages and good working conditions.

External Stakeholders (Outside the business)

1. Customers – Expect quality, fair prices, and good service.

2. Suppliers – Depend on the business for contracts.

3. Government – Regulates business activities.

4. Competitors – Compete for market dominance.

5. Local Community – Affected by business activities.

6. Pressure Groups – Advocate for social/environmental issues.

Stakeholder Conflict

• Different stakeholders have conflicting interests (e.g., employees want higher wages, but owners want lower costs).

1.5 Growth & Evolution

Types of Growth

1. Internal (Organic) Growth – Expanding from within (e.g., opening new stores).

2. External (Inorganic) Growth – Mergers, acquisitions, or joint ventures.

Economies of Scale (Cost savings as a business grows)

• Types: Technical, managerial, financial, marketing, risk-bearing.

Diseconomies of Scale (Rising costs due to overgrowth)

• Issues like communication problems, demotivation, and bureaucracy.

Small vs. Large Businesses

• Small: More flexibility, lower costs, personal customer service.

• Large: Financial stability, brand recognition, innovation potential.

1.6 Multinational Companies (MNCs)

Why Businesses Become Multinational

• Market Expansion – Reach more customers.

• Lower Costs – Benefit from cheap labor and raw materials.

• Tax Benefits – Some countries offer low corporate tax rates.

Impacts of MNCs

✅ Positive: Job creation, technology transfer, economic growth. ❌ Negative: Exploitation of workers, environmental damage, profit repatriation.

Globalization & MNCs

• Easier trade, higher competition, corporate social responsibility (CSR) pressures.

1.7 Organizational Planning Tools

Key Business Planning Tools

1. SWOT Analysis – Strengths, Weaknesses, Opportunities, Threats.

2. STEEPLE Analysis – Social, Technological, Economic, Environmental, Political, Legal, Ethical factors.

3. Decision Trees – Visual tool for evaluating different decision-making paths.

4. Force Field Analysis – Identifies driving vs. restraining forces for change.

5. Gantt Charts – Used for project planning and scheduling.

2.1 Introduction to Human Resource Management (HRM)

Definition & Role of HRM

• HRM manages an organization's workforce to maximize productivity and employee satisfaction.

• Key responsibilities include recruitment, training, performance management, and labor relations.

Workforce Planning

• Analyzing future staffing needs based on business objectives.

• Steps:

  1. Assess current workforce.

  2. Forecast future needs.

  3. Identify gaps.

  4. Develop action plans (hiring, training, restructuring).

The HR Cycle (Employee Life Cycle)

1. Recruitment – Hiring employees.

2. Onboarding – Introducing new hires to the company.

3. Training & Development – Improving skills and career growth.

4. Performance Management – Evaluating employee effectiveness.

5. Retention – Keeping talented employees engaged.

6. Separation – Managing retirements, resignations, layoffs.