Chapter 1- Business Environments – part1

Public vs. Private Sector

• Public Sector: government-owned, funds via taxes; provides collective goods (infrastructure, e.g., hospitals, schools, police)

• Private Sector: created by entrepreneurs; goal is profit while meeting customer needs; funding from own/borrowed capital; success depends on competitive advantage (quality, price)

Formal vs. Informal Private Sector

• Formal Sector: registered, pays tax, contributes to GDP; fixed premises

• Informal Sector: unregistered, no tax; mobile or home-based; contributes indirectly (buys inputs from formal sector, may transition to formal, alleviates poverty)

Economic Sectors of Activity

• Primary: extraction/harvesting (farming, mining); labour-intensive, low skill

• Secondary: manufacturing/construction; converts raw materials into goods

• Tertiary: distribution & sale of goods/services (retail, entertainment)

• Quaternary: intellectual, knowledge & research (science, education, consulting)

• Quinary: highest-level decision making (government, top management, cultural/media)

Concept of a Business

• Value-adding processes supplying goods/services for profit

• Creates employment & raises living standards

• Operates in any of the five economic sectors

• Must balance economic, social & environmental sustainability

Characteristics of a Successful Business

• Strong leadership & clear vision/mission

• Sustainable competitive advantage meaningful to target market

• Effective use of four factors of production (natural, financial, human, entrepreneurship)

• Responsible corporate citizenship: fair profits, skills development, community upliftment, tax payment

Key Business Objectives

• Survival

• Monitor external threats/opportunities

• Long-term vision → mission → aligned goals

• Feasibility of decisions & sustainable use of resources

• Profitability & Growth

• Aim: sustainable profit & ROI

• Increase sales, cut costs, expand assets, upskill employees

• Productivity & Efficiency

• Maximum output with minimum input

• Deliver right product, time, price, place; minimise waste

• Competitive Advantage

• Build on: quality, price, technology, service, resource use, location

• Employee Development & Relationships

• Attract, develop, retain key staff; ensure managerial support

• Encourage tolerance, constructive communication, time management

• Technological Development

• Use tech to differentiate & reach customers quickly (e.g., online platforms)

• Social Responsibility

• Ethical, accountable conduct beyond profit

• Address skills gaps, poverty, health issues (HIV/AIDS, TB, malaria)

• Invest in employees & communities, complementing government efforts