Principles of Business - Exam Notes

  • The development of Barter and the Role of Money

    • Barter involves exchanging goods/services w/o money.
    • Money usage reduced the need for barter.
    • Money: anything widely accepted for goods, including shells, paper, cards, and electronic payment.

  • Advantages of Barter

    • Access to goods, specialization,trade of surpluses

  • Disadvantages of Barter

    • Requires finding someone willing to barter and difficult to measure the value of items
    • Difficult to save or transport bartered goods

  • Instruments of Exchange

    • Methods of Payments: more sophisticated now.
    • Payments using money/coins instead of bartering in most cases.
    • Methods: Cheques, Bills of Exchange, Cards and mobile wallets are widely used.

  • Instruments of Exchange listed :

    • Barter, Bills of exchange, electronic transfer, tele-banking, e-commerce, cheques, money order, debit cards, credit cards, bank draft, telegraphic money transfer, bank transfers, M-money.

  • Private and Public Sectors

    • Private sector: Owned by individuals/groups, profit-driven
    • Public sector: Government-owned, benefits the community

  • Private Sector

    • Consists of businesses owned by private individuals or shareholders.
    • Examples: companies, partnerships, sole traders

  • Public Sector

    • Run by the government or government-owned companies (public corporations)
    • Examples: Public works, health service, police, Electricity Commission

  • Differences between Private and Public sectors

    • Ownership aims: Private individuals focuses is to make a profit unlike the Public sector whose focus is community wellbeing.

  • Business organizations and arrangements

    • Sole Trader, Partnerships, Co-operatives, Companies, Franchises

  • Sole Trader

    • One-person business, easy to form, owner has complete control, enjoys all profit.
    • Disadvantages: unlimited liability, difficult to raise finance.

  • Partnerships

    • Between 2-20 people, increased capital, shared responsibilities, but also shared liability and decision-making.

  • Co-operatives

    • Shared objectives/profits, members work for themselves, shared decisions.
    • May lack managerial/technical experience.

  • Companies (private limited and public limited)

    • Limited liability, companies attract large sums of money.
    • Shares are not easily transferred without director consent; decision-making can be slow.

  • Franchises

    • Set up through agreement, franchisee runs the business with franchisor support.
    • Restrictions usually placed on how the franchisee can run the business.

  • Economic Systems and the Functional Areas of a Business

  • Three types of economic systems:

    • Command/Planned/Socialist Economies, Mixed Economies, Free Market/Capitalist Economies

  • Functional areas:

    • Production, Marketing, Finance, Human Resources, Research and development.

  • The development of barter and the role of money

  • **Role and Functions of Stockholders in Business Activities:
    **

  • Stakeholder

  • Individual or group impacted by business decisions

  • Internal & External

  • Owners, Employees, Consumers, Suppliers, Communities, Environment, Future generations and Government

  • Ethical and Legal Issues

  • Business ethics are morals associated with doing the right thing in a business context.
    Companies must abide by laws on the national and international scenes.

  • Ethical behavior often involves more than what is legally required.

  • Unethical and Illegal Practices

M-isleading advertising, Withholding of tax, Unethical disposal of waste, Money laundering

  • Careers in the Field of Business

Advertising, Compliance officers, Strategic Planners, Educators, Web Designers.

  • Internal Organisational Environment

Managers should have a balanced way of handling situations carefully functions:-

planning, organising, directing, controlling, coordinating, delegating and motivating.

  • Construct simple organisational charts

  • Line organizational and functional charts

  • Characteristics of leadership styles
    Honesty, Flexibility, Focus, Trustworthiness, Ability to make intelligent decisions.
    Autocratic, Democratic, Laissez-faire, Charismatic, Transformational

  • Conflict within an organisation
    Consequences of workplace conflict, Employer and employeestrategies resolve.

  • Strategies used by employer and employees to gain an upper hand
    Employers may use lock out stratagies and employees may result to stick or go slow strategy
    Ways to establish good communication

  • Effective business strategies: -Establishing good communication with workers., Improving working conditions Motivating workers, Practicing good leadership

-Motivating Employees Strategies Financial methods, Non-financial methods

The role of teamwork in an organisation, improves morale and quick decision making helps with employee motivation

The functions and characteristics of a typical entrepreneur

Key function- conceptualizing, planning, accessing funds, evaluating business performance
Characteristics—Goal oriented, creative, innovative and flexible.

Economical systems and functional areas of a business

Entrepreneur and decision making Reasons to stablish business, financial independence Self-fulfillment, increased income ,increased control

Setting up a business and preparing a business plan

downline the essential steps that should be taken any steps for establishing a business, identification of resources and creation of business plans

Elements of a business plan in research into the establishment of a business, executive summary, operational plan the business opportunity marketing plan Financial forecast.