International Diploma in Business Administration: Fundamentals of Marketing and Management

International Diploma in Business Administration: Course Overview and Faculty

• Lecturer Profile: Piyumi Costa

  • Academic Qualifications: M.Sc. in Supply Chain & Logistics, B.Sc. Business Management (Hons).

  • Professional Certifications: CCHRM (Certificate in Certified Human Resource Management), FCHRM (Fellowship in Certified Human Resource Management), PCM (Professional Certificate in Marketing), Diploma in ICT, Diploma in English.

  • Professional Experience: Senior Lecturer, Former Employee of Qatar Airways, Advantis Freight, and Brandix.

• Diploma Modules:

  • Fundamentals of Marketing.

  • Fundamentals of Business Management.

  • Fundamentals of HRM (Human Resource Management).

  • Fundamentals of Business Finance.

  • Business Communication.

  • Business Statistics.

Module Learning Outcomes

• Develop an understanding of the various types of organizations and the environments in which they operate.

• Grasp the fundamental concepts of management.

• Recognize and understand the various functions of management.

• Assess organizational culture and its specific effects on business operations.

Fundamentals of Business Organizations

• Definition of an Organization: A social unit formed with a set of people to achieve a common goal.

• Definition of a Business Organization: Institutions engaged in producing and distributing goods and services with the primary intent of earning profits.

• Reasons for the Establishment of Different Types of Organizations:

  • The need for cooperativeness.

  • Changes in the needs of people.

  • Varying capital requirements across different ventures.

  • The need for social welfare.

  • The need for people possessing different skill sets.

  • Legal requirements mandated by law.

  • The ability to bear specific responsibilities.

  • The need for individuals to work independently.

Criteria for Classifying Business Organizations

Organizations are classified based on three primary criteria:

1. Ownership: Who owns the entity.

2. Objective: The primary goal of the entity (Profit vs. Not-for-Profit).

3. Scale: The size and scope of the entity.

Classification Based on Ownership

• Private Sector Business Organizations: Businesses owned by an individual or a group of individuals.

  • Sole Proprietorships.

  • Partnerships.

  • Incorporated Companies.

  • Co-operative Societies.

  • Other Associations.

• Public Sector Business Organizations: Businesses funded and owned by the government.

  • Businesses under Central Government, Provincial Councils, and Local Government Institutions.

  • State Departments.

  • State Corporations (Statutory Boards).

  • State Companies.

Classification Based on Objectives

• For-Profit Businesses:

  • Main Objective: To earn profits.

  • Operations: They operate under both the private and public sectors.

  • Private Examples: Sole Proprietorships, Partnerships, Incorporated Companies.

  • Public Examples: State Companies, State Corporations.

• Not-for-Profit Businesses:

  • Main Objective: To ensure the welfare of members and the general society.

  • Operations: They operate under both private and public sectors.

  • Private Examples: Co-operative Societies, Other Associations.

  • Public Examples: Government Departments.

Sole Proprietorship

• Definition: A business owned by a single individual.

• Key Attributes:

  • One person provides all the capital.

  • The owner bears all the risks of the business.

  • The business is relatively small in scale.

• Advantages:

  • Easily commenced.

  • Lower capital requirements.

  • Quick decision-making processes.

  • High degree of independence.

  • Profits are enjoyed solely by the individual owner.

  • Payment of income tax, accounting, and auditing is not compulsory.

  • No specific legal conditions for winding up the business.

  • Progress depends entirely on the owner's dedication.

• Disadvantages:

  • Lack of capital for expansion.

  • Individual decisions may be ineffective compared to group perspectives.

  • Unlimited Liability: The owner is personally responsible for all business debts.

  • No continuous existence; the business depends on the owner’s life.

  • The owner must bear all losses.

  • No separate legal personality from the owner.

  • Management becomes increasingly complex as the business expands.

Partnerships

• Definition: An association of two or more individuals who agree to operate a business together with a profit motive.

• Specific Characteristics:

  • Membership: Minimum of $2$ partners and a maximum of $20$ partners.

  • Agreement: There must be an agreement between partners (oral, written, or implied).

  • Profit Sharing: Agreement on how profits will be distributed.

  • Agency Relation: Every partner is an agent for the business and a head of himself and other partners.

  • Business Affair: The existence of some form of business activity.

• Partnership Agreement vs. Partnership Deed:

  • Partnership Agreement: The terms and conditions regarding initiation and succession. Can be oral, written, or implied.

  • Partnership Deed: A written partnership agreement containing all conditions of the partnership.

• Advantages:

  • Fewer legal conditions compared to companies.

  • Ability to collect more capital than a sole proprietorship.

  • Accounting and auditing are not compulsory.

  • Registration is not compulsory.

  • Effective decisions due to collective opinions.

  • Losses and risks are shared among partners.

  • Easy to start.

  • Individual income tax payment is not compulsory for the entity.

• Disadvantages:

  • No continuous existence.

  • No separate legal personality.

  • Unlimited Liability: Partners are personally liable for debts.

  • Potential for disputes among partners.

  • Winding up is somewhat difficult.

  • Ownership cannot be claimed individually.

  • Profits must be divided among all partners.

  • All partners are liable for the activities of any one partner.

Incorporated Companies

• Definition: A group of individuals incorporated under the Companies Act No. $07$ of $2007$. It is a separate legal entity distinct from its owners.

• Example: Aralia Company Ltd.

• General Characteristics:

  • Independent entity incorporated under the Companies Act.

  • Distinct legal entity from shareholders.

  • Continuous existence (perpetual succession).

  • Limited Liability: Shareholders' liability is restricted to their investment.

  • Capital accumulation occurs through share issues.

  • Ability to transfer shares.

• Private Limited Companies:

  • Cannot issue shares or securities to the public.

  • Shareholders: Minimum of $1$, maximum of $50$.

  • Directors: Minimum of $1$.

  • Profits distributed according to the desire of shareholders.

  • Examples: Central Depository (Private) Ltd, Lanka Clear (PVT) Ltd, Sri Lanka Electricity (Private) Co. Ltd.

• Public Limited Companies:

  • Authorized to issue shares and debentures to the public.

  • Shareholders: Minimum of $1$, maximum is unlimited.

  • Directors: Minimum of $2$.

  • Required to pass an insolvency test before distributing dividends to shareholders.

Detailed Public Sector Business Organizations

• Definition: Entities carried out and controlled by the state or local authority for the benefit of the general public.

• Reasons for State Involvement in Business:

  • Control pricing to prevent the private sector from gaining unreasonable profits.

  • Prevent the emergence of monopolies.

  • Engage in fields required for national defense.

  • Provide essential goods and services at reasonable prices.

  • Minimize wastage of natural resources through governmental planning.

  • Maintain large-scale projects that are not profitable enough for the private sector.

• Key Categories:

  1. State Corporations / Statutory Boards: Businesses fully or majority-owned by the government and controlled by a Board of Directors appointed by the government. Established under a general or special Act of Parliament (Commissions, Authorities, Boards, Bureaus).

  2. Government Departments: Directly and fully governed by the state under a specific ministry (e.g., to provide public services).

  3. State Companies: Companies incorporated under the Companies Act as public limited companies where more than $51\%$ of the total capital belongs to state organizations.

  4. Local Authority Businesses: Under Provincial Councils and local authorities.

Stakeholders in Business

• Definition: A person, group, or organization that has a direct or indirect interest in an organization because they can influence or be influenced by the organization’s actions, goals, and policies.

• Examples of Stakeholders:

  • Owners.

  • Managers.

  • Employees.

  • Customers.

  • Suppliers.

  • Creditors.

  • Competitors.

  • Government.

  • Society.

  • Potential Investors.

• Stakeholder vs. Shareholder:

  • Stakeholders: Have an interest in the business but do not necessarily own it. They may work for or transact with the business.

  • Shareholders: Own the business. They may also work in it and benefit directly from increases in the business's value.

Stakeholder Power and Mapping

• Stakeholder Power: Some stakeholders have more power/influence than others. Powers are held by the government, suppliers, customers, creditors, managers, society, owners, and employees.

• Stakeholder Mapping: The process of identifying, diagramming, and prioritizing stakeholders by analyzing their influence and interest.

• Mendelow’s Matrix (Power-Interest Matrix):

  1. High Power / High Interest (Key Players): These are decision-makers with the biggest impact. They must be managed closely, and their expectations must be prioritized.

  2. High Power / Low Interest (Keep Satisfied): Stakeholders who need to be kept in the loop and satisfied because they yield power, even if they aren't interested. They should be dealt with cautiously as they may use power negatively if unsatisfied.

  3. Low Power / High Interest (Keep Informed): Keep these people adequately informed and engage in dialogue to ensure no major issues arise. They can often be helpful with project details.

  4. Low Power / Low Interest (Monitor): Monitor these individuals but do not overwhelm them with communication.

• Managing Stakeholder Relationships (Steps):

  1. Understand the stakeholders.

  2. Prioritize stakeholders.

  3. Establish objectives for stakeholders.

  4. Align current strategy with stakeholder needs.

  5. Establish effective communications.

  6. Obtain feedback and evaluate.

The Business Environment

• Definition: The environment in which the factors that influence business operations exist.

• Categories:

  1. Internal Environment: Forces and conditions existing within the organization (Owners, Managers, Employees, Organization Structure, Organization Culture).

  2. External Environment: All forces outside the organization.

     • Immediate (Micro) Environment: Customers, Suppliers, Competitors, Producers of substitute products, Potential businessmen.

     • Macro Environment (PESTEL and more): Economic, Political, Legal, Demographic, Technological, Natural, Social/Cultural, and Global environments.

Introduction to Management

• Definition: A set of activities (Planning, Decision Making, Organizing, Leading, Controlling) directed at an organization’s resources (Human, Financial, Physical, Information) to achieve organizational goals efficiently and effectively.

• Efficiency: Using resources without waste and in a cost-effective way. Defined as "Doing things right."

• Effectiveness: How far the organization achieves its expected objectives with high quality within a certain period. Defined as "Doing right things."

• The Management Process Model:

  • Input: Men, Money, Machinery, Material, Methods.

  • Process (Functions): Planning, Organizing, Leading, Controlling.

  • Output: Achievement of goals and objectives.

• Four Functions of Management:

  1. Planning.

  2. Organizing.

  3. Leading.

  4. Controlling.