1.1 Introduction to Business Management

Role of Business

Input Process Output

Business

Businesses exist to satisfy the needs and wants of people, organizations and governments

Market Customers

Market place

Adding Value

Adding value is increasing price of the products by improving packaging or adding features

It leads to profit making by allowing a business to sell its products for more than its production costs

Opportunity Cost

This next best alternative foregone while making a choice is known as Opportunity Cost

Because of the fact that choice involves opportunity cost, the factors of production have to be used in the most efficient way and therefore SPECIALIZATION

Division of labor

The separation of a work process into a number of tasks, with each task performed by a separate person or group of persons.

Business Functions

Human Resources (Personnel)

Marketing Finance Production

(Operations)

Human Resources

Manpower Planning Job analysis and Job

description Determining wages and

salaries Recruitment and Selection

Training and Development Employee welfare and

motivation Labour management

relations Performance Appraisal

Marketing

Conducting Market Research

Price Planning Customer Relationship

Management Identifying New Business

Opportunities

Product Planning Distribution Planning Consumer Analysis

Finance

Advice on the financial and tax implications of business decisions

Management of wages Raising Finance Preparation and monitoring of annual budgets and

forecasts

Production

Production and planning Purchasing department Stores department Manufacture of products Design and technical support department

Business sectors

Primary Tertiary

Secondary Quaternary

Primary sector

Larger sector in underdeveloped & developing countries

Less capital investment Less use of machinery Agriculture constitutes the major part

Secondary sector

Takes the output of the primary sector and manufactures finished goods

Important sector to promote economic growth and development

Important source of income in developing countries

Tertiary sector

Significant contribution to GDP in developed countries

Provides key inputs to most other business Transformation of goods through providing

services

Quaternary Sector

The portion of an economy that is based on knowledge applicable to some business activity that usually involves the provision of services

Examples: Consultancy (offering advice to businesses) and R&D (research, particularly in scientific fields)

Sectoral change

Refers to a shift in the GDP contribution from primary sector to secondary and tertiary sector

Reasons for sectoral change

Cultural Changes Development of Markets Market orientation Rampant migration Focus on customer relationship management

Benefits of sectoral change

Creation of more jobs Gradual movement towards Tertiary sector High capital investment towards Government Increase in country’s GDP Decrease in imports & increase in exports

Role of Entrepreneurship

Bringing together the factors of production Contributes towards growth of

economy Reduces unemployment

Intrapreneurship

Giving opportunity to a person within a large corporation to take direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation 

Start-up cost of business

Premises Buildings Capital equipment Marketing costs Legal and professional fees

Factors to consider when setting up business:

Business idea Finance Human resources Entrepreneurial skills Fixed assets Suppliers Customers Marketing Legalities

Reasons for starting business

Growth Earnings Autonomy Security Hobbies

Challenges of start-up business

Obtaining Finance Market potential Cash flow problems Customer Loyalty towards other brands Regulations Finding the right staff Uncertainty

Elements of Business Plan