BUSINESS ORGANIZATION
AND ENVIRONMENT
1.1 INTRODUCTION TO BUSINESS MANAGEMENT
WHAT IS A BUSINESS?
• A business is a decision-making
organization involved in the process
of using inputs to produce goods
and/or to provide services.
GOODS & • Goods are physical products.
SERVICES • Services are intagible products.
ENTREPRENEUR
• Individual who plans, organizes and manages a business and its
operations, taking on financial risks in doing so.
• Entrepreneurship describes the trait of business leaders who
tend to be distinctive in their temperament, attitude and
outlook who drive the business to achieve its organizational
goals.
NATURE OF BUSINESS
• The nature or purpose of business
activity is to generate added value.
• This occurs when there is a positive
difference between the selling price
of a product and the cost of
producing the good or service.
THE ROLE OF A BUSINESS
• The role of a business is to combine
human, physical and financial
resources to create goods and
services in order to satisfy the
needs and wants of people,
organizations and governments.
• Needs are the basic necessities.
• Wants are people’s desires.
TYPES OF PRODUCTS
Consumer goods – products sold to the general public, rather
than to other businesses
Capital goods – physical products bought by businesses to
produce other goods and services.
Services – intangible products provided by businesses.
CUSTOMERS VS CONSUMERS
Customers – people or organizations that buy a product.
Consumers – people or organizations who actually use the
product.
THE MAIN FUNCTIONS OF BUSINESS
Human Finance and Marketing Operations
resources accounts management
HUMAN RESOURCES (HR)
• Responsible for managing the personnel of the organization.
• Workforce planning, recruitment, training, appraisal, dismissals
and redundancies, and outsourcing.
FINANCE AND
ACCOUNTS
• Responsible for managing the
organization’s money.
• Recording and reporting of financial
dfocumentation.
MARKETING
• Responsible for identifying and satisfying the needs and wants
of customers.
• 4P’s of marketing: product, place, price, promotion.
OPERATIONS MANAGEMENT
• Responsible for the process of
converting raw materials and
components into finished goods,
ready for sale and delivery to
customers.
• Primary sector
BUSINESS • Secondary sector
SECTORS • Tertiary sector
• Quaternary sector
PRIMARY SECTOR
• Involved with extraction, harvesting
and conversion of natural resources.
• Agriculture, mining, oil extraction.
• As economies develop, there is less
reliance on the primary sector.
SECONDARY SECTOR
• Manufacturing or construction of
products.
• Contruction firms, clothes
manufacturers, electronics.
• Economically developing countries tend
to have a dominant secondary sector.
TERTIARY SECTOR
• Provision of services to the general
population.
• Retailing, finance, insurance, healthcare.
• The most substantial sector in terms of
both employment and as a percentage of
GDP.
QUATERNARY
SECTOR
• Subcategory of the tertiary sector;
involved in intellectual, knowledge-
based activities that generate and
share information.
• ICT, R&D, consultancy services.
• Sector in which businesses invest
for further growth and evolution.
CHAIN OF
PRODUCTION
• Links four business sectors.
• Tracks the stages of an item’s
production, from the extraction of
raw materials to it being delivered
to the consumer.
• All sectors are interdependent.
FACTORS OF PRODUCTION
Land – natural resources
Labour – physical and mental efforts of people
Capital – non-natural resources; machinery
Entreprenurship – management and organization of
other factors
• Growth
• Earnings
REASONS FOR • Transference and inheritance
STARTING UP A • Challenge
BUSINESS • Autonomy
• Security
• Hobbies
STEPS IN THE PROCESS OF
STARTING UP A BUSINESS
1. Write a business plan.
2. Obtain start-up capital.
3. Obtain business registration.
4. Open a business bank account.
5. Marketing.
PROBLEMS THAT A NEW BUSINESS MAY FACE
• Lack of finance • Legalities
• Cash flow problems • Production problems
• Marketing problems • High production costs
• Unestablished customer base • Poor location
• People management problems • External influences
FACTORS TO CONSIDER WHEN SETTING UP A
BUSINESS
• Business idea • Suppliers
• Finance • Customers
• Human resources • Marketing
• Enterprise • Legal issues
• Fixed assets
BUSINESS PLAN
• Report detailing how a business sets
out to achieve its goals and
objectives.
• It helps financiers to make a more
objective judgement regarding the
firm’s likely success and its ability to
repay loans.
The business – name, address, start-up
costs, type of business organization,
goals and objectives.
ELEMENTS OF A
The product – details of products, BUSINESS PLAN
equipment that is needed, supporting
documents, details of the suppliers,
costs of production, pricing strategies.
The market – number of customers,
nature of the market, expected growth,
competitior analysis.
The finance – sources of finance,
financial reports.
ELEMENTS OF A The personnel – number of
BUSINESS PLAN employees, payment systems, job
roles.
The marketing – market research, test
marketing, promotional mix, unique
point.
REVIEW • What is a business?
QUESTIONS • Distinguish between goods and services.
• Distinguish between customers and consumers
• What are the four functional areas of a business?
• Describe the four business sectors of the economy.
• What is meant by the chain of production?
• What is meant by sectoral change?
• Differentiate between entrepreneurs and intrapreneurs.
• What are the main reasons for starting up a business?
• What are the problems that new businesses may face?
• What is a business plan? And its main elements.
