Unit 1.1 What is a business?

Topic 1: Introduction to Business Management

Unit content

The nature of business

What is a business?

1. Discuss this question with each other.
2. Write your answer onto a sticky note and stick it on the wall of your classroom.
3. Take a few minutes to look at each other’s answers.
1. What do your answers have in common?
2. What are some of the differences in your answers?

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Businesses as decision-making organizations

• A business is a decision-making organization involved in the process of using inputs to produce goods and/or services.

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• Capital
• Enterprise
• Land
• Labour

• Human resources
• Finance
• Marketing
• Operations management

• Goods
• Services

Over to you

What are some of the inputs, processes and outputs of a bakery business?

Functional areas of a business

• For a business organization to operate effectively, tasks must be carried out by functional areas (i.e. departments).
• These departments are interdependent (i.e. they must work together to reach the organization’s goals).

Human resources

• Manages the personnel of the organization.
• Personnel issues include:
• Workforce planning
• Recruitment
• Training
• Appraisals
• Dismissals
• Redundancies
• Outsourcing HR strategies

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Finance and accounts

• Manages the organization’s money.
• Accurate recording and reporting of financial documents must take place to:
• Comply with legal requirements (e.g., taxation laws)
• Inform stakeholders such as shareholders and potential investors.

Marketing

• Responsible for identifying and meeting the needs and wants of customers.
• Key functions focus on the seven Ps of marketing:
1. Product
2. Price
3. Place
4. Promotion
5. People
6. Processes
7. Physical evidence

Operations management

• Responsible for the process of converting raw materials and components into finished goods.
• Operations management also applies to the process of providing services to customers.

Over to you

• Hoang textbook
• Question 1.1 The business of education
• Page 13
• Answer all parts

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Question 1.1 - The business of education

Education is big business. Schools can earn revenue from numerous sources, such as tuition fees (for fee-paying schools), grants from the government and fund-raising events. They might also lease out their facilities (such as classrooms, sports facilities, drama studios and swimming pools) during the evenings, weekends and school holidays. Schools use these revenues to finance their costs, such as staff salaries, utility bills and the maintenance of the buildings. In addition to school fees, parents might also have to pay for items such as school uniforms, textbooks, stationery, sports equipment and food.

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(a) Distinguish between revenue and costs. (4 marks)

(b) Examine how business functions operate in an organization such as a school. (6 marks)

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Primary, secondary, tertiary and quaternary sectors

Business sectors

• Businesses can be classified according to the stage of production they are engaged in.
• These are known as sectors of an economy.

Primary sector

Businesses in this sector are involved in the extraction, harvesting and conversion of natural resources.

State three examples of businesses from the primary sector.

Secondary sector

Businesses in this sector are involved in the manufacturing or construction of products.

State three examples of businesses from the secondary sector.

Tertiary sector

Businesses in this sector specialize in providing services to the general population.

State three examples of businesses from the tertiary sector.

�Quaternary sector

Businesses in this sector are involved in intellectual, knowledge-based activities that generate and share information.

State three examples of businesses from the quaternary sector.

The chain of production

• The chain of production links all the production sectors by tracking the stages of an item’s production from the extraction of raw materials all the way through to it being delivered the consumer.
• As the item makes its way through the chain of production, value is added to the item.

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Value is added to item as it moves through each sector

The chain of production from cocoa beans to chocolate

Cocoa beans have value added to it as it is increasingly processed in the chain of production

Milk chocolate made from scratch

Over to you

• Hoang textbook
• Question 1.2 Production sectors
• Page 16
• Answer all parts

Question 1. 2 - Production Sectors

Study the data below and answer the questions that follow. A, B and C represent three countries: France, Bangladesh and the Philippines (although not necessarily in that order). Structure of employment (%)

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(a) Identify the countries A, B and C. [3 marks]

(b) With reference to the data above, explain your answer to Question 1.2 (a). [6 marks]

https://en.wikipedia.org/wiki/List_of_countries_by_sector_composition_of_the_labor_force

Entrepreneurship

Guess the entrepreneur

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Guess the entrepreneur (continued)

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Entrepreneurs

• An entrepreneur is an individual who plans, organizes and manages a business, taking on financial risks in doing so.
• Characteristics of entrepreneurs include:
• Taking substantial risks
• Having a vision for the business.
• Rewarded with profit.
• Responsibility for employees.
• Failure may result in personal costs.

Challenges and opportunities for starting a business

Commonly encountered challenges for new businesses

Opportunities for starting up a business

• There are many potential opportunities for starting a business. They can be easily remembered by the mnemonic GET CASH©.

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Growth

• Capital growth is one of the rewards to entrepreneurs who own their own businesses.
• This is when there is an appreciation in the value of the assets of the business (e.g. land and buildings).
• Capital growth has the potential to become worth more than the value of the owners’ salaries.

Earnings

• Entrepreneurs can earn far in excess of salaries from any other occupation that they might pursue working for someone else.

Transference and inheritance

• In many societies, it is the cultural norm for entrepreneurs to pass on their businesses (transference) to the next generation of children (inheritance) to secure the future of the younger generation.

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Challenge

• Some people view the setting up and running of a business to be an enjoyable challenge.

Autonomy

• There is autonomy (independence, freedom of choice and flexibility) in how a business is run by the self-employed.
• This is highly attractive to individuals who prefer to decide how they work instead of following the instructions and rules set by their employers.

Security

• Being self-employed can offer more job security than working for an employer.
• It is potentially easier to increase personal wealth for financial security in retirement.

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Hobbies

• Some people want to pursue their passion or turn their hobby into a business.

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Entrepreneurship in action at Gymshark

Ben Francis, founder of Gymshark, talks about how he started his sports apparel business.

Watch this video and identify as many:

1. Challenges encountered by Gymshark as a new business.
2. Opportunities enjoyed during the growth of Gymshark.

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Theory of knowledge

Look at the reasons for starting up a business. How do reason and emotion interact to affect the decision-making process?

Concepts in Business Management

• Concept-based learning is a three-dimensional model that structures:
• Facts (content)
• Skills
• Concepts
• In Business Management, these concepts are:
• Change
• Creativity
• Ethics
• Sustainability
• These concepts will be explored in greater depth in all topics.

BMT: �Business planning for a cleaning business

Scan the QR code to read an example of a business plan for a cleaning business.

• Identify a section of the business that will help a new cleaning business overcome the challenges of being a new business start-up.

Business Management Toolkit

Over to you

• Hoang textbook
• Review Questions
• Page 20

Review Questions

1. What is a business?

2. How do goods and services differ from each other?

3. How do needs and wants of consumers differ from each other?

4. How do customers and consumers differ from each other?

5. What are the four functional areas of a business?

6. What are the four business sectors of the economy?

7. How does a business add value to its goods and services?

8. What is meant by the chain of production?

9. What are the main challenges for business start-ups?

10. What are the main opportunities for business start-ups?