Business Management 1 - Chapter 1

Question 1

Briefly explain the importance of studying business management

Answer 1

The moment any person is employed, buys a product or make use of a service they are involved in economic life, a better knowledge and understanding of what a business is and how it functions increases understanding and appreciation. The subject of business management encompasses all activities that are related to the management of all types of organisations. A thorough understanding of business and its workings is essential to every business manager.

Question 2

List the four functional areas of business management

Answer 2

• Production and operations management
• Marketing Management
• Financial management
• Human resources management

Question 3

Briefly explain “Wants”

Answer 3

A “want” is a vague feeling that something is absent or unavailable and that something cannot always be clearly defined.

Question 4

Briefly explain “Needs”

Answer 4

A “need” is the psychological feature that awakens an organism to action towards achieving a desired goal, forming the reason for the particular action and giving purpose and direction to behavior.

Question 5

Briefly explain the economic principle

Answer 5

The economic principle form the fundamental basis of economic activity and productivity issue and focuses on the concept of getting the highest possible outputs with minimum possible inputs.

Question 6

List the four production factors

Answer 6

• Land
• Capital
• Labour
• Entrepreneurship

Question 7

What does “Land” as a production factor entail

Answer 7

Land is considered to include all natural resources used as raw materials.

Question 8

What does “Capital” as a production factor entail

Answer 8

Capital represents the financial means for acquiring other forms of production factors.

Question 9

What does “Labour” as a production factor entail

Answer 9

Labour refers to all physical and mental abilities of human resources.

Question 10

What does “Entrepreneurship” as a production factor entail

Answer 10

Entrepreneurship refers to the initiative of putting together a range of production factors in various combinations to satisfy the needs of consumers.

Question 11

Who suggested that the value chain concept could be used as a tool for identifying ways of creating customer value

Answer 11

Michael E. Porter

Question 12

What is the idea behind the value chain analysis

Answer 12

the idea behind value chain analysis is to identify the value that is added with each activity in the process of providing products and or services and to compare a business’s performance to that of competitors.

Question 13

List the two broad categories of activities in a typical value chain

Answer 13

• Primary Activities (line functions)

- Support Activities (Staff or overhead functions)

Question 14

Briefly explain “primary activities” in a value chain

Answer 14

Primary activities are the activities involved in the physical creation of the product, marketing, transfer to the buyer(sales) and after sales support.

Question 15

Briefly explain “support activities” in a value chain

Answer 15

Support activities assist the business as a whole by providing infrastructure or inputs that allow the primary activities to take place on an on-going basis.

Question 16

List the primary activities in a value chain

Answer 16

• Procurement and inbound logistics
• Production/Operations
• Outbound Logistics
• Marketing and sales
• Customer service

Question 17

List the support activities in a value chain

Answer 17

• Financial Management
• Human Resource Management
• Communication
• Information management and e-business

Question 18

What does “Procurement and inbound logistics” entail as a primary activity in a value chain

Answer 18

sourcing and receiving of goods from suppliers, storing them until required by production/operations and handling and transporting them within the organisation.

Question 19

What does “Production/Operations” entail as a primary activity in a value chain

Answer 19

This is the production area of the business. In some businesses this might be split into separate departments.

Question 20

What does “Outbound logistics” entail as a primary activity in a value chain

Answer 20

These distribute the final product to the customers and includes transport and warehousing, it may also include picking and wrapping of multiple products, bringing customers to branches or internet access to the organisations services.

Question 21

What does “Marketing and sales” entail as a primary activity in a value chain

Answer 21

This function analyses customer wants and needs and brings to the attention of customers the products or services on offer by the business.

Question 22

What does “Customer service” entail as a primary activity in a value chain

Answer 22

Before or after a product or service has been sold, there is often a need to arrange financing, installation, after-sales service,customer training and handling of queries.

Question 23

What does “Financial management” entail as a support activity in a value chain

Answer 23

All activities, costs and assets related to the acquisition, utilisation and control of the money the organisation requires to finance its activities.

Question 24

What does “Human resource management” entail as a support activity in a value chain

Answer 24

All activities, costs and assets associated with the recruitment , training, development and compensation of all types of personnel and labour relations activities.

Question 25

What does “Communication” entail as a support activity in a value chain

Answer 25

All activities, costs and assets associated with all the internal and external publics (communications) of the organisation.

Question 26

What does “Information management and e-business” entail as a support activity in a value chain

Answer 26

is the management of organisational processes and systems that acquire, create, organise, distribute and use information. E-business is the conduct of business processes on the internet.

Question 27

How does primary activities in the value chain add value to the organisation

Answer 27

Each primary activity adds value to the organisation in its own unique way in order for the business to undertake its tasks more efficiently than it competitors. lower production costs faster and cheaper outbound logistics and higher standards of customer service are a few examples

Question 28

How does support activities in the value chain add value to the organisation

Answer 28

Support activities adds value just as the primary activities however it is more difficult to link these activities with any one particular part of the organisation.