CHAPTER 1: Introduction to business

Question 1

Why do organisations exist?

Answer 1

Overcome individual limitations

Let people specialize

Save time

Accumulate and share knowledge

Pool expertise

Enable synergy

Question 2

Organization

Answer 2

A social arrangement for the controlled performance of collective goals, which has a boundary separating it from its environment

Question 3

How do organisations differ?

Answer 3

Ownership: Public vs Private – Private sector, Public sector

Control

Activity (what they do)

Profit or Non-profit orientation

Size

Legal status

Sources of finance

Technology

Question 4

Differences in what organisations do

Answer 4

Agriculture: Producing and processing food

Manufacturing: Acquiring raw materials and, by the application of labour and technology, turning them into a product (eg, a car)

Extractive/raw materials:
Extracting and refining raw materials (eg, mining)

Energy: Converting one resource (eg, coal) into another (eg, electricity)

Retailing/distribution: Delivering goods to the end consumer

Intellectual production: Producing intellectual property (eg, software, publishing, films, music)

Technology: Digitalising products (eg, e-books) and processes (eg, selling insurance online)

Service industries: Providing intangible services such as banking, accountancy and advertising, including public services such as education and healthcare

Question 5

Profit-oriented organisations

Answer 5

are generally referred to as ‘businesses’.

Question 6

Not-for-profit organisations

Answer 6

do not primarily aim to maximize profit or the wealth of their owners, but instead are focused on
providing goods and services to their beneficiaries at minimized cost

Question 7

Definition of a business

Answer 7

An organization that is oriented towards making a profit for its owners so as to maximize their wealth and that can be regarded as an entity separate from its owners

Question 8

Stakeholder

Answer 8

literally a person or group of persons who has a stake in the organization. They have an interest to protect in respect of what the organization does and how it performs

Question 9

Primary of Stakeholder

Answer 9

Owners (Shareholders)

Question 10

Secondary of Stakeholder

Answer 10

Directors / managers

Employees and trade unions

Customers, Suppliers, Lenders

Gov and its agencies

The local community and the public

The natural environment

Question 11

Natural capital

Answer 11

is therefore everything that the planet provides humans and business organisations to use in order to live

Question 12

sustainability (sự bền vững) concerns the use of both of the following:

Answer 12

How far a business can operate in a sustainable way,
and how it should interact with individuals and governments in doing so

Tangible resources such as natural capital (such as raw materials) and energy

Intangible resources such as human/intellectual capital, and relationships with stakeholders

Question 13

Corporate responsibility

Answer 13

concerns the organisation’s ideas and values on how to use resources, such as natural capital, promoting the positive impacts of their use and reducing the impact of any negative impacts.

Question 14

UN Global Goals for Sustainable Development

Answer 14

The overall aims of the Goals are to end poverty, fight inequality and stop climate change.

Question 15

The key sustainability Goals for businesses include:

Answer 15

Decent work and economic growth

Industry, innovation and infrastructure

Responsible consumption and production

Question 16

The hierarchy of objectives

Answer 16

1 primary objective and a series of secondary (subordinate) objectives should combine to ensure the achievement of the primary objective

Question 17

Primary objective:

Answer 17

profit maximization so as to increase shareholder wealth

Question 18

Profit:

Answer 18

make sure cost of inputs is less than the output

Shareholder wealth can only be maximized if profit is earned at an acceptable
level of risk

Profit can not be pursued at any cost (laws, regulations, social responsibility)

Question 19

Secondary objectives:

Answer 19

market position, product development, technology, employees and management

Question 20

Is wealth maximization always the primary objective?

Answer 20

Managers do not ecessarily make decisions that will maximize shareholder wealth:
No personal interest
Lack competitive pressure

Question 21

Profit satisficing:

Answer 21

operate at profit and risk levels which are acceptable to shareholders, and which provide enough profits for future growth

Question 22

Revenue maximization:

Answer 22

to maintain or increase its market share, ensure

survival, and discourage competition

Question 23

Multiple objectives:

Answer 23

market standing, innovation, productivity, physical and financial resources, profitability, manager performance and development, worker performance and development, corporate
responsibility

Question 24

Planning and control system:

Answer 24

Decide what they want to do to achieve primary objective

Decide how and when to do it and who is to do it (plans and standards)

Check that they achieve what they want (measure, monitor and compare)

Take control action to correct any deviation

Question 25

Mission:

Answer 25

The business’s basic function in society expressed in terms

of how it satisfies its various stakeholders

Question 26

Elements of Mission

Answer 26

Purpose: Why does organization exist and for whose benefit?

Strategy: What is the operational logic of organization?

Policies and standards of
behavior: What do our people do and how do they behave?

Values: What does the organization believe to be important –core principles

Question 27

Vision:

Answer 27

future state of the industry or buz which determines what its mission should be

Question 28

Goals:

Answer 28

a desired end result

There are 2 types of goal
• Non-operational aims (qualitative goals)
• Operational objectives (qualitative goals)

Question 29

Objectives should be SMART:

Answer 29

Specific
Measurable
Achievable
Relevant
Time-bound

Question 30

Purpose:

Answer 30

Objectives are needed in every area where performance and results
directly and vitally affect the survival and prosperity of the buz. Objectives should
enable management to: implement the mission, publicize the direction of
organization, appraise whether decisions are valid, assess and control actual performance

Question 31

Plans and standards:

Answer 31

Plan – State what should be done to achieve the operational objectives

Standards and targets – specify a desired level of performance
• Physical standards
• Cost standards
• Quality standards

Question 32

How are plans set?

Answer 32

The strategic planning process sets the overall mission, goals, plans
and standards that the buz will try to achieve