Unit 1.1 what is a business? Flashcards
Whats A business?
A business is a decision-making organization involved in the process of using inputs to produce goods and/or services.
Examples of inputs
-Capital
-Enterprise
-Land
-Labour
Examples of processes
-Human resources
-Finance
-Marketing
-Operations management
Examples of outputs
-Goods
-Services
Primary sector
Businesses in this sector are involved in the extraction, harvesting and conversion of natural resources.
Secondary sector
Businesses in this sector are involved in the manufacturing or construction of products.
Tertiary sector
Businesses in this sector specialize in providing services to the general population.
Quaternary sector
are involved in intellectual, knowledge-based activities that generate and share information.
Interdependence between sectors
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.
Functional areas of a business
-Human resources
-Finance
-Operations management
-Marketing
Human resources
Manages the personnel of the organization.
Personnel issues include:
-Workforce planning
-Recruitment
-Training
-Appraisals
-Dismissals
-Redundancies
-Outsourcing HR strategies
Finance and accounts
-Manages the organization’s money and ensuring compliance with legal requirements
-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.
factors of production
is the collective term for the resources needed to produce goods and services
-Land
-Labour
-Capital
-Entrepreneurship
Land
These are natural resources needed to produce goods and services. Examples include water, timber, sand, minerals, metal ores, plants and animals.
Labour
This refers to human effort used to produce goods and services.
Capital
This refers to non-natural (or man-made) resources used in the production process. Examples include tools, machinery, motor vehicles, physical premises, and infrastructure.
Entrepreneurship
This refers to the knowledge, skills and experiences of individuals who have the capability to manage the overall production process. Entrepreneurs have the ability and willingness to take risks in order to produce goods and provide services to customers, profitably.
Adding value
the process of producing a particular good or service that is worth more than the cost of the resources used to produce it.
Consumers
the people who use goods and services. They are not necessarily the customers though.
Customers
are the people or other businesses that purchase goods and services.
Goods
are physical products, e.g. food, clothes, furniture, cars, and smartphones.
Services
are intangible products, e.g. haircuts, tourism, public transport, banking, insurance education, and healthcare.
consumer goods (consumer durables)
products sold to the general public
producer goods (capital goods)
physical goods brought by other businesses to produce other goods and/or services
Characteristics of entrepreneurs
Taking substantial risks
Having a vision for the business.
Rewarded with profit.
Responsibility for employees.
Failure may result in personal costs.
Commonly encountered challenges for new businesses
-Production problems
-Poor location
-People management problems
-External influences
-Legalities
-Marketing problems
-Unstable customer base
-Lack of finance capital
-High production costs
-Cash flow problems
reasons to why people set up a business
G
E
T
C
A
S
H
Growth
Earnings
Transference and inheritance
Challenge
Autonomy
Security
Hobbies
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.
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.
Hobbies
Some people want to pursue their passion or turn their hobby into a business.
Entrpeneurship
collective knowledge skills and experiences of entrepreneurs
