1.1 IBMastery Notes PDF

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IBMastery Notes...

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The role of business Decision-making organization involved in the process of using inputs to produce goods/services. ●

Inputs: The resources that a business uses in the production process. Examples: labour, raw material.

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Processes: Turning the input into the provision of services of the manufacture of goods. Examples: Factories

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Outputs: Of final goods and services. Examples: Phones, computers, haircuts

Business exists to satisfy needs and wants of the people, organization and government. ●

Needs: what we will need to survive (food).

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Wants: the desire that we have (holiday)

Business grows it needs to develop functions to carry specialist tasks (Human recourses management and Marketing) Affected by external factors beyond their control (oil price rises) Customers, they buy and use the products. When firms are able to add value (see: Definitions), they are able to sell goods for more than they cost. ●

Value come from

o Speed, quality of service, product of prestige, a feel good factor, quality (finished product), brad image, design, taste… · Businesses have to make decisions; they affect daily operations and long-term prospects. · A business will need to decide among the various ways of spending the allocated budget. And it should choose the one that gives the highest benefit for the business. · Businesses will aim to provide goods and services (satisfy needs and wants) and make sure that they will gain profit to earn their investment in return. The main functions of business • If a business is to operate effectively, tasks must be carried out by functional areas, this are: Production, marketing, finance and human resources. Human resources · Managing the personnel, they will deal with the following issues: workforce planning, recruitment, training, appraisal, pay and benefits, equal opportunities, health and safety matters, working relations. · Large organizations allocate resources to each functional area, so they would be easily identified. But in small organizations, one person would carry out all the functions. In a business the four functional areas depend on each other. Product department needs the marketing staff to sell the products and inverse. Finance and accounts · Managing the business’s money. The accurate recording and reporting of financial documents take place. Comply with legal requirements (taxes) and to inform those interested.

Marketing

· Identifying and satisfying customers wants and needs and that the firm’s product sell. This is done through market research, test marketing, packaging and advertising. The four P’s o Product – the goods and services meet the customer's requirements. o Price – pricing methods to sell the product, depending on level of demand, number of substitute products and the costs of production. o Promotion – customers needs to know about the product. Mass media o Place – available in convenient places, appropriate ways to distribute the product to the marketplace. Production (Operations) · Converting of raw material into finished goods à ready for delivery to customers. · Plus: providing services to the customers. · Example for what production includes: Extraction of crude oil, construction of roads and provision or finance services. · Production department (production manager à important job, to make sure that production plans and efficient production) ●

How the good will be made or how the service will be delivered.

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What resources to be used/needed. (Equipment)

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Timescale (when/duration)

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Organizing stock management and control

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Organizing quality inspection and control

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Arranging delivery of finished product

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Meeting targets and deadlines

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Research and development into new products and work processes.

Business sectors · Businesses can be classified according to the stage of production that they are engaged in. ●

Primary – businesses in this sector are involved with harvesting, extraction and conversion of natural resources. Like fishing, forestry… this sector account for a large percentage of outputs and employments in LEDCs. The businesses that operate in the primary sector in MEDCs, use mechanisation and automation.

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Secondary sector – manufacturing or construction of products. Like construction firms. Output is then sold to the customers that could be other businesses, foreign buyers or domestic customers. Developing countries = dominant secondary sectors. The secondary sector is the wealth sector; manufactured goods can be exported all over the world, to earn income. Value is added. The importance of this sector tends to decline in terms of employment and output.

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Tertiary sector – providing services for the customers. Like transport and travel.

NB: goods can be transformed in the process of a product. In Canada and Italy the Tertiary sector is most substantial sector in terms of employment and percentage of GDP. ●

Quaternary sector – a sub category of tertiary sector, businesses in the quaternary sector are involved in intellectual knowledge based activities that generate and share information. It is also the sector in which businesses invest for further growth and evolution.

· The four business sectors are linked through the chain of production · From extraction of raw material to the product that goes to the customer. ●

The sectors are interdependent.

· Sectoral change refers to a shift in the relative share of national output and employment that is attributed to each business sector over time. The role of entrepreneurship and intrapreneurship · An entrepreneur is an individual who plans organizes and manages a business, 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. · Entrepreneurs have the skills needed to oversee the whole production process, whilst having the ability and willingness to take potentially high risks. · Successful entrepreneurs tend to be creative, innovate and passionate. · Intrapreneurship is the act of been an entrepreneur but as an employee within a large organization. · An intrapreneur is an employee who thinks and acts as an entrepreneur within a section of the organization. Reasons for starting a business · There are several reasons why people decide to set up a business or an enterprise. The reasons can be remembered by the mnemonic GET CASH ●

G rowth: Entrepreneurs benefit personally when there is an appreciation in the value of their assets.

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E arnings: the potential returns from setting up your own business can easily outweigh the costs, even though the risks are high.

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T ransference and inheritance: self-employed entrepreneurs view their business as something that they can pass onto their children.

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C hallenge: some people might view setting up and running a business as a challenge.

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A utonomy: being self-employed means that there is autonomy in how things are done within the organization.

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S ecurity: there is usually more job security for someone who is his or her own boss.

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H obbies: some people might want to pursue their passion or to turn their hobby into a business.

Steps in the process of starting a business · The steps in the process of starting up a business or an enterprise will vary from one country to another. Nevertheless, the common steps in the process of starting up a business. 1. Write a business plan: the ideal is officially formulated in a business plan. 2. Obtain start-up capital: starting a business requires money. 3. Obtain business registration: before a business can trade or hire workers, it must satisfy registration and licensing requirements. 4. Open a business bank account: to facilitate the financial operations of the new business, the owners need to set up a business account. 5. Marketing: potential customers need to know about the business and its products. Factors to consider when setting up a business ●

Business idea : a feasible business idea is needed.

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Finance : is needed to fund business activities, such as manufacturing and marketing of the firm’s products.

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Human resources : are needed at all stages of business activity, from the design and development of a product to delivering it to the consumer.

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Enterprise : entrepreneurial skills are required to successfully plan, organize and manage the business.

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Fixed assets : are needed, such as premises and capital equipment.

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Suppliers : are needed to provide the business with its raw material, finished stock of products and support services.

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Customers : need to be attracted because without them the business will fail.

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Marketing : is essential, irrespective of how good a business idea might be.

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Legal issues : legal issues also need to be considered. (e.g. consumer protection laws)

Problems that a new business may face · A new business is likely to face problems that must be dealt with immediately to prevent them from escalating and threatening its survival include: o Lack of finance: All businesses need finance for the purchase of fixed assets, however most owners of new and small businesses do not have the credentials to secure external funding without major difficulties. o Cash flow problems: financing working capital is also a major problem for many new businesses. Many businesses might have assets such as raw material and semi-finished products that cannot easily be turned into cash. o Marketing problems: marketing problems arise when businesses fail to meet customers’ needs, thereby resulting in poor sales. o Unestablished customers base: a major problem facing new businesses is attracting customers. o People management problems: new businesses may lack experience in hiring the right staff with all the necessary skills. o Legalities: it is necessary for business to comply with all necessary legislation. o Production problems: it can be difficult for new businesses to accurately forecast levels of demand so they are more likely to overproduce or underproduce. o High production costs: new businesses are likely to experience high production costs due to the large amount of money needed to pay for the cost of fixed assets. o Poor location: the areas with the most customers are the most expensive once. o External influences: all businesses, irrespective of size or how long they have been in operation, are prone to exogenous shocks that create a difficult trading environment.

· In summary, people set up their own businesses to satisfy their personal desires. The elements of a business plan · A business plan is a report detailing how a business sets out to achieve its goals and objectives. · It’s a useful planning tool as it requires the owners to consider the marketing, financial and human resources of the business. · The business plan helps to reassure financial lenders, such as banks and venture capitalist. ●

The elements of a business plan

o The business, product, market, finance, personnel marketing. · It helps financiers to make a more objective judgement regarding the firm's likely success and hence its ability to repay the loans. Introduction to business management and the CUEGIS concepts · Turning factor inputs into outputs of goods and services to meet wants and needs of different customers. · The functional areas are all instrumental in demanding the success. · Opportunity costs, makes the decisions in the business....