Business Organization and Environment

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1.1 Introduction to Business Management

What is a business?

Decision-making company or organization

May/may not be for profit

Involves the exchange of goods and services

Produce goods and/or provide services

Exist to satisfy the needs and wants of people, organizations, governments, etc.

Enterprise – a group of people that tackles an objective, usually profit

Quality of output depends on the quality of inputs

Main inputs in a business

Capital

Amount of money needed to run a business

Man-made goods like machines, buildings, vehicles, and equipment needed for business to operate

Investment – increasing spending on capital

Land

Space where a business operates

Raw materials and natural resources that are used in making a product

Labour/manpower

Physical & mental efforts of people to produce products/services

Enterprise/entrepreneurship

Management, organization, and planning of the other three factors of production

Actions of the entrepreneur who shows initiative and takes risks to set up, invest, and run a business

Main business functions and their roles

Human resources

Manages the workforce and labourers of the company

Deals with recruitment, wages, communication, and motivation of employees

Finance and accounts

In charge of managing the organization’s money and assets

Ensures accurate recording and reporting of financial documentation (to comply with legal requirements)

Marketing

Ensure that a company’s products sell

Concerned with identifying and satisfying consumers’ needs/wants

In charge of promotions, advertisements, etc.

Operations

In charge of business functions and processes that produce the actual goods

Concerned with research & development, delivery, stock management, etc.

Business sectors (or economic sectors)

Primary

Involves the harvesting of naturally available resources

e.g. mining, agriculture, livestock, drilling, and logging

Regulated and protected by the government

Fuels (produces inputs for) the other economic sectors

Example countries: Vietnam, Philippines, Canada, Dubai

Example companies: Philex Mining, Del Monte, Dole

Secondary

Involves manufacturing of raw products to finished or component goods

Finished goods – exported or sold to domestic consumers

Component goods – sold to companies in the tertiary sector

Example countries: China, Scotland, Japan, Italy, USA

Example companies: Coca-Cola, Honda, Del Monte

Tertiary

Involved with service and retail

Includes retail sales, transportation, entertainment, restaurants, media, healthcare, banking, etc.

Exploited in developing countries

The Philippines is a victim of brain drain: where professionals go abroad to look for jobs making it difficult for companies in the tertiary sector to find the employees they need

Relies on the primary and secondary sector for inputs

Example countries: USA, United Kingdom, Singapore, Hong Kong

Example companies: JP Morgan, Convergys, Lotte

Quaternary

Involves intellectual activities or innovation services

Includes government, education, libraries, scientific research, information technology, etc.

Impact of sectoral change

Change in economic structure (primary to secondary, secondary to tertiary, etc.)

Industrialization

When a country moves towards the manufacturing sector as its principal output and employment (primary to secondary)

Products become more refined and have more export potential

Raises the standard of education

Opens better job opportunities

Developed nation

Exploits the tertiary sector as the national output of employment

Further raises the standard of education

Examples of effects of shifting to the tertiary sector

For a labour intensive manufacturer of aluminium cans

Quality of products improve

More distributors

Fewer employees and higher wages for employees

Can consider turning to robots and machines, as well as outsourcing

For the owner of a small seaside bed and breakfast

Easier to find competent employees

More income due to higher demand

More competition

People would rather work for bigger companies

Can consider expanding

For a family-owned vegetable farm

More demand due to more stores

Opportunity for a “damper” system

Fewer labourers

Can consider opening a small business or outsource

Entrepreneurship (and the entrepreneur) vs. intrapreneurship (and the intrapreneur)

Entrepreneurship is the process of starting a business, company, or organization

The Entrepreneur

The founder, and usually the owner

Big risk, big reward

Organizes inputs of production into goods and services (outputs)

Obtains money, buys the inputs needed and makes decisions.

Takes risks and provides the vision for the business idea

Assumes large financial risk

Provides sufficient resources

Intrapreneurship is similar to entrepreneurship but is done in an existing organization

The Intrapreneur

Is an employee of the organization

Uses resources of company to undertake projects and therefore risks very little

Rewarded in the form of a paycheck

Does not act autonomously like an entrepreneur as he is dependent on other employees or the organization he works for

Reasons for starting up a business or an enterprise

Profit – positive difference between revenues and costs

Fame

Benefit human welfare

Very fulfilling

Family

Legacy

Common steps in starting up a business and problems new ones may face

Businesses often startup by looking for market opportunities (market gaps or niches)

Niche markets are where small businesses can easily compete

Factors to consider: What questions would businessmen ask about the factors?

Business idea

4 business inputs (capital, land, labour, and enterprise)

Four departments/functional areas

Possible problems faced by a start-up (either internal or external)

Internal

No land to establish a business

Product may not appeal to your location

Lack of manpower

External

Terrorists

Politics or government

National Calamities

Limited resources

Business plan

A report detailing the aims and objectives of a business

A planning tool that serves as a blueprint to address the issues of a startup business

Meant for investors/banks to help them decide on whether to invest/approve loans

Elements of a business plan

Business – the name of the business, type of the business, statement of aims and objectives, details of the owner

Product – details of goods/services, operations and equipment needed, suppliers, price

Market – who you’re selling to, market profile, competition (strengths and weaknesses)

Finance – money, start-up costs

Personnel – employees and the workforce, skills

Marketing – marketing mix employed by the business