Business Management Unit 1.1

What is the purpose of business activity?

- Combine factors of production to create goods and services. - Goods and services satisfy peoples wants. - Employs people and pays them wages so they can consume other products. Businesses combine human, physical and financial resources to produce goods and services Human resources: People needed to carry out the aims of the organization. Physical resources: Include buildings, machinery and raw materials Financial resources: Include the money needed to make the product or service It is needed because it: - Provides goods and services from limited resources to satisfy unlimited wants. - Scarcity results from limited resources and unlimited wants. - Choice is necessary for scarce resources. This leads to opportunity costs. - Specialization is required to make the most out of resources.

Outline the four functional areas of a business

- Human resources (HR): Ensuring that appropriate people are employed to make the product or service and that the people are suitably rewarded for doing so- To accomplish these goals, the HR department must recruit people, train them, at times dismiss them, and determine appropriate compensation - Marketing: Ensuring that the business offers a product or service that is desired by a sufficient number of people or businesses for profitable operations. To accomplish this goal, the marketing department must use appropriate strategies to promote, price, package, and distribute the product of service. - Finance and accounts: Ensuring that appropriate funds are made available to make the product or service. To accomplish this goal, the finance and accounts department must forecast requirements, keep accurate records, procure financial resources from various providers, and ensure proper payment for goods and services acquired to operate the business - Operations management or production: Ensuring that appropriate processes are used in order to make the product or service and that the product or service is of the desired quality. To accomplish this goal, the operations management or production department must control the quantity and flow of stock, determine appropriate methods of production, and, in today's competitive world, look for ways to produce the goods or service more efficiently

Outline problems of setting up a business

- Lack of finance capital - Cash flow problems; budgetary problems - Marketing problems - Unestablished customer base - People management problems - Legalities - Production problems - High production costs - Poor location - External influences Common mistake: Candidates often claim that businesses should not pursue a particular project because of the risks involved. However, all business decisions carry an element of risk. Mark Zuckerberg said that the biggest risk for entrepreneurs is not taking risks, especially in a rapidly changing business world.

Outline the four factors of production

- Land: All natural resources used to make a product or service. - Labour: The effort of workers required to make a product or service. - Capital: Finance, machinery and equipment required to make a product or service. - Enterprise: Skill and risk-taking ability of the entrepreneur

Explain the purpose of a business plan

- Support the launch of a new organization or business idea - Attract new funds from banks, grant providers, or venture capitalists - Support strategic planning - Identify resources needed - Provide a focus for development - Work as a measure of business succeses

Outline key elements in a business plan

- The business idea, aims, and objectives: Setting out the business idea in the right context - Business organization: How the business will be organized - HR (human resources): How the business will be staffed - Finances: How the business will be financed - Markting: How market the product best - Operations: How the product will be made

Define intrapreneur

An individual employed by a large organization who demonstrates entrepreneurial thinking in the development of new products or services

Define entrepreneur

An individual who demonstrates enterprise and initiative in order to make profit. Someone who exercises initiative by organizing a venture to take benefit of an opportunity and, as the decision maker, decides what, how, and how much of a good or service will be produced. An entrepreneur supplies risk capital as a risk taker, and monitors and controls the business activities. The entrepreneur is usually a sole proprietor, a partner, or the one who owns the majority of shares in an incorporated venture

Outline reasons for setting up a business (GET CASH)

Growth: Businesses may see or find an untapped opportunity in order to achieve "first mover advantage". Sometimes businesses, large or small, stumble into opportunities for which they were not looking. Earnings: Working for someone else means that you do not get to keep all the earnings yourself. Those who put their capital at risk (the business owners) get the rewards, whereas those who do not put their capital at risk (employees) receive wages or salaries that are typically less than the return on capital is to the owner. Actually, many millionares own "boring" small businesses Trans. & Inh (sharing an idea): If you really believe in something, ou may want to sell the idea to others. Challenge: Some people simply just want to see if they can "make-it" themselves. Autonomy: You are your own boss, and don't have to follow any specific rules of someone else. Starting a business yourself means that you can set and change the policies and procedures as you see fit Security: Hobbies: Many interesting businesses are set up by people with a passion for something who want to just keep doing what they enjoy doing. Businesses are started for many reasons. Steps involved in starting up a business include: Researching the market, planning the new business, establishing legal requirements, raising finance and testing te market

Define - Primary sector - Secondary sector - Tertiary sector - Quaternary sector

Primary sector: Generally involves the acquisition of raw materials. The industries engaged in production or extraction of natural resources such as crops, oil. Industries that produce goods using resources in the environment. For example - Fishing - Mining - Forestry - Farming Secondary sector: Involves processing of raw materials, usually to create a product They use the goods that primary sector businesses have produced. They will take the raw materials from the primary sector and turn them into finished goods. They can be summed up as businesses that refine, manufacture or construct goods. For example - Carpenters will use wood from forestry businesses to make things out of wood e.g. furniture, kitchen cabinets, ornaments - Steel works will drill and cut steel to size ready for construction - Car manufacturers will use metal to make cars - Builders will use things that have been mined or wood from forestry businesses Tertiary sector: Where the most service businesses sit The tertiary sector provides services for consumers or businesses. For example - Catering, - Hotels, - Call Centres, - Communications (telephone, broadband etc) - Medicine -Legal Services - Education - Distribution of Goods Quaternary sector: Provides services that focus on knowledge. Examples: - Information gathering - Distribution and technology; - Research and development; - Vocational education; - Business consulting; - Strategic financial services.

Outline advantages and disadvantages of specialization

Specialization is: When the production process is split up into different tasks and each specialized worker/ machine performs one of these tasks. Advantages: - Specialized workers are good at one task and increases efficiency and output. - Less time is wasted switching jobs by the individual. - Machinery also helps all jobs and can be operated 24/7. Disadvantages: - Boredom from doing the same job lowers efficiency. - No flexibility because workers can only do one job and cannot do others well if needed. - If one worker is absent and no-one can replace him, the production process stops.