Unit 1.

1
1) Roles of a business
- A business is a decision-making organization involved in the process of using inputs to produce
goods and/ or to provide service
- Inputs are the resources that a business uses in the production process, e.g. labour and raw
materials
- This process generates outputs (also known as products).
- The term product can refer to both goods and services.
o Goods are physical products, e.g. cars, computers, books and food.
o Services are intangible products, e.g. haircuts, bus rides, education and health care.
o Businesses can also provide goods and services to other organizations, such as freight
transportation and distribution
- Needs are the basic necessities that a person must have to survive, e.g. food, water, warmth,
shelter and clothing.
- Wants are people’s desires, i.e. The things they would like to have, e.g. a larger home, a new
smartphone or to go on an overseas holiday.

2) Main functions of a business

1) Human resources (HR)
a. responsible for managing the personnel of the organization.
b. HR department is likely to deal with the following issues: workforce planning,
recruitment, training, appraisal, dismissals and redundancies, and outsourcing human
resource strategies
2) Finance and accounts
a. in charge of managing the organization’s money + ensures that accurate recording and
reporting of financial documentation takes place
b. to comply with legal requirements (e.g. to prevent deliberate understating of profits to
avoid corporate taxes) and to inform those interested in the financial position of the
business (such as shareholders and potential investors)
3) Marketing
1) responsible for identifying and satisfying the needs and wants of customers.
2) in charge of ensuring that the firm's products sell.
3) Attainable through a series of activities such as market research, test marketing,
advertising and branding.
Classified as: -
 Product: ensures that goods and services meet the customer's requirements, such as a
product's various sizes, colors, packaging and core functions.
 Price: Pricing strategies to sell product; driven by cost of production, level of demand
and competition.
 Promotion: making sure that customers know about the firms products. This is often
done through the mass media; TV, Newspaper, YouTube and Billboard
  Place: ensuring that goods and services are available in convenient places for consumers
to buy, ensuring that goods and services are available in convenient places for
consumers to buy

3) Business Sectors

Primary Sector
Extraction, Harvesting and conversion of natural resources. Output is
Production
sent/sold to the secondary sector

Secondary Sector
Involved in the manufacturing of products. Industries included such as,
Maunfacturing Clothes manufacturers, publishing firms, etc. Output is sold to consumers,
governemnt, foreign buyers or domestic customers.

Tertiary Sector
Specializes in providing services to general population. Services ranges from
Services
Health care to Transportation.

Quaternary Sector
Part of Tertiary sector which mainly focuses on providing Intellectual and
Includes, ICT, R&D, Consultancy services etc.
sharing information

4) Sectoral Change
- refers to a shift in the relative share of national output and employment that is attributed to
each business sector over time.
- countries develop by shifting the majority of national output being contributed by the primary
sector (such as agriculture, fishing and mining) to manufacturing and then eventually to the
tertiary and quaternary sectors
- Shift from Primary sector to Service or Manufacturing sectors is known as Industrialization
- More economically developed countries are able to exploit the tertiary and quaternary sectors
as the main contributors to national output and employment.

i. Reasons for sectoral change in MEDCs

- Higher household incomes - The demand for services is positively correlated to changes in
income levels. As a country develops, consumers demand more services
 - More leisure time - A feature of higher standards of living is the increase in leisure time. As
nations develop, people tend to have more time for leisure and recreation
- Greater focus on customer services - Firms have realized that good customer service before,
during and after a sale can be an important source of competitive advantage.
- Increasing reliance on support services - Businesses need ever more sophisticated support
services. (sub-contractors, advertising agencies, market research analysts, technicians and
management consultants)

5) Role of Intrapreneurship and Entrepreneurship

i. Entrepreneur
- an individual who plans, organizes and manages a business, taking on financial risks in doing so.
- coined by Richard Cantillon (1680-1734) an Irish-French economist.
- Entrepreneurship describes the trait of business leaders who tend to be distinctive in their
temperament, attitude and outlook who drive the business.
- French economist and businessman Jean-Baptiste Say (1767- 1832) described an entrepreneur
as an individual who combines the other three factors of production
- 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, innovative and passionate. They search for and
exploit business opportunities by forecasting and/or responding to changes in the marketplace

ii. Intrapreneur
- the act of being an entrepreneur but as an employee within a large organization.
- The term was coined by American entrepreneurs Gifford and Elizabeth Pinchot (1978), co-
founders of the Bainbridge Graduate Institute in the USA.
o They described an intrapreneur as an employee who thinks and acts as an entrepreneur
within a section of the organization.
o intrapreneur is independent, proactive, creative, and generates new ideas and
innovations for the organization.
- Hence, the intrapreneur takes direct responsibility and risks for turning a project or idea into a
profitable finished product for the organization
- As the intrapreneur thinks like an entrepreneur looking for business opportunities to increase
profits, it is in the best interest of an organization to encourage intrapreneurship.

- An example would be a project manager of a large company who is given the authority to
exercise independent entrepreneurial initiatives to develop and launch a new product for the
organization, or to lead a subsidiary of the organization. Companies such as 3M and Google are
well known for promoting intrapreneurship. These companies encourage and fund
intrapreneurs to create and oversee projects of their own choice.

iii. Entrepreneur v/s Intrapreneurs

Entrepreneur Intrapreneur
Owners and/or operator of organization Employees of an organization
Takes substantial risks Takes medium to high risks
 Visionary Innovative
Rewarded with profit Rewarded with pay and remuneration
Responsible for workforce/labor Accountability to the owner of the organization
Failure incurs personal costs Failure is absorbed by the organization

6) Reasons for starting up your own business

i. Growth
ii. Earning
iii. Transference and Inheritance
iv. Challenge
v. Autonomy
vi. Security
vii. Hobby

7) Process of starting a business

i. Writing a business plan
(i) Once the entrepreneur has a feasible business idea, this is officially formulated in a business
plan. This document will include the goals and objectives for the new business with an outline
plan of how these targets are to be accomplished
ii. Obtain start-up capital
(i) Starting a business requires money. Quite often, small business owners will use their own
savings and/or obtain loans to finance their start-up. The loan process can take several months
to complete, with the lender usually requesting a completed business plan before any funds are
approved
iii. Obtain business registration.
(i) Before a business can trade or hire workers, it must satisfy registration and licensing
requirements.
iv. Open a business bank account.
(i) To facilitate the financial operations of the new business, the owner(s) need to set up a business
bank account.
v. Marketing.
(i) Potential customers need to know about the business and its products. This is done through the
marketing activities of the new business, such as advertising and other promotional materials.
8) Problems new Businesses face
i. Lack of finance
All businesses need finance for the purchase of fixed assets, such as premises, buildings,
machinery and equipment. However, most owners of new or small businesses do not have the
credentials to secure external funding without major difficulties.
 ii. Cash flow problems
Financing working capital (the money available for the daily running of a business) is also a
major problem for many new businesses. A business might have a lot of stock, such as raw
materials or semi-finished output, which cannot be easily turned into cash

iii. Marketing problems

Marketing problems arise when businesses fail to meet customer needs, thereby resulting in
poor sales.

iv. Unestablished customer base

A major problem facing new businesses is attracting customers, i.e. building a customer base.
The problem is intensified when there are well established rivals that already operate in the
market.

v. Legalities
It is necessary for businesses to comply with all necessary legislation, e.g. business registration
procedures, insurance cover for staff and buildings, consumer protection laws and copyright
rules

vi. Production problems

It can be difficult for new businesses to accurately forecast levels of demand so they are more
likely to either over produce or under produce.

vii. 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 equipment, machinery, stocks (inventory), rent,
advertising, insurance and so forth

viii. Poor Location

Businesses face a dilemma in the location decision: busy areas offer the highest potential
number of customers, but the premises in these areas will also cost the most.

ix. 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, such as an oil crisis or economic
recession

Unit 1.2
9) Comparison; Private sector v/s Public Sector
Private Sector Public Sector
Meaning The section of a nation's The section of a nation's
economy, which owned and economy, which is under the
controlled by private individuals control of government, whether
or companies is known as it is central, state or local, is
Private Sector. known as the Public Sector.
Objective Earning profit To serve the citizens of the
country.
Source of funds Issuing shares and debentures Public Revenue like tax, duty,
or by taking loan penalty etc.
Areas Finance, Information Police, Army, Mining, Health,
Technology, Mining, Transport, Manufacturing, Electricity,
Education, Telecommunication, Education, Transport,
Manufacturing, Banking, Telecommunication,
Construction, Pharmaceuticals Agriculture, Banking, Insurance,
etc. etc
Benefits of working Good salary package, Job security, Retirement
Competitive environment, benefits, Allowances,
Incentives etc. Perquisites etc
10) Jobs in Private Sector v/s Public Sector
Private Sector Public Sector
Pros  Better than average salaries  Better than average holiday
 Merit pays; pay increases and sick allowance
and/or incentive  Employer pays health plan
compensation costs
 Employer pays pension
 Pay increases based on
employment level
Cons  Shared health plan costs  Lower than average starting
 Lower than average holiday salaries
and sick allowance
11) Profit-based organizations
i. Sole Traders/Sole proprietor
 An individual who runs and owns a personal business.
 Held responsible for success and failure
 Most common type of business ownership
o Self-employed; Plumbers, Carpenters, Freelance photographers, etc.
 Sole traders may work alone or may employ to help in running the business
 Sole proprietorships are often small family-run businesses and can be set up with relatively little
capital. Start-up capital is usually obtained from personal savings and borrowing.

ii. Advantages and Disadvantages of Soler proprietorships

Disadvantages Advantages
Unlimited Liability - there is no limit to the Few Legal Formalities – These types of businesses
amount of debts that a sole trader is legally are easy to set-up, so their start-up costs are
responsible for if the business fails lower when compared to other types of business
organizations
Limited sources of finance - Sole traders often Profit taking – The sole trader is the owner of this
find it difficult to secure any funds beyond their business, thus is able to pocket all the profits, if
personal savings. Trying to expand can also be he wants to do so.
problematic due to the lack of sources of finance
available to sole traders
High risks - sole proprietorships have the largest Being one’s own boss – This allows quick
risk of failure, due to presence larger firms which decisions to be made, as there is only the owner
 are usually very well established who has the power to do so, which allows
flexibility in decision making.
Workload and stress – Owners often have to Personalized service – This feature is limited to
manage their business on their own, so they have sole traders, as they are able to provide personal
to do the work of Marketing, HR and Finance and care to their customers.
Accounting department on their own.
Limited economies of scale - A sole trader is not Privacy - Unlike other types of business
able to exploit the benefits of large-scale ownership, sole traders enjoy privacy as they do
production due to their workforce, so their prices not have to make their financial records available
might be less competitive compared with those to the public, i.e. the owner enjoys confidentiality
of larger rivals.
- Lack of continuity – Business of this type -
is not self-sustainable; it requires the owner to
watch over it
12) Social enterprises
- Social enterprises are revenue-generating businesses with social objectives at the core of their
operations.
- Commercial for-profit businesses strive to return a profit for their owners, social enterprises
strive to return a surplus for social gain.
- Social enterprises can be operated as a non-profit organization or as a for-profit company
- All social enterprises have two main goals: to achieve social objectives and to earn revenue in
excess of costs.

(i) For profit enterprises

Micro-finance
providers

For-profit Public-private Consumer

enterprises partnership (PPP) cooperative

Worker
Cooperatives
cooperative

Producer
cooperative
 1) Cooperatives

a) Consumer Cooperatives
o Owned by the customers who buy the goods and/or services for personal use
o E.g., food, credit unions (financial services), child care, housing, and health-care cooperatives
o members get access to goods and services at lower prices than those charged by traditional
commercial businesses

b) Worker Cooperatives
o Set up, owned and organized by their employee members
o E.g., cooperatives involved in production and manufacturing, cafes, printers and tourism and
communications
o members are provided with work

c) Producer Cooperatives
o cooperatives that join and support each other to process or market their products.
o E.g., a farmer cooperative might unite to buy equipment, fertilizers and seeds collectively, by
pooling their funds, thus benefiting from bulk-purchase discounts. Farmer cooperative can be an
example
 2) Microfinance providers
o financial service aimed at entrepreneurs of small businesses, especially females and those on
low incomes.
o microfinance providers enable the disadvantaged members of society to gain access to essential
financial services to help eradicate poverty.
o Access to banking and insurance services

3)
3)
3)
3)
3)
3)
3)
3)
3)
P
ublic-private partnerships (PPP)
o occur when the government works together with the private sector to jointly provide certain
goods or services
o E.g., In some countries the private sector runs public sector hospitals and schools, without the
services being actually privatized.
o public-private partnership can benefit from the dynamics, finance and efficiency of the private
sector alongside the benefits of public sector funding and support.
o Projects like the WHO, UN can be included here

ii. Non-profit social enterprises

o Non-profit social enterprises are businesses run in a commercial like manner but without profit
being the main goal
o non-profit organizations (NPOs) use their surplus revenues to achieve their social goals rather
than distributing the surplus as profits or dividends.
o E.g., public libraries, state schools, museums, government hospitals and social services

There are two types of non-profit enterprises: 1) NGOs and Charities

(i) NGO
o is non-profit social enterprise that operates in the private sector, i.e., it is not owned or
controlled by the government.
o NGOs do not aim primarily to make a profit; they are setup to benefit others in the society
o There are two categories of NGO: 1) Operational NGOs 2) Advocacy NGOs
o Operational NGOs are established from a given objective or purpose. These NGOs tend
to be involved in reliefbased and community projects, e.g., Oxfam and UNICEF.
 o Advocacy NGOs take a more aggressive approach to promote or defend a cause, striving
to raise awareness through direct action

(ii) Charities
o A charity is a non-profit social enterprise that provides voluntary support for good causes
o Its key function is raising funds from individuals and organizations to support a cause that is
beneficial to society
o charities do not necessarily sell' anything to customers, they must use refined marketing
strategies to catch the attention of donors, e.g., the use of celebrity endorsements, holding
special charity events or promoting their cause in the mass media

13) Key words

Key words Definitions
Limited Liability
Bureaucracy

14) Stake holder

mapping

+
 (https://youtu.be/HP2MZscvFl8)

15) STEEPLE
Analysis