Business basics

♡
₊˚⊹ WHAT IS
A BUSINESS?
♡ ⊹˚₊
Businesses are organisations that uses resources to meet customer needs and
wants. They use these resources to produce a product or service that consumers
demand.

Key terms:
♡
‎ Consumer goods
➼ The physical products/goods sold to the general public — tangible.
➼ There are two types of consumer goods; durable and non-durable products.
Durable products are products that can be used repeatedly like cars, electronics,
and et cetera, while non-durable goods can only be used onced like food and
beverages.
♡ Consumer services
➼ Selling services to meet customer’s needs — non-tangible.
➼ Examples: Travel agencies, hotel accommodation, etc

Business basics 1
 ₊˚⊹ ♡ BUSINESS INPUTS ♡⊹˚₊
Land: Land needed to operate/provide sources for a business (eg: farms, kiosk,
building, factory, etc)

Labour: Human labour needed to operate and produce products or services for a
business

Capital: Finance needed to run and operate a business

Enterprise: Driving force of the business; the ones who run and direct the business

₊˚⊹ ♡ BUSINESS FUNCTIONS ♡⊹˚₊

Marketing Human Resources Management

➼ Will consumers be prepared to buy ➼ Do we need more people to be able to

this product? produce/operate this business?
➼ Responsible for market research ➼ Identifies the work force needed
➼ In charge of promoting and selling the ➼ In charge of recruiting and selecting
product/service people who are appropriate for the
business
➼ Finding and calculating product prices
that is cheap yet profitable (to attract Operations Management
more customers)
➼ Can we produce this product at a cost
Finance which allows the marketing department to
set a profitable price level?
➼ Do we have the capital needed to
develop and produce it? ➼ Mantaining resources quality and
➼ Monitoring the flow of finance production
➼ Ensuring product quality and product
➼ Keeping and analysing accounts
resources
➼ Providing financial information

Business basics 2
 ₊˚⊹ ♡
SECTORS OF
INDUSTRY
♡ ⊹˚₊
Primary sector

➼ Sells natural resources and raw Sectors

materials ♡ Private sector
➼ made and run by individuals or a
➼ Examples: gas fuel companies,
group of individuals — profit oriented
fishing companies, etc
➼ Caters to consumers wants and
Secondary sector needs

➼ Manifactures their products

♡
‎ Public sector
➼ Owned by the government —
➼ Examples: snack manifacturers, ➼ Caters to consumers daily needs
toys, etc (such as public buses, etc)
Tertiary sector ♡
‎ Mixed economy
➼ owned and controlled by both public
➼ Provide services
and private sectors
➼ Examples: retail, transportation, ♡
‎ Free-market economy
etc ➼ economic resourcees are owned
Integrated sector largely by the private sector with little
state intervention
➼ Combines primary, secondary ♡
‎ Command economy
and tertiary sector to one business ➼ owned and controlled by the state
Quaternary sector

➼ focused on IT and digital

marketing ♡
‎ Industrialisation
➼ Describes the rapid growth of
manifacturing industries in developing
countries

Business basics 3
 ♡
₊˚⊹ TYPES
OF
ORGANISATION
♡ ⊹˚₊
Enterpreneur — profit oriented

➼ Run by one individual who controls everything within the business

➼ Uses their own capital to run the business

Partnership — profit oriented

➼ Formed by two or more people to run a business together

➼ The capital earned is shared equally along with the responsibilities and capital
investment
➼ Profit driven

♡ Limited liability — profit oriented

➼ The ownership of the company is divided into small units called shares

♡ Legal personality — profit oriented

➼ A company is legally recognised as having a separate identity with the owners —
if the company’s products are found dangerous, faulty or unethical, the company will
be prosecuted instead of the workers

♡ Private limited companies — profit oriented

➼ Protection that comes from forming a company

Public limited companies — profit oriented

➼ Most common form of legal organisation — have access to substantial funds for
expansion
➼ Has the rights to publicly sell their shares to the main public

➼ Has all the advantages of private company status

Business basics 4
 More about types of business and/or organisation

Non profit organisation — non-profit

➼ Not driven by profit

➼ Aims to distribute profit

➼ Consists of volunteering individuals

Non-governmental organisation — non-profit

➼ A legally constituted organisation without government assistance or control

➼ Aims to distribute profit

Social enterprises — profit oriented

➼ A proper business that makes money to benefit society — gaining profit for
themselves and for a cause

Public private partnership — profit oriented

➼ Aims to benefit the public through the involvement of private sector in form of
management experties and/or financial management

♡ Private sector funded: Government or state managed schemes — the government

does not have to find capital from taxpayers to pay for the project, but is in charge of
paying rent or leasing charge to the private sector business that created the
organisation

♡ Government directed but with private sector finance and management: Includes
both private sector funding and management

♡ Government funded: Privately managed schemes — the government provides all

parts of the fundings, but the organisation uses private sector methods and techniques
to control the efficiency

Business basics 5
 📖♡What are stakeholders and shareholders?
Stakeholders are those who own the shares of their company. They are
allowed to sell their company shares to shareholders to gain investment from
other people outside of the company
♡ Shareholders are those who purchases shares from stakeholders. They
have unlimited liability, which allows them to invest in multiple companies at
the same time.
— In short, stakeholders SELL shares, while shareholders BUY shares

More about stakeholders and shareholders

₊˚⊹ ♡
BUSINESS
OBJECTIVES
♡ ⊹˚₊
➼ BUSINESS OBJECTIVES helps businesses to control, review and direct their
business flow and success.

SMART GOALS OBJECTIVES HIERARCHY

➼ Specific: specific 1. Aim: to maximise shareholder value

objectives that focuses
2. Corporate objectives: to increase profits of all
on what the business
divisions by 10% per year
does
3. Divisional objectives: to increase market shar
➼ Measurable:
Objectives that are 4. Departmental objectives: specific objectives made
based on quantitative for each division
value 5. Individual targets: MS BANTUINNNN AKU
➼ Achievable: BINGUNGGGGGGG
Objectives that are
achievable within the
company FISHBONE DIAGRAM

Business basics 6
 ➼ Realistic and/or ➼ Used to analyse a problem or situation within a
relevant: Objectives that business
are realistic and relevant
to the business

VISION AND
MISSION
STATEMENT

➼ Vision: what do I
want to
achieve/accomplish? —
long term

➼ Mission: what should

I do in the short term to
achieve my vision? —
short term

SWOT ANALYSIS

➼ Strength: the positive

strengths and pros of the
business — advantages
of a business

➼ Weaknesses: the
negative weaknesses
and cons of the business
— disadvantage of the
business
➼ Opportunities: Ways
to expand and market
the business for future
profit
➼ Threats: External
factors that comes off as
a threat towards the
business

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 ₊˚⊹ ♡ GROWTH IN BUSINESS ♡⊹˚₊
GROWTH IN BUSINESS

— Expanding or growing a business

➼ Growth in sales revenue: increase in income

➼ Growth in profit: increase in profit

➼ Growth in market share: increase in the percentage of a given market by a
business’s shares

➼ Growing impact: increase in social and environmental impact/consewurncrs caused

by the business
➼ Growing a resilient business ecosystem: creating opportunities

ADVANTAGES OF GROWTH IN DISADVANTAGES OF GROWTH IN

BUSINESS BUSINESS

➼ Higher levels of outputs generates ➼ Problems with cash flow: larger

more tax revenue for local and/or expanding equals larger amount of
national governments money, though it can be solved by
stakeholders
➼ Higher levels of output also
decrease the rate of unemployment ➼ Problems with quality: increased
and increase in income output without quality supervision may
ruin the quality of the product
➼Increases consumption and improve
living standards ➼ Loss of control: as business grow,
tasks and organisational structure
become more complicated

➼ Higher labor in larger businesses:

the bigger the production, the amount of
labor needed increases (human
resources centric)

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 ➼ Increased pollution due to mass
production and millions of businesses
➼ Probability of more machineries and
less human employment

ECONOMICS OF SCALE

— Situation where the unit (average) cost of production lowers as the level of output
rises

♡ Internal economics of scale: cost reductions that can be done inside the company
when expanding output
➼ Purchasing economies of scale: the business buys inputs at a lower cost by mass
purchase/buying in bulk

➼ Marketing economies of scale: cost of marketing campaign

➼ Managerial economies of scale: the cost of hiring a manager is spread over large
output
➼ Technical economies of scale: large companies have the ability to invest in
equipments that are efficient towards the business, resulting in a lower average cost of
production

➼ Financial economies of scale: takes out a larger loan for investment, which leads
to lower interest rate

♡ External economics of scale: cost-savings caused by external factors in the region

or industry that is not under control of the business

Cost leadership strategy

— How to raise competitive advantage through cost leadership strategy

➼ Being the lowest cost to gain higher profit or increase market share

➼ Usually targets a broad rather than a niche market

Differentiation strategy

Business basics 9
 — developing a product or service that offers unique features that are not alike to other
products, attracting customers
➼ These features allow the business to charge more due to the unique products and/or
services they offer

Focus strategy

— focuses on narrow market segment, aiming to achiever a cost advantage or

differentiation

📖 Market share: total revenue/sales in a company’s business

Competitive advantage: creating low cost products to compete in the industrY
Niche market: specific market focus
Broad market: covers broad products
Narrow market: focuses on specific groups and types of audience to gain
customer loyalty

HL materials

Examples
🥛 OATSIDE M*LK

Business basics 10