PRINCIPLES OF ECONOMICS II/ INTRODUCTION TO BUSINESS

II BAM 124/BAM 121

PRINCIPLES OF ECONOMICS II

THE FIELD OF MACROECONOMICS

1.0 INTRODUCTION

We will start this unit by trying to know the meaning of macroeconomics.

Therefore we start by saying that the term “macro” was first used in economics by Ragner Frisch in 1933,
but it was only used as a methodological approach to economic problems, it originated with the
Mercantilists in the 16th and 17th centuries. However, if you may ask, they were concerned with the
economic system as a whole. In the 18 th century, the physiocrats adopted it in their table Economique to
show the ‘circulation of wealth’ (i.e the net product) among the three classes represented by the farmers,
landowners and the sterile class. Malthus, Sismondi and Marx in the 19 th century dealt with
macroeconomics problems. Walras, Wicksell and Fisher were the modern contributors to the development
of macroeconomic analysis before John Maynard Keynes. Economists such as Cassel, Marshall, Pigou,
Robertson, Hayek and Hawtrey, developed a theory of money and general prices in the decade following
the first World War, but the credit goes to John Maynard Keynes who finally developed a general theory
of income, output and employment in the wake of the Great Depression of 1929.

In this lecture, we will examine the subject matter. We shall also attempt to look at the similarities and
differences between the two fields and also the importance of macroeconomics as a separate field of study.

3.1 Definition of Macroeconomics

Let us start this lecture by first of all defining what Macroeconomics is. Can anyone define
macroeconomics? Macroeconomics studies the behavior of the whole (aggregate) economy or economic
systems rather than individual economic markets (which is the domain of Microeconomics).
Macroeconomics is concerned primarily with the forecasting of national income, through the analysis of
major economic factors that show predictable patterns and trends, and of their influence on one another.
These factors include level of employment/unemployment, gross national product (GNP), balance of
payments position, and prices (deflation or inflation). Macroeconomics also covers role of fiscal and
monetary policies, economic growth, and determination of consumption and investment levels.

However, we can also define macroeconomics as the field of economics that studies the behavior of the
aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in
unemployment, national income, rate of growth of gross domestic product, inflation and price levels.
Alternatively macroeconomics is the branch of economics that studies the behavior and performance of an
economy as a whole.

[[BUSINESS ADMINISTRATION, EDO UNIVERSITY, IYAMHO ]

]
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Having defined macroeconomics in two several ways, it can be said that it is concrete that
macroeconomics is a study of "the big picture" in the economy. Rather than focusing on individual
households and firms, it examines conditions within the economy as a whole. This is the most vital
differences between micro and macroeconomics. In more technical terms, macroeconomics looks at the
factors that influence aggregate supply and demand. Although macroeconomics has a much broader focus
than microeconomics does, many macroeconomic factors are essential to making predictions and
conclusions at the microeconomic level. For instance, knowing what the unemployment rate is at the
national level can help a macroeconomist to predict future layoffs in a specific industry.

Self-Assessment Exercise

What do you understand by the term macroeconomics?

3.2. Goal of Macroeconomics

(a) FULL EMPLOYMENT

Full employment has been ranked among the foremost objectives of macroeconomic goal. It is an
important goal not only because unemployment leads to wastage of potential output, but also because of
the loss of social standing and self-respect. Moreover, it breeds poverty.

According to Keynes, full employment means the absence of involuntary unemployment. In other words,
full employment is a situation in which everybody who wants to work gets work. Full employment so
define is consistent with frictional and voluntary unemployment. To achieve full employment, Keynes
advocated increase in effective demand to bring about reduction in real wages. Thus the problem of full
employment is one of maintaining adequate effective demand. Keynes gave an alternative definition of
full employment at another place in his General Theory thus: “it is a situation in which aggregate
employment is inelastic in response to an increase in the effective demand for its output.” It means that the
test of full employment is when any further increase in effective demand is not accompanied by any
increase in output. Since the supply of output becomes inelastic at the full employment level, any further
increase in effective demand will lead to inflation in the economy. Thus the Keynesian concept of full
employment involves three conditions:
(i) Reduction in the real wage rate
(ii) Increase in effective demand
(iii) Inelastic supply of output at the level of full employment.

(b) PRICE STABILITY

One of the goals of macroeconomics policy is to stabilize the price level. Both economists and laymen
favour this policy because fluctuations in prices bring uncertainty and instability to the economy. Rising
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and falling prices are both bad because they bring unnecessary loss to some and undue advantage to
others. Again, they are associated with business cycles. So a policy of price stability keeps the value of
money stable, eliminates cyclical fluctuations, brings economic stability, helps in reducing inequalities of
income and wealth, secure social justice and promotes economic welfare.

However, there are certain difficulties in pursuing a policy of stable price level. The first problem relates
to the type of price level to be stabilized. Should the relative or general price level be stabilized, the
wholesale or retail, of consumer goods or producer goods? There is no specific criterion with regard to the
choice of a price level. Economists suggest, the compromise solution would be to try to stabilize a price
level which would include consumers’ goods prices as well as wages. But this will necessitate increase in
the quantity of money but not by as much as is implied in the stabilization of consumer’s goods price.
Second, innovations may reduce the cost of production but a policy of stable prices may bring larger
profits to producers at the cost of consumers and wage earners. However, in an open economy which
imports raw materials and other intermediate products at high prices, the cost of production of domestic
goods will rise. But a policy of stable prices will reduce profits and retard further investment. Under the
circumstances, a policy of stable prices is not only inequitable but also conflicts with economic progress.
Despite these drawbacks, the majority of economists favour a policy of stable prices. But the problem is
one of defining price stability. Price stability does not mean that prices remain unchanged indefinitely.
Comparative prices will change as fluctuating tastes alter the composition of demand; as new products are
developed and as cost reducing technologies are introduced. Differential price changes are essential for
allocating resources in the market economy. However, since modern economies tend to exhibit fairly rigid
downward inflexibility of prices, differential price changes can only be attained by gradual increases in the
aggregate price level over the long-run. Further, prices may have to be changed if costs of imported goods
increase or if taxation policy leads to the rise in the domestic cost of production. It should be noted that
price stability can be maintained by following a counter-cyclical monetary policy, that is easy monetary
policy during a recession and dear monetary policy during boom.

(c) ECONOMIC GROWTH

One of the most important goals of macroeconomics objective in recent years has been the rapid economic
growth of an economy. Economic growth is defined as the process whereby the real per capita income of
a country increases over a long period of time. Economic growth is measured by the increase in the
amount of goods and services in each successive time period. Thus, growth occurs when an economy’s
productive capacity increases which, in turn, is used to produce more goods and services. However,
economic growth implies raising the standard of living of the people, and reducing inequalities of income
distribution. We all will agree that economic growth is a desire goal for a country. But there is non
agreement over the magic number viz, the annual growth rate which an economy should attain.

Generally, economists believe in the possibility of continual growth. This belief is based on the
presumption that innovations tend to increase productive technologies of both capital and labour over
time. But there is very likelihood that an economy might not grow despite technological innovations.
Production might not increase further due to the lack of demand which may retard the growth of the
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productive capacity of the economy. The economy may not grow further if there is no improvement in the
quality of labour in keeping with the new technologies.

However, policy makers do not take into consideration the costs of growth. Growth is not limitless
because resources are scarce in every economy. All factors have opportunity cost. To produce more of one
particular product will mean reduction in that of the other. New technologies lead to the replacement of
old machines which become useless. Workers are also displaced because they cannot be fitted in the new
technological set up immediately. Moreover, rapid growth leads to urbanization and industrialization with
their adverse effects on the pattern of living and environment. People have a live in squalor and slums.
The environment becomes polluted. Social tensions develop. But growth has other more basic effect on
our environment, and, today, people are not so sure that unrestricted growth is worth all its costs, since the
price in terms of change in, deterioration of, or even destruction of the environment is not yet fully known.
What does seem clear, however, is that growth is not going to be halted because of environmental
problems and that mankind must learn to cope with the problem or face the consequences.

(d) BALANCE OF PAYMENTS

Another goal of macroeconomic objectives has been to maintain equilibrium in the balance of payments.
The achievement of this goal has been necessitated by the phenomenal growth in the world trade as
against the growth of international liquidity. It is also recognized that deficit in the balance of payment
will retard the attainment of other goals. This is because a deficit in the balance of payments leads to a
sizeable outflow of gold. But it is not clear what constitutes a satisfactory balance of payments position.
Clearly a country with a net debt must be at a surplus to repay the debt over a reasonably short period of
time. Once any debt has been repaid and an adequate reserve attained, a zero balance maintained over time
would meet the policy objective. But how is this satisfactory balance to be achieved on the trading account
or on the capital account? The capital account must be looked upon as fulfilling merely a short-term
emergency role in times of crises.

Again, another problem relates to the question: what is the balance of payments target of a country? It is
where imports equal exports. But, in practice, a country whose current reserves of foreign exchange are
inadequate will have a mild export surplus as its balance of payments target. But when its reserve become
satisfactory, it will aim at the equality of imports and exports. This is because an export surplus means that
the country is accumulating foreign exchange and it is producing more than it is consuming. This will lead
to low standard of living of the people. But this cannot last long because some other country must be
having import surplus and in order to avoid it, it would impose trade restrictions on the export surplus
country. However, the attainment of a balance of payment equilibrium becomes an imperative goal of
macroeconomics policy in a country.

Finally, if the money supply is below the existing demand for money at the given exchange rate, there will
be a surplus in the balance of payments. Consequently, people acquire the domestic currency by selling
goods and securities to foreigners. They will also seek to acquire additional money balances by restricting
their expenditure relatively to their income. The central bank, on its part, will buy excess foreign currency
in exchange for domestic currency in order to eliminate the shortage of domestic currency.
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Self Assessment Exercise

List and explain the goal of macroeconomics.

4.0 Conclusion

In conclusion, we can vividly say that Macroeconomics is seen as the study of aggregates or average
covering the entire economy, such as total employment, national income, national output, total investment,
total consumption, total savings, aggregate supply, aggregate demand and general price level, wage level
and cost structure.

6.0 Tutor-Marked Assignment

1. Define the term macroeconomics and give a detail explanation on how it works in the economy.
2. Discuss the goal of macroeconomics policy in a country.

THE DISTINCTION BETWEEN MICROECONOMICS AND

MACROECONOMICS.

3.1 Difference between Microeconomics and Macroeconomics

Microeconomics is the study of individual economic units of an economy whereas macroeconomics is the
study of aggregates of an economy as a whole. For example, when we study an individual sugar mill
manufacturing firm, our study is micro analysis but if we study the entire sugar manufacturing sector of
the economy, our study is macro analysis.

Also please note if we study the problem of production of a firm, our analysis is micro study but if we
study the problems of production of the whole economy, our analysis is macro study. Both
Microeconomics and Macroeconomics are interdependent and complementary.

The main difference between the Microeconomics and Macroeconomics are as follows:
MICROECONOMICS MACROECONOMICS
1. It is the study of individual economic It is the study of economy as a whole and its
units of an economy aggregates.

2. It deals with individual income, It deals with aggregates like national income,
individual prices and individual general price level and national output, etc.
output, etc.
3. Its Central problem is price Its central problem is determination of level of
determination and allocation of income and employment.
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resources.
4. Its main tools are demand and supply Its main tools are aggregate demand and
of a particular commodity/factor. aggregate supply of economy as a whole.

5. It helps to solve the central problem

of what, how and for whom to It helps to solve the central problem of full
produce in the economy employment of resources in the economy.

6. It discusses how equilibrium of a It is concerned with the determination of

consumer, a producer or an industry is equilibrium level of income and employment
attained. of the economy.
7. Price is the main determinant of Income is the major determinant of
microeconomic problems. macroeconomic problems.

Self Assessment Exercise

Differentiate between Microeconomics and Macroeconomics analysis?

3.2 Transition from Microeconomics to Macroeconomics

However, both microeconomics and macroeconomics were used by both the classical and the neo-classical
economists in their analysis. Marshall was the one that developed and perfected microeconomics as a
method of economic analysis. More so, Keynes was the one that developed macroeconomics as a distinct
method in economic theory. Therefore, the actual process of transition from microeconomics to
macroeconomics started with the publication of Keynes’s general theory.

Microeconomics is the study of economic actions of individuals and small groups of individuals. It
includes particular households, particular firms, particular industries, particular commodities, individual
prices, wages and incomes. Thus microeconomics studies how resources are allocated to the production of
particular goods and services and how efficiently they are distributed. But microeconomics studied in
itself, and does not study the problem of allocation of resources to the economy as a whole. It is concerned
with the study of parts and neglects the whole, for example according to the economists “Description of a
large and complex universe of facts like the economic system is impossible in terms of individual items’.
Thus the study of microeconomics presents an imprecise picture of the economy. However, the orthodox
economist, like Pigou, tried to apply microeconomic analysis to the problems of an economy. Keynes
thought otherwise and advocated macroeconomics which is the study of aggregates covering the entire
economy such as total employment, total income, total output, total investment, total consumption, total
savings, aggregate supply, aggregate demand, and general price level, wage level and cost structure. For
understanding the problems facing the economy, Keynes adopted the macro approach which brought
about the transition from micro to macro.
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Microeconomics also assumes the total volume of employment as given and studies how it is allocated
among individual sectors of the economy. But Keynes rejected the assumption of full employment of
resources, especially of labour. From the macro angle, he regarded full employment as a special case. The
general situation is one of under-employment. The existence of involuntary unemployment of labour in
capitalist economies proves that underemployment equilibrium is a normal situation and full employment
is abnormal and accidental.

Keynes refuted Piguo’s view that a cut in money wage could eliminate unemployment during a depression
and bring about full employment in the economy. The fallacy in Piguo arguments was that he extended the
argument to the economy which was applicable to a particular industry. Reduction in money wage rate can
increase employment in an industry by reducing its cost of production and the price of the product thereby
raising its demand. But the adoption of such a policy for the economy leads to a reduction in employment.
When money wages of all workers in the economy are reduced, their incomes are reduced
correspondingly. As a result, aggregate demand falls leading to a decline in employment in the economy
as a whole.

Microeconomics takes the absolute price level as given and concerns itself with relative prices of goods
and services. How the price of a particular commodity likes rice, tea, milk, fan scooter, etc. is determined?
How the wages of a particular type of labour, interest on a particular type of capital asset, rent on a
particular land, and profits of an individual entrepreneur are determined? But an economy is not concerned
with relative prices but with the general level prices. And the study of the general level prices falls within
the domain of macroeconomics. It is the rise or fall in the general price level that leads to inflation, and to
prosperity and depression. Prior to the publication of Keynes’s General Theory economists concerned
themselves with the determination for relative prices and failed to explain the causes of inflation and
deflation or prosperity and depression. They attributed the rise or fall in the price level to the increase or
decrease in the quantity of money. Keynes, on the other hand, showed that deflation and depression were
caused by the deficiency of aggregate demand, and inflation and prosperity by the increase in aggregate
demand. It is thus the rise or fall in aggregate demand which affects the general price level rather than the
quantity of money.

Self Assessment Exercise

Discuss the view of the classical and neo-classical economists on the transition from microeconomics to
macroeconomics.

Tutor-Marked Assignment

1. Discuss the transition of micro economist to macroeconomist of Classical and Neo-classical

economists.
2. Differentiate between Classical and Neo-classical economists.

INTRODUCTION TO BUSINESS II BAM 121

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Introduction

Business is anything (legal) an individual(s) engage into with a value in

return The term ‘personnel management’ has been used to describe that
function of management that deals with the recruitment, employment,
training, development, safety and departure of employee.
DEFINITION OF PERSONNEL MANAGEMENT

• Personnel management has been defined by different authors and scholar based on their perception
about it. Among these definitions are:

• Cuming (1980) defined personnel management to be concerned with obtaining the best possible
staff for an organization and having got them, looking after them so that they will want to stay and
give their best to the job.

• Cole (2002) stated that management which has the following responsibilities.
• Formulating, proposing and gaining acceptance for the personnel policies and strategies for the
organization.

• Advising and guiding the organisation’s manager or implementation of personnel policies and
strategies.

• Providing adequate personnel service for the organization to enable it recruit, motivate and develop
sufficient and suitable employees at all levels.

• Advising the organization managers of the human consequences of change.

• The institute of personnel Management (IPM) (1967) defined personnel management as the part of
management concerned with people at work and with their relationship within an enterprise. Its
aim is to bring together and develop into an affective organization the men and women who make
up an enterprise and having regards for the well being of the individual and of working groups to
enable them to make their best contribution to its success.

• There has been a noticeable popularity in the use of the term “Human Resource Management”
(HRM) to replace the term Personnel Management (PM)

• Fisher et al (2003) defined HRM to involve all management decisions and practices that directly
affect or influence the people or human resource who works for the organization. Robbins and
Coulter (2007) defined HRM as the process by which manager ensures that they have the right
number and kinds of capable people in the right place and at the right time.

• Doft and Maricic (2004) opined the HRM refers to the design and application of formal systems in
an organization to ensure the effective and efficient use of human talent to accomplish organization
goals. This includes activities undertaken to attract, develop, and maintain an effective work force.
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• Although the term “HRM and PM” have been used interchangeably, there are salient feature that
distinguished them from each other.

Management Functions:

These functions consist of:

• Formulation of personnel policy

• Planning: it involves the determination of personnel requirements of the organization.

• Organisation: It is concerned with building organizational structure, diving up the total

department s, division, sections, etc.

• Directing: It pertains to getting people to carry the activities s of the organization.

• Controlling: It involves regulating activities of personnel in accordance with the

organizational plan.

• Motivating: This is the process of making personnel department perform better.

• Determining the proper staffing level: The personnel department decides on the number of
persons needed for the accomplishment of corporate objectives. The staff of a firm should not
be too many so as not to incur excessive costs.

• AREAS COVERED BY PERSONNEL MANAGEMENT:

• From the various definitions of personnel management, it can be observe that Personnel
Management policies and procedures cover the following areas.

• Manpower planning, recruitment, selection, placement and termination.

• Terms of employment, method and standards of remuneration.

• Education, training and development.

• Proper communication channels (formal and informal)

• Conducive working conditions and employment services

• Industrial relations

• Motivation

• Good leadership styles

• Job evaluation and performance appraisal

• Safety at work
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• Reward (salary and wages) management

• Grapevine management.

OBJECTIVES OF PERSONNEL MANAGEMENT

Personnel management is concerned with the management of human

resource of the organization, and as a maximum utilization of human
assets in the achievement of the goals and objectives of the organization
The objectives of personnel management are:
• The develop and maintain and effective organization with special regard to human resources

• To ensure peaceful co-existence among staff and between employers and employees.

• To ensure that the terms and conditions of the job general are strictly adhered to.

• To provide equal opportunity to staff in terms employment and promotion in the

organization.

• To obtain, develop and retain quality and quantity staff required to meet the present and
future challenges of the organization.

• To ensure that the right staff is obtaining, placed in the right place and given the right0op
responsibility.

• To ensure maximum provision of the needed resources to the employees to perform their
duty maximally.

CHALLENGES OF PERSONNEL MANAGEMENT

The most common challenge faced by personnel managers are caused

by constant change that occur within and outside the organization.
Flippo (1984) identified these problems to be:

• Changing mix of the work force

• Changing personal values of the work force

• Changing expectations of citizen/employees

• Changing levels of productivity

• Changing demands of government.

CHANGING MIX OF THE WORK FORCE

Among the major changes in the mix of personnel entering the

workforce are
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• Increased number of minority members entering occupations requiring greater skills.

• Increase levels of formal education for the entire work force.

• More female employees

• More married female employees

• More working mothers

• A steadily increasing majority of white-collar employees in place of the blue -collar

• The last challenges have had much to do with many of the above-listed changes. Prohibition
of discrimination and requirements for positives action to redress imbalances in work force
mix have led to greater numbers of minority personnel being hired for all types of job.
Steady increases in the level of formal education would seem too fared well for continued
change.

• Laws as well as activist groups have contributed to greater numbers of female employees
entering the work force. The challenging this have brought to personnel management is that
most women within their working age are mother or still bear children; this make it a little
problematic for the organization to manage, therefore personnel managers should seriously
consider practices such as flexible hours of work, sharing of one job by two or more workers,
and providing child care during working hours.

CHANGING PERSONAL VALUES OF THE WORK FORCE

• Employees have recently realized the importance of personal values. Instead of organizations
providing the basic guides to living, persons are now responsible for exploring and
determining for themselves what they want to do and become. With this philosophy, work
becomes only one alternative among many as a means for becoming a whole person. Family
activities, leisure, vocations and assignment in government, churches, and schools are all
equally viable means through which a person can find meaning and become self-actualized.
The absolute measure of a man is

• the value which is merged with the concept that all people are members of the great human
family. Climbing the organization ladder of success of its accompanying materialistic
symbols becomes less important than self-expression through a creative accomplishment.
Quality of life is preferred to quantity, equity to efficiency, diversity of conformity, and the
individual to the organization (Flippo 1984).

• With respect to an increasing emphasis upon the individual as compared with the
organization, a number of changes in personnel programmes have been tried. Attempt has
been made to redesign jobs to provide challenging activities that meet needs of the human
ego. The design called “flextime” is a programme that allows flexible starting and quitting
for the employee. Simply, an opportunity given to employee to choose to start work earlier
and quit/close early.
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Though flextime fits quite well with the new values of the modern work force, such plans have
also been found to have a number of advantages to the employer among the advantages are:

• Enhanced productivity: The increase in personal value enhanced productivity. Explanation

of this include better morals, better fit of work time to the employee’s time, courtesy,
improved handling of fluctuating workload, and increased customer service.

• Reduced employee tardiness and absenteeism: arrival time is within a two-hour flexible
When contemplating a late arrival under a fixed schedule, the employee is often tempted to
skip work altogether. If the approved band, both tardiness and absenteeism from this source
are eliminated. Personal errands can be taken care of without the necessity of being officially
absent for all or portion of the day.

• Improved moral and reduced turnover: Flexi time provides the employee with some control
over the work day, thereby constituting types of job enrichment. Employees are treated
substantially in the same fashion as managers and professional personnel.

• Some of the disadvantages associated with the employer’s utilizing a flexi time schedule are
utility cost; supervision etc utility costs are increased since the plant is open for longer
periods. And supervision may become a problem since a single supervisor cannot be present
for the full day or hours authorized. Changing expectation of citizen/employees:

• There are increasing signs that external rights of citizenship .are penetrating the boundaries
of business enterprises in the interest of improving the quality of work life. Two prominent
illustrations are

• Freedom of speech, and

• The right of privacy

• The big question is, should employees be allowed to speak up and criticize the organization’s
management and its product without jeopardizing their job security? In public
organizations, this right of “whistle blowing” is fairly well protected. Though some private
firms have voluntarily adopted policies favourable to employee freedom of speech, others
have been forced to such practices through court cases.

• There has been more voluntary movement in the area of privacy than in conjunction with
freedom of speech.

CHANGING LEVELS OF PRODUCTIVITY

• Personnel managers have been faced with a lot of challenge due to changes in production
level due to:

• Numerous federal regulations and laws have added to the cost of doing business with
enhancing productivity in the short run, such as environmental protection, health and safety,
affirmative action etc.
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• Such laws have led to increased numbers of new female and minorities may have resulted in
less productivity during the introductory period.

• With pressure from stockholders, stock markets and financial institutions, they tend to
postpone vital research, development, and new plant investment in the interest of short-term
showings. This leads to declining productivity over time. It is also contended that various tax
laws have discourage innovation and new plant investment.

Adversarial relationships with labour unions reduce cooperative

efforts that would enhance productivity.

• Employee alienation leads to refusal to collaborate in the interest of improving productivity.

Poor employee attitudes have been caused by such factors as high job insecurity, narrow and
meaningless jobs, and autocratic managers who deny significant employee participation in
decisions affecting the work and the quality of work life.

CHANGING DEMANDS OF GOVERNMENT

• This context poses a lot of challenges on personnel management as a result of constant

change in government legislation, and thus, personnel management is becoming increasingly
legalized.

MANPOWER PLANNING

• Manpower planning is also called Human Resource Planning. It is a process of ensuring that
the personnel need the organization will be constantly and appropriately met in the bid to
achieve organization objectives. That is, it is a process of forecasting future employee
demand and supply.

OBJECTIVES OF MANPOWER PLANNING

Shokan (1995) identified the objective of manpower planning as:

• To ensure the presence of right number of employees, with right level of skills, in the right
job, at the right time and performing the right activities so as to achieve the objectives of the
organization.

• To ensure the optimum use of human resources currently employed.

• To provide for future manpower needs of the organization in terms of skills, number and
age.

DETERMINANTS OF MANPOWER PLANNING

• Manpower planning will enable a personnel manager to answer the following question:

What kinds and number of people is the firm currently having?

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• What kinds of people does the organization require?

• What is the number of people required?

• Over what time span are these people required?

• How can the organization meet the shortfall between the existing employees and future
employee needs from internal and external sources?

• What changes are taking place in the external labour market which might affect the supply
of manpower?

MANPOWER PLANNING PROCESS

The steps involved in the process of manpower planning are:

• Identify and assess the relevant internal and external factors.

• Carry out the audit of current jobs numbers of current employees and employee skill by
generating human resources inventory highlighting names, education, training prior to
employment, languages spoken, capabilities, specialize skills. This exercise enables managers
to assess what talents and skills are available

• Predict the future gross human resources need of the organization.

• Compare the overall, manpower needs to the existing human inventory to determine net
manpower needs.

• Develop the human resources programme so as to match to supply of labour with estimated
demand. The existing human resource may need to be reduced, increased or adjusted.

BENEFITS OF MANPOWER PLANNING

• The benefits of manpower planning are:

• Personnel costs may be less; unnecessary personnel costs are avoided.

Workers enjoyed better opportunities

• Development of managers can be planned.

• Top management has better view of human dimensions of business decision.

• It provides the organization with the opportunity of locating talents because needs are
anticipated and intensified before the actual staffing.

Getting applications for the job is not hard, but being able to get the right people is the problem. You can
make a small advertisement in a local newspaper or paste a sign saying “vacancies are available for so and
so jobs” you can imagine the number of people applying will definitely be far more than what you wanted.
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You may be so much amazed that you will even need a help to sort out the entire applications forms and
shortlist those to be called for interview. Your responsibility as an employer is to be able to ascertain the
employability of the individuals who applied for the job.

The Process of Staffing

The process of staffing begins with the analysis of staff requirements and
ends with filling the various positions with the right persons. These
processes are as follows:
a) Analysis of staff requirement
i. Prepare a description of the job
ii. Match the job with the type of employees needed for each particular position. (Using criteria like
age, education, income, experience, skills and resumption date).
b) Job Description
Factors influencing it are:
i. Describe each job in detail
ii. Stating each responsibility of each and how each job relates to another within the organization.
iii. The specific skills needed to perform the function.
iv. The required educational qualification and experience the function needs.
c) Recruitment
Ways to source for right personnel’s.
i. Advertise on a newspaper in your area or on a national newspaper to attract qualified person.
•
ii.
You can past a sign on your premises or you can past a sign or you talk to your friends to assist in
recommending some persons of good character and good workers. iii. Visit schools and make
recruitment drives.
Recruitment Processes
1. Advertise on various medias
2. Accept applications
3. Shortlist candidate who are qualified.
4. Adopting various test
5. Interview
6. Orientation
7. Handbook

Factor to be Consider in Interviewing:

1. Select a congenial environment for your interview.
2. Pose questions clearly and precisely so that the interview will be able to understand your questions.
3. Judge his eye contacts, pronunciations, and ability to communicate and address issues intelligently.
Ask open-ended questions related to the jobs so that you can ascertain his ability to perform the
functions to be assigned to him.
4. Provide the application with technical test require these applications whose jobs require some expertise
such as confidential secretaries, typists, quality controllers, machinists etc. the practical test will enable
you determine his ability and skill on the job.
5. If you find the applicant suitable for the job, take his references; and validate their authenticity. You
can do that by writing to the referees or by telephone or by sending to the referees a designed
“experience check” forms.
6. Applicant required undergoing some necessary medical test.
7. A handbook stating the company’s guidelines for promotion, leave, rules and regulations of the
company is given to the new employees. d) Orientation:
 It exposes the new employee to the operations of the business.
 Close to the new employee
 To discover his strengths and weaknesses  Discuss an improvement method within.
 Create a cordial and harmonious working condition for the employee so that he may be able to put in
his best in the operations of the business.
e) Employees’ Handbook
The business owner should prepare an employees’ handbook for the employees. It should be precise, simple
and easy for comprehension. It should contain all the information about your business, its objectives, policies,
philosophy, the organizational chart, the reporting system, method of promotion, termination, and in event of
employee, death, the procedures for the settlement of the benefits. Other information needed are: paid public
holidays, check off system, service award, medical plan and paid sick leave. This should be given to the lawyer
for wetting.
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F) Employee Compensation Plan

The reason why people work is the economic reward attached to it. This
depends on the nature, size and location of your business. This is in addition to
fringe benefits; incentives which can attract caliber of persons to the business.
g) Training
Employee need adequate training to provide them with acquired knowledge and
skills to enhance their performance. The job will become mere routine,
unattractive, and boredom to the employees; when this happen, business
performance may begin to drop as high employee turnover and absenteeism will
begin to energy.

Types of Training
1. On-the-job Training
2. Formal classroom training

h) Employee Performance Appraisal

There are needs to evaluate the business periodically so as to find out the
contribution of staff to the business.
 Yardstick for measuring these are:
 Creating a performance appraisal form and at the end of each row the specific score for each item is
determined.
 Using the objective to evaluate.

I) Employee Termination

It is a process whereby an employee seizes to be a staff of the company. Reasons are: criminal offence
by a law court, arson, fraud, impersonation, armed robbery, willful destruction of the company’s property.
Other minor offences are lateness to work, constant absenteeism without permission, insubordination,
negligence to duty etc attract query, suspension, warning letter or termination letter.

BUSINESS RISK AND INSURANCE

INTRODUCTION

Business is economic activities directed at the provisions of goods and services with the sole aim of
profit making. This economic activities ranges from financial services, accounting services, personnel,
marketing, advertisement, health, education, production, business centres (photocopying and typing stores,
telephone, cybercafé, etc), and research and development (R and D). There are also non-profit making
businesses but, for the purpose of this text, we will concern ourselves with the profit motive businesses.

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Profit in business is not an immediate outcome when a business is established. It is what may take place
after a series of’ turnover, and over a time frame.

This time frame which may be in the very short period, medium period or even long term period,
depending on the nature of the business, is full of uncertainty or occurrence of events that may affect the
business ability to achieve the desired goals. This uncertainty or events can be fire outbreak,
theft/burglary, accident, drought, sea hazard or death, are referred to, as risk.

Business takes different forms. This may be small scale, medium scale or large scale such as, the one-man
business, the partnership, co-operative societies or those of the joint stock companies. In undertaking any
of these forms of businesses, an entrepreneur is exposed to risk.

What is risk? What are the business risks an entrepreneur is exposed to?
How can business risk be managed?

BUSINESS RISK

Risks are the uncertainties surrounding the expected outcomes from business activities. Technically,
this uncertainty may be positive or negative. However, general usage tends to focus only on potential
harm that may arise from the uncertainties which may occur either from incurring a cost [downside risk],
or by failing to attain some benefits [upside risk).

In this way, risk can also be defined as the probability of loss to which the business enterprise is exposed
to. In the work place, incidental and inherent risks exist.

Incidental risks are those risks which occur naturally in the business but are not part of the core
business. For example, risk can be caused by economic, social and political phenomenon such as war,
inflation, pollution, earthquake, floods, drought, labour strike, delay in passing the budget, even death,
and machine accident, etc.

Inherent risks are those risks that are inherent with business operations and thus, can have a negative
effect on the business profits. Inherent risks include; frauds, embezzlement, fire outbreak, break down of
machines, theft/burglary, pest, diseases or health hazard, etc.

INSURANCE

An entrepreneur can manage business risks by taking an insurance policy. Insurance, in law and
economics, is a form of risk management primarily used to hedge against the risk of a contingent loss.
Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange
for a premium. It can also be thought of as a guaranteed and known small loss to prevent a large, possibly
devastating loss. It is a valuable sort of protection against business risks that might arise in the course of
business operations. This is the role of the insurance company.

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An insurer is a company selling the insurance policy. An insured or policyholder is the person or entity
buying the insurance. The insurance rate is a factor used to determine the amount to be charged for a
certain of insurance coverage, called the premium.
CLASSES OF INSURANCE

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to
claims are known as “perils”. An insurance policy will set out in details which perils are covered by the
policy and which are not. Below are list of the many different types of insurance that exist.

[a] Auto/Motor vehicle insurance

Business vehicles can sometimes be involved in auto/motor accidents.

Auto insurance policy protects you against financial loss arising from motor
accidents. Auto insurance provides for the following:

1. Pay for damage to or theft of your car.

2. Legal responsibility to others for bodily injury or property damage.

3. Medical pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral
expenses.

Auto/Motor vehicle insurance policies are of two types: comprehensive motor vehicle policy and third
party motor vehicle policy.

Comprehensive policy covers loss/damages sustain by the insured and a third party involved in the
accident.

Third party policy only compensates the third party as a result of the damages caused by the insured.

Most auto policies are for six months to one year.

[b] Home insurance

Home insurance provides compensation for damage or destruction of a home by members of the
household, including pets. Insurers offer a package which may cover liability and legal responsibility
for injuries and property damage.

[c] Health insurance

In a case of a worker taking ill, sick or have a motor accident or accident in a work place, the
health insurance policy covers the payments for the treatment of the insured worker. Health insurance
policy is insurance that cover the cost of medical treatments of workers and their immediate families.
In Nigeria, such policy is called the National Health Insurance Scheme-NHIS.

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[d] Accident and Sickness insurance

Accident arises when embarking on a journey, injuries sustain or death in a place of work. Thus,
an employer can take accident/sickness insurance policy to cover their employees/workers against
accident and illness that may have been sustained in the course of their works. This insurance policy,
provide financial support in the event the policyholder is unable to continue working due to disabling
illness or injury sustained in the course of working. It provides monthly support/payment to such
person involved. The policy also covers goods and merchandise that are being transported from one
place to another. Likewise, when goods are carted away by theft, burglary, armed-robbers, etc. from
business premises.

[e] Fire insurance

Fire outbreak is a business risk that can create loss, damages or havoc to business operations.
Fire outbreak can result from lighting, explosion of domestic appliances such as kerosene can, petrol
can, candle light or faulty electrical wiring, etc. A fire insurance policy can, indemnify the insured
against any loss/damage occasioned by fire.

[f] Marine insurance

Marine is sea transportation. There are lots of hazard in transporting goods through the sea, such
as sea pirates, storm, fire, collision or ship wreckage, etc. An entrepreneur involved with international
trade should take marine insurance to cover such or damage from sea hazard.

[g] Fidelity insurance

There are also losses that can arise from the dishonesty or fraudulent acts of persons/workers
holding a position of trusts e.g. cashiers, accountants, salesmen/storekeepers etc. The fidelity
guarantee insurance policy protects, compensate or indemnify employers/entrepreneur against any
financial losses that they may incur as a result of employees’ dishonesty.

[h] Agricultural insurance

In the course of carrying out farming activities, farmers sometimes experience crops/animals
losses as a result of theft. Their farm goods, birds and animals, adverse weather conditions drought,
pests or diseases and fire outbreak, etc. This policy thus reduced, manage, and Protect/compensate
farmers against any loss damage caused by the aforementioned events. [i]
Life insurance.

Life insurance provides a monetary benefit to a dependent’s family or others. It is certain that one must
die. Thus, the term life insurance is to provide future income to the insured/assured beneficiary or
dependent in the event of his or her designated beneficiary, and may specifically provide for income to
an insured person’s family, burial, funeral and other final expenses. Life insurance policies often allow

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the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an
annuity. Life insurance/assurance takes different forms.
a. Whole life policy

Under this policy the amount of money paid-i.e. premium, as the insurance money would be
given to the assured/insured beneficiary upon his or her death. The premium paid by the
insured/assured is either throughout his or her life, or up to certain age.

b Endowment policy

This policy serves dual purposes. Apart from be use as life insurance, it also enable the
insured/assured to accumulate cash/savings attracting interest rates, and may be taken by the insured if
the policy is surrendered or borrowed against or withdraw part for his or her own use.

Role of insurance companies

In businesses, insurance plays the following roles.

a. it safeguard or protect the entrepreneur against the numerous risks to which capital is exposed;

b. it reduces the burden of losses to the entrepreneur;

c. it provides the entrepreneur the confidence and security of venturing or investing in certain areas;

d. A life insurance/assurance policy can be used as collateral for raising loans from the bank, needed for
investment or expansion purposes.

e. it assist in aiding savings. The premium for instance, on life insurance accumulates overtime such that
in the event that the unfortunate did not happen, this amount or part of the total sum can be
withdrawable even with interest rate payment.

d. BASIC PRINCIPLES OF INSURANCE

In carrying out insurance business, and in taking insurance policy, there are certain principles which
guide both the insured and the insurer. The six principles of insurance are:

a. Principle of indemnity

This principle states that the insurance company must indemnify or compensate the insured up to the
limit of the amount covered by the policy in the event of what is insured against occurs, but the insured is
not expected to make a profit out of the insurer. For example, if a car is worth N40,000.00, and was
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insured for N60,000.00, the insurer will only pay a compensation of up to the actual worth of the car if it is
stolen or damaged beyond repairs.

b. Principle of uberrimae rides

It is a Latin phrase meaning utmost good faith [literally, most abundant faith]. That a person buying an
insurance policy must disclosed in full to the insurance company all information/material facts concerning
the policy he or she is insuring against. Such information/facts would help the insurance company to
decide whether or not to cover the risk, and if then, what amount of premium to charge. The breach of this
principle either by the insurance company or by the individual/company taking the policy will render the
contract null and void.

c. Principle of insurable interest

Any individual/company who takes insurance policy, or insured against any loss or damage; that loss or
damage is called insurable interest. For example, a person who insured his or her car against accident, and
not another person insuring your car for his or her own benefit.
d. Principle of mitigation

This principle states that the insured just because he or she has taken insurance policy must not behave
irresponsibly, and not becoming careless and inactive in the event of any mishap, rather, he or she must act
like an uninsured person so that the risk of loss or the loss is minimized.

d. Principle of mitigation

This principle states that the insured just because he or she has taken insurance policy must not behave
irresponsibly, and not becoming careless and inactive in the event of any mishap, rather, he or she must act
like an uninsured person so that the risk of loss or the loss is minimized.

f. Principle of causa proxima-or proximate cause

Meaning, the proximate cause of loss, and to ascertain whether the loss is
covered under the policy, and to determine the liability of the insurer.

PRODUCTION MANAGEMENT

Production could be defined as the activity that involved human effort leading to the satisfaction of
human’s want.

Although, we have earlier known that factors of production are: land, labour, capital and entrepreneur. The
management be injected into production is called production management, it represent Lamn-1 where a-
constant- L- labour m- management. Organization either produces goods or service such organization
could resembles Breweries, Hospital as the case may be.

PRODUCTION MANAGEMENT VERSUS PRODUCTION ENGINEERING

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They are not the same but there are considerable areas of common interest. The production engineer is
concerned with the design of physical equipment while the production manager is concerned with
organization of the use of the equipment and other resources, man, materials and money. Knowledge of
engineering of any sort is not necessary equipment for a production manager, although it could be an
advantage.

SYSTEM AND MODEL IN PRODUCTION MANAGEMENT

A system is a physical entity i.e. component or sub parts that made up of all while a model is a symbol
way of representing the system. In a nutshell, a production is a system that is to say , the operation activity
consist of a number of interrelated element.

Properties or attributes of components of production model

(a) Inputs -these may be processed in any Predetermined Sequence of operation and are transport

(b) Operation- number of operation may vary from one to many

(c) Storage -this occurs between all operation and the time in storage may vary from zero to an infinite time.

(d) information-information system interconnected of all activities and provides the basis for management
decisions.

(e) output -these are drawn from storage according to some predetermined priority rule e.g. first come, first
service or emergencies first.

PRODUCTION MANAGEMENT FUNCTIONS

 Design and creation

 Production planning pre functions

I. Work study
II. Production control

III. Stock control

IV. Quality control

V. Manteca and replacement during production function

VI. Inventory control

VII. Motivation of the works

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VIII. Maintenance and replacement after production functions

IX. Inventory control

X. Motivation of the works

PRODUCTION CONTROL CHARTS

They are pictorial means of representing a mass of actual data so that significance can be understood they
are unduly use in industry for control purpose, sales. In the field of production, scheduling chart often
constitute the foundation upon which all scheduling activities are based. Control chart used as tool of
production control include the following:
 The project layout chart

 The load chart and

 The progress chart

The project layout- this schedules in advance the works ahead of either man or equipment or both and
determines the relatives’ importance of work and enhance the sequence in which it should be performed

The load chart: it indicates the number of hours, lays, or jobs the workload, ahead of a particular machine,
battery of machines department or plant.

The progress chart: it compare the progress or accomplishment made against a prescribe plan. It direct
attention to failure,thus, making possible appropriate investigation and action.

LAYOUT PLANNING

It pertains to problem of partial arrangement of the component entries and facilities of an origination so as
to secure optimum conceive in their location relationship. But plant layout in production management,
refers to the arrangement of departments, machine, storage areas, and other integral components of an
organization within the enclosure of a physical structure like a factor, a ware house, a retail store, an
office.

CHARACTERISTICS OF GOOD PLANT LAYOUT

 Maximum flexibility

 Maximum co-operation

 Maximum use of volume

 Maximum visibility

 Maximum accessibility
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 Maximum distance

 Minimum handling

 Minimum discomfort

 Inherent safety

 Maximum security
PREPARING A PLANT LAYOUT

The following information needs to be available when preparing plant

layout.
 The type and quantity of labour, together with the company’s organization structure.

 The volume of work to be produce forms the space, both immediately and in the foreseeable future.

 The equipment needed to carry out the operations

 The number of movement of materials from one work center to another during a given working period
ADVANTAGE OF A GOOD PLANT LAYOUT
 Reduction of time and costs

 Simplification of supervision and control

 Maximization of space use

 Accommodation of change in programmer

 Substance of quality of product

TYPES OF PLANT LAYOUT DESIGN

 Produce layout

 Process layout

 progress layout
ACCOUNTING AND FINANCE

• Definition of Accounting: Accounting is the complete process of identifying, recording, classifying,

summarizing, reporting, interpreting and analyzing the financial information.
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• It is an art of systematically recording the transactions, for keeping a proper track of financial
statements on the basis of Accounting Standard (AS).

• With the help of the financial statement of an entity, internal audit, and tax audit is conducted at the end
of the financial year.

• This financial statement is readable to the users after the audit, who can view the performance and
position of the business for a particular period. The users of the financial statement include all the
stakeholders such as creditors, debtors, lenders, suppliers, investors, shareholders, employees, etc. who
are

Definition of Finance
• Finance is the science of the acquisition and allocation (i.e. Spending or investment) of funds
effectively.

• It is a broader term, which studies about money and capital market along with the arrangement and
management of funds by business.

• The major aspect of finance is the “time value of money” i.e. the value of money changes over time.

• It helps in analyzing any budget for choosing an optimum investment plan, which lowers the risk factor
for a firm.

Difference between Accounting and Finance

Basis for Comparison Accounting Finance

Meaning Accounting is an art of Finance is the science of

recording and reporting of the management of funds of a business
monetary transactions of a
business.
Branches Financial Accounting, Private Finance, Public Finance,
Management accounting, Corporate Finance etc.
Cost accounting, Tax
Accounting etc.
Career Accounting professionals Finance professionals can
can become accountants, become an investment banker,
auditors, tax consultant, etc. financial analyst, finance
consultant, etc
objective To provide information . To study the capital market and
regarding the solvency status of funds of business for making
the company to the readers of future strategies.
the financial statement.
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Key Differences between Accounting and Finance

• Accounting is a methodical record keeping of transactions of business while Finance is the study of the
management of funds in the best possible manner.

• Accounting is a subset of Finance

• The accounting information is helpful for the users of the financial statement for understanding the
financial position of the business while Finance is useful in forecasting the performance of the entity in
the future.

• Accounting uses Income Statement, Balance Sheet, Cash Flow Statement, etc. as its tools. On the other
hand, Leverage, Capital Budgeting, Ratio Analysis, Risk Analysis, Working Capital Management, etc.
are financial tools.

• There are four branches of accounting while there are only three branches of finance
Interdependency

• Accounting and Finance both are a part of economics. Both these entities are dependent on each other,
such as accounting is a part of finance and finance is dependent on accounting.

The financial analysis is done with the help of the financial statement,
submitted by the auditor. In other words, they are very closely
interconnected, or we can say, the end of accounting is the beginning of
finance.

Key Points

• In every sphere of business, Accounting and Finance are involved in such a way that business cannot
survive for a long time without them. If you want to know its importance, just imagine what would be
the condition of a company if both of them were not there.

• There will be no records of transactions, no profits could be determined, there won’t exist any basis on
which the inventories and investments would be valued, management of capital is unimaginable, risk
factor will increase, no comparison could be made, budgeting and analysis of cash would not be
possible, etc. If any person

• If anyone wants to make a career in accounting and finance, first of all, the choice of career is great
because of diverse opportunity in banking, advertisement, insurance, marketing, management and so
on. And to do so, he has to take accounting and finance degrees.
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Importance of Accounting and Finance in Business

• When we talk about business, the first thing that comes into our mind is money. Generally, that is the
means and ends of for-profit entities- to keep earning money.

• To be able to do this, having the knowledge about accountability and management of money becomes a
necessity to every businessman.

• Businessmen must know how money revolves around his business, how to generate money, where
money came up from, how money is spent, and how to make use of the money.

Basically, every businessman must know the past, present, and future of his
business, in financial terms.
• Many businessmen claim that they understand accounting and finance enough for them to start out their
business ventures. Yes, accounting and finance are the basics of business, to which an entrepreneur
should be conversant of.

• And being the founding tools of business, it is very important that every businessperson should be well
aware of the functions and uses of accounting and finance.

• Thus, let us solidify your knowledge about Accounting and Finance

American Institute of Certified Public Accountants (AICPA)
• A common misnomer is the idea that accounting and finance are the same thing. But in reality,
accounting and finance are two separate process, in business. They are two different aspects of business
that harmoniously work to keep the business going. Yes, they are very much related, in a symbiotic
relationship, but they are not the same.

• Accounting, as defined by the American Institute of Certified Public Accountants (AICPA), is “the art
of recording, classifying and summarizing in a significant manner and in terms of money, transactions
and events which are in part at least, of a financial character, and interpreting the results thereof”.

• It is the whole process which will answer the what, where and how of the business in terms of money.

• The underlying concept about accounting is that it is the reporting about the status of the business using
the financial language which is money. Accounting begins with the process of identifying which events
and transactions affect the financial standing of the business.

Normally, a business undergoes a lot of dealings and happenings every day,

but not all of these occurrences qualify to be recognized as an accounting
event. Only accounting events are recorded and included in the accounting
process.

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• For example, Company ABC is a dealer of beauty products; it purchases items for resale from a
supplier, stores these items into their warehouse, and ultimately place them into their stores for selling
to customers.

• The process where Company ABC fill their warehouse with beauty products bought from the
supplier qualifies as an accounting event because the company disbursed cash to the supplier in
exchange for the products.Thus, it affected the company financially and must be recorded.

• On the other hand, the act where the company moved some of the items from their warehouse to their
store does not qualify to be an accounting event because the movement did not affect the company
financially.

• The movement of the merchandise did not change the fact that the items are still for resale and were not
converted to cash or any form but remained as part of the inventory. The basic rule, in classifying
whether the transaction should be recorded or not, rely mainly on recognizing if the event affects
the business financially or not.

• During recording, events are further classified as to which part of the accounting information it
belongs, the classifications are listed below:

• Assets – events which give rise to resources that will benefit the company;

• Liabilities – events which give rise to monetary obligations;

• Income – events which give rise to earnings for the company; and

• Expenses – events which give rise to outlays or charges against the earnings of the company.

At an interval, or what is called “at the end of the accounting period”, the
accounting events, which are recorded at their monetary value, are then
summarized according to their classification.
• This significant summary of accounting information is called Financial Statements. Financial
Statements presents the financial standing of the company. It shows what the company did with the
money, was the company successful in making use of the money, and the rest of the company’s history
and status of the finances of the business.

FINANCE

Financial Statements are the end products of the accounting process. While finance begins with the
interpretation of these financial statements.

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Finance is a lot broader concept compared to accounting. It encompasses accounting, economics, taxation,
business laws and all other fields contributory to the whole process of acquiring and utilizing funds for the
benefit of the business.

Bonneville and Dewey (1945) defined the finance function as consisting of “raising, providing,
managing of all the money, capital or funds of any kind to be used in connection with the business”.

MARKETING
• "Marketing is the management process responsible for identifying, anticipating and satisfying
customer requirements profitably."

• This means the ideas, the brand, how you communicate, the design, print process, measuring
effectiveness, market research and the psychology of consumer behavior all count as part of the
bigger picture of ‘marketing’.

An understanding of what customers need and value, is central to

marketing. Learning your customers' needs and how you can add value
through marketing activities paves the way for a successful business in
the long term

B2B - marketing to other businesses

• Business-to-business or B2B marketing involves products or services that are sold to other businesses or
organisations.

• These products are often referred to as industrial goods which could include yarn for use in textile
manufacture, installations - such as largescale equipment, aircraft, production machinery and operating
supplies like paper, pens, etc. Many roles require specialist technical or scientific knowledge.

B2C and FMCG - marketing directly to consumers

• Business-to-consumer marketing (B2C) relates to people who buy products and use services for their own
personal or domestic consumption.

• This includes durable items such as cars, white goods and consumer goods for speedy consumption such as
food, drinks and toiletries, also known as FMCG (Fast Moving Consumer Goods).

Approaches to Marketing
• An integrated marketing approach

• Marketing strategy

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• Market research

• Marketing communications

• Brand management

• Direct marketing

Advertising

• THE MARKETING CONCEPTS/PHILOSOPHY: What philosophy should guide a company

marketing and selling efforts?

• What relative weights should be given to the interests of the organization, the customers, and
society?

• These interest often clash, however, an organization’s marketing and selling activities should be
carried out under a well-thought-out philosophy of efficiency, effectiveness, and socially
responsibility.

• Five orientations (philosophical concepts to the marketplace have guided and continue to guide
organizational activities:

THE FIVE CONCEPTS

• The Production Concept: This concept is the oldest of the concepts in business. It holds that
consumers will prefer products that are widely available and inexpensive.

• Managers focusing on this concept concentrate on achieving high production efficiency, low costs,
and mass distribution. They assume that consumers are primarily interested in product availability
and low prices.

• This orientation makes sense in developing countries, where consumers are more interested in
obtaining the product than in its features.

• The Product Concept: This orientation holds that consumers will favor those products that offer the
most quality, performance, or innovative features. Managers focusing on this concept concentrate
on making superior products and improving them over time.

• They assume that buyers admire well-made products and can appraise quality and performance.
However, these managers are sometimes caught up in a love affair with their product and do not
realize what the market needs.

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Management might commit the “better-mousetrap” fallacy, believing that a better mousetrap will
lead people to beat a path to its door

• The Selling Concept: This is another common business orientation. It holds that consumers and
businesses, if left alone, will ordinarily not buy enough of the selling company’s products.

The organization must, therefore, undertake an aggressive selling and promotion effort. This
concept assumes that consumers typically show buying inertia or resistance and must be coaxed into
buying.

• It also assumes that the company has a whole battery of effective selling and promotional tools to
stimulate more buying. Most firms practice the selling concept when they have overcapacity.

• Their aim is to sell what they make rather than make what the market wants.

• The Marketing Concept: This is a business philosophy that challenges the above three business
orientations. Its central tenets crystallized in the 1950s.

• It holds that the key to achieving its organizational goals (goals of the selling company) consists of the
company being more effective than competitors in creating, delivering, and communicating customer
value to its selected target customers.

• The marketing concept rests on four pillars: target market, customer needs, integrated marketing
and profitability.

• The Societal Marketing Concept: This concept holds that the organization’s task is to determine the
needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively
and efficiently than competitors (this is the original Marketing Concept).

Additionally, it holds that this all must be done in a way that preserves
or enhances the consumer’s and the society’s well-being.

The marketing Mix

• The marketing mix definition is simple. It is about putting the right product or a combination thereof in
the place, at the right time, and at the right price. The difficult part is doing this well, as you need to know
every aspect of your business plan.

• As we noted before, the marketing mix is predominately associated with the 4P’s of marketing, the 7P’s of
service marketing, and the 4 Cs theories developed in the 1990s.

Marketing Mix – Product

• What does the client want from the service or product?

• How will the customer use it?

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• Where will the client use it?

• What features must the product have to meet the client’s needs?

• Are there any necessary features that you missed out?

• Are you creating features that are not needed by the client?

• What’s the name of the product?

• Does it have a catchy name?

• What are the sizes or colors available?

• How is the product different from the products of your competitors?

• What does the product look like?

Marketing Mix – Price
The price of the product is basically the amount that a customer pays for to
enjoy it. Price is a very important component of the marketing mix
definition.

PRICE
• When setting the product price, marketers should consider the perceived value that the product offers.
There are three major pricing strategies, and these are:

• Market penetration pricing

• Market skimming pricing

• Neutral pricing

• Here are some of the important questions that you should ask yourself when you are setting the product
price:

• How much did it cost you to produce the product?

• What is the customers’ perceived product value?

• Do you think that the slight price decrease could significantly increase your market share?

• Can the current price of the product keep up with the price of the product’s competitors?
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Marketing Mix – Place
• There are many distribution strategies, including:

• Intensive distribution

• Exclusive distribution

• Selective distribution

• Franchising

Here are some of the questions that you should answer in developing your
distribution strategy:
Where do your clients look for your service or product?
• What kind of stores do potential clients go to? Do they shop in a mall, in a regular brick and mortar store,
in the supermarket, or online?

• How do you access the different distribution channels?

• How is your distribution strategy different from your competitors?

• Do you need a strong sales force?

• Do you need to attend trade fairs?

• Do you need to sell in an online store?

Marketing Mix – Promotion
• Promotion is a very important component of marketing as it can boost brand recognition and sales.
Promotion is comprised of various elements like:

• Sales Organization

• Public Relations

• Advertising

• Sales Promotion

• Advertising typically covers communication methods that are paid for like television advertisements, radio
commercials, print media, and internet advertisements. In contemporary times, there seems to be a shift in
focus offline to the online world.

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Marketing Mix – People
Thorough research is important to discover whether there are enough people in your target market that
is in demand for certain types of products and services.

The company’s employees are important in marketing because they are the ones who deliver the
service. It is important to hire and train the right people to deliver superior service to the clients,
whether they run a support desk, customer service, copywriters, programmers…etc.
• When a business finds people who genuinely believe in the products or services that the particular business
creates, it’s is highly likely that the employees will perform the best they can.

• Additionally, they’ll be more open to honest feedback about the business and input their own thoughts and
passions which can scale and grow the business.

Marketing Mix – Process

• The systems and processes of the organization affect the execution of the service.

• So, you have to make sure that you have a well-tailored process in place to minimize costs.

• It could be your entire sales funnel, a pay system, distribution system and other systematic procedures and
steps to ensure a working business that is running effectively.

• Tweaking and enhancements can come later to “tighten up” a business to minimize costs and maximise
profits.

Marketing Mix – Physical Evidence

• In the service industries, there should be physical evidence that the service was delivered. Additionally,
physical evidence pertains also to how a business and it’s products are perceived in the marketplace.

It is the physical evidence of a business’ presence and establishment. A concept of this is branding. For
example, when you think of “fast food”, you think of Mr BIGGS When you think of sports, the names
Nike and Adidas come to mind.

• You immediately know exactly what their presence is in the marketplace, as they are generally market
leaders and have established a physical evidence as well as psychological evidence in their marketing.

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