P.O.

B
1. Barter- is the exchange of goods and services without the use of
money. (early humans used item like shells, dog’s teeth etc.)

Advantages:

• Easy disposal of surplus items

• Increased productivity which led to improved quality of life.
Disadvantage:

• Double coincidence- people who are trading with the same good
you are trading
• Divisibility of Goods- some goods were difficult to split

2. Money- is a medium of exchange that is generally accept in a

society.

Functions of money- To be a good store value, To be a unit of account,

provide a mean of deferred payment.

Characteristics of money-

• Durable
• Acceptable- people must agree to use it
• Exchangeable- can be exchange for g/s
• Divisible- can be divided into smaller units
Instrument of Exchange:
Barter, cheques, debit cards, Internet banking, bank drafts
 3. Types of cheques:

• Open cheques- it does not have 2 parallel across it (someone else

can cash it, if stolen)

• Crossed cheques- has 2 parallel lines across it

• Post-dated cheque- cheque that is dated sometime in the future

• Dishonoured cheque- a cheque that is paid by the drawer’s bank

is said to be honoured

4. Public and Private Sector

• Public Sector- is services or enterprises managed by the

government
• Private Sector- is managed by private individuals

5. Types of Businesses:
Unlimited Liability- the owner of the business is liable to lose the
money they have invested as well as personal assets to pay off debts

Limited Liability- this is where individuals can invest without the risk of
losing their money.
 ❖ Sole trader: is usually owned by 1 individual and easy to startup
Advantage:

• Easily formed
• All profit belongs to him
• Sole trader account only to himself

Disadvantage:

• Assumes all risks and lose himself

• Has unlimited liabilities
• Not easy to obtain loans from banks

❖ Partnership: Involves 2 to 20 persons, having more people means

more experience and knowledge
Advantage:

• Easily formed
• More people to contribute
• Expenses and management are shared

Disadvantages:

• Unlimited liability
• Disagreement between partners

❖ Sleeping Partner:
• Invests in the business
• Does not take an active part in operations
 ❖ Private Limited Companies:
• Has minimum of 50 members
• Capital of business is divided into shares
• Shares cannot be advertised

❖ Public Limited Companies:

• Has a minimum of 2 members and no maximum
• Shares can be sold publicly
• Has the ability of raise limitless funds

6. Franchises:
Is a form of business in which a firm that has successful
services/goods enter into a contractual relationship with another
business.

Advantages:

• They reduce startup risks

• Usually market a known successful brand
• Banks allow loan to successful businesses

Disadvantage:

• If franchisor has not researched the market carefully, the

franchise will suffer loses
• Costs may be higher than expected
• If the franchisor changes its operational techniques
 ❖ Multinational Company- is a business operating internationally
although its ownership is based in one country.

Advantages:

• Cheaper labour may be available in other countries

• Reduce unemployment
• Promote advanced technology

Disadvantages:

• Can engage in exploitation of cheap labour

• They are naturally motivated by self-interest rather than the
interest of the company

7. Types of Economies:

❖ Traditional Economy: Involves little trade and people grow most

of their food.
Advantages:

• Utilises nature

Disadvantages:

• Limited Choices of Goods

• Individuals couldn’t provide everything to satisfy their needs
 ❖ Controlled Economy- All economic activities controlled by the
government
Advantages:

• Basic needs are met

• Provision of public goods

Disadvantages:

• Lack of choices
• No competition results in low quality products

❖ Free Market- supply of goods/services are shared between the

state and private sector.
Advantages:

• Greater choice of products available

Disadvantages:

• Product demerit goods

• Lack of provision of public goods

❖ Mixed Economy- Supply of g/s are shared between public and

private sector.
Advantages:

• The government provides the public with public goods that the
private sector will not make

Disadvantages:

• Government may seek to control the private sector.

 8. Five (5) Functional areas of a Business:

• Production- the process and methods used by producers to

transform raw material into semi-finished products.

• Marketing- the process involved in promoting and selling g/s

efficiently.

• Finance- provides access to all the resources needs for the

production of g/s (Pay-roll system)

• Human Resources- are concerned with managing people with an

organisation (Safety, Training and Development)

• Research and Development- getting new knowledge that can be

used to create new products.

❖ Stakeholder of a Business- is anyone who has an interest in the

business.

Internal Stakeholder:

• Shareholders
• Employees
• Consumers
• Employers
External Stakeholder:

• Suppliers
• Government
 9. Globalisation:
Involves the opening up of market internationally leading to a
reduction of trading barriers and greater g/s.

The legal aspects of a business:

• Companies can develop ethical codes of conduct.

Legal Issues in Business operations:

• Registering of business
• Aiding by the government laws (employment laws)
• Business can protect ideas/products by applying for trademarks

Principals of business:

• Code of ethics- a organisation’s overall practices that guide its

decisions and actions

• Code of conduct- an internal document that demonstrates how to

apply code of ethics

• Code of practice- a set of written rules which explains how

people work in a profession

Consequences of Unethical Business practices:

• Workers can be dismissed

• Can lead to fall in share prices
• Customers stop buying the products
• Affect the health/safety of customers
Consequences of Illegal business practices:
-conviction -distorting the GDP

10. Management:
A process that involve planning, directing and controlling the
organisation resources to achieve goals.

The (7) functions of management are:

• Planning- determines what is to be achieved in the organisation

• Organising- Involve work arrangement, resource allocation and

allocate responsibilities

• Directing- ensures that employees are engaged in activities to

achieve goals and objectives

• Controlling- Involves monitoring the performance against set

goals

• Coordinating- ensuring there is harmony amoung the functional

areas of a business

• Delegating- takes the form of assigning responsibilities for

performing task

• Motivating- creating a drive for employees to achieve higher level

of productivity
 11. Conflicts within an Organisation

Some sources of conflicts are:

• Pay
• Internal Charges
• Harassment
• Poor communication

Conflict Strategies used by Employers:

• Lock out
• Strike breakers

Conflict strategies used by Employees:

• Working to rule
• Sit in
• Sick out

Strategies for resolution of conflicts: when employers and employees

are unable to reach a resolution in a dispute

• Mediation- a voluntary method to resolve disputes. Involves an

independent person assisting employers and employees to reach
a solution.
• Arbitration- the parties hand over their power to arbitrator and
they are expected to accept the arbitrator’s ruling as binding
• Trade union representative- gains expert guidance of collective
bargaining.
• Grievance Procedures- employers tries to manage an internal
investigation of a reported situation
Guidelines for Establishing Good Relationships between managers and
employees:

• Motivating workers
• Improving working condition
• Practice good leadership
• Good communication

Strategies for motivating Employees in a business:

• Good pay, higher salaries

• Having a friend among colleagues
• Job satisfaction

Teamwork:
When a group of people work together to achieve a common goal

Advantages- for employees:

• Sense of common purpose/ sense of belonging

• Working in groups is easier than alone
Advantages- for employers:

• Top to button communication is easier

• Output of groups is greater than that of an individual

Disadvantages:

• Some team members are lazy

• Teamwork can limit creativity
• Group decisions can take longer
 12. Effective Organisational Communication:
Two-way flow of information: Downwards from management and
upwards from employer

Downward Communication:

• Initiated by management and consists of oral (direct command,

intercom, telephone) and written (letters, emails).

Upward Communication:

• Initiated by employees and consists of Direct (Manager talking to

employees) and Indirect (Involve suggestion and attitude).

13. Entrepreneurship:
A person who undertakes the risks involved in establishing and running
a business.

Characteristics of an Entrepreneur:

• Flexible
• Persistent
• Innovation
Role of an Entrepreneur in Decision Making
1) Conceptualising- the ones who choose the business idea

2) Planning- a business plan is drafted to determine the direction

the owner want to take the business

3) Accessing funds- can be achieved from using personal

saving/loan

4) Organising- getting all the necessary particulars for the business

5) Operating and evaluating the performance of a Business- Proper

record keeping should be done weekly or monthly.

6) Risk Bearing- involves taking responsibility for the risks

The role of the Entrepreneur in Economic Development:

• Providing goods and services

• Creating jobs
• Contribute to nation (creating employment, bringing new
products)
 14. Establishing of a Business
Reasons for establishing a Business:

• Increased income
• Increased control of working life
• Desire for financial independence

Step for establishing a Business:

1) Conceptualisation- an idea for a business opportunity

2) Research- is to determine the demand for the potential

product/service and to gather information on preferences

3) Identification of Resources- (financial) where are you going to get

the money to start the business

4) Human Resources- How any individuals will I need to run the

business.

5) Material Resource- what tangible assets will I need to start the

business

6) Creation of Business Plan- this helps set a clean goal offer

guidelines on how you will manage the business

7) Acquisition of funds- money is needed for daily operation of the

business
8) Operation of the business- there must be a statement to guide as
to how things one run.
Business Plan:
A document that gives the entrepreneur the chance to process and
collect all the relevant to starting a business.

Reasons for preparing a Business Plan:

• To attract potential investors

• To source financing

Feasibility Study:
Is conducted before the business plan and involves analysing if
business is successful.
- To determine the possible costs attached to starting the business

Planning and Operation of the business:

• Short term- undertaken on a daily/weekly basis

• Medium term- can be put in place for a period of 1-2 years
• Long term- is carded to be established over a 5-year period.
Decisions are made by owners/directors.

Factors that determine the Location of a Business:

• Transport
• Labour surplus
• Availability of raw materials and supplies
 15. Collateral:
Involve items that put up as a form of security for repaying a loan.
(property, stocks, bonds, money, cash)

The value of collateral:

Gives the person borrowing access to funding that they would not have
had it were not for the collateral.

16. Contracts:
A contract is a voluntary, legally binding agreement between two or
more person

Characteristics of contracts:

• Legality- It must have a legal purpose

• Consideration- Each party must agree to give u something

• Agreement- Must be mutual agreement amongst all parties

• Capacity- when entering a contract persons must be of sound of

mind, legal age and not under the influence

• Good faith- must be honest and agreement must be done freely

Types of Contracts:

• Simple Contract
• Specialty Contract
Simple Contract:

• Agreement between 2 or more person

• Can be oral or written

Specialty Contract:

• They must be formal ( often written)

• Referred to as ‘deeds’
• 3 requirements
- Signing: the contracts is signed by all parties
- Delivery: is placed by the person whom it is delivered
- Sealing: is attached with some form of raised seal

Contracts can be discharged/Terminated by:

1) By mutual agreement- occurs when both parties agree to cancel
agreement
2) By death- If one person dies the contract automatically comes to
an end
3) By Brench of Contract- where one party fails to carry out their part
of the agreement

Offer:
This is a bid or proposal made by one individual to another.
Acceptance:
Occurs when one party willingly agrees to it (can be verbal and written)
Consideration:
The price of benefit that the parties to a contract receive.
Counter Offer:
This is a negation of the original offer and a proposal new offer is made.
Parties to a contract:
- The offeror: the person who makes the offer
- The offeree: the person to whom the offer is made
- The acceptor: the offeree having the accept the offer

Mistakes and Misrepresentation:

Common Mistake-
Parties of the contract agree on the subject of the contract but both
parties are equally mistaken about some aspect of the contract.

Mutual Mistake-
when both parties to a contract are mistaken about the same crucial
fact.

Unelated Mistake-
Only one is mistaken in the contract agreement
 17. Business Documents:

The importance of documenting/recording business documents:

• Evaluate performance
• Safeguard information
• Information decision making
• Track accountability

List of Business Documents:

1) Purchasing
- Purchase order
- Proforma Invoice
- Acknowledgement order

2) Dispatch and Delivery

- Delivery Note
- Advice Note

3) Charging
- Invoice
- Credit Note
- Debit Note

4) Payment of Debts
- Online Banking
- Cheque
- By cash
The importance of stock Records:
(Stock is the goods/materials held by the business)
- Internal Stock: Stationary, materials for factory production
- External Stock: Good supplied to customer
- Stock is a part of the capital or assets

Stock Levels:
- Minimum Stock Levels
The lowest level to which stock is allowed to fall

- Maximum Stock Levels

The greatest figure that the stock will be raised to.

Minimum and Maximum stock levels are established to ensure:

• Sufficient stock is available for internal operation

• Stock is readily available to meet customer’s order
• Too much Stock is not held.

Stock Records:
These are the ways in which addition and deductions from stocks are
recorded.

Computerised Stock Records:

• Large stock is usually computerised

• A spreadsheet is sued to record stock
• Stock item is labelled with barcodes
 18. What is Insurance?
• A system put in place to compensate those who suffer losses.
• A agreement between the Insurer and the insured

Difference between Insurance and Assurance:

Insurance: Is concerned about a risk that may or may not happen
Assurance: deals with event s that will happen

Premium- the cost/fee the insurance company charges

Policy- Contract drawn up between the insurer and the insured
Indemnity- compensation received

Principals upon which insurance is based on:

1) Pooling of Risks- a small sum of money to fund operated by an
insurance company
2) Indemnity- The compensation received for the losses incurred
3) Utmost Good Faith- accurate information must be given by the
insurance company.

Categories of insurance:
1) Life insurance
2) Non-life insurance

Non-life Insurance:

• Public liability
• Product liability
• Motor Insurance
Life Insurance consists of:
1) Whole life purpose: payment to be made after the death of the
insured.
2) Endowment Policies: payment can be received at a specific age
on the death of the insured.

How does Insurance Facilitate Trade?

• Insurance provides employment

• Insurance gives persons the opportunity to make investments

19. Factors of Production:

Are resources that are used to meet our unlimited wants
(The 4 F.O.P are land, labour, Capital, Enterprise)

1) Land-
- Made up of mineral deposits
- Quality of land can be improved

2) Labour-
• Involves the use of individuals to contribute to the creation of
goods and services
• Semi-skilled and Unskilled: no formal qualifications
required
• Skilled: engineers
• Managerial and Professional: Business executives,
Teachers, Doctors
 3) Capital-
• Involves the money used to start up a business to purchase
assets needed.
• Fixed Capital: involves items with a long life (Building)
• Working Capital: short term assets that change quickly
(cash, Bank, Stock)

4) Enterprise-
• Involves the owners of the business spare-heading the other
factors of production

Production and Productivity:

Production: deals with the unit of inputs from F.O.P
Productivity: the rate at which a product is produced

Types of Production:
1) Primary: deals with the extraction of raw materials

2) Secondary: involves the development of the end product by using

materials gained from the primary industry

3) Tertiary: involves the change of ownership of goods/services

Levels of Production:
1) Subsistence level- meet only the basic need of the country in
which it takes place.
2) Domestic level- everything is produced locally at the home
country, therefore no imports/exports
3) Surplus level- is achieved by countries with high level of
technology (resulting in exports)

20. Joint Ventures:

• Resources are pooled from 2 or more businesses
• Assist with the expansion and developing new products

Mergers:

• Firm voluntarily combine their businesses into a single business

• Expansion of operation are achieved leading to profits
• Owners of both companies continues being owners

Takeover and Acquisitions:

Is a hostile process of one firm gaining control of a business through
purchasing 51% of the firm’s shares.

Types of Mergers and Takeovers in Business Growth:

• Horizontal Integration- one firms take over another at a different

stage of production
• Vertical Integration- can be forward or backward
 - Vertical forward- firms integrate at a stage that at a later
stage of production
- Vertical backward- a firm aquires another that is closer to
the supply of raw materials

A conglomerate Merger- involve taking over firms that are not in the
same industry

Linkage Industries:

• One firm is linked to another

• One industry contributes to the production of something another
firms needs

Forward Linkage:
One industry us producing raw materials for another to utilze

Backward Linkage:
Involves materials needed to create a product

Growth of a business and effects on:

1) Organisational Structure- a company can seek to add more technology
or additional staff
2) Capital- more capital can be gained and invested into the business as
it grows
3) Labour- a mixture of human resources strategies must be added as the
labour force grows
4) Technology- as business grow, the need for modern technology also
arises
5) Export- when the production of goods and services passes domestic
level a business can now export goods
 21. Logistics and Supply chain:

Logistics Involves:

• The movement of materials, part, semi-finished and finished

goods
• Involves the process of storage and transport
• The management of supply chain

Supply Chain Operations:

The supply chain is the way that a business get its resources

The distribution channels:

Are how a business gets its finished product/service to a new market

The components of Logistics:

Forward and Reverse Flow- the movement of goods can be a two-way
process meaning good are not only delivered to customer, but
customers may also return some products

Warehousing:
A warehouse is a commercial building where goods are temporally
stored.

Inbound Functions- prepare items for storage (e.g. Packaging,

assembling)

Outbound Functions- involves shipping goods to the final destination

Activities involved in supply chain operations:
1) Transformation of natural resources- manufacturer taking
product from farmers and processing them

2) Movement and storage of natural resources- transporting and

storing raw materials to process finished goods

3) Processing of raw materials into finished good- purchases raw

materials to process finished goods

4) Storage of work in progress- parts stored until needed for

assembling a final product

5) Delivering the finished product- from the point of origin of

destination

Chains of Distribution:
Is the series of stages that finished product goes through to reach the
consumer.

1) Direct Chain of Distribution- no intermediary between producer

and consumer
2) Indirect Chain of Distribution- involves the use of intermediaries

Modes of Transport:
1) Multimodal Transport- refers to the transportation involving at
least 2 different means of transport
2) Intermodal transport- transportation of freight in an intermodal
container or vehicle using multiple modes of transport (road, rail,
ship, track, sea, air)
Role of Transport in Marketing:

• Reduce cost
• Ensure security of supply

Importance of transport documents, regional and foreign trade:

Is to enable goods to reach the costumer when they need them.

Domestic Market:
Is within the home country and is mainly carried out by various forms of
road transport.

International Market:
Consists of importing and exporting goods.