Chapter 1

1.1 Introduction to Business Management

The Role of Business

A business is a decision-making organization involved in the process of production of goods and services.

Inputs are the resources that a business uses in the production process (labour and raw material), these generate outputs (products). Goods are physical goods and services are intangible products.

Needs are the basic necessities that a person must have to survive

Wants are people's desires - whats they would like to have

There are consumer goods and services (for the public) and capital goods and services (from businesses to businesses e.g. raw materials, machinery)

The main functions of a business

For a business to operate effectively, tasks must be carried out by functional areas.

• Human resources - managing personnel and organization - workforce planning, recruitment, training, appraisal, dismissals, redundancies, outsourcing human resource strategies.
• Finance and accounts - managing the organization’s money, keeping track and reporting financial documentation for legal requirements and informing on the financial position of the business.
• Marketing - identifying and satisfying the needs and wants of customers - market research, test marketing, advertisement & branding
  • Product - goods and services meet customers requirements
  • Price - pricing strategies
  • Promotion - making sure customers know about a product
  • Place - goods and services are convenient for customers to buy
• Operations - responsible for the process of converting raw materials into finished goods.

Business Sectors

• Primary Sector - businesses involved in the cultivation or extraction of natural resources,
  • Large percentage of output and employment in less economicallly developed countries (LEDCs)
  • There is little value added in primary production (the difference between value of inputs and the value of outputs)
• Secondary Sector - the section of the economy where business activity is concerned with the construction and manufacturing
  • It's the wealth creating sector because manufactured foods can be exported worldwide to earn income for country
  • Value is added to the natural resources during production
• Tertiary Sector - business activity is concerned with the provision of services to customers i.e. retailing, transportation, banking, finance, insurance, health care, leisure, entertainment etc.
  • Most substantial sector in employment and as a percentage of gross domestic product (the value of the country's output each year) in MEDC’s
• Quaternary sector - is a subcategory of the tertiary sector, where businesses are involved in intellectual, knowledge-based activities that generate and share information , e.g. ICT, R&D, consultancy services, scientific research. It exists in MEDC’s as it requires a highly educated workforce.