1.1 Introduction to Business Management

• What is a business?
  • Decision-making companies or organizations May/may not be for-profit and involve the exchange of goods and services produced goods and/or provide services that exist to satisfy the needs and wants of people, organizations, governments, etc. Enterprise – a group of people that tackles an objective, usually profit
  • The quality of output depends on the quality of inputs
• Main inputs in a business
  • Capital
    • Amount of money needed to run a businessMan-made goods like machines, buildings, vehicles, and equipment needed for business to operate investment – increasing spending on capital
    Land
    • Space where a business operatesRaw materials and natural resources that are used in making a product
    Labor/manpower
    • Physical & mental efforts of people to produce products/services
  • Enterprise/entrepreneurship
    • Management, organization, and planning of the other three factors of production
    • Actions of an entrepreneur who shows initiative and takes risks to set up, invest, and run a business
• Main business functions and their roles
  • Human resources
    • Manages the workforce and laborers of the company deals with recruitment, wages, communication, and motivation of employees
    Finance and accounts
    • In charge of managing the organization’s money and assets, ensures accurate recording and reporting of financial documentation (to comply with legal requirements)
    Marketing
    • Ensure that a company’s products sell concerned with identifying and satisfying consumers’ needs/wants in charge of promotions, advertisements, etc.
  • Operations
    • In charge of business functions and processes that produce the actual goods
    • Concerned with research & development, delivery, stock management, etc.
• Business sectors (or economic sectors)
  • Primary
    • Involves the harvesting of naturally available resources.g. mining, agriculture, livestock, drilling, and loggingRegulated and protected by the government fuels (produces inputs for) the other economic sectorsExample countries: Vietnam, Philippines, Canada, DubaiExample companies: Philex Mining, Del Monte, Dole
    SecondaryInvolves manufacturing of raw products to finished or component goods finished
    • goods – exported or sold to domestic consumers Component goods – sold to companies in the tertiary sector example countries: China, Scotland, Japan, Italy, USAExample companies: Coca-Cola, Honda, Del Monte
    Tertiary
    • Involved with service and retailIncludes retail sales, transportation, entertainment, restaurants, media, healthcare, banking, etc.Exploited in developing countries
      • Philippines is a victim of brain drain: where professionals go abroad to look for jobs making it difficult for companies in the tertiary sector to find the employees they need
      Relies on the primary and secondary sector for inputsExample countries: USA, United Kingdom, Singapore, Hong KongExample companies: JP Morgan, Convergys, Lotte
  • Quaternary
    • Involves intellectual activities or innovation services
    • Includes government, education, libraries, scientific research, information technology, etc.
• Impact of sectoral change
  • Change in economic structure (primary to secondary, secondary to tertiary, etc.)
    • Industrialization
      • When a country moves towards the manufacturing sector as its principal output and employment (primary to secondary)Products become more refined and have more export potential Raises the standard of education and opens better job opportunities
      Developed nation
      • Exploits the tertiary sector as the national output of employment Further raises the standard of education
  • Examples of effects of shifting to the tertiary sector
    • For a labor-intensive manufacturer of aluminum cans
      • Quality of products improves more distributorsLess employees and higher wages for employees can consider turning to robots and machines, as well as outsourcing
      For the owner of a small seaside bed and breakfast
      • Easier to find competent employees with more income due to higher demand and more competition people would rather work for bigger companies can consider expanding
    • For a family-owned vegetable farm
      • More demand due to more storesOpportunity for a “damp” systemLess laborers
      • Can consider opening a small business or outsource
• Entrepreneurship (and the entrepreneur) vs. intrapreneurship (and the intrapreneur)
  • Entrepreneurship is the process of starting a business, company, or organization the Entrepreneur
    • The founder, and usually ownerBig risk, big rewardOrganizes inputs of production into goods and services (outputs)Obtains money, buys the inputs needed and makes decisions. Takes risks and provides the vision for the business idea assumes large financial risk provides sufficient resources
    Intrapreneurship is similar to entrepreneurship but is done in an existing organization
  • The Intrapreneur
    • Is an employee of the organization uses resources of the company to undertake projects and therefore risks very littleRewarded in the form of a paycheck
    • Does not act autonomously like an entrepreneur, as he is dependent on other employees or the organization he works for
• Reasons for starting up a business or an enterprise
  • Profit – the positive difference between revenues and costsFameBenefit human welfare very fulfilling family
  • Legacy
• Common steps in starting up a business and problems new ones may face
  • Businesses often start up by looking for market opportunities (market gaps or niches)Niche markets are where small businesses can easily competeFactors to consider: What questions would businessmen ask about the factors?
    • Business idea business inputs (capital, land, labor, and enterprise)Four departments/functional areas
  • Possible problems faced by a start-up (either internal or external)
    • Internal
      • No land to establish a business product may not appeal to your location lack of manpower
    • External
      • Terrorists
      • Politics or government
      • National Calamities
      • Limited resources
• Business plan
  • A report detailing aims and objectives of a business planning tool that serves as a blueprint to address the issues of a startup business meant for investors/banks to help them decide on whether to invest/approve loans
  • Elements of a business plan
    • Business – name of the business, type of the business, statement of aims and objectives, details of the owner product – details of goods/services, operations and equipment needed, suppliers, price market – who you’re selling to, market profile, competition (strengths and weaknesses)Finance – money, start-up costsPersonnel – employees and workforce, skills
    • Marketing – marketing mix employed bythe business