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1.1 Introduction to Business Management (Problems that a new business may…
1.1 Introduction to Business Management
Business combines
human
physical
financial
resources to create
goods
consumer - sold to the general public
capital/producer - sold to businesses to produce other products like machinery and buildings
services - intangible products
services
Main functions of business
Human Resources
managing the personnel of the organization
workforce planning, recruitment, training, appraisal, dismissals and redundancies, outsourcing resource strategies
Finance and Accounts
managing the organization's money
recording and reporting of financial documents
Marketing
identifying and satisfying consumer needs and wants
Product; Price; Promotion; Place
Operations
process of converting raw materials and components into finished goods, ready for sale and delivery to consumers
Extraction of crude oil, car manufacturing, construction of roads
Business sectors
Primary
Extraction, harvesting, conversion of natural resources
LEDCs - more reliance in terms of employment and national output
Little value added - costs - revenue
Secondary
Manufacturing, construction
EDCs - dominant secondary sector
Economists - wealth-creating sector because the products can be exported worldwide to earn income for the country
Tertiary
Services
MEDCs - most substantial value in terms of employment and GDP; (decline of sec sector and growing of tertiary sector)
Quaternary
Subcategory of the tertiary sector
Intellectual, knowledge based activities that generate information communication technology, research and development, consultancy services and scientific research
Sectoral change
the shift in the relative share of national output and employment that is attributed to each business sector over time
Factors
Higher household incomes
More leisure time
Greater focus on customer services
Increasing reliance on support services
Intrapreneurship
Intrapreneur - an individual employed by a large organization who demonstrates entrepreneurial thinking in the development of new products or services
Employees of organizations
Takes medium to high risks
Innovative
Rewarded with pay and remuneration
Accountability to the owner/operator
Failure is absorbed by the organization
Entrepreneurship
Entrepreneur - an individual who plans, organizes, and manages a business, taking financial risks in doing so
Owners and/or operator of organization
Takes substantial risks
Visionary
Rewarded with profit
Responsibility for workforce (labor)
Failure incurs personal costs
Factors of production
Land
Natural resources
Labor
Physical and mental efforts of people
Capital
Manufactured resources
Entrepreneurship
Management, organization and planning
Reasons for starting up a business
Growth
Earnings
Transference and inheritance
Challenge
Autonomy
Security
Hobbies
Steps in the process of starting up a business
Write a business plan
Obtain start-up capital
Obtain business registration
Open a business bank account
Marketing
Start-up costs of a business
Premises
Buildings
Capital equipment
Legal and professional fees
Marketing costs
Human resources
Factors to consider when setting up a business
Business idea
Finance
Human resources
Enterprise
Fixed assets
Suppliers
Customers
Marketing
Legal issues
Problems that a new business may face
Lack of finance
Cash flow problems
Marketing problems
Unestablished customer base
People management problems
Legalities
Production problems
High production costs
Poor location
External influences
Business plan
The product
details of goods/products being offered
supporting evidence showing why customers will par for the product
where and how production will take place, e.g. the equipment that is needed
details of suppliers of resources such as raw materials or components
costs of production
pricing strategy
The business
Name and address of the business;
cost of premises and start-up costs;
details of the owner(s) past business experience;
type of organization;
quantifiable goals and objectives
The market
expected number of customers or the forecast level of sales
the nature of the market such as customer profiles and market segmentation
expected growth of the market in the forseeable future
competition analysis
The finance
proposed sources of finance
break-even analysis
security (financial guarantees)
cash flow forecast
forecast of profit and loss account - 1st year trading
forecast balance sheet - firm's financial security
forecast rate of return for investors
The personnel
number of job roles
organizational structure
details of payment systems
The marketing
market research and test marketing
distribution plan
details of promotional mix
any unique or distinctive selling point to differentiate itself from rivals