1.1 Introduction to Business Management

  • What is a business?
    • Decision-making company or organization
    • May/may not be for profit
    • Involves the exchange of goods and services
    • Produce goods and/or provide services
    • Exist to satisfy the needs and wants of people, organizations, governments, etc.
    • Enterprise – a group of people that tackles an objective, usually profit
    • Quality of output depends on quality of inputs
  • Main inputs in a business
    • Capital
      • Amount of money needed to run a business
      • Man-made goods like machines, buildings, vehicles, and equipment needed for business to operate
      • Investment – increasing spending on capital
    • Land
      • Space where a business operates
      • Raw 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 other three factors of production
      • Actions of 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
      • e.g. mining, agriculture, livestock, drilling, and logging
      • Regulated and protected by the government
      • Fuels (produces inputs for) the other economic sectors
      • Example countries: Vietnam, Philippines, Canada, Dubai
      • Example companies: Philex Mining, Del Monte, Dole
    • Secondary
      • Involves 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, USA
      • Example companies: Coca-Cola, Honda, Del Monte
    • Tertiary
      • Involved with service and retail
      • Includes 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 inputs
      • Example countries: USA, United Kingdom, Singapore, Hong Kong
      • Example 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
        • 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 improve
        • More distributors
        • Less 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
        • More income due to higher demand
        • More competition
        • People would rather work for bigger companies
        • Can consider expanding
      • For a family-owned vegetable farm
        • More demand due to more stores
        • Opportunity for a “dampa” system
        • Less 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 owner
      • Big risk, big reward
      • Organizes 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 company to undertake projects and therefore risks very little
      • Rewarded 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 – positive difference between revenues and costs
    • Fame
    • Benefit 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 compete
    • Factors to consider: What questions would businessmen ask about the factors?
      • Business idea
      • 4 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
    • 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 costs
      • Personnel – employees and workforce, skills
      • Marketing – marketing mix employed by business

 

Kim De Leon1.1 Introduction to Business Management