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f INTRODUCTION TO BUSINESS MANAGEMENT

1. What is a business?
ROLE OF BUSINESS

Business is a decision-making organisation involved in the

process of using inputs to produce goods and/or services to
satisfy the needs and wants of the consumers.

2. What is the role of business?

The role of businesses is to combine the human, physical
and financial resources to create goods and services in order to
satisfy the human needs and wants of people, organisations and
government.

3. What is the difference between ‘needs’ and ‘wants’?

 Needs are the basic necessities that a person must have to
survive E.g. food, water, shelter, and clothing.
 Wants are people’s desires i.e. the things that they would like to
have, E.g. a larger home, a new smart phone, or to go for an
overseas holiday.

4. Represent the business activity using flow charts and

diagrams?
5. What are resource inputs? How is the resource inputs
categorized?
Inputs are the resources that a business uses in a
production process. E.g. labour, raw materials.
Resource inputs are categorized as follows:
 Human: the physical and the mental effort of the people that are
used in the production process.
 Physical: the man-made resources that are used in the
production process.
 Financial: the cash and other forms of money that are used in the
production process.
 Enterprise: the human resources which helps in arranging the
other three resources and which takes risk, bearing both the
success and the failures of the business.

6. What are the forms taken by the production process?

 The production process can take many forms:
 Capital intensive: production process in which a large
amount of capital is employed.
 Labour intensive: production in which a large amount of
labour is employed.

7. What are products? How are they classified?

Products are nothing but the outputs produced by the
production process. Products can either be in the form of goods
or services. Goods are physical products whereas services are
intangible products.
There are totally two types of products: goods and
services. But goods can be divided as consumer goods and
capital goods.
 Consumer goods: these are products which are sold to the
general public rather than to other businesses. Theses
goods can be further divided as (a) durable and (b) non-
durable on the basis of the duration of consumption after
the purchase.
 Capital goods: (or producer goods) these are physical
products which are bought by other businesses to produce
other goods and/or services.
 Services: these are intangible products of businesses.
Though the services are intangible their results are
tangible.

THE FUNCTIONS OF THE BUSINESS

8. What are the functions of the business?
There are about four functions of the business. They are:
 Finance and accounts
 Operations
  Marketing
 HR
All four functions of the business must be successfully managed and
coordinated to satisfy the need and wants of the consumers and at the
same time to ensure economical stability of the business.
THE FUNCTIONS OF THE BUSINESS DEPARTMENTS

9. What are the functions of the human resources departments?

The human resources (HR) department is responsible for

managing the personnel of the organisation. While handling the
people, the HR is likely to face the following issues: workforce
planning, recruitment, training, appraisal, dismissal and
redundancies, and outsourcing human resource strategies.

Appraisal: interviewing

Redundancies: state of uselessness

10. What are the functions of the finance department?

The finance and accounts department is in charge of

managing the organisation’s money. The finance and accounts
director must ensure that accurate recording and reporting of
financial documentation takes place to comply with legal
requirements and to inform those interested in the financial
position of the business.

11. What are the functions of the marketing department?

The marketing department is responsible for identifying
and satisfying the needs and wants of the customers. Ultimately
their job is to ensure that the firm’s products sell.
 This is done through a series of activities such as market
research, test marketing, advertising, and branding. All the
functions of the marketing department can be summed upto the
traditional 4 Ps of marketing: (i) product (ii) price
(iii) promotion and (iv) place

12. What are the functions of the operational department?

The operations department is also known as operations
management or production department. This functional area of
the business organisation is responsible for the process of
converting raw materials and other inputs into finished goods,
ready for sale and delivery to customers. Operation also applies
to the process of providing services to customers.

SECTORS OF BUISNESS ACTIVITY

13. Write a short note on the primary sector?
 All raw materials are acquired using the primary sector. This
can be extraction, mining, farming, fishing or even hunting.
 Today because of scarce nature of resources in the primary
sector or because of the potential to damage fragile
environments, governments closely monitor activities in the
primary sector.
 The primary sector activities tend to account for a large
percentage output and employment in less economically
developed countries.
 But as the economies develop there is less reliance on the
primary sector in terms of employment and national output,
because they will have a little value added to them.

14. Write a short note on secondary sector?

  Businesses that operate in the secondary sector are involved in
activities where raw materials are processed.
 Since these are highly associated with industries and
manufacturing it is also called as manufacturing sector.
 Economically developing countries tend to have a dominant
secondary sector that accounts for a relatively large proportion
of the country’s national output.

15. Write a short note on tertiary sector?

 Businesses which are involved in provision of services come
under the tertiary sector. Hence it is also called as service
sector.
 In more economically developed countries such as Canada and
Germany the tertiary sector tends to be the most substantial in
terms of both employment and as percentage of gross domestic
product.

16. Write a short note on quaternary sector?

 Quaternary sector is a subcategory of tertiary sector.
 Businesses in the quaternary sector are involved in intellectual,
knowledge based activities that generate and share information.
 Some examples of quaternary sector are Information
Communication Technology (ICT), Research and Development
(R&D), Consultancy services, and Scientific Research.
 The quaternary sector mainly exists in MEDCs as it requires a
highly educated workforce.
 It is also a sector in which businesses invest for further growth
and evolution.

17. How are the four sectors of economy related to the business
activity?
 The four business sectors are linked to each other through the
chain of production which tracks the stages of the item’s
production from the extraction of
raw materials used to make the
product to all the way through to
it being delivered to the customer.

18. What are the two types of

integration?
 We have two types of integration: (a) horizontal and (b)
vertical.
 Horizontal integration: as businesses grow, they try to acquire
other businesses. Such business acquiring or merging with
another business engaged in more or less the same activity is
called horizontal integration. This helps to have increased
market share.
 Vertical integration: at times, businesses buy other businesses
that are involved in the earlier or later stages in the chain
production, this is called vertical integration. The vertical
integration is further divided as backwards vertical integration
and forward vertical integration. If the activity or business
acquired is earlier in the production chain then it is called
backward vertical integration while the activity or business
acquired is later in the production chain then it is called
forward vertical integration.
19. What are the reasons for vertical integration to take place?
Vertical integration takes place for various reasons:
1) Lowering transaction costs: generally transaction costs take
place when there is exchange of commodities between the
businesses, which is eliminated by vertical integration.
2) Reliable supply: using backward vertical integration we can
control the price, availability and the quality of good that
reaches the consumer.
3) Avoids government controls: such as tax, prices or explicit
regulations.
4) Increasing market power: if there is successful integration of
business, it could allow the business to access more flexibility
over its own prices and thereby allows it to increase market
power using pricing strategies.
5) Eliminate and weaken the market power of other companies.

SECTORAL CHANGE
20. What is sectoral change?
Sectoral change refers to the shift in the relative share of
national output and employment that is attributed to each
business sector over time.
21. Why is there a shift from primary sectors to secondary and
tertiary sector in more developed countries?
 Primary sector tends to yield a low added value. In order to
develop economically, there must be shift in the business
activity to the manufacturing and the tertiary sector which yields
high added value. This process is known as industrialisation.
 Nevertheless, some countries are still able to exploit their
natural advantage and specialisation in the supply of agricultural
and primary products. For example, even though only 2% of the
French population work in the primary sector, the country
benefits immensely from its agricultural exports sold all around
the world.

22. What caused a decline in the employment in secondary

sector?
Automation and mechanisation in modern societies have led to the
decline in the secondary sector (manufacturing) in terms of
employment.

23. Why is there a shift to tertiary sector in developed countries?

 Higher household income: the demand for services is
positively correlated to the changes in income levels. As a
country develops, the consumer demands more services such
as dining out at restaurants, visits to hairdresser and seeking
advice on financial planning.
 More leisure time: a feature of higher standards of living is
the increase in the leisure time. As nations develop, people
tend to have more time for leisure and recreation such as
sporting activities, visits to theatre, and going on holiday.
 Greater focus on customer services: firms have realised that
good customer service before, during and after a sale can be
an important source of competitive advantage.
  Increasing reliance on support services: businesses need even
more sophisticated support services. Firms are increasingly
relying on the services of other businesses, such as sub-
contractors, advertising agencies, market research analysts,
technicians and management consultants. As businesses grow
internationally, they will also increasingly rely on the
services of financiers, accountants and lawyers.

ENTREPRENEURSHIP AND INTRAPRENEURSHIP

24. Who is an entrepreneur? What is entrepreneurship?
 Entrepreneur is an individual who plan, organizes and manages
a business, taking on financial risks in doing so.
 He/she is the one who combines the other three factors of
production.
 Entrepreneurship is the trait of the business leaders, who tend to
be distinctive in their in their temperament, attitude and outlook,
who drive the business.
 The entrepreneurs have the skills needed to oversee the whole
production process, whilst having the ability and willingness to
take potentially high risk.

25. What are the traits that can be seen in a potential

entrepreneur?

Successful entrepreneurs tend to be creative, innovative and

passionate. They search for and exploit business opportunities by
forecasting and/or responding to changes in the marketplace.

26. What is Intrapreneurship? Who is an intrapreneur?

 Intrapreneurship is the act of being an entrepreneur but as an
employee within a large association.
  Intrapreneur is an employee who thinks and acts as an
entrepreneur within a section of the organisation.
 The intrapreneur is independent, proactive, creative, and
generates new ideas and innovations for the organisation.\
 The intrapreneur takes direct responsibility and risks for
turning a project or idea into a profitable finished product for
the organisation.
 As the intrapreneur thinks like an entrepreneur looking for
business opportunities to increase profits, it is in the best interest
of an organization to encourage Intrapreneurship.

27. Give some examples of Intrapreneurship that led some

businesses into successes?
 One example of intrapreneur is Arthur Fry, who is credited for
inventing and commercialising the post-it note in 1980 whilst
working as a new product development researcher at 3M. Post-it
notes are now sold in over 100 countries around the world.
 We also have Paul Buchheit who is an employee of Google. He
was credited as creator of Gmail. He programmed the first
working version of Gmail in just one day and has been the lead
developer ever since.

28. Differentiate between intrapreneur and entrepreneur?

Entrepreneurs
 Owners and/or operators
of organisation
 Takes substantial risk
 Visionary
 Rewarded with profit
 Responsibility for
Intrapreneurs
 Employees of organisation
 Takes medium to high risk
 Innovative
 Rewarded with pay and
remuneration
 Accountability to the
 workforce owner/operator
 Failure incurs personal  Failure is absorbed by the
cost organisation

29. What are the reasons for starting a business?

There are many reasons as to why people start a business. But
some of the few basic reasons can be remembered using the
mnemonic: GET CASH:
 Growth: here it means capital growth of the entrepreneur.
By increasing one’s capital, it helps to increase one’s
personal benefit.
 Earnings: this means the profit gained by the entrepreneurs
by setting up their own companies.
 Transference and inheritance: in many societies it is a
cultural norm to pass on the assets including the businesses
to the next generation. Many self-employed entrepreneurs
view their businesses as something that they can pass on to
their future generation, to give them a sense of security.
This might not be possible if you are working for someone
else.
 Challenge: some people view setting up and running a
business as a challenge. It is this challenge that drives them
to perform and what gives them personal satisfaction.
Turning out successful in it will in turn boost their self-
esteem.
 Autonomy: while working under someone else you are
forced to follow the rules and regulations set by the
organisation such as holiday entitlement, working hours,
benefits and conditions of employments. But when one is
self-employed, it means that he has autonomy
(independence, freedom of choice, and flexibility) in how
things are to be done within the organisation.
  Security: usually there is more job security when one is
their own boss. Being an employee means that one can be
dismissed, made redundant or may even be replaced by
technology. Though the risks might be great but being self
employed means that it is easier to accumulate personal
wealth and to provide higher funds for retirement.
 Hobbies: some people might want to pursue their passion or
to turn their hobby into business.

30. What are the steps involved in setting up a business?

The steps in the process of setting up a business vary from one
country to another. Some of the common steps in this process of
starting up a business include:
 Write a business plan: once the entrepreneur has a feasible
idea, this is officially formulated as a business plan. This is
a document which will include the goals and targets of the
business with an outline plan of how these targets are to be
accomplished.
 Obtain start-up capital: starting a business requires money.
Small business owners use their own savings and/or take
loans to finance their business. The loan process can take
several months to complete, with the lender usually
requesting a completed business proposal before any funds
are approved.
 Obtain business registration: before a business could trade
or hire workers, it must satisfy the registration and licensing
requirements. The owner(s) must also register the legal
status of the business.
 Open a business account: to facilitate the financial
operations of the new business, the owner(s) need to set up
a business bank account. This allows them to pay for their
cost of operation and to receive payments from customers.
  Marketing: potential customers need to know about the
business and its products. This is done through the
marketing activities of the new business, such as advertising
and other promotional materials. For many businesses this
will also include establishing a presence on the internet.

31. Give some examples of start-up costs for a new business?

 Premises: purchase cost, mortgage deposit payment or rental
deposit costs.
 Buildings: alterations, fixtures and fittings and insurances
costs.
 Capital equipment: office furniture, telephones, computers,
machinery, tools and motor vehicles.
 Legal and professional fees: costs of solicitors, licenses,
permits, and copyright permission.
 Marketing costs: market research, advertising, and
promotional campaigns.
 Human resources: recruitment, induction and training costs.
32. What are the factors that are to be considered while setting
up a business?
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