Chapter 1 The business world and business management

The role of business in society

Involves the activity of transforming resources into products and services in order to meet
peoples’ needs. These products and services are offered to the market in exchange for
profit.
Four elements

 Human activities – Business activities are driven by human effort and involvement.
This includes various tasks such as planning, organizing, directing, and controlling
resources to achieve business goals. People are the driving force behind the
production and delivery of goods and services.
 Production – Production refers to the process of creating goods or providing
services. It involves transforming inputs (such as raw materials, labor, and capital)
into outputs (finished products or services) through a series of operations and
activities. This can range from manufacturing physical products to delivering
intangible services like consulting or software development.
 Exchange – Exchange is the act of offering products or services to the market in
exchange for something of value, typically money. This involves marketing and sales
activities to reach potential customers, create awareness, and persuade them to
make a purchase. The exchange of goods and services between businesses and
consumers forms the basis of economic transactions.
 Profit - Profit is a key motive for businesses. It is the financial gain that results from
the difference between the revenue generated from selling products or services and
the costs incurred in producing and delivering them. Profit serves as a measure of
business success and sustainability, enabling reinvestment, growth, and the ability to
meet stakeholders' expectations.
These four elements - human activities, production, exchange, and profit - are fundamental
components of the business process, driving economic activity and meeting the needs and
wants of individuals and society as a whole.
Market Economy
In a market economy, individuals have the autonomy to make their own business decisions.
They can choose the type of business they want to establish, the products or services they
want to offer, and the pricing strategies they want to implement. This entrepreneurial
freedom allows for innovation, competition, and diversity in the marketplace.
Industries
Businesses come together to form industries, which are groups of companies operating in
the same or related sectors.
Formal Sector
In the formal sector, there are large businesses such as Standard Bank, Naspers, Vodacom,
Anglo American, Tiger Brands, and others. These companies, along with the 375 public
corporations listed on the Johannesburg Securities Exchange (JSE), play a significant role in
driving South Africa's economic activity. As economies develop, they tend to shift from being
heavily reliant on primary economic activities like mining and agriculture to becoming more
dependent on services.
Informal Sector
The informal sector in South Africa comprises many microenterprises. These businesses are
not registered and operate outside of the formal economy. People involved in these
enterprises often rely on them for subsistence or survival. However, due to their informal
nature, these businesses do not contribute to rates and taxes. This can put pressure on the
infrastructure of inner-city areas.
Corporate Social Responsibility
refers to the concept that businesses have a responsibility to consider the impact of their
actions on society, the environment, and stakeholders beyond their primary goal of making
profits. It involves taking into account the social, ethical, and environmental implications of
business operations and making efforts to contribute positively to the communities in which
they operate.

Sustainability
Sustainability refers to the practice of meeting present needs without compromising the
ability of future generations to meet their own needs. It involves considering the
environmental, social, and economic impacts of our actions and making choices that
promote long-term well-being for both people and the planet.
Themes related to business sustainability.
1. Social responsibility
This theme emphasizes the responsibility of individuals, organizations, and society
as a whole to contribute positively to the well-being of communities. It involves
promoting social justice, supporting marginalized groups, and addressing issues
such as poverty, inequality, and access to basic needs.CSI.
2. Employment equity
Employment equity refers to ensuring fairness and equal opportunities in the
workplace. It involves eliminating discrimination and promoting diversity and
inclusion. This includes policies and practices that address gender, race, disability,
and other forms of inequality in employment.
3. Business ethics
Business ethics focuses on promoting ethical behavior and responsible practices
within organizations. This includes principles such as honesty, integrity, transparency,
and accountability. Businesses are encouraged to consider the social and
environmental impacts of their actions, beyond just financial considerations.
4. Consumerism
consumerism can indeed act as a social force that helps protect consumers against
unsafe products and malpractice by exerting both moral and economic pressure on
businesses. Consumerism refers to the collective actions and behaviors of
individuals as they engage in the marketplace and make purchasing decisions.
One aspect of consumerism is the demand for safe and reliable products.
Consumers have the right to expect that the products they purchase are safe for use
and meet certain quality standards. When businesses fail to meet these
expectations, consumerism empowers individuals to voice their concerns and hold
businesses accountable. This can be done through various means such as
 boycotting products, spreading awareness through social media, or filing complaints
with regulatory authorities.
5. Environmental Sustainability
This theme addresses the conservation and preservation of the natural environment.
It includes efforts to reduce carbon emissions, protect ecosystems and biodiversity,
promote renewable energy sources, and minimize waste and pollution.

Needs of society and how a business organisation satisfaction

The Multiplicity of human needs
Physiological needs refer to the basic biological requirements for survival, such as food,
water, shelter, and sleep. These needs are essential for maintaining the body's physical well-
being. Without fulfilling these needs, a person's health and survival are at risk.
Psychological needs, on the other hand, are related to mental and emotional well-being.
These needs include the need for love and belonging, self-esteem, and self-actualization.
Psychological needs are more focused on fulfilling our emotional and psychological desires,
rather than our basic physical survival.
Physiological needs: These are the basic biological needs necessary for survival, such as
food, water, shelter, and sleep.
Safety needs: Once physiological needs are met, individuals seek safety and security. This
includes personal and financial security, health, and protection from physical harm.
Love and belongingness needs: After safety needs are fulfilled, individuals desire social
connections, love, affection, and a sense of belonging. This includes relationships with
family, friends, and romantic partners.
Esteem needs: Once the lower-level needs are satisfied, individuals strive for self-esteem
and recognition. This includes gaining confidence, achieving goals, and receiving respect
and admiration from others.
Self-actualization needs: At the top of the hierarchy, individuals aim for self-actualization,
which involves reaching one's full potential, personal growth, and fulfilling one's unique
purpose in life.

Society's limited resources – Factors in production

Natural Resources: These include materials and substances that occur naturally in the
environment and are used in the production of goods and services. Examples include land,
water, minerals, forests, and energy sources like oil and gas. Natural resources are limited in
quantity and can be depleted if not managed sustainably.
Human Resources: This refers to the labor and skills of individuals that contribute to the
production of goods and services. Human resources encompass the physical and intellectual
abilities of people, their knowledge, expertise, and creativity. The size and quality of the labor
force are limited, making human resources a valuable but finite resource.
Capital: Capital represents the financial resources, infrastructure, and equipment used in
the production process. It includes physical capital like machinery, buildings, and technology,
as well as financial capital such as funds and investments. Capital is limited as it requires
investment and can be constrained by factors such as availability of funds and technological
advancements.
Entrepreneurship: Entrepreneurship refers to the ability and willingness to take risks,
innovate, and organize resources to create new ventures or improve existing ones.
Entrepreneurs play a crucial role in utilizing and maximizing the potential of other resources.
However, the number of individuals with entrepreneurial skills and mindset is limited, making
it a scarce resource.
Need satisfaction cycle
Economic Principle - how to ensure the highest possible satisfaction of needs with these scarce
resources.
The main economic systems
Market economy - A market economy is an economic system in which the production and
distribution of goods and services are determined by the interactions of buyers and sellers in
a market. In a market economy, prices are determined by supply and demand, and
resources are allocated based on individual choices and decisions. The government's role is
limited to enforcing contracts, protecting property rights, and ensuring fair competition.
Advantages:
Disadvantages
Command Economy - A command economy is an economic system in which the production
and distribution of goods and services are controlled and directed by a central authority,
typically the government. In a command economy, the government makes decisions about
what to produce, how much to produce, and how resources are allocated. Prices are often
set by the government, and individual choices and market forces have limited influence. This
type of economy is often associated with socialist or communist systems.
Socialism - Socialism is an economic and political ideology that advocates for the collective
ownership and control of the means of production and distribution of goods and services. It
aims to create a more equitable society by reducing economic inequality and ensuring that
resources are distributed more fairly among the population.
In a socialist system, the government or the community as a whole typically owns and
controls key industries, such as healthcare, education, transportation, and energy. The goal
is to prioritize the welfare of the entire society rather than individual profit. This can be
achieved through various means, such as nationalization of industries, cooperative
ownership, or democratic planning.
Mixed Economies - A mixed economy is an economic system that combines elements of
both capitalism and socialism. In a mixed economy, there is a blend of private ownership and
control of resources, as well as government intervention and regulation.
In a mixed economy, the private sector plays a significant role in the production and
distribution of goods and services. Private individuals and businesses are allowed to own
property, operate their own businesses, and make decisions based on market forces such as
supply and demand. This allows for competition, innovation, and individual initiative to drive
economic growth.
NB The economic system plays a crucial role in the need-satisfaction cycle by determining
how resources are allocated, goods and services are produced, and distribution occurs
within a society. In a market economy, such as capitalism, the system relies on supply and
demand to guide production and distribution. Consumers' needs and wants drive the market,
and producers respond by creating goods and services to satisfy those demands.
In contrast, a centrally planned economy, like socialism, focuses on meeting the collective
needs of society as determined by the government. The state allocates resources and sets
production targets based on societal priorities rather than individual demands. This approach
aims to ensure essential needs are met for all citizens, regardless of market forces.
Ultimately, the economic system influences the availability, affordability, and quality of goods
and services, shaping the overall ability to satisfy the needs of individuals and society as a
whole. The effectiveness of the economic system in addressing these needs can impact
various aspects of life, including standard of living, access to essential services, and overall
well-being.

Assignment Question 1 Answers guideline

Zebra Couture operates within a mixed economic system due to the blend of various
economic principles that it incorporates into its business model. In a mixed economic
system, elements of both capitalism and socialism coexist, allowing for a balance between
private ownership and government intervention.
Zebra Couture's focus on sustainable development aligns with the socialist aspect of a
mixed economy, as it integrates environmental and social considerations into its business
operations. By prioritizing sustainable fashion and utilizing natural energy sources, the
company demonstrates a commitment to social responsibility and environmental
conservation, which are key features of socialist economic systems.
On the other hand, Zebra Couture's emphasis on creating goods with public accreditation,
recycled materials, and upcycled products reflects the capitalist aspect of a mixed economy.
By catering to consumer demands for ethically sourced and environmentally friendly
products, the company leverages market forces to drive innovation and maintain a
competitive edge in the industry.
Overall, Zebra Couture's operation within a mixed economic system allows it to benefit from
the advantages of both capitalism and socialism. By balancing profit motives with social and
environmental considerations, the company can achieve sustainable growth while meeting
the evolving needs of consumers in a competitive market.

Various types of need-satisfying institutions

Businesses and Corporations: Private enterprises produce goods and services to meet
consumer demands and needs, generating revenue and profits in the process. They play a
crucial role in the economy by creating employment opportunities and driving innovation.
Government Institutions: These institutions provide essential services and resources to
meet the needs of the population, such as healthcare, education, infrastructure, and social
welfare programs.
Nonprofit Organizations: Nonprofits work towards addressing specific societal needs or
issues, such as poverty alleviation, environmental conservation, healthcare access, and
disaster relief, often relying on donations and grants to fund their operations.