Chapter1introduction To Business Management

why is each of you here?
souha.chebaane@gmail.com
Why are you here?
your expectations for the next 2 years?
This class is an experiment!
Unit 1
Business
organization and
environment
Chapter 1
An introduction to
business
management
Learning objectives
In this Chapter, you will be able to :

1. To explain the role of businesses in combining human,
physical and financial resources to create goods and
services.
2. Identify the factors of production.
3. Distinguish between capital and labor intensive.
4. Analyze and apply the main business functions and
their roles
5. Define primary secondary , tertiary and quaternary
sectors
Learning objectives

4. Outline the nature of business activity in each sector
and the impact of sectoral change on business activity
5. Explain the role of entrepreneurship and
intrapreneurship in overall business activity
6. Identify reasons for starting up a business or an
enterprise.
7. Examine problems that a new business or an
enterprise may face.
Learning objectives
8. Outline common steps in the process of starting up a

business or an enterprise.
9. Outline the element of a business plan.
The role of businesses
A business aims to meet the

needs and wants of
individuals or organizations
through providing goods and
services.
Apply Knowledge
Describe the role of business. [ 4]
Difference between wants
& needs
Needs are goods & services essential

for living.
nWants are goods & services which
people would like to have but which are
not essential for living.

NEEDS

WANTS
Food Toys & Games
Clothing Entertainment
Shelter Jewelry
Product outputs
Businesses provide goods and

services to satisfy needs and wants.
 Goods satisfy your wants and needs

for material things that you can see or
touch. Example: desk
Services : are tasks that people or
machines perform to satisfy needs and
wants. Example: delivery
GOODS SERVICES
Check your knowledge!
Define:
• Goods
• Services
• Wants
• Needs
Resource Product
inputs outputs
Human
Goods
Financial
Production
Physical
Services
Enterprise
Processes to add
value
Resources Input
Human The right quality and quantity of
people required to make a product or
provide a service.
Physical The right quality and quantity of
materials, machinery and land required
to make the product or service
Financial The right quality and quantity of money
needed to make the product or service.
Enterprise The process of combining other factors
of productions into a unit that is capable
of producing goods and services.[ the
business idea]
Apply knowledge
Select your own product
Human
Physical
Financial
Enterprise
How it might appear
Paper 1 or 2 section A-B
• Identify four factors of production
needed by Baker’s Plc to produce bread
and cookies.
Types of production
processes
Types of production
processes
Activity
Types Give your of own examples
production
Capital intensive Labour intensive
Industrial products processes
Service business or low technology
based industry
•Industrial carpets
Farming
•Car manufactory Restaurant
Coffee shop
Hand made carpet maker
=> All decisions will be focused on = > major decisions will be based on
managing people and hiring qualified
providing high quality and efficient labor [ human resource management]
machines [ production or operations]
•
Business functions
Four key functions:
• Human resources management

• Marketing
• Finance & Accounting
• Operation management or production
The role of business Functions
Goal : to ensure that appropriate people

are employed and retained to make the
product or service
HR Role: to do so the HR department must
recruit, train, give compensation and
dismiss at time.
Goal :Ensure that appropriate funds are
available to make the product or service
Finance & Role : to do so the accounting and finance
accounting dep, must forecast requirements, keep
records, procure financial resources, and
ensure proper payment.
The role of business
departments
Goal : Ensure that the business offers the
product or service desired by a sufficient
number of customer.
Marketing Role :to accomplish this goal the
marketing dep. Must use appropriate
strategies to promote, price, package and
distribute the product or service.
Goal: Ensure that appropriate processes are

used in order to make the product or service
Operation in the desired quality.
management Role: to accomplish this goal the production
or department must control the quality and the
production flow of stock, determine appropriate
methods of production
Activity
Identify which business function is most

likely to undertake the following roles:
•Recruiting a new production manager
•Setting prices of new product
•Decide on the appropriate level of stock needed.
•Allocating resources to purchase capital equipment
•Finding out if one customer prefer one product design

to another
•Determine the number of employees needed for future
operation.
Exam style question:
Explain the role of marketing. [ 2]
Explain the role and goal of marketing
[4]
Interdependence of the
business functions.
Explain how the four business
functions relate to each other.
Marks Level descriptor
0 The work does not reach a standard described by the descriptors below.
1–2 Little knowledge and understanding of relevant issues and business management
tools (where applicable), techniques and theories.
• Little use of business management terminology.
• Little reference to the stimulus material.
3–4 A description or partial analysis of some relevant issues with some use of
business management tools (where applicable), techniques and theories.
• Some use of appropriate terminology.
• Some reference to the stimulus material that goes beyond the name of a
person(s) and/or the name of the organization. • At the lower end of the
markband, responses are mainly theoretical.
5–6 • An analysis of the relevant issues with good use of business management tools
(where applicable), techniques and theories.
• Use of appropriate terminology throughout the response.
• Effective use of the stimulus material.
Interdependence of the
business functions.
Tesla Electric Car Manufacturers developing a new
product . (PowerWall/ Roadster)
Uber transport app service expanding to UberEats new
market.

Explain why a decision by Tesla to develop a new car or Uber
to expand will involve effective cooperation between all four
business functions.
Write a paragraph to explain how business functions relate to
each other.
Peer assessment [ explain criteria of 6 points questions]
Use the collaboration space to post your work for peer
assessment.
Structure
Introductory sentence:
Put in context: Introduce the decision
Body: explain how each function relate

to the other in order to succeed the
mentioned goal. [ what information will
be exchanged between all departments]
Kodak case study
• Discuss why Kodak
filed for bankruptcy
in 2012
• What Kodak did to
revitalize from its
bankruptcy
Dig deep!
The business functions
Do business functions differ from

small to large businesses?
How it may appear
Does a failure to achieve one
department’s goal could cause the
failure of the business itself ? Explain.
Explain the role of Human resources

department.
The sectors of business activity
Quaternar
Primary Secondary Tertiary
y
Services focused
Services : on knowledge
financial, leisure, and based on IT.
Extraction, Durable – non
education,
mining, hunting, durable and E-service, media,
healthcare,
fishing capital goods web based
security, transport.
Consultancy…. service, business
consulting
• Primary : acquire raw material

• Secondary: raw material are processed
to durable, non-durable consumer or
capital goods.
• Tertiary: all services provided or selling
goods.
• Quaternary: provide services focused on
knowledge (information provider), and
technology.souha.chebaane@gmail.com
The primary sector is

sometimes known as the
extraction sector – because it
involves taking raw
materials. These can be
renewable resources, such as
fish, wool and wind power.
Or it can be the use of non-
renewable resources, such as
oil extraction, mining for
coal.
Secondary
The manufacturing industry takes raw

materials and combines them to
produce a higher value-added finished
and semi-finished products. For
example, raw sheep wool can be spun to
form a better quality wool. This wool can
then be threaded and knitted to
produce a jumper that can be worn.
Service
• The service sector is concerned with the
intangible aspect of offering services to
consumers and business. It involves
retail of manufactured goods. It also
provides services, such as insurance
and banking. In the twentieth century,
the service sector has grown due to
improved labour productivity and
higher disposable income. More
disposable income enables more
spending on ‘luxury’ service items, such
as tourism and restaurants.
Be an Investigator!
• Identify these well-known companies: Coca-Cola,
HSBC, FAB, ADNOC,
• Identify the main sector of industry that they operate
in.
• Give details of their activities.
• research one company from your country, identify the
sector of industry it operates in and what is its main
activity.
• Put your answers on a word document and upload
work on managebac.
Chain of Production
Is the steps through the different

sectors that must be made to turn a
raw material into consumer good that
is marketed.
Activity
Sort cards to show the production

chain for the three products
mentioned:
• 1 litter of oil
• Cotton T-shirt
• Loaf of bread
Be a thinker
Student workpoint :
Think of some everyday products that you use
and imagine their production chain.
What primary, secondary, tertiary and
quaternary businesses are involved in the
production, distribution and marketing of the
chosen products?
Adding value
At each stage in the chain of production,
value is added to the product.
Value-added is the difference between

the price the consumer is willing to
pay and the cost of making a product.
Ways to add value
• Production [ Transform raw material
or product]
• Convenience and speed
• Branding
• Quality
• Design
• USP ( unique selling point)
Economic sectors
Sectoral change In US
Sectoral change within the economy
Sectoral change between
economies
Activity sectoral change
The decline of the primary sector in many countries:
In the 1920s, over one million people were employed in

the UK coal industry. It was a key part of the economy.
However, improved technology and the growth of other
energy sources has seen a dramatic decline in this
primary sector industry.
Activity sectoral change
• Write a paragraph to explain the impact of
sectoral change on different business
activities.
Chain of Production and
business growth
Businesses may grow:

• horizontally ( acquire or merge with
business from similar activity) it
occurs to increase the market share.
• or vertically ( expand their chain of
production) it could be forward
vertical or backward vertical.
Reasons of Vertical growth:
Lower transaction cost

Ensure quality, price and quantity.
Avoid gov. regulations.
Increase market power
Weakening the power of other
businesses.
Small Vs Large businesses
Small Large
Small number of employees Large number of employees
serving small numbers of serving a large number of
customers customers (larger share of the
market)
Main advantages: Main advantages:
-easy to start up (less costly) -easy to get funds
-flexibility in changes -power over banks and suppliers
-the process of setting up is easier -lower costs per unit (economies of
-loyal customer base (customized scale)
product) -attracts qualified employees
Main disadvantages: -not flexible with changes

-harder to get the funds to grow -hard to start up
-cannot compete with larger -the process of setting up is
businesses difficult
-experience higher costs (costly to -more disagreements within the
produce) poor power over supplier business
-unloyal customers
How it may appear
• Define secondary sector.
• Identify the sector(s) in which Shell Co. is
operating.
• Explain the difference between businesses
operating in the primary, secondary and
tertiary sector.
• Analyze the impact on a business in the
secondary sector if the national economy
earning increase proportions of national
income from tourism
Exam style questions
Successful
Entrepreneurs
Role of
Entrepreneurs
• Explain the impact of these two products

on your life and the industry.
Entrepreneurship
Entrepreneurship is the process of
recognizing an opportunity testing it in the
market, and gathering the resources to go
into business.
Entrepreneur
Entrepreneur An entrepreneur is a
person who recognizes a business
opportunity and organizes, manages, and
assumes the risks of starting and operating
a business.
Intrapreneur An intrapreneur is
employed by large businesses an develop
new products or services ( keep the flame )
Entrepreneur
Both intrapreneurs & entrepreneurs
innovate.
This typically comes in one of the three
forms:
Market reading: observing customer or competitors
and make change to the product
Need seeking: determine the need of customers
Technology driving: investing in research and
development or following technology opportunities
Qualities of an Entrepreneur
Watch the video: Steve jobs

Outline three main qualities of being a successful
entrepreneur.

Discuss the type ( s) of innovation that is (are ) central
to create Mc Donald’s.
Market reading – need seeking – technology driving
Qualities of an
Entrepreneur
Innovative
Leadership
Risk taker
skills
Entrepreneur
Multi-
commitment
skilled
Impact of entrepreneurs on
business activity
• Business growth
• Business survival to the external
changes
• Creation of employment
• Economic growth
Reasons for starting up a business
Starting-up a business
•Rewards: having more money

•Independence: do not like being instructed.
•Necessity: loosing or not finding a job.
•Challenge: having an idea
•Interest: like the activity
•Finding a gap: finding an opportunity
Reflect
It's often said that more than half of new
businesses fail during the first year.
According to the Small Business Association
(SBA), this isn't necessarily true. The SBA
states that only 30% of new businesses
fail during the first two years of being open,
50% during the first five years and 66%
during the first 10.
Possible problems (issues)
for starting a business
•Q1. What are the possible reasons for the problems

faced by McDonald's in Iceland?
•Q2. What are the positive economic prospects for
businesses operating in Iceland?
•https://www.theguardian.com/technology/
2018/sep/24/google-at-20-larry-page-serge
y-brin-internet
•Competition:
•Market research: poor research- not appropriate
target – place- poor customer base
•Poor management skill: lack of leadership skills,
lack of planning, organization, record keeping
•Poor Business plan: contradictory goals
•Legal requirement: too difficult to register- laborlaw-
•Lack of Finance: raising money- poor cash flow
•Changes in the market : the launch failed- limited
success
Reflect & Think
•The entrepreneurial Instinct profoundly
reveals that exceptional success has more to
do with thoughtful risk-taking and agility
than school pedigree, IQ and even decades of
experience. Fear keeps us small, but
following your instinct with stamina and
passion can lead to greatness’
•Ajaya Banga, President and CEO, Mastercard
• What does Ajaya tell us about the importance

of sense perception when making business
decision?
Investigate
•Identify a new business in your locality and

consider how well the entrepreneur have
started the business:
•1- have they invested in service and product
quality?
•2.- have they cut costs in term of what you
see?
•3- are they successful if so, why?
Process of starting a
business
•Organizing the basic [ set up the vision]+

Goals and objectives + identify a USP]
•Research the market
•Planning the business [ sept up a business
plan]
•Establishing legal requirement [ paper work]
•Raising the finance
•Testing the market
What is a business plan
•A written document that describes the

business, its objectives and its strategies, the
market it is in and the financial forecasts.
The elements of the
business plan
•The business idea, aims and objectives

[ short, mid term, long term]
•Business organization
•Hr
•Finance
•Marketing
•operations
The purpose of the business
plan
•Support the launch of the new organization

•Attract new funds [ marketing tool to attract
investors]
•Support strategic plans
•Identify resources needed
•Provide a focus for development
•Work as measure for business success
Theory of Knowledge
The entrepreneurial instinct profoundly reveals that exceptional

success has more to do with thoughtful risk-taking and agility than
school pedigree, IQ and even decades of experience. Fear keeps us
small, but following your instinct with stamina and passion can lead to
greatness.”
Ajay Banga, president and CEO, Mastercard worldwide
What does Ajay’s statement tell us bout the importance of sense

perception when making business decision?
The end
Good work!
Are you able to
answer your section
objectives?
So try
Try to summarize:
Main idea
Vocabulary
How it may appear
•Define the term secondary sector.
•Define the term entrepreneur.
•Outline the factors of production needed to
set up the business.
•Describe the role of marketing department for
Rent A Car Co.
•Discuss the advantages and disadvantages of
starting a business.
•Evaluate the importance of innovation in
starting a new business.

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Chapter1introduction To Business Management

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why is each of you here?

In this Chapter, you will be able to :

In this Chapter, you will be able to :

In this Chapter, you will be able to :

8. Outline common steps in the process of starting up a

A business aims to meet the

Describe the role of business. [ 4]

Needs are goods & services essential

Food Toys & Games

Businesses provide goods and

 Goods satisfy your wants and needs

machines [ production or operations]

Four key functions:

• Human resources management

Goal : to ensure that appropriate people

Goal: Ensure that appropriate processes are

Identify which business function is most

•Setting prices of new product

•Decide on the appropriate level of stock needed.

•Allocating resources to purchase capital equipment

•Finding out if one customer prefer one product design

Body: explain how each function relate

Do business functions differ from

Explain the role of Human resources

• Primary : acquire raw material

The primary sector is

The manufacturing industry takes raw

Is the steps through the different

Sort cards to show the production

Value-added is the difference between

In the 1920s, over one million people were employed in

Businesses may grow:

Lower transaction cost

Main disadvantages: -not flexible with changes

• Explain the impact of these two products

Watch the video: Steve jobs

•Rewards: having more money

•Q1. What are the possible reasons for the problems

• What does Ajaya tell us about the importance

•Identify a new business in your locality and

•Organizing the basic [ set up the vision]+

•A written document that describes the

•The business idea, aims and objectives

•Support the launch of the new organization

The entrepreneurial instinct profoundly reveals that exceptional

What does Ajay’s statement tell us bout the importance of sense

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