Introduction to Business

Management
11th edition
Ancillary material
ISBN 978 019 07 4576 9
P O Box 12119, N1 City, 7463, Cape Town, Republic of South Africa

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 Chapter 1
The business world and business management
Learning outcomes

• Explain the role the business organisation plays in making available the
products and services society must have to exist and thrived
• Describe the needs of society and how a business organisation satisfies
those needs in a market economy
• Distinguish between the world’s three main economic systems
• Explain the interface between a business organisation and a market
economy
• Describe the nature and purpose of business management as a science,
where the enabling factors, methods and principles of the business are
studied to ensure the efficient functioning of a business organisation
• Comment on the development of business management as a science
• Distinguish between and comment on the different management functions.
Chapter outline

• Introduction
• The role of business in society
• Needs and need satisfaction
• The main economic systems
• The need-satisfying institutions of the market economy
• The nature of business management
• Classifying the study material of business management
• Summary
The role of business in society

• Business world can be seen as a complex system that involves

transforming resources into products and services to meet the
needs of consumers in exchange for profit.
The role of business in society (continued)

• The description of a business emphasises four different elements:

oBusiness involves human activities
oBusiness involves production
oBusiness involves exchange
oBusiness involves profit.
The role of business in society (continued)

• The market economy comprises various businesses which are

grouped together to form industries.
• These industries are grouped as follows:

Formal Sector Informal Sector

Large businesses listed on the JSE Micro enterprises that do not contribute to
rates and taxes
For example Old Mutual, Exxaro, Telkom or For example independent family owned
Sasol enterprises
The role of business in society (continued)

• The ability of a business to survive and prosper over long periods of

time is the core of sustainability.
• Society and the business world both depend on and influence one
another.
• Themes of sustainability:
oSocial responsibility
oEmployment equity
oBusiness ethics
oConsumerism
oEnvironmental sustainability.
Needs and need satisfaction

• Maslow’s hierarchy of needs

• Humans have a wide range of unlimited physical, psychological and social
needs that need to be satisfied.
• Ranging from the most basic need for food to the need for self-realisation.
Needs and need satisfaction (continued)
Needs and need satisfaction (continued)

• Society’s limited resources:

Natural resources Human resources Capital Entrepreneurship

Production factor Production factor Production factor Production factor

of land and supply of labour. Also of assets. Used of collective
cannot be includes the not for final managerial
increased mental talents human capacity.
and skills of consumption but Individuals who
people to facilitate the accept risks
production of final
consumer
products
For example For example For example For example Elon
water, forests, employees buildings, Musk and Richard
minerals machinery, Branson
computers
The cycle of need-satisfaction

• The ability to satisfy community needs by utilising the scarce

resources to produce products and services.
• Society is often confronted with the economic problem/principle.
• Economic issues:
oWhich products/services should be produced and how many?
oWho should produce these products/services?
oHow should these products/services be produced and with which
resources?
oWho are you producing the products/services for?
The cycle of need-satisfaction (continued)
The main economic systems

• Three main systems can be identified:

Market economy Command economy Socialism

• Members of a community • System of communal • Compromise between a

may possess assets and ownership in which the pure market economy and
earn profits on them individual owns no a pure command
• The allocation of property, except private economy
resources is effected by domestic assets • Businesses and consumers
free markets • Choices of products and operate within free
• Members of the services are limited to markets in which they are
community have free what the state offers at liberty to make
choice of products, • State decides what the decisions without
services, places of needs of the community restriction
residence and careers are, how and where the • Consumers have greater
• The state keeps its goods will be obtained, freedom of choice than
interference in the and in what quantities those under a command
system to a minimum. they may be used. economy.
Mixed economies

• None of the three main economic systems can occur in a pure form
anywhere, but rather occur as mixed economies.
The need-satisfying institutions
of the market economy
Business organisations Government organisations Non-profit seeking organisations

A need satisfying Need satisfying Need satisfying

institution that needs to institutions where the institutions whose main
make a profit in order to states creates reason for existence is
survive. products/services not profit motivated.
believed to be of
strategic, economic or
political importance.

For example Pick ‘n Pay For example SAA and For example SPCA
SABC
Products and services offered in the market system
 The nature of business management

• Consider the following:

oEconomics and business management as related sciences
oThe purpose and task of business management
oIs business management an independent science?
oThe interfaces between business management and other sciences.
 Classifying the study material of business management

• The functional management areas of a business are:

oGeneral management
oMarketing management
oFinancial management
oProduction and operations management
oPurchasing management
oHuman resource management
oPublic relations management.
Interfaces between other sciences and business-
management functions
Interfaces between other sciences and business-
management functions
Summary

• Business organisation's role in society

• Social process that transforms a country's means of production
• Business as a component of the economic system
• Business provides for the needs of the people.