UNIT 1

BUSINESS
ORGANISATIONS
 A business (also known as an enterprise, a company, or a firm)
• Is an organisational entity and legal entity made up of an
association of people
 natural
 legal

DESCRIPTI  mixture of both

• Share a common purpose

ON OF A • Unite in order to focus their various talents and organize their

collectively available skills or resources

BUSINESS • To achieve specific declared goals

• Are involved in the provision of goods and services to
consumers. A business can also be described as an
organisation that provides goods and services for human
needs.
 
 Land
• It refers to all natural resources which
are free gifts of nature.
FOUR • Land, therefore, includes all gifts of
BASIC nature available to mankind—both on
RESOURCE the surface and under the surface,
• Examples, soil, rivers, waters, forests,
S mountains, mines, deserts, seas,
climate, rains, air, sun, etc.
 Labour
• Human efforts done mentally or
physically with the aim of earning
FOUR income is known as labour.
BASIC • Thus, labour is a physical or mental
effort of human being in the process of
RESOURCE production.
S • The compensation given to labourers in
return for their productive work is called
wages (or compensation of employees).
 Capital
• All man-made goods which are used for further
production of wealth are included in capital.
• It is man-made material source of production.

FOUR • Alternatively, all man-made aids to production,

which are not consumed/or their own sake, are
BASIC termed as capital.
• It is the produced means of production.
RESOURCE • Examples are—machines, tools, buildings, roads,
S bridges, raw material, trucks, factories, etc.
• An increase in the capital of an economy means an
increase in the productive capacity of the economy.
• Logically and chronologically, capital is derived from
land and labour and has therefore, been named as
Stored-Up labour.
 Entrepreneur
• An entrepreneur is a person who organises the other factors
and undertakes the risks and uncertainties involved in the
production.
• He hires the other three factors, brings them together,

FOUR organises and coordinates them so as to earn maximum profit.

• For example, Mr. X who takes the risk of manufacturing

BASIC television sets will be called an entrepreneur.

• An entrepreneur acts as a boss and decides how the business

RESOURCE shall run.

• He decides in what proportion factors should be combined.

S • What and where he will produce and by what method.

• He is loosely identified with the owner, speculator, innovator or
inventor and organiser of the business.
• Thus, entrepreneurship is a trait or quality owned by the
entrepreneur.
ECONOMIC Traditional Command
SYSTEMS
IN WHICH Economi
c
BUSINESS systems
OPERATES
Market Mixed
 A traditional economic system
• Focuses exclusively on goods and services that
are directly related to its beliefs, customs, and
traditions.
ECONOMIC • It relies heavily on individuals and doesn’t
SYSTEMS usually show a significant degree of
specialization and division of labour.
IN WHICH • In other words, traditional economic systems
BUSINESS are the most basic and ancient type of
OPERATES economies.
• Rural areas of second- or third-world countries,
where most economic activity revolves around
farming and other traditional activities.
 Weaknesses
• These economies often suffer from a lack of resources.
 Either because those resources don’t naturally occur in
the region
ECONOMIC  or because access to them is highly restricted by other,
SYSTEMS more powerful economies.
 Hence, they are usually not capable of generating the
IN WHICH same amount of output or surplus that other types of
economies can produce.
BUSINESS Strengths
OPERATES • The relatively primitive processes are often much more
sustainable
• The low output results in much less waste than we see in
any command, market, or mixed economy.
 Command Economic System
• A command economic system is characterized by a
dominant centralized power (usually the government)
that controls a large part of all economic activity.
ECONOMIC • This type of economy is most commonly found in
SYSTEMS communist countries.

IN WHICH • It is sometimes also referred to as a planned economic

system, because most production decisions are made by
BUSINESS the government (i.e. planned) and there is no free
market at play.
OPERATES • Economies that have access to large amounts of valuable
resources are especially prone to establish a command
economic system.
 Command Economic System
• In those cases the government steps in to regulate the
resources and most processes surrounding them.

ECONOMIC • In practice, the centralized control aspect usually only

covers the most valuable resources within the economy
SYSTEMS (e.g. oil, gold). Other parts, such as agriculture are often
left to be regulated by the general population.
IN WHICH • A command economic system can work well in theory, as
BUSINESS long as the government uses its power in the best
interest of society.
OPERATES • However, this is unfortunately not always the case. In
addition to that, command economies are less flexible
than the other systems and react slower to changes,
because of their centralized nature.
 Market Economic System 
• A market economic system relies on free markets and does not
allow any kind of government involvement in the economy.
• In this system, the government does not control any resources
ECONOMIC or other relevant economic segments.

SYSTEMS • Instead, the entire system is regulated by the people and the
law of supply and demand.
IN WHICH • The market economic system is a theoretical concept. That
BUSINESS means, there is no real example of a pure market economy in
the real world.
OPERATES • The reason for this is that all economies we know of show
characteristics of at least some kind of government
interference. For example, many governments pass laws to
regulate monopolies or to ensure fair trade and so on.
 Market Economic System 

• In theory, a market economic system enables an

economy to experience a high amount of growth.
ECONOMIC • Arguably the highest among all four economic
SYSTEMS systems.
• In addition to that, it also ensures that the economy
IN WHICH and the government remain separate.
BUSINESS • At the same time however, a market economy allows
private actors to become extremely powerful,
OPERATES especially those who own valuable resources.
• Thus, the distribution of wealth and other positive
aspects of the high economic output may not always
be beneficial for society as a whole.
 Mixed Economic System

• A mixed economic system refers to any kind of mixture of a market

and a command economic system.

ECONOMIC • It is sometimes also referred to as a dual economy.

SYSTEMS • Although there is no clear-cut definition of a mixed economic system,

in most cases the term is used to describe market economies with a

IN WHICH strong regulatory oversight and government control in specific areas

(e.g. public goods and services).

BUSINESS • Most western economies nowadays are considered mixed economies.

OPERATES • Most industries in those systems are privately owned whereas a small
number of public utilities and services remain in government control.

• Thus, neither the private nor the government sector alone can
maintain the economy, both play a critical part in the success of the
system.
 Mixed Economic System
• Mixed economies are widely considered an economic
ideal nowadays.

ECONOMIC • In theory, they are supposed combine the advantages of

both command and market economic systems.
SYSTEMS • In practice however, it’s not always that easy. The extent
IN WHICH of government control varies greatly and some
governments tend to increase their power more than
BUSINESS necessary.

OPERATES • South Africa is known as a mixed economy (free market

economy and socialism) which simply implies that it is a
blend of private enterprise, government ownership of
resources and government planning of the economy.
 DEFINITION
Management can be defined as a
process that is followed by managers in
order to ensure the achievement of a
MANAGEME business's goals and objectives. It
therefore implies that management is a
NT process whereby human, financial,
physical and information resources are
used to reach the goals of the
organisation.
MANAGEMENT FUNCTIONS
Planning

Control Organising

Leading
MANAGEMENT FUNCTIONS

• Planning
Determining which goals and courses of action the organisation and the various departments should pursue
• Organising
Involves the structuring and arranging of work, resources, departments and the overall organisation in a
manner which will facilitate the achievement of organisational goals (What, Who, When, Where)
• Leading
Involves influencing the organisation’s employees so as to ensure that they are motivated to perform
actions which are aligned with the organisation’s overall goals
• Control
Determine whether the organisation’s performance is in accordance with the predetermined goals,
originally devised during the planning process
LEVELS OF MANAGEMENT
Upper/Top-level managers
• The board of directors, president, vice-president, and CEO are all examples of top-level managers.
• Roles
 These managers are responsible for controlling and overseeing the entire organization.
 They develop goals, strategic plans, company policies, and make decisions on the
direction of the business. 
 In addition, top-level managers play a significant role in the mobilization of outside
resources.
 Top-level managers are accountable to the shareholders and general public.
LEVELS OF MANAGEMENT
• Middle-level manager

• Roles

 Executing organizational plans in conformance with the company’s policies and the objectives of
the top management;
 Defining and discussing information and policies from top management to lower management; and
most importantly
 Inspiring and providing guidance to low-level managers towards better performance:
 Designing and implementing effective group and intergroup work and information systems;
 Defining and monitoring group-level performance indicators;
 Diagnosing and resolving problems within and among work groups;
 Designing and implementing reward systems supporting cooperative behaviour.
LEVELS OF MANAGEMENT
• Low-level managers
• Roles

 Assigning employees tasks;

 Guiding and supervising employees on day-to-day activities;
 Ensuring the quality and quantity of production;
 Making recommendations and suggestions; and
 Up-channelling employee problems.

Also referred to as first-level managers, low-level managers are role models for employees. These managers provide:

 Basic supervision;
 Motivation;
 Career planning;

 Performance feedback; and

 Staff supervision. 
MANAGERIAL SKILLS

• Managerial skills are the knowledge and ability of the individuals in a

managerial position to fulfil some specific managerial activities or tasks.
• This knowledge and ability can be learned and practiced.
• However, they also can be acquired through practical implementation of
required activities and tasks. Therefore, each skill can be developed
through learning and practical experience of the individuals.
• Skills are abilities related to performance that are not necessarily inborn.
• Skills are specific abilities that result from knowledge, information,
practice, and aptitude (Bateman and Snell, 1999:23)
MANAGERIAL SKILLS
TECHNICAL SKILLS

• Different techniques to achieve objectives.

• Technical skills are not related only for machines, production tools or other equipment, but also they are skills that
will be required to increase sales, design different types of products and services, market the products and
services… 
• For example, let’s take an individual who works in the sales department and have high developed sales skills
obtained through education and experience in his department or the same departments in different organizations.
Because of these skills that he possesses, this person can be a perfect solution to become sales manager. This is
the best solution because he has great technical skills related to the sales department.
• On the other hand, the person who becomes sales manager will start to build his next type of required skills. It is
because if his task until now was only to work with the customers as sales representative, now he will need to work
with employees in the sales department as addition to the work with customers.
• Technical skills are most important for the first-level managers. Whet it comes to the top managers, these skills are
not something with high significance level. As we go through a hierarchy from the bottom to higher levels, the
technical skills lose their importance.
MANAGERIAL SKILLS
CONCEPTUAL SKILLS
• Conceptual skills present knowledge or ability of a manager for more abstract thinking.
• That means he can easily see the whole through analysis and diagnosis of different states. In
such a way they can predict the future of the business or department as a whole.
• Why managers need these skills? 
• As a first, a company contain more business elements or functions as selling, marketing, finance,
production… All these business elements have different goals even completely opposed goals.
Think about marketing and production as a business function and their specific goals. You’ll see
the essential difference. The conceptual skills will help managers to look outside their
department’s goals. So, they will make decisions that will satisfy overall business goals.
• Conceptual skills are vital for top managers, less important for mid-level managers, and not
required for first-level managers. As we go from a bottom of the managerial hierarchy to the top,
the importance of these skills will rise.
MANAGERIAL SKILLS
HUMAN OR INTERPERSONAL MANAGERIAL SKILLS
• Human or interpersonal managerial skills present a manager’s
knowledge and ability to work with people.
• One of the most important management tasks is to work with people.
Without people, there will not be a need for existence of management
and managers.
• These skills will enable managers to become leaders and motivate
employees for better accomplishments.
• Also, they will help them to make more effective use of human potential
in the company. Simply, they are the most important skills for managers.
MANAGERIAL ROLES

Interpersonal Roles
 Figurehead Role: the manager is involved in the performance of ceremonial duties, such as officiating at a long-
service award evening.
 Leader Role: the manager works with and through his/her subordinates in order to achieve the work of his/her
department. For example the manager appoints, trains, motivates and promotes his/her subordinates.
 Liaison Role: the manager makes contacts outside of the vertical chain of command to maintain good relationships
within and without the organisation, such as the forming of a sound relationship with a supplier or distributor.
MANAGERIAL ROLES
Information Roles
 Monitor Role: the manager is involved in constantly seeking pertinent information through, for example,
scanning the environment and receiving information from his network of contacts.
 Disseminator Role: the manager passes on information that he has received to individuals within the
organisation who would benefit from it, such as subordinates and colleagues.
 Spokesperson Role: the manager communicates information to people outside the organisation, for
example, the Marketing Director may ensure that the press is kept informed about the organisation’s
social responsibility initiatives.
MANAGERIAL ROLES
Decision-Making Roles
 Entrepreneur Role: the manager seeks to maintain and extend the unit’s/ organisation’s sustainability
through adapting it to changes within the environment. For example, the CEO and the management
team may decide to change strategy and reengineer the organisation as a result of influential changes
within the organisation’s environment.
 Disturbance Handler Role: the manager is involved in involuntarily responding to pressures and
solving problems. For example, the HR Director may be required to address an unexpected situation
within the company which may lead to strike action.
 Resource Allocator Role: the manager decides what quantities of resources such as people,
equipment and money each part of the department / organisation should receive. For example, during
the company’s budgeting period, the CEO approves a budget for the Information Technology department
which is considerably larger than the other departments’ budgets.
 Negotiator Role: due to his/her authority to allocate resources and his/her access to information, the
manager is involved in negotiations within the company. For example, a supervisor may negotiate
changes to job specifications with his/her subordinates.  
MANAGERIAL ROLES

 In closing, it needs to be noted that although Mintzberg (1990)

distinguishes ten managerial roles, he argues that all ten of these
roles form an integrated whole and cannot be easily separated
BUSINESS ENVIRONMENT
BUSINESS ENVIRONMENT
BUSINESS ENVIRONMENT
MICRO EMVIRONMENT 
Vision, mission and objectives of the business
• Mission and vision both relate to an organization’s purpose and are typically
communicated in some written form.
• Mission and vision are statements from the organization that answer questions about
who we are, what do we value, and where we’re going.  
• A mission statement communicates the organization’s reason for being, and how it aims
to serve its key stakeholders.
• In a mission statement, customers, employees, and investors are the stakeholders most
often emphasized, but other stakeholders like government or communities (i.e., in the
form of social or environmental impact) can also be discussed.
• Mission statements are often longer than vision statements.
 • Example of a vision statement
•  “Our vision is to be earth's most customer-centric
company; to build a place where people can come to find
and discover anything they might want to buy
online.” Amazon

BUSINESS
ENVIRONM
ENT
BUSINESS ENVIRONMENT

Our mission to utilise

innovative information and
communication
Example of mission
technologies to empower
statement
our communities grows
from strength to strength.
MTN
BUSINESS ENVIRONMENT

AREAS OF MANAGEMENT
• Operations are responsible for producing the product where the logistics focus on obtaining the products to be
used in the manufacturing of the product to be sold. Also included under logistics is the responsibility to ensure the
right quality, quantity, price and distributing the product.
• The financial function ensures that there is sufficient capital available in the short and long term. This includes
debt collection and paying creditors.
• The human resource management function must ensure that the right people are employed to perform the
tasks.
• The marketing function makes potential customers aware of the product and aims to persuade them to purchase
it.
• Public relations ensure that the organisation maintains a positive image amongst its customers and society at
large.
 MARKET ENVIRONMENT
• The market or task environment refers to the environment which
immediately surrounds the organisation, i.e. it comprises the industry in
which the organisation operates.
• The market environment has a direct influence on the organisation (or
micro-environment) through, for example, its competitors and suppliers
(Smit et al, 2011).
• The market environment comprises the:

BUSINESS  Market consisting of the consumers or potential consumers who have

particular needs and the buying power to satisfy these needs

ENVIRONME
 Suppliers provide the organisation with the ‘inputs’ required to produce
the organisation’s goods and/or services. These ‘inputs’ could take the
form of materials (raw materials, equipment, energy), capital and/or

NT
labour.
 Intermediaries include wholesalers, retailers and agents and serve to
bridge the gap between the producer and the consumer.
 Competitors are prevalent within a market economy and compete with
the organisation not only for market share but for materials, capital and
labour as well.
 General public: Your organisation has a duty to satisfy the public. Any
actions of your company must be considered from the angle of the
general public and how they are affected. The public have the power to
help you reach your goals; just as they can also prevent you from
achieving them.
 MACRO ENVIRONMENT
This environment includes all the factors on the national and international levels  
 The natural environment has to do with the availability of the natural resources
required as well as factors like climate, natural disasters, etc.
 Within the technological environment, invention and innovation is pivotal. Any
organisation that does not keep up with technological developments will not remain
competitive.

BUSINESS
 The social environment refers to the characteristics of the society in which the
organisation operates; the society’s demographics (age, education, religion, culture,
language, etc.)

ENVIRONME
 The political environment is the place where competition takes place as
organisations vie for power within a society. This environment is also influenced by
legislation.

NT
 The international environment consists of the events that occur around the world in
other countries that affect the organisation. Factors in the international environment
that can influence an organisation are, for instance, policy changes in other
countries, wars and terrorist attacks.
 The economic environment is one of the most important environments that a
manager needs to be able to predict and with which s/he must deal. A healthy
economy is one in which organisations are opening with an accompanying growth in
job creation that will lead to more spending, a bigger demand, an increase in job
creation to keep up with the demand, and so on.
SYSTEMS THEORY OF AN
ORGANISATION
 Open system

• When a business regularly interacts with its environment, and

exchanges and processes feedback, it is an open system
organizational structure.
• Open systems have open, or porous, boundaries that allow feedback
exchanges from inside and outside the business.
• The controllers of open systems pay attention to their external

SYSTEMS environment, internal environment and customer needs and

reactions.

THEORY OF AN • Open systems tend to devise more than one way to accomplish
goals or reach similar results with different conditions and
ORGANISATION operations--what von Bertanlanffy called “equifinality.”
• This is in direct contrast to closed systems that function under the
assumption that there is only one way to achieve a result: a direct
relationship between cause and effect (Entropy).
• Systems theory views the organisation as a purposeful and unified
system which is composed of interrelated elements.
• The principle of synergy applies in that the whole is regarded to be
greater than the sum of its parts (Hellriegel et al, 2009).
 Inputs
 Inputs are what the organisation acquires from its external environment.
 These include human, physical, financial and information resources (Hellriegel et
al, 2005).
 The nature and quality of the inputs received from the external environment will
have a significant impact on the organisation’s ability to transform these into
SYSTEMS quality outputs.

THEORY OF AN  For example, if there is a shortage of qualified artisans and engineers in the
external labour pool this will impact negatively on an aircraft manufacturer’s ability
to manufacture aircraft.
ORGANISATION Transformation Processes
• Refer to managerial, technological and operational processes within an
organisation which are used to combine and transform inputs into outputs (Botha et
al, 2009).
• For example, a furniture manufacturer would transform the inputs of skilled
carpenters, materials (such as wood, glass, plastic, etc.), information about the
needs and wants of its customers, as well as financial capital to produce furniture
(the output) such as dining room tables and chairs, lounge suites, etc.
 Outputs
• Refer to the products and services which the
SYSTEMS organisation produces or renders as a result of
implementing the transformation process
THEORY OF AN (Hellriegel et al, 2009).
ORGANISATION  Feedback is a very important component of the
organisational system as it provides information
on the organisation’s performance.
 Feedback can include financial reports,
production records, performance reviews and
marketing surveys (Hellriegel et al, 2005).
 • A closed system is independent, self-
SYSTEMS sufficient and is not dependent on
interaction with the external environment
THEORY OF AN for survival (Smit et al, 2011).
ORGANISATION • An open system, however, is
dependent on interaction with the
external environment for its survival. All
organisations are open systems.
 Advantages of an open system
• Open system organizational structures promote effective
problem solving by clarifying the big picture.

SYSTEMS • Continuous feedback and response results in better

understanding, by leadership and management, of the
THEORY organization’s structure within the environment and the
interactive dynamics between them.
OF • That opens the door for better communication and more

ANISATION feedback.
• When the system and subsystems have enough feedback,
the results can produce more clearly directed planning,
intelligent design, useful products and necessary services.