BASICS OF BUSINESS ADMINISTRATION

PART I :

Nature And Environment of Business

Meaning of Business
.

The etymology of business relates to the state of being busy either as an

individual or society, doing commercially viable and profitable work.
3 usages of the term:
a. singular usage - to mean a particular company or corporation.
b. generalized usage - refer to a particular market sector
c. broadest meaning - all activity of suppliers of goods or services.

In economics, a business is a legally-recognized organizational entity existing

within economically free country designed to sell goods and/or services to
consumers, usually in an effort to generate profit

Entrepreneurship-business refers to lawful activities enjoyed by human beings

which are involved in providing and exchanging goods and services to satisfy
enormous needs and wants to earn a living or make profit

Any human undertakings.

CLASSIFICATION OF BUSINESS:
A.

B.

C.

According to size:
Very small - under 20 employees
Small
- 20 to 99
Medium
-100 to 499
Large
- 500 or more employees

According to Purpose:
For Profit Non -Profit Mutual- Benefit -

for making money

for offering services
for aiding members

By Legal Forms of Ownership

Single Proprietorship

Partnership
Corporation
Cooperative

D. According to Kind of Activities:

Extractors: agriculture and mining

Manufacturers
Service businesses
Retailers and distributors
Financial Businesses
Information businesses
Utilities produce public services
Real estate businesses
Transportation

Why People Own or Manage a Business?

1. To satisfy personal objectives such as control, independence, profit, job security and
pride.
2. To achieve business objectives such as service, profit, corporate social responsibility,
innovation, growth and expansion.
Small Business and Entrepreneurial Venture:
Small business is independent owned and operated; does not engage in many innovative
practices. Its primary objective is to earn a profit.
An entrepreneurial venture practices strategic management. Its principal objectives are
profitability, growth, competitiveness further personal goal including profit. They are
much more in number, create more job opportunities but generate fewer revenues.
and expansion. They are fewer in number, provide lower employment but generate high
revenue.
Business and Society
The economic system cannot simply exist without a business.
A business concern can only operate profitably in an economically and socially stable
environment.
It is the responsibility of all business of all business entities to contribute to the progress
of the community where they operate to ensure its growth and development.
All institutions and not only business were for the quality of life. (Peter Drucker)

Economics and Business

Economics:

the social science that studies the production, distribution and consumption
of goods and services. The basic economic problem is scarcity. Scarcity
means that available resources are insufficient to satisfy all needs and
wants.

Business:

Efficiently and effectively uses economic resources to produce goods and

services to satisfy enormous needs and wants.

Economists task:
.
.
.

Studying ways in which society uses scarce resources.

Analyzing costs and benefits of distributing and consuming goods and services.
Coordinating research, collecting and analyzing data, monitoring economic trends and
developing forecast.

Managers task:
1.
2.
3.

Managing work and organization.

Managing people
Managing production and operations.

Social Development is the result of management and economics.

Types of economic System
1.
2.
3.

Custom Based Economy

Directed (planned) Economy
Market Economy

private enterprise

private property

profit motive

competition

freedom of choice

Kinds of Economic Resources : (Factors of Production - the means to produce goods and
services.)
.
.
.
.

Natural Resources (Raw materials from nature)

Human Resources (Labor)
Capital Resources (Equipment , building , facilities)
Technology

Business Administration:
It refers to the OVERSIGHT roles: the act or duty of overseeing the watchful care of
all the functional areas of business organizations, the growth strategies etc.
Functional Areas of Business
1.
2.
3.
4.

Management
Marketing
Production/Operation
Finance

Environment of Business Organization:

A.

The Internal Stakeholders

Owners

Employees

Board of Directors (if any)

B.

The Task Environment (External Stakeholders)

Customers

Competitors

Suppliers

Distributors

Allies

Unions

Government

Interest Group

Media

C.

The General Environment

Environment)

What Customers Buy?

Political-Legal
Economic
Socio-Cultural
Technological
Demographic

1. Goods
2. Services
3. Events

(External

4. Experiences 7. Properties 10. Ideas-benefits

5. Persons
8. Organizations
6. Places
9. Information

International