Unit 1

Business Organization
and Environment
 Topic 1.1

Introduction to
business management
Think about it…
•
Business, that’s easily defined;
it’s other people’s money.
Alexandre Dumas (1802-1870)

• What did Dumas mean by this?

• Why is his concept correct?
• Do you agree to his concept?
•…
 Focus Questions:

1. What is a business?
2. What are inputs, outputs and
processes of a business?
3. What are the factors of production?
4. What is meant by Specialization?
WHAT IS A BUSINESS?
Meet the needs\wants of stakeholders
Buy inputs – raw materials, labour,
machinery and equipment, land
Produce outputs – goods and services
Focus on efficient use of resources
Generate profit/surplus

What Businesses Do
WHAT IS A BUSINESS?

Production
Factors of
(Value Output
Production
Added)

What Businesses Do
Market Place

A market is a place or process whereby

buyers and sellers meet to trade

Types of Products
Consumer Goods
Producer or Capital Goods

What Businesses Do
Who are the stakeholders? – Anyone who
has an interest in the success of a business

• Customers
• Managers
• Employees
• Owners
• Local Community/Environment
• Suppliers
• Government
• Creditors

What Businesses Do
Who are the stakeholders? – Anyone who
has an interest in the success of a business

• Customers
• Managers
• Employees
• Owners
• Local Community/Environment
• Suppliers
• Government
• Creditors

What Businesses Do
Take Inputs Process/Manufacture Output

Costs – Fixed and Variable Revenue

Profit
What Businesses Do
Opportunity Cost

The next best alternative that is forgone

when making a decision.

Limited Resources and Unlimited wants

result in choices to be made.

What Businesses Do
Factors of Production
 Resources comprise human beings and all the
things they use to produce the goods and services
which people want. These resources are described
as the ‘factors of production’. Factors of Production
are therefore the resources of an economy.

1. LAND
2. LABOUR
3. CAPITAL
4. ENTREPRENEUR (ENTERPRISE)
What Businesses Do
1. LAND (Natural Resources)
The word land is taken to mean all those
gifts of nature, which are available to us for the
satisfaction of our wants. These are the
resources provided by nature and not by human
beings. It includes therefore,
a. The natural fertility of soil.
b. The minerals in the earth surface, chemicals and
gases in the air.
c. Forests, oil wells, deserts, rivers, and the riches
in the sea.
The main service of land is the provision of
space where production can take place.
What Businesses Do
2. LABOUR (Human Resources)
The word ‘Labour’ means human effort of all types
- Manual & Non-Manual.
- Unskilled & Skilled.
So by labour it is meant the mental & physical human
effort employed in production. These consist of energies,
skills and knowledge of the working population. Production
is determined both by the quantity & quality of labour in a
particular community.

What Businesses Do
2. CAPITAL (Manufactured
Resources or Man-Made
Resources)
The word capital is used to describe
manufactured resources. This includes varied
assortment of resources – factory building,
tools and machinery, raw materials, partly
finished goods & means of transport, power
stations, docks etc. When firms increase their
spending on capital stock is called investment
What Businesses Do
4.ENTREPRENEUR (Enterprise)
Entrepreneur is the one who decides what is to be produced
& who makes decisions to bring the other factors of productions
together to produce goods & services. In other words
entrepreneur is the owner of the business.
He or she also has to decide:
1. What to produce
2. How to produce
3. Where to produce
4. For whom to produce

So entrepreneurs are the risk bearers, organizers, decision

makers and managers.
What Businesses Do
 Type Description Reward

Land All natural resources Rent

The physical and

Labour mental work of Wages
people
All man-made tools
Capital Interest
and machines
All managers and
Entrepreneur Profit
organisers (owner)

Incomes of Factors of Production