1.

1 Introduction to
Business Management
Role of Business

Input Process Output

 Business

Businesses exist to satisfy the needs and wants of people, organizations and governments

Market place

Market Customers
Adding Value

Adding value is increasing price of the products by improving packaging or

adding features

It leads to profit making by allowing a business to sell its products for more
than its production costs
Opportunity Cost

This next best alternative foregone while making a choice is known

as Opportunity Cost

Because of the fact that choice involves opportunity cost, the factors of
production have to be used in the most efficient way and therefore
SPECIALIZATION
Division of labor

The separation of a work process into a number of tasks, with each

task performed by a separate person or group of persons.
Business Functions

 Human Resources (Personnel)

 Marketing
 Finance
 Production (Operations)
Human Resources

 Manpower Planning  Training and Development

 Job analysis and Job description  Employee welfare and
 motivation
Determining wages and salaries
 Labour management relations
 Recruitment and Selection
 Performance Appraisal
Marketing

 Conducting Market Research  Distribution Planning

 Price Planning  Consumer Analysis
 Product Planning  Identifying New Business
 Opportunities
Customer Relationship
Management
Finance

 Advice on the financial and tax implications of business

decisions
 Management of wages
 Raising Finance
 Preparation and monitoring of annual budgets and forecasts
Operations / Production

 Production and planning

 Purchasing department
 Stores department
 Manufacture of products
 Design and technical support department
 Business sectors

Primary Tertiary

Secondary
Quaternary
 Primary sector

 Larger sector in underdeveloped & developing

countries
 Less capital investment
 Less use of machinery
 Agriculture constitutes the major part
Secondary sector

 Takes the output of the primary sector and manufactures

finished goods
 Important sector to promote economic growth and
development
 Important source of income in developing countries
Tertiary sector

 Significant contribution to GDP in developed countries

 Provides key inputs to most other business
 Transformation of goods through providing services
Quaternary Sector

The portion of an economy that is based on knowledge applicable

to some business activity that usually involves the provision of
services

Examples: Consultancy (offering advice to businesses) and R&D

(research, particularly in scientific fields)
 Sectoral change

Refers to a shift in the GDP contribution from primary sector to

secondary and tertiary sector
Reasons for sectoral change

 Cultural Changes
 Development of Markets
 Market orientation
 Rampant migration
 Focus on customer relationship management
Benefits of sectoral change

 Creation of more jobs

 Gradual movement towards Tertiary sector
 High capital investment towards Government
 Increase in country’s GDP
 Decrease in imports & increase in exports
Role of Entrepreneurship

 Bringing together the factors of production

 Contributes towards growth of
economy
 Reduces unemployment
Intrapreneurship

Giving opportunity to a person within a large corporation to take

direct responsibility for turning an idea into a profitable finished
product through assertive risk-taking and innovation
Start-up cost of business

 Premises
 Buildings
 Capital equipment
 Marketing costs
 Legal and professional fees
Factors to consider when setting up business:

 Business idea
 Finance
 Human resources
 Entrepreneurial skills
 Fixed assets
 Suppliers
 Customers
 Marketing
 Legalities
Reasons for starting business

 Growth
 Earnings
 Autonomy
 Security
 Hobbies
Challenges of start-up business

 Obtaining Finance
 Market potential
 Cash flow problems
 Customer Loyalty towards other brands
 Regulations
 Finding the right staff
 Uncertainty
Elements of Business Plan