1.1 Nature Of Business Activity

Transcription

1 IB Business And Management Page Nature Of Business Activity Wednesday, September 4, :53 AM Input -----> Process----> Output Factors of production - Land - Labor - Capital - Entrepreneurship - Land - Nature resources - Labor - Mental Skilled - Physical Unskilled - Capital - Non nature resources - Entrepreneurship - People willing to take a risk to make profit

2 IB Business And Management Page 2 Class Work Wednesday, September 4, :24 AM Arooba Dhaduk Mr. Jules Business and managements Activity 1 In MKS Input - Land Trees - Labor Teachers Cleaners Management Principle Admistraters Accounts Board of chairs - Capital Tables Boards (white/pin) Building Equipment Books Projectors Computers - Entrepreneurship Management Process - Land Used to make the building in which the students will be accommodated within their classes The trees are used to give the schools court yard a nice appearance - Labor Used to teach and manage the whole system of the school - Capital Used to complete the class room building in which the students will be able to study and take the lesson which the school has to offer Will also be used to give in the knowledge that the labors (teachers) have to the costumers (students) - Entrepreneurship Taking a risk to start this school Output - The students that attend this school end up with the knowledge and degree

3 IB Business And Management Page 3 Key words Wednesday, September 4, :02 AM Business: is a decision making organization that involves input that are then processed and then produce the output that then is bought by customers which gives you profits. Product: goods and services Goods: tangible goods Services: intangible goods Needs: are the basic necessities that a person must have in order to survive Wants: are the desired things; things people would like to have Market: a place or process where the buyer (customers) and sellers (business) meet to trade Profit: revenue - expenses NGO's: Non Government Org Customers: person or organization that buy a product Consumer: the person who uses the product Added value: Is the difference between the value of inputs (the cost of production) and the value of output (the goods and services that are sold to customers.) Capital goods (producer goods): Are products by other businesses to produce good or services Consumer goods Are the products that are sold to the general public other then other business Durable good Non durable foods Opportunity cost: Is the next best alternative choice when making a decision Accounting cost: The cost of producing a product Division of labor: Is used to refer to the specialization of people

4 IB Business And Management Page 4 Factors of production Wednesday, September 4, :43 AM Factors of production - Land rent - Labor Wages Salary - Capital Interest - Entrepreneurship Profits

5 Specialization Wednesday, September 4, :14 AM Individual: Doctor, lawyers Departments: Human resources, production, Finance Corporation: Apple, samsung Regional: wallstreet National: Japan MNC-multi national companies INC- incorporated national company Division of labor Is used to refer to the specialization of people Advantages of specialization - Increased productivity - Increased efficiency - Standardization - Higher profit margin Disadvantage - Boredom - Inflexible - lack of autonomy - Capital cost IB Business And Management Page 5

6 IB Business And Management Page 6 Business Functions Sunday, September 8, :07 AM Product (operation) Is responsible for the process of converting raw materials into finished goods, ready for delivery to customers Marketing Is responsible for identifying and satisfying consumer wants and needs Financing Is in charge of managing the organization's money Human resources Is responsible for managing the personnel of the organization Google/apple Accounting/finance CFO - Finance manager/ director - Finance controller - Auditor - Financial accountant - Management accountant - Accountant - Account assistant

7 IB Business And Management Page 7 Opportunity Cost / Profit Sunday, September 8, :23 AM Opportunity cost Is the next best alternative choice when making a decision Profit Total revenue- total cost Revenue < cost=loss Revenue > cost= profit Revenue = cost=break even

8 IB Business And Management Page 8 Business Sectors Tuesday, September 10, :57 AM Aliko dangote-riches black person Primary - Natural resources - Extraction Found in less developed countries Secondary - Manufacturing Found in developed and developing Tertiary - Services Found in all developing, developed and less developed countries Less developed (Africa) Developing (UAE, BH) Developed (North Europe, North America)

9 IB Business And Management Page 9 Slide notes Wednesday, October 2, :39 AM Business and Management: 1.1 Nature of Business Activity Lesson 1: What is a business? 1. Focus Question What is a business? 2a. So what is a business? What is the difference between a hobby and a business? A business is an activity performed for profit. The difference between carrying on a business and a hobby is that a business has an expectation of profit. It is run in a systematic, continuous and regular businesslike manner, and has ordinary commercial principles governing it (such as business and accounting records). A person who collects and sells baseball cards on a regular basis from a store is engaged in a business. While a casual collector, who will occasionally trade a card or two with friends is probably engaged in a hobby. The distinction is important for tax purposes as losses from a business are tax-deductible, while losses generated from a hobby are not. 2b. So what is a business? The only purpose of a business is to create customers. Peter Drucker A business can be defined as an organization that provides goods and services to others who want or need them. Business exist to satisfy the NEEDS and WANTS of people, organizations, and governments. What is a need? Basic necessities that a person MUST have in order to survive. What is a want? Things that a person would LIKE to have. 2c. So what is a business? As a business grows it is important to have clearly defined functions or processes. Human resource management Production Marketing and finance External factors; beyond the control of the company Social changes Technological developments

10 IB Business And Management Page 10 The level of economic activity Environmental issues Government legislation and policies External Shock: Oil crisis Health care Remember: Natural disasters Outbreak of war It is easy to open a business, but much more difficult to keep it open. 3. The Marketplace - Chinese proverb What is the marketplace? Is a place where buyers (customers/consumers) and sellers (businesses) meet to trade. Physical Form: such as a shop or restaurant Non-physical Form: such as e-commerce Who are the customers? The people or organizations that buy a product. Who are the consumers? Are the people or organizations that actually use the product. 4. Types of Products Be careful when distinguishing between the two concepts. They are often interchangeable, but have very different meanings. All businesses produce goods and/or services What types of products do businesses produce? Consumer goods: Products sold to the general public What are the two types of consumer goods? Durable goods They last a long time and can be used again. Clothes, cars etc. Non-durable goods Capital goods / Producer goods: They need to be consumed after their purchase. Fresh food, meal at a restaurant, etc. Products purchased by other businesses. These are used to produce other goods. 4b. Types of Products Can you think of any examples?

11 Services: Are intangible products provided by businesses. Sometimes the results of the service are tangible. Doctors (health care) Bus and rail companies (transportation) Restaurants (food) Gyms and sports centers (recreation) Lawyers (legal advice) Teachers (education) 5. Adding Value All businesses must add value in the production process. What does value added mean? Value of outputs - Value of inputs = Value added (goods & services sold to customers)- (costs of production) Value added allows a business to sell its products for more than its production costs, thus earning a profit. For example: Suppose that the input costs (labor and components) for producing a Plasma TV are 500 dollars. If customers are willing to pay 2000 dollars for the TV, what is the value added? $1500, this surplus will contribute to the firms profit. This concept also applies to the service sector. Example, services of an electrician, teacher, accountant, customers are paying for the skills, expertise, and experience that they do not personally have. 5b. Adding Value What are some reasons for customers willing to pay in excess of the cost of producing goods and services? Speed or quality of service Prestige connected with the acquisition Feel-good factor Perceived value for money Quality of the finished good Brand image / brand loyalty Taste or design Inability to obtain the product cheaper elsewhere Explain how the following products have value added. 3. A 100-page fashion magazine A photo of a famous celebrity with a signed autograph. A state-of-the-art laptop computer. 6. Opportunity Cost and IB Business And Management Page 11

12 IB Business And Management Page 12 Business Activity Businesses make decisions that affect their daily operations. What is opportunity cost? is the value of a product forgone to produce or obtain another product. What is accounting cost? Do not look at the cost or value of forgone choices. They look at the actual cost of operations. If you go to university the accounting cost would be the tuition fees and other costs related to studying at university. The opportunity cost would be the forgone income that could have been earned had the person chosen to work instead of studying. Likewise, a student would hope that by studying for a degree that he would earn a higher salary to offset the accounting and opportunity costs of obtaining that degree. 7. The Role of Profit in Business Activity How would you calculate profit? A firms total revenue its total costs = profit What is revenue? The inflows of money, sale of products. What are costs? The outflows of money, to finance production. How would you calculate a loss? Business costs > than revenues = a loss The majority of businesses will aim to provide goods and services at a profit. This will ensure they earn a return on their investment (ROI) 7b. The Functions of Profit What are the functions of profit? Provides an incentive to produce. Acts as a reward for risk takers. It encourages invention and innovation. Acts as an indicator of growth or decline. It is a source of finance. In the end, all businesses MUST make profits to survive in the long run. Even for Non-profit Organizations it is important to make a SURPLUS (revenues exceeding costs). Confused? What is the difference between profits and surplus? Any surplus is put back into the business. Profits are usually divided up among its owners. 8. Factors of Production In order to produce a good or provide a service you need what? Resources or factors of production or factor inputs.

13 IB Business And Management Page 13 What are the factors of production of a book? Paper, ink, equipment for printing and binding, editor etc. What are the four vital factors of production to produce any good or service? Land natural resources found on the planet Renewable resources fish, trees, water Non-renewable resources minerals, fossil fuels Labor physical and mental effort of people Capital all non-natural resources used in production Enterprise (entrepreneurship) the management, organization, and planning of the other three factors of production. 8b. Factors of Production The four factors of production have a financial return for their part in the production process: 9. Specialization What does specialization mean? A business which concentrates on the production of a particular good or service or a small range of products. Can you list some examples of specialization? Pizza Hut Dominos Chow Family Burger King KFC At what levels does specialization occur? Individual in a job, doctor, teacher, lawyer Departmental marketing, finance, personnel Corporate Dell (computers), Hilton (hotels) Regional Wall Street, New York (financial services) National Japan (electronics), Germany (cars), France (wines) 9b. Specialization What does division of labor mean? Refers to the specialization of people. Defines different aspects of a job or task assigning different people to each part of the work. Are there advantages to specialization? Increased productivity staff are more skilled at what they do. Increased efficiency better use of resources, less time wasted. Standardization same quality being produced. High profit margins customers may be prepared to pay a higher price for specialist goods. 9c. Specialization What are the disadvantages to specialization? Boredom doing the same repetitive task.

14 IB Business And Management Page 14 Inflexibility less flexible to adapt to different roles and responsibilities. A lack of autonomy a breakdown or delay in the process will cause problems for the entire business. Capital cost the purchase and maintenance of specialist machinery and equipment may be extremely expensive. Lesson 2: Business Functions Lesson 3: Primary, Secondary, and Tertiary Sectors. 1. Focus Question What are the major functions of a business? 2a. Production / Operations What are the four vital functions that a business must have to operate effectively? Production Marketing Finance Human Resources (Personnel) 2b. Production / Operations What is this department responsible for? The process of converting raw materials into finished goods or services, for the customer. Who can give an example of this process? 2c. Production / Operations So who is in charge or responsible for the production department? The Production manager. J What are some of his/her tasks or duties? Determine how the good or service will be manufactured or delivered. Determining what resources are needed for production. Planning the timescale of production. Stock management and control Performing quality control Arranging delivery of product to customer Meeting production targets and deadlines Conducting research and development (R&D) The production manager s role is a vital one. 3a. Marketing Poor planning and control may lead to a delay or halt in production and this could cost the company a lot of money. What is the marketing department responsible for? They are responsible for identifying and satisfying consumer wants and needs. They are also responsible for making sure that the company s products sell.

15 IB Business And Management Page 15 How can the marketing department ensure that the firm s products sell? This is done by conducting market research, test marketing, packaging, and advertising. So any guesses about what the major functions of the marketing department are? 3b. Marketing The Four P s of Marketing: Product: making sure that goods and services meet the customer's requirements Size, color, 3c. Marketing packaging, core functions, market research, branding, and product development. Price: finding the correct pricing method to sell the product Depending on level of demand Number of substitute products and Cost of production. The Four P s of Marketing: 4. Finance 3. Promotion: making sure customers know about the product. Using mass media; TV or newspapers. Sales promotion Special donations Free samples 4. Place: making sure goods and services are in convenient places for consumers to purchase. Must select the right location, location, location to distribute products to the marketplace. What is the finance department in charge of? Managing the organization s money $$$$$ What must the financial manager ensure? They must ensure that accurate recording and reporting of financial documentation takes place. They must comply with legal requirements. 5. Human Resources / Personnel What is the human resources department responsible for? They are responsible for managing the personnel of the organization. What are they likely to deal with when managing people?

16 IB Business And Management Page 16 Workforce planning Recruitment Training Appraisal Pay and benefits Equal opportunities Health and safety concerns Fostering working relations Business Sectors 1. Focus Question What are the major sectors of a business? 2. Primary Sector What is the primary sector involved with? The extraction, harvesting, and conversion of land. Using natural resources as factors of production. Agriculture, fishing, mining, forestry and oil extraction. Less economically developed countries rely heavily on farming. In more economically developed countries, rely on machines and automation. As economies develop, there is less reliance on the primary sector in terms of employment and national output. 3. Secondary Sector What is the secondary sector involved in? They are involved in using raw materials and other resources for the manufacturing of products. Can you give an example of this? What are some other businesses in this sector? Construction firms Pharmaceutical companies Clothes manufacturers Publishing firms Electronic manufacturers Energy production companies The output is then sold to the customers. 4. Tertiary Sector What is the tertiary sector involved in? They are involved in providing services to their private and corporate customers. Can you provide an example of this? Borrowing a book from the library, nothing is produced here, they are just offering a service.

17 IB Business And Management Page 17 This sector is also know as what? The service sector. Can you list some examples of industries in this sector? Retailing Education Travel and tourism Entertainment Insurance Transport Banking and finance Healthcare and catering