Higher Business Management

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20 Νοε 2013 (πριν από 3 χρόνια και 9 μήνες)

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Mrs A Chambers

1

Higher Business Management

Unit 1

Learning Outcome 1

Business in Contemporary Society


Mrs A Chambers

2

What is Business Activity?


Using “resources” to produce
goods and services which people
require in order to satisfy their
“wants”.


Any kind of activity that results
in the provision of goods and
services which satisfy human
“wants”.

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Goods and Services

Goods


Food


Clothing


Houses


Cars


TVs


Computers


Furniture


CD players

Services


Hairdressers


Insurance


Gas and
Electricity


Hotels


Leisure Clubs


Lawyers


Banking


Education


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Durable Goods

Things that will last a long time
and will be used regularly.



Cars



TV



Washing Machines



Cookers



Microwave Ovens



Refrigerators

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Non
-
Durable Goods

Things that are “consumed” shortly
after purchase.



Food



Drink



Clothing



Shoes



Newspapers



Magazines

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Inputs and Outputs

Outputs

Inputs

Resources


Raw materials

Labour

Machinery

‘Organisation’

Goods

and

Services

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Business Activity

The

Organisation

(Internal)

Inputs

Land

Labour

Capital

Enterprise

Output

Goods

and

Services

Marketing

People

(Human

Resources)

Finance

Production

(Operations)

External Influences

eg Competition

External Influences

eg Government Policy

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Factors of Production


Land

-

raw materials, factory site


Labour

-

people with required skills


Capital

-

finance to buy equipment,
machinery, computers, etc


Enterprise

-

organisation of the
above factors, risk
-
taking, ideas

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Cycle of Business

WANTS

IDENTIFICATION

PRODUCTION

CONSUMPTION

WANTS

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Sectors of Industry

(Business Activity)

PRIMARY

(Extractive)


Mining

Fishing

Farming

Oil


SECONDARY

(Making goods)


Manufacturing

Construction

Durables

Non
-
durables


TERTIARY

(Services)


Banking

Insurance

Tourism

Distribution


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Organisations

Types of Organisation

Private Sector

Profit
-
making

Non
-
profit
-
making

Public Sector

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Private Sector

Organisations

Profit
-
making


Sole Traders (1)


Partnerships (2
-

20)


Private Limited Companies (50)


Public Limited Companies (no limit)


Franchises


Co
-
operatives

Non Profit
-
making


Charities and Clubs

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Public Sector

Organisations


Public Corporations


BBC and Royal Mail


Bank of England


Local Authority Services


Education, Housing, Police, Social
Services


Central Government Departments


Treasury, Defence, Health,
Employment, Social Services,
Environment, Transport, etc

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Business Objectives


Survival


Maximising profits


Growth


Good reputation


Maximising sales


Satisficing


Providing a service


Managerial objectives

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Enterprise and

the Entrepreneur


Having and developing a business
idea


Acquiring the necessary resources


Raising the finance to acquire
resources


Risking losing the money invested

Anita Roddick, Richard Branson,

James Dyson, Marth Lane Fox


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Stakeholders

Internal


Shareholders/


Owners


Managers


Employees


External


Suppliers


Customers


Banks/lenders


Society/Local
Community


National Government


Local Government


Taxpayers


Donors (Charities)


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Stakeholders’ Interests


Shareholders
-

dividends, capital growth


Managers
-

job security, fringe benefits


Employees
-

job security, pay and conditions


Suppliers
-

regular orders, prompt payment


Customers
-

low prices, high quality, good
service


Banks
-

ability to make payments for loans


Government
-

payment of taxes, compliance
with laws


Community
-

corporate responsibility

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Stakeholders’ Influence


Shareholders
-

voting rights at AGM


Managers
-

day
-
to
-
day decisions


Employees
-

possible industrial action


Suppliers
-

period of credit, level of discounts


Customers
-

taking their business elsewhere


Banks
-

granting of loans and rate of interest


Government
-

legislation, equal pay, minimum
wage, etc


Community
-

protest movements, direct action


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Sources of Finance

Long
-
term


Capital


Mortgages


Debentures


Sale and
Leaseback


Venture

Medium
-
term


Bank Loans


Short
-
term


Overdrafts


Factoring


Trade Credit

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Government Help

for Businesses


Local Enterprise Companies


Education/Business Partnerships


Business Start
-
up Scheme


Loan Guarantee Scheme


Reduced rate of Corporation Tax


Zero Rating (VAT) on Exports


Dept of Trade and Industry
-

advice,
Trade Fairs


Export Credit Guarantee Department


EU
-

Regional Development Funds

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Other Sources of Help


The Prince’s Youth Trust
-

help for
young people to set up in business


Local Authorities
-

‘small business
advisers’


Trade Associations
-

‘Association of
Small Businesses’, ‘Scottish Motor
Trade Association’, ‘ABTA’, etc


Local Chambers of Commerce

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Methods of Growth


Integration

-

2 firms combining
to become bigger


Merger

-

integration on equal
terms


Take
-
over

-

one firm’s identity
is lost in the take
-
over. Can be
‘friendly or hostile’

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Integration


Horizontal

-

firms at the same stage
of production


Vertical

-

forwards towards the
customer and backwards towards the
raw materials


Lateral

-

firms with related goods not
in competition with each other


Conglomerate/Diversifying

-

firms
operating in completely different
markets

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Reasons for Growth


Eliminate competition/increase market share


Achieving greater economies of scale


Security from hostile take
-
over
-

more
assets


Cutting out “middlemen”


Securing sources of raw materials


Controlling distribution of products


Spreading risks
-

‘not having all eggs in one
basket’


Smoothing seasonal fluctuations in sales



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De
-
integration


De
-
integration

-

conglomerate selling off
firms to concentrate on “core” business


De
-
merger

-

subsidiary companies splitting
away from the parent company and
operating on their own


Divestment

-

selling off companies


Contracting out/out
-
sourcing

-

getting
other companies to do work on your behalf


Management buy
-
out/buy
-
in

-

usually a
struggling company sold to a management
team

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Business as a “System”


Inputs

-

raw materials and other
resources


Processes

-

transformation into goods


Outputs

-

the finished product/service
to be marketed


Feedback

-

the reaction of the market

A system is made up of 4 inter
-
dependent
parts:
-

Any system is affected by the environment
in which it operates

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Internal Pressures

to Change


New personnel or management


New technology (the internet)


Change in financial position

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External Pressures to Change

(the ‘PEST’ analysis)


P
olitical/legal (legislation, planning,
devolved Parliament, etc)


E
conomic (interest rates, foreign
exchange rates, the Euro, etc)


S
ocial (ageing population, role of women,
greater general prosperity)


T
echnological (e
-
mail, internet)