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Higher Business Management

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Higher Business Management Unit 1 Learning Outcome 1 Business in Contemporary Society – PowerPoint PPT presentation

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Title: Higher Business Management


1
Higher Business Management
  • Unit 1
  • Learning Outcome 1
  • Business in Contemporary Society

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.

3
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

4
Durable Goods
  • Things that will last a long time and will be
    used regularly.
  • Cars
  • TV
  • Washing Machines
  • Cookers
  • Microwave Ovens
  • Refrigerators

5
Non-Durable Goods
  • Things that are consumed shortly after
    purchase.
  • Food
  • Drink
  • Clothing
  • Shoes
  • Newspapers
  • Magazines

6
Inputs and Outputs
Outputs
Inputs
Resources Raw materials Labour Machinery Organis
ation
Goods and Services
7
Business Activity
External Influences eg Government Policy
Marketing
Finance
The Organisation (Internal)
Inputs Land Labour Capital Enterprise
Output Goods and Services
People (Human Resources)
Production (Operations)
External Influences eg Competition
8
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

9
Cycle of Business
WANTS
IDENTIFICATION
PRODUCTION
CONSUMPTION
WANTS
10
Sectors of Industry (Business Activity)
PRIMARY (Extractive) Mining Fishing Farming Oil
SECONDARY (Making goods) Manufacturing Constructi
on Durables Non-durables
TERTIARY (Services) Banking Insurance Tourism Dis
tribution
11
Organisations
Types of Organisation
Private Sector
Public Sector
Profit-making
Non-profit-making
12
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

13
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

14
Business Objectives
  • Survival
  • Maximising profits
  • Growth
  • Good reputation
  • Maximising sales
  • Satisficing
  • Providing a service
  • Managerial objectives

15
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
16
Stakeholders
  • External
  • Suppliers
  • Customers
  • Banks/lenders
  • Society/Local Community
  • National Government
  • Local Government
  • Taxpayers
  • Donors (Charities)
  • Internal
  • Shareholders/
  • Owners
  • Managers
  • Employees

17
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

18
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

19
Sources of Finance
  • Long-term
  • Capital
  • Mortgages
  • Debentures
  • Sale and Leaseback
  • Venture
  • Medium-term
  • Bank Loans
  • Short-term
  • Overdrafts
  • Factoring
  • Trade Credit

20
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

21
Other Sources of Help
  • The Princes 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

22
Methods of Growth
  • Integration - 2 firms combining to become bigger
  • Merger - integration on equal terms
  • Take-over - one firms identity is lost in the
    take-over. Can be friendly or hostile

23
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

24
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

25
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

26
Business as a System
A system is made up of 4 inter-dependent parts-
  • Inputs - raw materials and other resources
  • Processes - transformation into goods
  • Outputs - the finished product/service to be
    marketed
  • Feedback - the reaction of the market

Any system is affected by the environment in
which it operates
27
Internal Pressures to Change
  • New personnel or management
  • New technology (the internet)
  • Change in financial position

28
External Pressures to Change (the PEST analysis)
  • Political/legal (legislation, planning, devolved
    Parliament, etc)
  • Economic (interest rates, foreign exchange rates,
    the Euro, etc)
  • Social (ageing population, role of women, greater
    general prosperity)
  • Technological (e-mail, internet)
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