Summary
Chapter 1 summary
- Course
- Business Management 113
- Institution
- Stellenbosch University (SUN)
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CHAPTER 1BUSINESS: A DEFINITION
BUSINESS: The organised effort of individuals to produce and sell, for a profit, the
goods and services that satisfy society’s needs.
THE ORANISED EFFORTS OF INDIVIDUALS
For a business to be organised it must combine four kinds of resources: material,
human, informational and financial. There are 3 types of businesses:
1. Manufacturing businesses – process various materials and deliver physical
product.
2. Service businesses – render services (eg. FedEx, Outsurance, ABSA)
3. Marketing intermediaries – buy products and resell them (eg. Makro,
Game)
SATISFYING NEEDS
The ultimate objective of every firm must be to satisfy the needs of its
customers. People generally do not buy goods and services to just own them;
they buy products and services to satisfy particular needs.
BUSINESS PROFIT
PROFIT: Money that remains after all business expenses have been deducted
from sales revenue. Negative profit – expenses > sales revenue (LOSS). Profit
earned by a business becomes the property of the owners. Purpose of a profit is
to reward or a payment for a risk taken.
STAKEHOLDERS: All the different people or groups of people who are affected by
the policies and decisions made by an organisation. (E.g. Shareholders,
consumers, employers, government)
TYPES OF ECONOMIC SYSTEMS
ECONOMICS: Study of how wealth is created and distributed.
ECONOMY: The systems through which a society creates and distributes wealth
, Experts study economics from 2 different perspectives:
- Microeconomics: Study of decisions made by individuals and businesses.
- Macroeconomics: Study of the national and global economy.
Individual decision whether to work or not Total supply of labour in the economy
Economic systems differ essentially in two ways:
1. The ownership of the factors of production and
2. How they answer four basic economic questions that direct a nation’s
economic activity.
FACTORS OF PRODUCTION: Resources used to produce goods and services.
o Land and natural resources – elements that can be used in the production
process.
o Labour – the time and effort that we use to produce goods and services.
o Capital – Money, facilities, equipment and machines used in the operation of
organisations.
o Entrepreneurship – activity that organises land, labour and capital. Willingness
to take risks and the knowledge and ability to make use of other factors
efficiently.
The way each system answers the four basic economic questions listed here,
determines a nation’s economy.
1. What goods will be produced?
2. How will they be produced?
3. For whom? (Target market)
4. Who owns and controls the major factors of production?
CAPITALISM
An economic system in which individuals own and operate the majority of
businesses that provides goods and services. It stems from the theories of the
18th-century Scottish economist Adam Smith. In his book Wealth of Nations, he
argued that a society’s interests are best served when the individuals within that
society are allowed to pursue their own self-interest. When individuals act to
improve their own fortunes, they indirectly promote the good of their community
and the people.
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