Summary
Summary BUSINESS MANAGEMENT 1ST YEAR NOTES
- Institution
- IMM GRADUATE SCHOOL (IMM)
These are in-depth notes which cover the whole syllabus for students studying BUSINESS MANAGEMENT for 1st year @ IMM.
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BusinessManagement
Notes:
Chapter: Page Number:
Chapter 1: 2
Chapter 2: 5
Chapter 3-8: 9
Chapter 9: 13
Chapter 10: 22
Chapter 11: 24
Chapter 12: 31
Chapter 13: 43
Chapter 14: 63
Chapter 15: 67
Business and its Challenges:
1|Page
, A business: Is an organisation that provides goods and services to its customers
in the economic system in which they operate.
Goods: Are all those things that we can feel and touch. These are tangible
goods.
Services: Are usually intangible we cannot feel or touch them.
Profit: The amount of money that remains in the business after the business has
paid all its costs.
Profit=Total Revenue−Total Costs
There are businesses that do not only look for profit, but try to get just enough
income to cover costs. Not-For-Profit Organisations (NPOs).
Economic Principle and Factors of Production:
This concept refers to the best possible utilisation of resources in order to create
profit for the organisation.
This principle forms one of the fundamental drivers for the existence of a profit-
driven organisation.
The four basic resources required to provide products and services, which aim to
service the multiple needs of the customers are known as the Factors of
Production:
1. Natural Resources: Things in nature that are regarded as valuable in
their untouched form.
2. Human Recourses (Labour): Are the employees who perform specific
activities for an organisation.
3. Capital: Is the money or the assets used to deliver something of value to
customers.
4. Entrepreneurship: Is the process in which natural resources, human
resources and capital are put together so as to manufacture a good, or
offer a service, in order to make a profit. An entrepreneur is a person
who takes the risk of starting and operating a business.
Entrepreneurship is therefore a key production factor in establishing and
developing a business in the free market economy.
Economic Systems:
Any business functions within an economic system. These systems do not refer
to a political system people easily confuse economic and political systems.
Generally a business functions within one or a combination of the following four
basic economic systems:
1. Capitalism: (Free-Market Economy) The basic theory of capitalism is
that each individual in society is free to choose his or her own economic
2|Page
, activity. Very little government interference because private
individuals own most of the society’s resources, they can freely use those
resources in any way they wish.
2. Communism: (Command Economy) Government owns almost all of
the country’s resources government officials can decide what goods and
services should be delivered, who should be employed, what each person
should earn, etc.
3. Socialism: Between these two systems we find socialism. Individuals
may own private property and choose their own form of economic activity
but the government also owns many of the country’s resources and
plays a far larger role in the economy than in capitalism.
4. Mixed economy: When an economy is a mix of private enterprise,
government ownership of resources, and government planning of the
economy then we call this economy a mixed economy. The kind of
economy in which a business functions influences the social contract that
a business will have with its stakeholders.
The Four Economic Systems:
Capitalism. Socialism. Communism.
Mixed
Economy.
Business Stakeholders and The Changing Social Contract:
Businesses need to consider the importance, role and influence of business
stakeholders.
Stakeholders include any internal and external role players that exist in the
environment within which an organisation functions.
The different primary and secondary stakeholders that are influencing South
African businesses are grouped according to three types of stakeholders:
1. Business Related: (Owners, investors, consumers, personal,
shareholders, banks, auditors, suppliers)
2. Opinion Related: (Competitors, potential employees, media)
3. Public related: (Local authorities, national authorities,
neighbours/community, NGOs, trade unions, politicians)
Corporate Social Responsibility:
3|Page
, CSR: Is the concept that organisations, especially corporations, have an
obligation to consider the interests of customers, employees, shareholders,
communities, and ecological organisms and their environment/s, in all aspects of
their operations.
What Sustainability meant when it was first used:
1. Not only making the business look good in the eyes of the public, but also
understanding the effect the business has on the physical environment
and finding ways that businesses could improve the environment.
2. Sustainable practices should be used by employees.
3. Sustainability was measurable, so that progress could be reported.
4. Sustainable policies were based on reality, not spur-of-the-moment ideas.
The Current Social Contract of a South African Business:
Society’s understanding of a business’s responsibilities can be divided into three
aspects, namely:
1. The Formal Contract: Refers to society’s unspoken expectations from
business. Such as keeping global laws and environmental standards,
and following the country’s industry codes and norms.
2. The Semi-Formal Contract: Refers to new spoken expectations that some
people have about the responsibilities of a business, and which may affect
formal contracts in the future.
3. Frontier (Future) Expectations: Refers to issues that will have an impact
on business in the future, such as health effects of obesity. As some of
these expectations change, issues may shift towards a semi-formal or
formal contract.
Some of the frontier issues that are shaping the social contract between
business and their stakeholders are:
1. Rising inequality between countries and continents: An uneven
distribution of wealth and power puts pressure on international
businesses.
2. Changes in population patterns: Major shifts are occurring in the
population figures of many countries.
3. Changes in availability of resources: As natural resources decrease
more pressure is put on businesses to manufacture more eco-friendly
cars.
4. Changes in climate: Results in pressure to reform manufacturing practices
and reduce harmful emissions.
5. Blurring boundaries between private responsibilities and laws:
Responsibility regarding issues such as obesity, medical provisions and
pensions is shifting away from individuals onto companies.
Chapter 2: The business environment:
4|Page
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