Lesson 1: The Business World and Business Management

Overview
This lesson will require approximately six notional hours. It covers the role of business in
society, needs and need satisfaction, economic systems, need-satisfying institutions,
and the nature of business management.

1.1 Introduction
 Purpose: Discusses the role of business in society and explains how businesses
use limited resources (natural, human, financial, entrepreneurship) to satisfy
societal needs.
 Key Concepts:
 Businesses operate within a market economy where they transform
resources into goods and services.
 Provides an overview of global economic systems and how businesses
function in a market economy.
 Examines the purpose and nature of business management.

1.2 The Role of Business in Society

Business plays multiple roles in society, including:
1. Provide Employment: Creates jobs for individuals, boosting local economies.
2. Supply Products and Services: Meets consumer needs/wants.
3. Preserve Natural Resources: Ensures sustainable practices.
4. Generate Income: Contributes to individual and national wealth.
5. Social Responsibility: Engages in ethical practices and contributes positively to
communities.
6. Influence the Country’s Economy: Drives growth and innovation.
7. Provide Taxes: Supports government revenue generation.
Impact on Society:
 Businesses influence societal behaviour through new products and innovations
(e.g., smartphones, e-cigarettes).
 Societal values and needs shape business activities (e.g., environmental
awareness pressures businesses to reduce pollution).
Interdependence:
 Businesses depend on society for labour, customers, and resources.
 Societies depend on businesses for employment, goods, and services.

1.3 Needs and Need Satisfaction

1.3.1 Maslow’s Hierarchy of Needs
Maslow classified human needs into five levels:
1. Physiological Needs: Basic survival needs (food, water, shelter, sleep).
2. Safety and Security Needs: Protection from violence, theft, health security, and
financial stability.
3. Social Needs: Love, friendship, family bonds, belonging, intimacy, and
relationships.
4. Esteem Needs: Prestige, achievement, recognition, and status.
5. Self-Actualization Needs: Realizing one's full potential and personal growth.
Application:
 A hungry person prioritizes physiological needs over higher-level needs.
 Businesses must understand these needs to design effective marketing strategies.
1.3.2 Society’s Scarce Resources
 Limited Resources vs. Unlimited Needs: Scarcity exists because time and
resources are finite.
 Production Factors:
1. Human Resources/Labor: Intellectual and physical efforts of people.
2. Capital: Machinery, tools, and buildings used to produce goods/services.
 3. Natural Resources/Land: Gifts of nature like climate, minerals, forests,
etc.
4. Entrepreneurship: Combines resources to create value while accepting
risks.
Activity Example: Classify items as production factors:
 Coal → Natural Resource
 Forklift → Capital
 Factory → Capital
 Oil → Natural Resource
 Patrice Motsepe → Entrepreneur

1.4 The Main Economic Systems

There are three primary economic systems:
1. Free-Market Economy (Capitalism):
 Individuals own resources and decide how to use them.
 Characteristics:
 Private ownership of resources.
 Freedom of association and right to strike.
 Profit motive and free competition.
2. Socialism:
 Balances private ownership with state control.
 Characteristics:
 Individuals can own private property but the state owns some resources.
 Government plays a significant role in planning and regulating the economy.
3. Command Economy (Communism):
 State owns most resources and decides production and distribution.
 Characteristics:
 Centralized decision-making by the government.
 Examples: North Korea, Cuba.
Mixed Economy:
 Combines elements of capitalism and socialism.
 Examples: USA, South Africa.
South Africa’s economy is a mix of free-market and socialist principles, characterized by:
 Market-oriented practices.
 High government participation and control.

1.5 The Need-Satisfying Institutions of the Market Economy

 Business Organizations: Aim to generate profit for owners.
 Types: Sole proprietorships, partnerships, corporations, public corporations
(e.g., Transnet).
 Government Institutions: Provide essential services without seeking profit.
 Funded through taxes.
 Non-Profit Organizations: Operate for specific causes rather than profit.
 Examples: Sports clubs, welfare organizations, religious groups.
Classification Activity:
 Telkom: Privatized but partially owned by the government.
 Treatment Action Campaign (TAC): Non-profit private organization.
 Pirates Soccer Club: Private profit-seeking organization.

1.6 The Nature of Business Management

 Definition: Studies the management of need-satisfying institutions.
 Key Functions:
1. Human Resources Management: Manages staffing and organizational
structure.
2. Marketing Management: Identifies and satisfies customer needs.
 3. Purchasing and Supply Management: Handles procurement and
logistics.
4. Operations Management: Converts resources into goods/services.
5. Financial Management: Oversees monetary requirements.
6. Information Management: Implements and controls technology.
 Economic Principle: Achieve maximum satisfaction with limited resources.
 Applies to both profit-seeking and non-profit organizations.

1.7 Summary
 Businesses play crucial roles in society, satisfying needs and driving economic
growth.
 Understanding Maslow’s hierarchy helps businesses target specific consumer
needs.
 Economic systems vary globally, with South Africa adopting a mixed approach.
 Effective business management ensures efficient resource utilization and goal
achievement.

Self-Assessment Questions
Question 1:
Which statement about Maslow’s hierarchy is correct?
 Answer: Option 4 – Self-actualization needs are at the top of the hierarchy.
Question 2:
What principle refers to ensuring the highest possible satisfaction of needs with limited
resources?
 Answer: Option 2 – The economic principle.
Question 3:
Characteristics of an entrepreneur include:
 Answer: Option 4 – Pursues profit, accepts risk, makes the most of opportunities,
combines expertise/resources.
Question 4:
Attributes of a free-market economy:
 Answer: Option 3 – Private ownership, free competition, profit motive recognized.
Question 5:
Incorrect statement:
 Answer: Option 1 – Not all non-profit organizations are state-owned.

References
 Kenro’s Blog. (2022). Economic systems: A comparison.
 Maslow, A. (1954). Motivation and personality. Harper & Row.
Central Node: Lesson 1: The Business World and Business Management

Branch 1: The Role of Business in Society

 Sub-Branch 1.1: Provide Employment
 Boosts local economies
 Reduces poverty levels
 Sub-Branch 1.2: Supply Products and Services
 Satisfies consumer needs/wants
 Sub-Branch 1.3: Preserve Natural Resources
 Promotes sustainability
 Sub-Branch 1.4: Generate Income
 Contributes to individual and national wealth
 Sub-Branch 1.5: Social Responsibility
 Ethical practices, community engagement
 Sub-Branch 1.6: Influence the Country’s Economy
 Drives growth and innovation.
 Sub-Branch 1.7: Provide Taxes
 Supports government revenue generation

Branch 2: Needs and Need Satisfaction

 Sub-Branch 2.1: Maslow’s Hierarchy of Needs
 Sub-Branch 2.1.1: Physiological Needs
 Food, water, shelter, sleep
 Sub-Branch 2.1.2: Safety and Security Needs
 Protection from violence, theft, financial security
 Sub-Branch 2.1.3: Social Needs
 Love, friendship, belonging, relationships
 Sub-Branch 2.1.4: Esteem Needs
 Prestige, achievement, recognition, status
 Sub-Branch 2.1.5: Self-Actualization Needs
 Realizing full potential, personal growth
 Sub-Branch 2.2: Society’s Scarce Resources
 Human Resources/Labor
 Capital (Machinery, Tools)
 Natural Resources/Land
 Entrepreneurship

Branch 3: The Main Economic Systems

 Sub-Branch 3.1: Free-Market Economy (Capitalism)
 Private ownership
 Free competition
 Profit motive recognized
 Sub-Branch 3.2: Socialism
 Mixed private/state ownership
 Government involvement in planning
 Sub-Branch 3.3: Command Economy (Communism)
 State ownership of resources
 Centralized decision-making
 Sub-Branch 3.4: Mixed Economy
 Combines elements of capitalism and socialism
 Example: South Africa

Branch 4: The Need-Satisfying Institutions of the Market Economy

 Sub-Branch 4.1: Business Organizations
 Sole Proprietorships
 Partnerships
  Corporations
 Public Corporations (e.g., Transnet)
 Sub-Branch 4.2: Government Institutions
 Non-profit-seeking
 Funded through taxes
 Sub-Branch 4.3: Non-Profit Organizations
 Sports clubs
 Welfare organizations
 Religious groups

Branch 5: The Nature of Business Management

 Sub-Branch 5.1: Key Functions
 Sub-Branch 5.1.1: Human Resources Management
 Staffing requirements, organizational structure
 Sub-Branch 5.1.2: Marketing Management
 Identifying and satisfying customer needs
 Sub-Branch 5.1.3: Purchasing and Supply Management
 Procurement and logistics
 Sub-Branch 5.1.4: Operations Management
 Transforming resources into goods/services
 Sub-Branch 5.1.5: Financial Management
 Monetary requirements for running the organization
 Sub-Branch 5.1.6: Information Management
 Technology implementation and control
 Sub-Branch 5.2: Economic Principle
 Achieve maximum satisfaction with limited resources
MNB1501 – Lesson 1
Businesses provide employment, supply
products/services, preserve natural
What is the role of business in society?
resources, generate income, fulfil social
responsibility, influence the economy, and
provide taxes to the government.

It starts with physiological needs (basic

survival needs like food, water, shelter) at
What does Maslow’s hierarchy of needs
the bottom and ends with self-
start with?
actualization needs (fulfilling one's
potential) at the top.

Human resources/labour, capital

What are the four production factors? (machinery/tools), natural resources/land,
and entrepreneurship.

The principle of achieving the highest

Define "economic principle." possible satisfaction of needs with limited,
scarce resources.

Private ownership, free competition,

What characterizes a free-market
recognition of the profit motive, and
economy?
freedom of association/right to strike.

Name two examples of non-profit

Sports clubs and welfare organizations.
organizations.

An economic system where individuals

can own private property but the state
What is socialism? also owns some resources and plays a
significant role in planning and regulating
the economy.

Combining natural resources, labour, and

What is entrepreneurship capital to create value while accepting
risks and pursuing profit.

What are safety and security needs Protection from violence, theft, health
according to Maslow? security, and financial security.
 A combination of capitalism and socialism,
What is a mixed economy? featuring both private enterprise and
government ownership/planning.

To identify and satisfy customer needs by

What is the purpose of marketing
making products/services available to
management?
them.

Which economic system does South Africa A mixed economy, combining elements of
follow? free-market and socialist principles.

What is self-actualization in Maslow’s The desire to reach one's full potential and
hierarchy? become more than what one currently is.

Managing staffing requirements and

What are the roles of human resource
organizing management structures within
management?
an organization.

To engage in ethical practices, contribute

Why do businesses have social positively to communities, and address
responsibility? societal issues like environmental
protection.

An economic system where the state owns

What is a command economy? most resources and decides production
and distribution centrally.

Profit-seeking organizations aim to

What is the difference between profit- generate profit for owners, while non-
seeking and non-profit organizations? profits aim to cover costs and reinvest any
surplus into their cause.

They strive to achieve maximum

What is the economic principle applied to satisfaction of their mission with limited
non-profit organizations? resources, similar to profit-seeking
businesses.
 Businesses must make choices about how
What is the impact of scarcity on
to allocate limited resources to satisfy
businesses?
unlimited needs efficiently.

Human resources management,

marketing management, purchasing and
What are the functional areas of business
supply management, operations
management?
management, financial management, and
information management.
Test Lesson 1 - The Business World and Business Management

Multiple-Choice Questions (20)

1. What is the primary role of businesses in society?
a) To provide entertainment
b) To supply products and services that satisfy consumer needs/wants
c) To generate taxes only
d) To control government institutions
2. According to Maslow’s hierarchy, which need is at the bottom of the pyramid?
a) Esteem needs
b) Physiological needs
c) Social needs
d) Safety needs
3. Which production factor refers to machinery, tools, and buildings?
a) Human resources
b) Capital
c) Natural resources
d) Entrepreneurship
4. In a free-market economy, who owns most of the resources?
a) The state
b) Private individuals
c) Non-profit organizations
d) International corporations
5. Which economic system lies between capitalism and communism?
a) Socialism
b) Mixed economy
c) Market economy
d) Command economy
6. What does the term "entrepreneurship" mean?
a) Combining resources to create value while accepting risks
b) Providing free services to the public
c) Working for the government
d) Managing human resources
7. Which of the following is NOT a function of business management?
a) Marketing management
b) Financial management
c) Political management
d) Operations management
8. What is the economic principle?
a) Maximizing profit at all costs
b) Achieving maximum satisfaction with limited resources
c) Ensuring equal distribution of wealth
d) Focusing solely on environmental sustainability
9. Which institution provides essential services without seeking profit?
a) Business organizations
b) Government institutions
c) Sports clubs
d) Public corporations
10. Which organization is an example of a non-profit private organization?
a) Telkom
b) Treatment Action Campaign (TAC)
c) Pirates soccer club
d) Transnet
11. What characterizes a command economy?
a) Private ownership of resources
b) Free competition
c) State ownership of resources
d) Profit motive recognized
12. Which level of Maslow’s hierarchy relates to prestige and recognition?
a) Physiological needs
b) Esteem needs
c) Safety needs
d) Self-actualization needs
13. Which of the following is a natural resource?
a) A factory
b) Oil
c) A forklift
d) Patrice Motsepe
14. What is the main goal of marketing management?
a) To identify and satisfy customer needs
b) To manage financial accounts
c) To purchase raw materials
d) To hire employees
15. Which statement about socialism is true?
a) It eliminates private property entirely.
b) It allows individuals to own private property but involves significant government
intervention.
c) It focuses solely on profit maximization.
d) It prohibits entrepreneurship.
16. Which functional area deals with acquiring and managing capital?
a) Human resources management
b) Financial management
c) Marketing management
d) Information management
17. Which of the following is a characteristic of a mixed economy?
a) Purely capitalist practices
b) Purely socialist practices
c) A combination of private enterprise and government ownership
d) No government involvement
18. What is the role of operations management?
a) Transforming resources into goods/services
b) Managing employee relations
c) Designing advertisements
d) Handling legal matters
19. Which need is satisfied by having a sense of belonging?
a) Physiological needs
b) Safety needs
c) Social needs
d) Esteem needs
20. Which statement best describes South Africa's economic system?
a) Pure capitalism
b) Pure socialism
c) A mix of free-market and socialist principles
d) Command economy
True or False Questions (20)
1. Businesses play no role in influencing societal values.
2. Maslow’s hierarchy starts with self-actualization needs at the bottom.
3. Scarcity exists because time and resources are finite.
4. Capital refers to money used in production.
5. In a command economy, the state decides what goods and services to produce.
6. Entrepreneurs do not accept risks in their ventures.
7. The economic principle applies only to profit-seeking businesses.
8. Government institutions operate on a profit-seeking basis.
9. Welfare organizations are examples of non-profit organizations.
10. Socialism completely eliminates private ownership.
11. The main goal of marketing management is to sell as many products as possible.
12. Natural resources include gifts of nature like forests and minerals.
13. A mixed economy combines elements of capitalism and socialism.
14. Financial management focuses on purchasing raw materials.
15. Human resources management is responsible for organizing management
structures.
16. North Korea operates under a free-market economy.
17. Entrepreneurs combine expertise and resources to create value.
18. Scarcity affects only individuals, not businesses or governments.
19. Safety needs include protection from violence and theft.
20. South Africa’s economy is purely socialist.

Fill in the Missing Word Questions (20)

1. Businesses provide _________ to members of society, boosting local economies.
2. Maslow’s hierarchy of needs includes physiological, safety, social, esteem, and
_________ needs.
3. The four production factors are human resources, capital, natural resources, and.
4. In a _________ economy, private individuals own most of the resources.
5. _________ is the process of combining resources to create value while
accepting risks.
**6. refers to achieving maximum satisfaction with limited resources.
7. Government institutions provide essential services funded by.
**8. needs refer to our desire for love, friendship, and belonging.
**9. ___ is a type of economic system where the state owns most resources.
**10._______ organizations seek to cover costs rather than make a profit.
**11._______ refers to the machinery, tools, and buildings used in production.
**12._______ is the study of managing need-satisfying institutions.
**13._______ needs relate to financial security and health protection.
**14._______ is a non-profit organization that campaigns for HIV/AIDS rights.
**15._______ is the functional area responsible for transforming resources into
goods/services.
**16._______ refers to the raw materials provided by nature.
**17._______ is the functional area that manages staffing requirements.
**18._______ is the economic system characterized by private ownership and free
competition.
**19._______ is the highest level of Maslow’s hierarchy of needs.
**20._______ is a mixed economy that combines capitalist and socialist principles.
Answers
Multiple-Choice Answers
1. b
2. b
3. b
4. b
5. a
6. a
7. c
8. b
9. b
10. b
11. c
12. b
13. b
14. a
15. b
16. b
17. c
18. a
19. c
20. c
True or False Answers
1. False
2. False
3. True
4. False
5. True
6. False
7. False
8. False
9. True
10. False
11. False
12. True
13. True
14. False
15. True
16. False
17. True
18. False
19. True
20. False
Fill in the Missing Word Answers
1. employment
2. self-actualization
3. entrepreneurship
4. free-market
5. entrepreneurship
6. economic principle
7. taxes
8. social
9. command
10. non-profit
11. capital
12. business management
13. safety
14. Treatment Action Campaign (TAC)
15. operations management
16. natural resources
17. human resources management
18. free-market economy
19. self-actualization
20. South Africa