NEEDS

Physical and mental conditions which must be fulfilled essentially for existence.

E.g.; food shelter clothing

CHARACTERISTICS OF NEEDS

1. Limited
2. Common to all
3. Essential for survival
4. Cannot be created

WANTS

Different ways of satisfying needs

E.g.: rice mansions tailor-made clothing

CHARACTERISTICS OF WANTS

1. Unlimited
2. Diverse
3. Not essential
4. Can be created

PRODUCTS

Anything offered to the market to satisfy needs and wants.

Products can be divided into 2

1. Good
2. Service

GOODS

Tangible

Can be stored

Can be duplicated

Separable from producer

SERVICE

Intangible

Cannot be stored

Duplication is not similar

Inseparable from service provider

BUSINESS

A business is an economic activity which is done to fulfill the needs and wants of people profitably

CHARACTERISTICS OF BUSINESS

1. Exchange or selling takes place

All business sell or exchange products for monetary value

Buying or selling goods and services at a price is an essential factor

E.g.: cooking food for family – not a business

Cooking food to sell - business

2. Transaction of goods and services takes place

All business produce or purchase goods or services in order to sell

This can be either consumer goods, capital goods

Consumer goods- goods produced for final consumption

Commercial/industrial goods- goods purchased in order to produce consumer goods

3. Continuous transactions

In order for a business to be considered one it should have continuous transactions taking place
 4. Profit/ benefit

Profit = income – expense

The main objective of a business is to maximize profit
Profit is vital for the survival and expansion of the business in the market place

This can be done by building business relationship and generating business opportunity

5. Risk

All business will face the risk of earning profit and incurring losses
This could be due to
1. Changes in consumer demand
2. Changes in production technology
3. Incorrect management e.g. Enron scandal

6. Creates wants

Business goods and services to satisfy wants

Raw material ----------- finished good

7. An economic activity
As a business is involves with the provision of goods and services to fulfill human needs and
wants in is considered an economic activity

8. Value adding
Increasing the value of resources which happen when the production process takes place

Goals of a business

1. Survival
2. Profit maximization
3. Sales maximization
4. Increasing market share
5. Maximizing the market values of shares
Evolution of business stages

1. Batter system
2. Use of money
3. Industrialization
4. Information era

Batter system

Direct production – individuals productions producing resources for his own consumption

Specialization - continuously producing specific goods which resulted in a more efficient method of
production

Through specialization comes a surplus of goods produced.

Individuals exchanging excess goods produced by them with goods of others = the batter system

Limitations of the batter system

1. Lack of double co incidence of wants

2. Lack of common unit available
3. Difficulty in storage and transfer of value

Use of money

Materials were used as a medium of exchange to overcome the drawbacks of the batter system

1. Use of common materials e.g. sea shells, tobacco etc.

2. Use of metals e.g. gold and silver
3. Use of metal money – values were imprinted on the face of metal plates and pieces
4. Use of coins and notes – due to scarcity of precious metals used notes and coins which didn’t
have an intrinsic value was used e.g. bank money
5. Electronic money

Industrial Revolution

A complete transformation in the way products were produced from hand made to machine made

Cottage industries were converted into large scale industries

Development in auxiliary services occurred during this era

E.g. banking, transport and logistics, insurance, communication, warehousing etc.

Commerce = trade + auxiliary services

Trade /2

1. Local trade – wholesale, retail

2. Foreign trade - import export

Information Era

Rapid shift from traditionally established business in the industry era to an economy primarily based
upon the information technology

E commerce

Buying and selling activities conducted through the internet

E business

All business functions conducted through the internet

Popularity of e commerce

1. Exchange of information without documents

2. Minimizing operational and inventory cost
3. Global market space
4. Improvement of infrastructure facilities

Trends of business due to improvements in IT

1. Expansion of globalization
2. Emergence of electronic businesses
3. Use of E money environment concern
4. CSR
Business classification

1. Nature of product
I) Primary sector – agriculture, forest, fishing
II) Secondary sector- manufacturing and construction
III) Tertiary sector – banking (aux) electricity

2. According to ownership
I) Private companies
II) Gov. Orgs.

3. Based on objective
I) Profit motive
II) Nonprofit motive

4. According to scale
I) Small and medium scale
II) Large business

5. According to production sector

I) Agriculture
II) Industry
III) Service

Analysis of business as a process of inputs and outputs

Inputs process outputs

Land admin good or a service
Labor operation
Capital marketing
Entrepreneurship finance
Information human resource
Time research and Dev.
Knowledge management

Operations
Process which involves with the conversion of raw materials and finished goods
Marketing
Identifying customer needs and wants and satisfying them profitability

Finance
Obtaining funds
Cost control

Human resource
Attracting selecting recruitment training and welfare of employees

Research and development

Improving and innovating the quality of new products repeatedly

Stakeholders
People or institutions who have an interest in the business

Stakeholders and their interest

1. Owner

Know whether the business will generate profits

Growth of business
Analyze the successfulness of management decisions

Importance for business (IFB)

I) Increase the investment in the business
II) Survival and growth of business

2. Manager

Maximize business profits

Growth
Analyze management decisions

IFB
I) Execute funding strategies
II) Execute growth strategies
III) Gauge business performance
3. Employees

Salary
Bonus
Promotions and job security

IFB
I) Improver employee efficiency
II) Retain employees
III) Employee motivation

4. Debtors/lenders

Know the ability of recovering loans

Know the safety of lending

IFB
I) To obtain funds continuously
II) To obtain funds at a lower cost

5. Customers
To receive a quality product at a reasonable price

6. Suppliers
To receive continuous orders
Collect money from goods supplied

7. Potential investors
To invest their resources in future businesses

8. Government
Collect taxes/ give tax relief
Improve employment
Measure economic development

IFB
I) To get tax relief
II) Infrastructure facilities
III) To obtain technological knowledge
 9. Community
To know about env policies
To obtain job opportunities

Business ENV

The environment in which factors/stakeholders of a business operate in.

1. Internal ENV

Influence and exist within an organization

I) Owner
II) Manager
III) Employee
IV) Org. structure
V) Org. culture
VI) Resources

2. External ENV

All forces which influence the business outside the org.

External environment /2
I) Task/immediate env
II) Macro env

Task/immediate

Exist outside the business but has a direct impact on its activities

I) Customers
II) Suppliers
III) Competitors
IV) Producers of substitutes
V) Potential businessman or investors
Macro ENV

Broad env of a business and influential groups

I) Political
II) Economical
III) Social
IV) Technological
V) Environmental
VI) Legal
VII) Demographical -

Benefits of studying business ENV

Able to identify SWOT of a business

Strength, weakness, opportunities, threats.

Internal ENV forces on a business

Strength – positive internal forces within a business

Weakness – negative internal forces within a business

Task ENV forces on a business

Opportunities- favorable impact by the external env to the business

E.g. new customer group

Better more reliable suppliers

New market trends

Increase in consumer awareness

Threats – unfavorable impacts by the external env to the business

E.g. Entry of a new competitor

Supplier going bankrupt

Loss of customer segment

For further info refer page 32 gr12 study text

Macro ENV forces on a business

Demographical env

Opportunity - increase in population = increase in demand for goods

Threats - decrease in population = decreased demand for goods

Economical env

Opportunity – decrease in interest rates = increase in favorable borrowing terms

Threat - increasing in interest rates = decrease in borrowing ability of a business

Political and legal

Imposing favorable rules and regulations = opportunity

Unfavorable rules and regulations = threat

For further info refer page 34-37 gr12 study text