MANAGEMENT

Lecturer – Baizhan A.B., assistant professor

Business activity

Learning objectives:

1. Identify the factors involved in business activity

2. Identify the sectors of an economy involved in creating wealth

3. Appreciate the functions involved in business activity

4. Understand the importance of added value in all parts of business

Content:

What is business?

What is business activity? The customer; Needs and wants; Inputs and outputs: land, labour, capital, managerial ability; Money; Business functions; Marketing; Production (Operations); Finance; People; Directors; Management: planning, organizing, controlling, coordinating, motivating; Opportunity cost; Risk versus profit; Added value; External factors; Manufacturing versus services: primary sector, secondary sector, tertiary sector, quaternary sector; The importance of manufacturing.

Task for essay: Explain how the external factors (environment, competition, government, unions, culture & purchasing habits, economic climate) might: (a) help (b) hinder a business which manufactures cycle helmets?

Multiple choice questions:

1. This sector of an economy is dominant in countries where there is either a wealth of raw materials or a wealth of rich, fertile land, which can be used to grow crops:

a) Primary sector c) Secondary sector

b) Tertiary sector d) Quaternary sector

2. This sector encompasses financial services – banks and building societies, estate agents, all retailers, solicitors, accountants, cleaners and recruitment agencies, etc.:

a) Primary sector c) Secondary sector

b) Tertiary sector d) Quaternary sector

3. All services which are associated with IT support, from companies which allow you to browse on the Internet to those which improve and update computer technology, are involved in this sector:

a) Primary sector c) Secondary sector

b) Tertiary sector d) Quaternary sector

4. This sector encompasses everything to do with the finished product in terms of its manufacture, apart from the extraction of raw materials:

a) Primary sector c) Secondary sector

b) Tertiary sector d) Quaternary sector

Glossary:

Needs and wants – customers have needs, which are for survival (housing, food, clothing), and wants, which improve their lifestyle (e.g. bigger car, smarter clothes).

Resources – factors of production (or inputs) used in the process of creating a product – land, labour, capital, management (enterprise).

Output – the end product of combining all inputs.

Money – a medium of exchange between businesses, shareholders, suppliers and customers.

Business functions – the various parts of business which combine to achieve the objectives e.g. marketing.

External factors – forces over which the business has no control, which affect its activity.

Fast moving consumer good – a type of product which is bought frequently and once used must be purchased again e.g. washing powder.

Consumer durables – purchased with a view to using many times e.g. washing machine.

Capital goods – sold to businesses in order to help them produce a product – this could be a welding machine or raw materials.

Market – the place where buyer meets seller.

Opportunity cost – the benefit foregone of the next best alternative (альтернативная стоимость, цена возможности – стоимость сделанного выбора, которая эквивалентна выгоде, которую могли бы получить, приняв наилучший из отвергнутых вариантов).

Added value – the process involved in making the selling price worth more than the cost.

Primary stage of production – extraction of raw materials.

Secondary – assembly and manufacture of products.

Tertiary – the service sector.

Quaternary – tertiary business associated with information technology.

Summary points:

1. A business uses factors of production – land, labour, capital and managerial ability to produce its output.

2. There are several functions within business e.g. marketing, production, which must be controlled and coordinated if the business is to operate efficiently.

3. If a business wishes to survive and grow, it must be able to add value.

4. There are several external factors, over which the business has no control, but which affect many parts of business operations.