MNB1501 exam summary

MNB1501 Introduction to business management Study Unit 1 – The business world and business management A business in a market economy employs limited resources of a nation (natural, human, financial, entrepreneurship) to satisfy the needs for products and services. The business world is a complex system which involves transforming these resources into products and services. A business is very closely linked to the society in which it operates – needs and values of the society have a strong influence on what a business does. Businesses can also have a strong behavioural influence on society (e.g. cellphones). Business and society are dependent on one another. Success of business has major impact on prosperity of society. Business is the means by which society endeavours to satisfy its needs and improve its standard of living. At the centre are entrepreneurs, who start new ventures and create jobs, economic growth, and prosperity. Primary purpose of a business is to make a profit while satisfying needs of the people. In a market economy involves the activity of transforming resources into products and services in order to meet peoples needs. These are then offered to the market in exchange for profit. Business activity involves:-  People / human activity (everything is ultimately run by people)  Production – transformation of resources into products and services  Exchange – for money or other products/services  Profit Business is the means by which society endeavours to satisfy its needs and improve its standard of living by creating wealth. In a market economy (or market system), the most important characteristic is that individuals have the choice to establish any business, and to produce within limits, any product or service the market requires (the prevailing economic system in SA). The entrepreneur can decide what/how to produce, and how much to sell it for. Includes large and small businesses, that group together to form industries. Micro-enterprises (one person businesses) are not considered part of formal economy, as they are typically survival/subsistence based, don’t pay tax, and put strain on inner city infrastructure. Business creates wealth, is a catalyst for economic growth, and is credited for bringing about high standards of living in developed countries. They serve the community indirectly through technological innovation, R & D, infrastructure improvements, and supporting education, dev. of human resources, sport etc. in communities. The business world and society both depend on and influence each other, this is the core of sustainability (the ability of a business to survive and prosper over a long period of time). Western nations have realised that a high standard of living amid a deteriorating physical environment does not make sense, so the business world is thus under constant pressure regarding (themes of sustainability):-  Social responsibility – restricting malpractice by businesses organisations through regulation, social performance. Business are under pressure to act as responsible citizens (corporate citizenship) their role goes beyond financial success to include health and safety in workplace, community issues, environmental awareness, BEE, corporate social investment.  Business ethics – ethical behaviour of managers/execs, codes of conduct,  Employment equity (Affirmative action) – employee complement at all levels representative of demographics. Equal employment opportunities for all, readdress past inequalities, (employment equity act)  Environmental sustainability / damage -  Consumerism – a social force protecting consumers against unsafe products/malpractice by exerting moral and economic pressure on businesses, national consumers act, consumer protection act Competition commission: government body instituted to ensure fair competition (prevent price fixing etc) Consumer protection act: prohibit unfair business practices and promote a consistent legislative and enforcement framework to protect consumers. Forces producers to take full responsibility. Humans have varied and seemingly unlimited needs, but society has limited resources, so choices must be made how to best utilise those resources. The economic principle is how to obtain the greatest possible benefit/satisfaction with the limited resources we have i.e. highest possible output with lowest possible input. There are 4 types of resources for producing goods/services: Needs and satisfaction The continued existence of humans depends on the satisfaction of needs, both physical and psychological. The work that every member of a community performs is directly or indirectly related to need satisfaction. Unlimited needs: Abraham Maslow’s principle is that all humans have the same basic needs, but not everyone strives to satisfy the same ones (e.g. people who are starving are only interested in physical needs). But once one level of needs is satisfied, people strive to fulfil the next level. Needs may have physical, psychological, or social origin. Needs are infinite, and as defined by Maslow, fall into a hierarchy of needs from most essential to least necessary.