MNB1501 REVISION PACK

Study Unit 1: The Business W orld and Business Management The role of business in society  Transformation of resources into goods and services society needs  Business cannot operate without society  Needs and values of society influence what business does. i.e. protecting the environment  Organisations influence behavior patterns of people in a particular society by developing new products. I.e. Impact of cell phones, tablets etc. on social life.  Success of business has an impact on the prosperity of a society. i.e. mining towns Needs and need satisfaction  Humans have many varied and seemingly unlimited needs  Society has limited resources to satisfy those needs, which requires a choice to be made about how best to utilize the limited resources.  Most people have limited resources (money) to afford our unlimited wants, so we have to decide how best to utilize the little we have to obtain the greatest satisfaction.  Decision to obtain the maximum benefit (satisfaction) with the limited resources = Economic Principal.  Consumerism = The social force that protects consumers from unsafe products and malpractices by exerting moral and economic pressure on business.  According to Maslow, all humans have same basic needs, but not everybody strives to satisfy the same ones.  According to Maslow, once basic needs (hunger) are satisfied, we strive to satisfy the next level i.e. security etc.  Unlimited needs (Maslow’s hierarchy): 1. Physiological Needs (hunger, thirst) 2. Security Needs (protection) 3. Social Needs (love, recognition) 4. Esteem Needs 5. Self-Realisation Needs  Basic Physical and Psychological needs may overlap  Limited Resources 1. Natural Resources (land, forests, water) 2. Human Resources (labour, physical and mental talents) 3. Capital (buildings, machinery, computers – Not for final human consumption) 4. Entrepreneurship (Individuals who accept the risk, also rewarded with profits for the risks) Main Economic Systems  Free Market Economy (free enterprise system) o Products and services demanded by a community is supplied by private organisations seeking profit. o Members of a community may possess assets and earn profits from them o Allocation of resources are affected by free markets o Community can freely choose between products, services, place to stay etc. 2 | P a g e 2 o Minimum interference from the state. o Right for individuals to possess property such as land, buildings equipment vehicles etc. o People are free to do with their assets as they wish (freedom of distribution) o Freedom of choice – producers can decide whether they can profitably produce products.  Command Economy o Alternative to Market Economy o Known as communism o State owns and controls resources and factors of production o System of communal ownership. Individuals own no land, factories or equipment  Socialism o Compromise between Free Market and Command Economies o State owns and controls the principal/strategic industries (steel manf, transportation, communication, health and energy) o Private initiative controls less important and smaller maters such as trade and construction. o Strategic and basic resources should belong to every member of the community (Command Economy), the rest operate within the Free Market Economy.  Mixed Economy o Includes a mix of both public and government control (capitalism and socialism) o Degree of private economic freedom with centralized economic planning and government regulation The prevailing economic system is South Africa is a Socialist-Oriented economy with a High degree of government participation and control The need-satisfying institutions of the free market economy  Business Organisations o Also known as Profit Seeking Businesses o Most are privately owned (Private Enterprises), but state can also own businesses. o State owned business = Public corporations (Transnet etc.)  Government Organisations o Do not operate on a profit-seeking basis. o Also known as Government Departments o Provide a service to the community. o Obtain funds from Treasury (people pay for these services through taxes).  Non-Profit-Seeking Organisations o Owned by state and private organisations o Do not strive to make a profit o Seek just sufficient income to cover costs o Sports clubs, welfare, religious etc. The Nature of Business Management and the Classification of the Study Material for Business Management  Purpose and task of Business Management = Achieving the maximum output with the lowest possible input of production factors.