MNB1501 BUSINESS MANAGEMENT STUDY NOTES STUDY assignment and self-assessments questions and answers.

CHAPTER 1: THE BUSINESS WORLD AND BUSINESS MANAGEMENT In a market economy, products and services must meet needs of people in exchange for a profit. Four different elements: human activities, production, exchange, profit. Production: transformation of resources into products and services. Market economy: Individuals decide what to produce, how to produce it and at what price to sell their product. Formal sector: large businesses. Informal sector: SME and SMMES. Society’s limited resources Natural resources: land, agricultural land, industrial sites, residential stands, minerals and metals, forests, water. Human effort is needed to process these resources into need-satisfying products. Human resources: Physical and mental talents and skills of people. Capital: Buildings, machinery, cash registers, computers and other products produced, not for human consumption. Entrepreneurship: New business owners. Economic principle: satisfy needs with scarce resources. CHAPTER 2: ENTREPRENEURSHIP Definitions of an entrepreneur: Driven primarily by profit. Creative, innovative, identify opportunities, find resources, take financial risks, bring about change, growth and wealth, re-energise economies and create jobs, start, manage and grow sustainable small businesses. Characteristics of an entrepreneur Achievement motivation: enjoy competition, an internal locus of control: need to be in charge of own destiny, innovation and creativity, risk-taking. Defining a small business SME (small and medium-sized enterprise) and SMME (small, micro and medium-sized enterprise): Fewer than 200 employees, annual turnover of less than 64 million, capital assets of less than 23 million, direct managerial involvement by owners. The entrepreneurial process involves the following phases to be worked through: 1. Characteristics, abilities and skills of the entrepreneur 2. Resources 3. Opportunities and ideas 4. Feasibility study 5. Business plan 6. Launch and manage the new business. Skills required for entrepreneurship Strategy (competition), planning, marketing, financial, project management and human relations skills. Resources needed to start a business Financial resources, human resources, operating resources (physical) Requirements for a good investment opportunity: Clearly defined market need for product or service Must be able to achieve a competitive advantage Must have potential to grow Must be rewarding to the investor or entrepreneur Timing must be right. Buying an existing business Advantages: Customers will be familiar with location, established customer base, experienced employees, planning can be based on historical data, supplier relationships in place, inventory and equipment in place, financing may be available from owner. Disadvantages: Business location may be undesirable, image of the business will be difficult to change, employees are inherited rather than chosen, difficulties in changing the way the business is run, may be liabilities for past business contracts, inventory and equipment may be obsolete, financing costs could drain cash flow and threaten survival of business.