Summary Principles of business management

Chapter 1 BUSINESS AND ITS CHALLENGES Johan Strydom PPurpose of this chapter This chapter explains the basic concepts (ideas) on which a business is built, such as prot, the economic principle and the factors of production. It also explains the basic economic systems in which businesses operate, and describes the importance of corporate social responsibility in the running of a business. This chapter provides a key to unlocking the fascinating subject of business management at an introductory level. Learning outcomes This chapter should enable you to: understand what the concept of business involves understand the concepts of prot-seeking and non-prot-seeking organisations show how business uses the factors of production in trying to make a prot distinguish between the different economic systems in which a business may operate describe the impact of the fourth industrial revolution on businesses • • • • 1.1 describe the different stakeholders that inuence South African businesses discuss the concept of corporate social responsibility explain the principles of the social contract under which South African businesses operate understand the model used to explain the layout of this book. Introduction Business management is a dynamic eld of study that focuses on institutions that satisfy customers’ needs.1 But what is a business and why do people start businesses? The answers to these questions involve the concepts of prot, the economic principle, and the factors of production. It is also useful to look at the different economic systems in which a business could operate, and how these systems can inuence the operations of that business. One factor that is of the utmost importance for any organisation is the stakeholders with whom it interacts on a day-to-day basis. There is growing pressure on businesses to accommodate these stakeholders. This has resulted in the development of the concept of corporate social responsibility, and in the making of a social contract between businesses and South African society as a whole. Figure 1.3 at the end of this chapter provides a model that will make it easier to understand the logical ow of this book. This model consists of four broad sections, namely: the business environment in which a business operates; the task of the manager: the different areas for which the manager is responsible, and how 1.2 business management is used in entrepreneurship and how a business plan is developed. What is a business? The term ‘business’ has many meanings, but the main one is that it is an organisation that provides goods and services to its customers in the economic system in which it operates. Goods are those things that we can feel and touch, such as fridges, clothing, shoes and cars. We say that these are tangible goods. Services are usually intangible; in other words, we cannot feel or touch them, such as consultations with a doctor or lawyer. For the purpose of this book, the term ‘products’ will include both tangible goods and intangible services. Most businesses deliver both goods and services to their customers – for instance, the delivery of fast food to your doorstep. The Domino’s pizza that is delivered is a tangible good, but the activity of delivering it to your home is a service. In this book, we will concentrate more on the side of tangible goods, but will from time to time provide examples of the service industry in South Africa. (In this book, the terms ‘business’, ‘organisation’, ‘rm’ and ‘enterprise’ are used interchangeably, i.e. they mean the same thing.) Critical thinking Which of the following activities performed in South Africa can be viewed as a business? • • • 1.2.1 A medical consultation South African Business Express A Spaza shop Business and prots