DP NOTES
1.1 WHAT IS BUSINESS?
What is a Business? Is a decision-making organization that is involved with the process of converting inputs
to outputs to produce goods and services.
Nature of business
- Primary, secondary, tertiary, and quaternary sectors.
- Entrepreneurship
- Challenges and opportunities or starting up a business.
NATURE OF BUSINESS
Input and output model.
- Inputs (factors and production) are the resources that a business uses in the production process.
Examples: raw materials, and labor.
- Processes (adding value) manufacture of goods and provision of services.
- Outputs (products) products and services which meet needs and wants from customers.
The role of business, satisfies the needs and wants of the public.
Distinguish between:
1. Customers and consumers. The customers are the ones which purchase (buy) a good and service
and the consumers are the ones who use it. We can be consumers and customers at the same time.
2. Goods and services. Goods are material, services are intangible products such as activities provided
by businesses
3. Consumer goods and capital goods. Consumer goods are products sold to the general public. There
are two types: Consumer durables (last a long time or are reusable and are houses, electronic
devices, cars, jewelry, or clothes), and Consumer non-durables (the ones you need to consume in a
short time period or can not be reused, such as, fresh food, medicines, beverages, newspapers).
Capital goods are used by a business to produce other goods or services, can last for many years
and they are investments.
4. Revenue and cost. The revenue is the money that comes in from selling goods and services to a
business (revenue - sales - income). Cost is the money that the business spends to produce goods
and services. n
4 FUNCTIONS OF BUSINESS
- Marketing department is in charge of identifying and satisfying customers' wants and needs. Also is
responsible for the firm’s sells. They use activities such as market research, promotions, pricing
branding and distribution.
- Human resources department responsible for managing the employees of the business, they create
the deals to hire and fire employees. Also they are in charge of planning and organizing structures
of the human resources.
- Finance are the ones who plan and manage the company's money. They ensure compliance of legal
requirements (example, taxes) and inform about the financial position of the business to
shareholders and potential investors.
- Operations department is the one which is in charge of converting raw materials and components
to finished goods ready to sell and deliver to the customers.
,SECTORS OF THE ECONOMY:
4 sectors:
- Primary sector, when a business is related with extraction of natural resources, such as, mining,
farming, energy extraction. It is also known as extractive production, or output sector. It is
predominant in the least economically developed countries or with low incomes. It represents most
part of the gross domestic product. Sierra Leone is the country with more agricultural development.
The value is low, and the workers are normally paid less than those in secondary and tertiary
sectors.
- Secondary, is the production of finished goods and components, manufacturing, food processing,
component assembly, and raw material.
- Tertiary, providing services to consumers and business, personal services, retailing, household
franchises.
- Quaternary, providing information.
Exercise: Germany, Pakistan and China
Agriculture, manufacturing, and services.
C - Pakistan (because it is the country which has more agriculture in comparison with Germany and China)
A - China (it one of the countries which more manufactures from the world)
B - Germany (because it has more services)
Based on the data in the table, country A represents China. 47% of labour/work force/employment works in
the secondary sector followed by 44% in the tertiary sector and 9% in the primary sector. China is classified
as a developing country, and also because it is one of the most productive countries in the world.
Elon Musk (entrepreneur) created his own company for his idea.
Arthur Fry (intrapreneur) was working in a company and then had an idea for it.
ENTREPRENEUR AND INTRAPRENEUR
- Entrepreneur: An individual who plans, organizes and manages a business, taking on financial risks
in doing so. Are the owners, taking the substantial risk, visionary, rewarded with the profits of all
the business, responsible for the workforce and failure. Take strategic decisions, do not always have
unlimited liability (Elon Musk an entrepreneur).
- Intrapreneur: the act of being an entrepreneur but as an employee within a large organization. Is an
employee of a larger organization, takes medium to high risks, is innovative inside the company,is
rewarded with a salary but not profit, accountable to the owner, and failure is absorbed by the
organization, not him.
-
1.2. TYPES OF BUSINESS ENTITIES
Public and private entities.
, PUBLIC SECTOR ORGANIZATIONS
● Ownership-owned & controlled by the government.
● Size-generally larger in a size (big business)
● Aims - to provide essential services to the general public and protection to the citizens.
● Profit - many operate on a non profit basis.
● Competition - Little competition. Benefit from monopoly power.
● Innovation - as these organizations are funded by taxes they are often less motivated to therefore
less innovative.
- Characteristics of public sector
● They don't really need to be innovative, they are not going to disappear).
● They will not disappear normally because they are paid from taxes.
PRIVATE SECTOR ORGANIZATIONS
● Ownership- Owned & controlled by individuals and businesses
● Size - can vary from a local shop to Multinational corporations.
● Aims- main, not always, si to generate profits for the owners
● Profit- main aim is usually to make a profit
(ProfitProfit = Revenue (money earned) - costs)
● Competition - usually high competition.
● Innovation - these businesses need to innovate / be creative to survive otherwise they may go
bankrupt.
- Characteristic of private sector
Types of business:
SOLE TRADER
sole Proprietorship
No separate legal identity (unincorporated) Owner = Business.
More common in the United States and everywhere. The owner provides all capital and runs the business. It
is one of the easiest ways of business.
Examples: Lemonade shop, youtube channel, or walking dogs.
, Advantages:
- Easy to start.
- You are the boss and do anything you think is better for the business.
- Easy to exit the business.
- No extra taxes because it is seen legally as your own identity.
Disadvantages:
- You have unlimited liability.
- It is hard to find the financial capital.
- Hard to find skilled labor.
- Limited managerial experiences
PARTNERSHIP
- From 2 to 20 people who own and run a business together.
- Not all of them run the business but they provide money and get some profits. They are called
sleeping partners.
- Finance is more available for partners (because each of them gives more initial money), but banks
will be more reluctant because they don’t trust in partnership loans.
- Unlimited liability, partners are personally liable for all debt or losses.
- More accountability because there are more people, and the decision makings are longer.
- Disagreements and conflicts are common.
- More ideas and different skills and expertise.
- There is less workload and responsibilities than in a sole trader, because there are more people.
- Lack of continuity, some partners want to leave or die.
- They benefit from specialization and division of labour, depending on their skills.
- Do not need to make their accounts public.
- Profits are shared between all the partners.
They need to have a document called the deed of partnership. It is a formal contract, it contains:
- Amount of finance contributed by each partner.
- Roles and responsibilities of each one.
- The share of profits and losses between the partners.
- Conditions for introduction of new partners.
- Procedure for ending the partnership or business.
Publicly held company
Primate limited company
VISION AND MISSION STATEMENT
1. Vision → Outlines the business aspirations in the distant future- (ideal situation where the business
wants to be).
- Examples: google (to provide access to the world’s information in one click).
1.1 WHAT IS BUSINESS?
What is a Business? Is a decision-making organization that is involved with the process of converting inputs
to outputs to produce goods and services.
Nature of business
- Primary, secondary, tertiary, and quaternary sectors.
- Entrepreneurship
- Challenges and opportunities or starting up a business.
NATURE OF BUSINESS
Input and output model.
- Inputs (factors and production) are the resources that a business uses in the production process.
Examples: raw materials, and labor.
- Processes (adding value) manufacture of goods and provision of services.
- Outputs (products) products and services which meet needs and wants from customers.
The role of business, satisfies the needs and wants of the public.
Distinguish between:
1. Customers and consumers. The customers are the ones which purchase (buy) a good and service
and the consumers are the ones who use it. We can be consumers and customers at the same time.
2. Goods and services. Goods are material, services are intangible products such as activities provided
by businesses
3. Consumer goods and capital goods. Consumer goods are products sold to the general public. There
are two types: Consumer durables (last a long time or are reusable and are houses, electronic
devices, cars, jewelry, or clothes), and Consumer non-durables (the ones you need to consume in a
short time period or can not be reused, such as, fresh food, medicines, beverages, newspapers).
Capital goods are used by a business to produce other goods or services, can last for many years
and they are investments.
4. Revenue and cost. The revenue is the money that comes in from selling goods and services to a
business (revenue - sales - income). Cost is the money that the business spends to produce goods
and services. n
4 FUNCTIONS OF BUSINESS
- Marketing department is in charge of identifying and satisfying customers' wants and needs. Also is
responsible for the firm’s sells. They use activities such as market research, promotions, pricing
branding and distribution.
- Human resources department responsible for managing the employees of the business, they create
the deals to hire and fire employees. Also they are in charge of planning and organizing structures
of the human resources.
- Finance are the ones who plan and manage the company's money. They ensure compliance of legal
requirements (example, taxes) and inform about the financial position of the business to
shareholders and potential investors.
- Operations department is the one which is in charge of converting raw materials and components
to finished goods ready to sell and deliver to the customers.
,SECTORS OF THE ECONOMY:
4 sectors:
- Primary sector, when a business is related with extraction of natural resources, such as, mining,
farming, energy extraction. It is also known as extractive production, or output sector. It is
predominant in the least economically developed countries or with low incomes. It represents most
part of the gross domestic product. Sierra Leone is the country with more agricultural development.
The value is low, and the workers are normally paid less than those in secondary and tertiary
sectors.
- Secondary, is the production of finished goods and components, manufacturing, food processing,
component assembly, and raw material.
- Tertiary, providing services to consumers and business, personal services, retailing, household
franchises.
- Quaternary, providing information.
Exercise: Germany, Pakistan and China
Agriculture, manufacturing, and services.
C - Pakistan (because it is the country which has more agriculture in comparison with Germany and China)
A - China (it one of the countries which more manufactures from the world)
B - Germany (because it has more services)
Based on the data in the table, country A represents China. 47% of labour/work force/employment works in
the secondary sector followed by 44% in the tertiary sector and 9% in the primary sector. China is classified
as a developing country, and also because it is one of the most productive countries in the world.
Elon Musk (entrepreneur) created his own company for his idea.
Arthur Fry (intrapreneur) was working in a company and then had an idea for it.
ENTREPRENEUR AND INTRAPRENEUR
- Entrepreneur: An individual who plans, organizes and manages a business, taking on financial risks
in doing so. Are the owners, taking the substantial risk, visionary, rewarded with the profits of all
the business, responsible for the workforce and failure. Take strategic decisions, do not always have
unlimited liability (Elon Musk an entrepreneur).
- Intrapreneur: the act of being an entrepreneur but as an employee within a large organization. Is an
employee of a larger organization, takes medium to high risks, is innovative inside the company,is
rewarded with a salary but not profit, accountable to the owner, and failure is absorbed by the
organization, not him.
-
1.2. TYPES OF BUSINESS ENTITIES
Public and private entities.
, PUBLIC SECTOR ORGANIZATIONS
● Ownership-owned & controlled by the government.
● Size-generally larger in a size (big business)
● Aims - to provide essential services to the general public and protection to the citizens.
● Profit - many operate on a non profit basis.
● Competition - Little competition. Benefit from monopoly power.
● Innovation - as these organizations are funded by taxes they are often less motivated to therefore
less innovative.
- Characteristics of public sector
● They don't really need to be innovative, they are not going to disappear).
● They will not disappear normally because they are paid from taxes.
PRIVATE SECTOR ORGANIZATIONS
● Ownership- Owned & controlled by individuals and businesses
● Size - can vary from a local shop to Multinational corporations.
● Aims- main, not always, si to generate profits for the owners
● Profit- main aim is usually to make a profit
(ProfitProfit = Revenue (money earned) - costs)
● Competition - usually high competition.
● Innovation - these businesses need to innovate / be creative to survive otherwise they may go
bankrupt.
- Characteristic of private sector
Types of business:
SOLE TRADER
sole Proprietorship
No separate legal identity (unincorporated) Owner = Business.
More common in the United States and everywhere. The owner provides all capital and runs the business. It
is one of the easiest ways of business.
Examples: Lemonade shop, youtube channel, or walking dogs.
, Advantages:
- Easy to start.
- You are the boss and do anything you think is better for the business.
- Easy to exit the business.
- No extra taxes because it is seen legally as your own identity.
Disadvantages:
- You have unlimited liability.
- It is hard to find the financial capital.
- Hard to find skilled labor.
- Limited managerial experiences
PARTNERSHIP
- From 2 to 20 people who own and run a business together.
- Not all of them run the business but they provide money and get some profits. They are called
sleeping partners.
- Finance is more available for partners (because each of them gives more initial money), but banks
will be more reluctant because they don’t trust in partnership loans.
- Unlimited liability, partners are personally liable for all debt or losses.
- More accountability because there are more people, and the decision makings are longer.
- Disagreements and conflicts are common.
- More ideas and different skills and expertise.
- There is less workload and responsibilities than in a sole trader, because there are more people.
- Lack of continuity, some partners want to leave or die.
- They benefit from specialization and division of labour, depending on their skills.
- Do not need to make their accounts public.
- Profits are shared between all the partners.
They need to have a document called the deed of partnership. It is a formal contract, it contains:
- Amount of finance contributed by each partner.
- Roles and responsibilities of each one.
- The share of profits and losses between the partners.
- Conditions for introduction of new partners.
- Procedure for ending the partnership or business.
Publicly held company
Primate limited company
VISION AND MISSION STATEMENT
1. Vision → Outlines the business aspirations in the distant future- (ideal situation where the business
wants to be).
- Examples: google (to provide access to the world’s information in one click).
