BUSINESS MANAGEMENT

Week 1: Lesson 1-3

Summary of week 1 work

 Each country’s economic policy will be influenced by the LEARNING OUTCOMES

political system and level of development of a country.
 Government must take responsibility to protect the 1. What is a business and
interests of investors and provide a stable economic what is business
environment. management
 Four economic systems were discussed in this section,
i.e.: 2. What drives a business
o Traditional system – this is an economic system
3. What are the factors of
where people use the resources that they have
production.
available and only produce enough for themselves.
When they exchange products among one another, 4. Economic systems
it is called a barter system.
o Market system – this system is also referred to as 5. Business environments
a free-market system or the capitalist system.
Everyone is free to enter the business market and 6. Various organisations and
can make their own decisions about how they want where they are found.
to operate in the market. 7. Sectors in the economy
o Command system – this system is also referred to
as a communist system. No individual may 8. Business management
independently decide to start and run any type of functions
business. All business decisions are taken by the
government.
o Mixed system – this system is also referred to as a
socialist system. The government controls major sectors,
such as road building, electricity or major manufacturing
plants, and private individuals can produce products and
services in the less important sectors, e.g. consumer
products like food or shoes, or clothing.
 Three kinds of organisations have been discussed:
o Private business organisations – they are owned by
private individuals who sell products and services to make
a profit while satisfying customer needs and wants. They
are referred to as the private sector.
o Government organisations – these organisations are
established and managed by government and are often
referred to as state-owned companies, e.g. Eskom
Holdings, Transnet.
o Non-profit organisations (NPOs) – they are
organisations that satisfy important needs of society
without making a profit. They are established and
managed by individuals who feel passionate about a
cause and whose aim is to uplift society.
 The sectors of industry – Businesses are grouped into three
sectors depending on the activities they perform. They are
categorised as:
o Primary sector: Products are extracted in their raw
format from the earth or nature, e.g. strawberries being
picked.
o Secondary sector: Products in their raw format are
processed in a factory and transformed into finished
products, e.g. sugar and other ingredients are added and
preserved in bottles.
o Tertiary sector: The finished products are distributed to
shops and stores to be sold to the consumer, e.g.
strawberry jam. This sector also includes all the services
offered by a business to a customer and therefore is also
known as the service sector.
 WEEK 1

Economic systems - An economic system is a way in which a country or South Africa has a
government chooses to distribute resources and trade goods and services. mixed economy in
which there is a
They use economic systems to control the five factors of production.
variety of private
freedom, combined
with centralized
command economic planning
system and government

mixed free
market market
system system

ECONOMIC ADVANTAGES DISADVANTAGES

SYSTEM
COMMAND Government is in control of all There are low motivation, low
SYSTEM resources and can ideally channel productivity, and low standards of
them to where they are needed. living.
MIXED There are good employment There are unproductive government-
MARKET opportunities as the government owned industries because of limited
SYSTEM focuses on limiting economic individual freedom.
fluctuations.
FREE MARKET People have freedom of choice, There are many economic fluctuations
SYSTEM which promotes private initiative. that make the business environment
unstable.

Command system Mixed market system Free market system

The Government: - Government owns - private individuals’

industries, but also own factors of
- Owns all resources private ownership production
and channels them of resources. - free competition
where they are - People with own among enterprises
needed. businesses make - prices of goods
- Decides prices of profit. and services
goods and services - Consumers have determined by
& what need to be freedom of choice, demand and
produced. except for supply.
- Determines government owned - Example: New
employments enterprises, in Zealand
opportunities. which prices are
- Example: North fixed.
Korea - Private enterprises
- Referred to as a compete with one
communist another but there
system.
Kinds of Organisations

Private Business Organisations

Private businesses are owned by private individuals who are in
business to make a profit by satisfying the needs of customers
and society. There is no guarantee that they will be successful.
These businesses can be private or publicly traded companies
and are also referred to as the private sector, which includes all
businesses not under government control. Example: Dischem.

Government Organisations
These organisations are established and managed by
government, and they are also called parastatals or state-owned
companies. They produce products and services of strategic,
economic, and political importance to the country. Example:
Eskom. These businesses can be operated at a national,
provincial, and local level, depending on the needs of the
population.

Non-profit Organisations
These are organisations that satisfy the needs of society without
making a profit. The people operating these organisations are
usually doing this because they are passionate about a cause
and their goal is to uplift and support society. They rely on
donations and help from volunteers. If government perceives the
NPO to be important to support and satisfy identified community
needs, they make subsidies available to these NPOs.

The Sectors of Industry

Primary Sector
Businesses in this sector extract natural resources in their raw
and unprocessed form from nature. They exploit the natural
resources and use them to make a profit. For example, the
farmer will pick the peaches from the trees to sell in the market
or will take the wool from sheep to sell, or the mining company
will mine coal or gold as raw materials.

Secondary Sector
In this sector, the raw materials from the primary sector are
processed and transformed into a final product. For example,
the peaches picked by the farmer may be cleaned, have their
pips removed, and be turned into fruit juice. Wool for sheep is
cleaned and spun and turned into wool or finished woolen
products. The raw materials from the mines is processed into a
variety of finished products including jewellery, machinery and
building materials.

Tertiary Sector
This is the sector where the finished or final products are
distributed to the consumer. The tertiary sector can include
business types like retail and also services like restaurants. This
sector also includes all the services offered by a business to a
customer and therefore is also known as the service sector.
Summary of week 2 work

 The business environment refers to all the factors

that influence the business and it includes the
internal and external environment.
 The internal environment, micro or decision-
making environment, includes factors in the
organisation that it can control.
 The organisation must do an analysis of its
strengths and weaknesses to understand its
internal environment.
 The factors of the micro environment include a
vision for the future, a mission on what to do now,
as well as specific objectives set to achieve the
vision.
 Other factors of the micro environment are the
recognition of culture, managing diversity,
providing strong ethical guidelines for employees,
and managing change to the benefit of the
organisation.
 The external environment includes the macro or
general environment and the market or task
environment.
 Management can use a SWOT analysis as a
framework to analyse strengths and weaknesses in
the business and opportunities and threats outside
the business to support their decision making.
 The macro environment influences the micro
environment and the market environment.
 The market environment is unique for every
organisation because each will have their own set
of customers, competitors, intermediaries,
suppliers and labour force.
 The general environment consists of a range of
factors or forces that put external pressure on the
organisation. These include economic,
technological, political-legal, demographics and
culture, international and ecosystem factors.
 Entrepreneurship is associated with creating and
building something of value from an inspired idea.
 Entrepreneurs are always looking for opportunities
to turn challenges into business success.
 Entrepreneurs are focused and dedicated to their
goals and are determined to succeed despite risk
and uncertainty. Other specific characteristics
 include creativity, innovation, commitment and
opportunity-orientation.
 Various types of entrepreneurs can be identified,
i.e. corporate entrepreneurs, technopreneurs,
copreneurs, corporate cast-offs and dropouts,
social entrepreneurs and women entrepreneurs.
 A comparison between entrepreneurial business
and a small business is summarised in Table 3.1.
 Advantages of a small business include being
independent, opportunity to maximise your
potential, generating unlimited profits,
contributing to society and growing yourself by
doing what you enjoy.
 Disadvantages of a small business include that it
demands taking full responsibility for everything in
the business; there is no guarantee of income;
hard work and sacrificing of quality time of family
life; and the risk of losing invested capital.
 Approaches to own a small business can be done
by starting a business from scratch, buying an
existing business or buying into a franchise group.
 Starting a small business starts with a business
idea that must be feasible and viable, then a
business plan must be compiled which includes a
summary page, cover page and a contents page,
introduction, description of the business,
marketing, financial and operating plan, as well as
a conclusion.

 Forms of business ownership – sole proprietorship,

partnership, close corporation and a company –
are discussed. Look at summaries showing the
differences between a sole proprietorship,
partnership and a company. These summaries
include characteristics, advantages and
disadvantages of each business form. The
contribution of small businesses includes creating
jobs, promoting entrepreneurship and keeping
society stable.

 Challenges facing small businesses are different

from those of bigger businesses. They include
limited support structures in terms of access to
finance, markets, information, technology, skills,
training and knowledge.
 Government has three structures in terms of the
White paper on a National Strategy for the
Development and Promotion of Small Business in
South Africa, i.e. Department of Small Business
Development (DSBD) to facilitate financial and
non-financial support services; The Small
Enterprise Development Agency (SEDA) provides
service centres and training programmes; and the
Small Enterprise Finance Agency (SEFA) assists
with the establishment, survival and growth of
SMMEs and contributes towards job creation
through provision of finance.
 WEEK 2
Lesson 4-8

The organisational environment

internal external
business business
environment environment

macro
environment

market
environment

The internal or micro environment

- Conditions within the organization itself
- Aka decision making environment
- The impact of decision making has a direct impact
on the organization
- Decision making environment that management
can control
- 8 interdependent functions: general management,
purchasing, operations & linguistics, marketing,
finance, human resources, public relations,
administration
- Factors in the micro environment to be managed:
strengths and weaknesses, vision and mission,
goals and objectives the organizational culture,
diversity, ethics and change.
 THE ORGANIZATIONAL
ENVIRONMENT
- Any organization in ANY part of the world
will form part of an organizational
environment and consequently, every
business owner will be influenced by their
organizational environment.
- Organisational environment: the forces and
conditions that make up the framework in
which the organisation has to survive and
grow.
- there are some forces that are out of the
managers and organizations control
- each condition influences the managers
ability to acquire and use resources in the
production of goods and services
THE INTERNAL MICRO ENVIRONMENT
- strengths/weaknesses = vision, mission ,
goals and objectives
- difference between a vision and a mission
statement: slide 13
THE EXTERNAL ENVIRONMENT
- consists of factors that organizations have
no control over
- managers must be aware of these factors,
especially changes in factors so that they
can react timeously
- changes can embody threats or
opportunities
THE MARKET ENVIRONMENT
- opportunities/threats = customers,
competitors, distributors, suppliers, labour
force.
THE MACRO/GENERAL ENVIRONMENT
- opportunities/threats = Economic,
Technological, Political- legal, Demographics,
culture, International Ecosystem.

ENTREPRENEURSHIP