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Nature of Business Activity
The document provides an overview of the key functions of a business. It discusses the nature of business activities and decision making as well as inputs such as goods, services, and customers, and outputs such as products. It then summarizes the main business functions of production, marketing, finance, and human resources which are responsible for converting materials into goods, identifying customer needs, managing finances, and overseeing personnel respectively.
Nature of Business Activity
- 1. Nature of Business Activity
- 2. A Business Decision-making organization Inputs Outputs
- 3. OUTPUTS Products Goods Services Could you list clear differences between goods and services? Give examples
- 4. • Peter Druckersaid: “The only purpose of a business is to create customers” What is a customer?
- 5. Businesses exist to satisfy Needs Wants
- 6. Needs: Basic neccesitiesa person must have in order to survive. Wants: Desires that people have, i.e. things they would like to have. Wants are said to be infinite since people always want more than they need.
- 7. What happens ifthe business gets larger? Specialist Departments HR Marketing Finance Production
- 8. • “It iseasy to open a business but much more difficult to keep it open” -Chinese proverb Analyze why this statement would be true.|
- 9. The Marketplace A market is… Buyers Sellers (customers) (businesses)
- 10. Customer vs. Consumer Describe the process by which this products get to your hands. RIM Claro Distribut or You
- 11. Types of products Nestlé Nuevo IBM Mundo Consumer goods Capital/producer Services goods
- 12. Which one ismore expensive? Determine why.
- 13. Value Added Value of inputs – value of outputs •Speed Profit •Prestige •Feel-good factor •Percieved value •Quality •Taste/design •Unavailability
- 15. Opportunity Cost • Itwasn't until the mid 1990s that supermarket went against advice and began to trade on sundays. Supermarkets in the UK realized the opportunity cost of being closed on sundays. They were fined for such actions, as licensing to trade on sundays had not been enacted, but the fines were so insignificant compared to the revenues they were earning by openning on sundays that the supermarkets continued with this practice. McDonald's Corporation has followed by opening some 24-hours stores around the world. Some banks in Hong Kong have openened on sundays since 2006. • Define the term opportunity cost.
- 16. The role ofprofit Profit refers to the positive difference between a firm’s total revenues and its total costs per period of time. Revenues: inflows of money, usually from the sale of products. Costs: Outflows of money, to finance production activities.
- 17. Functions of profit Incentive to produce Incentive to produce Reward for risk takers All businesses Reward for risk takers must make Encourages innovation and invention profits in order to Encourages innovation and invention Indicator of growth survive in the long run, Indicatorof finance Source of growth even NGOs
- 18. Factors of production Enterprise Land Capital Labor
- 19. Factors of productionand their returns Factors of prodution Land Labor Capital Enterprise Rent Wages Interest Profit Income
- 20. Specialization Think of apizzeria. What do they produce? How do they do it? Who makes it? It means that a business concentrates on the production of a particular good or service or a small range of similar products
- 21. Specialization It ocurrs atdifferent levels: • Individuals: people specialize in a profession, e.g. laywers, doctors. • Departamental: within an organization, e.g. marketing, finance. • Corporate: in a limited range of products, e.g. Dell, Hilton, Sony • Regional: London and NY specialize in financial services. • National: Japan and Germany are known for their manufacturing. DIVISION OF LABOR
- 22. Specialization ADVANTAGES Increased productivity Increased efficiency Standarization Higher profit margins
- 23. Specialization DISADVANTAGES Boredom Inflexibility (overspecialization) Lack of autonomy (interdependence) Capital costs
- 24. BUSINESS FUNCTIONS • Tooperate Production efficiently a business must be organized in areas/departments HR Marketing or functional areas: Finance Main functional areas
- 25. Business Functions: Production Converting rawmaterials into finished goods ready for delivery; services to customers. • Determine how the good will be manufactured. • Decide on resources needed • Plan timescale of production • Stock management and control • QC and inspections • Arrange for delivery to customers • Meet production targtets and deadlines • Carry out R&D
- 26. Business Functions: Marketing To identifyand satisfy consumer wants and needs. Ultimately, they ensure the products sell. This is done using tools: market research, test marketing, packaging and advertising. To sum up, the four P’s of Marketing are: • Product • Price • Promotion • Place
- 27. Business Functions: Finance This dept.is in charge of managing the firm’s money. The fnance manager must ensure that accurate recording and reporting of financial documentation takes place. This is to comply with legal requirements* and to inform those interested in the financial position of the business.
- 28. Business Functions: HumanResources (Personnel) This dept. is responsible for managing personnel: workforce planning, training, appraisal, pay and benefits, equal opportunities, health and safety matters, and fostering working relations.