A business transforms inputs into outputs to create wealth. It incurs costs for inputs and generates revenue from sales. The difference between revenue and input costs is the added value or profit. A business can be classified by its product, size, or ownership structure. The key functions of a business include marketing, sales, production, finance, human resources, purchasing, and legal. Management involves planning, organizing, leading, and controlling to achieve business objectives across various performance areas like market standing, innovation, productivity, and profitability.

1. BUSINESS BASICS

3. A Basic Business Model Production Function Process Inputs Outputs Other Functions Marketing Legal Technical Quality Assurance Finance Information Services Personnel Purchasing Sell Products Sales Revenue Added Value Gross Profit Operating Profit Operating Cost

6. Fundamental Equations GROSS PROFIT = SALES REVENUE – COST OF SALES Cost of sales = Input cost + Process cost Operating profit = Gross – Operating cost Added value = Sales revenue – Input cost Where:

36. Board of Directors Managing Director Production/ Operation Director IT/ MIS Director Marketing Director Finance Director Human Resource Director Figure 1: Organization by Function

37. Board of Directors Managing Director Finance & Product Directors Fire Security Intruder Alarms Physical Security Computer Security Finance Function Security Systems Figure 2: Organization by Product Security Guards

38. Board of Directors Managing Director Finance & Regional Directors Germany France Britain Other Countries Finance Function Other Europe Figure 3: Organization by Geography Asia

39. Global Power PLC Production Technical Marketing & Sales Quality Assurance Purchasing Finance Figure 4: A Large Company Organization Personnel/ HR Information Services British Power Ltd Physical Power Division

55. The Management Hierarchy Top Managers Middle Managers First-Line Managers President, CEO, VP Make long-term plans Establish policies Represent the company Financial Controller Marketing Mgr Production Mgr Implement goals Make decision Direct First-line mgrs Office mgr Supervisor Foreman Implement plans Oversee workers Assist middle mgr