1 introduction to business

Introduction To Business

1. INTRODUCTION TO BUSINESS MR.ABDULAHI ABUKAR HORMUUD UNIVERSITY

2. O VERVIEW There is little possibility that you would come to a true understanding of the new global business environment or the mind set of an entrepreneur simply by reading about it, involvement, critical thinking, and most importantly, decision making. The experiences you gain in this program of study will lay a foundation for future learning in business and in life. If a student of business covers all of the essential areas of study but misses the "feel" or perhaps, the anguish of making critical decisions, then that student will only partly understand what business is all about.

3. INTRODUCTION Today is an interesting time to study business. Advances in technology are bringing rapid changes in the ways we produce and deliver goods and services. The Internet and other improvements in communication now affect the way we do business. Companies are expanding international operations, and the workforce is more diverse than ever. Corporations are being held responsible for the behavior of their executives, and more people share the opinion that companies should be good corporate citizens.

4. What is Business ? DEFINITIONS: “Business may be defined as human activities directed toward providing or acquiring wealth through buying and selling of goods.” “Every human activity which is engaged in for the sake of earning profit may be called business.” “An institution organized and operated to provide goods and services to the society, under the incentive of private gain” is business. Business as system is a combination of business commerce, occupations, and resources to produces and distributes the goods and services for profit while creating value for people in a society .

5. Role of Business Commerce Occupations Resources = INPUT PROCESS OUTPUT

6. CHARACTERISTICS Following are the essential characteristics of a good business: Capital Capital is the lifeblood of every business. It is the most essential and important element of business. In case of deficiency, loans can be taken from various financial institutions. Creation of Utility Utility is an economic term referring to that characteristic of a certain commodity, which can satisfy any human need. Business creates utility, which gives benefit to the entire society as well as the businessmen. Dealing in Goods and Services Every business deals with sale, purchase, production and exchange of goods and services for some consideration. Employment Business is a good source of employment for its owners as well as for other people, for example, employees, agents, transporters etc.

7. Con… Islamic Process Business is an Islamic way of earning living. Income from business is known as profit, which is Rizq-e-Halal. The Holy Prophet Muhammad himself did prosperous business. Organization Every business needs an organization for its successful working. A proper organization is helpful in the smooth running of business and achieving the objectives. Productions or Purchase of Goods A businessman deals in production or purchase of goods. These goods are supplied to the people. So, it is necessary that more goods should be produced so that demand of people may be fulfilled. Risks and Uncertainty Business involves a large volume of risk and uncertainty. The risk element in business keeps a person vigilant and he tries to ward off his risk by executing his policies properly.

8. NATURE OF BUSINESS The following points state the nature of business in brief: Economic Activity Business is an economic activity as it is concerned with creation of wealth through the satisfaction of human wants. Human Activity Business is an economic activity and every economic activity is done by human beings. Thus, business is one of the most important human activities. Social Process Business is run by owners and employees with the help of professionals and customers. Thus, business is a social process. System Business is a systematic arrangement of various elements, which leads to the attainment of particular objective, according to a well-established plan.

9. Business sectors Primary Tertiary Secondary Quaternary

10. Primary sector Larger sector in underdeveloped & developing countries Less capital investment Less use of machinery Agriculture constitutes the major part

11. Secondary sector Takes the output of the primary sector and manufactures finished goods Important sector to promote economic growth and development Important source of income in developing countries

12. Tertiary sector Significant contribution to GDP in developed countries Provides key inputs to most other business Transformation of goods through providing services

13. Quaternary Sector The portion of an economy that is based on knowledge applicable to some business activity that usually involves the provision of services Examples: Consultancy (offering advice to businesses) and R&D (research, particularly in scientific fields) Reasons for sectoral change Cultural Changes Development of Markets Market orientation Rampant migration Focus on customer relationship management

14. 14 Types Of Business SOLE TRADER Is a person that owns & runs their own business one person provides all the money(capital) one person makes all the decisions one person keeps all the profit Characteristics Easy to set up (no legal documents) Keep all the profits Make all the decisions Personal contact with customers Advantages

15. 15 Con… PARTNERSHIP Two (2) to Twenty (20) people collaborating together to run the business as partners Capital provides by partners Collaborative decision making Partnership Agreement Characteristics Share Profits , losses and risk Making shared decisions Less legal procedure Advantages

16. 16 Cont.… Private Limited Company A business that is owned by 2 to 50 people 2 to 50 owners called shareholders. Shares (part ownership) cannot be bought by the general public. Shareholder’s receive a vote for every share they own Must have Ltd. After it’s name. Shareholders receive a share of the profits called a dividend. Characteristics

17. 17 Limited liability - If the business fails you can only lose the money that you invested in the company. Your own personal wealth cannot be touched. Business continues even when an owner dies. Easier to raise finance as you have up to 50 shareholders. Advantages Cont.… Legal Documents are needed to set up a co. More costly to set up. Decision making and profits are shared Disadvantages

18. 18 Con… FRANCHISING Franchising is a form of business organization in which a firm that already has a successful product or service (franchisor) licenses its trademark and method of doing business to another business or individual (franchisee) in exchange for a franchise fee and an ongoing royalty payment.

19. 19 Con… Good work ethic. Ability to follow instructions. Ability to operate with minimal supervision. Team oriented. Experience in the industry in which the franchise competes. Adequate financial resources and good credit history. Ability to make suggestions without becoming upset if the suggestions are not adopted. Represents the franchisor in a positive manner. WHY FRANCHISE?

20. SCOPE OF COMMERCE The scope of commerce can be explained as : Commerce Trade Aids to Trade TRADE Trade is the whole procedure of transferring or distributing the goods produced by different persons or industries to their ultimate consumers. In other words, the system or channel, which helps the exchange of goods, is called trade. TYPES OF TRADE : There are two types of trade: Home trade Foreign Trade

21. Con… AIDS TO TRADE Trade mans biting and selling of goods, whereas, aids to trade means all those things which are helpful in trade. Banking Transportation Insurance Warehousing Agents Finance Advertising Communication

22. 22 Social Responsibility Social Responsibility definition : Management philosophy that highlights the social and economic effects of managerial decisions. Or The management’s acceptance of the obligation to consider profit, consumer satisfaction, and societal well-being of equal value in evaluating the firm’s performance.

23. 23 Organizational Structure A chart that shows the structure of the organization including the title of each manager’s position and, by means of connecting lines, who is accountable to whom and who has authority for each area Work specialization A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job Principles/ Structure variables Chain of command Span of control Authority Power Responsibility

24. 24 Con… Tall vs. Flat Organizations Tall organizations: more management layers and more hierarchical controls. Flat organizations: fewer management layer and decision making closer to the customer.