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Unit 1: Business organisation and Management


1
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→ Non-profit organisations are classified as businesses
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Consumer goods: are products that are sold to the general public
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Services: intangible products provided by businesses
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Eg: shop

What do businesses do?
Businesses identify the needs of consumers/customers or other firms
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The outputs of a business are
dependent on the quantity and quality of the inputs (factors of production) and
how they are combined
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→ An output can be service related eg: a meal is a restaurant or the dry
cleaning of a suit
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Value added allows a business to sell its products for more than its
production costs, thereby earning the business a profit
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Can come in the form of:
⎯
Speed or quality of service
⎯
Feel-good factor
⎯
Perceived value for money
⎯
Quality of the finished product



Unit 1: Business organisation and Management


Role of profit in business activity:
Profit: refers to the positive difference between a firm´s total revenues and its
total costs, per period of time
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Return for the use of capital is interest
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Entrepreneurs receive profit

Specialization in a business:
Specialization: means that a business concentrates on the production of a
particular good or service or a small range of similar products
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However specialization can also be interpreted as the division of labour within a
business, which is also known as the specialization of people
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Different levels of specialization:
Individual: when people specialize in a profession eg: lawyers, teachers, doctors
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Unit 1: Business organisation and Management


Corporate: when most firms specialize in the provision of a limited range of
products eg: Dell manufactures computer hardware
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National: countries also specialize eg: Japan and Germany are known for their
manufacturing
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In traditional industries, division of labour is a major motive force for economic
growth
...


Business Functions:
Most businesses have four functional departments:
marketing (including sales)
⎯
finance
⎯
human resources management
⎯
operations management (production)

These functional areas will be staffed by people with specific qualifications,
skills and experience in the work of the functional areas
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⎯

⎯

Unit 1: Business organisation and Management

⎯

However, all four departmental areas are interrelated and a successful business
will try to ensure that there is a good team spirit and communication between
each function
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Also looks at deciding the product´s price and the type of promotion used
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Eg: via catalogues, websites, shops or even all three
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Finance:
⎯

⎯

⎯
⎯

⎯

This is the part of an organization that monitors the movement of funds into
and out of the business
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Finance is the management of money, credit, banking and investments
...

The accounts and finance section also provides the business with an array
of tools for keeping track of cash flow, judging the viability of an investment,
and being able to prepare and analyse a financial records to both report on
and evaluate the health of a business
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Also evaluating, selecting workers
...

Also covers the process of scheduling employees to achieve organisational
objectives

Operations management (production):
⎯

⎯

⎯

Is concerned with supervising, designing and controlling the procedures of
the production process
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It is the management of processes used to design, supply, produce and
deliver goods and services to customers
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Unit 1: Business organisation and Management


→ To be a successful business the challenge is making the four areas
work as one
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gold, coal), and
also agriculture and fishing
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Secondary sector:
⎯

⎯

⎯

Businesses involved in the construction/production and manufacturing of
physical products
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In recent decades the secondary sector has declined in importance for many
developed economies because of a loss of international competiveness
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Includes the transportation and distribution of goods, wholesale and retail
services
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Quaternary sector:
A 4th sector may be identified which includes organizations providing information
services through ICT
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All three sectors are said to be interdependent, this is
because each sector relies on the other two to remain in existence
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Public sector:
⎯
⎯

⎯

Covers activities that are within the control or direction of governments
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Often do not publish financial information, although in many democratic
countries there are independent accountants and advisors which will
monitor their efficiency
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Private sector:
⎯
⎯

⎯

Owned by individuals and not run by the state
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Businesses in the private sector include “public and private” limited
companies
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Profit - based organizations:
⎯
⎯
⎯

Sole traders or sole proprietors
Partnerships
Companies or corporations

Non – profit organizations:
⎯

⎯

⎯

⎯

⎯

If an organisation is taking resource input and then turning it into output,
they are a business, by definition
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Another example – pressure groups
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All these non-profit organisations need to be established carefully and
comply with legal requirements
...
They
also seek to allocate or inform the public about their area of expertise or
concern
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These would be the same for pressure groups
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Many charities can also
be considered to be NGOs, or non- profit organisations
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They also try to influence
government policies on areas such as poverty and human rights
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Types of organization and business strategy:
There are various factors that affect the choice of business organization

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