Emad ud Din Malik Introduction to Business BUS101

Course Objectives Basics of business theory. Context (modern & historical) of business practice. Impart an understanding of the various elements. Create an awareness of the global issues facing modern business. Course outline available on /teachers notes/emad/Introduction to Business/Lecture.. 2

Orientation to Business Fundamentals Define business? Perceptions of different elements of business activity. Purpose > why? Methods > how? Theory > what? Practice > when? 3

Definitions…. Price > Way of measuring value of a product by how much the customer is willing to pay for it. Business model > Plan of action on how to use resources to make a product that will increase competitive advantage. Competitive advantage > Ability to offer customers a product that has more value than other offered products. Sales Revenue > The amount of money generated from the sale of a product. 4

Definitions to be familiar with Business > Goal directed behaviour aimed at getting and using productive resources to buy, make, trade and sell goods and services that can be sold at a profit. Productive Resources > Crucial ingredients – land, labour, capital and enterprise – for business profit. Operating Costs > Cost of acquiring and using the four productive resources to make and sell goods/services. Product > Any kind of a good/service that people value and want to buy. 5

Definitions…. Value > How much utility a product gives customers, that is how well it satisfies their desires/needs. Profit > The total amount left over after operating costs are deducted from revenue. Capital > Profit invested in the business activity of a company. Wealth > The sum total of the resources, assets, riches, and material possessions owned by people and groups in society. 6

5 concepts of note Different meanings of business Forces of supply and demand Business models & profitability Division of labour, specialization and the invisible hand Rationale for business organisations 7

The three meanings of business. As commerce process by which people produce, exchange and trade goods/services. As occupation acquired set of specialized skills and abilities that allow creation of valuable goods/services. As organisation relationship between task and authority that functions as a coordinating & controlling element in the interactions between groups of people working together. 8

The three dimensions of business put together form business viewed as an integrated system. Combination of the three dimensions of business that produces and distributes the goods/services that create value for people in a society. Exercise: Brainstorming a visual representation of the three dimensions of business. 9

Four types of productive resources that comprise operational costs Land Capital Enterprise Labour What are operational costs? 10

Market forces. Demand As price rises consumers will buy less & vice versa Factors that increase/decrease demand? Supply As price rises producers will supply more & vice versa Factors that increase/decrease supply? Market Price Determined by the interaction of demand and supply. How? Diminishing Marginal Utility…. 11

Business models & profitability Companies are in business to make a profit. Essential basic concepts: – Industry and – Competitive advantage. Difference between profit and profitability? How to increase profitability? Ideas? A business model is basically how the available resources are put to use to create competitive advantage. 12

As occupation…. Specialization: refers to the process by which people become more skilled and proficient (and thus productive) when they perform a narrowly defined range of tasks specific to a job. Division of labour and how it facilitates specialization. As opposed to being a jack of all trades and…. What movement facilitated this trend? 13

The invisible hand of the market. Self-interest as a rationale for decisions. Competition as stimulation. Co-operation as necessity. Public Good as determiner of ends & means. Standard of living as necessary improvement. Profit sharing as indicator of productivity. Monopoly as an undesirable situation. Invisible hand means free markets are basically self- regulating. 14

As organisation…. Need for integration of activities due to increased division of labour. Greater level of complexity of elements. Transaction costs : The costs of bargaining, negotiating, monitoring and regulating exchanges between people in business. Teamwork : When people pool their skills to create more products than they would normally be able to do alone. 15

Business Organisation : A tool that empowers people to shape and control the behavior of other people to produce goods/services. Organisational Structure : The framework of tasks and authority relationships that coordinates people so they work together toward a common goal. 16

As overall system…. Functional Activities : The task-specific operations needed to convert resources into finished goods and services sold to customers. Value chain : Coordinated sequence of functional activities necessary to transform resources into products of value to consumers. Primary & Secondary Activities. Ideas? 17

Tasks for students : Read summary of Chapter I Book II. Identify the business model of a chosen company. Describe why you would (or not) like to work for this company. 1 A4 page (not more than). 18