1. THE FIELD OF STUDY OF BUSINESS MANAGEMENT Study unit 1

2. 2 LECTURE OUTLINE 1INTRODUCTION 2NEED SATISFACTION 3BUSINESS MANAGEMENT FIELD OF STUDY 4BUSINESS ENTERPRISE AND OPERATING UNIT 5BUSINESS MANAGEMENT AS A SCIENCE 6BUSINESS MANAGEMENT VE ECONOMICS 7FACTORS OF PRODUCTION 8FUNCTIONAL APPROACH 9SYSTEMS APPROACH 10STUDY UNIT REVIEW 11APPLICATION QUESTIONS

3. 3 INTRODUCTION Primary field of study: establishment and management of businesses Business Management: principles by which businesses are managed to achieve objectives successfully Entrepreneurs driving force behind economic progress businesses = firms = enterprises NEED SATISFACTION Motive drive satisfying needs Maslow’s hierarchy of needs

4. 4 NEED SATISFACTION To satisfy needs: scarce resources required Scarce resources = factors of production (FOP) Businesses perform conversion processes to create products and services from these four factors of production: inputs outputs Economic problem:unlimited/various needs BUT limited/scarce resources (FOP) Economic motive:the drive to satisfy needs by acquiring products and services Economic principle:(how is this to be done) to achieve the highest possible output of products and services to satisfy needs by using the lowest possible inputs (scarce FOP/ limited resources) Minimise input ; maximise output

5. 5 BUSINESS MANAGEMENT – FIELD OF STUDY  Business management as a science  Free market system and profit motive  What a business is  How a business is established and managed  The role of entrepreneurs in establishing and managing a business in the free market system  The business functions performed in an enterprise to deliver the required products and services to customers

6. 6 BUSINESS ENTERPRISE AND OPERATING UNIT ENTERPRISE  independent economic entity  legal entity for certain forms of business enterprises  continuity  own decisions  accepts risks, uncertainty, rapid change  profitable use of factors of production  remunerates factors of production  uses operating unit to achieve goals and objectives TYPES OF ENTERPRISES Private enterprises, public corporations, non-profit enterprises

7. 7 BUSINESS ENTERPRISE VS OPERATING UNIT OPERATING UNIT  physical, visible production unit  transformation (conversion) process takes place  production of products and provision of services  found in every economic system  in free market system its survival depends on business enterprise  not just a factory, may be a shop, store, warehouse, bank branch, restaurant, etc.

8. 8 BUSINESS ENTERPRISE VS OPERATING UNIT PLANT HUMAN ELEMENT OPERATING UNIT (ESTABLISHMENT) ALL OTHER BUSINESS FUNCTIONS ENTERPRISE

9. 9 BUSINESS MANAGEMENT AS A SCIENCE  body of knowledge  proved through observation, experimentation and/or logical argument  theories not yet proven wrong  theories formulated in Business Management relate to the establishment and management of businesses  object of study/empirical object Q:what is observed/studied? A:business enterprise and its operating unit(s)  problem statement/angle of investigation/cognitive object Q:what is the angle of investigation/viewpoint to be researched? A:maximisation of the rate of return on capital invested  applied/practical science  normative science – providing guidelines/principles

10. 10  Economic principle re-stated: To achieve the greatest economic return (income) with the lowest possible means of production (cost)

11. 11 BUSINESS MANAGEMENT VS ECONOMICS BUSINESS MANAGEMENTECONOMICS Private business enterprises concerned about customer need satisfaction and pursuit of rate of return through means of production, eg., income generation of enterprise and its operating unit Concerned about need satisfaction in the national economy as a whole, eg., income generation, income distribution and income expenditure for the economy as a whole Problem statement: Economic principle Problem statement: Economic principle Object of study: business enterprises – establishment and management Object of study: total economy – economic phenomena Smaller field of study: mainly concerned about economic processes within an enterprise

12. 12 FACTORS OF PRODCUTION/SCARCE RESOURCES (4)  Natural resources: occur naturally in earth’s environment land including agriculture, minerals, forests, wind/water energy, fruits of the sea  Human resources: physical and mental effort workforce and working population  Capital: ownership of the enterprise’s assets machinery, equipment, funds  Entrepreneurship: driving force bear all the risks, enjoy all the spoils

13. 13 SYSTEMS APPROACH  The systems approach assumes that all businesses comprises of interdependent parts that can only be understood by reference to the whole. As such, a business may be analysed in terms of inputs, processes and outputs.  synergetic principle  open or closed  every effort to achieve objective(s)  all systems are subsystems  open systems more complex