Introduction to Business
Management
11th edition
Ancillary material
ISBN 978 019 07 4576 9
P O Box 12119, N1 City, 7463, Cape Town, Republic of South Africa
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Chapter 1
The business world and business management
Learning outcomes
• Explain the role the business organisation plays in making available the
products and services society must have to exist and thrived
• Describe the needs of society and how a business organisation satisfies
those needs in a market economy
• Distinguish between the world’s three main economic systems
• Explain the interface between a business organisation and a market
economy
• Describe the nature and purpose of business management as a science,
where the enabling factors, methods and principles of the business are
studied to ensure the efficient functioning of a business organisation
• Comment on the development of business management as a science
• Distinguish between and comment on the different management functions.
Chapter outline
• Introduction
• The role of business in society
• Needs and need satisfaction
• The main economic systems
• The need-satisfying institutions of the market economy
• The nature of business management
• Classifying the study material of business management
• Summary
The role of business in society
• Business world can be seen as a complex system that involves
transforming resources into products and services to meet the
needs of consumers in exchange for profit.
The role of business in society (continued)
• The description of a business emphasises four different elements:
• Business involves human activities
• Business involves production
• Business involves exchange
• Business involves profit
The role of business in society (continued)
• The market economy comprises various businesses which are
grouped together to form industries.
• These industries are grouped as follows:
Formal Sector
Informal Sector
Large businesses listed on the JSE
Micro enterprises that do not contribute to
rates and taxes
For example Old Mutual, Exxaro, Telkom or
Sasol
For example independent family owned
enterprises
The role of business in society (continued)
• The ability of a business to survive and prosper over long periods of
time is the core of sustainability.
• Society and the business world both depend on and influence one
another.
• Themes of sustainability:
• Social responsibility
• Employment equity
• Business ethics
• Consumerism
• Environmental sustainability
Needs and need satisfaction
• Maslow’s hierarchy of needs
• Humans have a wide range of unlimited physical, psychological and social
needs that need to be satisfied.
• Ranging from the most basic need for food to the need for self-realisation
Needs and need satisfaction (continued)
Needs and need satisfaction (continued)
• Society’s limited resources:
Natural resources
Human resources
Capital
Entrepreneurship
Production factor
of land and supply
cannot be
increased
Production factor
of labour. Also
includes the
mental talents
and skills of
people
Production factor
of assets. Used
not for final
human
consumption but
to facilitate the
production of final
consumer
products
Production factor
of collective
managerial
capacity.
Individuals who
accept risks
For example
water, forests,
minerals
For example
employees
For example
buildings,
machinery,
computers
For example Elon
Musk and Richard
Branson
The cycle of need-satisfaction
• The ability to satisfy community needs by utilising the scarce
resources to produce products and services.
• Society is often confronted with the economic problem/principle.
• Economic issues:
• Which products/services should be produced and how many?
• Who should produce these products/services?
• How should these products/services be produced and with which
resources?
• Who are you producing the products/services for?
The cycle of need-satisfaction (continued)
The main economic systems
• Three main systems can be identified:
Market economy
Members of a community
may possess assets and
earn profits on them
• The allocation of
resources is effected by
free markets
• Members of the
community have free
choice of products,
services, places of
residence and careers
• The state keeps its
interference in the
system to a minimum.
•
Command economy
System of communal
ownership in which the
individual owns no
property, except private
domestic assets
• Choices of products and
services are limited to
what the state offers
• State decides what the
needs of the community
are, how and where the
goods will be obtained,
and in what quantities
they may be used.
•
Socialism
Compromise between a
pure market economy and
a pure command
economy
• Businesses and consumers
operate within free
markets in which they are
at liberty to make
decisions without
restriction
• Consumers have greater
freedom of choice than
those under a command
economy.
•
Comparison of main economic systems
Mixed economies
• None of the three main economic systems can occur in a pure form
anywhere, but rather occur as mixed economies.
The need-satisfying institutions
of the market economy
Business organisations
Government organisations
Non-profit seeking organisations
A need satisfying
institution that needs to
make a profit in order to
survive.
Need satisfying
institutions where the
states creates
products/services
believed to be of
strategic, economic or
political importance.
Need satisfying
institutions whose main
reason for existence is
not profit motivated.
For example Pick ‘n Pay
For example SAA and
SABC
For example SPCA
Products and services offered in the market system
The nature of business
management
• Consider the following:
• Economics and business management as related sciences
• The purpose and task of business management
• Is business management an independent science?
• The interfaces between business management and other sciences
Classifying the study material of business management
• The functional management areas of a business are:
• General management
• Marketing management
• Financial management
• Production and operations management
• Purchasing management
• Human resource management
• Public relations management
Interfaces between other sciences and businessmanagement functions
Interfaces between other sciences and businessmanagement functions
Summary
• Business organisation's role in society
• Social process that transforms a country's means of production
• Business as a component of the economic system
• Business provides for the needs of the people.