Introduction to business management

Greetings,

Business Management is a very interesting subject and the field of business is a dynamic and
exiting one. All of us are affected by the decisions that businesses make and we buy on a daily
basis products and service offered by businesses. The purpose of Business Management 1A
is to introduce you to the subject of business management as well as different management
functions (e.g HR, Finance) and management tasks (planning, organising, leading and control).
The subject also introduces a leaner to important concepts and latest developments within
the field of business.

When going through the tutorial letter it is important to take notice of the listed learning
outcomes of each unit as an indication of what aspects need to be more emphasized
regarding the unit. However it should be noted that this does not mean that the other study
aspects should be neglected, unless it is explicitly expressed.

It is important to note that assignments and exams are in the form of multiple choice
questions. It is important to note that when you attempt multiple choice questions, you write
out the reasoning of each option. In order words you should be able to justify why the answer
you selected as correct, is correct and why those you selected as incorrect are actually
incorrect. These reasoning are only for your own use and should be used to compare with the
correct answers after each assignment.

Dr Bongani Khonjelwayo

E Tutor
Unit 1: The business world and business management

Summary of the unit.

The main role of businesses is to transform resources such as raw materials and labour into
products and services in order to meet society's needs and wants. However, businesses
must ensure that in the process of satisfying the needs of consumers they must take care
of the environment and ensure that the products and services they produce don't lead to
harm to people and the environment. Businesses also have an obligation to support local
communities through social responsibility programmes as well.

Humans have unlimited needs however global resources are limited and therefore need
satisfaction has to be occur in a hierarchical manner, with the physiological needs taking
priority. Food and shelter are the primary needs and according to Maslow these needs are
the most important. Businesses have four types of resources at their disposal that they can
convert into products and services. These are human, capital, entrepreneurship and natural
resources.

There are three types of economic systems within which needs can be satisfied. The free
market system allows for citizens to choose how they will satisfy the needs. They have
access to resources and can own assets. On the extreme side is the command system where
individual’s dont own any assets except personal belongings and the state is responsible for
the provision of economic resources. The socialist system is in the middle of the two where
certain economic industries are the responsibility of the state however businesses can still
make a choice about which economic activities to pursue.

Need satisfying institutions can be categorized into three, private businesses, government
organisations and non-profit organisations. Lastly business management studies how to
manage businesses as effectively as possible and the key difference between economics
and business management is that economics focuses on national economies and business
management on individual businesses. There are several business functions such as Human
resources, Financial Management , and Marketing Management.
Study unit 2: Entrepreneurship
The objectives of the unit are the following:

 To explain the concept of entrepreneurship and entrepreneurial process.

 Define the entrepreneur.

 Describe the roles of entrepreneurs and small business owners play in the South
African economy.

 Discuss how to become an entrepreneur.

 Discuss the skills and resources required to become an entrepreneur

 Distinguish between and describe the different ways in which an entrepreneur

may start a business

 Discuss the implications of choosing a specific business opportunity.

Summary of the unit:

An entrepreneur is that person in the society who take an initiative and risk of a new venture
by utilising factors of production to generate products and services. The entrepreneur is
rewarded with a profit but may also face a loss for making wrong business decisions. The
entrepreneur accepts full responsibility for his/her action. Entrepreneurship is a scarce
human resource since not all members of a society are willing to take a risk or has the skills
to generate products and services.

Entrepreneurship plays an active role in the society, however not all business owners are
entrepreneurs. The are several reasons why entrepreneurs start a business;

 The traits and characteristics of an entrepreneurship include achievement and

motivation, an internal locus of control, innovation and creativity and risk taking.

 Skills and industry experience.

 Opportunities from outsourcing.

The role of society in business is the production of goods and services, innovation, the aiding
of business, and job creation. a small business has the following characteristics; The
management of business is independent, capital is provided by the entrepreneur, the
activities of an entrepreneur are local and the enterprise is small in relation to the largest
competitor.

The different types of enterprises are the following; Survivalist enterprise, micro enterprise,
very small enterprise, very small enterprise, small enterprise and medium enterprises
Study unit 3: Establishing a business
The objectives of the study unit are as follows;

 Identify the factors that influence the location of a business.

 Distinguish between the different forms of ownership that are found in South
Africa.

 Discuss the key considerations that are applicable when a form of business has to
be chosen.

 Describe the objectives of, importance of and need for a business plans.

 Describe the various components that compose the business plan write up a
business plan.

Summary of the study unit:

The geographical location of the business is very important for most businesses, although it
might be so for a certain king of businesses than others. This decision entails making a decision
as to whether the business should be located in its market, or near its source of raw materials,
near other competitors, or according to personal preferences. Key location factors include
the following; sources of raw material, availability of labour, proximity and access to the
market, availability and cost of transport facilities, etc.

The form of business ownership is important when establishing a business in South Africa and
it is important for an entrepreneur to be able to distinguish between different types of
ownership. Before a form of ownership is decided, certain considerations might be taken into
account. These include the entity's legal or juristic personality, the liability of owners or
members when legal action is taken against a business and the degree of control management
has over the affairs of the business, for example. Types of ownership covered in this unit
include the following; the sole proprietorship, the partnership, the close corporation, the
company, the business trust, co-operative society, joint ventures. It is therefore important to
understand the difference between these business types.

A business plan is an important piece of document that puts into context the nature of the
business to be established. It also explains how the entrepreneur will develop this
business opportunity, as well as to attract potential investors to provide financial resources
to the business. The business plan has the following components; the cover page, content of
the business plan, and financial analysis.
Study unit 4: The business environment
Study unit 5: Corporate Social Responsibility
The Study objectives of this business unit are the following:

 Distinguish between the different concepts in the field of corporate social

responsibility
 Discuss the imperatives for good corporate social responsibility in South Africa
 Draw up a stakeholder map for an organization, indicating the different categories
of stakeholders
 Explain the business case for corporate social responsibility as it relates to the
various business functions

Summary of the study unit:

Corporate social responsibility refers to the proactive efforts on the part of companies to
make a positive contribution to society. There is a number of reasons and these are
influenced by the social, government, market and ethical drivers. This concept derives from
the fact that corporates have particular rights and responsibilities, like ordinary
citizens. They also have an obligation to contribute to the welfare of the people in a
country. Companies are also responsible for the impact on society and natural environment,
they are also responsible for those with whom they do business. Lastly companies need to
manage their relationship with the wider society.

Some of the prominent terms of corporate social responsibility include the triple bottom
line which refers to the measurement of financial, social and environmental impacts of the
business. Sustainable development refers to the need to improve the lives of people and to
protect the environment. Corporate Social Investment refers to the companies
philanthropic initiatives. Sustainability reporting refers to the increasing expectations for
companies to publicly report not just on financial matters, but on social and environmental
issues as well.

Corporate governance refers to how the company's objectives, strategy and decision
making structures are developed, implemented, and monitored. Its also relates to the
accountability of a company to shareholders and other stakeholders. Sustainable
development means the ability to meet the need of the present without compromising the
ability of future generations to meet their own needs. There are several drivers for
corporate social responsibility both in South Africa and globally. These include the
following; The United Nations Global Impact, The Global Reporting Initiative (GRI), the
AA1000 Framework, King Code of Corporate Governance, the JSE Socially Responsible
Index. Corporate governance refers to the way companies make decisions and decide how
to manage its affairs. It is also about effective leadership, sustainability, innovation,
fairness, and collaboration as well. Stakeholder engagement is at the heart of corporate
social responsibility.
Study unit 6: General Management

The Study Unit's objectives are the following:

 Discuss the role of management in running a business.

 Evaluate the definitions of management and discuss the task of a manager.
 Describe the management process followed by managers, by referring to the levels
and type of management, the skills needed to manage an organisation and the
different roles performed by managers in the organisation.
 Discuss the various schools of thought in management and look at the innovations
that have occurred in management thinking over the year

The success of any business depends largely on how the organisation is managed.
Management in a business is essential to direct the organisation towards its objectives, set
and keep the operations of a business on a balanced course, keep the organisation in
equilibrium with the environment, and attain its goals synergistically and productively.

The role of management is the productive utilisation of resources to achieve business goals
and objectives and in order to do that management need to perform 4 managerial tasks;
planning, organising, leading and controlling. Planning entails determining what the goals of
an organisation are, organising means establishing a structure and processes to achieve those
goals, leading involves directing, equipping and motivating employees to achieve objectives
and controlling means determining whether the objectives have been achieved.

There are three different levels of management and several functions of management. The
three different levels are the senior management, middle management and junior
management. The types of management functions include the departments such as human
resources management, general management, marketing management and financial
management, as an example. The are different skills required at different levels of an
organisation; senior management requires less technical skills but more interpersonal and
conceptual and diagnostic skills. Middle management requires a little bit of all skills and junior
management requires the opposite skills of senior management.

Lastly, there are several theories, schools of thought, management process, behavioral and
quantitative schools that shape management discipline. There is also a systems approach and
contingency approach to management as well. It is important for a student of business
management to understand these different management concepts and the impact they have
on management.
Study unit 7: Planning

The objectives of this study unit are the following:

 Explain why planning is needed in the organization

 Explain what a goal is

 Discuss the steps in the planning process

 Compare the different organizational goals as used by top, middle and lower
management

 Discuss the requirements that must be met when setting goals

 Compare the different plans that can be used by the organization

 Differentiate between strategic, functional and operational planning

This is the starting point of the management process and entails a systematic description of
the direction the business intends to take to achieve its goals. A clear plan and consistent
strategy are the necessary requirements for successful managers. A plan consists of two
elements, activities involved in determining the organization's goals and showing the way
forward and how to achieve those goals.

There are several reasons why organisations needs plans; planning gives direction to the
organization in form of goals and plans, it helps the organization to get the different
functional areas to work together, it forces the organization to look at the future of the
organization.

Different goals are set by different managerial levels in the organization ranging from
strategic goals formulated at high levels of the organization to operational goals formed at
lower levels. Goal set must be realistic and achievable and measurable. The goals must also
be consistent to ensure that all departments work together to achieve them.

The planning process consists of goal setting, developing plans and implementation. Goals
are influenced by the mission of an organization. The mission of an organization entails
plans as set out by the management of an organization. The business environment
determines the kind of plans to be set for the organization. Management values also
influence the goals of an organization. The experience of management also determines the
goals that are set for the organization.

Different levels of the organization must set different types of goals; long term strategic
goals and top management level, tactical or functional goals at middle management level
and operational goals at lower management level.
Study unit 8: Organising

The objectives of this study unit are the following:

Organizing is the structured grouping and combining of people and other resources and
coordinating them in order to achieve organizational goals. It is the establishment of a
structure through which the organizational activities can be carried out. It includes the
division of an organization into specific divisions and departments. It also involves the
allocation of tasks to various positions in each department.

Organising is important for a number of reasons; it leads to a systemization of tasks,

resources, methods and procedures. Organising allows the total workload to be spread
evenly amongst employees. It results in the production application and utilization of
resources. It also allows individuals to concentrate on their field of expertise. Lastly it
results in the organization of resources within an organization.

Organisation activities include the following activities. The designing of jobs for employees
(specialization), grouping of employees into teams or departments based on what they have
in common (Departmentalization), establishing reporting lines (Span of management),
establishing authority relationships (Responsibility and authority), establishing coordinating
mechanisms (coordination). There are several factors that influence how the organization is
structured. These include the stability of the business environment, the strategy of the
business, the size of the business, the competence of employees, and the organizational
culture.
Study unit 9: Leading

The objectives of this study unit are the following;

 Analyse leadership as a management task, by (1) explaining the meaning of concepts

such as leadership, authority, power, influence, delegation, responsibility and
motivation, and (2) differentiating between leadership and management

 Discuss basic leadership models, by referring to the factors influencing effective

leadership

 Demonstrate an understanding of motivation as a key role of a leader by describing

the fundamental model of motivation

 Describe a simple communication model

 Discuss groups in the organization, by referring to (1) the reasons why groups are
formed, (2) the kinds of groups, and (3) the characteristics of groups

 Differentiate between groups and teams in the organization

Leadership is considered one of the most important aspects of the modern age of business
management. There are lot of leadership philosophies, theories, publications and self help
experts currently operating in the business space today. Leadership is that management
element that ensures that employees are inspired to do what they are supposed to do to
achieve the goals of an organization. Good leaders lead and direct, create and articulate vision
and change, innovate, develop, inspire and do the right things.

There are number of components of the leading function; authority, power, responsibility,
delegation, and accountability. Formal authority is that kind of leadership which is granted
formally through organizational delegation. Power refers to both the person and position and
influence that the leader exerts over subordinates. It is important to familiarize ourselves with
different forms of power as espoused in the textbook and study guide.

There is a number of leadership theories; leadership trait theory, behavioral theory of

leadership, and contingency and situational theory of leadership. Motivation is important to
ensure that people are inspired to do their work and are staff morale is high. Group dynamics
also influence leadership styles and ability of management to influence staff. Proper and
effective communication ensures that proper channels of communication exists between
employees and management.

A lot of organisations dedicate significant resources towards strengthening leadership skills

of their employee’s through leadership programmes, seminars, workshops, or even formal
academic programmes. A lot of literature in the form of academic textbooks, articles and web
based resources have been put together to discuss this management task.
Study unit 10: Control

The objectives of this study unit are the following;

 Analyse control as a management task, by (1) explaining the task of control and its
purpose, and (2) describing how a control process should function

 Illustrate how the task of control forms an integral part of the planning process

 Explain the various types of control

 Discuss the characteristics of an effective control system

 Describe how the control process provides feedback for the revision of planning.

Controlling is used to ensure that the organization's goals and objectives are reached and
that resource are being utilized productively and effectively as possible. The purpose is to
give feedback on the other three tasks of leading, organizing and planning. It is the process
where management obtains information to determine whether the objectives set during the
planning stage have been reached. It is concerned with narrowing the gap between what
was planned and the actual achievements of management and ensures that all activities are
carried out the way they should be.

The purpose of control is to ensure that planning is successful and effective. It enables
organisations to adapt to organizational change, helps to limit the accumulation of errors
emanating from poor decision making. Moreover, as the size of the business increases, it
becomes increasingly difficult to identify areas of weak performance. Control also minimizes
costs and increases output and allows management to identify problems before they
become critical for the organization.

The control process comprises of the following steps; setting standards that are derived from
goals, measuring actual performance, evaluating deviations and talking corrective actions to
rectify deviations. There are four areas of control; physical resources, financial resources,
information resources, and human resources.