Business and Business Administration
Kemal Candemir
99265621
İstanbul Bilgi
University
Course:İntroduction to Business Administiration
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PEOPLE BUSINESSES
(MONEY) PRODUCTS,
SERVICES
NEEDS,
DESIRES
SATISFACTION OF NEEDS
Business
The
organised effort of individuals to produce and provide goods and services to
meet the needs of the society.
Factors of Production
1
|
Natural Resources
2
Human
Resources
3
Capital
4
Entrepreneurship
Business Environment
Businesses do not
operate in a vacuum. They are
surrounded by internal and external environments:
a)
Internal
Environment
Functional departments, employees, consumers
suppliers, competitors.
b)
External
Environment
Political, Legal, Economic, Social, Cultural,
Technological.
BUSINESS
ACTIVITIES / FUNCTIONS
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Marketing
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Accounting and Human
Resource
Finance Management |
Production
and Operations
Business activities interact with each other.
Businesses interact
with other businesses and with the environment they operate in.
Private Enterprise System
– Capitalism
Competition among companies would assure consumers
receiving the best possible products and prices, because less efficient
producers would gradually be driven out of the market.
Adam Smith (1776)
Six Eras in the History of
Business
1 Colonial Period Prior to 1776
Primarily
agricultural.
2 The Industrial Revolution 1760-1830
Mass production by semiskilled workers, aided by
machines. Industrial Revolution in England
3 Production Prior
to 1920s
Emphasis on producing more goods faster, leading to
production innovations like assembly lines.
Henry Ford – Model T Automobiles
4 Marketing Since 1950s
Consumer orientation, seeking to understand and
satisfy needs and preferences of customer groups.
5 Relationship Began in 1990s
Benefits derived from deep, ongoing links with
individual customers, employees, suppliers, and other businesses.
Creating value through quality and customer
satisfaction.
Productivity.
Developing and Sustaining
a World-Class Workforce
1
Aging
of population
2
Shrinking
labour pool
3
Increased
mobility of workers
4
Increased
diversity
5
The
changing nature of work
6
The
new employer-employee relationship
Qualities of a New Type of
Manager
·
Importance
of vision
·
Importance
of critical thinking and creativity
·
Ability
to steer/manage change.
Basic Concepts of Economics
Economics is the study of allocation scarce
resources to infinite wants.
Politico-Economic Synthesis
Political
System
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1 2
Economic
System 3 4
Democratic Authoritarian
Free Market Planned
Economy
Economy
Planned Economy-Mixed
Economy-Free Market Economy
Pure Competition,
Monopolistic Competition,
Oligopoly, Monopoly
Levels of Economic
Analysis
Microeconomic
analysis
The study of economic
decision taking by both
individuals and
firms.
Supply and Demand
Supply is the seller’s willingness and ability
to provide products.
Demand refers to the buyer’s willingness
and ability to purchase products.
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Price Price
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Quantity Demanded Quantity Supplied
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Price
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Quantity
Macroeconomic analysis
The interactions in the
economy as a whole.
Macroeconomic
Objectives of the Government
1
Controlling Inflation
RPI,
WPI
Causes
of Inflation - Demand Pull or Cost Push
99% for 1997 40% for 2000
2
Economic Growth
GNP $ 191.171 bn (1997) $204.465 bn (1998)
Economic Growth 6%
(1997) 3% (1998)
The role of
population (64 million)
3
Reducing Unemployment
11.7% (1997)
4 A Favourable Balance of
Payments
(Deficit and Surplus)
Exports $ 26bn,
Imports$ 46bn Tourism $ 7bn
5
Controlling Public Borrowing (Internal
Debt)
6 A
Stable Exchange Rate
The
demand for a country’s products will determine the demand for that country’s
currency and hence its exchange rate.
Devaluation – its consequences for exports,
foreign debt.
Revaluation - its consequences for exports, foreign debt.
Government’s
Role in the Economy
1 consumer of resources (employer, landowner)
2 supplier of resources (infrastructure,
information)
3 consumer of goods and services
(government
spending)
4 supplier of goods and services (SOEs)
5 regulator of business activity (employment laws
consumer laws)
6 regulator of the business activity (fiscal and monetary
policies).
7 redistributor of income and wealth (taxation
system)
Government Policies
1 Fiscal policy - the use of changes in government
spending
and taxation to influence the level and composition of aggregate demand in the
economy.
Decrease in taxation or increase in government spending
Will support economy activity and
investments
2 Monetary Policy - using money supply, interest
rates to regulate the economy.
3 Direct Controls - weapons specially designed to
achieve specific macroeconomic objectives.
Incomes policies - controlling inflationary pressures by influencing
the rate at which wages and salaries and incomes rise.
Import controls - which attempt to improve a country’s balance of
payments.
Regional and urban policies - aimed at curing urban and regional problems,
particularly differences in income, output, employment, and local and regional
decline.
Global
Economic Changes of the 21st Century
·
A
shift toward a global information economy in which businesses use, manage, and
control information more effectively.
·
The
aging of population in most nations and its serious effects on their economies.
·
Human
resources has proved to be a decisive factor in maintaining the competitiveness
of the work force.
Influence of Globalisation
on Business Firms
Increasing
globalisation has produced opportunities for firms:
·
To
market their products and services in markets/countries which were not
conceived before.
·
To
source their raw materials in new countries at competitive prices.
·
To
subcontract the production and assembly of their products/components in
countries where labour and some other costs are more favourable.
Why
does international trade take place?
Resources
are unevenly distributed throughout the world and mobility of the factors of
production is limited.
Some countries are
better at producing certain goods better than others.
A country has an absolute
advantage in the marketing of a product if it has a monopolistic position
if it produces the item at the lowest cost.
A comparative
advantage in a product occurs if a nation can supply that item more efficiently
at a lower cost than it can supply other goods, compared to other nations.
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Produces wine Produces potatoes
per lt. at per kg. at
England
(England France
(France England
Self-sufficiency
Barriers to Global
Business
·
Cultural
barriers
·
Physical
barriers (geographic proximity, and different time zones).
·
Tariffs
and related trade restrictions (import quotas, embargoes and exchange control).
Tariff – tax levied on products imported from
abroad.
Quota – sets limit on the number of certain products
than can be imported.
Embargo – a total ban on imported or exported
products.
WTO
(World Trade Organisation)
GATT (General
Agreement on Tariffs and Trade)
Multinational
Economic Communities (NAFTA, EU)
Forms of Business
Classification of Businesses
· According to Size
Small, Medium and Large
· According to the Type of Industry
Primary, Secondary, Tertiary
· According to the Sector
Private Sector, Public Sector
· According to Main Goals/Objectives
Profit Making, Non-Profit
Making
· According to the Ownership and Legal Status
Sole
Proprietorships, Partnerships,
Private
Limited Companies and Public Limited Companies.
Private Sector Organisations
Sole Trader / Sole Proprietorship
The oldest, simplest and
therefore the most common form of business.
A sole trader is someone
who is self-employed and who usually starts a business with capital from
her/his savings or by borrowing form friends or a bank.
A sole trader is not necessarily a one person business.
It may have many employers and branches (a shoe-repair shops-chain, a
confectionery with more than one employees and branches).
However, the business is owned only by one person and
it is s/he who receives the profits and controls the business.
It is the most common form of
business. However they produce
comparatively very little of the output.
Examples
Shopkeepers (Grocers, etc., agriculture and manual trades (repairers
etc).
The Main Characteristics of Sole Proprietorship
· Unlimited
Liability
No
distinction between the assets of the business and the private assets of the
owner.
I.e. If the business goes bankrupt and the assets of the business do
not cover the debts, then the owner will be forced to sell his or her own
private assets as well.
· Ease of Formation
Easy to establish or wind down.
No particular legal formalities for setting up the business apart from
those which would apply to any business in the particular industry chosen.
· Control
The owner is likely to be in full control.
Is this good or bad?
Advantages of Sole Proprietorship
· Can be set up
relatively easy with a small amount of capital and few legal formalities.
· The owner is the
boss and can make decisions quickly about how the business is run.
· Personal contact
with the customers.
· All profits
belong to the owner.
· Satisfaction and
motivation resulting from one’s doing his or her business. Achievement.
· Business affairs
can be kept private except for completing tax returns.
Disadvantages of Sole Proprietorship
· Unlimited
liability.
· Lack of economies
of scale.
· Future growth may
be limited because the owner lacks capital and may have difficulty in
borrowing.
· Division of
labour may be difficult.
· Lack of
continuity. If the owner dies or
retires, the business may go out of existence.
The Partnership
2-20
people agree to provide capital and work together in a business with the
purpose of making a profit.
Examples : Professionals (Lawyers’, Accountants’ Doctors’ Practices)
and consultants.
As in the case of the sole trader partners within a partnership have unlimited
liability.
See the handouts for partnerships in Turkey
Advantages of Partnerships
· Relatively easy
to set up.
· More capital can
be brought into the business (when compared with a sole proprietor).
· Division of
labour may be possible to an extent as partners may have different skills.
· Responsibility
for control of the business is shared with more than one person. Therefore the problems of holidays, illness
and long working hours are reduced.
Disadvantages of Partnerships
· Unlimited liability.
· Disagreements
among partners may cause problems.
·
Lack of capital may limit
expansion.
·
No continuity of existence.
Limited Companies
Turkish Commercial Law –Articles 276-281
govern the establishment and running of these companies.
A- Private Limited Companies
Minimum two shareholders no upper limit.
Not allowed to offer their shares to public.
Shareholders may not be able to sell their
shares without the agreement of the other shareholders.
Advantages of Private
Limited Companies
·
Limited liability for
shareholders.
·
Continuity of existence.
·
Minimum number of
shareholders. (Only two).
·
Greater capital potential.
·
Benefits from operating on a
larger scale.
(Purchasing
in bulk, employment of specialist staff).
Disadvantages of Private
Limited Companies
·
Compared with a Public
Limited company growth may be limited by lack of capital as shares cannot be
offered to the general public.
·
Transfer of shares may be
limited to ‘approved’ members.
B-
Public Limited Companies
The shares can be freely bought and sold
on the stock exchange.
Usually a business starts as a private limited
company and then goes ‘public’ at a later date in order to raise more capital
to finance its further growth.
Advantages of PLC
·
Limited Liability for
shareholders.
·
Continuity of existence.
·
Easier to raise large
amounts of capital and expand.
·
Shares freely transferable
on the stock exchange.
·
Easier to borrow money i.e.
from banks.
·
Benefits from economies of
scale.
Disadvantages of Public
Limited Companies
·
Their formation requires
many legal documents and may be very costly.
·
Can become very large and
impersonal. People may not feel that
they ‘belong to the organisation’.
·
Inefficiency may result if a
firm becomes very large and difficult to manage.
·
Annual accounts must be
published.
·
Risk of ‘take-over’ bids by
other companies as shares can easily be bought on the stock exchange.
Co-operatives
Large number of small units working
together in their mutual interest to achieve economies of scale.
It has its roots in the anti-capitalist
sentiment.
Two types:
i)
Producer Co-operatives
ii)
Retail Co-operatives.
Public Sector
Organisations
·
Central government
departments (e.g. department of trade and industry).
·
Local authorities
·
Central government trading
organisations.
·
Public Corporations and
nationalised industries. (State Owned Enterprises, TEKEL, TEK, etc).
Franchising
Involves an existing company, usually a
well-known and an established company, allowing someone the exclusive right to
manufacture, service or sell its products in a particular area.
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