Business Organisation

week 1

Organisation

A. Learning Objectives:

The objectives of this week topic are to expose students to

1. What is organization and how it operates within the business environment.
2. How its operation differs from one place to another base on the types of economy.
3. Roles of government in helping business.

B. Learning Outcomes:

On successful completion of this topic students will be able to:

a. Recognize the general characteristics and purposes of an organization.

b. Illustrate how environment and business organization are interrelated.

c. Show the different economy that are available and their advantages and limitations.

d. Discover how the environment can affect the business organization.

e. Explain with examples how government can assist business organization.

C. Topic

1.0 Introduction

1.1 Definition

• Business is a trading unit and it is a major economic activity.

• “Production of goods and services to meet peoples wants”(Gabriel,V.1989)

• It is an activity of buying and selling of product or services between customer and producer in order to satisfy each others purposes.

• It is an exchange activity between two or more individuals.

• There are two types of business activity – domestic business and international business.

• Business activity does not only help meet humans’ basic needs but also contributes to a higher standard of living.

• This exchange activity is normally done in an organisation.

• Organisation is a collection of groups joined in a common mission.

1.2 Purpose of organisation

• Organisation operates for various reasons. Some of the reasons that had been gathered are as the followings.

i) To make a profit;

ii) To enjoy social activities with like-minded people;

iii) To provide a service to the public or to raise money for the under-privileged;

iv) To survive and to grow in the business industry;

v) To give more job opportunities; and

vi) To improve the standard of living.

1.3 Types of business industry

Industries can be broadly categorized under three headings:

• Primary. These are industries concerned with the extraction of raw materials and include agriculture, forestry, fishing, and mining.
• Secondary. These industries are in any way concerned with the processing and manufacturing of products. They include such industries as iron and steel, motor vehicles and food processing.
• Tertiary. The final group does not produce goods but supply and sell services. For this reason, they are termed as service industries. In this category are banking, education, tourism, and the distributive traders.

2.0 Types of economy

• Business organisation operates differently. This is because it depends on the types of economy the country is practising.

• There are three different type of economy available – planned economy, Market Free and Mixed Economy.

• The above classifications appeared due to a question of who allocates the resources.

2.1 Planned economy

• The principle behind the planned economy is that the government will provide allocate the resources.

• Individuals do not own companies; instead the government runs all the business and then sells the goods to the population.

• Cuba is an example of a Communist State or a Planned economy.

• Advantage of operating in this type of economy is that the system can be shaped in such a way as to reflect the social and political wishes of a group of people.

• Disadvantage of operating in this king of economy is that, it may stifle individual capabilities.

2.2 Market Free economy

• The markets naturally decide the price. The price will be set using the demand and supply curve.
• Government normally do not get themselves involved.
• United States of America is an example of a country that practices this type of economy.
• Advantage of operating in this type of economy is that the production surely will be reflecting the wishes of the consumer.
• Disadvantage of this economy is that the community have to pay for resources used.

2.3 Mixed economy

· A mixed economy has a mixture of government supported or owned businesses and privately owned businesses.

· The balance between who will provide services is often determined by government policy.

· Advantage of operating in this type of economy is that a healthy competition can be encouraged.

· Disadvantage is that businesses are unable to operate freely.

3.0 Relationship between business and the economy

4.0 The role of the government in business

5.0 Provides basic framework for private organization.

6.0 Helps ruthless exploitation of child and female labour.

7.0 Good working environment for business.

8.0 Pass laws and enforcing regulations that can protect society and business.

9.0 Tax incentives used to entice industries to locate in certain areas to solve unemployment problems.

10.0 Give education and training to provide sufficient skills.

11.0 Subsidise medical care and cheap public housing through a system of taxes.

12.0 Do a proper economy planning to ensure that manpower requirements in all sectors of the economy are met.

13.0 The business environment

• Business does not operate in a vacuum.
• For an effective business, knowing the environment and changing accordingly the business activities helps business organisation survive longer.
• The business environment can be classified into macro and micro environment.

13.1 Macro environment

· Legal and political

It is created by the government and powerful decision makers who are able to create laws, regulations and codes, as well as imposing taxes on organizations.

· Economic

Factors effecting the financial functioning of the organization such as the potential for growth or for retrenchment in the economy at large in relation to the market for the organisation’s products, or the value of money as it impacts on reward systems.

· Social

Factors affecting the supply of labour, such a demographic, ranges in terms of the age profile of the working population, numbers of people in the job market, and changing cultural norms of the behaviour and attitudes in society at large which influence people’s expectations and behaviour at work.

· Technology

It involves factors affecting the processes of production, such as changes in computer technology and communication, and the implications of new manufacturing processes.

13.1 Micro environment

· Competitors

It is the most important force that an organization confronts in its task environment.

· Customers

Changes in the number and types of customers or changes in customers taste and needs also can result in an opportunities or threats for a business.

· Distributors

If distributors are so large and powerful they can control customers access to a particular organisation’s goods and services, they can threaten the organization by demanding that it reduces the price of its goods or services.

· Suppliers.

They are very much important because the quality of their supply, the price and so on will affect the output that the organization produces.

14.0 References

1. Gabriel, V. 1989. Management. 2^nd Edition. Longman: Singapore.

2. NCC manual. Business Organisation.