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Business Basics

Part One- Overview of the Business World

The first thing you need to do when you start learning about business is simple- ask yourself the following question:

What is business?

You can probably find hundreds of definitions for business everywhere. My favourite, since it's simple and conclusive, is the following:

A business encompasses any activity that provides goods or services to others while earning a profit.

This, of course gives rise to a few more definitions:
Good- any tangible item that is produced, traded and consumed.
Service- an intangible action or work that is produced, traded and consumed.

Now that we know what business is, we can talk about the big business world out there.

Every business has one primary objective: to generate profit. In order to meet this objective, a manager has to consider 2 major structures- the external area and the internal area.

The internal structure:

This is the business organization itself. There are 4 major categories.The central areas are:

1. Production (operations): designing and creating a good or a service around which the business is based.

2. Distribution (marketing): selling the good/service for profit.

   The other areas enable and support the 2 central ones:

3. Accounting and Finance- responsible for the monetary aspects of the business.

4. Human Resources- responsible for keeping the employees of the business happy.

The external structure:

While managing the internal structure, or the business itself, it is important to also analyze the external world that affects the business. Without fast response to external change in our dynamic, global world, a business can quickly become obsolete and bankrupt.

A few areas of the external structure include:

1. Political: Laws and regulations that govern the business's activities.

2. Economical: Trade and the economy naturally affect businesses.

3. Social: Responding to consumers' needs is a key to success.

4. Technological: Keeping up with modern technology is vital.

5. Industrial: Watching the competition and other players in the industry.

The internal and external business structures represent stakeholders. A stakeholder is a group that share an interdependency with the business. There are 3 primary stakeholders:

1. Owners/shareholders- provide the business with the capacity (money) to operate and expect financial return.

2. Employees- provide business with labour and innovation, expect wages and fair conditions in return.

3. Customers- provide business with revenue, expect quality goods and services.

Secondary stakeholders in the business range from creditors and suppliers, the government, the nearby community, and society as a whole.

The manager's role:

Within the two business structures lies the management. Top managers have to monitor the two structures and analyze external risks or opportunities and internal successes or problems, to come up with a strategical business plan.

The business plan has to maximize profits while balancing the needs of the different stakeholders. In order to do so, managers must use important managerial skills:

1. Planning

2. Organizing

3. Motivating

4. Controlling

And this concludes the overview of the business world.

In part 2, we will begin discussing financial markets from the investor's point of view.