TOPIC 1: INTRODUCTION TO BUSINESS STUDIES

1.1.  THE CONCEPT OF A BUSINESS

BUSINESS

A business is an economic activity involving production or buying and selling of goods and services with the aim of generating profit through satisfying customers’ needs and wants. Business can be either small-scale business or large-scale business.

Examples of Small scale business includes:

— small retail shops,

— selling of fresh fruits or items on street and

— carpentry

— photography,

— makeup artistic,

— content video creation, — transcribing and translating

Examples of Large scale business includes:

— supermarkets,

— multiple shops,

— automotive, mobile phone companies,

— textile companies,

— ship building and — sugar industries

BUSINESS PROCESSES

A business process is a set of interrelated activities or tasks that are performed in a sequence to achieve a specific goal or objective. There are main four business processes. These are; Production, Distribution, Exchange and Consumption.

1. PRODUCTION

This is a process of transforming raw materials into finished products to satisfy human needs and wants. For example,

— a tailor transforms a fabric into a type of a cloth such as a trouser, shirt, dress or curtains.

— a carpenter producing furniture from raw wood in a factory

— turning raw agricultural products such as fruits into packed food items such as juice.

2. DISTRIBUTION

This is a process of moving goods and services from where they are produced to where they are needed for consumption. It ensures that products reach the right customers at the right time. For example,

— the transportation of manufactured sugar from industry to final consumers — Selling of goods directly to consumers through stores and Online platforms — Transporting goods via shipping, trucking, or air freight.

3. EXCHANGE

This refers to the process of buying and selling of goods and services between two or more parties. It facilitates the transfer of ownership in return for money or other value. Exchange enables consumers to consume items they do not produce and producers to produce what they do not consume.

4.  CONSUMPTION

This is the act of using goods and services to satisfy human needs and wants. For instance, people — consume food to satisfy hunger,  — buy cars for transportation.

— buy laptop for studying — drinks to satisfy thirst

PURPOSE OF BUSINESS

The main goal of any business is to generate profit. However, other purposes of businesses are: 1. Profit Generation:

The primary purpose of most businesses is to earn profits. For instance, a retailer  sell products at a price higher than their cost, so as to get profit.

2. Providing Goods and Services:

Businesses aim to fulfill consumer needs by offering goods or services. For example, a bakery provides fresh bread to satisfy the daily food requirements of its community.

3. Employment Creation:

Businesses contribute to economic growth by creating employment opportunities. A manufacturing company, for instance, hires workers for production, administrative, and logistical roles.

4. Innovation and Development:

Many businesses innovate to solve problems or improve existing solutions. For instance, a tech startup developing a mobile application to simplify personal finance management.

5. Wealth Creation and Distribution:

By generating revenue and profits, businesses create wealth, which is distributed to stakeholders, such as employees (wages), shareholders (dividends), and governments (taxes).

6. Economic Growth and Development:

Businesses stimulate economic activity, leading to national growth. For example, a construction company developing infrastructure projects like roads and bridges contributes to overall economic progress and development.

7. Social Responsibility:

Businesses often aim to give back to society by addressing social or environmental issues. For instance, a clothing company implementing sustainable practices and donating a portion of its profits to charity.

8. Global Connectivity:

Businesses facilitate international trade and cultural exchange. A multinational corporation like Coca-Cola, operating in multiple countries, connects global markets and adapts to diverse cultural preferences.

9. Improving Standards of Living:

By providing affordable and accessible products, businesses enhance quality of life. For instance, a pharmaceutical company offering low-cost medication makes healthcare accessible.

1.2.  TERMINOLOGIES USED IN BUSINESS

Important terminologies for understanding Business Studies include needs and wants, services, goods, resources, scarcity, and opportunity cost. These terms are explained as follows:

1. NEEDS AND WANTS

Needs refer to basic essentials required for survival, such as food, water, clothing, and shelter. For example, clean drinking water is a universal need.

Wants are desires for goods or services that improve comfort or quality of life but are not necessary for survival. For example, owning a luxury car or dining at a fancy restaurant represents wants.

Human needs and wants arc unlimited in number. They have a tendency of multiplying in such a way that when an individual satisfies one, another one tends to arise.

2.SERVICE

Services are intangible activities or actions provided by businesses or individuals to meet consumer needs. Examples include education provided by teachers, healthcare from doctors, or banking services offered by financial institutions.

3. GOOD

Goods are tangible physical items produced for consumption. They can be classified into different groups, for example:

i) FREE AND ECONOMIC GOODS

Free goods are goods which are available for consumption at no cost and they are abundant in supply. Their consumption by one individual does not reduce availability to others. Examples include sunlight, air, and rainwater in certain regions.

Economic goods are goods which must be bought before consumption such as a pen, a pencil, a computer, and cloth. These goods are scarce and have monetary value.

ii) CONSUMER AND PRODUCER GOODS

Consumer goods are goods which are produced for direct consumption such as vegetables, television sets, cars, buildings and furniture. These goods are not used for production of other goods.

Producer goods are goods which are used for producing other goods. They include goods such as machineries, seeds, and other raw materials

iii) PERISHABLE AND DURABLE GOODS

Perishable Goods are goods that have a short lifespan and must be consumed quickly before they spoil or become unusable. Examples include fresh fruits, vegetables, milk, bread, and flowers.

Durable Goods are goods that have a long lifespan and can be used repeatedly over time without significant deterioration. Examples include furniture, vehicles, building, and home appliances.

iv) MERIT AND DEMERIT GOODS

Merit goods are goods with high social benefits to consumers such as education, health services, sports facilities and fire protection.

Demerit goods are goods with negative impact to the society or most likely to cause health problems to the consumers such as tobacco, cigarettes and alcohol.

4. RESOURCES

Resources are the inputs used to produce goods and services, also known as factors of production.

There are mainly four factors of production. These are:

i) Land:

This refers to all natural resources used in production. It includes physical land as well as resources like minerals, water, forests, and fossil fuels.

ii) Labour

This refers to the human efforts, skills and expertise required to produce goods and services. It represents the human effort—physical and mental—contributed to the production process.

iii) Capital

Capital refers to physical or financial resources used in production. It consists of tools, machinery, equipment, finance or money and infrastructures.

iv) Entrepreneurship

Entrepreneurship is the ability to organize and combine the other three factors of production effectively to produce goods and services. Entrepreneurs take risks, make decisions, and innovate to drive business success.

5. SCARCITY

Scarcity refers to the fundamental economic problem that arises because resources are limited, while human wants and needs are virtually unlimited. It is a situation where the available resources are insufficient to satisfy all the desires of individuals, businesses, or societies.

6. OPPORTUNITY COST

Opportunity cost refers to the value of the next best alternative foregone when a choice is made. For example, if a student decides to spend money on a laptop instead of a vacation, the vacation is the opportunity cost.

1.3. THE IMPORTANCE OF STUDYING BUSINESS STUDIES 

1. Entrepreneurship and innovation

Business Studies nurture an entrepreneurial mindset by teaching how to identify opportunities, create innovative solutions, and manage the risks associated with starting and growing businesses.

2. Understanding  customer needs  and preferences

Business Studies help students to realise and appreciate the role of business in the provision of goods and services which satisfy customers’ needs and wants.

3.   Critical thinking and problem solving

Students develop critical thinking skills as they analyse business situations, make decisions, and solve complex problems related to management, marketing, finance, procurement, and operations.

4. Global perspective

Business Studies often explore international trade, globalisation, and cross-cultural communication, fostering an understanding of how businesses operate in a globalised world.

5.  Financial literacy

Studying business equips individuals with financial literacy to help them manage personal finances, understand investments, and make informed decisions about saving and borrowing.

6.  Career opportunities:

Business Studies offer a wide range of career opportunities in fields such as marketing, finance, human resources, management, consulting and entrepreneurship.

7.  Soft skills development:

Students learn communication, teamwork, leadership, and negotiation skills that arc applicable in both professional and personal contexts.

8.  Ethics and corporate social responsibility:

Business Studies address ethical considerations and corporate social responsibility,encouraging responsible and ethical business practices that contribute to sustainable development in the society.

9.  Adapting to change:

Business environments are constantly evolving. Studying business equips the student with skills to adapt to changes, technological advancements, and shifts in market trends.

10. Contribution to society:

Successful businesses drive economic growth, create jobs, and contribute to the overall well being of society. Business Studies provide insights in to how businesses can positively impact communities.

11. Interdisciplinary learning:

Business Studies often intersect with various discipline  such as economics, psychology, sociology, and technology, offering a multidimensional understanding of how these fields interact in realworld scenarios.

      

1.4.  THE SCOPE OF BUSINESS STUDIES

Business Studies covers various components that provide a comprehensive understanding of how businesses operate successfully in today’s dynamic economy. Below are the key components of Business Studies:

1.  Business Environment

This component focuses on the internal and external factors affecting businesses, such as economic, political, social, technological, and legal environments. For example, understanding market trends and government policies is crucial for business success.

2.  Entrepreneurship

Entrepreneurship explores the process of identifying opportunities, developing business ideas, and managing risks to establish and grow a business. It also emphasizes creativity, innovation, and leadership skills necessary for entrepreneurs.

3.  Marketing

Marketing involves understanding customer needs, promoting products or services, setting competitive prices, and managing distribution channels. Key areas include advertising, branding, market research, and customer relationship management.

4.  Finance and Accounting

This area covers financial planning, budgeting, bookkeeping, and the preparation of financial statements. It also examines concepts like profit and loss, capital management, and the role of financial markets.

5. Human Resource Management (HRM)

HRM focuses on managing the workforce within an organization. Topics include recruitment, training and development, employee motivation, performance appraisal, and maintaining workplace ethics.

6. Economics:

This includes concepts of wants, needs, scarcity, opportunity cost and demand and supply of goods and services in the market.

7.  Business management:

This component encompasses the principles and practices of operating a business effectively. It includes planning, organising, directing, staffing and controlling the business resources to achieve the business goals.

8. Information technology and e-business:

This component focuses on the role of Information and Communication Technology (ICT) in business operations. It includes e-commerce and digital marketing.

9.  Business laws and regulations:

This component focuses on understanding legal aspects for effective business operations such as compliance, employment law and contract, and intellectual property.

10.  Risk management:

This component focuses on identifying potential risks that a business may encounter and developing effective ways to overcome the risks, including insurance.

1.5.  THE RELATIONSHIP BETWEEN BUSINESS STUDIES AND OTHER SUBJECTS

Business Studies relate with all subjects as it prepares and allows students to transfer knowledge, skills and attitudes acquired from various subjects into business opportunities. Such relationship can be explained as follows:

1.  Business Studies with Agriculture

Business Studies will equip the students with business skills which will enable them to turn vegetable cultivation into a profit-making business.

2.  Business Studies with Theatre arts and Music subjects

Business Studies will equip students who are taking Theatre arts and music subjects with necessary skills to create a business plan, manage the business finances and marketing their services.

3.  Business Studies with Language subjects

Business Studies will enable students who are taking language subjects such as English, Kiswahili, Arabic, Chinese and French to promote their skills to become translators, interpreters, editors and content creators for websites and social media.

4. Business Studies with Mathematics

Mathematics is like a toolkit for entrepreneurship and Business Studies. It helps them with aspects like budgeting, measuring how well ideas are working, and making smart decisions about money.