By Nadeem Zaidi: AS Business Notes

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DA PUBLIC SCHOOL KARACHI

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AS Business Notes
By Nadeem Zaidi
9/26/2017
These notes are for use by DA Public School students. Printing/photocopying of these notes by outside
individuals is not allowed
1 AS Business Notes Nadeem Zaidi Ph: 03333556336

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Chapter 1
Entrepreneurship
Introduction
Business adds value to raw materials. If the customer is willing to pay a price greater
than raw material cost, the business has added value. If a jeweler has well designed
shop with attractive fittings, knowledgeable assistants and beautiful boxes he has added
value. A sweet manufacturer can use extensive adverting of his brand of sweets to
create an easily recognized name and brand identity for which people are willing to pay
a high price. Entrepreneur is someone who takes financial risk of starting a new business
venture. Ventures can be based on totally new ideas or new ways of offering services.
When Entrepreneurs have new ideas, they must be able to
• Invest some Capital
• Accept Responsibility of management
• Accept Risk of Failure
Characteristics of Entrepreneurs
1. Innovation: They may not be inventors must be able to make nice for themselves in the
market. They can also offer an existing product or attract customers in an innovative
way
2. Self-Motivation: Setting up your own business requires hard work and commitment of a
lot of hours of work.
3. Multi Skilled: Entrepreneur will have to make the product, promote and sell it> he
should have technical skills, communication skills and even accounting skills
4. Leadership Skills: Lead by example; a personality people want to follow
5. Self Confidence: Ability to bounce back after failure as many new ventures fail
6. Must be willing to take risk in order to see results
Challenges faced by Entrepreneurs

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Identifying Business Opportunities: Must be able to identify a market need and an original idea
about fulfilling it
These ideas come from:
a. Own skills and hobbies example dress making etc.

b. Employment experience, successful hair dresser, for example,
c. Conferences and exhibitions, wide range of new business startup,
d. Use of the internet to browse business
e. Many businesses that are in the local area offering certain goods or services
Source Capital (Finance)
Once the entrepreneur has decided on the business idea the task is to raise the necessary
capital. Many entrepreneurs have very limited personal saving.
The capital can be raised in the following ways:
• Awareness of the financial support available.

• Any trading record to present evidence of past business success.
• Produce business plan for investors
Competition
Competition is nearly always a problem unless the business idea is very unique. Entrepreneur
will have to offer better customer service to offer the cost and price benefits that big
businesses have
Building a customer base
The long term success will depend on getting loyal customer (customers who return to
purchase products again and again). Many small businesses encourage this by offering a better
service that might include personal customer service, pre and after sales service
Why new businesses often fail
The most common reasons for new enterprises failing are:
The lack of accurate record:
• It is not less important than meeting customer needs

• You can’t remember everything
• Use computers for record keeping

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• It is always advisable to keep paper records, receipts

• They are good back up and evidence to tax receipts etc.
Lack of working capital:
• Working capital is running finance

• Very common reason in first year
• Without WC you can’t buy stocks or pay creditors or give sufficient credit to important
customers.
• Construct a cash flow forecasts to know the WC needs of the business
• Inject sufficient capital at start up to last the first few months
• Establish good relations with banks for short term finance
• Use effective credit control/ not too long credit period.
Poor management skills:
• Leadership skills
• Cash Handling skills
• Planning and coordinating skills
• Decision making skills.
• Communication Skills
• Marketing/ promotion and selling skills
• Some entrepreneurs can hire staff for this but many can’t afford this expensive option
• Get trained to understand the work or get some experience through employment

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Chapter 2
BUISNESS STRUCTURE
KEY DEFINITIONS
Primary Sector Business
These are activity firms engaged in farming fishing, oil extraction and all other industries that
extract natural resources so that they can be used and processed by other firms.
Secondary Sector Business
These are activity firms that manufacture and process products from natural resources,
computers, brewing, bakers, clothes making and construction.
Tertiary Sector Business
These are activity firms that provide services to consumers and other businesses; such as
retailing, transport, insurance, banking, hotels, tourism and telecommunications.
CHANGES IN BUSINESS ACTIVITY
The importance of each sector in economy changes over time. Industrialization is the term used
to describe the growing importance of the secondary sector manufacturing industries the
developing countries.
BENEFITS
• Total national output (gross domestic product) increase and this raises average
standards of living.
• Increasing output of goods can result in lower imports and higher exports of such
products.
• Expanding manufacturing businesses will result in more jobs being created.
• Expanding and profitable firms will pay more tax to the government.
• Value is added to the countries’ output of raw materials , rather than just exporting
these as basic ,unprocessed products.

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PROBLEMS
• The chance of working in manufacture can encourage a huge movement of people from
the country to the towns, which leads to housing and social problems.
• Imports of raw materials and components are often needed, which can increase the
country’s import costs.
• Much of the growth of manufacturing industry is due to the expansion of multinational

companies. The consequences of this are covered later in this chapter.
• In developed countries, the situation is reversed .There is a decline in the importance of

secondary-sector activity and an increase in the tertiary sector. This process is termed
deindustrialization.
• Rising incomes associated with higher living standards have led consumers to spend
much of their extra income on services rather than more goods.
• Therefore, rising imports of goods are taking the market away from the domestic
secondary sector firms.
KEY DEFINITIONS
Primary sector comprises businesses owned and controlled by individuals or groups of

individuals
Public sector comprises organizations accountable to controlled by central or local

government (the state).
In most mixed economy countries, certain important goods and services are provided by
state –run organizations as it is argued that they are too significant to be left to private
businesses .These usually include health and educational services, defense and public
law and other (police force).

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Sole Proprietorship
This is most common form of business organization. Although there is a single owner in this
business organization, it is common for sole traders to employ others, but firms are likely to
very small. Because of this, although they are great in number, sole traders account for only a
small proportions of total business turnover. All sole traders have unlimited liability. This means
that the owner’s personal possessions and property can be taken off the debts of the business,
should it fail. In order to remain a sole trader, the owner is dependent own savings, profits and
loans for injections of capital.

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Partnership
The partnership agreement does not create a separate legal unit; a partnership is just a
grouping of individuals. Partnerships are formed in order to overcome some of the drawbacks
of a sole trader. When planning to go into partnerships, it is important to choose business
partners carefully-the errors and poor decisions of any one partner are considered to be the
responsibility of them all. This also applies to business debts incurred by one partner are
considered to be the responsibility of them all. This also applies to business debts incurred by
one partner-in most countries there is unlimited liability for all partners should the business
venture fail.
It is unusual, although not a legal requirement, to draw up a formed deed partnership between
all partners. This would provide agreement on issues such as voting rights, the distribution of
profits, the management role of each partner and who has authority to sign contract.
Partnerships are the most common form of business organization in some professions, such as
laws and accountancy.
LIMITED COMPANIES
Limited liability
The ownership of companies is divided into small units called shares. People can buy these and
become ‘shareholders’-part owners of the business. It is possible to buy just one share but
usually these are owned in blocks, and it is possible for one person or organizations to have
complete control by owning more than 50% of the shares. Individuals with large blocks of
shares often become directors of the business. All shareholders benefit from the advantage of
limited liability. Nobody can make any further claim against shareholders, should the company
fail.
This has two important effects.
• People are prepared to provide finance to enable companies to expand.
• The greater risk of the company failing to pay its debts is now transferred from investors to
creditors (those suppliers/lenders who have not been paid).
Legal personally
A company is recognized in law as having a legal identity separate from that of its owners.
Accompany can be sued and can itself sue through the courts. This does not take all legal

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responsibilities away from the managers and owners .For example, directors can be legally
responsible if they knowingly continue trading when their company is illiquid.
Continuity
In a company, the death of an owner or director does not lead to its break-up or dissolution .All
that happens is that ownership continues through the inheritance of the shares, and there is no
break in ownership at all. The word ‘limited’ or ltd (‘Pte’ in some countries) tells us that the
business has this legal form. Usually the shares will be owned by the original sole trader,
relatives, friends and employees . New issues of shares cannot be sold on the open market and
existing shareholders may sell their shares only with the agreement of the other shareholders.
Public Ltd Company
• Public limited company is a limited company, often a large business, with the legal right to
sell shares to the general public-share prices are quoted on the national stock exchange.
• A public limited company (plc) has all the advantages of private-company status, plus the
right to advertise their shares for sale and have them quoted on the stock exchange. This
not only means that public limited companies can raise potentially very large sums from
public issues of shares , but existing shareholders may also quickly sell their shares if they
wish to. This flexibility of share buying and selling encourages the public to purchase the
shares in the first instance and thus invest in the business. The other main difference
between private and public companies concerns the ‘divorce between ownership and
control’. This is most unlikely with public limited companies, due to the sheer volume of
shares issued and number of people and institutions as investors. These shareholders own
the company, but they appoint, at the annual general meeting a board of directors who
control the management and decision making of the business.

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• This clear distinction between and control can lead to conflicts, for the objectives to set and
the directions to be taken by the business. It is possible for the directors or the original
owners of a business to convert it back from a plc to private limited company status. It is
often said that the major investors in plc are only interested in the short-term gains. ’Short
termism’ can be damaging to the long-term investment plans of a business.

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Memorandum of Association
This states the name of the company, the address of the head office through which it can be
contacted, the maximum share capital for which the company seeks authorization and the
declared aims of the business.
The last two points in this definition are great interest to shareholders.
1. Knowing the maximum share capital means that the relative importance of any one
share can be determined.
2. Being aware of the company’s aims means that the shareholders can avoid business that
may operate in markets and products –such weapons –that they may not want to be
associated with.
The other main document is called the Articles of Association.
Articles of Association
This document covers the internal workings and control of the business-for example, the names
of directors and the procedures to be followed at meetings will be detailed.
Other Forms of Business Organization
Cooperatives
It is common to differentiate between producer or worker cooperatives that are involved with
making goods and consumers (or retail) cooperatives that sell goods and services. Certain
common features are common to all cooperatives:
• All members can contribute to the running of the business ,sharing the workload ,
responsibilities and decision making ,although in larger cooperatives some delegation to
professional managers takes place
• All members have one vote at important meetings.
• Profits are shared equally among members.
The advantages of such business units are:
• Buying in bulk
• Working together to solve problems and take decisions

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• Good motivation of all members to work hard as they will benefit from shared profits .
• The potential drawbacks includes:
• Poor management skills until professionals are employed
• Capital shortages because no sale of shares to the non- ember general public is allowed
• Slow decision making if all members are to be consulted on important issues.
FRANCHISES
• This contract allows one of them, the franchisee, to use the name, logo and marketing
methods of the other , the franchiser . The franchiser can , separately then decide which
form of legal structure to adopt .Franchise are rapidly expanding form of business
operation
Joint Ventures
Two or more businesses agree to work closely together on a particular project and create a
separate business division to do so.
• Costs and risks of a new business venture are shared –this is a major consideration
when the cost of developing new products is rising rapidly.
• Different companies and the therefore fit well together.
• They might have their major markets in different countries and they could exploit these
with the new product more effectively than if they both decided to ‘ go it alone’
Holding company
A business organization that owns and controls a number of separate businesses, but does not
unite them into one unified company
Often the separate businesses are in different markets altogether and this would mean that the
holding company had diversified interests.
Public-Sector Enterprises-Public Corporations
Caution! The use of the term ‘public’ in two ways often causes confusion
Public corporation a business enterprise owned and controlled by the state-also known as
nationalized industry.

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In many countries, the publicly owned TV channels as their main priority the quality of public-
service programs.
Chapter 3
SIZE OF BUSINESS
INTRODUCTION:-
• Businesses vary in size from sole traders with no additional workers to huge
multinational corporations employing hundreds of thousands of employees.
• Measuring the size of businesses is rather inexact science , but efforts are still made so
that comparisons can be made between them and so that growth or contraction can be
assessed.
MEASURING BUSINESS SIZE:-
• There are two problems for these and other requirements for a way measuring business
size
• There are several different ways of measuring and comparing business size and they
often give different comparative results .a firm might appear large by one measure but
quite small by another.
• There is no internationally agreed definition of what a small , medium or large business

is , but the number of employees is often used to make this distinction.
• DIFFERENT MEASURES OF SIZE:-
• 1-Number of employees
This simplest measure.it is easy to understand for example ; it is obvious to everyone that
shops with just the owner or family are small.
It is also clear that a firm employing many staff is likely to be large .
But there is a problem , how about a business that needs to employ only a few people –such
as a highly automated computer –chip maker with expensive capital equipment?

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EXAMPLE ; there are two soft drinks firms in the same town.one uses traditional methods of
production , using 180 people to make 300,000 liters of drink a week. The other is totally
automated and produces one million liters a week with just ten staff.
2-Sales turnover:-
Sales turnover is often used as a measure of size especially when comparing firms in the
same industry.
It Is less effective when comparing firms in different industries because some might be
engaged in high value production such as precious jewels , and another might be in low
value production , such as cleaning services.
This measure is needed to calculate market share.
3-Capital employed:-
CAPITAL EMPLOYED the total value of all long-term finances invested in the business.
Generally ,the larger the business enterprise , the greater the value of capital needed for
long-term investment , or the greater the amount of capital employed .
Again , comparisons between firms in different industries may give a rather misleading
picture .
Two firms employing the same number of staff may have very different capital equipment
needs , such as hairdresser and an optician .
The latter will need expensive diagnostic and eyesight measuring machines.
4-Market capitalization:-
Market capitalization can be used only for businesses that have shares ‘quoted’ on the stock
exchange ( public limited companies) .it is calculated by this formula;
market capitalization=current share price * total number of shares issued.
As share prices tend to change everyday , this form of comparison is not very stable one .
For example , a temporary but sharp drop in the share price of a company could appear to
make it much smaller than this measure would normally suggest.

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As share prices tend to change everyday , this form of comparison is not very stable one .
For example , a temporary but sharp drop in the share price of a company could appear to
make it much smaller than this measure would normally suggest.
5-Market share:-
Market share is relative measure .if a firm has a high market share , it must be among the
leaders in the industry and comparitively large .
However , when the size of the total market is small , a high market share will not indicate a
very large firm .
This is calculated using formula:
(total sales of business/total sales of industry)*100
Other measures that can be used
the total number of shops could be used to retailers .
THE SIGNIFICANCE OF SMALL AND MICRO BUSINESSES:-
Small firms (including micro –enterprises) are very important to all economies ,
Encouraging the development of small business units can have the following benefits:
Many jobs created by small firms and even though each one may not employ many staff ,
collectively the small-businesses sector employs a very significant proportion f the working
population in most countries.
Small businesses are often run by dynamic entrepreneurs , with new ideas for customer
goods and services . This helps to create variety in the market and consumers will benefit
from greater choice.
Closely linked to this is the competition that small firms can create for large businesses .
Without this competition , larger firms could exploit consumers with high prices and poor
service.
For Example
The cost of air travel has been reduced in the recent years due to the establishment of
many small airlines competing with the large established companies.
Small firms often supply specialist goods and services to important industries in a country .

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For example ; a very large car manufacture may depend on small specialist suppliers of
wheels , audio equipment , training and cleaning services.
All great businesses were small at one time . The large firms of the future are the small firms
of today- and the more small firms are encouraged to become established and expand , the
greater the chances that an economy will benefit from large –scale organizations in the
future .
Small firms may enjoy lower average costs than larger ones and this benefit could be passed
on to the consumer too. Costs could be lower because wage rates paid to staff may not
approach the salaries paid organizations ,
or the sheer cost of the administration and management structure of bigger enterprises
may increases their cost dramatically
Government assistance for small businesses used in many countries includes
Reduced rate of profits tax( corporation tax) – this will allow a small company the chances to
retain more profits in the businesses for expansion.
Loan guarantee scheme – this is a government guarantee of a certain percentage of a bank

loan should the business fail .
Information , advice and support will be provided to the small firms through agency of the
department of trade and industry .
In very economically deprived areas, such s cities with high unemployment , government
finance the establishment of small workshops , which are rented to small firms overcome
the particular problems that they frequently experience.
These include:-
Lack of specialist management expertise – often the owner has to undertake all
management , keeping accounts and dealing with staff matters , because the businesses
cannot afford to employ specialist in each of these areas .
Problems in raising both short – and long term finance –small firms have little security to
offer banks in exchange for loans and this makes obtaining finance much more difficult than
for most larger firms .
Also , suppliers may be reluctant to sell goods on credit if the business has been operating
for only a short time.

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Marketing risks from a limited product range :Many small firms produce just one type of
goods or services or at least a very limited range of them . This exposes them to problems
should consumer tastes and demand conditions change.
Difficulty in finding suitable and reasonably priced premises .
BUSINESSES GROWTH
The owners of many businesses do not want the firm to remain a small –although some do ,
for reasons of remaining in control , avoiding taking too many risks and preventing
workloads from becoming too heavy .
Why do other businesses and owners and directors of companies seek growth for their
businesses? There are a number of possible reasons:
1. Increased profits-if the main aim of the owners and directors is profit , then expanding
the businesses and achieving higher sales is one way of becoming more profitable .
2. Increased market share –this will give a business a higher market profile and greater
bargaining power with both suppliers ( eg ,lower prices ) and retailers ( eg ,best
positions in the shop )
INTERNAL GROWTH

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Internal growth expansion of a businesses by means of opening new branches , shops or

factories ( also known as organic growth )
An example of internal growth would be a retailing businesses opeing more shops in town
and cities where it previously had none .
This growth can be quite slow with , perhaps only a few branches or shops opening each
year .
However ,it can avoid problems of excessively fast growth , which leads to inadequate
capital ( overtrading ) and management problems associated with two businesses together
that often have different attitudes and cultures together .

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Chapter 4
BUSINESS OBJECTIVES
THE IMPORTANCE OF OBJECTIVES
The most effectiveness business usually meet the following ‘SMART’ criteria.
• S-SPECIFIC: objectives should focus on what the business does and should apply directly
to that business . A hotel may set objective of 75% bed occupancy over the winter
period . This objective is specific to this business .
• M-MEASURABLE: objectives that have quantitative
• A value is likely to be more effective as targets for directors and staff to work towards .
For instance , to increase sales in the south-east region by 15% this year.
• A-ACHIEVABLE :setting objectives that are almost impossible in the time given will be
pointless. They will demotivate staff who have the task of trying to reach these targets .
Smart objectives should be achievable
• T – TIME –SPECIFIC : a time limit should be set when an objective is established –by
when does the business expect to increase profits by 5%?
Without a time limit , t will be impossible to access whether the objective has actually
been sent
Hierarchy of objectives
• AIM
• MISSON
• CORPORATE OBJECTIVES

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• DIVISIONAL OJECTIVES
• DEPARTMENTAL OBJECTIVES
• INDIVISUAL TARGETS
CORPORATE AIMS:
•These are the long term goals which a business hopes to achieve .
•The core of a business ‘s activity is expressed in its corporate terms and plans
•The term is rather misleading because its not just companies that have these goals
•Sole traders , and partnerships will also commonly , develop the same kind of long term
vision for their business.
•What benefits flow from establishing corporate aims:
They become the starting point for the entire set of objectives on which effective
management is based
They can help develop a sense of purpose and direction for the whole organization if they
are clearly and unambiguously communicated to the workforce.
they allow an assessment to be made , at a later date of how successful the business has
been in attaining its goals .
They provide the framework within which the strategies and plans of the business can be
drawn up or a business without a long term corporate plan or aim is likely to drift from
event to event without a clear sense of purpose .
MISSION STATEMENTS:
KEY DEFINITION: a statement of the business ‘s core aims , phrased in a way to motivae
employees and to stimulate interest by outside groups .

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Examples are;
UNIGATE ‘we are committed to consistent profitable growth as the means by which we can
provide attractive returns to the shareholders , be a responsible employer and support the
communities in which we operate ‘ .
EVALUATION OF MISSION STATEMENTS:

Some of the arguments used in the favor of mission statements are:
They quickly inform the groups outside the business what the central aim and vision are .
They can prove motivating to employees , especially where an organization is looked upon ,
as a result of mission statement , as a caring and environmentally friendly body
When they include moral statements and values to be work towards , then these can help
to guide and direct individual employees behaviour at work.
They are not meant to be detailed as working objectives , but they help to establish in the
eyes of other groups ‘ what the business is about ‘
On the other hand the statements are often criticized for being
Too vague and general , so that they end up saying little that is specific about the business
or its future plans .
Based on public relation exercise to make stakeholder groups ‘ feel good ‘about the
organization
Virtually impossible to really analyze or disagree with
Other rather ‘woolly’ and general , so it is common for two completely different businesses
to have very similar mission statements
Communicating mission statements is almost as important as establishing them

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They often feature in the published accounts and other communication to

share holders
CORPORATE OBJECTIVES
The aims and mission statements of a business share a common problem :they lack specific
detail for operational decsions and they are rarely expressed in quantitative terms
COMMON CORPORTAIVE OBJECTIVES
PROFIT MAXIMIZATION:
•All the stakeholders in a business are working for reward . profits are essential for
rewarding investors in a business and for financial further growth . Profits are necessary to
persuade business owners – or enterpreneurs –to take risks.
•The chief argument in support of this objective is that it seems rational to seek the
maximum profit available from a given venture. Not to maximize profit , according to this
objective , seen as a missed opportunity . However , there are serious limitations with this
corporate objective .
•The focus on high short term profits may encourage competitors to enter the market and
jeopardise the long-term survival of the business.
•Many businesses seek to maximize sales in order to secure the greatest possible market
share , rather than to maximize profits . The business would expect to make a target rate of
profit from these sales .

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•the owners of smaller businesses may be more concerned with ensuring that leisure time is
safeguarded . The issues of independence and retaining control may assume greater
significance than making higher profits .
•Most business analysts assess the performance of a business through return on capital
employed rather than through total profit figures .
•Profit maximization may well be the preferred objective of the owners and shareholders ,
but other stakeholders will give priority to other issues business managers cannot ignore
these .
•Hence , the growing concern over job security for the workforce , and the environmental
concerns of local residents may force profitable business decisions to be modified , yielding
lower profit levels .
•In practice , it is very difficult to assess whether the point of profit maximization has been
reached , and constant changes to prices or output to attempt to achieve it may well lead
to negative consumer reactions .
PROFIT SATISFICING :
This means aiming to achieve enough profit to keep the owners happy but not aiming to
work ‘flat out ‘ to earns as much profit as possible
This objective is often suggested as being common among owners of small businesses who
wish to live comfortably but do not want t work longer and longer hours in order to earn
even more profit .
GROWTH :
The growth of a business –usually measured in terms of sales or value of output has many
potential benefits for the managers and owners .
Business objectives based on growth do have limitations :
Expansion that is too rapid can lead to cash-flow problems
Sales growth might be achieved at the expense of lower profit margins
Larger businesses can experience diseconomies of scale
Using profits to finance growth –retained profits can lead to lower short term returns to
shareholders
Growth into new businesses areas and activities – away from the firms’s core activities –can
result in a loss of focus and direction for the whole organization

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INCREASING MARKET SHARE:
Closely linked to overall growth of a business is the market share it enjoys within its main
market
Although the two are usually related , it is possible for an expanding business to suffer
market share reductions if the market is growing at a faster rate than the business itself
.
•Increasing market share indicates that the marketing of the business is proving to be more
successful than of its competitors.
Benefits resulting from having the highest market share –being the brand leader- include
Retailers will be keen to stock and promote the best selling brand
Profit margins offered to retailers may be lower than competing brands as the shops are so
keen to stock it – this leaves more profit for the producer
1.Effective promotional campaigns are often based on’ buy our product with confidence –it
is brand leader ‘
SURVIVAL:
This is likely to be the key objective of most new business start –ups the high failure rate of
new businesses means that to survive for the first two years of trading is an important aim
entrepreneurs .
CORPORATE SOCIAL RESPONSIBILITY (RSR):
•KEY DEFINITION : this concepts applies to those businesses that considers the interests of
society by taking responsibility for the impact of their decisions and activities on customers
employees , communities and the environment .
•Should firms have objectives about social , environmental and ethical issues?
•Increasingly influential pressure groups are forcing businesses to

reconsider their approach to decision making .
•Also , legal changes – at local , national and EULEVEL–have forced businesses to refrain
from certain practices . Firms can no longer pay staff very low wages or avoid legal
responsibility for their products . Managers clearly wish to avoid conflicts with the law or
bad publicly .

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•There are other reasons for these trends in business objectives- increasingly , consumers
and other stakeholders are reacting positively to business that act in ‘green’ or socially
responsible ways .
•Examples include:
•Firms that promote vegetarian and organic foods .
•Retailers that emphasize the proportion of their materials made from recycled materials.
business that refuse to stock goods that have been tested on animals , or foods based on
genetically modified ingredients.
•Conceivably , firms are being ethical or environmentally conscious because they have an
objective that Peter Drucker , a famous writer on management , calls ‘ public responsibility ‘
because they want to
behave in these ways
•Many consumers groups and pressure groups are still dubious as to whether these
objectives are based on genuinely held beliefs or not .
•MAXIMIZNG SHORT TERM SALE REVENUE :
•This could benefit managers and staff when the salaries bonuses are dependent on sales
revenue levels . However , if increased sales are achieved by reducing prices , the actual
prices of the business might fall.
MAXIMIZING SHAREHOLDERS VALUE :

•This could apply to public limited companies and directs management action towards
taking decisions that would increase the company share price and dividends paid to
shareholders.
IMPORTANT ISSUES REALATING TO CORPORATE OBJECTIVES
Some important issues are :
Must be based on corporate aims and should clearly link in with it
Should be achievable and measurable if they are to motivate employees
Need to be communicated to employees and investors in the business – unless staff are
informed of the objectives and their own targets that result from these then the business is
most unlikely to be successful
Will form the framework of more specific departmental or strategic objectives
Should indicate a time scale for their achievement remember SMART .
CONFLICTS BETWEEN CORPORATE OBJECTIVES
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The most common conflicts are:

Growth verses profit achieving higher sales by raising promotional expenditures and by
reducing prices will be likely to reduce short term profits
Short term verses long term lower profits and cash flow may need to be accepted in the
short term if managers decide to invest heavily in new technology or in developing new
products that might lead to higher profits in the long term
Stakeholders conflicts are covered in chapter 5
CHANGES TO CORPORATE OBJECTIVES

A newly formed business may have satisfied the ‘ survival ‘ objectives by operating for
several years , an now the owners wish to persue objectives of growth or increased profits .
The competitive and economic environment may change so the entry into a market of
powerful rival or the start of an economic recession may lead a firm to switch from growth
to survival as to its main aim .
A short term objective or growth in sales or market share might become a longer term
objective of maximizing profits from the higher level of sales.
FACTORS THAT DETERMINE THE CORPORATE OBJECTIVE OF A BUSINESS
Corporate culture:
according to Cadbury plc 2007 annual report , ‘ culture is about people , how they deliver ,
what they are accountable for , how aggressive they are in pursuit of objectives and how
adaptable they are in the face of change ‘ if directors are aggressive in their pursuit of their
aims , are keen to take over or defeat rival businesses and care little about social and
environmental factors ,then the objective of the business will be very difficult to those
businesses owned and controlled by directors with a more people or social oriented culture
.
The size and legal form of the businesses :
Owners of small businesses may be concerned only with a satisfactory level of profit –called
satisficing .
Larger businesses perhaps controlled by directors rather than owners , such as public
limited companies , might be more concerned with rapid business growth in order to
increase the status and power of managers this is the often result of a development known
as ‘divorce between the ownership and control’

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•Which nearly always exists in large companies with professional directors who do not own
they may be more concerned about their bounces , salaries and fringe benefits –which
often depend on their sheer business size – than to maximizing return to shareholders .
PUBLIC -PRIVATE SECTOR BUSINESSES:
Stated-own organizations tend not to have profit as a major objective the aims of these
organizations can vary greatly , but when the service they provide is not ; ‘charged for ‘
such a education and health services , than a financial target would be inappropriate .
THE NUMBER OF YEARS THE BUSWINESS HAS BEEN OPERATING:
The newly formed business are likely to be driven by the desire to survive at all costs – the
failure rate of new firms in the first year of operation is very high . Once well established
business may pursue other objectives such as growth and profit .
DIVISIONAL , DEPARTMENTAL AND INDIVIDUAL OBJECTIVES : Once corporate objectives have

been established they need to be broken down into specific targets for separate divisions ,
departments and ultimately , individuals .
Corporate objectives relate to the whole organizations they cannot be used to each
division of the business to create strategies for action until they have been broken
down into meaningful targets focusing on individual goals .
These divisional objective should be set by senior manager to ensure:
Coordination between all divisions: if they not work together the focus of the
organization will appear confused to outsiders and there will be disagreement
between departments
Consistency with corporate objectives
Then adequate resources are provided to allow for the successful achievement of
the objectives
MANAGEMENT BY OBJECTIVES:
KEY DEFINITION management by objectives a method of coordinating and
motivating all staff in an organization by dividing its overall aim into specific targets
for each department , manager and employee . If this process is undertaken after

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discussion and agreement with personnel at each level f the organization then it can
be very effective of delegating authority and motivating staff.
ETHICAL INFUENCES ON BUSINESS OBJECTIVES AND DECISIONS: The growing acceptance of

corporate and social responsibility has led to business adopting an ‘ ethical code’ to influence
the way in Which decisions are taken
EVALUATING ETHICAL DECISIONS: Adopting and keeping to a strict ethical code in decision
making can be expensive in the short term : Using ethical and fair-trade suppliers can add to
business costs
Not taking the bribes to secure the business contracts can mean to failing to secure
significant sales
Limiting the advertising of toys and other child related products to just to reduce ‘pester
power’ may result in lost sales
Accept that it is wrong to fix prices with competitors might lead to lower prices and profits
Paying fair wages even in very low –wage economies –raises wage costs and may reduce a
firm’s competitiveness against businesses that exploit workers
However, perhaps in the long term there could be substantial benefits from acting ethically :
Avoiding potentially expensive court cases can reduce costs of fines
While bad publicly from being ‘caught’ acting unethically can lead to lost consumer loyalty
and long term reduction in sales , ethical policies can lead to good publicly and increased
sales

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Chapter 5
Stakeholders
Introduction
1. The shareholders are the owners of the company and the firm has a legally binding duty
to put the needs first. In other words, to take actions and to make decisions that will
increase shareholder value.
2. In non-limited company businesses, obviously the same principle well apply to satisfying
the objective of their owners, even though they are not, strictly, shareholders.
3. In recent times, this limited views of the business responsibility has been extended to
include the interests not just of the investors/owners, but also the suppliers, employees
and the customers.
4. The stakeholder theory or the stake holder concept is that there are many other parties
involved and interested in business activities and that the interest of these groups, local
communities, the public government and pressure groups, such as environmental
lobbyists should be considered by business decision makers.

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Who are the stakeholders?
1. The main stakeholders of a business are therefore:
2. Customers
3. Suppliers
4. Employees and the families
5. Local communities
6. Government agencies
Local communities
1. Business that fails to meet responsibilities to the local communities may

experience serious problems with opposition to plan to expend or they may not
attract local customers. it is argued that business should meet the following
responsibilities to the local population:
2. Offer secure employment so the there is less local fear of job losses
3. Spend as much as possible on local supplies to generate more income
4. Reduce the transport impact of business activity as much as possible
5. Keep the adverse environmental effects to a minimum.
Responsibilities To Government
All businesses should meet their legal responsibilities as defined by the government legislation.
In addition, business should pay taxes on time, complete government statistical and other
forms accurately and where possible, seek export markets. Foreign currency earned by exports
allows a country to pay for important imports of food, new technology.
Benefits of accepting the responsibilities
Good relations with government might lead to success with expansion projects receiving
valuable government contracts, requests for subsidies to expand businesses are more likely
to be approved by government, license to set up new operations are more likely to be
awarded to businesses that meet their responsibilities to the government and the wider
society.

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Chapter 6
Motivation
Motivation of workers has a direct impact on productivity and business efficiency.
Managing people has never been easy.
Businesses that manage and motivate staff effectively will gain a loyal and productive
workforce.
.
What is motivation- and why does it matter?
‘The internal and external factors that stimulate people to take actions that lead to
achieving a goal.’
In business motivation means the desire of workers to see a job done quickly and well.

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Motivation results from the individual’s desire to achieve objectives and to satisfy needs.
The best motivated workers will help an organisation achieve its objectives as cost
effectively as possible.
De Motivated workers
Unmotivated staff will be reluctant to perform effectively and quickly and will offer nothing
other than the absolute minimum of what is expected.
Motivation levels have a direct impact on the level of productivity and thus the competitiveness
of the business.
They will be less likely to offer useful suggestions and to contribute in ways other than their
contractual obligations
Lateness Often becomes habitual.
Poor performance Poor quality work; low levels of work or greater

waste of materials.

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Accidents Poorly motivated workers are often more careless,

concentrated less on their work or distract others,
and this increases accidents.
Labor turnover People leave for reasons that are not positive;
even
if they do not get other jobs, they spend time
in trying
to do so.
Grievances There are more of them within the workforce
and there might be more union disputes.
Poor response rate Workers do not respond very well to orders or

leadership and any response is often slow.
Content theories of motivation
These theories focus on the assumption that individuals are motivated by the desire to
fulfils their inner needs. Taylor (1856-1917) and scientific management F.W Taylors made
the first serious attempt to analyse worker motivation to increase worker performance or
productivity. This approach has become known as ‘scientific management’ due to the
detailed recording and analysis of result that it involved. To reduce the level of inefficiency
that existed in US manufacturing industry. Any productivity gain could then, be shared
between business owner and workers. The vast mass of workers was untrained.
How to improve out put per worker or productivitytaylor’s scientific approach

SO-RITS Model (How to pay)
1. Select workers to perform a task.

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2. Observe them performing the task and note the key element of it.
3. Record time taken to do each part of the task.
4. Identify the quickest methods recorded.
5. Train all workers in this quickest method and do not allow them to make any change
to it.
6. Supervise workers to ensure that this ‘best way’ is being carried out and time them to
check that the time is not being exceeded.
7. Pay workers on the basis of results based I the theory of economic man.
ECONOMIC MAN
The view was that man was driven or motivated by money alone an d the only factor that
could stimulate further effort was the chance of earning extra money. And the amount
should be directly linked to output through a system known as ‘piece rate’.
Results of taylor’s work
The emphasis on increasing efficiency and productivity was greeted by industrial leaders as a
route towards greater profits.
However,
Worker’s leaders: did not believe Taylor and did not think the fruits of higher efficiency
would be shared between workers and business owners.

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Impact
The Taylor approach was widely taken up by workers specializing were important features of
productionline techniques.
These principles were the driving force behind all

mass production until the ‘Japanese style’ of working and people management
Taylor approach
Economic man Some managers still believe that

money is the only way to motivate
staff. However, the more general
view is hat workers have a wide
range of needs, not just money.
That can be met in past at least,
from work.
Select the right people for each job Before Taylor there had been few
attempts to identify the principles
of staff election. The importance
he gave to this is still reflected in
the significance given to careful
staff selection in nearly all
businesses.

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Observe and record he performance of staff This was widely adopted and
become known as ‘time and
motion study’. Regarded with
suspicious by workers as a way
of thinking them work harder, it
is still employed as technique but
often with the cooperation and
involvement of staff.
Taylor approach
Establish the best method of doing job Again, this is still accepted as being
important as efficiency depends on the
best ways of working being adopted.
However, Taylor approach of
management
giving instructions to workers with no
discussion or feed back is considered to
be considerable. Worker participation in
devising best work practices is now
encouraged.

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Pieces work payment system This is not now a widely used payment
system. Quality may be sacrificed in the
search for quantity- workers will vary
output according to their financial needs a
accepting
changes at work in case they lose some
pay.
In most of modern industry, especially
service industries, it as become very
difficult to identify the output of
individual
workers.
Mayo (1880-1949) and the human relations theories
Elton Mayo is best known for his ‘Hawthorne effect’ conclusion.
These were based on a series of experiments he and his team conducted year a five-year
period at the Hawthorne factory
His work was initially based on the assumption that working conditions have a significant
effect on workers’ productivity.
Mayo
Experiments were undertaken to establish working conditions and, of a control group were
also recorded and this group experienced no changes in working conditions at all.
The results surprised all observers- as lighting and other conditions were changed, both
improved and worsened, so productivity rose in all groups including the control group.
This forces Mayo to accept that;
•working conditions in themselves were not that important in determining productivity

levels
•Other motivational factors needed to be investigated further before conclusions could be

drawn.

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•Subsequent experiments were carried out with a group of assembly-line workers.
•Changes to rest periods, payment systems, assembly-bench layout and canteen food were
made at 12-week intervals.
•At the end of experiments, the working conditions and hours of work were returned to
how they had been before the start of the trial.
•Output rose far above the original level.
•Clearly other motivational factors were operating factors were operating to increase
productivity completely from the condition of work.
The Hawthorne effect- the conclusions of Mayo works

Mayo drew the following conclusion from his work;
• Changes in working conditions and financial rewards have little or no effect on

productivity.
• When management consult with workers and take an interest in their work, then
motivation is improved.
• Working in teams and developing a team spirit can improved productivity.
• When some control over their own working lives is given to workers, such as
deciding when to take breaks, there is a positive motivational effect.
• Groups can establish their own norms and these can be greatly influenced by the
informal leaders of the group.
Maslow (1908-1970) and the hierarchy human needs
Abraham Maslow’s was trying to identify and classify the main needs that human have.
Our needs determine our actions- we will always try to satisfy them and we will be
motivated to do so.

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If work can be organized so that we can satisfy some or all of our needs at work, then we
will become more productive and satisfied. This hierarchy was interpreted by Maslow’s as
follows;
Individual’s needs start on the lowest level.
Once one level of need has been satisfied, humans will strive to achieve the next level.
Self actualization, or self fulfilment, is not reached by many people, but everyone is capable
of reaching their potential.
•Once a need has been satisfied, it ill no longer motivate individual to action-thus, when
material needs have been satisfied, the offer of more money will not increase productivity.
•Reversion is possible- it is possible for satisfaction at one level to be withdrawn, for

example a loss of job security, and for individuals to move down to next level.
Maslow’s hierarchy of needs
Self actualization reaching one’s full potential

______________________________________________
Esteem needs respect from others; status recognition of achievement

________________________________________________________________
_
Social needs trust; acceptance; friendship; belonging to a group;

social facilities

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______________________________________________________________
_________
Safety needs protection from threats; job security; health and safety
at work
_______________________________________________________________
_________________
Physical needs food; shelter; water; rest

`
Level of need Business conditions which could allow the need
Self actualization-fulfilment of potential Challenging work that stretches the individual-

this will give a sense of achievement
opportunity to develop and apply new skills
will increase potential
Limitations of Maslow's approach

Criticisms of Maslow's hierarchy include;
Not everyone has the same needs as is assumed the hierarchy.
In practices it can be vary difficult to identify the degree to which each need has been met
and which levels a worker is ‘on’.
Money is necessary to satisfy physical needs, yet it might also play a role in satisfying the
other levels of needs, such as status and esteem.
self actualization is never permanently achieved as some observe of the hierarchy have
suggested.

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Frederick Herzberg's’ famous two- factor theory have had the greatest impact of
motivational practices since Taylor's work almost 60 years earlier.
Those factors that led to them having very good feeling about their jobs and
Those factors that led them having very negative feelings about their jobs.
His conclusion were that:
•Jobs satisfaction resulted from five main factors- achievement, recognition for
achievement, advancement, work. He called these factors the ‘motivators’. He
considered the last three to be the most significant.
•Job dissatisfaction also resulted from five main factors- company policy and administration,
supervision, salary, relationships with others and working conditions. He termed these
‘hygiene factors’. These were factors that surround the job it self extrinsic factors.
•Pay and working conditions can be improved and these will help to remove dissatisfaction
about work;
•but they will not, on their own, provide conditions for motivation to exist.
•Herzberg argued that it is possible to encourage someone to do a job by paying them he

call his movement.
•However, movement does not mean that someone wants to do the job.
•The motivator need to be in place for workers to be prepared to work willingly and to
always gives of their best.
•Herzberg suggested that they could be provided by adopting the principle of ‘job
enrichment’.
•There are three main features of job enrichment:
Result of Herzberg’s work
• Complete units of work: typical mass production methods leave worker to

assemble one small part of the finished product.

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This is not rewarding can be boring and repetitive and prevents the worker from
appreciating the importance of what they are doing as part of overall production
system.
• Herzberg argue that complete and identifiable unit of work.
These complete units of work could be whole sub-assemblies of manufactured

goods, such as a complete engine assembly in a car plant. In service industries it
could men that a small team of multi skilled people, such as waiters, chef, and
technicians for IT/ video equipment, provide all of the conference facilities in a hotel
for a business conference rather than many people doing just one small and
relatively unimportant task before moving on to another part of the hotel.
a) feedback on performance this type of communication could give recognition for work
well done and could be provide incentives to achieve even more.
b) A range of tasks to give challenge and to stretch the individual, arrange of task
should be given some of which may be, at least initially, beyond the workers’ current
experience. This, in quite a large measure, ties in with the self-actualization’ level in
Maslow’s hierarchy.
Evaluation of Herzberg's work
Team working is now much more widespread, with whole units of work being delegated to
these groups. Workers tend to be made much more responsible for the quality of their own
work rather than being closely supervised by a quality controlling inspectorate.
Most firms are continually looking for ways to improve effective communication, and group
meetings allowing two-ways communication are often favoured.
Achievement motivation(n-ach)
A person wishes the strong motivation need for achievement will seek to reach realistic
challenging goals and job advancement . There is a constant need for feed back regarding
progress and achievement and need for a sense of accomplishment.
Authority/ power motivation (n-pow):
A person with with this dominant need is ‘authority motivated’. The desire to control theirs
is a powerful motivating force- the need to be influential, effective and to make an impact.
There is a strong leadership instinct and when authority is gained over others, it brings
personal status and prestige.

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Affiliation motivation (n-affil)

The personal with need for the affiliation as the strongest driver or motivator has a need for
interaction relationships and is motivated towards interaction with other people. These
people tend to be good team members- there is a need to be lied and popular and to be
held in high regard.Friendly relationships and is motivated towards interaction with other
people. These people tend to be good team members- there is an need to be liked and
popular to be held in high regard. These three needs are found of varying degrees. All
workers and managers McClelland firmly believe that ‘achievement –motivated’ people are
generally the ones who make things happen an get result. However, they can demand too
much of their staff in achievement of targets and priorities this above the many and varied
needs of their workers.
Process theories:
Theories emphasize how and why people choose certain behaviors in order to meet their
personal goals and the thought process that influence behavior.
Vroom (1932-) and expectancy theory: vroom suggested that individuals choose to behave
in ways that that believe will lead to outcomes they value. His expectancy theory states
that individuals have different set of goals and can be motivated if they believe that:
• There is a positive link between effort and performance.
• Favorable performance will result in a desirable reward.
• The reward will satisfy an important need.
• The desire to satisfy the need is strong enough to make the work effort worthwhile.
His expectancy theory is based on the following here beliefs:
• ‘Valence’- the depth of the want of an employee for an extrinsic reward, such as one, or
an intrinsic reward such as satisfaction.
• ‘expectancy’- the degree to which people believe that putting effort into work will lead
to a given level of performance
• ‘Instrumentality’- the confidence of employees that they will actually get what they
desire, even if it has been promised by the manager.

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Even if just one these condition or belief is missing, then, Vroom argued, workers will no
have the motivation to do the job well. Therefore, according to Vroom, managers should try
to ensure that employees believe the increased work effort will improve performance and
this performance will lead to value rewards.
Motivational theories- how useful are they?
They provide us with us starting point a frameworks analyzing and discussing the main
motivational issues.
The research undertaken has been criticized for its lack of rigor and follow-up work, yet the
basic ideas that have been covered in this chapter are still talked about and evaluated many
years after the initial finding were published.
In examination terms, it is more important to identify the most appropriate theory to the
question set and to explain the relevance of it to managers who have responsible for
motivating staff.
It is the application of the motivational theorists’ ideas and the potential difficulties in
applying them to certain situation that are most likely to earn you high marks in
examination.
Evaluation of may researches for today’s businesses:

There has been a trend towards giving workers more of a role in business decision making –
this is called participation. Team working and group working can be applied in many types
of modern business organizations and these offer the greatest opportunities for workers
and firms to benefits from the Hawthorne effect.
The idea of involving workers, taking an interest in their welfare and finding out their
individuals goals has opened up new fields of research for industrial psychologist and this
area of study is now regarded as an important component of university business courses.
This development of the ‘people’ side of business has taken industry away from the
engineer-focused and purely money-motivated views of Taylor.

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Payment or Financial Reward System
Hourly wage rate
Definition: An hourly wage rate or ‘time rate’ is set for the job perhaps by comparing with
other firms or similar jobs.
This is the most common way of paying manual … and ‘non-management workers’. Hourly
wage rate payment to a worker made for each hour worked. This total is usually paid weekly.
This method offers some security to workers.
Piece rate
Definition: A rate fixed for the production of each unit and the worker’s wages therefore
depend on the quantity of output produced.
The piece rate can be adjusted to reflect the difficulty of the job and the ‘standard time’ needed
to complete it. These issues are determined by work study.

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Salary
Definition: Annual income that is usually paid on a monthly basis
A salary is the most common form of payment for professional, supervisory and management
staff. The salary level is fixed each year and it is not dependent on the number of hours’ worked
(time rate) or the number of units produced (piece rate).The fixing of the salary level for each
job is very important process because it helps to determine the status of that post in the whole
organization. Joint evaluation techniques may be used to assist in deciding the salary bands and
the differences between them. In most organizations, all jobs will be put into one of a number
of salary bands and the precise income earned within each band will depend upon experience
and progress.It is always possible to gain promotion to another job in a higher salary hand.

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Commission
This is most frequently used in personal selling, where the salesperson is paid a commission or
a proportion of the sales gained.
Definition: a payment to a sales person for each sale made.
It can make up 100% of the total income- reducing security as there is no ‘basic’ or flat rate
payment if nothing is sold during a particular period. It has the same advantages and
disadvantages as piece rates used in production industries except that the potential drawback
of low quality of production can be replaced by the risk that sales staff could try too hard to
convince a customer to buy and put so much pressure on them that they have a bad view of the
whole company. Also, teamwork is not encouraged with commission based- pay- each
individual salesperson will be keen to grab each new customer for them to earn more
commission.

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Performance related pay
Definition: a bonus scheme to reward staff for above average work performance.
Performance- related pay is usually in the form of a bonus payable in addition to the basic
salary. It is widely used for those workers whose ‘output is not measurable, in quantitative
terms, such as management, supervisory and clerical posts.
It requires the following procedure:
• Regular target setting, establishing specific objectives for the individual

• Annual appraisals of the worker’s performance against the pre-set targets.
• Paying each worker a bonus according to the degree to which the targets have been
exceeded.
The main aim is to provide further financial incentives and to encourage staff to meet agreed
targets. Bonuses are usually paid on an individual basis but they can also be calculated and
awarded on the basis of teams or even whole departments. There are problems with PRP
schemes. The main issue is one that Herzberg would recognize-does the chance of additional
pay ‘motivate’ or just temporarily ‘move; a worker to perform better? As there is no change in
the nature of the work being undertaken, most of the ‘motivators’ recognized by Herzberg
would not be satisfied by PRP. In addition, the concentration on individual performance can
create divisions within team and groups , and this can work against the findings of its
Hawthorne effect. There is also a widely held view that PRP bonuses are often inadequate, even
to achieve short term productivity gains or improvements in effort. The last problem concerns
the style of management that PRP can lead to. By giving senior managers the power to deal
which subordinates have achieved performances above target, it can lead to claims of
favoritism and the ability of control staff by means of the ‘carrot’ of extra reward.

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Profit sharing
Definition: a bonus for staff based on the profits of the business-usually paid as a proportion of
basic salary.
The essential idea behind profit sharing arrangements is that staff will feel more committed to
the success of the business and will strive to achieve higher performances and cost savings.
Some shareholders groups, however, claim that profits should be the return to the owners of
the business and are a reward to them for taking risks with their own capital. Some profit
sharing schemes do not offer cash but shares in the business to each worker when the firm
declares a profit. This is designed to establish the workers as part owners of the business and
reduce the conflict that might exist between ‘them’ and ‘us’. In practice, many of the shares in
such schemes are quickly sold by the workers, thus reducing hoped for long term impact on
motivation.

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Fringe Benefits
Definition: These are non-cash forms of reward – and there are many alternatives that can be
used.
They include: company cars, free insurance and pension schemes, private health insurance,
discounts on company products, and low interest rate loans. They are used by businesses in
addition to normal payment systems in order to give status to higher level employees and to
recruit and retain the best staff. Some of these fringe benefits are taxed, but other are not and
that gives the employees an added benefit, because to purchase these ‘perks’ from after tax
income would be very expensive.
Non-Financial methods of motivation
• Job rotation
• Job enlargement
• Job enrichment
• Quality circles
• Target setting
• Delegation
• Empowerment
• Participation

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Job Rotation
Definition: Increasing the flexibility of the workforce and the variety of work they do by
switching from one job to another
Rotation may relieve the boredom of doing one task and it can give the worker multi-skills,
which makes the workforce more flexible, but it does not , by itself, increase empowerment or
responsibility for the work being performed. In addition, it does not necessarily give a worker a
complete unit of work to perform, but just a series of separate tasks.
Job enlargement
Definition: Attempting to increase the scope of a job by broadening or deepening the tasks
undertaken
It can include both job rotation and job enrichment, but it also refers to increasing the ‘loading’
of tasks on existing workers, perhaps as a result of shortage of staff or redundancies. It is
unlikely to lead to long term job satisfaction, unless the principles of job enrichment are
adopted.
Job enrichment
This involves the principle of organizing work so that employees are encouraged and allowed
to use their full abilities not just physical effort. Herzberg’s findings formed the basis of the job
enrichment principle. The three key features of it are not always easy to apply in practice, but
employers are increasingly recognizing the benefits to be gained by attempting to implement
them:
• Complete units of work so that the contribution of the worker can be identified and more
challenging work offered
• Direct feedback on performance to allow each worker to have an awareness of their own
progress
• Challenging tasks offered as part of a range of activities, some of which are beyond the
worker's recent experiences- these tasks will require training and the learning of new skills.
Job redesign
Definition: Involves the restructuring of a job-usually with employees’ involvement and

agreement-to make work more interesting, satisfying and challenging.

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Clearly, job redesign is closely linked to job enrichment above. Journalists now have to be IT
exerts to communicate through the wide range of technological media. Bank employees are
encourage and trained to sell financial products to customers-not just to serve art tills.
Hairdressers may be given opportunities to add beauty therapies as part of their total job skills.
Production lines have been reorganized in many factories and team working introduced in
many industries to more easily allow for job redesign and for job enrichment ideas to be
introduced. These job changes can lead to improved recognition by management for the work
undertaken by workers and can increase workers’ chances of gaining promotion as a result of
the wider skills gained.
The limitations of participation are that it may be time consuming to involve workers in every
decision. Autocratic managers would find it hard to adapt to the idea of asking workers for their
opinions-they may set up a participation system but have no intention of actually responding to
workers’ input. This approach could eventually prove to be very demotivating for workers.
Team working
Definition: Production is organized so that groups of workers undertake complete units of work.
This approaches to work places each member of staff into a small team of employees. Some
traditionalists argue that moving away from pure division of labor where on worker performs
just one simple task all the time, will result in lower productivity and time wasting team
meetings. Supporters of job enrichment would respond by claiming that more challenging and
interesting work, as allowed by team working or cell production will lead to:
• Lower labor turnover

• More and better ideas from the workforce on improving the product and the manufacturing
process
• Consistently higher quality, especially when TQM is incorporated.
Target setting
The purpose of target setting is to enable direct feedback to workers on how their performance
compares with agreed objectives while making work more interesting and rewarding.
Delegation and empowerment
They involve the passing down of authority to perform tasks to workers, although
empowerment goes further, by allowing workers some degree of authority over how the task
should be undertaken.

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DA PUBLIC SCHOOL KARACHI

1 AS Business Notes Nadeem Zaidi Ph: 03333556336

When Entrepreneurs have new ideas, they must be able to

• Invest some Capital

• Accept Responsibility of management

• Accept Risk of Failure

Challenges faced by Entrepreneurs

2 AS Business Notes Nadeem Zaidi Ph: 03333556336

These ideas come from:

a. Own skills and hobbies example dress making etc.

Source Capital (Finance)

The capital can be raised in the following ways:

• Awareness of the financial support available.

Building a customer base

Why new businesses often fail

The most common reasons for new enterprises failing are:

The lack of accurate record:

• It is not less important than meeting customer needs

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• It is always advisable to keep paper records, receipts

Lack of working capital:

• Working capital is running finance

Poor management skills:

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Primary Sector Business

Secondary Sector Business

Tertiary Sector Business

CHANGES IN BUSINESS ACTIVITY

• Expanding manufacturing businesses will result in more jobs being created.

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• Much of the growth of manufacturing industry is due to the expansion of multinational

• In developed countries, the situation is reversed .There is a decline in the importance of

Primary sector comprises businesses owned and controlled by individuals or groups of

Public sector comprises organizations accountable to controlled by central or local

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This has two important effects.

• People are prepared to provide finance to enable companies to expand.

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Public Ltd Company

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termism’ can be damaging to the long-term investment plans of a business.

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Other Forms of Business Organization

• All members have one vote at important meetings.

• Profits are shared equally among members.

The advantages of such business units are:

• Working together to solve problems and take decisions

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• The potential drawbacks includes:

• Poor management skills until professionals are employed

• Slow decision making if all members are to be consulted on important issues.

• Different companies and the therefore fit well together.

Public-Sector Enterprises-Public Corporations

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MEASURING BUSINESS SIZE:-

• There is no internationally agreed definition of what a small , medium or large business

• DIFFERENT MEASURES OF SIZE:-