Functions Of A Business

The functions of a business are:

1. To produce high quality goods and services that will satisfy needs and wants.
Entrepreneurs enter business to make profits. They must be very keen in identifying those goods and
services that will create high demand make profits.
2.To create employment
Business will need all categories of workers to carry out the various tasks required to achieve its
goals. If the business is profitable and expands then more workers will be needed for its operations.
3.To make a profit
The reason for the establishment of a business is to make profits. If businesses are not profitable, its
owners will not be encouraged to continue operating. Profits are used to reinvest in the business for
its expansion.
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Role Of A Business Within A Community

Corporate citizen is the term used to describe the responsibilities that businesses have within their
environment. As a good corporate citizen business must strive to have a good relationship with their
community.
Good corporate citizenship includes:
-Support for the community through community projects, sports and youth clubs.
-Being environmentally aware by reducing pollution
-Providing job opportunities for community members e.g. a holiday work programme
Functional Areas Of Business
Departments in a business organization are structured according to certain functions. The
departments of various organizations will differ depending on the type of business. Below are four
main functions that tend to be general to most organizations.
Production
The production department is responsible for transforming raw materials into finished products.
They are also responsible for quality control to ensure that required standards are met.
Finance/Accounts
The accounts department makes and receives all payments on behalf of the business and records all
financial transactions
Marketing
This department creates awareness for the firm products and motivates consumers to buy. They also
carry out market research to identify customer’s needs
Human Resources/Personnel
The human resource department recruits and selects staff for the business organization. They are
also responsible for staff training and welfare.
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Functions Of Management
Planning
All managers must plan, that is, setting out steps for the attainment of future organizational
objectives. It involves formulating the policies and programmes for the firm.

Organizing
Organization reduces cost, time, chaos and conflicts. Managers must obtain all the necessary tools,
machinery and personnel for each task and arrange all tasks so that they are done in the most
efficient manner.

Directing
Managers must guide subordinates by giving them instructions to perform the tasks assigned.

Delegating
Delegating duties involves giving others (e.g. supervisors) the authority to have specific tasks
completed through the management of others. Therefore, supervisors will ensure that workers
complete tasks assigned. Delegation reduces the workload of the manager.

Controlling
Managers must continually measure the activities of subordinates, ensuring that all activities
conform to plan.

Coordinating
Managers must bring together all the various organizational tasks so that the organization may
function harmoniously.

Motivating
Managers must inspire workers to perform their tasks well.

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Responsibilities Of Management
Management must be aware of their responsibilities to the various groups that they interact with for
the successful running of the business.

1. To the owners of the business (this also includes shareholders)

Managers are expected to ensure efficiency in all areas of the business.

2. To employees – Managers must pay adequate wages and provide good working conditions.

3. To customers – Managers must ensure that products are of good quality and are reasonably
priced.

4. To the society – Managers must find ways to reduce harmful air pollution and the discharge of
harmful waste created by the production process into rivers and seas.

5. To the government – Management should adhere to various government legislation and

regulation.
Characteristics Of A Good Leader
A leader is someone who has been given authority over a group of individuals. His job is to motivate
the group to achieve the goals set out for it. Leadership is therefore about influencing or inspiring an
organized group towards the accomplishment of goals. Below are the characteristics of a good leader.

Integrity
It is important for a leader to posses this quality as it makes them trustworthy. They are perceived as
honest and therefore command the respect of their subordinates.

Good communication skills

Leaders should be able to communicate effectively with persons at all levels of the organization.
Manager must pass down directives as well as listen to workers opinions complaints and ideas. This
will foster good working relations among leader and followers.

Intelligent
This is a very important characteristic for leaders. It refers to being rational and having good
judgment when making decisions. Leaders are decision makers and therefore need to be
intelligent. This characteristic also refers to shrewdness and therefore describes someone who is
smart, perceptive and wise.

Devoted and Committed

A leader must be a role model for others. He/she should therefore believe in the goals of the group
and motivate others to achieve it. His/her continuous hard work will portray dedication and loyalty
to duty.
Leadership Styles
Autocratic
This type of leader makes all decisions and asks members only to be obedient in following
orders. He will give detailed instructions and closely supervise subordinates.
Advantage
Time is not wasted consulting with others to reach a decision.
Disadvantage
Workers must comply with directives given by the leader and therefore the organization will not
benefit from workers initiative and innovative ideas
Democratic
A democratic leader allows the participation of subordinates in decision making. The leader asks for
progress reports at intervals instead of continuous close supervision.
Advantage
Discussion between management and workers leads an improved relationship.
Disadvantage
The variety of opinions to consider may slow down the decision making process.
Laissez-Faire
This type of leader will give minimum directives and allow maximum freedom for workers to make
decisions about completing their tasks.
Advantage
The firm will benefit from the initiative and innovation of workers.
Disadvantage
It may lead to chaos in the organization. This type of style can only be used with persons that are very
self- motivated and disciplined
 Sources Of Conflict Within An Organization
Unfair treatment of workers
Unfair dismissal
Discrimination

Health related issues

The need for protective clothing
Poor ventilation
Harmful fumes from chemicals

Wages and fringe benefits

Non-payment of allowances
Underpayment
ethods Used To Gain An Upper Hand During Periods Of Conflict
Workers organize themselves to collectively deal with conflicts. This is done through the trade union.
A Trade Union is an organization of persons employed in an industry who have joined together in
order to improve their wages and working conditions.
Methods used by Trade Unions
1. Strikes
2. Sick-out
3. Work-to-rule
4. Go slow
5. Picketing
Methods used by employers during conflicts
Union busting
Union busting is the prevention by management of the formation of a trade union within its
organization. The employer may explicitly state this to workers or covertly discourage its formation.
Lock out
A lockout refers to the refusal by an employer to allow workers into the business place during an
industrial dispute. This is a means of coercing workers to comply with management.
Scab labour
This is a derogatory term used to refer to workers hired to replace workers on strike.
 Strategies Used To Resolve Conflicts
Collective Bargaining
Collective bargaining is the process whereby the union representative on
behalf of the employees and management, negotiate the terms of their
agreement which are incorporated in the employees’ contract of
employment. It is a means to reach an agreement between trade unions
and employers.
The Role/Function of the Trade Union
1. To ensure better wages and working conditions for workers
2. To protect workers against arbitrary disciplinary actions.
3. To deal with grievances in accordance with the grievance procedures
The Grievance Procedure
A grievance is a complaint of a worker. A worker will have a complaint
when:
a. he is treated unfairly. (e.g. cases of discrimination)
b. his health or safety is threatened (e.g. chemicals and dust at work etc)
c. there is a violation of the collective agreement or work rules. (e.g. if
employers have not abided by the agreement between management and the
trade union.)
The grievance procedure is a set of steps which employees can use to solve
any grievance that may arise.
STEP 1 - The employee discusses the complaint with his or her
supervisor. If the complaint is not satisfactorily dealt with by the
supervisor the employee may take the matter further.
STEP 2 - The employee will discuss the matter with the head of
department.
STEP 3 - The employee, along with the union delegate, will discuss the
matter with top management.
STEP 4 - If the grievance still exists, the union official will seek
conciliation or mediation from the Ministry of Labour or any independent
body, i.e. the friendly intervention of these bodies into the dispute for the
purpose of adjusting the differences.
STEP 5 - The matter is sent to arbitration, i.e. before the court where the
judge will make the final decision. Therefore both parties; employer and
employee must accept the judges decision.

Reasons Persons Establish Their Own Businesses

1.Financial Independence
Some persons feel restricted financially with the income received from their
job. Starting a business would give them the opportunity to be a successful
business person and achieve financial independence.
2. Being your own boss
You are able to make decisions about the direction and operation of the
business.
3. To use your skills and knowledge for yourself
The skills, knowledge and experience that you have acquired can be put to
work for you.
4. Self-actualization/fulfilment
Owning and operating a successful business will give a feeling of
accomplishment.
6. To create employment for relatives, friends and community members
Businesses can assist in providing jobs for persons in communities with
high levels of unemployment.
1. Conceptualization
All business ventures begin with the conceptualization of an idea. At this initial stage the product or
service idea is envisioned. Most Entrepreneurs identify a need in the market i.e. a service that is not
being provided or a product that does not exist. If the product or service already exists then ideas to
make improvements may be conceptualized.
2. Research
The entrepreneur is a shrewd investor and takes calculated risks. Before investing money in a
business venture a market research must therefore be done to ascertain the extent of the need for the
product or service. This helps to minimize losses. A market research involves gathering information
about a potential market to help an investor make decisions about entering that market.
3. Identification of resources
What resources are needed to start the business?
If the market research is favourable the entrepreneur must now identify the necessary resources to
operate business. The resources required are land, labour and capital. Land refers to location or
place used to set up a business. This may be bought, rented or family home. Labour employed must
be qualified and skilled to efficiently carry out their duties. Capital includes money, raw material and
assets such as machinery and equipment.
4. Creation of a business plan
Preparing a business plan is very important before the start of a business. This will help the business
to ascertain whether or not the business will be profitable. A business plan outlines the goals of a
business and the strategies that will be employed to achieve them. Usually financial institutions
require that a business plan be presented when a loan is requested for business investment.
5. Acquisition of funds
There are several ways of acquiring funds to start a business. There are a myriad of financial
institutions that are willing to assist small businesses once their business plans are deemed
workable. The investor must weigh the advantages and disadvantages of acquiring funds from the
various financial institutions. The cost of borrowing i.e. the interest rate charged and the length of
the repayment period are factors to consider.
Funds may be borrowed from friends and relatives that may attract a lower or no repayment cost and
a more flexible repayment schedule. Funds can also be acquired from personal savings. Encouraging
partners or selling shares are ways of avoiding high costs of capital.
6. Operation of a business
A business must be efficiently operated to ensure high quality goods and service. This is important to
keep existing customers and for business growth. Many companies employ an operation manager to
design and oversee its operations. This person develops and manages the various processes used to
create goods and services efficiently to ensure customer satisfaction.
 Process Between Planning And The Operation Of A Business
Managers must continue to plan in order to ensure that its operations meet all long – term, medium-
term and short- term goals.
Long- term plans are made for 3 to 5 year periods. Long-term plans determine the direction of the
company. These plans set out the firm’s overall strategy to move from its present position to where it
intends to be. Long-term plans include expansion plans and plans to create new products and
services. Long-term plans are made by the directors or persons in senior management positions of a
company.
Medium-term plans range from 1 to 2 years. They are made by department managers or persons
in middle management positions. Medium term plans include increasing the efficiency of a
department in order to increase the quality and quantity of output. This would involve implementing
training programmes for staff and identifying equipment that would increase efficiency.
Short-term plans are made daily, weekly and monthly by supervisors or persons in lower level
management positions. These plans are centred on meeting daily, weekly and monthly production
targets.
Capital is one of the resources required to set up a business establishment.
Capital mainly refers to those assets that are used to start and continuously operate a business.
Fixed capital includes machinery, equipment and vehicles owned by the company. These assets are
so called because they cannot easily be turned into cash.
Circulating capital includes raw materials, finished and semi-finished, goods, bank and cash
balances. These assets can easily be converted into cash.
Sources of Capital
- Personal savings of the owner or owners
- Assistance from friends and family
- Loan from a financial institution
- Selling shares
The significance of collateral in accessing capital to establish a business
Collateral is anything of value that is used to secure a loan. It is required by financial institutions for
the approval of loans. If the loan is not repaid then the financial institution has the authority to seize
the borrower’s collateral. Forms of collateral include: bank balances, motor vehicle, dwelling house,
land, machinery and equipment etc.
 Features Of A Business Plan
A business plan is a document outlining the goals of a business and the strategies to achieve these
goals. It is mainly prepared by new businesses or by ones making major changes.
Executive Summary
The Executive Summary is a synopsis of the full business plan. It presents the salient points of the
plan. It contains information on the purpose of the business, its methods of operation and future
expectations.
History of the business
This section gives full details on previous operations of a business. For a new business it will explain
where the idea came from and the reasons for starting the business.
Mission Statement
The Mission Statement gives the overall goal of a business as well as its values. It serves as a guide to
the operation o the business. For example: providing the highest quality goods and services.
Business goals and objectives
The firms’ short-term, medium-term and long-term goals and the time in which these are to be
achieved is outlined in this section.
Organization
The business must state the ownership structure and give details of the management team.
SWOT Analysis
Looks at the strength and weaknesses of the business
E.g. Strengths – strategic location, years of experience
Weakness – Loans at affordable interest rates,
Industry Analysis
How has the industry changed in the past few years and who are the other firms in the industry.
Product /Service Description
Describe clearly the product or service that you will be offering.
Market Analysis
Describe your target market and your competitors.
Marketing Strategy
Explain the various promotional, pricing and distribution strategies.
Operations
Explain how the business will function on a day-to-day basis. For example: Procurement of raw
materials, the use of technology and operating methods.
Sales Forecast
What amount of sales the business expects to make on a monthly basis.
Start –up Cost
The total amount needed to start the new business, giving a detailed description of what the money
will be used for.
Operating costs
E.g. fixed Costs (rent, insurance and salary) and variable costs (utilities and wages)
Projected Cash Flow
An estimate of how much you expect to earn periodically once you start operating.
Acquisition of Funds
Information on how funds will be obtained e.g. personal savings, borrowing from friends and family,
borrowing from financial institutions or by selling shares
 Concept Of A Contract
A contract is an agreement that is enforceable by law. A contract therefore has legal implications for
the parties who enter into a contract. A mere agreement is not legally binding and therefore neither
of the parties is liable if anyone breaks the agreement.
What makes a contract different from an agreement?
A contract requires not only an agreement between parties but also something of value must be
passed from one party to the next to make the contract binding.
Characteristics Of A Simple Contract
There must be offer and acceptance. The offerer is the party that makes
the offer and the offeree is the person that the offer is being made to.
There must a clear offer and clear acceptance for a contract to be
binding.
Consideration is the price paid by one party for the promise of the other.
Thus if one party promises to provide goods or services, something of
value must be given in exchange. This may be in the form of money,
goods, services or it may be an act of forbearance.
The capacity to contract – Parties to the contract must be over 18 years,
of sound mind, not under the influence of drugs or incarcerated.
There must be no force, misrepresentation or fraud. Persons should not
be forced to sign a contract e.g. blackmail. They should not be lied to
e.g. giving the wrong year of a car. Fraud may involve forging
someone’s signature.
There must be an obvious intention to create legal relations.This is
based on the actions of the parties e.g. offer, acceptance and
consideration.
A contract must be legal- thus, agreements made between parties
concerning illegal drugs and any other illegal activity is not a contract.
 Differences Between A Simple & A Speciality Contract
A simple contract can be made orally, in writing or by the implications deemed from the actions of
the parties. A specialty contract must be signed by the parties sealed, for example with a company
seal and finally it must be delivered.
Examples of specialty contracts include:
1. Mortgages and leases for over three years
2. Sale of land
3. Contracts of insurance
4. Hire purchase agreements
5. Transfer of company shares
6. Assignments of copyright
 Difference Between An Offer & An Invitation To Treat
An invitation to treat is not an offer but an invitation to bid or bargain for an item. For example, at
an auction persons may bid on various items presented. An invitation to treat also occurs also when
goods are advertised for sale in the media or in shop windows. Goods in a shop window or goods
advertised are not an offer by the owners of the goods but are technically an invitation for interested
persons to make an offer

Conditions Under Which Offer And Acceptance Are Communicated

An offer must be very clearly made. An offer can be made to one person, a group or to the whole
world. For example, offering a reward for a lost wallet is an offer to anyone finding the wallet. In
cases where there is a counter-offer the original offer is no longer valid. A counter offer is an implied
rejection of the original offer. Foe example: John offers to sell Paula a laptop for $10,000. Paula
subsequently offers him $8000.00 as she thought $10,000 was too expensive. Paula has rejected
John’s original offer and has made a counter-offer of $8,000.
Acceptance must also be clear. In the case of a counter offer a clear acceptance to the new offer must
be identified.
Contracts may be made orally, in writing or they may be implied.
Oral Contracts
Are based on what the parties said. For example, asking someone to wash your car for payment
Written Contracts
Both offerer and offeree must sign the contract document
Implied Contracts
Implied Contracts are made by the observed actions of the parties involved. For example, someone
who sits at a table in a restaurant and places an order has implied that he will pay for the food that
will be served.

Ways In Which Contracts May Be Terminated

Contracts may be brought to an end:
(a) By performance of the parties i.e. each party completing his obligations as stipulated by the
contract.
(b) By frustration i.e. an event through no fault of the parties that make one party unable to
perform the contract. For example: if one party suffers a prolonged illness which makes him unable
to perform the contract.
(c) By lapse of time i.e. if the time limit set for the contract to be executed by both parties has been
passed. For example, sellers of real estate usually require that the buyers pay the full balance on the
property within a certain time period after the initial down payment has been made.
(d) By the mutual agreement of all parties.
(e)If one of the parties become bankrupt after the contract has been signed.
(f) By changes in law i.e. where a legal contract is rendered illegal through changes in law.
(g) By notice e.g. some firms require that employees give at least one month notice when resigning
their positions.
(h) If one party dies.
(i) By breach of contract-When one party defaults on his part of the agreement i.e. he does not
perform his part of the contract.