1. Unit (2) Who is involved in business activity ? People in business : - Business activity exists because of people. - They employ others to manage the business and work for them. - Business activity results in goods and services which bought by people. - The people who buy these goods and services may work for businesses to earn income. - The people involved in business activity fall into four groups: (1) Owners and shareholders. (2) managers. (3) employees. (4) consumers.

2. -There is an overlap between the four groups. -The owner of a large company may be a shareholder and may also be a manager. -An employee might also be a shareholder and may be a consumer. -Most managers will also be employees of the company. -The first three groups mentioned above are all part of a business, but consumers are not part of a company.

3. Owners : -A business is the property of it’s owner or owners. -The owner of a business can use it to earn income by hiring it out (owner of a van), or wait for it’s value increase and then sell it (owner of jewellery). -The owner of a small business may be the only person in the business then makes the all decision. -In very large companies there are thousands of joint owners this entitles them to share in the profit, and elect the directors of the company.

4. The entrepreneur : -The entrepreneur is a factor of production. -Enterpreneur refers to the person who collects and organizes land labour and capital and uses them to produce goods and services. -Without entrepreneur business activity would not take place.

5. The entrepreneur has three functions in a business activity. ( 1 ) Innovation : - Business activity usually begins with the entrepreneur having a business idea. -He or she forms a new business that did not exist before. -Even when ideas are copied, it could be an innovation process.

6. ( 2 ) Organizing : - The entrepreneur, collects land, labour and capital, organises the, and uses them to produce goods and services. -Making many decisions a bout the location of the premises, the method of production, product design and prices. ( 3 ) Risk taking : - setting up a business is risky. -Money has to be paid out in a advance to buy materials equipment and pay wages. -The entrepreneur may use some personal money to meet these costs. -There is no guarantee that the final product will be sold. -It is not possible to insure against unquantifiable risks. -If goods are unsold the entrepreneur will bear all the cost of failure.

7. Type of shareholder : -Certain types of business do not have shareholders such as, sole traders, and partnerships. -Limited companies raise money by issuing shares. -Shareholders are the Joint owners of the business. -The shareholder or group of shareholders with the majority of shares, ie 51, percent, will be the majority shareholder in the business.

8. Shareholders may be: Directors, are elected by the shareholders each year and responsible for running the business. -They do not have to hold shares in the company they run, but generally they do. Managers, are usually appointed by directors and involved in running the business. -Some managers own shares in their companies, but they do not have to. -Sometimes they are allowed to buy shares or are given shares as a bonus in order to motivate then to perform well in their jobs.

9. Employees, most employees in large business are not shareholders, however in the last decade the government has encouraged employees to own share in their companies. -Companies has also offered shares for employees as a bonus. Individuals it is possible for individuals to own shares in companies. -Any member of the public is allowed to buy shares. -They can buy them from stockbroker. -They buy shares because they want to earn dividends. -Individuals rarely have any control since own only a small fraction of the total number of shares.

10. Institutional investors : -These are financial institutions, such as insurances companies, pension funds and units trusts. -They buy shares to earn income. -They buy very large numbers of shares. -They rarely participate in the running of the businesses. -In some cases they may exert control, since they own large blocks of shares.

11. Other companies : -Some companies hold or buy shares to earn income. -Many companies aim at controlling other companies. -Some companies need to build up stakes in other companies with a view to taking them in the future.  Managers might make a successful decision and then they might be promoted. -However if the decision is unsuccessful, the manager may be sacked. -The manager is accountable for carrying out many tasks, Innovating and risk taking.

12. Employees : -Employees are hired by firms to carry out business activities. -The major role of employees is to follow the instructions of employers. -Business provide a training programmer for employees to familiarize them with the firms policies and practices. -Employees sign contracts to carry out all instruction related to their job. -The employees received a payment as a return.

13. The role of employees has began to change in the recent years : -Copping with the new technologies. -Participating in problem solving and decision making. -The employees become more flexible and are expected to be able to change from one job to another.

14. Managers : -A manager can be defined as an individual who is accountable for more work than the could undertake. -Firms of all sizes employ managers. -In a small firm the owner is responsible for all managerial tasks. -In a large business it is not possible for one person to carry out the whole burden. -The responsibility for some decisions is eften delegated to others.

15. There are a number of common functions of managers : Organizing and decision making. -In a small business the owners may appoint one manager to control each department. -The manager will be responsible for all activities and employees in the department. Planning and control. -Manager is responsible for planning of company activities. -They also have controlling role in the business. -Controlling finance, equipment, time and people. -In the large business managers become more specialist and concentrate on a narrower aspect of management.

16. Accountability : -Managers are accountable to the owners. -If the production department does not achieve satisfactory level of out put, the manager may have to shoulder the blame. Entrepreneurial role : -Managers may risk their own money as well as their job.

17. Consumers : -Consumers are not members of business, but they are vital to any business activity. -Consumers are the customer of goods and services. -Consumers expending generates income for the firm. -In some cases consumers can be other businesses -Firms that produces goods which are not wanted by consumers will fail.

18. Consumers and business have many different relationships: -Contact between businesses and consumers takes place when goods or services are bought. -Businesses communicate with consumers to find out what they want “market research”. -Collecting information from consumers helps the business to set up the nature of product, the price charged, and where the product might be bought “advertising”. -Businesses must take the consumer expectations into account when designing, manufacturing, and marketing products. - Consumer right and protection.

19. Interdependence : There is a significant degree of interdependence within business : -In large business the owners are dependent upon the skill and ability of the management team. -If manager perform well, then the business will make profit which will benefit the owner. -Managers and other employees are dependent upon each other. -Employees rely on the guidance of management in order to do their jobs. -Management depend on workers to produce out put. -Management will be accountable to the owners if workers are inefficient.

20. -Businesses are dependent upon consumers. -Business activity would not take place if consumers did not buy goods and services. -Thus business owners are dependent upon consumers for their income, and consumers in their role as employees and managers are dependent upon business owners for their income.

21. Conflict : Conflict can exist between many groups that working the business. What might lead to conflict between the employees and the owner of the business ? * Levels of pay : -In most businesses rates of pay are negotiated every year. -Bargaining takes place between employees and owners. -Conflict occurs when workers want more than the owners are prepared to pay.

22. * Working conditions : -Conflict may occur when the working environment is too cold for employees to do their jobs. * Changing practices : -Disputes have occurred when employees have been required to perform new tasks or change the way they perform the existing tasks. * Redundancy : -Redundancy happened when the jobs are replaced by machines. -The world has experienced this phenomena at the early 1980 and early 1990.

23. * Owners and managers : -In some businesses the management team may become powerful. -Management team may pursue their own interest rather than those of the owners. -They might pay themselves high salaries and organizing their time to suit their own needs. -In some cases management team may not achieve a reasonable level of profit. -Such conflicts may result in some owners selling their shares which is often referred to a divorce ownership an control.

24. * Consumers and Business : What might lead to conflict between consumers and business? * Price : -Consumers want to buy goods as cheaply as possible. -Owners may want to maximize their profit by setting a high price. -If the competition exists in the market, consumers will benefit. -If there is a lack of competition, consumers will not have a choice except to go without.

25. * Quality : -Quality plays a vital role in the business world. -If consumers return goods, businesses will lose income. -Disagreement often occur as to whether a firm should accept returned goods. * Delivery time : -Customers are often keep to get the goods they need on time, as quickly as possible. -Disputes would occur if the business can not deliver the goods needed on the promised time.

26. * After sales service : -Consumers may be upset by poor after sales service. -If a person buys a T.V, and find that it does not work, a dispute might emerge if the business refuse to investigate the problem.

27. * Management buy – outs : -Management buy – outs has been where the management team becomes the owner of the business. -The management team buys the shares from the existing owners. -It would raise the finance itself from banks and other institutions. -Why have buy-outs by the management of a company taken place in the business world? -It is an alternative to full closure of a family business or it’s subsidiary. -Sometimes large companies sell off parts of their business which do not fit into their future plans. -To resurrect a company that had already gone into receivership. -As part of the privatization programme of the government.

28. * The advantages of management buy-outs : -From the sellers “point of view” it lets them to raise finance for a possibly ailing firm. -From the managers and employees “point of view” it enables them to keep their occupation. -Following a buy-out enables management team to benefit from any profit made by the company. -Reducing the conflict between owners and managers because after a buy – out the owners become the managers. * Management buy-ins: -Management buy-ins occurs when outside management team takes over a business. -Many small business owners prefer their companies to remain independent.