Prologue to Business Management ………Part One “Business”

In this series of articles titled “Following & Leading in Business Management South Africa.”  This is the fourth blog in the series, it has in common with the first three, that of preparing the stage for the main event the Practice of Management, in summary so far.       

The first blog:

• “Getting our Thinking Right” the message was twofold, firstly, to think like a scientist and not like a prosecutor, a preacher or a politician and secondly more emotional, don’t build barriers by creating confrontation and conflict. Don’t blame people, when one is serious about change and where we must work together, listen and stay away from emotional conflict. This advice could not be better timed now that we have the GNU (Government of National Unity).

• The second blog discussed the environment in which businesses operate and how important our new government would be.

•  The third blog described the business entity, whether the business was a one person show or a huge conglomerate, it had to be seen as separate entity …….an artificial person with all the legal rights, ownerships, responsibilities, characteristics of a person including a name.

• This, fourth blog entitled Prologue to Business Management is the action and coordination that is needed to make the business come alive and to take its place in the community. This blog is and introduction and overview to business management.      

Business and Management

These two components in business management, the business can be looked on as the hardware and management the software.

Before we get into more detail, Google Gemini gave the following definitions. I did ask for the definitions to punchy and empathetic.

 Business: Business is the journey of building something you care about, from a spark of creativity to serving customers and making a difference. It's not always smooth sailing, but the rewards of creating something of your own can be amazing.

Marketing: Marketing is all about understanding what people need and crafting a compelling story to connect with them, heart-to-heart. It's about removing the mystery and frustration of getting your message heard.

Financial Accounting:  Accounting is your financial friend, helping you track your progress, understand your finances, and make informed decisions for a secure future. It's not just about crunching numbers; it's about empowering you to take control.

These answers are attractive for beginners going into business management and for veterans in business they might have forgotten that business can be fun as well as fulfilling. While on the Journey of creating this blog it made sense to have part one and part two, part one the business and part two management.    

The Business.

 Below I start the discussion on the business by posting Michael Porters Value Chain.

The Value Chain of Business.

Michael Porters Value Chain a simplified diagram of the major headings in a typical mature business. Companies are collections of discrete activities in which competitive advantage resides.

These words are taken from Porter’s description of his value chain. We are introducing our reader to the real thing, competitive business. As in sport competition provides the drive to greater achievement.    

We devote more time to this value chain in future blogs. In this short account below, I give something of the thinking and philosophy behind the value chain concept.

In the Primary activities above

·         First, it is a good framework for a business to adopt. It provides the major headings and can be used to develop a business plan. The headings in the primary activities can be changed to suit the organisation.

·         The margin: in a business this is profit, income over expenditure. We can also describe this as the money customers are willing to pay for the product or service.

·         Operations in any enterprise is the main activity; it could be manufacturing. The operations needs suppliers, linked to inbound logistics, then distribution of the finished product, outbound logistics.

·         Before operations or logistics, you need customers; this comes under marketing and sales. The margin is the necessary profit, income in excess of expenditure, this to sustain the enterprise and provide shareholders with a return.

·         The links in a chain provide the real lessons. All suppliers of services or goods are links in the value chain of the user – this may be a chain of retail stores, with all suppliers contributing to the value of the retailer. The transport company delivering the goods to the stores is an example. All add value to the retailer. 

·         Staff contribute to the value chain of the business – all the staff, from bottom to top. Awareness and appreciation of this is the beginning of a harmonious, dynamic and productive work environment.

·         The adding of value must ultimately give the user e.g. the retailer competitive advantage over its rivals.

Support Activities in the Value Chain

Firm’s Infrastructure

·         The CEO (Chief Executive Officer) heads the firm’s infrastructure, he may be the firm’s master strategist, or it may be delegated to someone else.

·         This infrastructure supports the whole value chain and provides leadership/ management of the business (general management, planning, finance, accounting, legal, governance affairs, quality management and strategic planning). Let us emphasize and Financial Accounting.

·         The board of directors and company secretary are also part of the infrastructure.

Human Resources Management

·         Human Resources Management is a critical success factor for South African firms because the multicultural nature of staff needs, good cross-cultural management is needed.

·         There is the need for skills development and a need to use the world’s best in employment practices, continuous learning, including staff appraisals.

·         The concept of the Value Chain should also be part of staff training including information on the Green Economy and the Circle economy.

Technology Development

·         Information Communication Technology (ICT) has been at the forefront of technological development in most businesses.

·          New technology is being discovered every day and decisions must be made on when and how to implement new technology. A policy on AI (Artificial Intelligence). Timing is important.

·          Does a firm wait before changing and risk the possibility of not being up with others, or does it have a first to be second strategy.

·         Real time information is crucial in controlling inefficiency and under-productivity.

·         Technology Developments would include the firm’s Research and Development R&D. This can also be crucial for many businesses.

·         All firms must be innovative to succeed.

Procurement

·         Procurement is not a narrow focus, as is the case with purchasing. Procurement is associated with “value chain activities” and is central to achieving strategies adopted by the firm.

·          The decision to outsource a non-core activity comes under procurement and is a strategic decision.  Subsequently there would be a need for close monitoring of an outsourced product or service. It becomes a supply management function.

·         As a result of increased outsourcing, companies have become more dependent upon their suppliers, thus making supply chain management a key success factor.” Insourcing is also an option.

Summary and conclusion

In preparing this blog I have become mindful that I am also on a journey and not a destination……. not yet anyway. I thought I could introduce both Business and Management in one Blog. I cannot, even though this is an introduction/overview……I did call it a prologue. I will handle management in the next blog. In conclusion, Marketing and Financial Accounting are key areas in business management ……...More within two weeks.