CERTIFICATE LEVEL
Subject Fundamentals of Business Economics (BA1)
Tharindu Ameresekere MBCS(UK),ACMA(UK),CGMA, Masters in Project Mgmt.(USQ)(Aus),
Lecturer PQHRM(IPM-SL),BSc(Hons) Computing(UK),BCS-PGD(UK), [Link] ABNLP
Module Tute 01 - Micro Economics Section 1 : Organizations Basics
Code BA1/TA/01
THINK ABOUT IT……
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Tute Usage Guidance
- Theory in Summary : Explaining the theory in brief
- Econ in Practise : Case Studies to apply theory
- ESQ : Exam Success Questions
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Micro Economics
Basics of Demand & Market System
Organisational Supply Management
Management Management and Regulations
Micro Economics Section 1: Organizations Basics
1) Organization Intro
➢ Economy & Economic resources
Economy is a System by which goods and services are to be produced, distributed and
consumed between business and people.
Any economy will need resources for its economic activity. The 4 main Economic Resources are
• Land
• Labor
• Capital
• Entrepreneurship
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Scarcity
This refers to the concept of the available resources not being adequate or enough to fulfill the
economic needs and demand of the individuals & Organizations.
Example: Toyota cannot make all the types of vehicles in the World because resources are
limited
The term Opportunity cost means that when a Company decides to focus on one product, they
are giving up another product (X) out of the products given up; value of the next bet alternative
is called Opportunity Cost.
➢ Types of Economies
There are three main economic systems to approach the Fundamental economic
problem.
The Market Economy - where the supply, demand interactions (Market Forces) determine the
economic activity,
Command Economy - Production decisions taken by the government.
Mixed Economy - A mix of the above types.
(Most of the economic decisions are made by the government)
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➢ Organizations
They are social arrangements for the controlled performance of collective goals. An
organization has a goal, for which people are organized in a certain structure, where their
functions and performance is monitored & controlled.
(a) ‘Collective goals’ – organisations are defined primarily by their goals. A school has the main
goal of educating pupils and will be organised differently from a company where the main
objective is to make profits.
(b) ‘Social arrangements’ – someone working on his own does not constitute an organisation.
Organisations have structure to enable people to work together towards the common goals.
Larger organisations tend to have more formal structures in place but even small organisations
will divide up responsibilities between the people concerned.
(c) ‘Controlled performance’ – organisations have systems and procedures to ensure that goals
are achieved. These could vary from ad-hoc informal reviews to complex weekly targets and
performance reviews.
➢ Classifying organizations
Based on their objective, (For profit or Not for Profit)
Profit-seeking organisations
Some organisations, such as companies and partnerships, see their main objective as maximizing
the wealth of their owners. Such organisations are often referred to as ‘profit-seeking’.
The objective of wealth maximization is usually expanded into three primary objectives:
• To continue in existence (survival)
• To maintain growth and development
• To make a profit.
Not-for-profit organisations
Other organisations do not see profitability as their main objective. Such not-for-profit
organisations (‘NFPs’ or ‘NPOs’) are unlikely to have financial objectives as their primary ones.
Instead they are seeking to satisfy particular needs of their members or the sectors of society
that they have been set up to benefit.
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NFPs must stay within their budgets to survive. But their stakeholders are primarily interested
in how the organisation contributes to its chosen field. This can frequently lead to tensions
between financial constraints and the NFP's Objectives.
Many NFPs view financial matters as constraints under which they have to operate, rather than
objectives. For example:
• Hospitals seek to offer the best possible care to as many patients as Possible, subject to
budgetary restrictions imposed upon them.
• Councils organise services such as refuse collection, while trying to achieve value for money
with residents’ council tax.
• Charities may try to alleviate suffering subject to funds raised.
(Save the Children is a Not for Profit that is focusing on improving the lfe conditions of Children
around the world)
** One specific category of NFPs is a mutual organisation. Mutual organisations are voluntary not-
for-profit associations formed for the purpose of raising funds by subscriptions of members, out of
which common services can be provided to those members.
Mutual organisations include:
• some building societies
• trade unions and
• some social clubs.
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Based on ownership. (As Private sector, Public sector, & NGOs)
Public sector organisations
The public sector is that part of the economy that is concerned with providing basic
government services and is thus controlled by government organisations.
• military
• public roads
• public transit
• primary education and
• healthcare for the poor.
What is a Cooperative?
A co-operative is an autonomous association of persons united voluntarily to meet their
common economic, social and cultural needs and aspirations through a jointly owned and
democratically controlled enterprise.
(The International Co-operative Alliance Statement on the Co-operative Identity, Manchester 1995)
Co-operatives are thus businesses with the following characteristics:
a. They are owned and democratically controlled by their members – the people who buy
their goods or use their services. They are not owned by investors.
b. Co-operatives are organised solely to meet the needs of the member-owners, not to
accumulate capital for investors.
Private Sector Organisations
Within these will be profit-seeking and not-for-profit organisations.
This sector thus includes:
• businesses
• charities and
• clubs.
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Econ in Practice Scenario 1
Marina Bay Sands is a hotel in Singapore known for top class luxury. All the people there are focused on
making the hotel the best in the region and there are people from different functions such as chefs,
house keepers, reception workers etc. Decisions are taken by the management and also passed down to
lower levels across the management teams, supervisors etc.
Requirement – What makes Marina Bay Sands an Organization?
Social Arrangement
The different people at MBS will be working under different titles and
reporting to each other.
Controlled Performance
There are health guidelines, government guidelines and company guidelines
to be followed.
Collective Goals Everyone working there will want the hotel to be the best in the world.
Why was an organization needed? Why could the owners not do it by them alone?
Having the hotel as an organisation allows them to :
a. Share the different skills
b. Pool in resources – This can be time, money, labor effort
c. Specialize in what they are good at doing and not worry about the other functions
ESQ 1
A mobile phone company having all employees focused on making it the best is an example of
an organization’s controlled performance. TRUE / FALSE (To be discussed in the class)
ESQ 2 (Fill the blank)
Save our Kids is a not for profit. This means that it [will/will not] have financial goals and
targets even though their main purpose is to [make a profit / give a service]
(To be discussed in the class)
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Stakeholders Management
Any party having Power and Interest over an organization is a stakeholder of it. They can also be
further classified as
Internal - Intimately connected with the organization
(ex; Employees, Managers, Directors)
Connected - Having a contractual relationship with the organization.
(ex: Shareholders, Customers, Suppliers, Lenders of Finance)
External - Those outside it, with no direct relation.
(ex: Government, [Link], Trade Unions, community)
Each stakeholder has different needs/expectations. This often leads to stakeholder conflicts.
What are the different types of Stakeholders that Nike might have to deal with?
Internal Stakeholders Connected Stakeholders External Stakeholders
Paying employees on time. Give what customers want. Media channels paying
attention to labor problems of
Developing managers, giving Pay suppliers on time. Nike factories in Asia.
them performance bonuses.
Payback loans to banks on time. Government checking if taxes
are paid on time.
Pressure groups forcing Nike to
make environmentally clothes
End of Tute - 1
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Practice Questions
1. Which of these are not a connected stake holder of Laundrocart a Laundry service company
(Select all that apply) :
a. Employees
b. Customers
c. Government
d. Suppliers
2. Not For profit means the organisation has NO financial goals – TRUE / FALSE
3. Any resource that can command a _______________ is scarce (Fill in the blanks)
a. Demand
b. Supply
c. Need
d. None of the Above
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