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I NTERNATI ONAL BUSI NESS SKI LLS COURSEWARE
ABP ntermediate Award
Business Basics and Finance
PUBLISHED BY:
British Business Professional Skills Development (BBPSD) Ltd,
80 Lodge Lane, Liverpool, L08 0QL
United Kingdom
http://www.bbpsd.org.uk
ACCREDITED BY:
Tbe Assoclatlon ot 8uslness Practltloners (A8P) ls a UK awarolng booy wblcb possesses epertlse ln oeveloplng ano accreoltlng quallcatlons ot oltterent slzes ano
levels relevant to a wide range of industry sectors.
http://www.abp.org.uk/
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FIRST EDITION
First Print 2010
BOOK NUMBER
BB&F10-01
Copyright 2010 by British Business Professional Skills Development (BBPSD) Ltd, UK. All rights reserved. This publication is protected by Copyright, and
permission should be obtained from the publisher prior to any prohibited reproduction.
INTERNATIONAL BUSINESS SKILLS COURSEWARE
ABP Intermediate Award
Business Basics and Finance
Association of Business Practitioners (ABP)
APPROVED COURSEWARE
BASIC BUSINESS AND FINANCE
Contents
Introduction to basic business and Bnance 01
Module Learning Outcomes 02
Module Design 02
Learning & Teaching Methods 05
Assessment Type & Weighting 05
How to get the most from this booklet 06
Section1 Introduction to common business
terminology 07
The internal and external environments 09
The internal environment 10
The external environment 12
Identify the market and market competitors 20
Section 2 Legal structures for business 27
The need for the correct legal structure 35
Importing and Exporting, an overview of the legal requirements 39
Importing 39
Exporting 41
Legal obligations when dealing with customers 42

vii Basic Business and Finance
Section 3 Making use of resources 47
The importance of Effective Business Planning 49
Conducting market research and understanding markets 52
SWOT and PEST analysis to understand a businesss competitive advantage 55
Section 4 Basic Financial Planning 65
Understanding How to Calculate and Raise Finance 67
Setting a Budget and Breakeven Analysis 70
The Importance of Cash Flow 74
Meosur|ng ond lncreos|ng Proft 77
Section 5 Managing a business 83
Developing an Effective Workforce 85
How to make the best use of technology 91
Differences between Leading and Managing an Organisation 94
Motivating and Communicating with Employees 96
viii BBPSD 2010. All Rights Reserved.
BASIC BUSINESS AND FINANCE
Introduction
Business now plays a fundamental part in our lives. Take a look around you now and almost
everything you can see has been touched by a business of one type or another. The desk
you are sitting at, the chair you are sitting in, the clothes you are wearing and the pen you
will write with have all been created by business. Without business we would not be able
to enjoy a number of things that we now take for granted. However operating a business
is challenging and is dependent on a number of different factors that we consider in this
booklet.
The vast amount of businesses that exist in the world mean that there are many differing
types and styles for an organisation to choose from. This richness and diversity ensure that
organisations are always looking for ways in which to improve on what they do and hence
organisations are keen to employ people with a good understanding of many of the more
common successful business techniques.
This module considers some of the fundamental basic business functions and structures
that are internationally recognised as being effective and also takes a closer look at how
5us|nesses orgon|se the|r fnonces.
1 Basic Business and Finance
The module is a core component of the ABP intermediate Diploma in International
Business Skills programme.
Module Learning Outcomes

After successfully completing this module students will be able to:
L1 Identify and appreciate everyday business terminology.
L2 Distinguish between the various legal structures for a business.
L3 Appreciate the importance of transforming resources into goods and services.
L4 Apply baslc nanclal plannlng resources.
L5 Appreciate the main issues in managing a business.
Module Design: This module introduces everyday business terminology and
relates this to the more common legal business entities. The different internal and
external factors that affect a business are explained and their importance explored.
8aslc nanclal plannlng ls lntroouceo ano tbere ls a tocus on maklng best use ot
avallable resources, partlcular empbasls ls placeo on tbe lmportance ot casb Now to
the business.
The module is subdivided into 5 sections. Each of these 5 sections deals in more
depth with one of the overall modules learning outcomes, L1 to L5 listed above.
Thus Section 1 corresponds to L1, Section 2 to L2, etc.
2 BBPSD 2010. All Rights Reserved.
The following table provides a brief description of each section in the business
communication module.
Section Title Learning Outcomes Covered in this
Section
Section 1:
Introduction to common
business terminology
Appreciate the difference between the
internal and external environment.
Understand and appreciate the importance
of the different functions of the internal
environment
Understand and appreciate the importance
of the different functions of the external
environment
Identify the market and market competitors
3 Basic Business and Finance
Section 2:
Legal structures for
business
Identify the legal structures available to
a business and appreciate the differences
between them.
Appreciate the importance of having the
correct legal structures for businesses of
different types and sectors.
Understand the importance of international
legal systems when exporting and importing
goods and services.
Understand the legal obligations of business
when dealing with customers.
Section 3:
Making use of resources
Understand the importance of effective
business planning
Appreciate how to conduct market research
and understand markets.
Be able to apply SWOT and PEST analysis to
understand a businesss competitive
advantage
An awareness of the importance of
operational decisions.
4 BBPSD 2010. All Rights Reserved.
Section 4:
Basic Financial Planning
Understand how to calculate and raise
nance.
Be able to set a budget and use break-even
analysis
Unoerstano tbe lmportance ot casb Now
8e able to measure prot ano unoerstano
bow to lncrease prot.
Section 5:
Managing a business
Understand how to develop an effective
workforce
Be aware of how and when to make best use
of technology
Understand the difference between leading
and managing an organisation
Motivating and communicating with
employees.
Learning & Teaching Methods: A suitable mix of lectures, tutorials, workshops,
case studies, videos and hands on practical exercises. The module has 20 hours of
formal contact teaching.
5 Basic Business and Finance
Assessment Type & Weighting: The module will be assessed by a formal
examination of 1 hour duration.
How to get the most from this booklet
You wlll galn more benet wben stuoylng tbls booklet lt you stop ano reNect at tbe
end of each section. This module contains 5 sections and you should look back at
the learning outcomes for each section as you complete the section and ensure that
you are comfortable with each learning outcome. If you are not sure about one of
the learning outcomes, or any aspect of that section then look back at the associated
tutorial notes and exercises you have done in class.
Also dont forget that this is YOUR booklet, so make notes in it as you go along
that will help your understanding as you are learning. Remember that learning is an
active exercise and you need to engage fully with the text, it is not the same as casual
reading.
Finally, we hope you enjoy this booklet and get as much pleasure in studying aspects
of business as we do!
6 BBPSD 2010. All Rights Reserved.
Section 1
Introduction to common business
terminology
Learning Outcomes
The learning outcomes covered in this section are:
Appreclate tbe oltterence between tbe lnternal ano eternal envlronment.
Unoerstano ano appreclate tbe lmportance ot tbe oltterent tunctlons ot tbe lnternal
environment.
Unoerstano ano appreclate tbe lmportance ot tbe oltterent tunctlons ot tbe eternal
environment.
|oentlty tbe market ano market competltors.
7 Basic Business and Finance
Introduction
Having an understanding of everyday business terminology means that you will be
able to comprehend more thoroughly the meaning of terms, structures and the
general business environment. This section will carefully lead you through both the
internal and external environments in which business operates and how to identify
markets and the associated competition. Studying both the internal and external
envlronments ls a usetul remlnoer ot just bow many lnNuences tbere are attectlng a
business in one way or another, some within and some outside of our control.
8 BBPSD 2010. All Rights Reserved.
The Internal and External Environments
There are many factors that affect the overall operation of a business and these
are described as the internal or the external environments. Whilst it is not always
possible to have complete control over these environments, particularly the external,
it is important that they are recognised and understood as they will affect the decision
making process. If an important customer moves their business to a competitor this
may have serious repercussions for a business. The appearance of a new competitor
from overseas may well affect the business, as could the failure to invest in technological
change that would maintain a competitive edge.
9 Basic Business and Finance
The internal environment
The internal environment of any business is made up of many differing functions.
These include its mission statement, structure, policies, cultures and resources.
The last one is a large list of elements meaning the people, information, facilities,
lntrastructure, macblnery, equlpment, supplles ano nance. Let us take a look at some
of these differing aspects individually.
Mission Statement In many countries, it is the law that a company must
declare what it is in business to do, in other words its overall aim. This is its Mission
Statement. It is at its best when it is a short and memorable sentence which explains
what it does and its objectives. It should also give a sense of underlying purpose and
direction.
Structure The formal structure of a business is usually the hierarchical arrangement
ot people ano actlvltles. Tbe structure oetermlnes bow lntormatlon Nows tbrougb
the business, which department is responsible for the various activities and where
the authority levels lie. The organisation chart is usually a diagram illustrating the
llnes ot autborlty ano bow communlcatlon Nows wltbln tbe buslness.
Policies These are the guidelines that provide employees in the appropriate
positions of authority with the guidance necessary to understand how to make the
decisions to address various events that regularly occur within the business. These
guidelines show everything from the way the organisation runs its business to how
it manages its people. It is likely that there will be policies concerning nearly all
activities for the business.
10 BBPSD 2010. All Rights Reserved.
Culture The culture of a business is to a large extent its own character and style
and just as individuals, it is true of a company. One of the main components that make
up a companys culture is the values it holds. These can range from empowering and
encouraging employees to take more decisions in their job roles to its recognition of
achievement or even to the way a company may recognise length of service or similar.
Resources Are the people, information technology, infrastructure, machines,
equlpment ano nance ot tbe buslness. Ot tbese, people remaln tbe slngle most
lmportant resource ot any buslness. Tbe slze ano magnltuoe ot tbe otber resources
will much depend on the type of business concerned. For instance, a manufacturing
business will differ considerably from those of a business whose activities are purely
otce baseo.
11 Basic Business and Finance
The external environment
Having considered some of the aspects of the internal environments of a business
let us now look at some of the external environments. Firstly, let us consider and
examine some of the external environments over which we may have some control
or at least a closer view to enable us to make rapid responses to minimise any
damaging effects. These include customers, suppliers, and competitors who are
known as stakeholders within the business. We also have control over whether we
wish to be a socially responsible business. Then we can look at some of the external
envlronments wbere we bave no control or lnNuence. Tbese lncluoe economlc ano
polltlcal envlronments, tbe legal envlronments, ano nally tbe tecbnologlcal ano soclal
environments.
Customers, Suppliers, Competitors Customers demand satisfaction with
the product or services they purchase and use. Where the product is not unique
they will be continuously looking for improvements in prices and terms. - Suppliers
will require continual attention to ensure consistent quality and price. Finally,
competitors will continually apply pressure in the market place. These 3 external
factors allow us in most cases to respond quickly to change.
12 BBPSD 2010. All Rights Reserved.
Example
Let us consider the position of a food manufacturer supplying one of the major
supermarket groups such as Tesco or Asda, Sainsburys or Morrisons. All these are
very challenging customers wanting the best in terms of price, service and quality at
all times. If we were a manufacturer of their own label baked beans for instance, we
woulo be supplylng a proouct wltbout many slgnlcant USP's (unlque selllng polnts)
and as a result it would be easier for these customers to look around for the best
offers they can obtain. It is in instances such as these where prices and quality need
to be monitored, particularly as competitors who can manufacture the product will
be constantly attempting to win the business. It should, however, be possible for a
business to respond quickly to these external factors.

13 Basic Business and Finance
14 BBPSD 2010. All Rights Reserved.
1,000,000
5,000,000
10,000,000
20,000,000
Social A socially responsible business observes the following key standards:
It ensures the waste it produces stays at a minimum, it creates wealth,
it treats its employees acceptably, it shows respect for the environment,
lt ls etclent wltb lts resources ano lt reolstrlbutes some ot lts prots
back to the community who made them.
The top ethical issues in the business world are currently recognised as the
following:
Using child labour
Dealing with corrupt governments
Damaging the environment
15 Basic Business and Finance
Economic Economic issues can have a major impact on business. Poor economic
performance by the country can lead to poor demand at home because consumers
have little disposable cash. Similarly, currency performance can affect exporting and
importing depending on the direction of the movement. If our currency is strong then
we can buy imports at more attractive prices, but our exports become expensive. If
our currency is weak, imports are more expensive but our exports become more
competitive. The point is that the economy can change very rapidly and it is sometimes
oltcult tor a buslness to react. Tbese cbanges are more oltcult to torecast.
16 BBPSD 2010. All Rights Reserved.
Political - Nowadays the UK has a mixed economy This is the same as many
countries in the developed world. It means that there is a mixture of goods supplied
by either the public sector (government) or the private sector (privately run business).
Apart from producing a sound economy the government has less scope to intervene.
Monetary policy is now controlled in the UK by the Bank of England (i.e. the control
ot lnterest rates). Tbere bas been some support tor a tew major employers ln oltculty
but bltberto tbe government bas aoopteo a lalssez- talre approacb altbougb tbe new
UK government is introducing change. Much of course will depend on the political
complelon ot tbe Government ot tbe oay as to wbetber buslness ls llkely to benet
from government spending programmes.
Legal - Governments have passed many pieces of legislation in recent years to ensure
that both consumers and employees are protected from poor business practice. In
the UK these include such things as the Trade Descriptions Act and the Employment
Relations Bill respectively. All these, combined with competition legislation such as
tbe Otce ot Falr Traolng leglslatlon oo not precluoe buslness trom prosperlng but
require strict adherence. Those mentioned represent only a few of the elements of
the legislation.
17 Basic Business and Finance
Technological- Generally speaking, the affects of new technology have been
considerable. It has led to advancement in people working from home (teleworking),
lncreaslng levels ot output ano proouctlvlty, more Nelblllty ln manutacturlng ano
reduced times to develop new products. Whilst there have been a few negative
effects such as job losses in some sectors, many processes are now assisted by the
new system ano tbe assoclateo benets.
18 BBPSD 2010. All Rights Reserved.
Activity
Can you think of any other external factors that may have any effect on the operation
of a business either to its advantage or disadvantage?
19 Basic Business and Finance
Identify the market and market competitors
Understanding the market within which the business operates and the competitive
position is essential in order to gain a thorough understanding of the business.
Without some of this basic information it is not possible to make informed planning
or strategy decisions. It is rather like practicing archery with your eyes closed or
trying to play a game of football with a blindfold on. In both cases not knowing where
you are shooting or where your target is would make it impossible to play.
|oentltylng your market ls tbe rst process. |t you oon't bave tbls lntormatlon tbere
are many sources where it is readily available. For instance, the internet or references
at the local library and there are research companies who undertake regular market
reports that will identify most of the key data. This will identify much of the following
key data required:
Market size: This is usually expressed in value terms based on the manufacturers
selling prices (MSP) or at the retail selling price ( RSP ). This data is important to be
able to track the market for growth or decline and also to be able to estimate your
own market share performance.
Market competition: This will identify the current competition in the market
with estimates of their market share. It will often include some further details
concerning performance and may also attempt to consider some of their strengths
and weaknesses.
20 BBPSD 2010. All Rights Reserved.
Distribution: This will highlight the major channels of distribution that will show
how the product or products reaches the marketplace and will sometimes indicate
the national regional variations. If it is a product for the export market it will show
many of the major export countries.
Customers: Based on the distribution details, it should be possible to make some
accurate assessments of the customers buying the product. Certainly, if we are working
ln tbe consumer gooos market tben elo researcb can belp complle tbls lntormatlon.
The above information is the very least you need to know about the market identity
in order to establish some understanding.
Obtaining a detailed knowledge of your competitors activities can be a little bit more
challenging but some is available through published research as already discussed.
Assuming they are limited companies then it is possible to obtain a copy of their
annual accounts in the UK from companies house.
Depenolng on tbelr slze tbls wlll provloe oetalls ot tbelr prot ano loss accounts so
it will be possible to understand their performance. What we are really trying to do
is build up a picture of their strengths and weaknesses and try and establish how
they may be a threat and indeed establish any vulnerability which could provide an
opportunity.
21 Basic Business and Finance
22 BBPSD 2010. All Rights Reserved.
Example
As mentioned, learning some of the detail we require to build an understanding of
a market can be readily obtained without cost. If we wish to study an example of a
product within the consumer goods market then it can be particularly straightforward.
For instance, should we wish to understand the performance of Nescafe and the
coffee market in a particular country, then much of the information is readily available,
both through libraries and the Internet where market research details covering
market slzes, tbe competltlon ln tbat proouct area, olstrlbutlon ano customers wlll be
available.
23 Basic Business and Finance
Activity
Try to conduct some simple research within your own class. Choose some consumer
prooucts ano no out wblcb one ls useo ano tbose wblcb are most popular or otber
brands of that product that are preferred.
24 BBPSD 2010. All Rights Reserved.
Overview
In Section 1 we have carefully studied the internal and external environments. We
should now have a clear understanding of the differences between the two. We have
been through in some detail the various factors that make up these two environments
and you should by now feel comfortable with their different meanings and effects.
You should also understand why having thorough market information for the business
is so important. Here we have covered how to undertake some desk research,
consloereo wbere tbe lntormatlon may be avallable ano nally all tbe oltterent types
of information that we need to know to understand the market place in which our
business may operate.
25 Basic Business and Finance
Notes...
26 BBPSD 2010. All Rights Reserved.
ABP Intermediate
Awards
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and Personal
Development
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Service
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Time
Management
IT for
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Business
Etiquette
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in
International
Business Skills
Association of Business Practitioners
INTERNATIONAL BUSINESS SKILLS COURSEWARE
ABP Intermediate
Diploma
INTERNATIONAL BUSINESS SKILLS COURSEWARE
Student Guide
Professional Curriculum
Association of Business Practioners
ACCREDITED BY
British Business Professional Skills Development (BBPSD) Ltd,
80 Lodge Lane, Liverpool, L08 0QL
United Kingdom
http://www.bbpsd.org.uk