What You Need to Know about Business
By Roger Trapp, Sumeet Desai and George Buckley
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About this ebook
This book is designed to answer all those confusing questions that flit through your mind when you get to the business pages of the paper, and stop you being embarrassed in job interviews.
It explains the things you really need to know about business, and will tell you:
- What the point of business is
- How what happens in the economy affects real businesses
- What the law means for business
- Finance, accounting, shares, bonds etc and other big numbers
- How companies grow and why the merge (even though most mergers fail)
- What HR departments actually do all day
- Time management, motivation, leadership, communication skills and all the other skills you'll need if you want to know what the view's like from the CEO's office
After reading it, you'll smile knowingly whenever the advantages of outsourcing, balanced scorecards or Porter's 5 Ps come up in polite conversation.
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What You Need to Know about Business - Roger Trapp
INTRODUCTION
Business is big. Well, in fact, it’s also small, and medium-sized – and very big. The point is that everybody is talking about it. This is because, increasingly, wherever you work, and whatever you do, you are in all probability in a business. And even if you are not working, you will be affected by business. We are all subject to business, as hospital managers, school teachers and politicians all talk about performance targets
, metrics
and other bywords of management speak.
Television programmes such as The Apprentice and Dragons’ Den present business as a reality show even though the world they portray is a million miles from most people’s average day in the office. On the other hand, the programme actually called The Office satirised management mantras and the way business is conducted – in much the same way that the Dilbert cartoons make fun of how mundane office life can be.
In truth, business is not generally portrayed in a much better light than it was in the 1970s, when the image of British business in particular was bound up with strikes, poor-quality goods and a general air of hopelessness. Even in America, which has always been more exuberant about business, young people were dismissive of their elders who worked in big companies. And perhaps the most famous television programme about business – Dallas – took a particularly cynical view of the machinations of corporate life.
Somehow, though, we see through all that and are inspired by such figures as Virgin Group founder Sir Richard Branson, Microsoft’s Bill Gates and Apple chief Steve Jobs. We follow their every move in the hope that some of this stardust will rub off and make us successful in the same way as they have been.
The internet has played an important part in this. At the height of the dot.com boom
of the late 1990s, everybody was so excited that they felt as if they were missing out if they were not involved in a start-up of some kind and thus eligible for a big pot of stock options. There was an excitement about business that was reminiscent of the exuberance that greeted the development of the railways in the nineteenth century. Established businesses grew so fearful of losing their brightest stars that they smashed hierarchies and threw away dress codes in an attempt to hang on to them. The technology bubble
burst (and many of those options simply disappeared). But the informality – and hence, for want of a better term, the funkiness
of business that it unleashed – remains.
Nor has this appeal really been dented by the financial crisis of 2008 and 2009. People may have been outraged by the financial alchemy on New York’s Wall Street and in the City of London and by its devastating effects on the wider, real
economy, but this dissatisfaction has not apparently put people off the idea of business.
Indeed, individuals seem more enthusiastic about non-financial businesses than ever. By the middle of 2010, the passion for the technology gadget company Apple’s products had reached such a pitch that queues formed outside its stores whenever a new product became available. Slightly more prosaically, the John Lewis Partnership transformed itself from middle England’s dependable department store into a shining example of what a business can be even in difficult times by being truly switched on to the wants of its customers and also apparently by being decent – towards its staff (significantly, partners in the business), its customers and its suppliers. What was once a slightly stuffy purveyor of curtain fabrics and household goods became the subject of a television series and gained many a mention in the newspaper columns of the chattering classes – the sort of publicity that is impossible to buy.
Nor are these the only examples of the passion generated by business today – among customers, employees and senior managers alike. Howard Schultz, head of the global coffee bar chain Starbucks, even called the book he wrote about the company’s growth Pour Your Heart Into It. Entrepreneur Henry Stewart arguably went further, naming the information technology training company he set up in London a couple of decades ago Happy Computer. The company – despite being in a field that can be less than inspiring – is regularly featured in lists of the best places to work and is even using its experience to help other companies become happier workplaces.
There is clearly an appetite for work to be something more than just a means of earning a living.
This is not necessarily new. For example, Hewlett-Packard, one of the pioneers of the technology industry of which Google is a current star, set out an HP Way
of doing business and employees would often make decisions based on what they thought Bill and Dave
(Hewlett and Packard) would do.
Of course, this does not mean that everybody in business is following some cult. But it is definitely true that there is huge enthusiasm for business – among would-be employees as well as among policymakers and the general public. Back in the 1960s, when the London Business School was established, business education was almost unknown in Britain – although it was, of course, available in the United States and elsewhere. Now it is very different. In Britain alone, thousands of people study business and management each year, while a significant proportion of each year’s graduates head into some kind of business. And the number of start-ups continues to grow, contributing to there being just under three million businesses in the country in 2008.
In the United States, the Index of Entrepreneurial Activity produced by the Kauffman Foundation, an organisation dedicated to promoting entrepreneurialism, found that 558 000 individuals started new companies in 2009, a 4% rise on the previous year in spite of the recession. In Germany 200 000 small businesses were founded in 2009, according to research by the economic research institute Institut für Mittelstandsforschung. Meanwhile, China is showing great enthusiasm for enterprise. The number of Chinese who are either self-employed or working in companies not primarily owned by the state rose from about 8 million in 1992 to nearly 80 million in 2008.
However, attractive and exciting as we now realise it can be, business can also be a confusing place. Not only can its activities often involve complex processes or a mastery of obscure niche markets, the whole language of business can appear arcane and hard to get a grip on. Have you, for example, ever stared at the pages of the FT
wondering how other people make sense of what looks like Ancient Greek to you? Have you ever nodded in agreement in a meeting even though there are so many acronyms and concepts flying around that you have no idea what is going on? Do you find spreadsheets mesmerising? Is your boss’s jargon impenetrable?
If you recognise any of these situations, you are not alone. Few of us have had much introduction to business before we start doing it. Although things are starting to change, there is little about business on the school curriculum. As a result, we tend to muddle along, chiefly through a mixture of bluffing and picking up things as we go along.
This book is here to make life easier. It will take you through the main concepts and terms, ideas and phrases you’ll come across in the business world. By the end you will have some understanding of how the stock market works, what all those economists are talking about, why cash is king and why being busy isn’t the same as making money.
Balance sheets and profit-and-loss accounts should no longer hold any fear for you. And you should be able to talk strategy just like an MBA. In addition, you will have had an introduction to the nuts and bolts
of business, the parts (often not too glamorous) that bring alive the vision of the founder or head of the enterprise. No longer should you be caught out by finance experts and their figures.
Nor should you fall foul of the lawyers, for there is also a chapter devoted to the increasingly tough laws that govern the behaviour of those in business, particularly directors of publicly-quoted companies. Some of the mysteries surrounding supply and demand, competition and other theories should be clearer, as should be the pros and cons of globalisation.
You will also have a solid grounding in the skills you need to succeed. You will, for instance, learn about time management, about communication skills and even about how to be a leader.
Quite simply, this book provides an introduction to all that you need to know in order to succeed in business. All you have to do now is get out there and do it. True, there will be plenty of challenges, many of them emanating from beyond the world of business. But it can never have been more true that enterprise is a major part of the solution. As a result, there has surely never been a better – nor a more exciting – time to be in business.
WHAT YOU NEED TO READ
• For general information on a whole range of aspects surrounding business, Business, The Ultimate Resource (A&C Black) is a very good starting point, as is The Capstone Encyclopaedia of Business (Capstone). Financial Times Handbook of Management (FT/Prentice Hall) is slightly narrower in scope, but similarly useful.
• For advice on starting and/or running a small business, try Good Small Business Guide (A&C Black) or Sara Williams’ Financial Times Guide to Business Start Up (FT/Prentice Hall).
• Business, the Ultimate Resource also has a website – www.ultimatebusinessresource.com. Among those focused on small businesses are www.Bytestart.co.uk, www.Startups.co.uk and www.yoodoo.biz. In the United States, the magazines Inc and Fast Company and their websites, www.inc.com, and www.fastcompany.com, are both informative and inspirational.
• For information on social enterprises and how to start them – the Social Enterprise Coalition – www.socialenterprise.org.uk.
CHAPTER 1
WHAT IS BUSINESS?
WHAT IT’S ALL ABOUT 002
• What business is
• How business developed
• What types of business there are
• How business is changing
• What the future might look like
WHAT IS BUSINESS?
So, what is this thing called business? Essentially, a business is an enterprise set up to make money through selling goods or services or a mixture of the two. However, this is a bit simplistic. Increasingly, there are governmental bodies and charities that are run increasingly like businesses. At the same time, the picture is becoming blurred by organisations that are set up as businesses but look more like charities, with their aims of being social enterprises
or not-for-profits
and righting some social wrong. Business is everywhere.
This is all the more remarkable because until the last decade or so – certainly in Britain, less so in America – business
was something of a dirty word. Entrepreneur
was a sort of codeword for wheeler-dealer
.
What has brought about this dramatic change of heart? It is fair to say that a large part of it is the internet, with its promise of limitless possibilities. But there is also a much greater willingness to try things – even when it comes to careers. This is perhaps best illustrated by the numbers of business school graduates rejecting positions with investment banks and large corporations in favour of start-ups. Reinforcing all this is a change in attitude among policy makers. Young people are actively encouraged to start their own businesses for genuine reasons, such as doing good and/or creating wealth.
WHO YOU NEED TO KNOW
Sir Richard Branson
Many of today’s business heroes are technology wizards who use a bright idea to launch a successful business. Branson is a more old-fashioned buccaneering type of entrepreneur who has got where he has largely on the strength of his extreme self-confidence and love of challenging the big guy. As such, he has become an inspiration to many would-be business owners and is one of the best-known business people in the world.
His best-known business is Virgin Atlantic Airways, which in the 1980s had the audacity to take on British Airways in the battle for the lucrative trans-Atlantic air travel market. A quarter of a century later, Virgin Atlantic is a major player on the travel scene, with various related holidays operations, but Branson still likes to portray the business as a young upstart battling against the established incumbents.
Branson’s Virgin empire started as a mail-order record company (which hit the big time with the unlikely hit Tubular Bells
) and has moved into record shops, cola drinks, publishing, health and beauty, financial services and trains. It has not always been resoundingly successful, but Branson – bearded, long-haired and tie-less even in his 60s – always gives the impression that he is enjoying a great adventure.
A SHORT HISTORY OF BUSINESS
There is nothing new to the realisation that a successful business community is vital to a successful political system. One of the earliest examples of what we now think of as a company was the British East India Company, which was founded by Queen Elizabeth I in 1600 and over the next two-and-a-half centuries became inextricably linked with the growth of the British Empire. Perhaps even more significant were the businesses created at about the same time in the newly colonised North America. Historians cannot quite decide on which came first – Puritanism or Capitalism. But it is clear that the two are closely entwined, particularly in America, where such virtues as subordinating the individual to the group, marshalling resources to achieve a single purpose and a belief in self-help are shared by both creeds.
These early joint stock companies – ventures which raised funds by selling shares to investors who became partners in the enterprise (and thus predecessors to the current quoted companies) – paved the way for the businesses that helped develop the fledgling United States. Among these were railway companies and many types of manufacturing enterprises, which in a short period of time turned a few colonist-farmers into the factory of the world.
Similar developments were taking place in Britain, the birthplace of the Industrial Revolution. By the early twentieth century, the geographical spread of some of the businesses mirrored the reach of the Empire, with names such as Cable & Wireless and the now-defunct Imperial Chemical Industries seen as synonymous with British power and influence.
However, for sheer audacity nothing could beat the American businesses. Beefed up by serving a huge home market, the likes of the consumer goods company Procter & Gamble, the conglomerate ITT and the Ford Motor Company became huge players around the world. They