1

Table of Contents
Nature of Business ......................................................................................................................6
The Development of the Barter System....................................................................................7
The Role of Money ..................................................................................................................8
Instruments of Exchange .........................................................................................................9
Difference between Private Sector and Public Sector ............................................................. 10
Forms of Business Organizations ........................................................................................... 11
Economic Systems................................................................................................................. 17
Functional Areas of a Business .............................................................................................. 18
Stakeholders of a Business ..................................................................................................... 19
Ethical and Legal Issues in Establishing a Business ............................................................... 20
Internal Organizational Environment ......................................................................................... 22
Functions of Management...................................................................................................... 23
Responsibilities of Management ............................................................................................ 24
Organizational Charts ............................................................................................................ 24
Characteristics of a Good Leader ........................................................................................... 26
Sources of Internal Conflict in an Organization...................................................................... 27
Guidelines for Establishing Good Relations between Employer and Employee ...................... 29
Value of Teamwork in an Organization ................................................................................. 30
Strategies for Effective Communication................................................................................. 30
Establishing a Business ............................................................................................................. 33
Functions/Roles of the Entrepreneur ...................................................................................... 34
Characteristics of an Entrepreneur ......................................................................................... 34
Roles of the Entrepreneur in Economic Development ............................................................ 36
Reasons for Wanting To Start a Business ............................................................................... 36
Steps for Establishing a Business ........................................................................................... 37
Reasons for Preparing a Business Plan ................................................................................... 38
Elements of the Business Plan ............................................................................................... 38
Local, Regional and Global Rules for Conducting Business ................................................... 41
Regulatory Practices Instituted By Governments for the Establishment and Conduct Of
Different Types Of Businesses ............................................................................................... 41
Factors That Determine the Location of a Business ................................................................ 42

2
Legal Aspects of a Business ...................................................................................................... 44
Contract ................................................................................................................................. 45
Types of Contracts................................................................................................................. 45
Ways in Which Contracts May Be Terminated ...................................................................... 48
The Importance of Record Keeping in a Business .................................................................. 48
Preparing Common Business Documents ............................................................................... 49
Insurance ............................................................................................................................... 50
The Principles of Insurance.................................................................................................... 51
Types of Insurance Policies ................................................................................................... 52
How Insurance Facilitates Trade ............................................................................................ 54
Production................................................................................................................................. 55
Natural Resources of the Caribbean and Their Industries ....................................................... 57
Difference between Production and Productivity ................................................................... 57
Importance of Productivity .................................................................................................... 58
Role of Capital in Production................................................................................................. 59
Types of Capital .................................................................................................................... 59
Types of Production............................................................................................................... 59
Production Levels .................................................................................................................. 60
Cottage Industries .................................................................................................................. 61
Small Businesses/Firms ......................................................................................................... 61
Linkage Industries ................................................................................................................. 63
Capital and Labour Intensive Production ............................................................................... 64
Marketing ................................................................................................................................. 65
Marketing Activities .............................................................................................................. 66
Marketing Mix....................................................................................................................... 69
Factors That Influence Consumer Behaviour ......................................................................... 69
Factors Affecting Packaging and Presentation of Goods ........................................................ 70
Method of Promoting Sales.................................................................................................... 71
Terms of Sales ....................................................................................................................... 74
Role of Customer Service ...................................................................................................... 77
Concept of Intellectual Property Rights ................................................................................. 78
Logistics and Supply Chain ....................................................................................................... 80

3
 Logistics and Supply Chain ................................................................................................... 81
The Distribution Chain .......................................................................................................... 83
Multimodal and Intermodal Transport.................................................................................... 84
Transport Documents ............................................................................................................ 87
The Role of Transport in Marketing ....................................................................................... 88
Problems in Distribution ........................................................................................................ 91
The Impact of Technology on Logistics and Supply Chain Operations................................... 92
Business Finance ....................................................................................................................... 95
Financial Institutions ............................................................................................................. 96
Functions and Services Offered By Financial Institutions ...................................................... 97
Role and Functions of Financial Regularly Bodies ................................................................. 98
Relationship between Financial Institutions and Regulatory Bodies ..................................... 100
Ways in Which Individuals Manage Personal Income .......................................................... 101
Short Term and Long Term Investments .............................................................................. 103
Sources of Personal Capital ................................................................................................. 104
Purpose of Basic Financial Records for A Sole Trader ......................................................... 105
The Role of Government in the Economy ................................................................................ 107
Responsibilities of the Government ..................................................................................... 108
How the Government can influence Businesses to Protect the Environment ......................... 109
The Purpose of Taxation ...................................................................................................... 109
Difference between Direct Tax and Indirect Tax .................................................................. 110
Forms of Assistance Offered By Government to Businesses ................................................ 110
Technology and the Global Business Environment .................................................................. 113
The Concept of Business Technology .................................................................................. 114
The Role of Information Communication Technology (ICT) In Business ............................. 114
Types of Technology Used In Business ............................................................................... 115
Distinguish Between E-Commerce and E-Business.............................................................. 117
Ways in Which ICT Can Be Used To Improve Efficiency of Business Operations ............... 117
Ethical and Consequences of Unethical Uses of ICT ............................................................ 118
Indicators of a Country’s Standard Of Living (SOL) ............................................................ 120
National Income (Ni) ........................................................................................................... 121
Role of Education in Economic Growth and Development................................................... 123

4
International Trade .............................................................................................................. 123
Functions of Major Economic Institutions ........................................................................... 123
The Impact of Economic Institutions or Trade Agreements in the Caribbean ....................... 127
Major Economic Problems in the Caribbean ........................................................................ 128
Possible Solutions to Economic Problems ............................................................................ 129
The Role, Benefits and Impact of Foreign Investment .......................................................... 130

5
 Section 01
Nature of Business

6
The Development of the Barter System
 Early people had a simple way of life, they would provide all their needs themselves
without the help of others, and this is called direct production.
 People would hunt animals and gather plants and berries. Some farmers would grow
crops and keep animals for the purpose of feeding themselves. They were living in a
subsistence economy [that is providing just enough to survive but there was no surplus
for trade.].
 In time people began to improve their way of living by building permanent homes and
making tools to satisfy their way of living. They began to produce more goods than
required, thus resulting in a surplus.
 As a result of the surplus, people began exchanging goods for surplus of others. The
exchange of one thing for another without the use of money is called Barter.
Advantages of Barter
i. It allows people to get rid of any surplus goods and at the same time allows them to
obtain a wide variety of things they needed.
ii. It facilitated an improvement in the way people lived
iii. It allowed people to specialise in producing the thing they could do best
iv. It increased productivity and resulted in more surplus and further wealth
Disadvantages of Barter
i. Double Coincidence of Wants
 An individual must have what another person needed and be prepared to exchange it.
 E.g. Jim must need the bananas that Tom has and Tom must need the peas that Jim has.
ii. An Exchange Rate
 This involves deciding on the right quantity of goods acceptable in the exchange process.
 E.g. How many chickens should be exchanged for an axe-head
iii. Divisibility of Goods
 The rate of exchange would be difficult because some goods used could not be split into
smaller parts.
 E.g. trading one axe-head for half of a ‘live pig’, you cannot have a half pig and keep it
alive.

7
 iv. Storage of Wealth
 Many goods which had to be exchanged could not be saved for use at a future date
because they could not be stored for a long period of time.

The Role of Money

a. Money- is anything that is generally accepted as a medium of exchange and used to
purchase goods and services. Money is a legal tender- that means, it is acceptable as a
means of payment.
b. In early societies the barter system was used as a method of exchange in which one
good or service is exchange for another before a system of money was used.
c. The barter system allowed farmers and hunters to swap surplus goods, beads or shells in
exchange for goods they could not produce themselves. However, the barter system had
several limitations such as: double coincidence of want, exchange rates, divisibility of
good and storage of wealth
d. To overcome the disadvantages of the barter system a common medium of exchange had
to be developed. The problem was solved with the use of money, gold and silver were
minted and used as money.
e. Today money is in the form of notes, coins and other modern means of instruments of
exchange [bill of exchange, credit card, debit card, cheques etc.]
Characteristic of Money Functions of Money
Durable-does not rot or wear out A medium of exchange - for quick
easily and easy purchase
Divisible-so that change can be given A measure of value - to determine
prices
Portable- it can be carried A store of value-it can be saved
In limited supply-this prevents people A standard of deferred payment-it can
from spending more without working be used to pay in the future
to earn it

8
Instruments of Exchange
 Barter System- was used as a method of exchange in which one good or service is
exchanged for another before a system of money was used.
 Bill of exchange - a document that instructs one person to pay a fixed amount of
money to another at a future date.
 Electronic transfers- involves the movement of funds from one account to
another electronically.
 Telebanking – carrying out banking transaction via telecommunications net-
work, customers can telephone from home/office and instruct the bank to make
payments.
 E-commerce –the buying and selling of goods and services or transmitting of
funds or data via the internet. It involves business to consumer transaction or
business to business transactions.
 A Cheque- is a written instruction to the bank to transfer certain sum of money to
the account of the payee [person receiving the money].
 Money order -is used as a method of payment which is sold by the bank to
persons who wish to make overseas payment for good and services. It clearly
states the amount to be paid and the name of the person it is to be paid to.
 Debit Cards - are ATM cards issued by the banks that can be used to buy goods
and services. They are swiped by the shop assistant to obtain authorisation from the
issuing bank computer centre. If there is sufficient funds, the card is approved for
purchase.
 Credit Cards - are used to pay for goods and services on credit from a business, card
holders have a limit and cannot exceed that amount. The amount paid must be repaid
by a due date, if not interest rates are charged.
 Bank – Draft - is a cheque from one bank to another bank for payments in the name
of a particular person or organization. It is used to make payments for goods and
service in a foreign currency.
 Telegraphic Money Transfer [T/T] - is an electronic means of transferring money
from one bank account to another. The bank communicates by computer telex or
cable in order to carry out the transactions.

9
  Internet Banking- allows customers to have direct access to their own accounts on
line where they can check the balance on their accounts and make payments to
suppliers.
 Mobile Money and Mobile Wallets - this is an app on the phone that is connected to
the individual’s bank account that allows paying for an item with use of the phone.
E.g. Grace Kennedy’s PayPak

Difference between Private Sector and Public Sector

 The private sector is that part of the economy which comprises of businesses owned
and operated by private individuals. [private enterprise]
 The public sector is that part of the economy which comprises of businesses owned
and operated by the government. [public enterprise]

Private Sector Public Sector

Ownership Private individuals The government
Aims To make profits To provide social services
Source of finance Profits and loans The government
Distribution of profits Dividends paid to shareholders Paid to the government
Goods and services demanded by Public goods such as street
Type of products
consumers lights, health care
E.g. Sole trader, partnership, company, E.g. Ministry of Education,
Type of business multinational, franchise, cooperatives, Health, Agriculture etc.
conglomerate

Privatization Vs Nationalization
 Privatization- is the transferring of government owned firms to the private sector
 Nationalization- is the taking over of private firms by the state
Privatization Benefits
 It removes political interference in business operations
 It improves access to better quality services at affordable prices
 It helps to empower citizens

10
  It improves efficiency because of competition and the drive to increase profits
Privatization Disadvantages
 It can lead to massive job losses
 Profits go to the individual and not the whole nation
 Government may lose control of essential services
Nationalization Benefits
 Profits go to the state to fund development projects and used to expand other nationalized
industries
 It secures employment for the population
 It is used to pay interest and repayment of loans
 The state can control essential industries that are important for development
Nationalization Disadvantages
 Too much political interference by parliament makes it difficult to make profits
 The lack of profit motive leads to a waste of resources
 Consumer may lose their freedom of choice as fewer market options are available

Forms of Business Organizations

Sole Trader
 Definition- a business in which one person provides the capital and gets all the profit
 Formation – no legal formation but the firm must be registered
 It is funded by the owner’s savings or profits made or loans from the banks
 Examples of sole trader business – retailing, hairdressing, catering services
Advantages of a Sole Trader
 Easy to set up, that is small amount of capital needed and no legal formalities
 Owner has complete control and can take decisions quickly, he is not answerable to
anyone
 Owner keeps all the profits, this can be used to develop the business
 The business is based on the personal interest or skills of the owner rather than working
for someone
Disadvantages of a Sole Trader

11
  Unlimited liability –owner’s personal assets can be used to pay off debts if the business
fails
 Usually experience difficulty in raising capital – therefore the business remains small
 Owners usually work long hours and suffers all losses if the business fails
 Lack of continuity- when the owner dies the business comes to an end.
Partnership
 Definition - a business formed by 2 to 20 persons providing capital and shared
responsibilities
 Formation- the business may use a partnership deed, this is a document that governs the
legal requirement of a partnership
 Examples of partnerships – law and accounting firms
 Types of partnerships: joint ventures, syndicates, and limited liability
i. Joint venture: is a special type of partnership established to perform a
single business activity and closes when the activity has been completed.
E.g. NHT joins with the Matalan’s to build house, the government
provided the land and WICHON built the houses.
ii. Syndicates: is a group of persons or business organization that are given
legal authority to carry out a specific business transaction.
Advantages of a Partnership
 Better management - partners may specialise and have different skills
 Better decisions- partners discuss issues before arriving at a decision
 Larger capital - more capital can be raised since more people contribute to the running of
the business
 Sharing of losses and problems –the burden is for all and not just one person
Disadvantages of a Partnership
 Unlimited liability – partners personal assets can be used to pay off debts if the business
fails
 Lack of continuity - new partnership will be formed upon death or resignation of a
partner
 Delay in taking decisions - partners have to discuss issues before arriving at a decision

12
  Lack of capital to expand – the capital is more than a sole trader, but it is still difficult for
the business to expand
Co-operative
 Definition- a business owned, controlled and operated by a group of users for their own
benefit. The group may be users or producers of the product.
Characteristics
 Formation- open membership to any person over 16 may join for a small fee
 Democratic - all members have one vote and contribute to sharing responsibilities and
decisions
 Distribution of profits- profits are shared equally among members in the form of
dividends
 Shares are sold to its members as the members are also the clients
 Limited interest on capital – members are paid low rate of return [5%] on money
borrowed
Types of Cooperatives
i. Consumer cooperative - are persons who buy goods in large quantities then resell
them at reduced prices
ii. Agricultural cooperative - are farmers who corporate in the production of
agricultural products, share workload, make decisions and share profits
iii. Financial cooperatives – are organizations that sells shares and its members
receive dividends, they charge interest on loans and have fund raising activities
E.g. Credit Union- St Catherine Cooperative Credit Union]
Advantages of a Cooperative
 Betters decisions - members work together to solve problems and make decisions
 Offers lower prices - compared to larger supermarkets that aim for higher profits
 Profits are shared in the form of dividends -members are motivated to work hard to
benefit
Disadvantages of a Cooperative
 Unable to expand due limited finance – members do not have resources and profits may
be low
 Inefficient management - members may not have the experience of running a business

13
  Delay in decision making – all the members have to be consulted on major issues
Franchise
 A business that uses the name, logo and trading system of an existing business. E.g.
Burger King, Pizza Hut, Dominoes, KFC, Pizza Hut, Federal Express, Wendy’s
Advantages of a Franchise
 Less chances of the business failing as a well-known name is being used
 Advice and training are offered by the franchisor
 Supplies are obtained from established suppliers
Disadvantages of a Franchise
 Revenues have to be shared with the franchisor
 Initial license fee is expensive
 There is no choice of supplier
Companies
(i) There are two types of companies these are Private Limited and Public Limited
 The word ‘Limited ‘ means a company has limited liability and in case the
business fails the shareholders will lose capital contributed and not personal assets
(ii) A company raises capital by selling shares and debentures
(iii) The business must be incorporated i.e. it has a separate legal identity from the owners.
Private Limited Company
 Definition - a business with 2-50 shareholders who are often family members
 Formation- a business must be incorporated and give the registrar of companies the
following documents: The Memorandum of Association, The Articles of Association,
Statement of Authorised Capital
 Management - by owners or persons appointed by owners
 A private limited company receives a Certificate of Incorporation from the register of
companies to start operations
Advantages of a Private Limited Company
 Limited liability – in case the business closes down the shareholders will only lose their
capital and not personal assets
 Can raise capital by selling shares privately to individuals

14
  It has a separate legal entity, that is, a company may be sued and can sue, additionally a
company can be taken to court, but its owners cannot
 Greater continuity means that shares can be sold to someone and the company continues
Disadvantages of a Private Limited Company
 Too many legal formalities, this may be costly and time consuming
 Too many legal requirements that is, end of year accounts must be published
 Selling of shares is restricted to private individuals only and not to the general public
Public Limited Company/Joint Stock Company
 Definition – a business with at least seven members that offers shares to the public [ it
must have the words ‘PLC’ or ‘INC’ after the company’s name]
 Formation – must be registered an give the registrar of companies the following
documents: the Memorandum of Association, the Articles of Association, the Statement
of Authorised Capital ,and the Prospectus
 Management - by a board of directors who appoints an executive director
 Receives a Certificate of Trading from the register of companies to start operations
Advantages of a Public Limited Company
 Limited liability – in case the business closes down the shareholders will only lose their
capital and not personal assets
 It can raise capital by selling shares publicly
 It has a separate legal entity- means a company can be sued and can sue or while a
company can be taken to court its owners cannot
 Greater continuity – it does not close down on the death of a shareholder
Disadvantages of a Public Limited Company
 Too many legal formalities – this may be costly and time consuming
 Too many legal requirement – that is, end of year accounts must be published
 Risk of takeover- control may be lost if another company obtain enough shares in the
company
Documents that MUST be submitted by Limited Companies
i) Memorandum of Association
 It governs the company’s relationship with the outside

15
  It contains: The company’s name with the word ‘limited’, the address, and the objectives
of the company
ii) Articles of Association
 This document controls the internal running of a company
 It contains: procedures for calling AGM, procedures for election of directors and
A statement concerning borrowing powers of the company
iii) Statement of Authorised Capital
 This is the maximum amount of capital which the company is allowed to raise
iv) The Prospectus
 This is an invitation to the public to buy shares in a public limited company
 It contains the following information:
 Information about the business venture
 Objectives of the company
 Details of the types of shares and the amount of shares being sold
 Instructions how to apply for shares

Capital Structure of Limited Companies

i) Authorised capital
 The maximum amount of share capital a company is allowed to raise through issuing/
selling shares
(ii) Shares
 A share is a unit of a limited company’s capital. The two types of shares are Preference and
Ordinary
 When a person buys a share, he/she is given a share certificate and receives dividend when
the company makes profit
(iii) Debentures
 This is a loan given to a company from members of the public.
 The person who lends the company money receives a fixed rate of interest whether or not
the business makes profit

16
Economic Systems
An Economic system is the way in which a society allocates scare resources to produce goods
and services to satisfy wants of the population

Types of Economic Systems are:

1. Traditional [Subsistence]
2. Free Market [Capitalist Economy]
3. Planned/Command or Controlled Economy
4. The Mixed Economy
Traditional
 This is based on traditions and customs where nearly the entire population is engaged in
agriculture and produce enough food for their needs.
 E.g. in early societies, the Taino tribe produced enough food to satisfy their need using
the barter system
2. Free Market
 Economic resources are owned by the private individuals with very little government
intervention. E.g. USA and Japan
 The consumer influences the producers’ decisions on what to produce
 Goods and services are bought and sold in the market
Advantages
 Incentive to work is high, as a result, the labourer is free to work where he is paid the best
 Competition among firms results in greater efficiency and reduced prices
 Consumers are free to spend their money in any way therefore the firm produces more
goods that are in demand
 A large variety of goods and services are made available
Disadvantages
 Great inequality with income and wealth, this will result in poverty being a major issue
 Large sums of money are spent on advertising, this creates an artificial demand for goods
 Wealthy people have more economic power than the poor
 People’s basic needs may not be met e.g. health and education

17
3. Planned/Command Economy
 One in which all the economic decisions are made by the government
 All resources and products are decided by the government e.g., health, education
 E.g. countries with planned economy- North Korea, Cuba, China
Advantages
 Basic needs of the population are met
 There is little inequality of wealth and income
 There is less waste of resources
Disadvantages
 Private firms do not exist to compete with each other and force prices down
 There is less incentive to work hard to earn more or make profits
 There is limited consumer choice
The Mixed Economy
 One in which economic resources are owned and controlled by both private and public
sector. E.g. Caribbean countries including Jamaica, Trinidad
 E.g. the government provides services such as; defence, hospitals, schools, public health
Advantages
 The government is free to make laws to protect consumers from unfair trading practices
 A wide variety of goods are provided by both government and private individuals
Disadvantages
 Too much government intervention may result in conflict between private and public
sector
 State owned firms are allowed to operate inefficiently wasting resources

Functional Areas of a Business

Functional area of a business refers to how the organization is structured for efficient
operation. This means that the activities of the business are grouped accordingly to the nature of
what is required. A small business will be managed by one person, but a large business will be
managed by more than one person with specific skills. Functional areas of business
include marketing, production, personnel, finance and research and development.
Production
18
  This department is responsible for converting raw materials into goods and services
needed by customers to satisfy their needs and wants.
 The functions include: buying raw materials, ensuring high-quality production, storing
material and finished products, research and development of new products
Marketing
 This department is responsible for finding out what customers want and how this can be
promoted and sold
 The functions include: pricing the product, promotion and advertising, distribution and
selling, market research
Personnel/Human Resource
 This department responsible for recruiting the right person with the expertise to carry out
the job, it is responsible for the employee’s welfare
 The functions include: recruitment of staff, staff training, disciplining of workers, staff
wages, sick leave, and pension schemes
Finance
 This department is responsible for managing the finances and cash flow of the business.
 The functions include: keeping up-to-date accounts, keeping cash flow records, keeping
within the budget and obtaining new finances
Research and Development
 This department is responsible for seeking to improve its product or service in order to
maintain its competitive edge.
 The functions include: redesigning or rebranding, financial research, feasibility study

Stakeholders of a Business
It is important to identify stakeholders in a business so that the organisation knows who depends
on it for survival and knows who has interest in the business
 Stakeholder - An individual or group with direct interest in the operations and
performance of a business
 Examples of Stakeholders- Employees, Employers/Owners, Customers, Suppliers,
Government, Members of the society

19
Role of Employers
 To provide goods and services of high quality and reasonable price
 To manage resources (employee, raw material, equipment) efficiently
 To provide goods working conditions, fair payment of wages etc.
Employees
 To provide labour to allow goods and services to be provided
 To efficiently use resources placed in their care
Customers
 To purchase and use the products it was intended to be used for
 To provide feedback on the product through complaints and suggestions
Government
 To protect customers through laws
 To provide law and order to allow legal business activity to take place
The Society
 To provide local services and infrastructure to the business

Ethical and Legal Issues in Establishing a Business

 Ethical and legal issues are laws and regulations that guide the decisions of an
entrepreneur. Ethical issues are basic principles of what is legally right
 Legal issues refer to; activities that are guided by the laws of a country. These laws must
be followed, or persons will suffer the penalties such as pay paying a fine or going to
prison
 Ethical and legal principles include adopting an organization’s code of ethics, policies of
environmental issue, handling of personal information, legal source of funding, payment
of taxes and registration of the business

Consequences of Unethical/ Illegal Practices in Business

Advertising
 The law states that a business should create honest and realistic advertisements.
 Consequences of misleading advertising will lead to a loss of customer support or
customers may boycott the product

20
Payment of Taxes
 All taxes must be paid over to the state, this will be used for the development of the
country
 Consequences of not paying taxes may lead to legal actions being taken against the
business leading to heavy fines or imprisonment
Environmental Issue
 The law provides guidelines about disposal of waste and packaging to be used, however
some businesses may go undetected for years
 Consequences of Unethical disposal of waste may lead to pollution in the environment
and fines imposed by the courts
Use of Safe and good quality raw material
 A business should use safe and good quality raw material to make its product
 Consequences of making cheap and unsafe product may create health problems or loss of
customer support
Not Accepting or Offering Bribes
 An entrepreneur should not accept or offer bribes, this will encourage the customer that
the business is always doing the right thing.
Money Laundering
 A business should avoid the practice of money laundering, this is where an entrepreneur
receives money illegally through serious crimes such as drug trafficking but makes it
appear legal.
 Consequences of money laundering may result in the entrepreneur being imprisoned.

21
 Section 02
Internal Organizational
Environment

22
Functions of Management
Management is bringing together all the human resources and non-human resources in an effort
to meet the organization's goals. The functions of management are designed to create an
environment in which the goals of the organization can be pursued in an efficient manner. These
include:

Planning
 This is concerned with defining goals for the future of the organization, deciding the
direction the business should take and the resources needed
Organizing
 This involves bringing together the factors of productions land, labour, capital and
enterprise
 It also means planning who is going to do a particular task and who is going to supervise
the job
Directing
 This involves giving instructions and getting people to work in an efficient and effective
manner.
Controlling
 This function involves monitoring the employee’s activities to determine if the
organization has achieved its target and make corrections if necessary.
Co-ordinating
 This function involves making all the resources in a business work efficiently to avoid
confusions and duplication of activities between departments.
Delegating
 This involves assigning a task to subordinates so that the manager can have more time to
devote to more important issues.
Motivating
 This is a process where workers are inspired to do their best and take responsibility for
their own work

23
Responsibilities of Management
Businesses have a duty to demonstrate that they care about their stakeholders such: employees,
society, customers and the government
Management Responsibility to Owners
 To maximize efficient use of resources to reduce wastage
 To earn profit to pay dividends to shareholder
 To keep owners informed through annual reports
Management Responsibility to Employees
 To pay fair wages
 To provide good working conditions
 To offer training courses to develop workers
Management Responsibility to the Society
 To provide stable employment
 To avoid damages to the environment
 To sponsor special social/cultural events
Management Responsibility to Customers
 To charge fair prices
 To provide quality products
 To offer pre-sales and after-sales services
Management Responsibility to Government
 To observe all legal laws
 To pay all necessary taxes
 To provide all information required by government

Organizational Charts
An organizational chart is a diagram of the organizational structure showing different
management and employee positions in a business. It shows:
1. The levels of authority and the span of control
2. The department manager is responsible for
3. Who the manager is responsible for
4. A formal relationship in the organization

24
Interpretation of the Chart
The most senior position is placed by itself with no other position at that level
All positions with the same level of authority but different departments are placed on the same
level
Span of control – the number of subordinates reporting directly to the manager. It can be narrow
or wide
Chain of the command-the route through which authority is passed down from the chief
executive

Types of Organizational Charts

Functional
The functional structure is designed
according to the functional area of a
business such as production, marketing,
finance. In this structure, the staff of
the production department reports to
the production manager.

Line
Authority flows from top to bottom and
workers are assigned goals or task
accomplished.

Line and Staff

The line manager has ultimate authority in a firm and the staff managers area subordinates who
assist them in carrying out certain activities in the organization.

25
Characteristics of a Good Leader
A leader is someone who influences and directs workers towards achieving the goals of the
organization. The main characteristics of a leader are:
 Must have the ability to communicate with clarity - so that workers can understand what
is being said and not misinterpret the information
 Must be willing to listen - this will enable the leader to solve conflicts and problems
 Must be a critical thinker and be able to solve problems- being able to look at alternatives
before making a decision
 Must be able to motivate others to be self-driven- this enables workers to accomplish a
task quickly
 Must be creative- be able to come up with new
 Must have self- confidence, this allows the workers to have confidence in their leader
resulting in their willingness to follow his/her instructions

Leadership Styles
Leadership styles refer to the way in which a manager makes decisions and deals with his/her
staff. Leadership styles include - Autocratic, Democratic and Laisser-faire
Autocratic
One who takes decisions alone with no discussion, the workers are not involved in the decision-
making process. It is best suited for military service, army, and police force
Advantages
 Makes quick decisions without the need to consult others so no time is wasted
 Supervises workers closely, this will eliminate the tendency for workers to ‘slack off
’resulting in increased productivity.
 Takes full control of the organization and get persons to carry out the required task
Disadvantages
 The leader is a poor motivator- this demotivate workers who want to contribute and
accept responsibility
 This leadership style does not contribute to team building since the leader is detached
 This leadership style leads to resentment and frustration among workers who cannot
pursue the goals of the organization

26
Democratic
One who engages in discussion with workers before taking a decision, this involvement can lead
to better decisions. It is best suited for small organizations where the organization’s goals require
a major commitment from the staff
Advantages
 Worker involvement is encouraged, this can lead to better decisions.
 It facilitates a two-way communication which allows feedback from workers.
 Job enrichment is more likely to be achieved because attention is given to workers
through involving them in decision making
Disadvantages
 Consultation with staff can be time-consuming since the views of many persons have to
be considered
 On occasions where quick decisions have to be made, this leadership style might not be
the best
Laisser-faire
One who leaves colleague to get on with their work, such as tertiary institutions where teachers
are expected to facilitate students’ education.
Advantages
 Little if any supervision is required, this provides job enrichment
 It encourages horizontal communication, this encourages the staff to be innovative
Disadvantages
 Delay in decision making due to numerous discussions and deliberations
 Laisser-faire approach by supervisors may be interpreted as a lack of care for the workers

Sources of Internal Conflict in an Organization

There are some factors that can lead to dissatisfaction and conflict between management and
workers, which management should guard against or be prepared to handle. These include:
 Pay Dispute- Levels of worker’s pay
 Working conditions e.g. long hours
 Unfair treatment of employees e.g. unfair dismissal
 Competition between employees regarding performance/promotions

27
  Leadership style not suitable for employees
 Breakdown in communication leading to a misunderstanding between employer and
employee
Employer’s Strategy to Settle Disputes
 Negotiations – are used to reach a settlement between the employer and employee
 Public relations- this is using the media to gain public support for the employer’s position
 Threats of redundancies- this is where the employer puts pressure on the union to reach a
settlement
 Change of contract – this is where the employer may change or issue a new contract
when old ones are due for renewal if the worker takes part in industrial actions
 Closure – the business or factory will be closed to solve the conflict leading to
redundancy and loss of profit to the owner
 Lockouts – these are short-term closures of the business to prevent employees from
working and being paid
 The employment of other workers to break the strike
Employees Strategy to Settle Disputes
 Go slow- a form of industrial action where worker’s work at a minimum pace, they may
lose their bonus pay.
 Work to rule- workers refuse to work outside of the precise terms of their employment.
 Overtime bans – employers refuse to work more than contracted number of hours.
 Strike actions – workers totally withdraw their labor for a period of time leading to
production stoppage.
 Picketing – demonstration by workers to gain support for their case.
Conflict Resolution Strategy
A grievance is an issue or dispute that workers take to their employer.
The following grievance procedure is taken to resolve a conflict:
1. Workers report the grievance to Trade Union
2. Union delegates utilize collective bargaining to resolve conflict with supervisors
3. If unresolved delegates seek to resolve conflict with top managers
4. If an unresolved matter is reported to the Labour Minister for mediation or conciliation

28
 5. If unresolved then the Industrial Disputes Tribunal [IDT], the chief arbitration body is
bought in to solve the problem
6. IDT hears the case from both parties and makes a rule or judgment on it
Role of Trade Unions
A Trade Union assist workers in dealing with a conflict that arises in the workshop between
management and themselves, they help to settle disputes between workers and management.
Purpose of Trade Unions
1. To represent the worker's interest
2. To negotiate on behalf of workers for better wage and salaries, fringe, benefit, and
improved working condition.
3. To settle disputes between management and workers
4. To educate their members about their rights and responsibilities
Key Terms
Trade Unions- is a mediatory body that helps to settle disputes between workers and
management
Collective bargaining – negotiations between a representative of workers and employers
Shop Stewart – a union representative
Industrial action – measure taken by the workforce or trade union to put pressure on management
to settle an industrial dispute in favor of employees
Conciliation/Mediation – the use of a third party in industrial disputes to encourage both
employer and union to discuss an acceptable compromise
Arbitration –resolving an industrial dispute by using an independent third party to judge and
recommend a solution
Grievance procedure- the agreed process of attempting to resolve an industrial dispute

Guidelines for Establishing Good Relations between Employer and Employee

1. Maintain good communication with workers to avoid misunderstanding
2. Adopt good management styles to guide workers to the desired actions required
3. Provide good working condition to motivate workers to work efficiently
4. Motivate workers with adequate compensation to build trust loyalty and
5. employees self- worth

29
 6. Establish grievance procedures to help to eliminate industrial actions since there
7. is an opportunity for dialogue

Value of Teamwork in an Organization

Teamwork
This is consist of grouping workers together to work cooperatively to achieve the same goal
Advantages
 Team members can share ideas, so the quality of decision making is improved
 Fosters the participative approach, this gives a feeling of belonging
 Improves morale- group interaction and participation can motivate workers
 Encourages innovation- fewer experience workers can learn from working with more
experienced workers
 Boosts productivity -allows workload to be shared equally among members according to
each member’s strength
 Establishes a strong relationship- strong relationships are developed
Disadvantages
 Personality clashes may exist between team members
 More time is needed to make decisions and solve conflicts as more people are involved
 Some persons may prefer to work as an individual and not as a team resulting in some
members doing all the work

Strategies for Effective Communication

Communication is the exchange of information between people or groups with feedback
Manages will have to consider the following factors before deciding on the best communication
methods:
Medium [oral, written, visual or electronic]
Cost
Speed
Quantity of data to be sent
Barrier to communication and how to overcome them

30
Communication Channels
Formal channel - include letters, memos, reports, hosting a meeting, suggestion boxes
Informal channels [also called the ‘grapevine’] transmits messages that may or may not be true
and sometimes result in much confusion in the organization.
Communication Methods
Written Communication
Examples – letters, memo’s, reports, minutes in a meeting, press release, bulletins and notices,
emails
Advantages Disadvantages
Provides written document No immediate response
Can be sent to persons far away Maybe misinterpreted
Can confirm, explain or clarify an oral Can be costly and time-consuming to create
message

Oral Communication
Examples – face to face conversations or meetings, interviews, telephone calls
Advantages Disadvantages
Provides direct contact Can be affected by noise
Can be varied to suit the need of the receiver Can be quickly forgotten
Allows for instant feedback There might not be any written record

Visual Communication
Examples – photographs, films, graphs, charts, body language [gestures, posture, and facial
expression]
Advantages Disadvantages
More interactive May be difficult to interpret
Easier to remember May require time to interpret
Creates greater interest Maybe expensive

31
Electronic Communication
Examples – internet and emails, fax messages, video conferencing, mobile telephones
Advantages Disadvantages
Great speed Cannot always be received
Creates interest It expensive
Encourage response Risk of communication o
overload

32
03
Establishing a Business

33
Functions/Roles of the Entrepreneur
An entrepreneur is someone who shows vision and creativity, taking the financial risk of starting
and managing a new business
Entrepreneurship is showing enterprise skills of vision and creativity when taking the risk to set
up a new business venture
Conceptualizing
This is where the entrepreneur comes up with a new idea. It may be a new product, service or
improvement to existing ones or ways to fill a need rather than trying to find an existing
business.
Planning
The entrepreneur should plan for the formation and operation of the business by stating his
objectives, targets and goals and ways of accomplishing them.
Accessing Funds
The entrepreneur will find ways to finance the business, he may have to use his own savings,
obtain loans from banks, and obtain government grants and other investors.
Organizing
This is the ability of the entrepreneur to bring people together, material and equipment in such a
way that he gets the work done. This involves deciding what needs to be done and deploying
workers where their skills are needed most.
Operating and Evaluating the Performance of a Business
The entrepreneur must ensure that the day to day activities are carried as well assess how the
business is performing and whether or not it is achieving its objectives. The information gathered
can be used as a foundation for future planning and adjustments.
Risk Bearing
The entrepreneur must accept the possible risk of success as well as accept the possible risk of
failure. If profits are made the entrepreneur is entitled to it, but he/she will bear the loss if the
business fails.

Characteristics of an Entrepreneur
 Creative- the ability to develop new ideas, or new ways of doing things and satisfying
needs, it involves being open-minded, resourceful and knowledgeable.

34
  Innovative- developing a new idea or making changes to an existing one, this might be a
change in the way it is delivered or a new feature.
 Flexible and multi-skilled- the ability to react quickly to changes such as economic
changes, be able to get on with people, good at handling money and keeping accounts.
 Goal-oriented- the entrepreneur has a high need for achievement, accomplishing a
specific task or goal.
 Persistent and persevering – determined not easily deterred from the target, confident and
optimistic, believing they will make things work in spite of the risk.
 A risk taker- having a propensity to take calculated risks, likes challenges, confident that
they can be successful.
 Other characteristics include: humility, honest, highly motivated, self- sacrificing, and
sociable.

Roles of the Entrepreneur in Decision Making

Entrepreneurs play a pivotal role in driving economic development by fostering innovations,
creating jobs and stimulating growth within communities. Entrepreneurs identify opportunities,
mobilize resources, and generate wealth, ultimately enhancing the standard of living and
contributing to the overall prosperity of society. Thus entrepreneurial activities helps with
shaping a vibrant and sustainable economy.
Collaborating
Entrepreneurs bring people and resources together to work collaboratively to achieve shared
objectives. They also work with other businesses (such as suppliers) and with the government to
create a vibrant economy.
Providing Goods and Services to Satisfy Citizens
Enterprise provides society with the products and services it needs. Where an entrepreneurial
culture is widespread, citizens will benefit from the development of new and exciting products,
such as new music acts, food stuffs, cosmetics and many other new products. Entrepreneur
listens carefully to the thoughts and feelings of consumers order to provide the products and
services that they want, and more choice and variety in what they can buy.

35
Creating Jobs
As most new businesses start to grow they create job vacancies and this offers more employment
opportunities for citizens. Most of the employment in the Caribbean is in the small business
sector, although there are also jobs created by international companies.
Contributing to Nation Building
Business prioritize solutions that are kind to the environment, provide sponsorship and employee
time for charitable events and causes and get involved in the life of the community. The output
produced and sold by new businesses increases gross domestic product (GDP) and helps to
increase living standards (GDP per Capita) Businesses that supply materials and services to
entrepreneurs will gain increased trade, allowing them to provide more jobs and income. Some
new businesses will also sell their products to other counties to improve the country's balance of
trade and foreign currencies. All of these gains help to build the strength of the nation.
Small businesses pay duties and taxes on sales and profits that must be turned over to the
government. The government in turn uses the funds to provide social goods and services (such as
schools and health clinics) and to maintain infrastructure (such as roads).

Roles of the Entrepreneur in Economic Development

 Providing goods and services - to satisfy the needs of customers.
 Creating jobs - individuals can earn an income and improve their standard of living.
 Contributing to nation building- by exporting goods thus earning foreign exchange that
will be used to buy more capital goods needed for further production.
 Collaborating- in building partnerships with communities by contributing towards
community projects, this will help members of the community to improve their well-
being.

Reasons for Wanting To Start a Business

 Desire for Financial Independence – the entrepreneur prefers to make his own decisions
in order to create their own wealth, not having to depend on another for limited resources.
 Self - fulfilment – the belief that he/she will get more rewards i.e. more than if they were
working for someone else.

36
  Self-actualization- that is the ultimate satisfaction of the need to fulfil one’s potential and
to become the best in the industry.
 Increased income: an individual can start a business to earn more money.
 Increased control of working life – that is, to become your own boss in making all the
decisions without consulting anyone.

Steps for Establishing a Business

i. Conceptualizing- Identifying a possible business idea based on skills or hobbies or
previous employment.
ii. Research- The entrepreneur will have to probe the market to find customer’s wants,
who are its competitors. Competition is always a problem for new businesses, so an
entrepreneur may have to offer better customer service to attract customers.
iii. Identification of Resources- The entrepreneur has to identify his financial, human and
material resources.
 Financial resources - the entrepreneur using his savings or borrowing money from
friends/relatives or the bank to finance his business.
 Human resource - the entrepreneur and his workers need the necessary skills that
will make the business successful.
 Material resources- you will need good quality raw materials and the necessary
supplies if you are providing a service.
iv. Creation of a Business Plan- This is a detailed document that provides information on
the purpose, the resources and the main activities of the business. A business plan is
important when you have to submit it to a lending institution or a prospective investor.
v. Acquisition of Funds- Obtaining finance can be a problem as many entrepreneurs lack
sufficient savings or lack knowledge of financial support/grants available and many
suffer from poor business plans
vi. Operation of the Business- Once all the resources and finance are in place, the
business can start trading. This means meeting and selling to the customer, ordering
fresh supplies etc.

37
Reasons for Preparing a Business Plan
A business plan is a written document that describes the rationale for starting a business and the
steps involved in starting and operating it successfully. The following are some reasons to
prepare a business plan.
 To ensure that careful research is conducted into the feasibility of the business.
 To attract potential investors, for example, persons who wish to purchase shares in the
company.
 To source financing when applying for a loan from a bank or any financial institution.
 To guide the operations of the business when making decisions -it gives clear objectives
of what the business hopes to achieve.
 It outlines resources needed e.g. machinery, labour, premises.

Elements of the Business Plan

 The executive summary - is a summary that gives a clear picture of the main points of
the business. It contains: the type of business, its main objectives, its owners, a brief
description of the product, nature of the business, government regulations.
 Operational plan: The business and its objectives, name, address, legal structure, aims
and objectives, personnel, suppliers, equipment necessary.
 The business opportunity: a description of the product or service.
 The Marketing plan - contains the organization of the marketing department, market
research, product strategies, pricing strategy, distribution strategy, and promotional
strategy.
 The Financial plan – contains the purpose for which finance is needed, production cost,
collateral, cash flow, and profit and loss forecasts.

Sources of Information for Conducting Research

Market research is important to the success of any business. Market research is the collection and
analysis of data about consumer preference. There are two main types of market research, these
include primary and secondary research.

38
Primary Research
Primary / Field research - refers to first- hand information that does not already exist. Primary
research involves the use of:
 Questionnaires – given to shoppers to complete and hand back or internet users to fill out
online
 Interviews – can be street-based or telephoned based.
 Observation- observe consumer behaviour example by identifying which shop displays
make them shop and buy.
 Product tests- ask consumers to try a product or service offered by the business.and fill in
a report card on their experience
Secondary Research
Secondary /Desk research- refers to the use of secondary data, that is, information that already
exists. Secondary research involves the use of:
 Internet searches – e.g. search the web for information on the market size of the
competitor
 Government publications – import/export data for industries
 Brochures -Information from competitors

39
Feasibility Study
A feasibility study is a report that investigates whether a new business idea is worthwhile, will
the idea work or is it likely to be profitable.
When Is It Done
 It is done before a business plan – to determine if a business or project is worthwhile
going ahead
 It is done on ventures that are newly starting – to determine if the idea will work, will it
be profitable
 It is done on a current business that is expanding- to determine the likely cost
 It is done on a new aspect of a current business- to determine if it is likely to be
profitable

The Need for Planning In Operating a Business

Planning is a decision- making process by which an organization decides what it wants to
achieve and how it intends to achieve it and in what manner.
Importance of Planning
 Planning gives direction-provides a guideline
 Planning forces managers to look ahead and anticipate possible changes
 Planning helps to avoid mistakes
Consequences of Not Planning
 Little chances of success or survival of the business
 Firms would not have resources to deal with expansion or its competitors
 Workers not being able to deal with different events e.g. new machines
Short Term Planning
Preparing the business for the day to day activities, these may be for each day, week, and 12-24
months.
Medium Term Planning
Preparing business for events that could occur within the next 3years. E.g. decisions to use a
particular sales promotion to keep up with a competitor.

40
Long Term Planning
Preparing the business for events that may occur several years – up to 10 years in the future. E.g.
decisions to introduce a new product, or to undergo a major expansion.

Local, Regional and Global Rules for Conducting Business

 All businesses must observe laws or rules that govern their activities at all levels. Below
is a list of laws that are practiced locally / globally and their impact on businesses.

Regulatory Practices Instituted By Governments for the Establishment and Conduct Of

Different Types Of Businesses
Payment of Taxes-All taxes must be paid over to the state if taxes are paid there would be no
chance of legal actions being taken against the business leading to heavy fines or imprisonment.
Operating in Commercial Zones- All business should operate in commercial zones, factories
should not be located in residential areas in order to prevent pollution and health hazard to
members of the community.
Registration of the Business- All businesses should be registered so that the government can
monitor it activities and provide guidance if a business is registered there would be no chance of
heavy fines being imposed or imprisonment.
Food Handlers Permit- Anyone handling food or preparing material must possess a food
handler’s permit, this will reduce the risk of food poisoning and ensure a hygienic working
environment.
Inspection of Business Place- Business places should be inspected by safety and health officials
this will prevent infestation of animals carrying dangerous diseases.
Adherence to Copy Right and Patent Laws-This should be practiced to avoid legal actions being
taken against the business for breach of the copyrights laws.
Workers Redundant/ Redundancy Pay- Entrepreneurs should avoid making workers redundant
without no explanation, this will motivate the employees to work hard as they feel the business is
addressing their issues such as working conditions and wages.
Registration of trade persons- Skilled persons such as electricians need to obtain a license to
ensure that they are qualified for the job. Certain products such as medicines and defence
equipment cannot be sold without a license.

41
Factors That Determine the Location of a Business
Choosing a site for a new business or relocating of an existing business are some of the most
important decisions made by management. The best site should maximize long term profits. The
following factors should be considered when choosing the location of a business:
Geographical
 A business must be accessible and well positioned, this will have the potential for high
sales
 A business that is cheap to purchase but is located far from towns may have problems
recruiting staff or attracting suppliers.
Availability of Raw Material
 Nearness of the raw material can reduce production cost, as there will be no need for
high transport cost in getting materials.
Infrastructure
 Up-to-date communication system – an increase in online shopping may lead to less
opening of street stores and more ‘warehouse’ operations to supply consumers.
Power
 A business needs reliable low- cost suppliers of power to operate efficiently.
Water
 Fresh clean water supplies are needed for healthy living and countries with poor water
supply find it difficult to attract investors.
Health Facility
 A business should be located where there are good health facilities to keep the workforce
healthy and capable of effective work.
Transport Cost
 A business should locate near to the supplier of their material e.g. service industries such
as hotels and retailing need to be located near to their customers so that transport cost will
be less.
Labour Supply
 A business should employ the appropriate labour skills where needed, a shortage of
skilled labour may result in the labourer demanding high wages.

42
Government Legislation
 The government may provide grants and tax incentives to attract businesses to locate in
certain areas.
 The government may also provide financial assistance so that firms provide jobs in areas
of high unemployment. E.g. The government may grant an investor duty- free
concessions on raw materials if they are willing to locate their business in rural areas.

Significance of Collateral in Accessing Capital to Establish a Business

Collateral is an asset pledged as payment for a loan if the borrower fails to make regular
payments. Collateral is security required by a lending institution to act as a safeguard in case the
loan is not repaid.
Different Types of Collateral
 Property – e.g. land, building
 Trucks, drilling rigs, computers, motor vehicle
 Natural resources e.g. gas oil
 Stock such as shares in a company
 Money
Valuation of Collateral
 The lender puts a value on an asset being used as collateral to help decide how much can
be lent
 The borrower will try to suggest that the value of the collateral is high in order to get a
higher loan
 The collateral is valued based on expert advice or past price trends

43
04
Legal Aspects of a Business

44
Contract
A contract a specific legal binding agreement between two or more people in which there is an
agreement to do something in return for a benefit [consideration]. A contract is enforceable by
law- this means if the other party does not abide by the contract, the other party may take legal
actions.
Parties to a Contract
 Offeror- the person who made the offer
 Offeree- the person to whom the offer is made
 Acceptor – the offeree who has accepted the offer

Types of Contracts
There are two main types of contracts. Simple and speciality contracts.
A Simple Contract
 It may written, oral or implied by conduct
 Consideration is an important element in a simple contract
 Examples: Hiring a taxi, entering a store to purchase items, life or general insurance
[written contract]
Characteristics of a Simple Contract
The essential elements of the formation of a valid and enforceable contract are listed below. A
contract is void or voidable [cannot be enforced by law] if one or more of the following features
are lacking
1. Offer and acceptance
2. Consideration
3. Legality
4. Competence of the parties/Capacity
1. OFFER AND ACCEPTANCE
A contract is formed when an offer has been unconditionally accepted. The means that all terms
of the agreement must be accepted by both parties.
The Offer
 This is an indication by one party to the other that they are willing to make a proposal and
to be legally bound by it

45
Rules Governing an Offer
i. The offer must be communicated to either to a specific person or to the general public
 E.g. - Golda offers to sell her bracelet to Tamara, this is an offer made to a specific
person
 E.g. - Golda advertises that the first person who comes to her house on a specific
date and time
 Will be able to buy the bracelet, this is an example of an offer made to the general
public.
ii. An offer can be expressed in writing, oral or implied
E.g. - if you went to the dentist for some treatment, you are agreeing in principle to pay
for the treatment, if you are handed a bill and refuse to pay, you would be in breach of a
contract
Acceptance
 Acceptance is when the offeree [the person to whom the offer was made] agrees to the
terms of the offer made by the offeror
Rules Governing an Acceptance
i. Acceptance must be communicated:
 written- that is effective from the time
 verbal- that is when a seller says ‘okay I accept your offer
 by conduct e.g. when a shop owner puts your jeans in your bag and accepts your
money
ii. Acceptance must be unconditional/unqualified.
The offeree cannot introduce a new term to the contract. E.g. if a seller offers a used car for sale,
you cannot say ‘I accept your offer on the condition that all tyres are replaced’, this is not
acceptance, but you have created a counter offer.
NB: a counter offer is when the offeree changes the term of the agreement and it is equal to
the rejection of the original offer and is not legal acceptance.it is left up to the offeror if
he/she will accept the new terms presented by the offeree.
iii. Acceptance must be within an agreed time – however if no time period is stated, it must
be done within a reasonable period.
iv. Acceptance made through the post is effective once the letter is posted.

46
 E.g. an acceptance letter lost in the post and which never reaches the offeror is still valid,
since a contract existed from the time of posting by the offeree.
Invitation to Treat
An invitation to treat is not an offer, it is an invitation to make an offer. This is a situation where
an offeror invites other parties to make him an offer
Examples of Invitation to Treat
 An auctioneer’s request for a bid
 goods on display in a shop or store with a price tag
 property advertised for sale
 an advertisement in the newspaper
2. Consideration
 Consideration is the benefit received by both parties either in the form of cash, goods or
services. E.g. a promise to dig someone’s garden in exchange for repairs to a washing
machine is a valid contract
 Consideration must be real, that is well defined, it should be able to convert to cash
 Consideration should be lawful since an unlawful act would be void [cannot be enforced
by law]
3. Competencies of Parties [Capacity of Parties]
 Competencies of parties or capacity in law means that the persons are eligible to enter
into a contract.
 The following groups are not eligible to enter contracts: Minors ( those less than 18
years) drunks , insane persons, prisoners
4. Legality
 All forms of contract must conform to the laws of the land. E.g. if Joe pays Michael $500
,000 to deliver a tonne of marijuana and Michael fails to carry out his side of the contract,
then Joe cannot get the courts to force Michael to carry out his side of the agreement.
 Illegal contracts include: contracts to commit wrongs or crimes or contracts involving
sexual immorality
Speciality Contract
 Speciality contracts are also called a deed or contract under a seal. Speciality contracts
apart from being written must be :

47
  Signed –signed by both parties
 Sealed – seal imprint is put on the document
 Delivered – all the parties to the contract must have a copy of the document
 Examples: mortgage agreements, land or property sales, hire purchase agreement

Ways in Which Contracts May Be Terminated

A contract may be discharged or terminated when one of the parties is released from their
contractual obligation.
Methods of Discharge
 By breach- one party breaks the contract by failing to carry out its side of the agreement
 By agreement- both parties agree to cancel the contract before it is completed
 By performance- both parties carry out their side of the agreement
 By frustration- one or both parties being unable to meet their obligations because of
circumstances out of their control
 Lapse of time- failure of a party to carry out its side of contract within reasonable time
 By renunciation – one party carries out a portion and fails to carry on any further
 By death – one party may die
 By bankruptcy – one party may become bankrupt
Breach of Contract
 Breach of Contract is a refusal of one party to fulfil the obligation of the contract. When
one party breaches a contract the innocent party is entitled to some form of compensation.
Where there is a breach of contract the innocent party must be paid for damages, that is,
compensation must be given to the innocent person in the form of cash

The Importance of Record Keeping in a Business
Business documents are the official documents used in a business to help keep track of all
official and unofficial business transactions.
Business documents are important because:
 they make the communication process possible and are used for reference purposes e.g. if
a customer queries a bill the filed copy can be used in clarifying any queries
 governments require proper documentation for taxation and auditing purposes

48
  they provide a written record between a firm and its customers e.g. receipts, invoices
 it prevents business persons from forgetting important information to be used in the
performance of their various task
 it saves time since relevant information can be located easily and can be extracted if
needed
Preparing Common Business Documents
Pro-forma Invoice
 A Pro-forma Invoice-is a bill sent to the buyer when the supplier requires payment in
advance of delivery when the buyer is not well known by the seller. It is sent when
 the buyer is not well- known by the seller
 when certain goods are sold on a trial basis to the customer who has the option to
return the goods if they do not wish to purchase them
 used in import/export trade to assist in the calculation of customs duties and other
fees
The Invoice
 The invoice lists the goods purchased and informs the buyer of the amount owed to the
seller
 It contains the: quantity supplied, price per unit, total amount owed, invoice number,
buyer’s order number, terms of sales, E & OE [errors and omissions expected] means the
supplier has the right to correct any errors at a later date
Statement of Account
 Is a summary of all transactions made between the buyer and the seller during the month
and it reminds the customer that payment is due.
 It enables the customer to compare the records kept by the seller with his own
 It contains: balance owing at the beginning of the month, the amount of invoice issued,
debit or credit notes issued, the net amount owing at the end of the month
Purchase Requisition Forms
 This is a business document that is used within an organization when goods are needed
from the stock room.

49
  The purpose of the document - it helps to control the movement of stock it informs the
firm on how stocks are used and by whom, it gives information on what persons need and
the quantity
Stock Card
 Document that keeps information about the stock such as records of stock received and
issued and the balance at any given time
 It contains: minimum and maximum levels of stock , amount if stock received, amount of
stock issued, re-order levels
Credit Note
 A document sent to a buyer if he has been overcharged due to: faulty or damaged goods
that have been returned , goods are supplied in smaller quantities than shown in the
invoice, discounts were left off the invoice, too much charged for transport
Debit Note
 A document sent to the buyer if he/she is undercharged due to : some delivered items are
not on the invoice , pricing errors made on the invoice , the buyer has kept samples that
were sent by the seller, transport cost omitted

Insurance
Insurance is a promise for financial compensation for a risk that may or may not occur such as
accidents, theft, and fire. Unexpected events may occur at times when individual cannot afford to
restore themselves.
Insurable and Uninsurable Risk
 Insurable risk are events that the insurance company will be able to calculate and charge
customers a premium. e.g. fire
 Uninsurable risks are events that the insurance company will not be able to calculate and
charge customers a premium e.g. you cannot insure if a business will be successful or not.
The Insurance Contract
 An insurance policy is a document sent by the insurer to the insured which states what has
been agreed between the two parties. Insurance policies may be obtained through an agent
working for a particular company or through brokers selling insurance for a number of
different companies.

50
 Insurance can be provided by insurance companies, underwriters and the government.
Pooling of Risk
 The pooling of risk is where people faced by same events, come together to protect
themselves. Every person or business faced with a risk pays a small amount of money
called a premium to the insurance company, to compensate for losses suffered by
themselves and others.
 If a home-owner loses his house due to the risk of fire, instead of one person bearing the
loss, it is shared by several persons of a large group.
Value of Insurance In Lowering Risk Associated With Business
1. It provides financial protection and compensation if a risk occur e.g. fire
2. It provides business confidence and peace of mind, that is, people will invest their money in a
business without the fear of losing it
3. It is an invisible export, which brings revenue/foreign exchange to a country, this helps to
improve the country’s balance of payment position

The Principles of Insurance

The four principles of insurance include:
1. Indemnity 2. Utmost good faith 3. Insurable interest 4.Proximate cause
Indemnity
This means to restore the insured to where he or she was before the loss or damage occurred.
This principle does not apply to life assurance since no money can compensate death.The
principle of indemnity is not to make a profit from a loss, but you receiving a fair compensation
Rules Governing Indemnity
Subrogation- This is where the insurer after being compensated, surrenders the right of
ownership to the insurance company. E.g. if your car was completely wrecked in an accident, the
insurance company would compensate you, but they would take the wreck to ensure that you do
not sell the wreck and make a profit.
Contribution- This occurs when more than one insurance company is liable for the loss, the
amount of loss is shared in proportion by different insurance companies. E.g. If you have insured
your car with two different insurance companies and your car was stolen, the two insurance

51
companies would contribute half the value of your stolen car and buy you a new car, so you are
fully compensated. You cannot get a car from each insurance company
Utmost Good Faith- This principle states that the insured must give all relevant information
about the thing or person being insured, he/she must be truthful. Failure to give accurate
information may mean the insurance company may refuse to pay on the claim. Note: The
insurance company must also give all relevant facts about the policy
Insurable Interest- A person cannot take out an insurance policy to protect property in which
they do not have insurable interest. E.g. you cannot insure your neighbour’s house, it is not yours
and you will lose nothing
Proximate Cause- The insurance company can only pay out compensation if the loss suffered
was caused by the risk covered in the policy. E.g. if a person insures his house against fire but it
was destroyed by flood, then he cannot expect to get compensation from the insurance company

Types of Insurance Policies

(i) Life Assurance
(ii) Non – life (Business Insurance)
Life Assurance Policies
Life assurance is a promise of financial compensation for events that must happen such as death.
Life assurance is the insurance of people’s life or health. It is a form of savings plan which
benefits the dependants of the assured. The principle of indemnity cannot be applied under this
coverage as no amount of money can restore a person back to life.
Whole Life Policy
Provides payment after the death of the insured, the spouse or dependent should benefit from this
policy.
Endowment Policy
Allows a sum of money to be paid, payable at a certain age or on death of the policy
holder, whichever comes first. Upon maturity, if the insured survives the period covered by the
policy, then he receives a lump sum of money.
Term Policy
This is used by persons who need a mortgage on their home, in the event of death, the policy is
used to pay off the mortgage.

52
Non-Life Insurance Policies
Fire Insurance- Covers both domestic and business premises and their contents. It also includes
explosions, flood, and burglary. Premiums paid depend on the type of building, its layout, and
nature of the contents [flammable]
Liability Insurance
Public Liability: provides coverage for firms which may have to pay claims for injury to
persons caused by their negligence.
Employer’s Liability: provides coverage for employee’s having accidents on the job, all
businesses are required by law to have such a policy.
Fidelity Bond: this is where insurance companies will compensate against theft by employees.
Product liability: it provides coverage to a business if a customer takes legal action as a result
of unsafe goods being supplied by the business.
Motor Vehicle Insurance Policies
Third Party Policy: covers death or injury caused to other road users apart from the insured on
the road, plus damage to other people’s property.
Third party, theft and fire insurance: this covers the damage to other people’s property plus
the owners’ car through fire or theft.
Comprehensive Policy: this includes third party, fire and theft, damage to the insured vehicle,
personal injury to the driver and loss of possessions in the vehicle.
Business Insurance Policies
Consequential Loss: covers loss of profit as a business would have earned if the business was
still operating.
Goods in transit or goods in transit coverage for loss/theft of goods or cash being transported.
Personal accidents: covers injuries to a person that prevents you from working
Marine insurance: covers damage to the vessel, the cargo (damaged goods) and the ship
owner’s liability, that is, coverage for injury of passengers/crew or collision with another
vessel.
Aviation insurance - covers aircraft against damage or death of passengers or crew.

53
How Insurance Facilitates Trade
Insurance lowers the risks of carrying out business and thus gives businesses more confidence to

take part in trade. For example, insurance can provide compensation l'1hen goods are damaged in

transit, stolen, or even not paid for. Transport firms such as airlines and shipping lines can insure

their fleets by taking out aircraft Insurance or marine Insurance. When trading internationally, a

company can take out freight insurance so it can claim compensation ii a parcel or container is

lost or damaged.

A specific type of trade insurance called trade credit Insurance encourages traders to be bolder

and to export more goods.

 The exporter pays a premium to the insurer.

 The exporter sells goods on credit to a foreign buyer.

 The exporter wails for payment. However, to the buyer fails to pay wit11in a certain time

period (usually 180 days) then the insurer will compensate the exporter up lo a certain

percentage of what is owed (for example 75 per cent)

54
05
Production

55
Factors of Production
Production is the process of using materials (inputs) and transforming them in some way to
produce goods and services or it is the act of creating or manufacturing.

Factors of production are the resources needed by businesses to produce goods and services.
There are four factors of production are land, labour, capital and enterprise
Land
Includes not only land but also natural resources found on and under the earth, seas and air. E.g.
water, gold, copper, diamond. Natural resources are resources found on the land, they are usually
known as ‘gifts of nature’.
Labour
Labour includes any human effort mental or physical that contributes to production for which
payment is made. E.g. repairing a road [physical effort], preparing accounts [mental effort].
Labour force- is the total number of people employed or seeking employment in a country
Classification of Labour
Types of Labour –unskilled, semi-skilled, skilled and managerial and professional skills
1. Unskilled- jobs that require very little or no formal training e.g. street cleaners.
2. Semi-skilled – jobs that require some formal training or work- based qualification e.g.
assembly line workers operating a machine
3. Skilled- jobs that require a high level of training combined with considerable
experience, e.g. engineers, computers operators
4. Managerial and professional skills – jobs that require a high level of educational
qualification.
Factors Affecting Labour Supply
 Total Size and Age Structure of the Population-an aging population, high levels of
retired persons and a very young population will reduce potential labour supply
 Length of Working Hours - countries with limited working hours limit the supply of
labour compared with those who do not have restrictions
 Skill levels- the quality or skill levels of workers can greatly increase the standard and
productivity of the firm

56
  Mobility of labour- if workers are willing to move where jobs are, this will increase
output and reduce unemployment
 Number of women who work – when a higher proportion of women work, it increases
the nation’s supply of labour
Capital
Capital is the amount of money invested in a business as well as it assets used to start the
business. E.g. machines, equipment
Enterprise
Enterprise is shown by people when they combine other factors of production to form a business.
They aim to produce goods and services and sell them to make a profit. An entrepreneur is
someone who shows vision and creativity, taking the financial risk of starting and managing a
new business venture

Natural Resources of the Caribbean and Their Industries

Country Natural Resources Industry Product
Jamaica and Guyana Bauxite Bauxite Aluminium

Gypsum Gypsum Plaster used in foot

creams, black board,
fertilizers
Trinidad and Tobago Asphalt Asphalt Road Construction

Oil and natural gas Petroleum Kerosene, gasoline,

paraffin wax
Guyana and Belize Forestry Construction Wood used in furniture
and construction of house
Guyana Gold and diamond Gold and diamond Jewellery

Difference between Production and Productivity

Production- the value or volume of goods produced, production can be increased by using more
factors of production such as employing more workers.

57
Productivity- Productivity measures efficiency, it is the amount produced per worker. E.g. if a
worker produced more furniture for each hour of the day, this would increase productivity
A business measures productivity using a simple format:

Productivity = Output [Goods and services produced]

Input [Workers, money, machinery, raw material]
Example: if a business produced 100 chairs in a week and there were 10 employees. Calculate
the labour productivity

Labour productivity = Output 100 chairs = 10 chairs per employee

No. of employee 10 employees
Importance of Productivity
Productivity levels must be high if the business is to be profitability and therefore productivity is
very important. When productivity is low the business will make little or no profit.
 Productivity reduces the cost of each unit made - this helps to make the business
competitive
 Productivity should lead to an increase in sales and profits -this leads to expansion of the
business
 Productivity allows the business product to compete more effectively in the foreign
market – which will increase the country’s export
Factors Affecting Productivity
 Training skills and levels of workers-better trained workers tend to work faster and more
efficiently
 Workers health- unhealthy workers or sick workers will have low productivity resulting
in inefficiency
 Working conditions and layout of the factory- if work area is clean, layout is logical
workers will produce more
 Worker motivation – if worker works hard, go to work on time, avoid absences then
productivity will increase

58
Role of Capital in Production
Capital is used to buy land to build a factory, repair a building as well as expand a business used
in production.
Labour intensive production-A business that operates with little capital and uses more labour and
low-cost tools is
Capital intensive production – is a business that uses less people, but more expensive equipment,
results in an increase in productivity.

Types of Capital
Fixed capital- assets such as buildings, machinery which will be kept for a long time and used
many times in the production process
Working capital -includes stocks of goods and cash needed for day to day running of the
business
Venture Capital- finance provided to new or small business with the potential for growth by
wealthy investors

Types of Production
There are four types of production. They
are linked to three different sectors
within the economy, namely primary
sector, secondary sector and tertiary
sector.

Extractive
Extractive production is the first stage of production, it involves extracting raw material from the
earth. E.g. Oil drilling, natural gas, fishing, agriculture
Construction
Building is important in creating the infrastructure of an economy and might involve building
roads, bridges, tunnels, houses and factories.

59
Manufacturing
This involves making products from raw materials and includes factory work such as bottling
and processing. E.g. (assembling, refining)
Service
This involves industries made up of firms that provide services to people and not a physical
product (such as personal banking and domestic insurance} and to businesses (such as the
transport of goods and business Insurance). It can be divided into direct services and commercial
services. Examples of direct services (personal services) e.g. dentist, teachers, doctors. Examples
of commercial services: advertising, banking, transport, insurance

Production Levels
Subsistence Production
Goods are produced to meet the basic needs of the group/family. There is little or no surplus
production to be sold to pay for other products or prepare for disasters. The people are barely
able to survive on this output. As a result the citizens experience low standards of living and the
country does not have any extra goods to be traded with other countries.
Domestic Production
All products are produced for local /domestic market, mainly from local resources. It provides
employment and self -sufficiency and conserve a country’s foreign currency reserve. Local
resources including land and labour are used to produce output which is consumed by the
population.
Surplus Production
At the surplus level the country produces more than enough goods and services to meet its
domestic needs and the extra or surplus is exported to other countries. This surplus, when sold,
earns the country valuable foreign exchange which can be used to purchase imports such as
medicines, equipment and technology.
Surpluses are produced when Industries start to become more efficient and small factories and
plantations start to develop. Entrepreneurs look for ways to benefit from surplus products and
may search out new markets to sell to.

60
Export Production
This is a situation in which a country produces goods to sell outside of the country. It creates
jobs and the income from export is used to import other goods and services. This type of
production ensures a good supply of foreign exchange when overseas customers pay for the
goods produced.

Cottage Industries
An industry where the creation of products and services is home- based or community based
rather than factory based.
 They do not rely on expensive machinery
 They offer employment to family members with manual skills
 They use local material like wood, clay, recycle materials to reduce waste
 E.g. products made include: leather-craft, embroidery work, floral arrangements,
basketry, making dolls, making pastries, tailoring, hairdressings, barbering, making jams
and jellies

Small Businesses/Firms
A small business is owned by private individuals and has a relatively low number of employees
and sales
Features
 Small capital is needed usually less than $250 000
 Consists of one to twenty employees, this may be fewer depending on the industry
 It uses simply technology, usually manual
 It occupies small land space
 It receives small sales turnover
Advantages of a Small Firm
 Produce goods and services to customers and offers a wider choice i.e. it can provide
good/service that a large firm may not provide e.g. repairing a bicycle

61
  Increases competition for larger businesses and encourage them to become more
efficient. E.g. a large firm may be forced to offer free deliver services if a small firm was
doing it first
 Reduce unemployment especially in rural area by recruiting workers as many large firm
operate in towns or cities
 Provide income -for the owners of the business and the workers especially if the workers
have seasonal jobs
 Innovative – small firms sometimes introduce and develop new ideas for goods and
services
Disadvantages
 The business lacks expertise in certain areas
 Owners find it difficult sourcing from financial institutions
 Limited ability to service customers due to unavailability of resources

Effects of Growth of a Business

A small business may want to expand to make higher profits, employ more people, increase
sales benefit from economies of scale which will reduce cost of producing each unit and reduce a
competitor. There are several effects of growth of a business on:
1) Organisational Structure-This will change greatly as the business expand - business
will increase number of departments
2) Capital-Expanding business will need more capital -fixed capital such as buildings and
machinery and working capital such as stock of goods
3) Labour-More labourers are needed – business may employ part time workers when it is
busy.
4) Use of Technology-Growing firms use more technology as computers will be used to
communicate internally, with customers and suppliers, keeping accounts, keeping records
5) Potential for Export-Small firm meet local demand but when a business expands it
looks for overseas markets to export it goods
A business can grow two ways: Internally or Externally.

62
Internal growth
 Opening other outlets
 Employing more workers
 Increasing capital
External Growth
 Joint ventures- is a special type of partnership established to perform one single activity
and closes when the activity has been completed
 Mergers/Takeover/Acquisition- takes place when a company purchase most or all of the
shares/stocks in another company. The company that buys all the stocks has to pay for the
cost of acquisition

Linkage Industries
Emerges from a situation in which one industry produces something which another industry
depends on to carry out its own productive activity. E.g. Dairy producers depend on Livestock
producers for inputs, the producers of Rum depend on Sugar industry for inputs
Forward linkage
When one industry provides raw material for another. E.g. Farmer provides raw material, tanners
produce leather products and leather items sold to wholesalers or retailers or E.g. Farmer, food
canning factory and tourist industry
Backward Linkages
When the demand of one industry leads to the development of another industry. E.g. the tourist
industry depends on food canning, food canning factory depends on the farmer
Advantages of Linkage Industries
 Linkages can encourage large-scale production. The surplus production can be sold on
the overseas market, thus earning foreign exchange.
 There is a reduced risk of disruption of the supply of inputs due to these linkages.
 Contracts that are entered into with the linkage firm ensure more secure markets for the
firm. Contracts for supply of inputs can improve quality of inputs.
 Linkages allow companies (particularly in local areas) to build mutually beneficial
networks and relationships that help sustain the industries involved. •

63
  Industries learn from each other, spreading best practice techniques, encouraging
innovation and making more comprehensive use of natural resources.
 Employment is created; this creates income for those previously unemployed, who then
create income for others through the purchase of goods and services.
Disadvantages of Linkage Industries
 Formation of these linkages may be capital intensive, and finding the investment needed
may be difficult.
 If the linkages are attempted with industries in foreign markets, there may be difficulty in
gaining access to export markets due to strict requirements on inputs and labelling or if
there is a protected competitor product.
 If linkages are forged with domestic suppliers and an inadequate supply of the raw
material arises, this may lead to substituting domestic products with imported products,
which could consequently damage local industries.

Capital and Labour Intensive Production

Capital-intensive production means that the production process employs more machines than
humans. Capital-intensive production requires high capital investment from the business. This is
used to buy the equipment for the production process. The labour involved here generally is
highly specialised and requires high levels of training and experience. Capital-intensive
businesses also produce output in high quantities as machines can produce more and work longer
hours than humans. Labour-intensive production occurs where more humans labour are
employed than machines.

64
06
Marketing

65
The Concepts of Market and Marketing
Market
A market is any situation that brings buyer and sellers together for the purpose of exchange. Key
elements of a market-it must have a buyer, a seller, product and price
Types of market include:
1. Money market/capital market [e.g. banks, unit trust]
2. Commodity market [e.g. sells tea, sugar, coffee]
3. Consumer market [retail and wholesale shops]
Marketing
Marketing is all the process involved in getting the right product, to the right consumer, at the
right price, in the right place in a profitable and efficient way.
 Social media marketing- is a form of internet marketing that utilises social networking
website as a marketing tool.
 Integrated marketing – This is a method that creates a unified experience for customers
to interact with the brand. It is a marketing strategy that promotes a brand across
multiples media (television, radio, print, internet, in person) in a similar style.

Marketing Activities
Marketing activities include market research, pricing, packaging, branding, sales promotion,
advertising, and distribution. Each of these activities will be discussed below:
Market Research- A market research is the collection and analysis of data about the consumer’s
preference and competitors. It is important to research any new market you are moving into to
avoid wasting time and money on failed projects.
Consumer Taste- A consumer’s taste refers to the products and services that consumer’s choose
over others. Market research helps to identify the consumer’s taste, this will assist the firm in
making better decisions about the products/services offered.
Competitor-Market research helps a firm to obtain information about their competitor in order
to make better designs, offer competitive prices, and becoming more effective.
Consumer Behaviour-Consumer behaviour is a study of the public reactions towards a product.
Market research helps a firm to understand what prompts a consumer to purchase a particular
product and what stops him from buying it.

66
Pricing- Pricing is the monetary value of a good/service or the amount asked for the
product/service. Pricing strategy is a way of finding a competitive price of a product or a service.
This strategy is combined with other factors such as 4 ‘P’s, demand and supply, and competition.
Pricing Strategies
Cost plus pricing: The business adds a mark-up to the cost of producing the product. If the cost
of producing a T-shirt is $40.00 and the business wants to add a mark-up of 25% then the price
the shirt will be sold at is calculated as $40.00 × 1.25 = $50.00. This pricing strategy helps to
secure a target profit on each item sold.
Penetration pricing: This strategy is especially used for new products to encourage trial by
potential customers. The business sets a low price initially to increase sales and market share and
eventually increases the price when market share has been captured.
Price skimming: This strategy is especially used for new innovative or high-quality products.
The business sets a high price initially to earn as much profit as possible before competitors enter
the market. Eventually, when the competitors arrive, the price may fall. A business introducing a
new type of television may use price skimming.
Psychological pricing: The business uses the psychology of pricing to charge $9.95 instead of
$10.00. This is because $9.95 appears to be less than $10.00 even though it’s just a difference of
five cents in reality. All types of businesses use this strategy for all types of products – furniture
stores, fast food shops, stationery businesses, etc.
Loss leader pricing: A ‘loss leader’ is a product that is priced below cost. This strategy is
especially used in supermarkets to attract customers who will purchase the ‘loss leaders’ as well
as items that are regularly priced.
Premium pricing: The business sets a very high price for high-quality or luxurious products.
High-end cars and high-end brands of jewellery use premium pricing as a signal of quality and
exclusivity.
Competition-based pricing: The business sets price similar to competitors’ price. This can be
the exact price, slightly higher or slightly lower.
Going rate pricing: The business sets price at the going market price for identical or
homogeneous products.

67
Price discrimination: The business charges different prices to different groups of people for the
same product. This allows a business to capture more segments of a market, especially when
these segments have different levels of purchasing power

Packaging -Packaging is the way in which a saleable product is wrapped/ displayed or presented
to the customer. Labelling is an important part of packaging this may be a small tag attached to
the product.
Distribution - Distribution refers to the flow of goods and services from the producer or
manufacturer to the buyer or consumer.
 The distribution chain involves getting the product to the consumer in a convenient way
 E.g. Producer-----Wholesaler---------- Retailer-------Consumer
The Producer/Manufacturer- The producer is the person who converts raw material or semi-
finished goods into finished products or services.
Wholesaler - Is the middleman who buys goods from the producer in large quantities and sells in
smaller quantities to the retailer.
Functions of a Wholesaler
 Risk bearing- wholesalers take the risk of storing goods that may not be wanted by
customers or may become obsolete or out of fashion, or the prices may fall forcing them
to sell at a loss.
 Warehousing- wholesalers store goods and keep them until they are required by the
retailers ensuring them a ready supply of goods when needed.
 Breaking bulk- wholesalers buy goods in large quantities and repackage them in smaller
quantities and sell them to retailers.
 Transport- wholesalers pick up goods from the manufacturer and at times deliver goods
to the retailer’s premises in their own vehicles.
Retailer- The retailer is a business that buys from the producer or the wholesaler and sells
directly to the consumer.
Functions of a Retailer
 Breaking bulk - retailers buy goods in bulk from the manufacturer and sells them in
smaller quantities to the consumers.

68
  Providing useful information – information gained from customers about the products
will provide feedback to the wholesalers and manufacturers.
 Providing presales and aftersales services - presales is checking the appliances that they
are working before they are sold. After buying the goods, some retailers offer repair and
maintenance services which is known as aftersales services.
 Make goods and services available to consumers in the quantities that they want – goods
such as meat, vegetables, kitchen utensils and house hold appliances

Marketing Mix
Marketing mix involves key decisions that must be taken to effectively market a product. It
consists of 4 elements - Product, Pricing, Place, and Promotion [4P’s]
Product
Includes consumer goods e.g. washing machine, sports car and services e.g. car wash. The
product should meet customer’s expectation in terms of- quality, durability, performance and
appearance.
Pricing
Pricing is the monetary value of a good/service or the amount asked for the product. It should not
be too high otherwise consumers will not pay and if it is too low, they will question if the
product is of a low quality.
Place [Distribution]
This is concerned with how products pass from the manufacturer to the final consumer. There are
different channels of distribution e.g. producer sells to the retailer and the retailer sells to the
consumer.
Promotion
Promotion is a method that a firm uses to make the consumer aware of the product. It helps to
inform the customer about a product, create an image about the product or encourage existing
customers. This can be done through banding, advertising, personal selling and sales promotion
Factors That Influence Consumer Behaviour
What makes consumers behave in the way they do when they make their purchase decision?
There are several factors that influence consumer behaviour as seen below:

69
  Price –generally the higher price of a good, the consumer will buy less of that product,
however, if the price of the product is reduced, the customer would purchase more.
 Price of substitutes – a substitute is one that can be bought instead of another one. When
the price of a product’s substitute increases then the demand for the first product will
increase.
 Quality- a consumer may ignore price and pay high amounts for a product if they are
getting good quality.
 Taste- people’s taste differ, therefore marketers must be aware of the various
preferences.
 Tradition- some people will purchase a particular brand/product due to family tradition
such as buying Grace Foods products only.
 Income (affordability) – when a consumer’s income rises, expensive goods will become
more affordable. In contrast when consumer’s income fall, they tend to purchase cheaper
goods.
 Spending patterns- marketers need to identify patterns so they influence consumers e.g.
some customer always shop at a favourite store.
 Brand loyalty – marketers try to build brand loyalty to prevent consumers from
switching to another brand.

Factors Affecting Packaging and Presentation of Goods

Packaging -Packaging is the way in which a saleable product is wrapped/ displayed or presented
to the customer. Labelling is an important part of packaging this may be a small tag attached to
the product.
Forms of Packaging
Form of packaging include boxes, glass containers, plastic bags, paper, metal cans, cloth [crocus
bag]
Presentation/Benefits of Packaging
 The package should look bright, attractive and different from its competitor
 The package should provide some measure of safety i.e. wrapped to protect the
product
 The package should give information about the product e.g. description of the content

70
  It should be suitable for easy handling and transportation
 The package carries the firm’s logo and brand name to allow customers to identify the
product
Use of Brand Names
A brand name is a symbol, colour, name or trade mark that distinguishes a product from its
competitors.
Reasons for Branding
 It helps to create customer loyalty, that is the faithfulness of a customer to buy a
particular brand regularly
 It is easier for the firm to promote the product resulting in an increase in sales
 Branding leads to returning customers, if a firm delivers what their brand promises,
the customer will return
 Having a strong brand helps the firm to charge a high price especially if the product is
of a high quality.

Method of Promoting Sales

Promotion are strategies businesses use to tell customers about the product and get them to buy
the product through advertising, public relations, sales promotion and personal selling.
Advertising
Advertisements are messages paid for by those who send them and are intended to inform or
influence people who receive them.
Advertising Functions
 Build a firm’s image which will attract more customers
 Highlight special events such as sales, or features of the product
 It provides factual information such as the benefits and where product can be found.
E.g. adverts on medication
 It is persuasive, it tries to entice the consumer to purchase the product by using
emotional and psychological appeals. E.g. use of sexual appeal adds
Forms of Advertising Media
Circulars, Free samples, Newspaper, Magazines, Television, Radio, Posters, Internet
Public Relations

71
Gaining free publicity by inviting members of the press and other media to the business and
special functions
Examples of Public Relations
 Press release to draw public’s attention to company’s product
 Offering special awards such as scholarships for children
 Offering expense paid trips to long service members or employees
 Promoting work for art exhibitions, musical events and cultural activities
 Sponsoring sporting and cultural activities

Sales Promotion
Sales promotion refers to the way special offers or special deals are directed at consumers to
increase sales and repeat purchases by consumers.
Examples of Sales Promotion
 Free Samples - are mini replicas of the product, usually take place at trade fairs,
exhibitions and supermarket.
 Coupons - are detachable tickets that entices the holder through the probability of
receiving something.
 Price discounts - is the amount taken off the price of an item and cash refunds are
repayments given to customers on the return of damaged items or empties.
 Cash discounts - are given for prompt payments e.g. if a customer pays within a specified
time or buy one get one free.
 Competitions - where customers are enticed to enter for large sums of money or
expensive trips abroad or prizes.
 Trade shows -where items are displayed for potential customer to examine the quality of
the product.
 Trading stamps and coupons- a stamp/coupons given by some stores to a customer
according to the amount spent, and exchangeable for various articles.
 Loyalty points - loyalty program rewards customers who buy from a business on a
regular basis, encouraging the customer to return frequently.

72
  Rebate - is an amount paid by way of reduction, return, or refund on what has already
been paid or contributed.
 Loss leaders - are items with huge discounts used to attract customers to the store.
 Social media – can be used to promote a firm’s brand or products through social media
such as Face-book, Instagram, and Linked-in, and Twitter.
Personal Selling- Involves the sales person moving from place to place with their products
 It facilitates direct contact and immediate feedback
 It allows the customer to buy on credit from the seller
 Telemarketing can be considered as personal selling, as banks use this facility to make
arrangement for loans with customers

Techniques in Selling
Sales Men and their Approaches- This is where sales staff sell their company’s product, they
often receive a salary and a commission. Personal selling involves the following steps
i. Contacting potential customers by telephone or emails
ii. Preparing sales meeting with customers and making initial contact with them
iii. Holding sales meeting and using selling techniques such as ’this special offer ends today’
iv. Closing the sale by allowing the customer to sign the order form
Merchandising and Adjusting of Pricing Policies- Merchandizing is the presentation of goods
in a shop, examples include:
 a well laid out shop that encourages customers to walk around
 colourful dramatic window displays
 well stocked shelves with banners and labels indicating price
 some foods can be taken out of the package to allow customers to see and
touch them
Methods of Retailing/Distribution Outlets
 Shops – these are small retail outlets which sells a variety of goods.
 Department stores – are retail outlets that sells a variety of product lines e.g. e.g.
Woolworth
 Mail order- selling by mail e.g. catalogues and goods are delivered by post to the
consumer’s home.

73
  E-commerce – buying and selling goods and services via the internet and distributing
them by post. Pay-pack.
 Telemarketing – buying and selling goods or services over the phone e.g. car insurance
 Vending machines – self- service machine that use coins to purchase a drinks or snacks
located at convenient places.
 Supermarket- these are large self -service stores selling mainly food and small household
items. They attract customers by offering specials and cutting prices on certain items.
Terms of Sales
This involves the method of payment you expect the customers to pay for purchases e.g. cash,
cheques, credit card or debit card.

Advantages Disadvantages
Cash -Quick payment -Risk of money being stolen
Using cash for -No risk of none payment -Fake notes may be used
payment
-No interest charged
Trade credit - Giving customers time to pay -the customer may not pay so cash
for goods, this encourages them is not collected immediately, this
to buy more slows down cash flows for the
business
-Interest is charged on the amount
owed this increases the profits of
the business
Hire Purchase -The customer is offered credit -Interest payment increases the cost
and agrees to pay for the goods in of the item
Goods are paid for regular instalments
by instalments -The goods do not belong to the
- The goods become the property buyer until last instalment is paid
of the buyer immediately
-The seller can repossess the item if
- The buyer enjoys the use of the the buyer defaults.
goods while paying for it.
Layaway The customer makes a deposit The customer receives the goods
and is protected against price only after full payment is made
fluctuations
Consignment Selling on consignment is a The dealer has the right to return
situation where goods are shipped the merchandise to the supplier
to a dealer who pays the supplier which does not sell without any
only for stock which is sold obligation

74
 Cash discounts -Cash discounts encourage the -The full selling price is not
customers to pay on time, received so business makes less
resulting in an increase in sales profit
Trade Discounts Trade discounts encourage the Trade customers may resell the
customers to buy in bulk, product thus taking the sales from
resulting in an increase in sales the business
and profits

Functions of Consumer Organization

Consumers - Refers to any individual or group that derives satisfaction from goods and services
through the process of exchange.

The Rights and Protection of Consumers

Any individual who purchases products goods or services for their own personal use is called a
consumer. Consumer protection is the practice of safeguarding buyers of goods and services, and
the public, against unfair practices in the marketplace.
The Rights of Consumers
Right to consumer education. The right to be educated about their own rights.
Right to safety Protection against hazardous products.
Right to information Right to information about price, quality, ingredients, etc
Right to choice The right to have a choice and not be forced into a decision.
Right to be heard. The right for a consumer’s complaints to be heard.
Right to redress. Consumers have the right to seek redress.

Why Is Consumer Protection Needed?

 Some consumers may be illiterate and ignorant of laws and their own rights as
consumers.
 By organising into a group, consumers receive more power to be represented as
compared to manufacturers and businesses that have their own trade groups.

75
  There are many ‘copycat’ products on the market which seek to imitate branded products
and may fool the consumer into purchasing the item. These products may be inferior or
may cause harm to the consumer.
 Some businesses may use false advertising to convince the consumer to purchase the
product by making exaggerated claims on the product’s ability.
 Some businesses work together to control the price of a product or its supply (collusion).
This creates an artificially high price and basically holds the consumer to ransom,
particularly when there are no close substitutes.
 Some consumers are treated unfairly when they seek to return a product with which they
are dissatisfied or when they have to make a complaint about the product or service
received.
How Are Consumers Protected?
Consumers are protected by:
 Laws and regulations put in place by governments to protect the rights of consumers
 Consumer organisations which serve to inform consumers on their own rights and
responsibilities.
 Government agencies who are enacted by legislation to protect the rights of consumers;
this generally takes the form of the Bureau of Standards and the Ombudsman.

Consumer organizations are advocacy groups that seek to protect people from corporate abuse
like unsafe products or false advertising. Consumer organization consist of private and
government organizations.
Private organization - are institutions which educate and lobby for legislation to be put in place
to protect consumers. E.g. Consumer Affairs Commission addresses the concerns of the
consumer and organise consumer fairs and prepare publication.
Government agencies- such as the Bureau of Standards and the Ombudsman.
The Bureau of Standards
In each country the bureau of standards will be under the purview of a specific government
ministry and will have its own mandate. Likewise they will be guided by the laws of the
particular country.

76
  Develop, promote and enforce standards in order to improve the quality and performance
of goods used and produced.
 To promote and encourage standardisation in relation to commodities, processes and
practices.
 It also provides services which relate to the meeting of standards, for example
certification, inspection and testing and calibration.
 It sets high standards for which the producer must abide e.g. proper labelling, description
and safety requirement of products.
 It administers the weights and measurement act of 1976 protecting consumers against
buying products of incorrect weights.
The Ombudsman
The Ombudsman creates another layer of protection for consumers and businesses. The Office of
the Ombudsman is established to give assistance to people who believe they have suffered
injustice at the hands of public officers employed by government agencies and departments.
The mandate of the Ombudsman includes:
 Responding to inquiries from the public
 Conducting thorough, impartial and independent investigation of complaints.
 Resolving complaints.
 Consulting and making recommendations for the purpose of improving policy and
administration.
 Providing counselling and referrals for matters not under the purview of the office.
In addition, the Ombudsman is equipped with extensive powers of investigation in order to shed
light on any complaint made against a public officer. This includes the power to enter and
inspect premises, to summon witnesses and to compel them to give evidence under oath
Role of Customer Service
Customer service is the assistance provided by a business to those people who buy or use its
products or services.
Roles
 Provide assistance /help when customers visit the organization,

77
  Provide information so the customer is well-informed about the choices available to
them, answer frequently asked questions, be friendly and act professionally with the
customers.
 Refund or replace a product if a customer is dissatisfied with a product they have
purchased.
 Follow up sales with courtesy call, that is, contact customers to find out what they
think about the product.
 Provide credit facility, delivery services and give discounts to customers when
necessary.
 Practice adherence to copyright laws to avoid being sued or prosecuted.

Forms of Customer Service

 Warranty - refers to a situation in which repairs or exchange will be made in the event
that the product does not function as intended.
 Aftersales Sales - refers to all the help and information that a business provides to a
customer after they have bought a particular product. E.g. repair services, information
follow-up.
 Feed-back - information/reactions to a product/service which is used as a basis for
improvement.
 Toll free number/Call Centres - this allows callers to reach the business without
paying for the call.
 On Line Chat - refers to any communication over the internet that offers transmission
of text messages from sender to receiver.
 Suggestion Box -used for collecting information from customers and patrons about
the organization.
 Surveys - used to find out information about people or things by asking people a
series of question

Concept of Intellectual Property Rights

Trade Mark- A trade mark is a registered brand or trade name, it can include a combination of a
name, slogan, logo or colours that identifies a company’s product or services.
78
A brand name helps customers to recognize the product, while a trademark provides legal
protection of the brand name.
Copy- Right- Copy right is the legal protection to prevent the copying of a design, written work,
music or film. Copy right products cannot be reproduced for commercial use without permission
from owners
A producer must obtain copyright for their designs or other forms of work as it prevents others
from copying or selling your work without your permission. The consumer must be aware of
copy right laws that exist for a product. E.g. the following symbol indicates when a copyright
exists ©.
Patents- Patent is the right granted to an inventor of a machine, formula, and technique. A
business that wishes to use the invention must seek permission from the inventor. A franchisee
receives a special licence to reproduce the product and must pay a fee.

79
07
Logistics and Supply Chain

80
Logistics and Supply Chain
(i) Logistics
 In a general business sense, logistics in the supply chain is the management of the
movement of goods from the point of origin to the point of consumption in order to meet
requirements of the customers.
 A logistic system involves many activities such as; storage, transportation, loading and
unloading, material handling, packaging and distribution of goods.
 The aims of logistics are to: 1) achieve high customer satisfaction; 2) high quality service
with low cost; and 3) ensure that the right products are delivered to the right location on
time and at a good cost.
(ii) Supply Chain Operations (SCO)
 Supply Chain (SC) is a network or processes wherein several enterprises (manufacturers,
distributors and retailers) collaborate in making, marketing, selling, storing and
delivering the product or service to the customer.
 The supply chain starts with the materials you need to make your product or people you
rely on to create your service. It includes the methods and equipment for making your
product, the procedures for promoting and selling it, your storage capabilities and
delivery function.
 For example, in a restaurant, the supply chain includes the food, food storage, cooking,
the ability to seat and serve diners and take online or phone orders, and the ability to
generate receipts and accept payment.

Components of Logistics
 Components of logistics are; forward and reverse flow of goods; storage of goods;
services such as insurance and related information between destinations.
Forward Flow of Goods (Forward Logistics)
 Forward logistics deals with the flow of products from the factory to the consumer.
Forwards logistics include direct orders, pick and pack services (e.g. Pay Pal) and
shipping (e.g. Caribbean fright Handlers Ltd).
 When a certain amount of product is required, that quantity will be shipped to the
distribution centre and then to the retail stores from there.

81
Reverse Flow of Goods (Reverse Logistics)
 Reverse logistics deals with moving the product from the point of consumption to the
point of origin. A product intended for a sale may be returned by the customer due to a
defect or product recall.
 Reverse logistics stand for all the operations related to the reuse of products and
materials e.g. recycling, refurbishing, and repackaging the products and at the same time
helps in the safe disposal of waste.
Storage of Goods
 Storage of goods involves holding and protecting commodities for later use. Goods will
be kept in a safe and secured place for when needed.
Services
 Services such as insurance and related information between destinations. Insurance
provides coverage for losses caused and protects against risks.
FORWARD AND REVERSE FLOW OF GOODS

Supplier of
Raw material

Consumer Manufacturer

Wholesaler/
Retailer
Distibutor

Activities involved in Supply Chain Operations

 Transformation of natural resources

 Movement and storage of raw materials
 Processing of raw materials and components into finished goods
 Storage of work-in-progress and finished goods

82
  Delivering the finished product from point of origin to point of destination

The Distribution Chain

 A distribution channel is a chain of businesses through which goods pass from the
manufacturer to the consumer. It includes manufacturers, wholesalers, retailers, and even
the internet.
 Channels are broken into direct and indirect forms: A direct channel allows the consumer
to buy the good from the manufacturer, and an indirect channel allows the consumer to
buy the good from a wholesaler or retailer
(i) Manufacturer -Wholesaler – Retailer - Consumer
 The first channel is the longest because it includes all four: producer, wholesaler,
retailer and consumer.
 E.g. Wine and Adult Beverage Industry, the law requires the winery to first sell its
product to a wholesaler who then sells to a retailer who then sells to the consumer.
(ii) Manufacturer – Wholesaler – Consumer
 The second channel is one where the producer sells directly to a wholesaler who then
sells the product to the consumer. (This channel contains only one intermediary).
 E.g. Grace manufacturing sells its products to Price Smart who then sells to its
customers.
(iii) Manufacturer - Retailer- Consumer
 The third channel is where the producer sells directly to a retailer who then sells the
product to the consumer. (This channel also contains only one intermediary).
 E.g. Tastee Cheese manufacturing company sells its products to Shoppers Fair
supermarket who then sells to the consumer.
(iv) Manufacturer - Consumer
 The final channel is where the producer sells its product directly to the consumer.
This is the shortest distribution channel.
 E.g. Captain’s Bakery sells its products to the consumer.

83
Multimodal and Intermodal Transport
Multimodal Transport Intermodal Transport
 This is the transportation of goods by  This is the transportation of goods by
several modes of transport (rail, road, several modes of transport (rail, road,
sea, or air) organises the transportation sea, or air) organises the transportation
from the point of origin to the from the point of origin to the
destination under a single contract. destination under multiple contracts.
 A single carrier during a single  Multiple carriers mean that the
journey means that the same transport shipper will have several contracts,
carrier is responsible for moving the one with each transport carrier to
shipment to the destination handle their specific leg of the
 E.g. local carrier- Jamaica Freight & shipment.
Shipping Company  E.g. local carriers- Jamaica Freight &
Shipping Company, JLB International
Ltd
 E.g. international carrier-
Mediterranean Shipping Company SA
 Multimodal transport uses various  Intermodal transport uses various
modes of transport but uses one modes of transport but depending on
document - a bill of lading. how responsibilities are shared
different documents are used.
 Advantage - you can negotiate terms  Advantage -less overheads for you as
separately with each company but the companies that handle the
there is increased overhead cost. shipment will be able to handle delays
at each leg of the shipment without
you needing to be involved.

Modes of Transport and their Suitability for Different Goods

Air- It carries goods and passengers through airways by using different aircrafts like passenger
aircraft, cargo aircraft, helicopters, etc.
Advantages Disadvantages
 It is a relatively more expensive mode
 It is the fastest mode of transport. of transport.

 It is very useful in transporting goods  It is not suitable for transporting heavy

and passengers. and bulky goods.
 It is affected by adverse weather
 It is accessible by any other means. conditions.

84
  It is the most convenient mode of
transport during natural calamities like  It is not suitable for short distance
earthquake and floods. travel.

 It provides vital support to the national  In case of accidents, it results in heavy

security and defence. losses of goods, property and life.
Rail-Transportation of goods and passengers on rail lines through trains is called rail transport.
Advantages Disadvantages
 It is relatively expensive for carrying
 It is a convenient mode of transport goods and passengers over short
for travelling long distances. distances.

 It is relatively faster than road  It is not available in remote parts of

transport. the country.
 It provides service according to fixed
 It is suitable for carrying heavy goods time schedule and is not flexible for
in large quantities over long distances. loading or unloading of goods at any
place.
 It involves heavy losses of life as well
 Its operation is less affected by as goods in case of accident.
adverse weathers conditions like rain,
floods, fog, etc.

Road- Roads are the means that connect one place to another on the surface of the land. Road
transport may be divided into three types:
 Man driven - carrying goods on their head or back or bicycles
 Animal driven - carts (drawn by bullocks, camels, horses, donkeys, etc.)
 Motor driven - scooters, vans, buses, trucks, etc.
Advantages Disadvantages
 Due to limited carrying capacity road
 It is a relatively cheaper mode of transport is not economical for long
transport as compared to other modes. distance transportation of goods.

 Perishable goods can be transported at  Transportation of heavy goods or goods

a faster speed by road carriers over a in bulk by road involves high cost.
short distance.

85
  It is a flexible mode of transport as  It is affected by adverse weather
loading and unloading is possible at a conditions e.g. floods, rain, landslide,
destination. It provides door-to-door etc.
service.

 It helps people to travel and carry

goods from one place to another, in  Sometimes create obstructions to road
places which are not connected by other transport.
means of transport like hilly areas.

Marine (cruise and cargo)

Water transport refers to movement of goods and passengers on waterways by using various
means like boats, steamers, launches, ships, etc.
Advantages Disadvantages
 The depth and navigability of rivers
 It is a relatively economical mode of and canals vary and thus, affect
transport for bulky and heavy goods. operations of different transport
vessels.
 It is a slow- moving mode of transport
 It is a safe mode of transport with and therefore not suitable for transport
respect to occurrence of accidents. of perishable goods.
 The cost of maintaining and  It is adversely affected by weather
constructing routes is very low as conditions.
most of them are naturally made.
 Sea transport requires large
 It promotes international trade. investment on ships and their
maintenance.

Pipelines- In modern times, pipelines are used for various purposes. This is the most convenient
as well as economical mode of transport for petroleum as well as natural gas in comparison to
road and rail transport.
Advantages Disadvantages
 Maintenance and installation cost are
 Cheap to operate and maintain. high (expensive to build)
 Best to transport water, natural gas, oil
 Only certain type of goods can be
transported.

86
  Risk of damaging pipe lines due to
 Safe method of transport. road repairs
 It can be erected on land or
underwater  Illegal pilferage and wastage due to
leak is a problem in pipelines.
.
 In case of chemicals and petroleum
 Not affected by bad weather or traffic pipelines any leak can cause an
conditions. accident.

Digital Delivery
 The term digital delivery refers to the electronic delivery of information including data
and content across multiple platforms and devices like web or mobile.
 Digital distribution (also referred to online distribution, or electronic software distribution
(ESD), among others) is the delivery or distribution of digital media content such as
audio, video, software and video games.

Transport Documents
Import licence
 This is issued by the importing country giving permission for the import of certain
products in certain quantities.
 It contains the name of importing country, exporting country and quantity imported.

Bill of Lading
 These are documents used when transporting goods by sea, it contains details of the
goods, port of destination and carriage terms.
 Purpose of the bill - it serves as a receipt for goods shipped, a document of title, and it
indicates the conditions of the goods shipped.
 Three copies are made for importer, exporter and the ship’s captain.

Airway Bill
 These are documents used when goods are sent by air transport containing details of the
goods and its port of destination.
 Purpose of the bill- it serves as a receipt for goods sent by air.

87
The Role of Transport in Marketing
 Transportation is the means to carry people and goods from one place to another. The
functions of transport in marketing will be discussed as follows:
(i) Sourcing of the Goods
 Transport plays a very important role in the marketing of goods because without it, raw
materials would not reach the producer and the finished goods would not reach the
consumer.
(ii) Mobility of Labor
 Transportation provides mobility to labor, this means, and transport takes the workers to
and from the factory so that production can proceed smoothly.
(iii) Stabilization in Price
 Transportation helps to bring stability in price of different products. It transports goods
from where they are produced to where they are scarcely supplied. This establishes
coordination between demand and supply and brings stability in prices.

(iv) Transport in Domestic, Regional and Foreign Trade

 Transport provides opportunities for countries to specialize and trade locally and
internationally which in turns means cheaper goods and higher standard of living.
 It helps to establish relationship with foreign countries, it also helps to widen knowledge
and skill in different sectors.
 It provides a much wider variety of goods from which to choose from and enables
individuals to enjoy a higher standard of living.

Advantages and Challenges of the Supply Chain Operations (SCO)

When a company has an effective supply chain management in place it allows businesses to
decrease their risks when it comes to buying raw materials and selling products or services.
Advantages
 More shipping options-SCO help a company to determine the best way to ship their
products, while also reducing costs at the same time.

88
  Eliminate waste - SCO adheres to strict practices that can help a firm to identify areas
of waste improvement.
 Reduce overhead cost- SCO helps a company to identify processes that are unnecessary
in order to help them save money in the production process.
 Improve customer service – a company is able track their shipments, products, and
materials on the supply side very easily.
 Other factors- better quality of life; wealth creation; new and innovative job
opportunities
Disadvantages
 Globalization – this necessitates that the supply chains are highly efficient and well run in
order to stay competitive in a global market
 Rapid product obsolescence
 Regulatory complexity
 Natural disasters,
 Political instability
The Impact of Logistics and Supply Chain Operations on the Competitiveness of Business
Competitive Advantage
 Competitive advantage is generally gained by offering customer service of greater value
with lower prices and superior benefits. Logistic aims to meet the customer’s demand at
the lowest possible cost.
Logistics Improve Competitive Advantage
 Logistics can put a company ahead of its competitors by ensuring effective and efficient
services such as delivering the right products quickly to the right place and at right price.
Comparative Cost Advantage Outsourcing
 Logistics is the management of the flow of goods from a point of origin to an end point.
The point of origin will usually be the producer of an item, while the end point is usually
an individual consumer or business.
 Outsourcing is a situation in which a company employs another organization to do some
of its work, rather than using its own employees to do it.
 Companies tend to outsource operations including warehousing, transportation, materials,
planning, freight forwarding and reverse logistics.
89
 Companies may handle logistics on their own, but increasingly, many are turning instead
to second party, third party and forth party also known as logistic service providers
(LSP).
(i) Second Party
 After expanding, companies can apply to a second party logistics provider (2PL). 2PL
provides companies with basic necessary functions such as transportation, material
handling and warehousing.
(ii) Third Party
 The next level is third-party logistics. 3PL performs the whole logistics process and
offers the variety of logistics activities services such as: a) monitoring material flows
through IT; b) customs procedures and documents; c) monitoring of documents; and d)
warehousing services.
(iii) Forth Party
 Fourth-party logistics is a new type of provider that offers services concerning
projecting and planning supply chains. Some of the services that 4PL offers are: a)
integration IT systems; b) monitoring of orders inside supply chains; c) managing
stocks inside supply chains; d) monitoring of documents; e) monitoring of quality.
Comparative Cost Advantages Using Second Party, Third Party and Forth Party
 LSP saves on time and cost – LSP providers have larger resources so using an LSP
provider reduces the need to invest in transportation, warehouse storage, technology and
staff.
 LSP providers are experts with handling logistics - a good provider will also be able to
stay up to date on the latest developments in logistics software, technology and other
techniques.
 LSP providers give you the freedom to focus on your core business- instead of
spending time, money and attention on a secondary aspect of the business using a
professional third part can remove some unneeded stress.
 Using LSP providers increase the efficiency, flexibility and productivity of a business.

90
Problems in Distribution
 The relationship between the availability of airport, harbour and docking facility can be a
problem if certain infrastructures are not put in place such as having;
 good road network
 adequate refrigeration facility
 adequate handling and moving facilities such as forklifts
 enough parking spacing for aircraft, trucks, containers
 enough warehousing spaces
Problems Encountered in Distribution
 Delayed shipment
 Spoilage of goods
 Misdirection of goods
 Inadequate warehousing facilities
 Lack of proper security measures
 Ineffective communication
 Industrial unrest
Measures To Mitigate the Problems
 Delayed shipment- use handling services with good reputation and select the most
appropriate channel of distribution based on the product.
 Spoilage of goods - avoid holding large stock and insure stock against any risk that may
occur.
 Misdirection of goods - to avoid this ensure careful labeling and documentation of
goods.
 Inadequate warehousing facilities- provide proper storage facility.
 Lack of proper security measures- employ a security company or use security cameras.
 Ineffective communication - establish good communication network between importers
and exporters e.g use of the internet.

91
The Impact of Technology on Logistics and Supply Chain Operations
Choosing the right technology for various logistics activities is very crucial to any business to
gain competitive advantage in today’s competitive market. Forms of technology include: GPS,
GIS, Portnet, Telemarketing, Ecommerce, Logistic providers such as; FedEx, DHL, Amazon,
and Logistics hub.
Global Positing System (GPS)
 Global Positioning system (GPS) can tell where you are, and where your most important
assets are located. GPS as a part of the supply chain management will allow a company
more detailed and diligent tracking of their assets across a whole network.
Geographical Information systems (GIS)
 Geographical information systems (GIS is a software that provides an advanced visual
picture of what is going on in the supply chain and allows the user to make intelligent and
strategic decisions.
 E.g. GIS can map movement inside facilities to do pattern analysis, retailers can see
which aisles get the most traffic, and this provides insights on where to place the
merchandise.
 E.g. in case of natural disasters GIS is a mapping tool that provides information that can
be seen ahead of time so you know which manufacturing facilities and which
transportation routes will be impacted.
Portnet
 Portnet is a National Single Window for foreign trade procedures, it is a computer tool
which enables the electronic processing of all documents for release and clearance of all
goods in international transactions.
 “Single window” can be defined as «a system that allows traders to provide information
to a single body to fulfill all regulatory requirements related to import or export operations»
 Portnet is vital tool to improve effectiveness of foreign trade logistics chain, as it reduces
the waiting time and storage period of export and imported goods. It is also an efficient
tool to overcome problems and uncertainty in this field.
Telemarketing /Ecommerce
 E-commerce allows customers to shop using online stores rather than physical stores. As a
result, the delivery of goods and packages are delivered by distributing companies.

92
  The impact of Ecommerce on the supply chain is significant as the link in old supply chain
will vanish because the distribution center will take over services of the retail shop due to
customers not buying from the physical stores but rather from online stores.
Global Logistic Providers
 Global logistic providers such as FedEx, DHL, and Amazon play a vital role in
transportation in the supply chain operations. The company is responsible for physical
materials and goods going across international borders.
 Logistics companies manage the supply chain to ensure the finished product reaches
the customers. This involved packaging, labeling, insurance, storage, distribution and
even security
FedEx
 FedEx supply chain provides transportation, warehousing and distribution, and the
cycle continues with our innovative reverse logistics processes, including returns and
recycling.
DHL (Dalsey, Hillblom and Lynn - founders of DHL Worldwide Express)
 DHL supply chain provides the customers with production, storage and delivery
services to its customers.
 A pioneer in global express shipping, DHL's international network is linked to over
220 countries and territories.
Amazon
 Amazon supply chain strategy include warehousing, delivery, technology and
manufacturing.
 A big part of Amazon’s success lies in;
 Its expert warehousing strategy, which ensures products are easily accessible
from pretty much everywhere in the world.
 a number of delivery options offered
 manufacturing its own products
 Utilizing automation and robots to pick and pack orders as well as stacking and
storing inventory.

93
Logistic Hub
 The Government is positioning Jamaica as the fourth global logistics connecting point,
comparable to Singapore, Dubai and Rotterdam in order to help transform Jamaica’s
economy and create jobs.
 The Jamaican Government has proposed that with the development of Jamaica as a
logistics hub, the country will have greater opportunities to handle increased volumes
of transshipment cargo.
 The hub will allow Jamaica to increase international trade and create numerous jobs
such as; maintenance, assembly, machinery repair and dry docking, packaging and
labeling.
 The hub will include: maritime and air cargo logistics, storage, sorting and distribution,
aviation repair and maintenance, ship repair and dry docking, and digital network
system.

94
08
Business Finance

95
Financial Institutions
(i) Central Bank
The central bank is established by the government and its main role is to help the government
run of the financial system in a country. It is a nationalised organisation owned by the
government. Other responsibilities include:
 Managing government borrowing
 Managing the national debt, Including making repayments
 Setting interest rates
 Issuing notes and coins
 Supervising and limiting the lending of other banks
 Advising the government on monetary policy
(ii) Commercial Banks
A commercial bank is a privately owned bank that provides services to businesses and
individuals. These services include accepting deposits of funds (for safekeeping), making a range
of short- and long-term loans (on which the bank charges Interest) and managing customer
accounts (so they can make withdrawals and payments). Commercial banks typically make a
profit by charging a higher interest rate on their loans than the interest they pay to depositors.

(iii)Non- Financial Institutions

Credit unions
A credit union is a type of co-operative run by its members for the benefit of its members. Credit
unions offer savings accounts, current accounts and loans to their members. There are many
credit unions in the Caribbean and they are often created for a particular occupational group,
such as teachers or police officers. Credit unions are not-for-profit organisations.
Insurance companies
An insurance company accepts risk on behalf of people that pay premiums into a central pool.
The company will then pay compensation in the event of a loss by a policy holder. The insurance
company calculates the likelihood of losses occurring (such as fire loss and accident loss) in
order to charge premiums that enable it to cover possible losses while making a profit at the
same time.

96
Building Societies
Building societies are financial Institutions set up as mutual organisations and owned by their
members. They originally lent capital for the building of houses and the purchase of property.
Today building societies have taken on additional functions more closely associated with
commercial banks, such as providing foreign currency and offering bank cards.
Micro Lending Agencies
These are institutions that offer credit on a very small scale to individuals and small enterprises,
particularly to people who find it difficult to borrow from larger institutions. The rate of interest
may be higher than at a commercial bank but the sums are much smaller. Micro-lending is very
important in supporting small, rural enterprises.
Government agencies
Government development banks provide low-interest loans and grants, usually to entrepreneurs.
Government agencies also play a role in providing insurance to exporters. An example is the
Agricultural Development Bank in Trinidad and Tobago which provides low-Interest loans and
grants to farmers and the fishing Industry.

Functions and Services Offered By Financial Institutions

Functions offered by financial services
 Provide loans of varied amounts – this can be used for various purposes such as buying a
car, furniture, a house etc.
 Accepting savings and deposits from the customer – this will provide safe keeping of the
customer’s money.
 Process payments made and received by customers – via face to face, internet banking
and telegraphic transfers.
 They offer investment services and safekeeping of documents and other items in safety
deposit boxes
Services offered by financial institutions
 Night safe deposits– this is a deposit slot located on the outside of a bank, allowing
money to be deposited in the banks safe when the bank is closed. They can be accessed
with keys, pin numbers or some other security passes.
 On-line banking – this is a method of banking that enables a customer to conduct a range
of financial transactions electronically using the internet.

97
  Advisory service- such as advice on pension plans and long- term investment plans. This
advice will help the customer to make informed decisions concerning investments.
 They offer debit card and credit card [plastic money]
 Debit cards transfer money immediately from the customer’s bank account into
the shop’s bank.
 Credit card allows purchases to be made even if the customer does not have
enough money in their bank account. The credit will have to be paid over the
next few months often at a high interest rate.
 Trustee work – the trustee is legally bound to manage the property or assets for the
benefit of a third party or beneficiary, they have to make decisions in the best interest of
the beneficiary.
 Deposit boxes- these are fireproof metal strong box es that are usually in the bank for
storing valuables.
 ATM/ABM services- an automatic teller machine (ATM) is an electronic banking outlet
that allows customers to carry out basic transactions without a teller. It uses a credit card
or debit card.
 E-trade- is sometimes called electronic or paperless trade, this is a method of trading
securities (e.g. stocks/share and bonds) electronically. Electronic trading is quickly
replacing human trading in global security markets.
 Settlement service – this includes any service provided in connection to real estate as well
as other services such as; services offered by real estate agent or broker or by taking out a
loan application and processing.
 Remittance service – refers to the sum of money sent by generally to someplace abroad
by any method e.g. wire transfer, online transfer, by mail or using a debit card or credit
card.

Role and Functions of Financial Regularly Bodies

Financial regulations are rules that govern the running and organisation of the financial services
sector of the economy. The regulators are the people and organisations that create the rules.
Financial regulatory bodies are government organisations that creates rules and makes sure that
the industry it regulates keeps to these policies and rules. Financial regulatory include:

98
 i. The Central Bank
The central bank oversees the printing of notes and coins, with the aim of ensuring that there is
enough money to enable business transactions but not enough to cause inflation (a general
increase in the level of prices). The central bank also licenses other banks. To obtain and keep a
licence, banks must act within the guidelines set out by the central bank.
ii. The Jamaica Deposit Insurance Company (JDIC)
The JDIC is an insurance scheme where the government guarantees the money held in banks.
Funds deposited by businesses and individuals into Jamaican banks are therefore safe (in
Jamaica, funds of up to J$600 000 are guaranteed).
iii. The Financial Services Commission (FSC)
The FSC supervises and regulates the financial sector (including insurance companies, pension
funds and securities) to make sure the public's money is looked after in a safe way.

Role of Regulatory Bodies

The central bank and the FSC monitor and control the activities of banks, credit unions, pension
funds, insurance companies and other financial institutions. They check that these companies
have sufficient funds to meet the requirements of their customers, and that they offer their
customer’s sound products. The central bank and FSC set out rules about how much these
companies can lend. They also guide financial Institutions, for example by providing literature
about sound financial practice. Therefore, the role of regulatory bodies is to monitor, control and
guide various industry sectors in order to protect consumers.

Functions of Regulatory Bodies

Regulatory bodies carry out the following functions:
 Regulating the issue, supply and availability of money
 Enforcing financial regulations from the government
 Registering financial Institutions
 Enforcing licences 'or various financial activities, such as lending and depositing money
 Advising the government on mone1ary and fiscal matters
 Providing statistical data to the government and 1he public
 Promoting stability, public awareness and public confidence in the financial institutions
supervising the operations of all financial institutions, especially commercial banks

99
Relationship between Financial Institutions and Regulatory Bodies
(a) Central Banks
The Central Bank is a government owned organization responsible for regulating all the
currencies supplied and related policies for a country while Commercial banks are banks that
offer service to the general public and to companies

Ways in which a Central Bank may Regulate Commercial Banks

(i) Vary liquid assets ratio
 Liquid assets are those that can be converted into cash easily in order for the
banks to ensure that they can meet the demands of their customers.
 Commercial banks are required to have the prescribed liquid assets such as cash
reserves, notes, coins etc as sometimes they have insufficient capital and may
require assistance from the government due to inadequate capital or a lack of
liquidity or both.
(ii) Vary or adjust bank rates
 A bank rate is the interest rate at which the central bank lends money to
commercial banks often in the form of short-term loans.
 Lowering the bank rates or making it higher are methods in which central banks
manage the economy.
(iii) Change the minimum reserve requirement
 Commercial banks are required to maintain a minimum cash reserve to be held
with the Bank of Jamaica.
(b) Financial Services Commission (FSC)
The financial services commission (FSC} of a country regulates the providers of financial
services that are not monitored and controlled by the central bank. The purpose of this regulation
is to safeguard the public against illegal or unauthorised financial services operating in a country
 FSC oversees the regulation of Jamaica’s insurance, pension and securities
industries.
(c) Supervisor of Insurance
The supervisor of insurance is responsible for the overall regulation of the insurance industry
within a country.

100
  Under the Insurance Act of 2001 and Insurance Regulations 2001 the FSC is
responsible for the supervision of insurance companies in Jamaica.

Ways in Which Individuals Manage Personal Income

A person’s income is the money he or she receives (often on a regular basis} as a result of
employment, investment and other inflows. A person can manage their income ln the following
ways.

(a) Budgeting
 Budgeting means making a financial plan, it means planning what you pay out in
relation to what you earn.
 Having a personal budget ensures that a person does not spend more than his income
over a period of time and help you to plan for the future.
 A budget enables us to cut out unnecessary expenses, save or stop having large debts.
(b) Savings
 Saving is that part of income that is not spent, if deposited it can earn interest.
 It allows an individual and a firm to buy goods in the future that is too expensive
now.
 It allows a person to survive if they lose their job until they can they find another job.
(c) Investments
 Investment is spending by a business over a given period on the production of capital
goods e.g. machinery and raw material.
 For a company, investment means the purchase of capital equipment e.g. machinery
or additions to capital stock.
 For an individual, investment means buying shares in a company or putting money in
the bank.
(d) Financial Advising
 An individual can access financial advice from financial institutions on pension plans
and long- term investment, this advice will help the customer make the most
appropriate decision.

101
Differences between Savings and Investment
Savings are the part of an income that is not spent. They can be kept as cash or deposited in a
bank account. It used to either to make a future purchase or to provide a store of funds that will
protect against a future loss. Saving in a bank is a good way of keeping money safe, and it also
helps a person's money to grow through interest rewards. Investment on the other hand, is a type
of deferred income in that investing (and not spending) will lead to financial rewards in the
future. However, investing is a risk-associated activity because sometimes investments lose
money rather than making a financial gain.
Forms of Savings
(a) Sou Sou
 Sou Sou [also known as partner/box hand/meeting turn] is where a group of people
each pool an equal amount of money for a period of time and after the time is up, one
person in the group receives all the money.
(b) Deposits in financial institutions
 Savings is where a customer makes a deposit and earns interest. The customer has
easy access to their money as withdrawals can be made from the ATM.
(c) Short term fixed deposits
 This is a form of savings account where money cannot be withdrawn for a certain
period e.g. six months. Interest rates are higher than those earned on savings account.
Forms of Investments
(a) Stock Market/Stock Exchange
 This is a market where a company’s shares [also called stocks] are bought and sold on
the stock exchange. This can be done through a broker or may be done on line.
(b) Government securities (bonds and debentures)
 A bond is where the government borrows money and promises to repay the lender at
a fixed rate of interest at a specified time.
 A denture is where a company borrows money on a medium or short- term basis and
promises to pay back the lender at a fixed rate of interest.

102
 (c) Mutual funds
 Mutual fund companies collect a pool of funds from many investors (members of the
public) and use that money to buy other securities such as stocks, bonds and other
assets.

Short Term and Long Term Investments

Businesses need finance in order to purchase stock and equipment, and to pay day-to-day
operational costs such as wages, raw materials, supplies and energy. A distinction is made
between short-term (less than one year) and long-term (over one year) financing.
Short Term Financing

1. Trade Credits- request your suppliers to give you a grace period within which to pay for
the goods they deliver to you.
2. Commercial Bank Loans- banks provide short term loans and bank overdrafts.
3. Promissory Notes- this is signed document containing a written promise to pay a stated
sum of money to a person at a particular date.
4. Instalment Credit – is a means by which most durable products are bought. The
customer is allowed credit for a fixed sum to be repaid in instalments e.g. hire purchase
agreements.
5. Indigenous Credit (Private Money Lenders) - this refers to borrowing money from an
individual or group of investors, this loan is not a bank loan.
6. Advances from Customers- refers to money collected by a company before providing
product or service.
7. Factoring- is a financing method is which a business owner sells its invoice at a discount
to a third party in order to meet its immediate cash needs.
8. Venture Capitalist - this is where wealthy investors invest their capital in a company
that is just starting and shows potential for growth. The returns to venture capitalist
depend upon the growth of the company.
9. Crowd Funding- is way of raising finance by asking a large number of persons for a
small amount for a project or a venture. Those seeking funds also use friends and social
media. E.g. Jamaican bobsled team used crowd funding to raise US $129, 687.18 in
January 2014 to offset their expenses for the Winter Olympics.
103
 10. Angel Investors- is where an investor usually a family member or friend provide a one-
time investment to help a business in its early stage. They may also provide an on-going
injection of money to support a business through its difficulty in its early stage
Long Term Financing
1. Loans from government agencies such as;
- Development Bank of Jamaica Ltd provides loans for agricultural enterprise
manufacturing and tourism.
- The Jamaica Social Investment Fund (JSIF) provides funds to scale
community- based projects.
2. Mortgages- pledging an asset in order to get a loan from the bank
3. Debentures- A denture is where a company borrows money on a medium or long-term
basis and promises to pay back the lender at a fixed rate of interest.
4. Shares – a company may sell shares to raise capital,
5. Insurance- is a promise for financial compensation for a risk that may or may not occur
such as accidents, theft, and fire.
6. Investment and Unit Trust- are institutions that are available for persons who want to
invest their money in a company. The dividends earned are distributed among unit trust
holders. E.g. Barita Investment and Jamaica Money Market.

Sources of Personal Capital

To set up a business, entrepreneurs can use one or more of the following sources of capital.

1. Friends and Family: This provides funding from parents, siblings and the wider family.
Personal Savings: This is easier than pitching for loans and investment, but depends on
the entrepreneur having built up a pool of savings.
2. Government Grants: Governments provide grants to support en1erprises (for example
to support new businesses in the ICT sector or rural enterprises). These grants are not
expected to be repaid.
3. Loans: This involves securing a loan for a fixed sum from a financial institu1ion, to be
repaid over time with Interest.
4. Equity: This involves raising funds by Issuing shares in the company. Shares are issued
in set denominations, such as a $10 share in Company X.
104
 5. Venture Capital: This involves selling a stake in an enterprise to a venture capttalis1 in
return for them owning a percentage of the business.
6. Crowd Funding: This involves securing funds from a range of investors by publicising
the business on the Internet.

Purpose of Basic Financial Records for A Sole Trader

A bookkeeper is someone who records the day-to-day financial transactions of a business using
bookkeeping systems.

Types of Bookkeeping Systems

 Single-entry bookkeeping is where a single entry is made into the accounting
records for each transaction mace by a business.
 Double-entry bookkeeping is a system where every entry in the "books" requires a
second (matching and opposite) entry to a different account. This is so the accounts
will "balance". Every credit is matched by a corresponding debit. Credit is an entry
into an account book that either decreases an asset account or increases a liability
account. Credit entries are positioned to the right in an accounting entry. On the
other hand a Debit is an entry into an account book that either increases an asset
account or decreases a liability account. Debit entries are positioned 10 the left in an
accounting entry.
Purpose of Basic Financial Statements

(i) Income Statement (Trading and Profit And Loss A/C)

An Income statement enables a business to calculate how much profit has been made in a
particular trading period. It outlines the value of the sales made by the business as well as its
costs. The income statement makes it possible to compare profits in one year against another and
to compare the profitability of similar (and different) businesses.
(ii) Statement of Financial Position (Balance Sheet)
The purpose of a balance sheet also known as the statement of financial position is to show how
much the business is worth on a particular date, including its assets (what the business owns or is
owed by others) and its liabilities (what the business owes to others).

105
 (iii)The Statement of Cash Flow
When analysing how well a business is doing it is also helpful to examine the statement of cash
flow, which indicates movements of cash rather than of profit. Cash is crucial to a business to
pay current debts and wages, as well as for other short-term purposes. The statement of cash flow
illustrates three types of cash movements.
 Movements of cash from operations: This should be a positive figure showing that the
business is generating cash from day-to-day activities.
 Movements of cash from investment activities: There will be an outflow of cash for
investments, for example buying new plant and equipment, as well as some inflows of
cash. For example from a sale of land.
 Movements of cash from financial activities: Some cash will flow in under this reading,
for example from selling shares, and some cash will flow out, for example from paying
dividends to shareholders.
The statement of cash flow shows the overall net Inflow or outflow of cash from the above types
of cash movements, as well as the overall balance of cash at a given date.

106
09
The Role of Government in
the Economy

107
The government is defined as a group of official body elected by adults with the authority to
carry out the will of the people. The government of every country has specific responsibilities
that it must carry out to satisfy the needs its citizens. The essential responsibilities will be
discussed below.
Responsibilities of the Government
Government in the Caribbean operates at a number of levels from parish council right up to
national government, of which is elected by the majority of voters in a country. The following
are responsibilities of national government:
Security of the State
 This means defending the country against external aggression by establishing military
and defence forces, army and the coast guards
Protection and General Welfare of Citizens
 The armed forces are established to maintain law and order within a country
 The government also provides social services such as education and health care
Job Security and Severance Benefits to Citizens
 The government provides employment through its organizations
 If workers lose their job, the government has passed laws insisting that severance or
redundancy payments are made by the employer
Protection of the Environment
 The government has created laws that ensures that air, water and soil is not polluted by
harmful materials and toxic waste
Maintenance of Safe Environment for Investors
 Governments encourage investors to remain in their country by reducing crime and
interest rate and creating a stable economy
Regulation of Business Activity
The government has regulated business activities by;
 Establishing zoning regulations that confine business location to specific areas
 Providing environmental protection laws that confine waste disposal to restricted areas
 Educating consumers about products and methods that harm the environment
 Providing environmental protection agencies that monitor activities of individuals or firm
that may harm the environment

108
How the Government can influence Businesses to Protect the Environment
The government of Jamaica has established numerous environmental and planning laws to
protect the environment such as the; the Beach Control Regulations, the Clean Air Act (1964),
Fishing Industry Act (2000), the Endangered Species Regulations among others. The
government can influence a business to protect the environment via:
 Green Technology- firms are encouraged to use products that are made from recycled
materials e.g. office furniture made from recycled rubber
 Reforestation- deforestation damages the environments, firms are therefore encouraged
to plant trees to fight against global climate changes and issues dealing with the
availability of water
 Proper Disposal Of Waste- a firm should ensure proper disposal of waste in order to
protect the environment and reduce pollution
 Zoning Laws- firms are required by law to locate factories in specified commercial areas
away from residential areas
 Firms should apply the Appropriate Use of Technology in Production and Disposal of
Wastes- such as reducing carbon emission by generating their own renewable energy and
practice recycling of waste material from productive activities

The Purpose of Taxation

Taxation is a compulsory money payment to the state by business and individuals levied
(charged) on property, income, a product or a service. There are two types of taxes, direct and
indirect. The purposes of taxation are as follows:
 To raise revenue to finance government activity e.g. build roads, schools and hospitals
 To reduce consumption of undesirable products e.g. cigarettes, alcohol and some imports
by imposing high taxes on such items
 To curb inflation by reducing the supply of money in the economy
 To remove competition from local goods in order to protect infant industries by taxing
imports at high rates
 To lower unemployment by encouraging persons to buy local produce thus encouraging
linkages among the industries

109
  To achieve greater equality in the distribution of wealth and income by taxing the higher
income earners so as to provide social services for the majority of citizens

Difference between Direct Tax and Indirect Tax

Direct Taxes
 This is tax levied on income and wealth paid by individuals or a company. Examples
include:
 Income tax- tax paid on income
 Corporation tax -tax paid on profits earned by firms
 Capital gains – tax charged on increase in value of an assets
 Capital transfer tax and estate duties – tax levied when property is transferred
from one person to another
Indirect Tax
 This type of taxes is levied on goods and services and is usually paid by the retailer,
manufacturers or importers who passes the cost on to the consumer in the form of high
prices. Examples include:
 Custom duties -tax on imported goods
 Excise duty – tax charged on goods manufactured in the country
 Consumption Tax such as GCT , SCT and VAT
 Purchase tax- tax charged falls on the purchaser of a good and will typically be
paid by the seller.
 Stamp duty- a tax charged on the legal recognition of certain documents, such as
the deed of sale on a house. The tax falls on the person who needs a legal
document.

Forms of Assistance Offered By Government to Businesses

Central and local governments can provide assistance to businesses. The government in Jamaica
provides various financial assistance to businesses, these include:

110
  Provide lending capital and technical assistance
 E.g. the Jamaica Development Bank (DBJ) is the government’s main vehicle in
providing finance to micro and small businesses such as the Fisherman Revolving
Loan Scheme.
 Other government institution such as Micro Investment Development Agency
(MIDAS) and Jamaica Promotions Corporation (Jampro) offer loans at low
interest rates
 Provide training and human resource development
 The Heart Trust and National Youth Service (NYS) are government institutions
which provide training programs to empower the youths to participate effectively
on the job.
 Establishing research and information centers
 The Statistical Institute of Jamaica and Jamaica Information Service (JIS) carry
out analysis and provide expert advice to government and private business in
getting accurate and timely information that can benefit them
 Providing subsidies and grants
 Subsidies are cash grants by government to entrepreneurs to encourage them to
provide goods and services at a cheaper price
 Subsidies and grants are provided by the government to businesses to cut cost,
boost export, up-date the equipment, and produce more

The Impact of Social Services Offered By the Government

The government has a responsibility for the welfare of its citizens, particularly in relation to the
provision of social services, the following are some services provided by the government.
National Insurance Service [NIS]
 Provides sick benefits, maternity benefits and old age pension for contributors
 This will provide income when people cannot work and security for the elderly
Health Care
 The government provides public hospitals, clinics and health official and distribute
vaccine and medical supplies when necessary
 This will create a healthy population and a labour force that will work efficiently

111
Education
 The government builds schools, pays the wags for teacher and provide the opportunity for
teachers and student to improve themselves
 This will result in a more literate and informed society
Transportation and Roads
 The government has built high ways to link towns and allow easier movement of goods
and people
 This will lead to greater efficiency in the productive sector resulting in higher standard of
living and quality life

112
10
Technology and the Global
Business Environment

113
The Concept of Business Technology
Every day, new business technology is being invented and being employed by various
organizations to gain competitive advantage. Business technology is comprised of a wide range
of hardware components and software applications which keep a business running to ensure
efficiency and smooth operation of daily business activities.
Business technology refers to applications of science, data, engineering, and information for
business purposes, such as the achievement of economic and organizational goals. The main
element of technology is the idea of change, and how it can affect business and society.

The Role of Information Communication Technology (ICT) In Business

Role of Technology in Business
 ICT is considered to be all the uses of digital technology that exist to help individuals,
businesses and organizations use information.
 ICT is concerned with the storage, retrieval, manipulation, transmission or
receipt of digital data. Importantly, it is also concerned with the way these different
uses can work with each other.
 Inventory management, enabling staff to access real-time stock records so that the
right quantities ate stocked and reordered.
 Virtual collaboration- so that members of a team can work together online even
though they are based in different locations.
 Reducing production costs-enabling more efficient production and supply chain
management.
Ways in which Technology has Influenced Banking and Commerce
(i) Automatic Teller Machines (ATMs) and Automated Banking Machines
(ABMs)
 Automatic Teller Machines (ATMs) and Automated Banking Machines (ABMs) have
facilitated the deposit and withdrawal of funds, without having to go into a bank to
access teller services.
 The location of ATM machines at petrol stations and malls adds to the convenience of
customers who can transact business without having to wait in line at a bank.
(ii) On Line Banking

114
  The practice of on-line banking enables customers to access their accounts from home
and other locations using personal computers.
 This facility enables customers to check their balances from the comfort of their
homes, pay utility bills and transfer funds from one account to another.
(iii) Ecommerce
 E-commerce is an abbreviation used for electronic commerce. It is the process of
buying, selling, and paying for the goods and services on line.
 Using the internet, individuals and businesses are now able to make business
transactions via the World-wide web, without having to visit a physical brick and
mortar store.

Types of Technology Used In Business

The types of ICT technology used in business are:
 Productivity tools e.g. Microsoft word, Micro excel,
 Database software e.g. Access
 Presentation software e.g. PowerPoint, Prezi
 Graphics software e.g. Adobe Photoshop
 Specialist applications e.g. Accounting QuickBooks, Computer Aided Design
(CAD), and Management Information Systems (MIS)
 Digital communication technologies e.g. Internet and Mobile
Productivity Tools
Microsoft Word- Microsoft word is a word processing software that is used to create various
types of official documents that you can print and publish. It can create documents such as
resume, letters, business cards, eBooks, and newsletter in speed with high quality.
Microsoft Excel- Microsoft Excel application is based on an electronic spreadsheet in which a
firm can use various mathematical and logical formulas. It is used to conduct calculation,
research, and data visualization in charts among others.
Microsoft Access- Microsoft Access is an information management tool that helps you store
information for reference, reporting, and analysis. Microsoft Access helps you analyze large
amounts of information and manage related data more efficiently than Microsoft Excel or other
spreadsheet applications.

115
Microsoft PowerPoint- PowerPoint is a software package created by Microsoft. Presentations
are created in a series of PowerPoint slides, where users can import audio, video, graphics and
text into PowerPoint to make interesting and dynamic presentations.
Prezi-Prezi is a story- telling software for presenting ideas on a large, blank page (canvas)
instead of traditional slides. It allows the user to zoom in and out of their presentation giving
them more flexibility when presenting ideas.
Adobe Photoshop- Photoshop is a photo editing software that allows users to crop, resize,
correct color on digital photos. It is popular among professional photographers and graphic
designers.
Specialist Applications
Accounting QuickBooks- Accounting QuickBooks is a small business software use to manage
sales and expenses and keep track of bills, create invoices, pay bills, create reports, and track
cash flows in a business.
Computer Aided Design [CAD] - Computer aided design [CAD] consists of a wide range of
computer- based tools that assist engineers and design professionals to design their work. CAD
can be used to design patterns in the garment industry. Whereas in the past people were
employed to do pattern designing manually, this is now done by a computer software
Management Information System (MIS) - MIS involves collecting, processing, storing and
retrieving data which is then disseminated in the form of information for management decisions.
 MIS saves time as the information is easily available. E.g. a hospital keeps record of a
patient’s record in files [manually or electronically) that can be retrieved quickly.
Digital Communication
The Internet- The internet is a powerful tool that can make your business more productive and
profitable. The internet and email can help a business to communicate more efficiently with
customers and helps to reduce business expenses.
Mobile Phones- Mobile phones are a vital piece of business equipment for many business
owners and their staff. Mobile phones can increase productivity, improve customer service and
allow the business to remain in contact with their customers and suppliers.

116
Distinguish Between E-Commerce and E-Business
In both cases, the e stands for "electronic networks" and describes the application of electronic
network technology, including Internet and electronic data.
E-commerce covers outward-facing processes that touch customers, suppliers and external
partners, including sales, marketing, order taking, delivery, customer service, purchasing of raw
materials and supplies for production and procurement of indirect operating-expense items, such
as office supplies. It involves new business models and the potential to gain new revenue or lose
some existing revenue to new competitors. Interchange (EDI) – to improve and change business
processes while E-business includes e-commerce but also covers internal processes such as
production, inventory management, product development, risk management, finance, knowledge
management and human resources. E-business strategy is more complex, more focused on
internal processes, and aimed at cost savings and improvements in efficiency, productivity and
cost savings.
Differences between E-commerce and E-business
E-Commerce E-Business

Uses the internet to connect with the rest of Uses the internet as well as intranet and
the world extranet to conduct business

Confined to buying, selling, ordering and Not confined to buying and selling of goods
paying for the goods and services on line but also include other activities e.g. supply
chain management

Where a company owns an office and carries E- Business is where a business completely
out their business activities via the internet. carried through an electronic medium, there is
E.g. Amazon no need for a physical presence in the market.
E.g. software developers such as Micro-soft,
Adobe

Ways in Which ICT Can Be Used To Improve Efficiency of Business Operations

Ways in which technology can improve business:
(i) Provides greater speed- Operations can be carried out much more quickly, for
example a customer's order can be transmitted online and immediately processed for
dispatch. Additionally, payment can be made online.

117
 (ii) Provides easier storage- Very large quantities of h formation can be stored on a
computer or a storage server and can be updated easily.
(iii)Provides improved sharing of information- Information can be shared easily and
quickly through LANs and the Internet, either privately within a firm or with all
Internet users through a commercial website that has open access.
(iv) Provides increased automation- Automation speeds up manufacturing and
production processes while minimizing human error. It facilitates batch production,
allowing adjustments for features such as colour or size to be made.
Benefits of technology to business
(i) It can reach more potential customers- A business can reach and develop a relationship
with more potential customers, for example through a commercial website.
(ii) It develops a business relationship with potential customers- Businesses can support
better relationships with key partners (such as suppliers and government agencies).
(iii)It maximizes profit and minimize waste and It improves efficiency and reduce cost-
Business operations can be streamlined and this will reduce costs (such as through better
use of materials), improve efficiency, maximize profit and minimize waste (because
fewer mistakes are made). It will also make it possible to devote talent (particularly
human resources) to core business activities
(iv) It provides a better service to customers- Businesses can provide better service to
customers by providing a more customer-focused experience.
(v) Customers are able to guide businesses better-Through ICT a business can better
understand customer thoughts and feelings, for example through online market research
and feedback from customers in online comments.

Ethical and Consequences of Unethical Uses of ICT

Ethical issues are basic principles of what is legally right. Ethical issues are laws and regulations
that guide the decisions of an entrepreneur.
Security
 ICT security and ethics refers to all activities needed by a firm to secure information from
unauthorized access, use or disclosure. It is concerned about setting guidelines to ensure
confidentiality of its data.

118
  The most popular security concerns include data loss, security breaches and malicious
attacks, such as hacking and viruses.
Privacy
 Customers' records are usually kept in an electronic format by a business (for example, a
bank will store details of customers' addresses and account details). Sharing these details
without consent is unethical and sometimes illegal.
 Many Caribbean countries have data protection Acts which prohibit companies from
revealing personal customer data.
Intellectual Property Infringement
 An intellectual property infringement is the violation of an intellectual property right.
There are several types of intellectual property rights, such as: copyrights, patents,
and trademarks.
 E.g. copy right products cannot be reproduced for commercial use without permission
from owners, therefore, copyright infringement is the use of works protected by copyright
law without the permission of the copyright holder.
Impact on Humans
 Ethics in information technology is important because it creates a culture of trust and
integrity in the use of resources.
 Many employees come with flash drives at work, so they can transfer critical business
information and use it for their own personal gains. The employer has created ethical
guidelines which prevents unauthorized deletion, copying or modification of private data,
such as emails and files.
Distractions
 Technology in the workplace can distract employees such as the use of social networks at
work can affect the productivity of employees.
 In order to prevent this distraction, some companies have blocked access to specific
websites like Facebook, Twitter and You tube, because of the distraction they cause.

119
Indicators of a Country’s Standard Of Living (SOL)
Standard of living refers to the financial well-being of a population measured in terms of a
person’s level of consumption and their income. Standard of living in different countries are
compared based on the annual per capita income.

Indicators of a Country’s Standard of Living (SOL)

(i) Level of consumption of goods and services- depending on the quantity of consumer
goods and services enjoyed by the consumer, the standard of living in a country may
increase or decrease. The higher the consumption the greater the standard of living.
(ii) Average disposable income of the population - the increase in the availability of
average disposable income [i.e. income received by a person after deduction of taxes and
other compulsory payment] may result in higher living standard in a country.
(iii) Level of national ownership of capital equipment- a country that spends more on
machinery can greatly increase its material wealth thus increasing its standard of living.
(iv) Level of investment in research and technology - having access to modern technology
will improve technology, increase output, and ultimately result in higher living standards
of a country.
(v) Levels of investment in research and technology – an increase in investment in
research and technology will lead to an increase in new products that consumers want to
buy, thus leading to an increase in output and income resulting in an increase standard of
living.
Indicators of quality of life (QOL)
The quality of life refers to the extent to which the population enjoys the benefit of wealth.
(i) Extent of Security Involved [level of crime]- Individuals who live free without the
fear of crime tend to enjoy a better quality of life, however, the fear of crime
increases people stress level and makes them less happy.
(ii) The Availability of Health, Education and Recreational Facility- A higher quality
of life in seen where individuals are able to visit a doctor when ill or be admitted to a
hospital in case of emergency or have easy access to education without any
challenges.

120
 (iii) Diet and Nutrition- Higher incomes allow consumers to buy more food with better
nutritional value indicating a higher quality of life, while having a lower income may
result in shortage of food with poor nutritional value representing a lower quality of
life.
(iv) Life Expectancy- Life Expectancy is the number of years a baby born in a country
can expect to live, this is another indicator of the quality of life experienced in a
country. Factors such as wars, disease, and famine may result in low life expectancy
which will have a negative impact on people’s quality of life.
(v) Rate of Infant Mortality- Infant mortality is the number of infant deaths [1 year or
under] in every 1000 live birth. High infant mortality rate indicates poor health
services, widespread disease and a lack of food and dirty water supplies.
(vi) Access to Public Utilities- Regular access to electricity, clean water supply, effective
drainage all contribute to a better quality of life.

National Income (Ni)

(i) National Income (NI)
 If we were asked to measure living standards of your family and another family
you would start by calculating total income from savings and so on, it is the same
for countries.
 A nation is able to calculate its national income from goods and services produced
by private individuals, government or foreigners.
 National Income [NI]-is the total money value of all goods and services produced
by a country over a period of a year.
The national income statistics can be expressed differently based on what is included or
excluded:
(ii) Gross Domestic Product [GDP]
 This is the total value of all goods and services produced by a country within a
year by residents or foreign owned companies.
(iii) Gross National Product [GNP]
 This is the total money value of goods and services produced by a country in one
year by residents of the country.

121
 (iv) Per Capita Income
 Per capita income is the national income divided by the total population whether
man woman or child.
 Per capita does not tell how the national income is distributed within the economy
as most of it may go to the rich and very little to the poor.
 Per capita income = National income
Total population

(a) How Each of these Concepts Affect Growth and Development and Impact Standard
of Living and Quality of Life
Economic Growth [EG]
 EG refers to an overall expansion in the economy resulting from an increase in gross
domestic product or national output.

 It is a quantitative change in goods and services and contributes to an increased tax

revenue for government. This will result in better health services, a rise in income
level and increased spending thus resulting in a higher standard of living for the
population.
 EG refers to a quantitative change or an overall expansion in the economy resulting
from an increase in gross domestic product or national output.
 Quantitative change indicators include; increase revenue for government better
health services, a rise in income level and increased spending thus resulting in a
higher standard of living for the population.
Economic Development [ED]
 Economic development is qualitative and more concern with the pattern of economic
change. It is a process of improving quality of life for citizens of a country.
 Qualitative indicators include an improvement in literacy rates, longer life
expectancy, and reduction in poverty, reduction in infant mortality and an
improvement in labor force.

122
Role of Education in Economic Growth and Development
How Education can improve the Workforce Leading to Increase in Output
 Human resource development or ‘human capital’ means helping workers develop
personal and work- related skills.
 It includes opportunity for employee training ‘on the job’ and ‘off the job’, career
development, transferable skills and improvement in literacy and numeracy skills.
 The benefits of human resource development to EG and ED include: lower cost of
production, reduced unemployment and the ability to operate the latest technology
equipment.

International Trade
 International trade or foreign trade is trade between countries to increase their total
revenue or profits.
Reasons Why Countries Trade With Each Other
 One country may not be endowed with certain assets or have the natural resources such
as land, labour, capital or enterprise to produce the goods that they need
 A country may not be able to produce the goods and services they need in the quantities
or of the quality that they require
 A country may not have the climate to grow certain foods and have to depend on trade to
get it for example wheat in United States
 International trade allows for foreign direct investment allowing individuals in one
country to invest money in foreign companies and other assets.
 To get rid of surplus
 specialization

Functions of Major Economic Institutions

 Economic institutions are formed by groups of countries working together to have a
better chance of developing at a faster pace by sharing their expertise, resources and
cooperating in areas of health, education and technology

123
  In trade they will negotiate on tariffs and duties to be imposed on ‘outside’ trading
partners and agree on a unified foreign policies that is the best interest of all members.
Caribbean Community [CARICOM]
 CARICOM was established by the treaty of Chaguarmas August 1, 1973
 It consists of 15 member states including Jamaica, Guyana, Trinidad and Tobago
Functions of CARICOM
 To foster economic cooperation and regional trade
 To foster cooperation in health, education, culture and communication among member
states
 To encourage the use of raw materials of the region
 To foster cooperation in ensuring security of the region
The Caribbean Single Market and Economy [CSME]
 CSME was agreed at a heads of government CARICOM conference in 1992
 It is designed to create among all member states a large economic union within which
goods, services and people can move without restrictions
Functions of CSME
 It facilitates free movement of goods and services , thus allowing free trade and
acceptable standards of goods and services
 It facilitates free movement of labour resulting in the removal of all legal barriers to the
movement of workers between states
 It facilitates free movement of capital resulting in no exchange controls among member
states
 A common external tariff or a rate of duty is applied by all members to a product
imported from a country, which is not a member
 It allows the right to establish a business in any member state
Caribbean Development Bank [CDB]
 An agreement signed by Caribbean nations in January 1970
 CDB funding comes from international organizations such as the World Bank and the
Inter-American Development Bank [IDB]

124
Functions CDB
 To reduce poverty and contribute to economic growth and development of member
states
 To provide loans at low interest rates called ‘soft loans’ to member states
 It provides services to local development bank that may lack expertise to handle
major projects
World Bank
 Was established in1944 in USA comprising of two institutions:
 International Bank for Reconstruction and Development [IBRD]
 International Development Association [IDB]
 It consists of 186 member states and is financed by wealthier countries
Functions IBRD and IDA
 It aims to reduce poverty and lend money to less developed countries
 They provide low interest loans, interest free credits and grants to fund projects such as
education, health and agriculture
 It provides funding for certain private investment when money is not available
International Monetary Fund [IMF]
 IMF was established 1944 with 45 government heads in the United States to provide
financial assistance to countries that experience serious financial difficulties
Functions of IMF
 They assist member states with loans and in return they are required to launch certain
reforms to prevent further financial crisis
 They provide foreign currency to pay for essential goods and services- member states set
aside amounts in foreign currency which they can draw upon in times of need. Therefore,
members have what is called Special Drawing Rights [SDRs]
 To keep the international monetary system running smoothly through the promotion of
economic growth and fair trade among member states
 To establish and sustain a pool of fund this is made possible through subscription of
member states
 To foster and bring stability to international trade

125
World Trade Organization [WTO]
 Was established January I, 1995 with 152 member states and several non- members
Functions of WTO
 To develop, implement and monitor rules governing world trade
 To assist countries in resolving international trade disputes
 To help developing countries benefit from international trade
Organization of American States [OAS]
 Established 1948 to create better relationship between the Caribbean, North America and
South America
 The organization’s main concerns are democracy, human rights, security and
development
Functions of OAS
 To achieve better political cooperation among member states
 To settle disputes between member states
 To provide training for government officials in areas off disaster management
 To promote social, economic and cultural development
Barriers to Trade
Countries can create barriers to trade to restrict Imports from foreign countries and to protect
home industries. Barriers include:
1. Quotas: setting a limit on the number of goods or tne value of goods that can be imported
from other countries
2. Tariffs: imposing taxes on imported goods. Taxes can be on the value of the imports (an
ad valorem tax} or on the number of imports (a specific tax)
3. Exchange controls: limiting the value of foreign currency that citizens can purchase from
banks, thereby restricting how much foreign currency they can import.
4. Embargos: direct prohibitions on imports from particular countries.
Balance of Payments
The balance of payments is a set of national accounts that outline the value of exports to, and
imports from, foreign countries. The accounts are split into visible trade (exports and imports of
goods) and invisible trade (exports and Imports of services}. When the value of exports exceeds

126
the value of imports, a country has a current account surplus. When the value of imports exceeds
the value of exports the current account is in deficit.

The Impact of Economic Institutions or Trade Agreements in the Caribbean

CARICOM- Promotes integration and cooperation between members, and seeks to ensure that
the benefits of integration are shared fairly between members. Also seeks to coordinate foreign
policy. The sharing of resources and approaches between members makes, the region more
competitive in global markets.
CSME- Promotes regional cooperation, particularly in relation to free trade and the
establishment of a common external tariff with non-CARICOM countries. In addition to the free
movement of goods and services within the Caribbean. The CSME means there is free
movement of capital and that CARICOM nationals can set up enterprises elsewhere in the region
operating in a single market enables CARICOM businesses to operate on a larger scale because
they have a larger home market, facilitating economic growth.
CDB- Provides funding for Caribbean countries that need funds to enable sustainable long-term
economic growth. The funds help countries to use their resources more effec1ively, for example
by building new transport links and Improving agricultural practices, as well as for educational
and other social purposes.
IDRB- Provides funding for reconstruction projec1s, for example rebuilding infrastructure after
natural disasters such as earthquakes and hurricanes. It also provides funding for development
projects, for example to help with ongoing development after reconstruction work has been
completed.
World Bank- Contributes to a range of development projects in the Caribbean, for example
projects to strengthen a healthcare syS1em or to build dams and highways as well as other
projects designed to reduce poverty.
IMF- Provides short-term finance lo help countries manage debt, particularly where countries
have built up large amounts of debt that are difficult to repay. However, the IMF will typically
demand changes to a country's economic policies, for example a reduction in government
spending.

127
WTO- Works with Caribbean and overseas governments to enable tariff-free entry o' Caribbean
products to overseas markets. For example tariff-free entry of agricultural produce. The
Caribbean is expected to reciprocate by opening up of home markets to foreign goods.
OAS- A political alliance that develops policies which American Slates tend to focus on
democracy and human-rights issues (whereas Caribbean governments would like to see more
emphasis on security and development).

Major Economic Problems in the Caribbean

The countries of the Caribbean are identified as middle- income countries however despite the
progress over the years there are many problems preventing economic growth. Economic
problems include:
 Unemployment- (people are classified as being unemployed when they want and seek
work but cannot get a job). The decline of some traditional industries (such as
agriculture) because of stiff competition from overseas has led to a rising number of
people looking for work. Other sectors have not expanded enough to absorb those who
are willing and able to work.
 Population Density- (high density occurs when there are lots of people living in a
relatively small geographical area). In the Caribbean region, most people are located in
urban areas and many countries are relatively small in size. This leads to pressure on
resources such as water and electricity.
 Migration- (net emigration occurs when mere people leave a country than enter the
country) The Caribbean has suffered from a "brain drain" since the 1950s as skilled
people such as doctors and engineers have sought employment in the United States and
elsewhere in an attempt to improve the lives of their families.
 Debt burden- (this occurs and increases in scale when the country is indebted to
overseas countries and institutions). The debt burden has risen for many Caribbean
countries as a result of foreign borrowing, mainly from the IMF. For some Caribbean
countries. the amount of debt is greater than the national income
 Sourcing capital and raw material- (capital and raw materials for Caribbean industries
are often acquired from overseas). Caribbean countries tend to have poorly developed

128
 capital markets and need to import significant quantities of raw materials. Acquiring
capital and raw materials is a costly business.
 Economic dualism – economy is divided into two distinct sections. One with high
technology the other with low technology (The Caribbean is by areas of prosperity
alongside areas of relative poverty). There is an urban/rural divide in the Caribbean
creating a two- speed economy. In addition, some countries are relatively prosperous
(such as Barbados, Jamaica, and Trinidad and Tobago) while others are much less so
(such as Haiti).

Possible Solutions to Economic Problems

1. Access to Foreign Direct Investment [FDI]
The capital market is poorly developed in the Caribbean. Most Caribbean countries have to rely
on funding from institutions like the World Bank or Caribbean Development Bank for major
funds, such as to build bridges and port facilities.
 Access to FDI, where overseas companies invest in the Caribbean, helps to supplement
funding from institutions like the World Bank. Foreign Investors are most likely to Invest
In a country when it proves to have a stable government, low crime rates and business
friendly policies. Caribbean entrepreneurs also need to present a strong case for why
foreign investors should offer them funding.
2. Development of Human Resources
 The Caribbean will become more resources competitive and self-sustaining if it develops
a more skilled and enterprising workforce.
 Investing in ‘human capital’ through education and training will increase productivity
and allow the country to adapt and invent new technology
3. Development of the Manufacturing Sector
Due to their relatively small size, most Caribbean economies are restricted in terms of being able
to develop large-scale production industries (such as automobile manufacture). However, there
are plenty of opportunities for developing specialist manufacturing, such as Cuba's excellent
record in pharmaceuticals development, as well as the processing of tropical fruits in Trinidad
and elsewhere. Distribution is also an important opportunity in the Caribbean, with the
development of international ports and logistics hubs in Barbados and Jamaica. Developing

129
export sectors for niche products (such as Blue Mountain coffee in Jamaica) also brings in extra
foreign currency.
 This creates employment and well-paid jobs
 This increase exports and reduces the balance of payment
4. Development of technology to generate economic activity
ICT is one of the key drivers of economic success. However, the successful economic activity
development of ICT depends on having a solid ICT infrastructure in place, such as high-speed
broadband, education and training in the use of ICT and government support for the use of new
technologies.
 Developing a strong ICT base will give the Caribbean a stronger engine for economic
growth.
Role of Human Resource Development
 Human resource development looks at improving human resource of labour and
entrepreneurship.
 Improvement in labour means that productivity will increase and will more likely be an
increase in economic growth and economic development.
 Human resource can be improved through: education, training, improved health facility,
improved working conditions and improvement in the factors of production.
The Role of Education in Economic Growth and Development
 Improved education and training means that labour and entrepreneurship will now have a
greater capacity to increase national output and improve the well- being of the nation.
 Through education and training, labourers may have to learn new and more efficient
methods of production and thereby increase overall output.
 The entrepreneur might learn how to better organize and bear the risk, thereby causing
improved output and improved economic well-being.

The Role, Benefits and Impact of Foreign Investment

Foreign Investment occurs when capital flows from one country to another. Foreign direct
investment is an investment in the buildings, equipment, machinery and technologies of a
business In the Caribbean by foreigners. FDI is an injection of funds obtained from overseas that
is invested in the local economy.
 E.g. where a company located in one country makes a physical investment in another
country such as building a factory. A European company might set up a business to

130
 produce solar panels in Jamaica, or a Chinese company might build and run a hotel in
Antigua.
Benefits of FDI
 FDI is important in building a country’s infrastructure, energy and water supply
 FDI will reduce unemployment rate and create new employment opportunities
 FDI increase government revenue through taxation
 Through FDI locals can benefit from the transfer of technology and the learning new
skills
Disadvantages of FDI
 It hinders domestic companies as the money from FDI is not going into a domestic
company.
 It can lead to exploitation as an FDI company may decide to take their money and leave
the country.
 Political instability in a country may mean that the business environment is not always
safe so FDI may sometimes be risky.
FOREIGN INDIRECT INVESTMENT
 Foreign Indirect investment simply involves a foreign investor buying the shares of a
Caribbean company.
 For example, Emera (a Canadian energy company) purchased the shares of Barbados
Light & Power Company through its subsidiary Emera Caribbean. Emera Caribbean also
holds the majority of shares in Dominica Electricity Services.
Benefits of Foreign Indirect Investment
 Foreign Indirect investment brings additional pools of capital to the Caribbean.
 Provide domestic companies with the finance needed to manage cash flows, purchase
new assets, make new investments and engage with new technologies.
Disadvantages of Foreign Indirect Investment
 Foreign Indirect investment means that foreign investors will take profits away from the
Caribbean.
 They may also seek to influence business decision-making in a direction that focuses on
the Investor's profits rather than the development of the Caribbean

131