UNIT 4 – SUSTAINABILITY LITERACYModule1: Business, Environment and Society.
Welcome! We will be discussing how to balance your business with the environment and society. This is about the ethics of business. But first, let’s start with the full summary of previous lessons.
Summary of Previous Lessons As usual, before going into this week’s topic, let’s quickly recap what we covered in previous classes:
Products have evolved over time in order to offer more benefits to customers.
A business would not function with only money, but a business can earn money if it considers the customers and their needs.
Customers are more important than money.
Money was created to facilitate the exchanges between customers and businesses. Business created the demand for money; money didn’t create the demand for business.
Hard work alone is not enough. We earn money only if we perform a service or sell a product that satisfies a particular need or requirement of the consumer.
The value chain of a product includes multiple activities like the addition or removal of ingredients, transportation, etc., in a chain-like process to increase the product’s value.
Customers spend money in order to satisfy their needs. There are physical needs that help us stay alive, like basic food and clothing, and there are psychological needs that help us feel better, like dining in a restaurant or wearing fancy clothes.
Customer needs can be satisfied through goods and services.
A good is something that is tangible, like milk or toothpaste.
A service is something that is intangible, like appliance repair or medical practice.
Customers who have the same needs or face the same difficulties are grouped together into segments. These customer segments can be based on gender, income, age, etc.
When you go shopping, there is transactional value taking place: you give something and get something in return.
Consider not just money, but also the distance you have to travel and time you spend. Those factors also have value.
Check for any guarantee, warrantee, and usage details for a product.
Check the weight of the product, cross-verify the price with different sellers, and buy products only based on needs.
Get a receipt for your purchase and compare the quantity with the quantity purchased.
Compare the price of items on the receipt to the actual price of the products purchased and the receipt total with our actual total price.
Check the product’s date of manufacture, date of expiry, the net weight, ingredients used, preparation methods, and its usage instructions before buying.
Do not pay more than the maximum retail price of the product.
Verify if the seller provides the same brand of product that you ask for and if there are any offers, discounts, or free items included.
It is useful to buy some products in their peak availability season.
Decide if it’s cheaper to buy or make the product at home.
If we can’t find the details of a particular product, we have to ask the people who are aware of it and learn from them.
If you want to be a good seller or entrepreneur, there are certain qualities you will need.
Sell products or services that satisfy the customer’s needs at a fair price.
Don’t focus too much on earning revenue immediately after starting the business.
Don’t determine the transactional value based on the monetary value alone. Also consider the distance you have to travel for this transaction, the time spent on an activity, details of the guarantee/warrantee/usage, and other contributions to the value chain.
Research various techniques related to your products.
Don’t think that running a business is easier for other sellers and difficult for you.
Invest in your business for the future. Think about where your business will be in a week, a month, a year and so on. Focus on how your customer’s needs will change in that time and how you can better meet your customer’s needs in the future.
Identify the different needs of the customers.
Which of these needs can you fulfill?
Do you have the handiwork, skill, and intellect needed to run this business?
Which customer segments would you target? Which of their needs would you fulfill?
Identify how your business would compare to your competition.
What are the strengths and weaknesses of your competitors?
Can you satisfy the needs of the consumers better than your competitors?
What are the strengths and weaknesses of your business and how can you convert your weaknesses into strengths?
Conduct research on the ways into your chosen business is typically run. How do you gather information?
Ask friends and family.
Identify customer segments, competitors, average prices, and other details for your business.
Get to know as much as you can about your particular business.
Customers choose products and services that fulfill their needs cheaply and conveniently.
The product or service that you sell should fulfill customer’s requirements and needs at an affordable price.
Your product or service should be easy and reliable to use in order to satisfy the customer.
When a customer is faced with some need, s/he will seek information on a product’s ability to satisfy that need. Then s/he will look into the various options for that product and decide on a brand based on its affordability and convenience.
Once a customer has bought the product and used it, s/he will decide whether to buy that product again or recommend it to others based on her satisfaction with it. This is referred to as customer preference or habits.
For a business to be successful, we need to design products that cater to the needs of our customers.
We should have information regarding the needs of the customers, the target customer segment, and the ingredients required to make the product.
We should identify wholesale shops where we can obtain good-quality ingredients and ensure the finished product sold to customers is of a good quality.
We should also identify how to transport the products to customers.
The product we design should look pleasing to the eye, smell good, taste good, and be praised by the people who use it.
As you think of each feature or ingredient, ask why. Why this ingredient? Because it provides a benefit. What is the benefit? How do ingredients add up to benefits? How do benefits add up to the entire value proposition? Remember what is unique about our approach, understanding why.
You can use various means to communicate your product to customers.
Identify your target customer segments and identify the most suitable option to communicate about your product based on their activities.
You also need to decide whether your product is going to be sold just in your local community, across a wider area, or nationwide.
You need to decide what you hope to achieve based on your understanding of customers and the marketplace.
You can advertise in print notices, pamphlets, newspaper ads, or local magazines.
You can use banners or boards as visual ads.
You can offer discounts or provide free items with a product purchase.
You can hire agents to sell your goods or advertise your business.
You can promote your business in carnivals, malls, or exhibitions.
The quality of your product will determine the retention of your customers.
If the customer likes the product, s/he will advocate or recommend it to others. This is called word-of-mouth.
Your product advertising should address the needs that the product satisfies, its price, and how the customers can find or contact your business.
There are many ways to deliver your product to customers.
You can sell your product in small doses for immediate use or large, bulk amounts.
You can sell your product in a store, door-to-door, or deliver it to customer’s homes.
You can sell in places where there are a lot of people, like a market or a festival.
You can commission agents to distribute your product or find customers through friends and family.
Using the value chain is very helpful here.
For every step that a product makes from the manufacturer to the end consumer, its price will increase. (Remember, this is the value chain!)
First it is transported to the customer’s area wholesale seller, so the cost of transportation is added to the selling price.
The wholesale seller adds his or her own expenses and profits to the price.
Finally, the retailer or small shopkeeper adds his or her expenses and profits to the product price.
In order to determine the price of a product, we need to take into account the cost of the ingredients, the transportation expenses for buying and selling the goods, the cost of making the good like the labor costs and utensils costs, advertising expenses, any discounts and free gifts, rent and utilities, the cost of selling through any commission agents, the cost of packaging, and government business fees.
It’s important to identify the value of the product that we sell and not the money involved in it.
When we manufacture or make a product, the time involved in making it and the distance we transport it has to be taken into account while determining the price.
It is important to keep a written account of all the money you spend and make it a part of your business. Doing this will help you know whether your business is succeeding or failing.
Use any thoughtful approach, as long as it is something you understand.
You can use a notebook to take notes.
If you cannot write, you can ask one of your children or a friend you trust to do it for you.
Keep track of all the money you spend on making products, transportation, rent, utilities, loan payments, advertising, employees, etc.
Also keep track of your inventory, how much money you are making per day/week/month/year, and what customers buy or don’t buy so you can make changes accordingly.
Keep a separate account book for your household expenses and make a note of any business items you use in your household.
To finance a small business, you need money, good recordkeeping, long-term planning, and goals for the future.
When you borrow money, you will be charged an interest fee. A fixed interest rate will be the same payment throughout the duration of your loan.
A Return on Investment (ROI) compares what you pay to what you get back. To calculate ROI, take the total amount you stand to gain from an investment and subtract what you lose. The higher the number, the better return you will get.
The opportunity cost is what you have to give up in order to get something new.
We are repeating all these points because remembering them will help you to be an informed customer. When you buy products, you will understand what to do and how to get the best value for your money. Similarly, these points can help you learn how to be a good entrepreneur.
Lecture: Business Ethics
Now, we are going to discuss business ethics and how you can contribute to the society through your business. What is business ethics? What are some reasons why we feel the need to be ethical in what we do? As we discussed earlier, the buyer and seller are like two sides of a weighing scale; they should be in balance for a proper transaction to take place. But there is a third side. We need to take into consideration not just customers and profits, but also the greater society to which we belong. Tanzania