Table of Contents
Title Page
Copyright Page

This is the stuff you’ve always been embarrassed to ask about the world of modern business.
The What You Need to Know… books can get you up to speed on a core business subject fast. Whether it’s for a new job, a new responsibility, or a meeting with someone you need to impress, these books will give you what you need to get by as someone who knows what they’re talking about.
Each book contains:
What It’s all About – A summary of key points
Who You Need to Know – The basics about the key players
Who Said It – Quotes from key figures
What You Need to Read – Books and online resources for if you want to deepen your knowledge
If You Only Remember One Thing – A one-liner of the most important information
You might also want to know:
What You Need to Know about Economics
What You Need to Know about Strategy
What You Need to Know about Project Management
What You Need to Know about Leadership
What You Need to Know about Marketing

Business is big. Well, in fact, it’s also small, and medium-sized – and very big. The point is that everybody is talking about it. This is because, increasingly, wherever you work, and whatever you do, you are in all probability in a business. And even if you are not working, you will be affected by business. We are all subject to business, as hospital managers, school teachers and politicians all talk about “performance targets”, “metrics” and other bywords of management speak.
Television programmes such as The Apprentice and Dragons’ Den present business as a reality show even though the world they portray is a million miles from most people’s average day in the office. On the other hand, the programme actually called The Office satirised management mantras and the way business is conducted – in much the same way that the Dilbert cartoons make fun of how mundane office life can be.
In truth, business is not generally portrayed in a much better light than it was in the 1970s, when the image of British business in particular was bound up with strikes, poor-quality goods and a general air of hopelessness. Even in America, which has always been more exuberant about business, young people were dismissive of their elders who worked in big companies. And perhaps the most famous television programme about business – Dallas – took a particularly cynical view of the machinations of corporate life.
Somehow, though, we see through all that and are inspired by such figures as Virgin Group founder Sir Richard Branson, Microsoft’s Bill Gates and Apple chief Steve Jobs. We follow their every move in the hope that some of this stardust will rub off and make us successful in the same way as they have been.
The internet has played an important part in this. At the height of the “dot.com boom” of the late 1990s, everybody was so excited that they felt as if they were missing out if they were not involved in a start-up of some kind and thus eligible for a big pot of stock options. There was an excitement about business that was reminiscent of the exuberance that greeted the development of the railways in the nineteenth century. Established businesses grew so fearful of losing their brightest stars that they smashed hierarchies and threw away dress codes in an attempt to hang on to them. The “technology bubble” burst (and many of those options simply disappeared). But the informality – and hence, for want of a better term, the “funkiness” of business that it unleashed – remains.
Nor has this appeal really been dented by the financial crisis of 2008 and 2009. People may have been outraged by the financial alchemy on New York’s Wall Street and in the City of London and by its devastating effects on the wider, “real” economy, but this dissatisfaction has not apparently put people off the idea of business.
Indeed, individuals seem more enthusiastic about non-financial businesses than ever. By the middle of 2010, the passion for the technology gadget company Apple’s products had reached such a pitch that queues formed outside its stores whenever a new product became available. Slightly more prosaically, the John Lewis Partnership transformed itself from middle England’s dependable department store into a shining example of what a business can be even in difficult times by being truly switched on to the wants of its customers and also apparently by being decent – towards its staff (significantly, partners in the business), its customers and its suppliers. What was once a slightly stuffy purveyor of curtain fabrics and household goods became the subject of a television series and gained many a mention in the newspaper columns of the chattering classes – the sort of publicity that is impossible to buy.
Nor are these the only examples of the passion generated by business today – among customers, employees and senior managers alike. Howard Schultz, head of the global coffee bar chain Starbucks, even called the book he wrote about the company’s growth Pour Your Heart Into It. Entrepreneur Henry Stewart arguably went further, naming the information technology training company he set up in London a couple of decades ago Happy Computer. The company – despite being in a field that can be less than inspiring – is regularly featured in lists of the best places to work and is even using its experience to help other companies become happier workplaces.
There is clearly an appetite for work to be something more than just a means of earning a living.
This is not necessarily new. For example, Hewlett-Packard, one of the pioneers of the technology industry of which Google is a current star, set out an “HP Way” of doing business and employees would often make decisions based on what they thought “Bill and Dave” (Hewlett and Packard) would do.
Of course, this does not mean that everybody in business is following some cult. But it is definitely true that there is huge enthusiasm for business – among would-be employees as well as among policymakers and the general public. Back in the 1960s, when the London Business School was established, business education was almost unknown in Britain – although it was, of course, available in the United States and elsewhere. Now it is very different. In Britain alone, thousands of people study business and management each year, while a significant proportion of each year’s graduates head into some kind of business. And the number of start-ups continues to grow, contributing to there being just under three million businesses in the country in 2008.
In the United States, the Index of Entrepreneurial Activity produced by the Kauffman Foundation, an organisation dedicated to promoting entrepreneurialism, found that 558 000 individuals started new companies in 2009, a 4% rise on the previous year in spite of the recession. In Germany 200 000 small businesses were founded in 2009, according to research by the economic research institute Institut für Mittelstandsforschung. Meanwhile, China is showing great enthusiasm for enterprise. The number of Chinese who are either self-employed or working in companies not primarily owned by the state rose from about 8 million in 1992 to nearly 80 million in 2008.
However, attractive and exciting as we now realise it can be, business can also be a confusing place. Not only can its activities often involve complex processes or a mastery of obscure niche markets, the whole language of business can appear arcane and hard to get a grip on. Have you, for example, ever stared at the pages of the “FT” wondering how other people make sense of what looks like Ancient Greek to you? Have you ever nodded in agreement in a meeting even though there are so many acronyms and concepts flying around that you have no idea what is going on? Do you find spreadsheets mesmerising? Is your boss’s jargon impenetrable?
If you recognise any of these situations, you are not alone. Few of us have had much introduction to business before we start doing it. Although things are starting to change, there is little about business on the school curriculum. As a result, we tend to muddle along, chiefly through a mixture of bluffing and picking up things as we go along.
This book is here to make life easier. It will take you through the main concepts and terms, ideas and phrases you’ll come across in the business world. By the end you will have some understanding of how the stock market works, what all those economists are talking about, why cash is king and why being busy isn’t the same as making money.
Balance sheets and profit-and-loss accounts should no longer hold any fear for you. And you should be able to talk strategy just like an MBA. In addition, you will have had an introduction to the “nuts and bolts” of business, the parts (often not too glamorous) that bring alive the vision of the founder or head of the enterprise. No longer should you be caught out by finance experts and their figures.
Nor should you fall foul of the lawyers, for there is also a chapter devoted to the increasingly tough laws that govern the behaviour of those in business, particularly directors of publicly-quoted companies. Some of the mysteries surrounding supply and demand, competition and other theories should be clearer, as should be the pros and cons of globalisation.
You will also have a solid grounding in the skills you need to succeed. You will, for instance, learn about time management, about communication skills and even about how to be a leader.
Quite simply, this book provides an introduction to all that you need to know in order to succeed in business. All you have to do now is get out there and do it. True, there will be plenty of challenges, many of them emanating from beyond the world of business. But it can never have been more true that enterprise is a major part of the solution. As a result, there has surely never been a better – nor a more exciting – time to be in business.
• For general information on a whole range of aspects surrounding business, Business, The Ultimate Resource (A&C Black) is a very good starting point, as is The Capstone Encyclopaedia of Business (Capstone). Financial Times Handbook of Management (FT/Prentice Hall) is slightly narrower in scope, but similarly useful.
• For advice on starting and/or running a small business, try Good Small Business Guide (A&C Black) or Sara Williams’ Financial Times Guide to Business Start Up (FT/Prentice Hall).
• Business, the Ultimate Resource also has a website – www.ultimatebusinessresource.com. Among those focused on small businesses are www.Bytestart.co.uk, www.Startups.co.uk and www.yoodoo.biz. In the United States, the magazines Inc and Fast Company and their websites, www.inc.com, and www.fastcompany.com, are both informative and inspirational.
• For information on social enterprises and how to start them – the Social Enterprise Coalition – www.socialenterprise.org.uk.

• What business is
• How business developed
• What types of business there are
• How business is changing
• What the future might look like


So, what is this thing called business? Essentially, a business is an enterprise set up to make money through selling goods or services or a mixture of the two. However, this is a bit simplistic. Increasingly, there are governmental bodies and charities that are run increasingly like businesses. At the same time, the picture is becoming blurred by organisations that are set up as businesses but look more like charities, with their aims of being “social enterprises” or “not-for-profits” and righting some social wrong. Business is everywhere.
This is all the more remarkable because until the last decade or so – certainly in Britain, less so in America – “business” was something of a dirty word. “Entrepreneur” was a sort of codeword for “wheeler-dealer”.
What has brought about this dramatic change of heart? It is fair to say that a large part of it is the internet, with its promise of limitless possibilities. But there is also a much greater willingness to try things – even when it comes to careers. This is perhaps best illustrated by the numbers of business school graduates rejecting positions with investment banks and large corporations in favour of start-ups. Reinforcing all this is a change in attitude among policy makers. Young people are actively encouraged to start their own businesses for genuine reasons, such as doing good and/or creating wealth.
Sir Richard Branson
Many of today’s business heroes are technology wizards who use a bright idea to launch a successful business. Branson is a more old-fashioned buccaneering type of entrepreneur who has got where he has largely on the strength of his extreme self-confidence and love of challenging the big guy. As such, he has become an inspiration to many would-be business owners and is one of the best-known business people in the world.
His best-known business is Virgin Atlantic Airways, which in the 1980s had the audacity to take on British Airways in the battle for the lucrative trans-Atlantic air travel market. A quarter of a century later, Virgin Atlantic is a major player on the travel scene, with various related holidays operations, but Branson still likes to portray the business as a young upstart battling against the established incumbents.
Branson’s Virgin empire started as a mail-order record company (which hit the big time with the unlikely hit “Tubular Bells”) and has moved into record shops, cola drinks, publishing, health and beauty, financial services and trains. It has not always been resoundingly successful, but Branson – bearded, long-haired and tie-less even in his 60s – always gives the impression that he is enjoying a great adventure.


There is nothing new to the realisation that a successful business community is vital to a successful political system. One of the earliest examples of what we now think of as a company was the British East India Company, which was founded by Queen Elizabeth I in 1600 and over the next two-and-a-half centuries became inextricably linked with the growth of the British Empire. Perhaps even more significant were the businesses created at about the same time in the newly colonised North America. Historians cannot quite decide on which came first – Puritanism or Capitalism. But it is clear that the two are closely entwined, particularly in America, where such virtues as subordinating the individual to the group, marshalling resources to achieve a single purpose and a belief in self-help are shared by both creeds.
These early joint stock companies – ventures which raised funds by selling shares to investors who became partners in the enterprise (and thus predecessors to the current quoted companies) – paved the way for the businesses that helped develop the fledgling United States. Among these were railway companies and many types of manufacturing enterprises, which in a short period of time turned a few colonist-farmers into the factory of the world.
Similar developments were taking place in Britain, the birthplace of the Industrial Revolution. By the early twentieth century, the geographical spread of some of the businesses mirrored the reach of the Empire, with names such as Cable & Wireless and the now-defunct Imperial Chemical Industries seen as synonymous with British power and influence.
However, for sheer audacity nothing could beat the American businesses. Beefed up by serving a huge home market, the likes of the consumer goods company Procter & Gamble, the conglomerate ITT and the Ford Motor Company became huge players around the world. They used this strength to build up significant subsidiaries and own more businesses around the world than many people realised, but particularly in Europe, long before the more obvious US invasion that led to McDonald’s fast-food restaurants and Starbucks coffee shops appearing in every major city.
“What is good for the country is good for General Motors, and vice versa.”
– Charles Wilson
At their peak, these businesses were immense – so big that individuals could, and often did, spend their whole career at a single employer. Thanks to mass production and the application of scientific principles of management established by early business leaders, these businesses were effectively giant machines operating in huge factories employing so many workers that whole towns depended upon and grew up around them. They also developed equally enormous offices to house the people supposedly running them. The rows of machinery minders in the factories were matched by lines of typists and other clerical workers in the offices.
What had started out as exciting enterprises had ballooned into huge bureaucracies where few people really knew what they were doing and why, and where conformity ruled. This is the dull, stultified world of the “Corporate Man”, made fun of in films and novels and analysed in the sociological study The Organisation Man by William H. Whyte.
This cosy world of golf clubs and long lunch breaks came crashing to an end in the 1970s, when a sudden rise in the oil price by the increasingly assertive oil-producing nations of the Middle East challenged the whole basis on which business in countries such as the United States and Britain was conducted. A serious recession on both sides of the Atlantic paved the way for the arrival of Margaret Thatcher in Britain and Ronald Reagan in America and, with them, a robust “market forces” approach to economics. In the 1980s, a chill wind blew through the boardrooms and across the factory floors of both nations. And, when it was realised that in Germany and Japan, the two nations supposedly defeated in the Second World War, industry was in much better shape, producing better, more reliable products at better prices, a heavy bout of soul-searching set in.
Suddenly, management gurus, notably the charismatic and evangelical Tom Peters, and their theories about “quality”, “excellence” and “customer service” were all the rage. In fact, there were so many theories – often contradicting each other – that they were quickly termed fads and ignored by embattled workforces and management teams alike. This was also the period when service industries began to take over in importance from manufacturing. It was the time of deregulation of the financial markets and the arrival of the “Masters of the Universe” on Wall Street and in the City of London. It was also the era of “yuppie” excess. Although nobody at the time realised it was small beer compared with what was to come in the early years of the twenty-first century, it was still seen as unattractive. It was hard to admit to being a merchant banker in polite society.
Despite, or because of, the emphasis on financial engineering at the expense of real engineering, businesses were in no state to cope with the next big recession, which came in the wake of the first Gulf War in the early 1990s. This led to great swathes of job cuts across whole industries that were euphemistically described as “downsizing” or even “rightsizing”. It also led to a renewed focus on market forces and the arrival of the term “shareholder value”, for a concept designed to improve businesses’ focus on their main purpose – making money, or creating value, for shareholders. Conglomerates were “demerged” and “focus” became the watchword.
Business became a lot more efficient. But it also became a lot less enjoyable. The failings exposed by the 1990s recession led to a fresh bout of introspection and the realisation that perhaps business had lost its way.
Some people saw a link between the superiority of Japanese and German goods – particularly in such areas as cars and consumer electronics – and these countries’ companies were run differently from the Anglo-Saxon model. In Japan, the concept of a job for life had benefits in loyalty and a readiness to take a long-term view, while Germany had the consensual approach to management common across much of continental Europe, where workers’ councils typically had much greater influence than the trade unions in Britain and the United States. However, as time wore on – and Japan and Germany both endured difficult economic periods – the Anglo-Saxon, and, it has to be said, increasingly American, view held sway.
Although some of them drew from other cultures, the gurus and consultants who were growing ever more important in business were largely American. As a result, business premises across the world began to ring with American terms such as “double whammy” and “ball park figure” and managing directors became chief executives or CEOs, a title that Peter Drucker, the guru of gurus, had previously said was peculiar to America.
Some of the analysis of “what went wrong” that followed the early 1990s recession, and the spectacular collapses that accompanied it, took place in Britain. For example, the Cadbury Committee came up with a code on corporate governance that did much to pave the way for the improvements in that area that have followed, while the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) initiated an inquiry that gave rise to the ongoing experiment with “Tomorrow’s Company”.
Peter Drucker
Peter Drucker was without a doubt the doyen of management gurus. Born in Austria, he moved to the United States in the 1930s and published his first book – an examination of General Motors entitled Concept of the Corporation in 1946. Over the next half century he covered a huge variety of management topics, along the way identifying many notions that would become central to business thinking, such as the “knowledge worker” and “managing by objectives”.
In the key work The Practice of Management (1954) he offered his view of the first principles of management and wrote what has come to be regarded as one of the key statements of management thinking: “There is only one valid definition of business purpose: to create a customer.”
Always prolific and provocative, he continued writing and consulting into his 90s and applied the thinking that had originated in the study of large organisations to entrepreneurship and non-profit organisations. But he remained remarkably consistent – the tasks for the manager of the future that he set out towards the end of his life had in fact been identified by him years before.
But it was, of course, in America that business was really born again. Particularly in California and in a small area that came to be known as Silicon Valley. The area, close as it is to the prestigious Stanford University and its mighty engineering faculty, had long been a centre for business, giving rise to what would become the computer giant Hewlett-Packard and many others. However, it really came into its own when it became the de facto centre of the world’s high-technology businesses. Sure, Microsoft was based in Seattle, a few others came out of the area around Boston and some were even spawned around Cambridge University – Silicon Fen. But the vast majority of the new technology businesses and – more importantly – the new attitudes came out of Silicon Valley.
One aspect of this approach – involving employees or customers in the ownership of the business – had been tried before. Indeed, Britain has at least two long-running success stories in this area – the financial services and retail group the Co-operative Society and the retail company the John Lewis Partnership.
However, it was the first time that a significant group of companies had adopted such an approach. Moreover, it looked so attractive that many other businesses had to start following suit in order to avoid losing their best people.
There has been much comment in recent years about businesses moving away from their original purpose – as expounded by the late Chicago free-market economist Milton Friedman – of being to maximise profits for shareholders. Companies have been encouraged to look at the interests of stakeholders other than shareholders, to engage in corporate social responsibility, even to look for a new form of capitalism.
Charles Handy
Charles Handy is more quietly spoken and more circumspect than many management thinkers. Nevertheless, he has been hugely influential in imagining and describing many aspects of the current workplace.
For example, he developed the “shamrock organisation” as a way of explaining how many built around cores of essential businesses would be built around cores of essential executives and workers supported by outside contractors and part-time help. He has also pioneered the concept of the “portfolio career”, both in his own way of working and in describing it in a series of accessible and popular books. Reacting against the old split between work and play, Handy sees people dividing their time between work for which they get paid, free work for friends and charities, studying in order to keep up with their professions, working at home and leisure.
Having begun his business career at Shell, he was an early teacher at London Business School before becoming best-known for his talks and books, such as The Future of Work (1984), The Age of Unreason (1989) and The Empty Raincoat (1994).
But what has really made business attractive is that people who previously would not have dreamed of going into commerce suddenly saw it as a way of “making a difference”, of getting things done (roles previously answered by public services) and, above all, of having fun.
Having thrown out the notions of loyalty and paternalism in response to market forces, business is now returning to something similar. Companies now queue up to be included in the lists of the best companies to work for, they constantly add to the services they provide for their hard-pressed staff and they encourage them to use mobile technology so that they can work flexibly (critics inevitably say this means working longer). Almost without exception, they are also anxious to stress the good they do in their communities through supporting charities, supplying schools with computers, regenerating rundown areas and the like.
This work hard, play hard approach and almost cult-like devotion to the company that you currently work for harks back to the earliest days of industry, when – just as now – there was a blurring between work and life and a belief that business could change the world. Indeed, Google – towards the end of the first decade of the twenty-first century perhaps the most ubiquitous new company of them all – has been described as “a religion posing as a company”.
It is really not going too far to say that business has become a way of life. Which makes this book all the more important.
That said, most people’s idea of business – unless they are involved in it – is of the sort of large international affairs that attract coverage in the media through takeovers, strikes or involvement in catastrophe. In truth, though, such businesses are the exception. There are many more businesses that do not attract any attention at all.
Here, we will look at the two main types of business – big business and small and medium-sized business.


Although they only make up a tiny proportion of the businesses in the world, one could be forgiven for thinking that big companies were the only ones in existence. Most of the coverage in the media is given over to them. And they also attract the greatest criticism from politicians, commentators and the public at large. This is because they are seen as increasingly powerful in a world where ease of communication and other technological developments are enabling more and more companies to act on a global scale.
“Big companies are small companies that succeeded.”
– Robert Townsend