Business Essentials Chapt. 1

Primary Goal of Businesses
To earn profit or offer service by creating products or services

Products
Tangible Goods, Services, and Ideas

Types of Business
Commercial Enterprise and Social Enterprise

Commercial Enterprise
For-Profit

Social Enterprise
Non-Profit

Interested Parties?
Stakeholders & Customers

Stakeholders
A group that have a stake in the success and outcome of a business

Activities of Business
Management, Marketing, Finance

Management
Involves coordinating employees actions to achieve the firm’s goals, organizing people to work effectively, and motivating them to achieve the company’s goals (Employees)(Economy)

Marketing
The focus of all marketing activities is satisfying customers. Includes all the activities designed to provide goods and services that satisfy the consumer needs and wants (Consumers)(Information technology & Legal,Political, and regulatory Forces)

Finance
Primary responsibility of the owners to provide financial resources for the operation of business (Owners) (Competition & Social Responsibility and Ethics)

Economy/Economics
The study of how resources are distributed for the production of goods and services within a social system (Resources, Distributed, Production)

Types of Resources:
Natural, Human, and Financial

Natural Resources
Land, Forests, Minerals, Water, and Other things NOT MADE BY PEOPLE

Human Resources
Physical and Mental abilities that people can use to produce goods and services (LABOR)

Financial Resources
Funds used to acquire the natural and human resources needed to provide products (CAPITAL)

Communism
-Business Ownership
-Competition
-Profits
-Product Availability and Price
-Employment Options
People (Govt.) own all.
-Majority of Businesses owned by Govt.
-No Competition
-Profits go to Govt.
-Limited choice in product, quantity, and high prices
-Limited to no choice

Socialism
-Business Ownership
-Competition
-Profits
-Product Availability and Price
-Employment Options
Govt. owns some businesses but People own Most
-Govt. owns major industries and people own small businesses
-Restricted to Major industries; Encouraged in People owned businesses
-Based on Ownership
-Some variation on Choice and Services; Prices determined by supply and demand
-Some Career choice; Most work for Govt.

Capitalism (Free Enterprise System)
-Business Ownership
-Competition
-Profits
-Product Availability and Price
-Employment Options
Individuals own and operate all businesses
-Individuals own and operate the majority
-Encouraged by Market and Govt. regulations
-Profits go to business owner
-Wide variety; Prices based off Supply and Demand
-Unlimited Career Choices

Free-Market System
All Economic Decisions are made without Govt.

Mixed Economy
An Economic System that pulls from various other systems

Free Enterprise System requirements
-Own and Pass Property to Heirs
-Earn Profits and Use Them Freely*
-Make Decisions on Business Operations*
-Choose Career, Places to Live, Purchases, Etc.

*With Govt. regulatory and Lawful Boundaries

Supply
Number of products that businesses are willing to sell (at different prices at a specific time)

Demand
Number of products that consumers are willing to buy (at different prices at different times)

Equilibrium Price
Number of products that consumers are willing to buy (at a specific point in time)

Competition
The rivalry among businesses for consumers dollars (vital element in free enterprise)

Pure Competition
(Best) Many small businesses selling one standardized product

Monopolistic Competition
Fewer business competing and products may differ in nature and use

Oligopoly
Very few businesses selling all products

Monopoly
One business providing a product in a given market

Economic Expasion
Economy is growing and people are spending more money

Economic Contraction
When spending declines and business cut back product as well as lay off workers

Inflation
A continuing rise in prices

Recession
A decline in production, employment, and income

Unemployment
Percentage of population that want to work but are unable to find jobs

Depression
Unemployment is high, consumer spending is low, and business output is sharply reduced

Gross Domestic Products (GDP)
The sum of all goods and services produced in a country in a year

Budget Deficit
A nation spends more than it takes in from taxes

Agricultural Economy
Everything was man-made and self produced

Manufacturing Economy
Manufactured goods and provided services

Marketing Economy
Consumers determine what goods and services are produced

Service Economy
Devoted to buying services that make life easier

Entrepreneur
An individual who risks his/her wealth, time, and effort to develop a innovative product or method (for profit)