An Business: organization that provides goods or services that are then sold to earn profit. Profits: The difference between a business's revenues and its expenses. The rewards owners get for risking their money and time. The Benefits of business: Provides goods and services Employment of workers Innovation and opportunities Increased quality of life and standard of living Enhance personal incomes of owners and stockholders Tax payments support government Support for charities and community leadership Types of Economic systems: ECONOMIC SYSTEM A nation's system for allocating its resources among its citizens, both individuals and organizations. FACTORS OF PRODUCTION Labor: Human resource Capital: Financial resource Entrepreneurs: Persons who risk starting a business Physical resources: Tangible things used to conduct business. Information resources: Data and other information. PLANNED ECONOMY A centralized government controls all or most factors of production and makes all or most production and allocation decision for the economy.
MARKET ECONOMY Individual producers and consumers control production and allocation by creating combinations of supply and demand. MARKET A mechanism of exchange between buyers and sellers of a good or service. Mixed Market Economy (SUCH AS U.S.A.) Featured characteristics of both planned and market economies. PRIVATIZATION: The process of converting government enterprises into privately owned companies. SOCIALISM: The government owns and operates select major industries such as banking and transportation. Smaller businesses are privately owned. Degrees of competition: PERFECT COMPETITION: Prices are determined by supply and demand because no single firm is powerful enough to influence the price of the product. - All firms are small - The number of firms in the industry is large Principles of perfect competition: - Buyers view all products as identical. - Buyers and sellers know the prices that others are paying and receiving in the marketplace. - It is easy for firms to enter or leave the Markey.
- Prices are set exclusively by supply and demand and accepted by both sellers and buyers.
MONOPOLISTIC COMPETITION: - There are numerous sellers trying to differentiate their products from those of competitors so as to have some control over price. (WENDY'S SQUARE BURGER) - There are many sellers though fewer than in pure competition. - Sellers can enter or leave the market easily. - The large number of buyers relative to sellers applies potential limits to prices. Ethics in the Workplace: ETHICS - Beliefs about what is right and wrong or good and bad. ETHICAL BEHAVIOR - Behavior conforming to individual beliefs and social norms about what is right and good.
Company practices and Business Ethics: ENCOURAGING ETHICAL BHAVIOR INCOLVES: - Adopting written codes of conduct and establishing clear ethical positions for the conduct of business. - Having top management demonstrates its support of ethical standards.
Social Responsibility: The overall way in which a business attempts to balance its commitments to relevant groups and individuals in its social environment. Areas of Social Responsibility: BASIC CONSUMER RIGHTS: - To possess safe products - To informed be about all relevant aspects of a product - To be heard - To choose what to buy - To be educated about purchases - To courteous service RESPONSIBILITY TOWARD EMPLOYEES - Legal and social commitments to: o Not practice illegal discrimination o Provide a physically and socially safe workplace o Provide opportunities to balance work and life o Provide protection for WHISTLEBLOWERS TOWARD INVESTORS - Proper financial management (no insider trading) OBSTRUCTIONIST STANCE -A company does as little as possible and may attempt to deny or cover up violations. DEFENSIVE STANCE -A company does everything required of it legally but no more.
ACCOMMODATIVE STANCE - A company meets its legal and ethical requirements and also goes further in certain cases. PROACTIVE STANCE - A company actively seeks to contribute to the wellbeing of groups and individuals in its social environment. Social responsibility must start at the top and be considered as a factor in strategic planning. What is a "Small" Business SMALL BUSINESS: - A business that is independent (not part of a larger business) and that has relatively little influence in its market. POPULAR AREAS OF SMALL-BUSINESS ENTERPRISE - Major small business industry groups: o o o o o o SERVICE (SMALLEST) RETAILING (50%) Construction Wholesaling Finance and Insurance Manufacturing and transportation
Starting the Small Business: BUYING AN EXISTING BUSINESS: - Less risk in purchasing ongoing, viable business FRANCHISING - Advantages o Proven business opportunity for franchisee o Access to management expertise of franchisor - Disadvantages o Start-up Costs or franchise purchase o Ongoing payments to the franchisor o Management rules and restrictions on the franchisee ENTEPRENEUR -One who accepts the risks and opportunities of creating, operating and growing a new business. FASTEST GROWING FRANCHISE SUBWAY!!!!! REASONS FOR SUCCESS - customer service!!! Sole Proprietorships: (MOST ADVANTAGE) ADVANTAGES: - Freedom - Low start-up $ DISADVANTAGES: - Unlimited liability: o Owners are responsible for all debts of a business How many home builders? 179
GENERAL PARTNERSHIP: Where more than 1 person contribute $ equally
Corporation - An artificial being, invisible, intangible, and existing only in the contemplation of the law. *ADVANTAGES: - Limited liability DISADVEANTAGES: ****Double taxation dividends*** corporate governance is established by the firm's bylaws and involves three bodies: -stockholders -the board of directors -corporate officers GLOBALIZATION - The process by which the world's various national economies and trading systems are fast becoming a single highly interdependent system... FORMS OF COMPETITIVE ADVANTAGE - Absolute advantage o When a country can produce something that is cheaper and of higher quality than any other country o An advantage based on possessing a scarce resource. - Comparative advantage:
o When a country can produce goods more efficiently or better than other countries can produce the same goods. o An advantage based on superior productivity. BARRIERS TO INTERNATIONAL TRADE: -business practice laws -social and cultural differences -economic differences -legal and political differences -tariffs