MGT 131

Ch 1

Business
Business Any individual or organization that seeks or wants to provide goods and services to others while operating at a profit Businesses provide people with the opportunity to become wealthy, eg Bill Gates and Microsoft Owning a business if you are willing to be an entrepreneur or working for a business can help you to support your family, own your home etc.
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Entrepreneur
A person who owns and operates his or her own business Profit is the amount of money a business earns above and beyond what it pays out for salaries and other expenses Revenue is the total amount of money a business takes in during a given period by selling goods and services Loss this occurs when a businesss expenses are more than its revenue
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Business
If a business loses money over time, it will likely have to close. This is where risk comes in Starting a business always involves some risk Risk taking is very important for improving our standard of living
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Standard of living
This is a grade or level of subsistence (basic needs) and comfort in everyday life enjoyed by a community, class, or individual Risk this is the exposure to the chance of a financial or time loss due to something that is not successful Reward the gratification or compensation all people stand to gain or lose from the policies and activities of a business
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Stakeholders
All the people who stand to gain or lose from the policies and activities of a business Shareholder this is a person who actually owns stock in a company Stock is an intangible piece of ownership in a company By owning stock shareholders actually own a piece of the company Shareholders want to see return on their investments, and as a result, business people are constantly under pressure to satisfy the needs of the stakeholders including the shareholders

FIVE PARTS OF THE BUSINESS ENVIRONMENT

5 Elements are:
1 the economic and legal environment 2 the technological environment 3 The competitive environment 4 the social environment 5 The global environment A business owner can keep abreast of changes in the environment by reading the newspaper and various business publications
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The environment
Business owners who are not aware of the environment around them necessarily have less success than those who are aware. Business owners need to be aware of stakeholders in each of the business environments

The Economic and Legal Environment

Businesses do not operate in a vacuum but rather within a framework of laws and economic forces People are willing to start new businesses if they believe that the risk of losing their money is not too great Part of entrepreneurs risk involves the economic system and how government works with or against businesses Government can do a lot to lessen the risk of starting business and thus increase entrepreneurship and wealth 10

Return on Investment
ROI this is the money gained from taking a business venture risk In addition to money, investment of time is also an important consideration for business people A business person will benefit if he or she has an awareness of the laws affecting business and knowledge of the economic environment in which business operates
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What can Governments do?

Governments can lessen the risks of entrepreneurship by passing laws that enable business people to write contracts that can be enforced in courts Also a government can establish a tradable currency this means that you can buy and sell goods anywhere in the world using this currency eg. US$ used for trading in oil
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Board of Directors
This is a group that oversees the activities of a corporation Generally represents a mix a small number of company executives and a greater number of outsiders

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Capitalist system
Companies and businesses are owned by citizens instead of government

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The Technological Environment

Many tools and machines developed throughout history have changed the business environment sometimes dramatically, but few technical changes have had a more comprehensive and lasting impact on business than the recent emergence of information technology (IT); computers, modems, the Internet, cell phones and so on. Chief among these, the Internet
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The Technology Environment

Increased Productivity Technology Includes everything which makes business processes more effective, efficient and productive

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Technology
Effectiveness producing the desired result Efficiency the ability to produce using the least amount of resources Resource something used in the production of goods Productivity the amount of output you generate given the amount of input (eg. Hours worked) The more your can work in any given time the more money you are worth to companies
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Technology
Technology affects people in all industries As machines are invented that improve processes, fewer human beings are needed to do the job As these changes take place, businesses evolve to adapt to the new challenges

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Making Buying and Selling Easier

One of the most important recent environmental changes of interest to business people is the growth of e commerce the buying and selling of goods electronically over the Internet There are 2 major types of e commerce transactions: Business to consumer (B2C) Business to business (B2B)
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Business to consumer (B2C)

A business that produces products to sell directly to the consumer Business to business (B2B) A business that produces products to sell to another business

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Responsiveness to customers
Uniform Product Codes (UPC) A series of lines and numbers that you see on most consumer packaged goods The UPC identifies the type of products Another name BAR CODE They can be used to tell retailers what products you bought, in what size and colour, and at what price A scanner at the check out counter can read that information and put it into a data base
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Responsiveness to customers
A Database This is an electronic storage file where information is kept Consumer information can be saved in a data base with cross references to purchased product information

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The Competitive Environment

Competition among businesses has always existed but it has never been greater that it is today Some companies have found a competitive edge by focusing on quality The goal for many companies is zero defects no mistakes in making the product
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The Competitive Environment

The concept of value is very important Value is the relative worth, merit, or importance The competitive Environment This involves Customer service Stakeholder recognition Employee service Concern for the environment
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Competitive Environment
Customer Driven Organizations Customers require both high quality and high value and for companies to stay competitive they must offer both Look at Fig, 1.7 P 21 Employee Empowerment Empowerment this is to give power or authority to make decisions without the need to consult managers
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Competitive Environment
Cross-functional teams - a group of people with different expertise working together to achieve a common goal These teams sometimes work without close supervision; thus, they are sometimes called self managed cross functional teams One point about empowerment is that it eliminates managers and redistributes workloads
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The Social Environment

It is important to know how people life, where they live, what they buy, and how they spend their time Any business person needs to be aware of shifts in society in order to be able to meet the needs of the consumer Diversity this is the broad differences between people (ethnicity, gender, color, body size, age, etc
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The Social Environment

The management of diversity is an important concern for business people Businesses are concerned about having a diverse workforce for two main reasons. First a business can better serve customers with a diverse workforce Second a diverse workforce environment brings about new, fresh ideas and perspectives A diverse workforce is better overall for all companies because we have to work with people 28 of various races, ages, etc.

Social Environment
Management has to organise a diverse work force but there are other issues which are important in the workforce: Aging Consumers Another social issue and concern is the fact that Baby Boomers (born between 1946 and 1964) are soon due to retire and will have to be replaced by qualified staff Baby boomers are not aging the way previous generations did they are very active and there is 29 a growing market for adventure travel

The Social Environment

Dual Incomes families also play a role in the societal changes in the world This is a family where both household heads work Both adults have to work because of the cost of housing, and of having a comfortable lifestyle have made it necessary to have two incomes Child care, counseling to parents, part time workers, flexi working hours etc. 30
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The Social Environment

Single parents have brought about family leave, flexi working hours, etc. Marriage many people today are getting married later in life and having children later Unmarried people need products for a single life style, cars, holidays, etc.
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The Global Environment

This has brought about international competition and the increase of free trade among nations Free Trade this is the reduction of barriers to trade such as doing away with taxes or tariffs on goods brought into another country The threat of terrorism on a world wide level adds greatly to organizational costs such as security personnel, security equipment, and insurance
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Your Future in Business

We are in the midst of an information based global revolution that will alter all sectors of the economy; agricultural, industrial, and service Entrepreneurship v Working for others There are two ways to succeed in a business One is to work for others, get experience and skills and rise up through the ranks
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YOUR FUTURE
Someone else is assuming the entrepreneurial risks in that case and paying your salary and benefits Most people choose this option It can lead to a happy and prosperous life The other riskier path is to start your own business (become an entrepreneur)
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Creation of Wealth
Five factors which contribute to wealth are the factors of production

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Factors of Production
1 2 3 4 5 land Labour Capital Entrepreneurship Knowledge

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Factors of Production
If you were to analyze rich countries versus poor countries to see what causes the differences in the levels of wealth, you would have to look at these factors of production in each country Russia and China have both vast areas of land with many resources but they are not rich countries yet
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Factors of production
Most poor countries have many labourers so it is not labour that is the primary source of wealth Capital machinery and tools is now becoming available in world markets, and so mere access to capital is not the missing element
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Nonprofit Organization
An organization whose goals do not include making a personal profit for its owners and organizers but rather the alleviation or making less of some social problem Examples or these organizations are: schools, civic associations, and charities Non profit organizations do want financial gains but these are used to meet the shared social or educational goals of the organization rather than for personal profits. social entrepreneurs
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