Business Foundations MGMT1053
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This 9 page Class Notes was uploaded by Jordan Calvert on Friday January 22, 2016. The Class Notes belongs to MGMT1053 at The University of Cincinnati taught by Melissa Newman in Spring 2016. Since its upload, it has received 37 views. For similar materials see Business Foundations in Business at The University of Cincinnati.
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Date Created: 01/22/16
Business Foundations Chapter 1 notes The Nature of Business -‐Business: tries to earn a profit by providing products that satisfy people’s needs. Products -‐Tangible: ex. Automobile, computer, phone, coat, ect. -‐Service (Intangible): manicure, tanning, haircut, ect. Business -‐The primary goal of all businesses is to earn a profit. -‐Nonprofit organizations: (ex, Red Cross, Special Olympics) they do not have the fundamental purpose of earning profits, although they may provide goods or services and engage in fund raising. -‐To earn a profit, a person or organization needs management skills to plan, organize, and control the activities of the books and to find and develop employees so that it can make products consumers will buy. -‐Stakeholders: have a stake in the success and outcomes of a business. (ex. Investors). They’re concerned about how the production and distribution of their products affect the environment. -‐To be profitable, businesses must serve their stakeholders. Management -‐Management involves coordinating employees’ actions to achieve the firm’s goals, organizing people to work efficiently, and motivating them to achieve the business’ goals. Marketing -‐The focus of all marketing activities is satisfying customers. -‐Marketing includes all the activities designed to provide goods and services that satisfy consumers’ needs and wants. Finance -‐It is the primary responsibility of the owners to provide financial resources for the operation of the business. -‐Finance refers to all activities concerned with obtaining money and using it effectively (ex. Accountants, stockbrokers, investment advisors and bankers). The Economic Foundations of Business -‐Economics: the study of how resources are distributed for the production of goods and services within a social system. -‐Natural resources: land, forests, minerals, water, and other things not made by people. -‐Human resources (labor): refers to the physical and mental abilities that people use to produce goods. -‐Financial resources (capital): the funds used to acquire the natural and human resources needed to provide products. -‐Because natural, human, and financial resources are used to provide goods and services, they are sometimes called factors of production. -‐Economic system: describe how a particular society distributes its resources to produce goods and services. Communism -‐Communism: a society in which the people, without regard to class, own all the nation’s resources (defined by Karl Max). -‐In a communist economy, the people (through the government) own and operate all businesses and factors of production. -‐Communist economies have been marked by low standards of living, critical shortages of consumer goods, high prices, corruption, and little freedom. Socialism Socialism: an economic system in which the government owns and operates basic industries-‐ postal service, telephone, utilities, transportation, health care, banking, and some manufacturing-‐ but individuals own most businesses. Capitalism Capitalism (free enterprise): an economic system in which individuals own and operate the majority of businesses that provide goods and services. -‐Competition, supply, and demand determine which goods and services are produced, how they’re produced, and how they are distributed. -‐U.S. (along with Canada, Japan, and Australia) are examples of economic systems based on capitalism. There are two forms of capitalism: pure capitalism and modified capitalism. -‐Pure capitalism (free market system): all economic decisions are made without government intervention. First described by Adam Smith in The Wealth of Nations. -‐Modified capitalism: the government intervenes and regulates business to some extent. Mixed Economies -‐Most nations operate as mixed economies, which have elements from more than one economic system. The Free-‐Enterprise System -‐Provides an opportunity for a business to succeed or fail on the basis of market demand. The Forces of Supply and Demand -‐Demand: the number of goods and services that consumers are willing to buy at different prices at a specific time. -‐The relationship between the price and the number of rugs consumers are willing to buy can be shown graphically with a demand curve. -‐Supply: the number of products that businesses are willing to sell at different prices at a specific time. -‐Equilibrium Price: the price at which the number of products that businesses are willing to supply equals the number of products that consumers are willing to buy at a specific point in them. The Nature of Competition -‐Competition: the rivalry among businesses for consumers’ dollars. -‐Competition fosters efficiency and low prices by forcing producers to offer the best products at the most reasonable price; those who fail to do so are not able to stay in business (Adam Smith). -‐Pure Competition: exists when there are many small businesses selling one standardized product, such as agricultural commodities like wheat, corn, and cotton. -‐Prices are determined solely by the forces of supply and demand. -‐Monopolistic competition: exists when there are fewer businesses than in a pure-‐competition environment and the differences among the goods they sell are small. -‐Oligopoly: exists when there are very few businesses selling a product. -‐In an oligopoly, individual businesses have control over their products’ price because each business supplies a large portion of the products sold in the market place. -‐Monopoly: where there is one business providing a product in a market (ex. Utility companies that supply electricity, natural gas, and water). -‐Economic expansion: occurs when an economy is growing and people are spending more money. -‐Rapid expansions of the economy, however, may result in inflation, a continuing rise in prices. -‐Economic Contraction: occurs when spending declines. Businesses cut back on production and lay off workers and the economy as a whole slows down. -‐Contractions of the economy lead to a recession-‐ a decline in production, employment, and income. -‐Recessions are often characterized by rising levels of unemployment, which is measured as the percentage of the population that wants to work but is unable to find jobs. -‐A severe recession may turn into a depression, in which unemployment is very high, consumer spending is low, and business output is sharply reduced. -‐Economies expand and contract in response to changes in consumer, business, and government spending. -‐Gross domestic product (GDP): the sum of all goods and services produced in a country during a year. GDP measures only those goods and services made within a country and therefore does not include profits from companies’ overseas operations; includes profits earned by foreign companies within the country being measured. -‐Budget deficit: When a nation spends more than it takes in from taxes. A Brief History of the American Economy The Industrial Revolution -‐The 19 industrial revolution brought the development of new technologies and factories. The Manufacturing and Marketing Economies -‐Industrialization brought increased prosperity, and the United States gradually became a manufacturing economy-‐one devoted to manufacturing goods and providing services rather than producing agricultural products. -‐Businesses became more concerned with the needs of consumer and entered the marketing economy. The Service and New Digital Economy -‐After World War II, with the increased standard of living, Americans had more money and more time. They began to pay others to perform services that made their lives easier. -‐Service economy: one devoted to the production of services that make life easier for busy consumers. The Role of the Entrepreneur -‐Entrepreneur: an individual who risks his or her wealth, time, and effort to develop for profit an innovative product or way of doing something. -‐Business ethics generally refers to the standards and principles used by society to define appropriate and inappropriate conduct in the workplace. The Role of Government in the American Economy -‐The American economic system is best described as modified capitalism because the government regulates business to preserve competition and protect consumers and employees. The Role of Ethics and Social Responsibility in Business -‐Society is increasingly demanding that businesspeople behave ethically and socially responsibly toward not only their customers but also employees, investors, government regulators, communities, and natural environment.
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