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Business Foundations

by: Jordan Calvert

Business Foundations MGMT1053

Jordan Calvert
GPA 3.6

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About this Document

Chapter 1: What we covered in class plus the rest of the chapter that we didn't cover
Business Foundations
Melissa Newman
Class Notes
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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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