Profit, Competition and Decision Making Model

1. Profit, Competition and Decision Making Model

2. Profit and competition The goal of every business is to make a profit from the sale of goods and services to meet consumer demands When businesses sell goods and services they generate revenues Profit is the income which is left over after all of the costs and expenses are paid Expenses are the expenditures involved in running a business such as the wages and the assets that get used up in the process of running a business Costs are the amounts of money required at each stage of production such as cost of raw materials

3. Profit, Loss and Break-even The Break-even point is the point where a business’s revenues cover their expenses Above the break-even a business makes a profit Below the break-even a business takes a loss

4. Competition • In business, competition is the rivalry between two or more businesses to generate sales • In a free enterprise system competition is both encouraged and promoted • In Carleton Place there are many ‘fast food’ businesses competing for the your money • Competition helps to: • helps to keep prices lower • deliver better quality products to the marketplace • Introduce new products/services to the marketplace

5. Task Select one product or service Classify the product - state what industry or market you think the product is in. For example, is it a type of food product? Is it an electrical good? Is it a mobile phone? Is it a service? Having classified it as much as you can, do some investigation to think of as many different competitors that exist for the product as possible. You will need to be careful because some firms produce different brands of similar goods. For example, the company Proctor & Gamble produce Bold, Daz, Ariel, Dreft, Fairy, Lenor, and - all laundry products but produced by the same firm. Are these all in competition with each other? If so, why might a firm produce a product that competes with itself? Lots of choice? Possibly, but many of these brands are made by the same company - why?

6. Key to business survival • A business can not survive unless it produces goods and services that consumers need and want • The choices and buying habits of consumers dictate: • What goods and services businesses produce • What quantities they produce • The choices made by consumers decide which businesses survive and which don’t • To survive businesses must be able to: • Adapt • Innovate • Take risks

7. Decision Making Model • Making timely decisions is something that business owners must do • For instance knowing how much Inventory to keep on hand • Decision making involves 5 steps: • Define what has to be done • Identify the alternatives • Evaluate the advantages and disadvantages of each • Select the best choice and take action • Evaluate the decision to see if it needs revision.

8. Demonstrate how you would use these five steps in each of the following situations: • Selecting courses to complete your diploma • Deciding whether to take a part time job while attending school