BBI 10/20 • Introduction to Business
UNIT 1: Business Fundamentals • Chapter 1: • Economic Basics
WHAT IS A BUSINESS? A business is an organization that produces and/or sells goods and/or services to satisfy the needs, wants, and demands of consumers.
What is a business? • There are many ways to classify a business……
What is a business? • A For-profit Business • “an organization that produces or sells goods or services to satisfy the needs of consumers for the purpose of making a profit.”
What is a Business? Profit: money left after all expenses have been paid. Expenses: money spent on running the business (wages, supplies)
WHAT IS A BUSINESS? • Costs: money spent for the production of the good or service. • Businesses try to keep profits up by keeping costs and expenses down.
WHAT IS A BUSINESS? • Profit = Revenue – Expenses • If profit is negative, it is called a loss.
WHAT IS A BUSINESS? • A business which makes profit may use the money to: • - expand/grow operations • - improve products/services • - give to owner/shareholders
WHAT IS A BUSINESS? • Non-profit and Not-for-profit Business. • NP: does not look to make a profit, but raises funds for a specific goal (charities, charitable organizations) • What are some examples of these?
WHAT IS A BUSINESS? • NFP: does not seek to make a profit. Extra moneys it brings in is used to improve services. • What are some examples of these?
WHAT IS A BUSINESS? • Co-operative: A group of people who come together to meet a set of goals in a democratically controlled business.
What is A Business? • SIZE OF BUSINESS • Small or medium sized business: less than 500 employees/management.
What is a business? • Forms of Business Ownership • We will cover this in Chapter 2
What is a business? • Goods or Services? • Business either sell goods (physical things you take home) or provide services (do something) in exchange for money. • Some do both.
What is a business? • Distribution How are goods and services delivered? • Bricks and mortar business, telemarketing, catalogue, virtual store (internet) • Examples?
What is a business? • Role in the Community • What dies the business do for the community? • Jobs • What type of jobs does it provide?
The role of the consumer • Producers manufacture goods for consumers. Companies that attract more consumers can make more sales and more profit. • The interaction between producer and consumer, creates the marketplace. • Producer ------ Marketplace ------Consumer
The role of the consumer • Years ago, business dictated what was produced, and in what quantities. • Eventually, consumers started to tell manufacturers their needs and wants, creating competition. • Consumers also decide when a product will no longer be produced. When no one wants a product anymore, it becomes obsolete. • What are some things you know of that have become obsolete?
The role of the consumer • Consumers also influence price. Companies used to have pricingpower (could charge what they want), but with competition consumers can shop around for the best deal. • Consumers also have consumer purchasing power – as customers they dictate how much they are willing to pay, but also the level of service.
Starting a business • People who start their own businesses are called entrepreneurs. • Entrepreneurs need: • - self-confidence • - a flair for innovation • - the ability to work alone • - an aptitude for managing others
Starting a business • Consumers needs and wants: • Sometimes a business is started to satisfy consumer needs. Needs are things that are necessary for survival. • Ex. You need food and clothing.
Starting a business • Consumers needs and wants: • Wants are things that are not necessary for survival, but add comfort and pleasure to our lives. • Ex. You want a hamburger, TH shirt…
Starting a business • Attracting consumer interest: • It is important to understand how consumers make buying decisions. This will help decide what to make, how to market and distribute the product. • Businesses need to listen to what the consumer wants. The challenge is then to get those customers to buy your product.
Starting a business • Attracting consumer interest: • What can companies do to attract more customers?
Starting a business • Attracting consumer interest: • - Sample answers: • - create a new product • - modify an existing product • - more heavily promote a product • - offer purchase incentives (coupons) • - convince consumers they need (want) the product • - develop different uses for product • - offer free samples • - In-store demonstrations
Starting a business • Attracting consumer interest: • The task is to come up with a product that consumers need or want, at a price they’re willing to pay, in a place that is convenient, and promote it so they know about it.
Making good business decisions • The five-step decision-makingmodel can be used to help in any business situation. • 1. Determine what decision has to be made. • 2. Identify the alternatives. • 3. Evaluate the advantages and disadvantages of each. • 4. Make a decision and take action. • 5. Evaluate the decision.
Making good business decisions • 1. Determine what decision has to be made. • What is the problem? What issue needs to be resolved? • 2. Identify the alternatives. • Brainstorm as many solutions to the problem as possible.
Making good business decisions • 3. Evaluate the advantages and disadvantages of each. • What are the pros and cons of each option? • 4. Make a decision and take action. • Choose the best alternative, and go with it.
Making good business decisions • 5. Evaluate the decision. • After some time, review the decision. Was it the best choice? Would you do something differently or considered something else next time?
Economic resources • Economic resources, or factors of production are how products are made available to consumers. • Natural Resources • - materials that come from the earth, water, or air • - most are non-renewable (oil), or take a long time to renew (trees) • - business are limited
Economic resources • Human Resources • - also called labour or “HR” • - the people who are involved in the production of the product. • - most businesses have an HR department • Capital Resources • - the buildings, equipment, vehicles, factories used • - usually lasts a long time, require large initial investment • - money is considered capital too.
Economic resources • Interdependence • - almost all companies have some dependence on other companies • - work on many levels • Economic Systems • - a way to deal with the selection, production, distribution and consumption of products • - Government and business work together • - try to make best use of resources, develop alternatives.
Supply, demand and price • Demand is the quantity consumers are willing/able to buy at a particular price. • Generally: • Lower price = greater demand • Called the Law of Demand.
Supply, demand and price • Demand is created by: • - consumer awareness/interest • - ample supply • - reasonable/competitive price • - easy access
Supply, demand and price • Supply is the quantity that a business is willing to provide for a range of prices people are willing to pay. • Generally: • Higher price = higher supply • Called the Law of Supply.
Supply, demand and price • Supply is created by a company’s desire to satisfy consumers’ needs and wants for a price. • Sometimes, a business will try to create demand for a product through marketing it well • Price is determined by many factors, including demand and supply. Another important factor is cost of production.