Objective 1.01 Understand the purpose and the functions of business 1.01 Purpose and Functions of Business Objective 1.01 Understand the purpose and the functions of business

Purpose of Business Businesses fulfill the needs and wants of consumers. Consumers use goods and services Customers purchase goods and services Businesses sell goods, services or both to consumers Goods—clothing, cars, computers, CDs Services—hairdresser, dry cleaner, lawn care, babysitting

Motivation to start a business Profit motive—desire to make money; see the opportunity to make money in the marketplace. Opportunity to meet wants and needs of consumers Opportunity to increase competition in the marketplace Businesses are investment opportunities for individuals—future income

Functions of Business Accounting—recording and reporting financial activity and transactions Examples Paying bills Collecting money from customers Paying taxes Preparing employee payroll checks Reconciling bank statements Investing cash Purchasing inventory

Functions of Business Management Makes sure that the entire organization meets its goals and obligations Effectively works with people in the organization Uses available resources to accomplish the organizations’ goals

Functions of Business Marketing Satisfies the needs and wants of consumers through exchange Based on four “P’s” Product Price (establishing the price of the product) Placement (placing the product in attractive and convenient sales locations) Promotion (advertising)

Functions of Business Information Technology Uses technology to share knowledge, facts, and data to others (co-workers, customers, and suppliers) Examples Maintains e-mail accounts Maintains software applications Maintains processing systems Maintains hardware for all technology used

Functions of Business Operations Considered the “back office” Involves behind the scenes paperwork required to complete all transactions Found in both the service and the manufacturing sector

Functions of Business Human Resources Manages “people” relations within the company Helps workers develop the skills and knowledge needed to be successful on the job Responsible for hiring and firing of employees Selects employee benefits and enrolls all employees in the benefits (insurance, retirement, etc.) Helps employees pursue educational opportunities

Terms: Purposes of Business Profit Money that remains after a business has paid for the expenses of running the business. Income > Expenses Profit motive A person's incentive to work to gain something for himself or herself (that is to make money). Competition Contest between businesses to win customers‘ business and loyalty Needs Items necessary for existence, such as clothing, food, and shelter. Wants Items that would be nice to have, but are not necessary. Consumer A person who uses goods or services. Many times the consumer is also the customer(purchaser). Goods Items businesses sell that can be physically weighed or measured, such as iPods and CDs. Services Tasks that businesses perform or provide for customers, such as hair cuts and car washes.

Terms: Types of Businesses Sole proprietorship A business owned by only one person. Partnership A business owned by two or more people. Franchise A contract between a parent company and a franchisee to use the name and sell the goods or services of the parent company, such as KFC. Non-profit organization A business whose goal is to provide a service rather than to make a profit, such as the American Red Cross. Corporation A business considered separate from the owners of the business by law. The owners are the stockholders. Multinational corporation A company that does business and has business facilities in many countries, such as Coca Cola.

Terms: Functions of Business Accounting The process of recording and reporting the financial data for a business. Management The process of leading and directing all or part of an organization Marketing The process of creating, promoting, and presenting a product to the consumers. Information Technology The process of developing, installing, and implementing computer information systems and applications. IT includes the support and maintenance of computer hardware and software. Operations The activities involved in the day-to-day running of a business for the purpose of producing value for the stakeholders. Human Resources The activities that deal with the hiring, firing, training and other personnel (employee) issues.