UNIT ONE – Business Fundamentals Chapter 1 Economic Basics
LESSON #1 LESSON #1 Needs, Wants, and Business
What is a Business? A A A An organization that produces or sells goods or services to satisfy the needs, wants, and demands of consumers for the purpose of making a profit. EEEExamples:
Goods or Services Goods Tangible/physical item sold by the business. Tangible/physical item sold by the business. (i.e. Plasma TV from Best Buy) (i.e. Plasma TV from Best Buy)Services Expertise or service provided to the customer. Expertise or service provided to the customer. (i.e. haircut, physician annual check up, legal advice, income tax return service) (i.e. haircut, physician annual check up, legal advice, income tax return service) Goods and Services Restaurant (food and service) Restaurant (food and service)
Needs, Wants, and Demands Needs Things you must have in order to stay alive (i.e. warmth in winter, clean water and air, food, shelter and medical care.) Wants The extras You don’t need them to survive, but they make life more pleasant and comfortable (i.e. that 62 inch plasma TV)
Business Terminology Consumers A general a term to describe anyone who purchases something from any business. The people who purchase the computers and those who have their computer repaired at a local repair shop. Customers The term used by a business to describe those consumers who shop at its business.
Business Terminology Producers businesses that make goods or provide services. businesses that make goods or provide services. For example: A computer manufacturer is a producer of goods; A computer-repair shop is a provider of a service.
Business Terminology Profit Profit The money(income/revenue) that is left after all costs and expenses of running the business are paid. Revenue/income The money the business collects from customers when it makes a sale. (Price of shoes to the customer is $100, not including taxes) Expenses The expenditures that are involved in running the business on a daily basis, such as wages and hydro as well as those things that get used up such as paper and computer toner.
Business Terminology Costs Amount of money required for each stage of production. For example the need to purchase other items such as: 1. the cost of the goods a company is selling (inventory); 2. the cost of the raw materials to used to manufacture the good being sold (cotton or steel) 2. the cost of the raw materials to used to manufacture the good being sold (cotton or steel)
REVENUE – EXPENSES = Profit or (Loss) REVENUE – EXPENSES = Profit or (Loss) Revenue ( Price of 1 pair of shoes ) $100 Revenue ( Price of 1 pair of shoes ) $100 Less: Cost of Shoes 50 Less: Cost of Shoes 50 Less: Other daily expenses 35 Less: Other daily expenses 35 Profit 15 Profit 15
What does a Company do when it makes a profit? Improve its goods and services and reinvest the money back into the business Hire more people or give raises or bonuses
Business Terminology Solvency Business Terminology Solvency Means having the ability to pay your debts and meet your financial obligations. Means having the ability to pay your debts and meet your financial obligations. A company may not make a profit but be still have enough money in the bank to pay of its debts and stay in business. Insolvency – when a company does not have the ability to pay off its debt obligations.
What Impacts Consumer Needs and Wants? Personality and personal interests; Personality and personal interests; Individual abilities; Individual abilities; Individual priorities and values; Individual’s stage of life; Family responsibilities; Trends and fads (may be impacted by technology, media, businesses, the environment)
Consumer Trends and Fads Trends A general direction or change in society that lasts a long time – 3 years or more Fads Changes that lead to temporary or short-term adjustment - 6 months to a year)
Consumer Trends The 1970’s began the trend of more women entering the workforce. How did this impact changing consumer needs and wants? – demand for convenience food, extended shopping and banking hours, convenient house-hold appliances, hotels including hair dryers and ironing boards.
Television Trends Reality TV
Automobile Trends MINIVAN (90’s) SUV (2000’S) HYBRID 2010’S ??
Fashion Trends
Trend Examples Trends in Television Reality TV, Crime TV shows, Homeshopping network Trends in Automobiles Mini vans and SUV’s Fashion Trends Jeans
Toy Fads
Fashion Fads
Fad Examples Toy Fads Pokemon, Cabbage Patch Kids, Furbies, Pogs, Skooters, Yoyos, Hula Hoops Fashion Fads tie dye, fluorescent clothes, knee warmers
Needs and Wants Maslow’s Hierarchy of Needs and Personal Motivation
Maslow’s Hierarchy of Needs Physiological Physical survival needs: water, food, sleep, warmth, exercise, etc. Safety/Security Physical safety, economic security, freedom from threats Social(Belonging) Acceptance, be part of a group, indentification with a successful team Ego (Esteem) Important projects, recognition and respect from others, prestige and status Self-Actualization Challenging projects, opportunities for innovation and creativity, learning and creating at a high level
Where do Consumers and Producers Meet? The Market A market exits wherever consumers (buyers) and producers (sellers) come together to do business. Three Major Groups of Markets 1. Consumer Market 2. Business-to-Business or Industrial Market 3. Stock Market (TBD later in the course)
Consumer Market Made up of all individuals or households who want goods and services for personal consumption or use.
Business-to-Business or Industrial Market All the individuals and organizations that produce, sell, rent, or supply goods and services to other businesses. For example, cash registers sold to the grocery store, delivery vans sold to the flower shop, gas to the gas stations, etc.
Types of Business Most business fall into one of the four categories: Most business fall into one of the four categories: 1. The Merchandising Business 1. The Merchandising Business 2. The Service Business 2. The Service Business 3. The manufacturing or Producing Business 3. The manufacturing or Producing Business 4. The Non-Profit Organization 4. The Non-Profit Organization
The Merchandising Business Buys goods and resells them at a higher price for a profit. Buys goods and resells them at a higher price for a profit.Examples:
The Service Business sells a service to the public sells a service to the public it does not sell a product as its main activity it does not sell a product as its main activity usually provides skills or expertise and the customer is involved in the delivery of the service usually provides skills or expertise and the customer is involved in the delivery of the service
Note: Sometimes a service company will sell products (i.e. hairdresser selling shampoo), but it is a sideline and not the main business. Sometimes a merchandising business will offer services (i.e. computer repair or hemming clothes), but it is also just a sideline and not the main business.
The Manufacturing Business Buys raw materials, converts them into a product and sells these products to earn a profit. Consider a construction company, a paper mill, or steel plant.
The Producing Business Closely related to manufacturing Examples include farms who may produce milk, grain, etc. Other examples include oil extraction, mining, forestry, hunting, and fishing
Non-Profit or Not-for-Profit Organization An organization that does not seek to make a profit, but instead raises money/funds for a specific goal. (churches, charities, recreational sports clubs) An organization that does not seek to make a profit, but instead raises money/funds for a specific goal. (churches, charities, recreational sports clubs) Examples include: Canadian Cancer Foundation, Amnesty International, Junior Achievement etc.
Channels of Distribution A business can be classified by how it delivers its goods to consumers Telephone marketing Telephone marketing Catalogues Catalogues E-commerce E-commerce
Large or Small Business Small or medium-sized business (SMB) is a business that employs fewer than 500 people. Over 1 million SMBs in Canada Employ more than 60% of all Canadians Local, national, international in scope