Business Essentials: Unit 3 The U.S. Business Environment

Discussion Points Concept of Business and Profit External Environments of Business Factors of Production Economics of Market Systems

What is a Business? An enterprise owned by one or more people whose activities is to provide goods and services to consumers. A business can be operated for profit or not-for-profit.

Types of Businesses Industrial Businesses Produce goods used by other businesses Examples: Mining companies, agricultural producers Service Businesses Engaged in marketing, finance, and in providing services to consumers Examples: Banks, retailers, and mobile phone companies

Profit – Making Money$ Profit is the difference between earned income and costs. Profit is one indicator of an organizations ability to sustain. Organizations use profit to invest back into their business

External Environments of Business Economic Environment Socio-Cultural Environment Political-Legal Environment Global Business Environment Domestic Environment Technological Environment

Technological Environment Includes all the ways by which firms create value for their constituents. Includes human knowledge, work methods, physical equipment, electronics and telecommunications, and various processing systems.

Political-Legal Environment Reflects the relationship between business and government. Legal system defines in part what an organization can and cannot do.

Domestic Business Environment Environment in which a firm conducts its operations and derives its revenues. Businesses seeks to be close to their customers and build strong relationships with their suppliers. Businesses distinguishes themselves from competitors.

Global Business Environment International forces that affects a business. General factors affecting global environment International trade agreements International economic conditions Political unrest

Socio-Cultural Environment Includes the customs, mores, values and demographic characteristics of the society in which organization operates. Determines the goods and services and standards of business conduct.

Economic Environment Relevant conditions that exist in the economic system in which a company operates. An economic system is a major component of a nation’s economic environment.

Factors of Production Four basic inputs an economic system requires: Natural Resources All production inputs that are useful in their natural state. Capital Technology, tools, information, and physical facilities. Human Resources Anyone who works, including the CEO and a self-employed mechanic. Entrepreneurship Willingness to take risks to create and operate a business.

Supply and Demand Decisions about what to buy and sell are determined by the forces of supply and demand. Demand is the willingness and ability of buyers to purchase a good or service. Supply is the willingness and ability of producers to offer a good or service for sale.

Factors Driving Demand Demand curve shows the amount of a product buyers will purchase at different prices. Quantity increases as price decreases. Economists distinguish between changes in the quantity demanded at various prices and a true shift in the demand curve.

Factors Driving Supply A supply curve shows the relationship between different prices and the quantities that sellers will offer for sale, regardless of demand. Movement along the supply curve is the opposite of movement along the demand curve. The factors of production play a central role in determining the overall supply of goods and services.

Key Terms business capital demand demand curve domestic business environment economic environment entrepreneur global business environment information resources labor physical resources political-legal environment sociocultural environment supply supply curve technological environment