The Nature of Business What is a business? Individuals or organizations trying to earn a profit by providing products that satisfy people's needs. 1-1

The Nature of Business What is a product? A good or service with tangible and intangible characteristics that provide satisfaction and benefits 1-2

Products Tangible Goods & Services Automobile Computer Loaf of bread Television Services Dry cleaning Photo processing Checkup at doctor’s Movie star performance 1-3

The Primary Goal of Business Earn a Profit The difference between what it costs to make and sell a product and what a customer pays for it. 1-4

The Primary Goal of Business PROFIT -- The reward for the risks that businesses take in providing products. 1-5

Non-Profit Organizations Not all organizations are businesses. Nonprofit organizations provide goods and services but do not have the fundamental purpose of earning profits. 1-6

Maintaining Profitability Quality products Efficient operations Social responsibility Business ethics Management skills Planning Organizing Controlling Leading Marketing Expertise Products Price Promotion Distribution 1-7

Stakeholders Customers, employees, investors, government regulators, community and society. Those that have a stake in the success and outcomes of a business are considered stakeholders. 1-8

The People & Activities of Business 1-9

The People & Activities of Business Management – Focus on employees Coordinating employee’s actions Organizing people for efficiency Motivating employees toward business goals . 1-10

The People & Activities of Business Management – Production and Manufacturing Plan activities Organize staff Control tasks . 1-11

The People & Activities of Business Marketing – Focus on satisfying customers Determine what products customers want Plan and develop products Determine distribution Determine place Determine promotion 1-12

The People & Activities of Business Marketing & Promotion Advertising Personal selling Sales promotion Publicity 1-13

The People & Activities of Business Finance – Primary responsibility of owners Obtaining money Using money effectively Accountants, stockbrokers, bankers 1-14

The Economic Foundations of Business Distribution of resources for the production of goods and services within a social system. Resources -- Natural resources (land, forests, minerals, water) Human resources (labor) Financial resources (capital) 1-15

Factors of Production -- Natural, human, and financial resources used to produce goods and services -- 1-16

Economic Systems Central issue of economics – How a society distributes its resources to produce goods and services Central issue of economics – How to fulfill an unlimited demand for goods and services with a limited supply of resources 1-17

Economic Systems Three Important questions – How a society distributes its resources to produce goods and services Three Important questions – What types and quantities of goods/services will satisfy consumer needs? How will goods/services be produced? By whom? With what resources? How are goods/services distributed to consumers? 1-18

Comparison of Communism, Socialism, and Capitalism 1-19

Economic Systems Communism A society in which the people without regard to class, own all the nation’s resources. China North Korea Cuba 1-20

Economic Systems Socialism System in which the government owns and operates basic industries but individuals own most businesses. Sweden India Israel 1-21

Economic Systems Capitalism Free Enterprise – individuals own and operate majority of businesses providing goods and services United States Japan Australia Canada 1-22

Economic Systems Pure Capitalism Modified Capitalism Free Market -- All economic decisions made without government intervention (pure capitalism) Government intervenes and regulates business to some extent (modified capitalism) 1-23

Economic Systems Mixed Economies No country practices pure capitalism or pure socialism/communism. Economic systems contain various elements of government intervention 1-24

Supply & Demand Distribution of resources and products determined by supply and demand Demand -- number of goods/services consumers buy at given price at a specific time Supply -- number of products businesses will sell at different prices at a specific time 1-25

Forces of Supply & Demand Price at which number of products supplied equal amount of products consumers are willing to buy at a specific time = equilibrium price 1-26

Nature of Competition Rivalry among businesses for consumers’ dollars. Pure competition – many small businesses in same product market Monopolistic competition – small number of businesses little difference in products Oligopoly– very few businesses selling a product Monopoly- one business selling a product 1-27

Economic Cycles and Productivity Expansion and Contraction Economic Expansion – economy is growing and consumers are spending money Economic Contraction – spending declines, layoffs, economy slows down 1-28

Economic Cycles Inflation– condition characterized by continuing rise in prices Recession– decline in production, employment, and income Unemployment– % population wants to work but unable to find jobs Depression– unemployment very high; consumer spending low; business output sharply reduced 1-29

Evaluating Economy GDP: the sum of all goods and services produced in a country during a year 1-30