2. © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
Chapter One
What is Business?
© The McGraw-Hill Companies, Inc., All Rights Reserved.
McGraw-Hill/Irwin
Introduction to Business

3. Learning Objectives
Differentiate the three meanings of business as commerce, business as occupation and business as organization and identify the four main kinds of productive resources.
Understand how the forces of supply and demand determine fair, or market, prices.
Appreciate how a company’s business model is the source of its competitive advantage and can mean the difference between merely making a profit and profitability

4. Learning Objectives
Recognize the way specialization and the division of labor lead to increasing profit and wealth via the market’s “invisible hand”.
List the reasons why business organizations are created and how they facilitate commerce and lower transaction costs.

5. What is Business? Business Productive resources Operating costs
Value
Price

6. Key Business Terms Business Model Competitive advantage Sales revenue
Profit
Capital
Wealth

7. Key Business Terms
Franchising
Nonprofit organization

8. The Three Meanings of Business
Business system
commerce
occupations
organizations

9. Business as Commerce
Business commerce
Trade
Barter

10. Demand, Supply, and the Market Price
Diminishing marginal utility
Law of demand
Law of supply
Determining the market price

11. The Business Model and Profitability
Industry
The difference between profit and profitability
Increasing profitability
Premium price

12. Increasing Profitability
Companies are in competition to:
Develop new and improved products to attract customers
Use their resources more productively in order to reduce their operating costs

13. Business as an Occupation
Specialization, the division of labor, and people’s well-being
Specialization and profitability over time
The invisible hand of the market

14. The Invisible Hand of the Market
Monopoly
Human capital

15. Business as an Organization
Transaction costs related to business
How business organizations lower transaction costs

16. Transaction Costs Related to Business
Teamwork

17. How Business Organizations Lower Transaction Costs
Organizational structure

18. How Business Creates Value for People
Functional activities
Value chain
Primary functions
Secondary functions