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chapter
Business Basics
Better Business
2nd Edition
Solomon (Contributing Editor) ·
Poatsy · Martin
© 2012 Pearson Education, Inc.
Publishing as Prentice Hall
1-2
Learning Objectives
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2.
3.
4.
5.
6.
What are profits, and how do for-profit and not-for-profit
organizations compare?
What is the difference between a good and a service, and
what are the factors of production?
How do competition, the social environment,
globalization, and technological growth challenge and
provide opportunities to business owners?
What are the four types of businesses?
How do sole proprietorships, partnerships, corporations,
and limited liability companies (LLCs) differ from one
another as forms of business?
How do life skills translate to the business environment?
© 2012 Pearson Education, Inc.
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1-3
Basic Business Definitions
• Businesses- entities that offer products to their customers
to earn a profit
• Profit- when a company’s revenue (the money it brings in)
is greater than its expenses (the money it pays out)
• Good- refers to a physical product a business sells
• Service- refers to an intangible product that is bought or
sold
• Not-for-profit organizations- businesses that do not
pursue profits, but instead seek to service the community
through social, educational, or political means
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The Factors of Production
• Labor
• Natural resources
• Capital
o Real capital
o Financial capital
• Entrepreneurs
• Technology
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How Does Competition Influence
Business?
Competition arises when two or more businesses
contend with one another to attract customers and
gain an advantage.
Competition forces companies to
- Improve their product offerings
- Lower their prices
- Aggressively promote their brands
- Focus on customer satisfaction
- Employers seek workers who have interpersonal,
communication, and decision-making skills
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How Does the Social
Environment Affect Businesses?
Baby Boomers: An aging
population
- Business opportunities
- Providing for retirees
Increasing diversity
- Workforce development
- Consumer demographics
The Green Movement
- Environmental concerns
- New product opportunities
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Globalization
• Globalization is a movement toward a more
interconnected and interdependent world economy
• Multinational enterprises
• Off shoring
• Benefits to the U.S. economy
- Lower prices for goods
- Increased competition stimulates innovation
• Risks to the U.S. economy
- U.S. jobs lost to overseas workers
- Increased competition
- Fluctuation in the dollar value
- Security and patent protection concerns
- Unstable political climates in foreign countries
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Technological Changes
Challenges of technological changes:
• The pace of technology is expensive and time consuming
• Advancements in technology are changing the foundation
and focus of how many businesses are run
Benefits of technological changes:
• Lower costs and improved productivity, security, and
communications.
• Telecommuting, teleconferencing and other tools help
human relations and globalization.
• The Internet aids company operations.
- E-commerce (B2B and B2C) streamline sales.
- Businesses must provide online security and privacy
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Types of Businesses:
Local and Regional
• A local business is usually one of a kind, relies on local
consumers to generate business, and serves a limited
surrounding area
• Regional businesses serve a wider area although, like local
companies, they do not serve a national or international
market (i.e. Wawa).
• Managing money is the most significant special challenge of
these businesses
- Poor financial
planning
- Unfavorable economic conditions
• Undercapitalization occurs when a business owner cannot
gain access to adequate funding
• Taxes and insurance costs must be taken into consideration
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Types of Businesses:
National
A national business has several outlets throughout the
country and provides goods or services to virtually all U.S.
residents, no matter where in the country they live
Special challenges:
• Budget and finances
• Must be aware of all state laws in every state they do
business in
• Manage longer, more complex supply chain
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Types of Businesses: Multinational
Multinational businesses are businesses that have expanded to
provide goods or services to international costumers or serve only
one country but have suppliers or production facilities in other
countries
Special challenges:
• Different countries’ laws
• Cultural differences
‾ Business hours
‾ Workweek schedules
‾ Values and customs relating
to business etiquette
‾ Violating local taboos
‾ Wage differences
‾ Language barriers
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• Economic differences© 2012
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Types of Business Ownership
• Sole Proprietorship
• Partnership
• Corporation
• LLC
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The Players in
Business Ownership
A corporate stakeholder is someone who is affect
by a company’s actions or who has an interest in
what the company does.
Stakeholders include: employees, shareholders,
investors, suppliers, and society at large
• Some stakeholders are only remotely affected
by the business
Sole proprietorships usually have fewer
stakeholders than large corporations
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Taking Business Personally
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Are you a sole proprietorship or a partnership?
How do you receive funding?
What are your expenses?
How does the social environment affect your life?
How does globalization affect your life?
How do you keep up with new technology?
What sort of e-commerce do you use?
How do you keep your “business” secure
What types of goals do you have?
© 2012 Pearson Education, Inc.
Publishing as Prentice Hall
1-16
Chapter Summary
1.
2.
3.
4.
5.
6.
What are profits, and how do businesses and not-for-profit
organizations compare?
What is the difference between a good and a service, and
what are the factors of production?
How do competition, the social environment,
globalization, and technological growth challenge provide
opportunities to business owners?
What are the four types of businesses?
How do sole proprietorships, partnerships, corporations,
and LLCs differ from one another as forms of business?
How do life skills translate to the business environment?
© 2012 Pearson Education, Inc.
Publishing as Prentice Hall
1-17
© 2012 Pearson Education, Inc.
Publishing as Prentice Hall
1-18