Introduction to Business BBI 10/20 Introduction to Business

UNIT 1: Business Fundamentals Chapter 1: Economic Basics

WHAT IS A BUSINESS? A business is an organization that produces and/or sells goods and/or services to satisfy the needs, wants, and demands of consumers.

There are many ways to classify a business…… What is a business? There are many ways to classify a business……

What is a business? A For-profit Business “an organization that produces or sells goods or services to satisfy the needs of consumers for the purpose of making a profit.”

What is a Business? Profit: money left after all expenses have been paid. Expenses: money spent on running the business (wages, supplies)

WHAT IS A BUSINESS? Costs: money spent for the production of the good or service. Businesses try to keep profits up by keeping costs and expenses down.

WHAT IS A BUSINESS? Profit = Revenue – Expenses If profit is negative, it is called a loss.

WHAT IS A BUSINESS? A business which makes profit may use the money to: - expand/grow operations - improve products/services - give to owner/shareholders

WHAT IS A BUSINESS? Non-profit and Not-for-profit Business. NP: does not look to make a profit, but raises funds for a specific goal (charities, charitable organizations) What are some examples of these?

WHAT IS A BUSINESS? NFP: does not seek to make a profit. Extra moneys it brings in is used to improve services. What are some examples of these?

WHAT IS A BUSINESS? Co-operative: A group of people who come together to meet a set of goals in a democratically controlled business.

What is A Business? SIZE OF BUSINESS Small or medium sized business: less than 500 employees/management.

What is a business? Forms of Business Ownership We will cover this in Chapter 2

What is a business? Goods or Services? Business either sell goods (physical things you take home) or provide services (do something) in exchange for money. Some do both.

What is a business? Distribution How are goods and services delivered? Bricks and mortar business, telemarketing, catalogue, virtual store (internet) Examples?

What is a business? Role in the Community What dies the business do for the community? Jobs What type of jobs does it provide?

The role of the consumer

The role of the consumer Producers manufacture goods for consumers. Companies that attract more consumers can make more sales and more profit. The interaction between producer and consumer, creates the marketplace. Producer ------ Marketplace ------Consumer

The role of the consumer Years ago, business dictated what was produced, and in what quantities. Eventually, consumers started to tell manufacturers their needs and wants, creating competition. Consumers also decide when a product will no longer be produced. When no one wants a product anymore, it becomes obsolete. What are some things you know of that have become obsolete?

The role of the consumer Consumers also influence price. Companies used to have pricing power (could charge what they want), but with competition consumers can shop around for the best deal. Consumers also have consumer purchasing power – as customers they dictate how much they are willing to pay, but also the level of service.

Starting a business

Starting a business People who start their own businesses are called entrepreneurs. Entrepreneurs need: - self-confidence - a flair for innovation - the ability to work alone - an aptitude for managing others

Starting a business Consumers needs and wants: Sometimes a business is started to satisfy consumer needs. Needs are things that are necessary for survival. Ex. You need food and clothing.

Starting a business Consumers needs and wants: Wants are things that are not necessary for survival, but add comfort and pleasure to our lives. Ex. You want a hamburger, TH shirt…

Starting a business Attracting consumer interest: It is important to understand how consumers make buying decisions. This will help decide what to make, how to market and distribute the product. Businesses need to listen to what the consumer wants. The challenge is then to get those customers to buy your product.

Starting a business Attracting consumer interest: What can companies do to attract more customers?

Starting a business Attracting consumer interest: - Sample answers: - create a new product - modify an existing product - more heavily promote a product - offer purchase incentives (coupons) - convince consumers they need (want) the product - develop different uses for product - offer free samples - In-store demonstrations

Starting a business Attracting consumer interest: The task is to come up with a product that consumers need or want, at a price they’re willing to pay, in a place that is convenient, and promote it so they know about it.

Making good business decisions

Making good business decisions The five-step decision-making model can be used to help in any business situation. 1. Determine what decision has to be made. 2. Identify the alternatives. 3. Evaluate the advantages and disadvantages of each. 4. Make a decision and take action. 5. Evaluate the decision.

Making good business decisions 1. Determine what decision has to be made. What is the problem? What issue needs to be resolved? 2. Identify the alternatives. Brainstorm as many solutions to the problem as possible.

Making good business decisions 3. Evaluate the advantages and disadvantages of each. What are the pros and cons of each option? 4. Make a decision and take action. Choose the best alternative, and go with it.

Making good business decisions 5. Evaluate the decision. After some time, review the decision. Was it the best choice? Would you do something differently or considered something else next time?

Economic resources

Economic resources Economic resources, or factors of production are how products are made available to consumers. Natural Resources - materials that come from the earth, water, or air - most are non-renewable (oil), or take a long time to renew (trees) - business are limited

Economic resources Human Resources - also called labour or “HR” - the people who are involved in the production of the product. - most businesses have an HR department Capital Resources - the buildings, equipment, vehicles, factories used - usually lasts a long time, require large initial investment - money is considered capital too.

Economic resources Interdependence - almost all companies have some dependence on other companies - work on many levels Economic Systems - a way to deal with the selection, production, distribution and consumption of products - Government and business work together - try to make best use of resources, develop alternatives.

Demand, supply, and price

Supply, demand and price Demand is the quantity consumers are willing/able to buy at a particular price. Generally: Lower price = greater demand Called the Law of Demand.

Supply, demand and price

Supply, demand and price Demand is created by: - consumer awareness/interest - ample supply - reasonable/competitive price - easy access

Supply, demand and price Supply is the quantity that a business is willing to provide for a range of prices people are willing to pay. Generally: Higher price = higher supply Called the Law of Supply.

Supply, demand and price

Supply, demand and price Supply is created by a company’s desire to satisfy consumers’ needs and wants for a price. Sometimes, a business will try to create demand for a product through marketing it well Price is determined by many factors, including demand and supply. Another important factor is cost of production.