Introduction to Business

•What is Business?

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What is Business?

•                           Differentiate the three meanings of business as commerce, occupation and organization and identify the four main kinds of productive resources.

•                           Understand the forces of supply and demand determine fair or market price.

•                           Appreciate how a company’s business model is the source of its competitive advantage and the difference between profit and profitability

•                           Recognize the way specialization and the division of labor through the “invisible had of the market” lead to increasing profit and wealth.

•                           List the reasons why business organizations are created to structure business exchanges and facilitate business commerce.

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What is Business?

Definitions of Business

•     Business has three dimensions of a meaning

-       A commerce

-       An occupation 

-       An organization

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What is Business?

Definitions of Business

•     Business as a commerce is the process that people produce, exchange and trade goods and services

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What is Business?

Definitions of Business

•     Business as an occupation is the acquired set of specialized skills and abilities that allows people to create valuable goods and services

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What is Business?

Definitions of Business

•     Business as an organization is the system of task and authority relationship that coordinates and controls the interactions between people so that they work toward a common goal

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What is Business?

Definitions of Business

•     Business as a system is a combination of business commerce, occupations, and organizations that produces and distributes the goods and services that create value for people in a society

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What is Business?

Factors of Production

•     Regardless of meaning there are four crucial ingredients or productive factors or resources of land, labor, capital and enterprise that are needed to profit from business

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What is Business?

Factors of Production

•     These four productive factors or resources of land, labor, capital and enterprise that are needed to profit from business  and are  limited in supply (scarcity)

•     A company must use them efficiently and effectively to produce goods and services

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What is Business?

•     Together, the cost of acquiring and using these four resources to make and sell goods and services determines a company’s operating costs

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What is Business?

•     Owners/managers are the enterprise of the business, while the people are the labor and the capital buys materials, machinery

•     The land may provide a specific location or a URL in cyberspace. The land may provide a specific location or a URL in cyberspace

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What is Business?

•     These resources allow for the creation of a product and/or service that customers value a price

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 What is Business?

•     The company’s business model not only outlines the plan for these resources but creates a competitive advantage in the value of its product   and  generates profitable sales revenue

•     By reinvesting the profits the business increases its capital and contributes to the wealth of the owners

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What is Business?

•     All business activity is self-interested and competitive, and  this competition may benefit people and society when it leads resources to be employed in their most profitable use

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What is Business?

Supply and Demand

•     The forces of supply and demand determine a product’s market price

•     In turn, supply and demand are the result of peoples’ subjective judgment of the value or utility they will receive from supplying or consuming a particular product

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What is Business?

Law of Demand

•     Reflects the usefulness or utility from that product

•     Given the price of a product or service, we generally demand less quantity  of it as the price increases and demand more of it as the prices decreases

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What is Business?

Law of Supply

•      Sellers  are more willing to supply a product as the price increases and less willing to supply as the price decreases

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What is Business?

•     There is no rule of business that says all people need profit from business commerce, nor they will profit equally from the business system

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What is Business?

•     Some people or companies will always ruthlessly pursue their self-interest and try to cheat and defraud others

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What is Business?

•     Through the process of specialization and the division of labor, business occupations develop and increase the amount of goods and services people can produce and trade

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What is Business?

•     Increasing specialization, through the invisible hand of the market, leads to increasing profitability and the generating of more capital and wealth

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What is Business?

•     Through this “invisible hand” of the market, the interaction of business commerce and occupation determines the standard of living, wealth, and prosperity of people, groups, and society

•      It also determines how profit will be shared between people and groups in a society

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What is Business?

•     Business organizations are created to reduce transaction costs, the costs that arise from business commerce and from the process of specialization and the division of labor

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What is Business?

•     Business organizations develop an organizational structure, a set of task and authority relationships, to reduce transaction costs and increase profitability

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What is Business?

•     No rules exist that specify how the profit created from business commerce or occupations will be distributed or even who will receive it

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What is Business?

•     Your chance of pursuing a profitable occupation that allows you to accumulate capital depends on your ability to take part in the “great game of business”