Business Basics and Risk Evaluation

Business Basics

• Any profit-seeking organization providing goods or services to satisfy customer needs.
• Revenue: Money a company earns from selling goods/services.
• Business model: Concise description of how a business plans to generate revenue.
• Profit: Revenue minus all costs involved in doing business.
• Competitive advantage: A feature that makes a product/company more appealing to its target market.
• Not-for-profit organization: Provides goods/services without profit motive.
• Goods-producing businesses: Create value by making tangible things.
• Service businesses: Create value by performing activities benefiting customers.

Risk and Reward

• Goods-producing businesses are often capital-intensive.
• Service businesses are often labor-intensive.
• Barrier to entry: Resources or capabilities needed to enter a market.
• Business Mindset: Recognizes the decisions & challenges needed to satisfy customer needs.

Business Environments

• Social environment: Trends and forces shaping society at large.
• Stakeholders: Internal/external groups affected by a company's decisions.
• Technological environment: Practical application of science to innovations, products, processes.
• Disruptive technologies: Fundamentally change an industry, potentially creating or destroying companies.
• Economic environment: Conditions & forces affecting goods, services, labor costs, and buyer/seller behavior.
• Legal and regulatory environment: Laws/regulations at various levels (local, state, national, international).
• Market environment: Target customers, buying influences, competitors offering similar products.

Business Functions

• Research & Development (R&D): Conceive and design new products.
• Information Technology (IT): Systems for communication, information sharing, and offering new services.
• Manufacturing, Production, or Operations: Where goods are made or services are performed.
• Purchasing, Logistics, Facilities Management: Sub-functions within manufacturing/operations.
• Marketing: Identifies market opportunities, develops products, creates branding/advertising, sets prices.
• Finance and Accounting: Manages finances, ensures funds are available, monitors spending, reports to management & external audiences.
• Human Resources (HR): Recruits, hires, develops, and supports employees.

Professionalism in Business

• Performing at a high level and with purpose and pride.

Economy

• The sum total of economic activity within a region.

Economics

• Study of how society uses scarce resources to produce and distribute goods/services.
• Microeconomics: Study of consumer, business, and industry decisions on quantity and prices.
• Macroeconomics: Study of "big picture" economy including firm competition, government policies, and resource allocation.

Factors of Production

• Natural resources: Land, forests, minerals, water, etc.
• Human resources: People working for a company.
• Capital: Funds for business operations and physical/human-made elements (factories, computers).

Business Concepts

• Entrepreneurship: Combining innovation, initiative, and risk-taking to create new businesses.
• Knowledge: Expertise gained through experience or association.
• Scarcity: Finite supply of productive resources.
• Opportunity cost: Value of the best alternative not chosen.
• Economic system: Policies defining a society's economic structure (e.g., free-market, planned).
• Free-market system: Market buyers and sellers determine production and quantities.
• Capitalism: System with economic freedom and competition.
• Planned system: Government controls factors of production and resource allocation.
• Socialism: Public ownership of key industries + private ownership of less vital industries.
• Nationalization: Government takeover of companies or industries.
• Privatization: Transferring government-performed services to private businesses.

Market Dynamics

• Demand: Buyers' willingness and ability to purchase at various prices.
• Supply: Quantity of a product a seller is willing to provide at various prices.
• Competition: Rivalry among businesses.
• Pure competition: Many buyers/sellers, no one entity controls prices.
• Monopoly: One dominant company controls prices.
• Monopolistic competition: Many sellers each slightly differentiate their products.
• Oligopoly: Few suppliers control a good or service (often only two).

Economic Cycles and Indicators

• Recession: Decline in national income, employment, and production (at least six months of GDP decline).
• Business cycle: Fluctuations in economic growth over several years.
• Unemployment rate: Proportion of the labor force without a job.
• Inflation: Steady increase in prices throughout the economy.
• Deflation: Steady decrease in prices throughout the economy.

Government's Role in a Free Market

• Protect stakeholders.
• Foster competition.
• Encourage innovation and development.
• Stabilize and stimulate the economy.

Government Regulation

• Regulation: Utilizing laws and policies to govern economic activity.
• Deregulation: Removing regulations allowing the market to self-correct.
• Gross Domestic Product (GDP): Value of all final goods/services produced within a nation's borders (excludes overseas operations).

Business Ethics

• Ethics: Rules or standards guiding individual or group conduct.
• Transparency: Affected parties can observe relevant aspects of transactions or decisions.
• Insider trading: Using confidential information to benefit from market fluctuations.
• Ethical behavior: Competing fairly, communicating truthfully, being transparent, not harming others.

Ethical Decision-Making

• Cultural differences: Can influence ethical perceptions.
• Knowledge: Understanding ethical principles informs decision-making.
• Organizational behavior: Company culture and practices influence ethical choices.
• Code of ethics: Written statement outlining guiding organizational principles.
• Whistle-blowing: Disclosure of illegal or unethical behavior within a company.
• Ethical lapse: A morally, legally, or ethically wrong decision.
• Ethical dilemma: Situation where multiple perspectives offer valid support.
• Conflict of interest: Competing loyalties potentially leading to ethical lapses (personal gain influences decisions).

Corporate Social Responsibility (CSR)

• Corporate social responsibility (CSR): Business has obligations beyond profit.
• Philanthropy: Donating to charitable, humanitarian, or educational organizations.
• Strategic CSR: Social contributions aligned with business strategy.
• Sustainable development: Minimizing pollution, resource depletion, ensuring resources for future generations.
• Consumerism: Movement advocating for consumer rights.
• Identity theft: Stealing personal information for fraud.

CSR: Consumer Rights

• Buy safe products and safely.
• Be informed about products.
• Choose products freely.
• Be heard.

Small Business

• Independently owned and operated, not dominant in its field, employs fewer than 500 people (number varies by industry).

Importance of Small Businesses

• Provide jobs.
• Introduce new products.
• Meet the needs of larger organizations.
• Inject money into the economy.
• Take risks larger companies avoid.
• Offer specialized goods/services.

Characteristics of Small Businesses

• Narrow focus.
• Limited resources.
• Easy to innovate.
• Quick decision-making and adaptability to market changes.

Factors Increasing Small Business Growth

• E-commerce.
• Social media.
• Technological advancements.
• Diversity in entrepreneurship.
• Corporate downsizing and outsourcing.

Entrepreneurial Spirit

• Positive, forward-thinking desire to create profitable businesses.

Motivations for Starting a Business

• Control over one's future.
• Tired of working for someone else.
• Passion for new products.
• Personal business goals.
• Lack of attractive employment opportunities.

Business Plan

• Summarizes a business venture, goals, and plans to achieve those goals.

Key Elements of a Business Plan

• Summary.
• Mission and objectives.
• Company overview.
• Products and services.
• Management and key personnel.
• Target market.
• Marketing strategy.
• Design and development plans.
• Operations plan.
• Start-up schedule.
• Major risk factors.
• Financial projections.
• Exit strategy.

Supporting Small Businesses

• Advisory board: Subject-area experts and contacts to advise business owners.
• Business incubators: Facilities housing small businesses and providing support.
• Seed money: Initial capital for a business.
• Micro lenders: Organizations loaning smaller amounts to ineligible businesses.
• Venture capitalists (VCs): Investors providing money for start-ups or turnarounds in exchange for ownership.
• Angel investors: Private individuals investing in start-ups (typically smaller amounts).
• Initial public offering (IPO): A company's first public share offering.
• Crowd funding: Raising project funds, investment, or loans from the public.