Business Lesson 1: Nature of Business

Nature of Business

• A business comprises individuals or organizations aiming to profit through products that satisfy consumer needs.
• Products can be tangible (physical goods) or intangible (services) that provide satisfaction and benefits.

Tangible Goods and Services

• Tangible Goods: Examples include a loaf of bread, television, automobile, and computer.
• Services: Include dry cleaning, photo processing, doctor’s check-ups, and musical concerts.

Primary Goal of Business

• The essential aim of a business is to earn a profit, defined as the difference between production costs and the selling price.

Non-Profit Organizations

• Non-profit organizations offer goods and services but do not focus on profit-making.
• Stakeholders include customers, employees, investors, government regulators, and the community.

Business Functions

• Management: Involves motivating employees, coordinating actions, and organizing for efficiency.
• Marketing: Aims to satisfy customers by determining product needs, development, distribution, promotion, and pricing.
• Finance: Owners manage resources by obtaining and utilizing money efficiently.

Economic Foundations of Business

• Economics: Concerned with distributing resources to produce goods and services.
• Resources: Include natural (land, forests), human (labor), financial (capital), and intangible resources (reputation, product quality).

Economic Systems

• Central economics issue: balancing limited resources with unlimited demand for goods and services.
• Types include market economy, command economy, and mixed economy.

Supply and Demand

• Demand: Volume of goods consumers are willing to purchase at specific prices.
• Supply: Quantity of goods that businesses are prepared to sell at varying prices.

Economic Cycles

• Inflation: Rising prices over time.
• Recession: Decrease in production, employment, and income.
• Depression: Characterized by high unemployment, low consumer spending, and significant drop in business output.

Unemployment

• Defined as the percentage of the population seeking but unable to find jobs.

Entrepreneurship

• Entrepreneurs are individuals who invest time, wealth, and effort into innovations, requiring risk, creativity, and the potential for reward.

International Trade

• Facilitates access to raw materials and goods at favorable prices for nations.
• Outsourcing: Transferring tasks to countries with cheaper labor and resources.

Balance of Trade and Payments

• Balance of Trade: Difference between the value of a nation's exports and imports.
• Balance of Payments: Includes trade balance, foreign investments, aid, and expenditures.

Economic Barriers to Trade

• Influences include economic development, infrastructure quality, exchange rates, and less-developed countries (LCDs) with low income and market potential.

Infrastructure

• Comprises physical facilities supporting economic activities such as transportation systems and utilities.

Legal Barriers to Trade

• Quota: Limits the number of specific product imports.
• Embargo: Prohibition on trade for certain products.
• Dumping: Selling products below production costs.

Cultural Barriers

• Communication challenges arise from language differences and differing cultural expectations and practices.

Technological Barriers

• Obstacles related to technology implementation, such as outdated infrastructure and lack of technical skills.

Trade Agreements and Organizations

• GATT: Established in 1947, replaced by WTO in 1995 for tariff negotiations and international trade issue resolutions.
• WTO: Founded in 1995, overseeing global trade rules, with 153 members.
• NAFTA: Promotes trade among Canada, the U.S., and Mexico by eliminating tariffs.
• EU: Fostered trade among European nations since 1958, creating a significant single market.
• APEC: An alliance for promoting open trade and economic cooperation in the Asia-Pacific region.

International Financial Institutions

• World Bank: Established in 1946 to provide loans to developing countries.
• IMF: Founded in 1947 to encourage trade and financial cooperation among member nations.

Involvement in International Business

• Various methods include exporting/importing, trading companies, licensing/franchising, contract manufacturing, joint ventures, and multinational corporations.
• Countertrade Agreements: Involve barter instead of currency transactions, aiding in international trade facilitation.

This quiz covers the fundamental concepts of business, including the definition of business, what constitutes a product, and the distinction between tangible goods and services. It explores various examples of tangible goods and introduces key principles that shape the understanding of business operations.