Comm 101 - Chapter 1 PDF

A business is an organization that seeks profit by providing goods and services to satisfy society's needs Benefits of business to society: offering valuable goods and services, providing employment and opportunities , contributing to our standard of living, improving the quality of life , and driv...

A business is an organization that seeks profit by providing goods and services to satisfy society's needs Benefits of business to society: offering valuable goods and services, providing employment and opportunities , contributing to our standard of living, improving the quality of life , and driving innovation and creativity (improvements ex- using less time or resources) - Objective : satisfy needs of its stakeholders Potential benefits of studying business: help you choose a career, improving your career, making you a better informed consumer and investor, and making you a more influential community member A good : physical, tangible product that we can see and touch ex- food, A service : an intangible product that we experience or use ex- stylists, hospitals Standard of living – The amount of products available, the wealth of the nation, and lifestyle opportunities- Canada has a high standard of living Quality of life: the general level of human well-being and happiness of people and societies including access to healthcare,education and food Risk – The chance that an investments actual return will be different than expected. Potential for losing resources (i.e. time, money) or be unable to accomplish organizational goals. Revenue: the money a company earns from providing services or selling goods to a customer Costs: Expenses for rent, salaries, supplies, transportation and many other items that a business incurs from creating and selling goods and services Profit: the money left over after all expenses are paid Not all businesses pursue profits – an organization that typically exists to achieve a social goal or goals as opposed to the usual business goal of profit For a business to be successful it must be organized and combine 4 types of resources: - Material resource, raw materials used in manufacturing, buildings and machinery - Human resources: people who provide their labor to a business in return for wages - Financial resource: money required to pay employees, purchase materials and generally keep the business operating - Information resource: the resource that tells the manager of the business how effectively the other 3 resources are being combined and used Benefits of business to society: offering valuable goods and services, providing employment and opportunities , contributing to our standard of living, improving the quality of life , and driving innovation and creativity (improvements ex- using less time or resources) - Objective of every organization : satisfy needs of its stakeholders Stakeholders: anyone who is impacted by the activities of the business ex- customers Businesses can also have negative impacts Social concerns: Health and safety risks: use of potentially unsafe materials in manufacturing , and unsafe product design - Expensive not only for being hurt on the job but also stress related illnesses - Proactive by implementing training programs , government also have laws like WHMIS to decrease cost associated with harm to employees Environmental damage: production of any kind involves consumption of natural resources – however when companies don't focus on making these resources sustainable it can cause irreversible damage to the land,air and water, which in turn can negatively impact the health of citizens in the community - Unsustainable use of natural resources Community impacts : when a company is successful, can = increase in employment , customer activity can increase traffic, crown schools, damage existing business and even change the culture of a community in unwanted ways - Some employees dont feel benefits of the success, with low pay and limited benefits - When a once successful business hits hard times or fails it can throw many people out of work and bring community hardship Managers must take care to balance the pursuit of profits with social concerns 1.3 The Buisness environment (external environment) consists of Five factors that affect the success or failure of a business : 1.Political factors : each of the 3 levels of government in Canada have different roles and responsibilities that affect businesses (taxation, banking, healthcare) 2. Economic and competitive factors: size and health of economy must always be considered when making business decisions especially when the country's economy slows down or individual businesses sales and profit are declining. - Competition can be good (developing new , lower cost products) and bad (can drive smaller businesses out and people lose jobs) 3. Social factors: changes in population including age,gender, ethnicity, cultural diversity and family composition will influence what products companies offer and how they operate their business ex- people retiring, increased life expectancy 4. Technology factors: innovations have changed how companies produce and distribute products , and how we communicate with customers and one another - social media sites provide communication platforms and e-commerce has become common instead of in-store shopping International factors: Canadian businesses have to compete with themselves and international businesses as well , access to global markets increases competition and need to enhance skills ex- china leads in electronic manufacturing  Environmental scan: the process of gathering information about the external environment to determine how it will potentially impact the business operations Economic and competitive factors: Example- Covid 19 changed what and how customers purchased and how people worked (not always financial) 1.4- economic systems A growing economy (the way in which people deal with the creation and distribution of wealth) is typically good for businesses and consumers – but if the economy has stalled or begins to shrink , the result can be fewer jobs,lower incomes and less consumer choice Another economic factor that can affect the business environment is a countries economic system : a combination of policies,laws and choices made by its governments that determine who owns and controls the factors of production Affects business opportunities to make income and create wealth Affects the choices of consumers and the prices they pay Economy: The way in which people deal with the creation and distribution of wealth Economics: The study of how society uses resources to produce and distribute goods and services Macroeconomics: the sub-area of economics that focuses on the economy as a whole by looking at aggregate data for large group of people ,companies or products Unemployment rate, interest rate, fuel costs , national level of sales of new cars Microeconomics: the sub-area of economics that focuses on individual parts of the economy such as households or businesses - Factors of production: the resources used to create goods and services including natural resources,capital, labor, entrepreneurship and knowledge A country's economy is determined by the way each system answers the following 4 basic economic questions: 1. What goods and services will be produced, and how much of each? 2. How will these goods and services be produced? 3. For whom will these goods and services be produced? 4. Who owns and who controls the major factors of production? 1.5- 4 different degrees of competition: Perfect(pure) competition : 5 concepts necessary for perfect competition to exist : 1. We are discussing the market for a single product, such as bushels of wheat. 2. No restrictions exist on companies entering the industry. 3. All sellers offer essentially the same product for sale. 4. All buyers and sellers know everything there is to know about the market (including, in our example, the prices that all sellers are asking for their wheat). 5. The overall market is not affected by the actions of any one buyer or seller. - Sellers ask the same price as every other seller : higher price= no sales, lower price= sell quickly and lose sales revenue and profit since buyers are willing to pay more - Sellers and buyers must accept the going price - which is determined by the collective actions of all buyers and all sellers through the forces of supply and demand Monopolistic competition: - The various products are very similar in nature, and are all intended to satisfy the same need - however each seller attempts to make its products different from the others by providing unique product features, attention-getting brand name, unique packaging , or services such as free delivery or lifetime warranty - Key strategic consideration for sellers in these markets is product differentiation (the process of developing and promoting differences between ones products and all competitive products) - Gets saturated Oligopoly : - Companies in an oligopoly-type industry may use game theory: used to model the interactions between businesses to determine what will happen if companies take specific actions regarding changing prices or introducing new goods or services Monopoly : - 1 firm controls all industry sales, no entry of new firms - Pricing in some monopoly industries (gas, water and electric utilities) is regulated by government – in certain industries, government regulation effectively prevents new competitors from entering the market at all – still have choices - Massive investment is usually required to enter business 1.6 - Consistent economic growth rarely happens , the economic growth rate for Canada resembles a roller-coaster ride with peaks and troughs– these fluctuations are referred to as the business cycle Economies fluctuate between high and low points resulting in business cycles consisting of 4 phases: - When the economy is growing its called an expansion or recovery - When the economy is shrinking its called a contraction - When an economy contracts at least 2 quarters(6 months) in a row its described as a recession , a severe recession thats longer and has a larger decline in business activity is defined as a depression - Trough is the business cycle phase when a countries economy bottoms out and production and employment rates reach their lowest points - When the economy begins to improve its in the recovery phase which can lead to expansion The unemployment rate = When unemployed workers, their families and the country as a whole lose – wages, and goods or services that could have been produced – purchasing power of the workers is lost which can lead to unemployment for other workers as well Inflation: - Usually the price of goods and services increases over time hence inflation - Low stable rate of inflation is ~2%, sign of stable economy - When inflation jumped to over 10%/yr , as prices increase too fast (a few decades ago) – our dollars lose purchasing power and it can be a sign of economic trouble Demand pull inflation: when demand for goods and services is greater than the supply Cost push inflation: triggered by increases in production costs Inflation is usually measured by using the consumer price index (CPI) What is CPI video - statistics canada Deflation: decrease in the price of goods and services over a period of time , opposite of inflation - The purchasing power of your dollar increases = can buy more goods and services with the same amount of money - Sign of economic trouble , declining prices leads to declining profits for companies , which can lead to declining employment and a shrinking economy for the country