Introduction to Business (Chapter 1) - Fall 2024-2025 PDF

INTRODUCTION TO B U S I N E SS CHAPTER # 1 The Foundations of Business HAMIDUL ISLAM [HAMID] S E N I O R A SS I S TA N T P R O F E SS O R , D E PA RT M E N T O F M A R K E T I N G , F B A , A I U B 2 W H AT I S B U S I...

INTRODUCTION TO B U S I N E SS CHAPTER # 1 The Foundations of Business HAMIDUL ISLAM [HAMID] S E N I O R A SS I S TA N T P R O F E SS O R , D E PA RT M E N T O F M A R K E T I N G , F B A , A I U B 2 W H AT I S B U S I N E S S ? o In general, business means being busy or engaged in any work. o Any kind of Legal activity to earn Profit is called Business. o According to Skinner and Ivancevich : “Business is the exchange of goods, services, or money for Mutual Benefit or Profit”. 3 W H AT I S B U S I N E S S ? (CONTD.) o All of us need food, clothes, and accommodation. o We also have many other requirements to be satisfied in our daily lives. o We met some of these requirements from the shopkeeper. o The shopkeeper gets it from the wholesaler. o The wholesaler gets from the manufacturers. o The shopkeeper, the wholesalers, and the manufacturer are doing business and therefore are known as businessmen. 4 CHARACTERISTICS OF BUSINESS 1. Economic Activities Business is an economic activity of production and distribution of goods and services. It provides employment opportunities in different sectors like banking, insurance, transport, industries, trade etc. It provides a source of income to the society. 2. Profit Motive Profit is an indicator of the success and failure of a business. It is the difference between the income and expenses of the business. The primary goal of a business is usually to obtain the highest possible level of profit through the production and sale of goods and services. 3. Requires Creativity, Technical Skills, and Market Knowledge Anyone cannot run a business. Modern business is creative and dynamic in nature. Businesses and firms must come out with creative ideas, technical skills, approaches, 5 CHARACTERISTICS OF BUSINESS(CONTD.) 4. Risk and Uncertainties Business is subject to risks and uncertainties. Risk is defined as the effect of uncertainty arising on the objectives of the business. Risk is associated with every business. Business is exposed to two types of risks, Insurable and Non-insurable. Insurable risk is predictable. Some risks, such as risks of loss due to fire and theft, can be insured. 5. Managing Customer Satisfaction The phase of business has changed from a traditional concept to a modern concept. Nowadays, business adopts a consumer-oriented approach. Customer satisfaction is the ultimate aim of all economic activities. Modern business believes in satisfying customers by providing quality products at a reasonable price. 6 CHARACTERISTICS OF BUSINESS(CONTD.) 6. Social Responsibilities Business is a socio-economic activity. Both business and society are interdependent. Modern business runs in the areas of social responsibility. The business has some responsibility towards society and in turn, it needs the support of various social groups like investors, employees, customers, creditors, etc. By making goods available to various sections of society, the business performs an important social function and meets social needs. 7. Government Control and Regulations Business organizations are subject to government control. They must follow certain rules and regulations enacted by the government. The government ensures that the business is conducted for social good by keeping effective supervision and control by enacting and amending laws and rules from time to time. 7 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E BUSINESS… o Products [Goods and Services] o Buyer and Seller o Markets [Physical and Virtual] o Exchange [Barter and Transaction] o Economic Condition [Purchasing Power, Inflation Rate, Standard of Living] o Managing Business Departments 8 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Products: A Product is anything that can be offered to a market that might satisfy a want or need of the customers. (Basically, the Product is a solution to consumers'’ need) 9 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Buyer and Seller: A buyer is a person or organization who is buying something or who intends to buy it. And a person or an organization that sells something can be called a seller. 10 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Markets: A market is the set of actual and potential buyers of a product or service. o It works as the medium of interactions between buyer and seller. 11 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Markets: Market Physical Market Virtual/Online Market 12 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Markets: Physical Markets Traditional/ Open Market Modern/ Supermarket 13 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Markets: Virtual Markets  FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … 14 (CONTD.) o Exchange: Exchange is the act of obtaining a desired object from someone by offering something in return. o The process by which parties provide something of value to one another to satisfy the needs of each. 15 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Exchange: Provide the needed Goods/ Services Seller Buyer Money and Support 16 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Exchange: Barter is the direct exchange of one good for another without using anything as money or as a medium of exchange. Barter is a type of trade where goods or services are exchanged for a certain amount of other goods or services; no money is involved in the deal. 17 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Exchange: Transaction: A transaction is a completed agreement between a buyer and a seller to exchange goods, services, or financial assets in return for money. A transaction involves a monetary exchange for a good or service. 18 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Economic Conditions: Economic conditions refer to the state of the economy in a country or region. o They change over time in line with the economic and business cycles. Purchasing Power: Purchasing power refers to a person's ability to buy goods and services. 19 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Economic Conditions: Inflation Rate: A Rate at which the general level of prices for goods and services is rising and purchase power is falling. For example: The inflation rate goes up to 5%. 20 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Economic Conditions: Standard of Living: The way people lead their life. A measure of how well a person or family is doing in terms of satisfying needs and wants with goods and services. 21 FA C T O R S T O B E C O N S I D E R E D T O O P E R AT E B U S I N E SS … (CONTD.) o Managing Business Departments DIFFERENCE BETWEEN SHAREHOLDER & S TA K E H O L D E R  S H A R E H O L D E R & S TA K E H O L D E R 23 24 SHAREHOLDER & S TA K E H O L D E R ( C O N T D. )  FA C T O R S O F PRODUCTION Businesses need many things before successfully producing the goods and services customers demand. But four major factors of production are needed by a business if it wants to produce goods and services. 26 FA C T O R S O F PRODUCTION o These are land, labor, capital, and entrepreneurship. 27 FA C T O R S O F P R O D U C T I O N (CONTD.) o Land: This general term includes not only land but all of the renewable and non-renewable natural resources, such as coal, water, crude oil, timber, etc. o The solid part of the earth’s surface where the production, distribution of goods and services and other business operations take places. 28 FA C T O R S O F P R O D U C T I O N (CONTD.) o Labor is the amount of physical and mental effort (both skilled and unskilled) used to produce goods and services in an economy. o Labor is also called the manpower or Human Resources of a business. o All companies need labor to function. o Everyone from the manual workers to the company owner falls under the classification of human resources. 29 FA C T O R S O F P R O D U C T I O N (CONTD.) o Capital refers to the financial assets, such as cash in hand, bank deposits, tangible machinery, production equipment, and other manufacturing facilities, used to produce goods and services. o Without capital, the company would not be able to produce anything. 30 FA C T O R S O F P R O D U C T I O N (CONTD.) o Entrepreneurship is the capacity and willingness to develop, organize and manage a business venture along with any of its risks to make a profit. o Entrepreneurs are the people who start their own businesses, taking all the necessary risks to make a profit. o Without these people and their ideas, no companies would ever start. o The capacity and willingness to develop, organize and manage a business venture and any of its risks to make a profit.  FA C T O R S O F P R O D U C T I O N 31 (CONTD.)  U N D E R S TA N D I N G ECONOMICS AND THE ECONOMIC SYSTEM 33 ECONOMICS o According to Paul A. Samuelson “Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people”. o Resources include the time, and the talent people have available, the land, the buildings, equipment, and other tools on hand, and the knowledge of how to combine them to create useful products and services. 34 ECONOMIC SYSTEM o An Economic System is a nation’s system for allocating resources among its citizens and organizations. o The following questions must be addressed in the chosen economic system:​  What is to be produced?​  How much will be produced?​  Who will produce it?​  How much will it cost?​  Who will consume it?​ 35 ECONOMIC SYSTEM (CONTD.) Bases for Economic System Capitalism An economic system in which all or most of the sources of production and distribution are privately owned and operated for profit. The founder of this system is Adam Smith. Example: USA, Europe, Japan, Canada. 36 ECONOMIC SYSTEM (CONTD.) Bases for Economic System Socialism An economic system based on the premise that businesses should be owned by the state so that profits can be evenly distributed among the people. The founder of this system is Karl Marx. Example: Soviet Union, Cuba, China. 37 ECONOMIC SYSTEM (CONTD.) Bases for Economic System 38 ECONOMIC SYSTEM (CONTD.) Types of Economic System: 39 ECONOMIC SYSTEM (CONTD.) Types of Economic System: Planned/Command Economy A planned/ command economy is an economic system in which the central government makes all the decisions on production and consumption of goods and services. Central planners decide what should be produced and direct the lower-level enterprises to produce those goods in accordance with national and social objectives. The government owns the productive resources, financial institutions, factories, retail stores etc. Example: Former Soviet Union, Cuba, North Korea, etc. 40 ECONOMIC SYSTEM (CONTD.) Types of Economic System: Free Market Economy A free-market economy is an economic system which is based on the division of labor as the prices of goods and services are determined in a free price system set by the market forces of demand and supply. The buyers negotiate the price of the products with the sellers and eventually set-up the market prices of the commodities available in the market. Example: USA, European Union, etc. 41 ECONOMIC SYSTEM (CONTD.) Types of Economic System: Mixed Economy A mixed economy is an economic system in which the government and the private sector direct the economy and the resources to produce the needed goods and services, reflecting characteristics of both planned and market economies. Both the government and the private business enterprises produce and distribute goods and services. Example: Bangladesh, India, etc. T H A N K YO U ! END OF CHAPTER # 1