Business Definitions and Concepts PDF

Definition of Business: \- Business: Defined as an enterprise or organization engaged in commercial, manufacturing, or professional activities. Characteristics or Features of Business: 1. Exchange of Goods and Services: Directly or indirectly. 2. Deals in Numerous Transactions: Not just one or t...

Definition of Business: \- Business: Defined as an enterprise or organization engaged in commercial, manufacturing, or professional activities. Characteristics or Features of Business: 1. Exchange of Goods and Services: Directly or indirectly. 2. Deals in Numerous Transactions: Not just one or two transactions. 3. Profit is the Main Objective: Profit is a reward for the services offered by a businessman. 4. Business Skills for Economic Success: Need experience and skill. 5. Risks and Uncertainties: Business is subject to risks and uncertainties. 6. Buyer and Seller: Business is a contract or agreement between a buyer and seller. 7. Connected with Production: Connected with the production of goods and services. 8. Marketing and Distribution of Goods: Called commercial activity. 9. Deals in Goods and Services: \- Consumer Goods: Used by the final consumer for consumption. \- Producer Goods: Used by producers for further production. 10. To Satisfy Human Wants: 11. Social Obligations: Service-oriented rather than profit. Relationship of Business and Economy: \- Businesses: Provide goods and services that drive economic output. \- Economics: Deals with supply and demand of all products in the country. Elements of Business: \- Economics: Divide the factors of production into four categories: \- Land: Represents all natural resources that serve as raw materials for production. The income that resource owners earn in return for land is rent. \- Labor: Contribute to the production of goods and services. Income earned is wages. \- Capital: The machinery, tools, and buildings humans use to produce goods. The income earned is called interest. \- Entrepreneurship: A person who combines the other factors of production. The income earned/payment is profit. Profit: \- Profit is measured by deducting expenses from the company\'s total revenues. Reasons for Engaging in Business: \- People engage in business because of power, profit, service to the community, prestige, livelihood, and social approval. Abraham Maslow\'s Hierarchy of Needs: \- Abraham Maslow, an industrial psychologist, proposed a hierarchy of needs theory, which outlines five needs of men: 1. Physiological or Biological Needs: Essential for survival, such as food. 2. Safety Needs: The desire for security, stability, or protection against danger. 3. Social Needs: The need for group belongingness, affection, love, friendship. 4. Ego or Self-Esteem Needs: The need for self-recognition or group recognition. 5. Self-Fulfillment Needs: The need for realization of personal goals. Kinds of Business and Forms of Ownership: 1. Industries: Involve the conversion of raw materials into finished products or goods and the application of labor upon raw materials. \- Manufacturing Industries: Use materials and supplies turned out by the extractive industries. 2. Commerce: Involves the process of buying and selling where the goods are moved from the point of production. Consumption involves purchasing and the actual investment of capital in the merchandise. 3. Service Enterprises: Primarily concerned with the satisfaction of the needs and wants of the consumers. \- Public and Community Service: \- Professional or Trade Service: Forms of Business Ownership: 1. Sole Proprietorship: \- Owned by one person, usually the one who is accountable for the day-to-day running of the business. \- Advantage: Easiest and least expensive form of ownership to organize. \- Disadvantage: May have a hard time attracting high-caliber employees. 2. Partnership: \- Two or more persons bind themselves. \- Advantage: The profits from the business flow directly through to the partners\' personal tax returns. \- Disadvantage: Some employee benefits are not deductible from business income on tax returns. \- Types of Partnership: \- General Partnership: Equal shares are assumed unless there is a written agreement that states differently. \- Limited Partnership and Partnership with Limited Liability: Limited means that most of the partners have limited liability (to the extent of their investment). 3. Corporation: \- For tax purposes, separate entities and are considered a legal person. \"Personal income.\" \- Advantage: Limits liability of the owner to debts or losses. \- Disadvantage: Corporate operations are costly. Kinds of Economic System & Medium of Exchange: 1. Capitalism: A system in which the means of production are owned and operated by private individuals. 2. Socialism: The ownership of production and capital by the government. 3. Communism: Stresses for the collective ownership by the government of consumption goods and production goods. Medium of Exchange: 1. Barter Economy: A cashless economy system where goods and services are exchanged based on the agreement of the parties involved. 2. Money Economy: Throughout time and evolution, money was used as a medium of exchange. 3. Money and Credit Economy: Credit is the power to obtain economic goods and services in exchange for the promise to pay the agreed equivalent at some future time. Feasibility Study: \- A feasibility study is a study that takes into account all the related factors of a project, including economic, technological, legal, and scheduling considerations. \- To assess the probability of successfully completing the project, feasibility studies are important to business development. They can allow a business to address where and how it will operate. Components of a Good Feasibility Study: \- Marketing Aspect: To determine the quantity of the product that can be sold at a certain price given the competitive situation. \- Organization and Management Aspect: Includes study of the officers and key personnel, basic organization consideration in forming the organization (forms of ownership, organizational chart), and project schedule. \- Technical Aspect: Determines to what extent the project meets the technical soundness criteria and notions. \- Financial Aspect: Quantifies the results of the marketing, technical, management, taxation, and legal phases of the project study. \- Socio-Economic Aspect: Determines how the project will affect income, taxes, price, local producers, and the community. Definition of Management: \- Management: A distinct method of planning, organizing, staffing, directing, and controlling (POSDCORB) undertaken through the use of human and other business resources to evaluate and accomplish specific goals. Different Perspectives on Management: \- According to George Terry: Management is a distinct process consisting of planning, organizing, actuating, and controlling performed to determine and accomplish the objective by the use of people and resources. \- For Henry Fayol: \"To manage is to forecast and not to plan, to organize, to command, to co-ordinate, and to control!\" \- For Peter F. Drucker: Management is a multi-purpose organ that manages a business, not manage managers and manage worker and work. Five Basic Functions of a Manager: 1. Setting Objectives 2. Organizing 3. Motivating the Team 4. Devising Systems of Measurement 5. Developing People Function of Management: \- Planning: The basic function of management - deciding ahead of time what to do and how to do it. \- Organizing: Bringing together physical, financial, and human resources. \- Staffing: Man-power planning, maintaining the positions provided. \- Directing: Supervision, motivation, and leadership, communication. \- Controlling: Corrective action, establishment of standard performance. Levels of Management: \- Top Level of Management: Ultimate source of authority, consist of board of directors, chief executive, or managing director. \- Middle Level of Management: The branch managers and departmental managers constitute middle level. \- Lower Level of Management: Known as supervisory/operative levels of management. Henri Fayol: \- A French industrialist who was the first to issue a complete statement on a theory of general management. \- Key Principles: 1. Division of Work: Breaking down tasks into smaller, more manageable units. 2. Authority: The right to give orders and expect obedience. 3. Unity of Command: Each employee should receive orders from only one superior. 4. Subordination of Individual Interest to General Interest: Prioritizing the goals of the organization over personal interests. Frederick Taylor: \- Considered the father of modern-time study, known for his contributions to scientific management. \- Time Period: His work was influential from 1856 to 1915. \- Focus: Taylor emphasized the use of scientific methods to improve efficiency in the workplace.