Chapter 1: Exploring the World of Business 2024 Introduction to Business Concepts PDF

Chapter 1: Exploring the World of Business  Learning Outcomes 1. Explain how business benefits society. 2. Identify potential societal concerns about business. 3. Identify the responsibilities of the three levels of government in Canada and how this affects business. 4. Expl...

Chapter 1: Exploring the World of Business  Learning Outcomes 1. Explain how business benefits society. 2. Identify potential societal concerns about business. 3. Identify the responsibilities of the three levels of government in Canada and how this affects business. 4. Explain some of the Canadian laws that protect businesses and consumers. 5. Classify various economies. 6. Identify the effects of various price changes on supply and demand. 7. Explain how different economic indicators are positive or negative indications of economic conditions. 8. Examine some of the trends that are reshaping the political and economic environment.  Key Terms to Get Started Business: an organization that seeks profit by providing goods and services to satisfy society's needs Goods: are physical, tangible products that we buy and sell Services:  Business Basics Standard of living – The amount of products available, the wealth of the nation, and lifestyle opportunities. Quality of life – General level of human well-being and happiness including access to healthcare, education and food. How do we measure happiness? 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.  The Basics: Profit 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 for Profit Organization member… not all businesses pursue profi An organization that typically exists to achieve a social goal or goals as opposed to the usual business goal of profit  Benefits and Concerns Business Offers Many Benefits Job opportunities, offer different types of service, satisfy customer needs, providing employment, and improving the quality of life. Business Offers Many Concerns Health and safety risks, environmental damage, social disruption.  The Business Environment Environmental scan: the process of gathering information about the external environment to determine how it may potentially impact the business operations  The Business Environment Five factors affect the business environment: 1. Political The 3 levels of government in Canada have different roles and responsibilities that affect business (e.g., taxation, banking, healthcare). 2. Economic and Competitive Size and health of economy must be considered when making business decisions (e.g., when a nation’s economy or a business’s profits trend negatively). High levels of competition force businesses to cut costs, develop new products, increase marketing efforts. 3. Social Changes in demographics influences what products companies offer including age, gender, ethnicity, cultural diversity (e.g., diversity, baby boomers retiring). 4. Technology Technology innovation has changed how businesses produce and distribute goods and how we communicate. (e.g., social media) 5. International Access to global markets increases competition and need to enhance skills (e.g., China leads in electronics manufacturing).  Federal Government: Overseeing the Well Being of Canada Federal Government has the Authority over: Criminal Law Money and Banking Employment Trade Regulations Insurance External Relations Copyrights Defense Transportation Canada’s financial system is regulated and wealth is collected, transferred and spent to provide Canadians with one of the highest standards of living.  Provincial and Territorial Governments: Protecting Rights i b i l i ti e s : Respons o u r l a w s n o f l a b n i s t r a ti o Adm i c a t i o n Ed u w e l fa re i l ri g h ts l t h a n d y a n d c iv He a f p r o p e rt e c t i o n o Prot o u rc e s e s Natural r t o n m e n Envir s su c h t a n da rd o r k i n g s a n d i m um w h o l i da y s d es m i n a tu to r y a w i n c l u t i o n s, s t o u r l v a c a Lab m w a g e s, i n i m u as m Municipal Governments: Delivering the Services Deliver services such as: Water Sewer Waste Collection Encourages: Economic Development BYLAWS = REGULATION  Governments’ Other Roles Governments as tax agents: Income taxes, sales taxes, property taxes and sin taxes The federal government provides significant financial support to assist the provinces and territories to provide the program and services they are responsible for in the form of transfer payments. Three main transfer payments (equalizing wealth) include: Canada’s health transfer (CHT) Canada social transfer (CST) Equalization program  Taxation Income taxes Based on income of businesses and individuals Property taxes Imposed on real and personal property and based on an assessment Payroll taxes Collected by the employer and remitted to the federal government (DEDUCTIONS) Sales taxes Levied on goods and services when they are sold (PERCENTAGE OF THE PRICE) Excise taxes Taxes imposed on specific items like gasoline, alcohol, and tobacco  Governments’ Other Roles Continued Governments as providers of Governments as essential services: regulators: Reliable National Defense Protect Canadian interests Transportation means: roads Create competition Hospitals Protect the consumer Economic development Promote social programs Safe drinking water Protect the environment Effective Police service  Protecting Businesses and Consumers Patents: gives an inventor the exclusive right to manufacture, use and sell an invention for 20 years Need to meet requirements of being new, unique and useful. Protects authors, inventors and creators Includes: printed material (books, magazine articles, lectures), works of art (art, photographs, and movies) Trademarks: a design, name, or other distinctive mark that is used to idenitify products. Creates uniqueness in the minds of consumers Canadian Intellectual Property Office:  Protecting Businesses and Consumers Consumer Protection Consumerism - reflects the struggle for power between buyers and sellers. Movement seeking to increase rights and power. Warranties Product Liability Law Competition Act: Parallel pricing Quota selling Market sharing Product specialization Bankruptcy The legal act by which individuals or businesses that cannot meet their financial obligations are relieved of some, if not all, of their debt. Deregulation The removal of rules and regulations governing business competition  Economic Systems – Basic Concepts Economic Systems: a combination of policies, laws, and choices made by governments that determine who owns and controls the factor 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 Microeconomics: The sub-area of economics that focuses on individual parts of the economy, such as households or businesses  Micro vs Macroeconomics Microeconomics: Consumer demand for new cars vs. existing supply, competing models, labour and material costs, and availability Current prices and sales incentives Macroeconomics: National level of personal income Unemployment rate Interest rate Fuel costs National level of sales of new cars Factors of Production: Building Blocks of Business Natural Capital: inputs Resources: used to Entrepreneurs: commodities produce goods combination of that are and services natural useful inputs and get them resources, in their to the labour, and natural state customers capital to Labour: produce goods Knowledge: economic and services the contribution combined s of people talents and skills of the workforce  Four types of Economies Market Economy/Capitalism: an economic system in which individuals own and operate the majority of businesses that provide goods and services Invisible Hand: a term created by Adam Smith to describe how an individual’s personal gain benefits others and a country’s economy Businesses and individuals decide what to produce and buy and the market determines prices and quantities sold Command Economy: an economic system in which the government decides what goods and services will be produced, how they will be produced, for whom available goods and services will be produced and who owns and controls the factors of production Socialism: major infrastructure is owned and controlled by the government, while smaller businesses are controlled by individuals Mixed economy: an economic system where most land and business  Four types of Economies Types of Who owns and controls? economies Market Economy Individuals Command Government Socialism Government owns major infrastructure Individuals owns smaller business Mixed Economy Mostly privately owned by individuals Various levels of government regulations Economic Systems Continued Degrees Of Competition and Supply and Demand Competition: Rivalry among businesses for sales to potential customers. Degree of competition: Affect the number of choices an individual has and the prices he or she pays for products of an industry Helps business owners and employees to choose effective business strategies  Degrees of Competition Perfect Competition Large # of small firms, similar products, available information, low barriers to entry/exit Monopolistic Competition Many firms, differentiated substitutes, relatively easy entry Oligopoly Few firms, large capital requirements (high barriers to entry) Monopoly 1 firm controls all industry sales, no entry of new firms Degrees of Competition  Free Markets: Benefits and Limitations Any Ideas? Inequality of wealth-causes national and world tension Greed may compromise ethics Icons by  Perfect Competition and the Concept of Supply and Demand Market situation in which there are many buyers and sellers of a product No single buyer or seller is powerful enough to affect the price of that product. Prices are decided by the economic concept of supply and demand Equilibrium Price price at which the quantity demanded is exactly equal to the quantity supplied  Microeconomics: Point of Equilibrium Supply: The quantity of a product that producers are willing to sell at each of various prices Demand: The quantity of a product that buyers are willing to purchase at each of various prices  Economic Performance Economies fluctuate between high and low points resulting in business cycles consisting of four phases: 1. Peak or Boom 2. Recession (or Contraction) Two or more consecutive three-month periods of a decline in a country’s GDP 3. Depression 4. Expansion or Recovery Peak Recession Expansion o Recovery Depression Key Economic Indicators: Measuring Performance Gross Domestic Product (GDP): Total dollar value of all goods and services produced by all people within the boundaries of a country during a one-year period. Growth in GDP increases employment and incomes Unemployment rate: percentage of a country’s labour force unemployed at any time. Calculated as the number of unemployed divided by the number of people currently in the labour force  Key Economic Indicators: Measuring Performance Inflation: tracks the increase in general level of prices of goods and services over a period of time Low inflation of 2% is a sign of a stable economy. Inflation rate of 10% can be a troubling sign for the economy because rising prices cause a loss of purchasing power. Deflation: decrease in the price of goods and services; the opposite of inflation. Consumer Price Index (CPI): A monthly index that measures the changes in the prices of a fixed basket of goods typically purchased by typical consumer in an urban area. Key Economic Indicators: Measuring Performance Purchasing power: the value of what money can buy Housing starts, commodity prices, stock markets  Inflation The average of all prices of goods and services is rising. Demand Pull Inflation When demand for goods and services is greater than the supply Cost Push Inflation Triggered by increases in production costs Inflation Calculator ( https://www.bankofcanada.ca/rates/related/inflation-calcula tor/  The Future of Politics and Economics Increased interest and investment in clean technology projects Increased need for skilled labour – Immigration and Indigenous engagement Governments are expecting more transparency in marketing, operations, and corporate social responsibility Capitalizing on public-private partnerships (P3s) to harness innovation and access to capital for public infrastructure projects Lack of confidence in markets