Business BasicsBetter Business

2nd EditionSolomon (Contributing

Editor) · Poatsy · Martin

© 2012 Pearson Education, Inc.Publishing as Prentice Hall 1-2

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Learning Objectives

1. What are profits, and how do for-profit and not-for-profit organizations compare?

2. What is the difference between a good and a service, and what are the factors of production?

3. How do competition, the social environment, globalization, and technological growth challenge and provide opportunities to business owners?

4. What are the four types of businesses?5. How do sole proprietorships, partnerships,

corporations, and limited liability companies (LLCs) differ from one another as forms of business?

6. How do life skills translate to the business environment?

© 2012 Pearson Education, Inc.Publishing as Prentice Hall 1-3

Basic Business Definitions• Businesses- entities that offer products to their

customers to earn a profit• Profit- when a company’s revenue (the money it brings

in) is greater than its expenses (the money it pays out) • Good- refers to a physical product a business sells • Service- refers to an intangible product that is bought

or sold• Not-for-profit organizations- businesses that do not

pursue profits, but instead seek to service the community through social, educational, or political means

© 2012 Pearson Education, Inc.Publishing as Prentice Hall 1-4

The Factors of Production

• Labor• Natural

resources• Capital

o Real capital o Financial capital

• Entrepreneurs• Technology

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How Does Competition Influence Business?

Competition arises when two or more businesses contend with one another to attract customers and gain an advantage.

Competition forces companies to - Improve their product offerings- Lower their prices- Aggressively promote their brands- Focus on customer satisfaction- Employers seek workers who have

interpersonal, communication, and decision-making skills

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How Does the Social Environment Affect Businesses?

Baby Boomers: An aging population- Business opportunities- Providing for retirees

Increasing diversity- Workforce development- Consumer demographics

The Green Movement- Environmental concerns- New product opportunities

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Globalization• Globalization is a movement toward a more

interconnected and interdependent world economy• Multinational enterprises• Off shoring• Benefits to the U.S. economy

- Lower prices for goods- Increased competition stimulates innovation

• Risks to the U.S. economy- U.S. jobs lost to overseas workers- Increased competition- Fluctuation in the dollar value- Security and patent protection concerns- Unstable political climates in foreign countries

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Technological ChangesChallenges of technological changes:• The pace of technology is expensive and time consuming• Advancements in technology are changing the foundation

and focus of how many businesses are runBenefits of technological changes: • Lower costs and improved productivity, security, and

communications.• Telecommuting, teleconferencing and other tools help

human relations and globalization.• The Internet aids company operations.

- E-commerce (B2B and B2C) streamline sales.- Businesses must provide online security and privacy

© 2012 Pearson Education, Inc.Publishing as Prentice Hall 1-10

Types of Businesses:Local and Regional

• A local business is usually one of a kind, relies on local consumers to generate business, and serves a limited surrounding area

• Regional businesses serve a wider area although, like local companies, they do not serve a national or international market (i.e. Wawa).

• Managing money is the most significant special challenge of these businesses- Poor financial

planning- Unfavorable economic conditions

• Undercapitalization occurs when a business owner cannot gain access to adequate funding

• Taxes and insurance costs must be taken into consideration

© 2012 Pearson Education, Inc.Publishing as Prentice Hall 1-11

Types of Businesses:National

A national business has several outlets throughout the country and provides goods or services to virtually all U.S. residents, no matter where in the country they live

Special challenges:• Budget and finances• Must be aware of all state laws in every state they

do business in• Manage longer, more complex supply chain

© 2012 Pearson Education, Inc.Publishing as Prentice Hall 1-12

Types of Businesses: MultinationalMultinational businesses are businesses that have expanded to

provide goods or services to international costumers or serve only one country but have suppliers or production facilities in other countries

Special challenges:• Different countries’ laws • Cultural differences

‾ Business hours‾ Workweek schedules‾ Values and customs relating to business etiquette‾ Violating local taboos‾ Wage differences‾ Language barriers

• Economic differences

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Types of Business Ownership

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• Sole Proprietorship

• Partnership

• Corporation

• LLC

The Players in Business Ownership

A corporate stakeholder is someone who is affect by a company’s actions or who has an interest in what the company does.

Stakeholders include: employees, shareholders, investors, suppliers, and society at large• Some stakeholders are only remotely

affected by the businessSole proprietorships usually have fewer

stakeholders than large corporations

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Taking Business Personally

• Are you a sole proprietorship or a partnership?

• How do you receive funding? • What are your expenses? • How does the social environment affect your

life?• How does globalization affect your life? • How do you keep up with new technology? • What sort of e-commerce do you use? • How do you keep your “business” secure• What types of goals do you have?

© 2012 Pearson Education, Inc.Publishing as Prentice Hall 1-16

Chapter Summary

1. What are profits, and how do businesses and not-for-profit organizations compare?

2. What is the difference between a good and a service, and what are the factors of production?

3. How do competition, the social environment, globalization, and technological growth challenge provide opportunities to business owners?

4. What are the four types of businesses?5. How do sole proprietorships, partnerships,

corporations, and LLCs differ from one another as forms of business?

6. How do life skills translate to the business environment?

© 2012 Pearson Education, Inc.Publishing as Prentice Hall 1-17

© 2012 Pearson Education, Inc.Publishing as Prentice Hall 1-18