pmgt 01 - introduction business environment and entrepreneurship

Serenity Prayer

God grant me the serenity to accept the things I cannot change;Courage to change the things I can; And wisdom to know the difference.

Living one day at a time;Enjoying one moment at a time;

Accepting hardships as the pathway to peace;Taking, as He did, this sinful world as it is, not as I would have it;

Trusting that He will make all things right if I surrender to His will;

So that I may be reasonably happy in this life;And supremely happy with Him, forever and ever in the next.

AMEN.

Introduction to Business

The Philippine Business Enterprise

What is Business?

- social process which involves the assembly and utilization of resources to produce goods and services in order to satisfy the needs of society. (Gitman)

- includes all profit-seeking activities of enterprises that provide goods and services necessary to an economic system.

• Business involves production and/or selling of goods and services• A business enterprise is organized to

acquire profit, the biggest profit if possible.• The purpose of business is to create

a customer and satisfy him. (Drucker)

Goods

- refers to anything that provides satisfaction to needs, wants and desires of the consumer.

- Tangible products that contribute directly or indirectly to the satisfaction of human needs and wants.

• Ex: watches, tables, photographs

Services

- Intangible economic activities that also contribute directly or indirectly to the satisfaction of human needs and wants.

Ex: Hairdressing, catering, banking, telecommunications.

Profit

- the money that remains after a firm deducts its expenses related to producing and marketing goods or services from its revenues. The firm receives money arising out of sales, commissions, and the like.

Profit Maximization

– is the long term goal of creating customers and maximizing their satisfaction by selling quality goods, good service and reasonable price.

Customer / Consumer

• The one who demands goods or services.• A person who buys goods and services• One that utilizes economic goods• Determines what a business is, what

he is buying, what he considers as valuable.

Reasons why people go into business:

1. personal satisfaction2. family involvement3. independence and power4. social activities5. profit expectation

Business Basic Resources

1. Men2. Money3. Machines 4. Materials5. Methods

Economic System Models

Economic system - set of economic institutions that dominate an economy. Its basic objective is to satisfy the economic needs of the people.

1. Capitalism

- the factors of production and distribution are owned and managed by private individuals.

Features:• Private property• Economic freedom• Free competition• Profit motive

2. Communism

- the factors of production and distribution are owned and managed by the state. It is a command economy.

Features: • No one owns property privately• Government is the only producer and seller• There are no economic freedoms• The profit motive is prohibited.

3. Socialism

- mixture of capitalism and communism. Major industries belong to the state while the minor industries to private individuals.

Basic Market Models

- are theoretical frameworks for existing firms and industries.

1. Pure competition- is a market situation wherein there is a large number of independent sellers offering identical products. It is easy for sellers to enter and leave the market. No single seller or no single buyer can influence the prevailing market price.Ex: rice, corn, fish, vegetables

2. Pure monopoly

- is a market situation wherein there is only one producer or seller. Goods and services are unique in the sense that there are no close substitutes. The monopolist determines the market price since he is the only supplier. It is extremely difficult for new firms to enter the market because of the huge capital required.

Ex: meralco, maynilad

3. Monopolistic competition

- is a market situation where there is relatively large number of small producers or suppliers selling similar but not identical products. Products are differentiated in terms of advertising, packaging, services and sales promotion.

Ex: banks, book publications, drugs, tailoring shops, gasoline stations

4. Oligopoly

- is a market situation where there are few firms offering standardized or differentiated goods and services. Usually there is a price agreement among the oligarchs for their own business interests.

Philippine Business Environment

Business Environment - refers to the internal and external factors that affect the efficiency of a business enterprise.

Internal business environment:

• management• technology• facilities• financial incentives

External business environment:

• peace and order• transportation, communication and

electrical facilities• monetary and fiscal policies• political, social and economic conditions

The Role of the Government

• assistance and control• protect consumers and other sectors of society • extend financial and technical assistance to

marginal business enterprises to ensure viability• provide the essential socio-economic

infrastructures in order to accelerate business growth

• supervise and regulate the activities of business enterprises in the interest of the economy and society.

Major areas of government regulation of business enterprise:

a. occupational safety b. fair labor practicesc. consumer protectiond. pollution preventione. economic security

Entrepreneurship

Introduction to Business

The Private Enterprise System and The Entrepreneur

• The entrepreneur is the one assigned to perform the lead role in making the private enterprise system work.

• It is inevitable that there will be shortages in some types of goods and services, which in turn results to some unsatisfied need.

• When an unsatisfied economic need is recognized, the entrepreneur devises a plan and designs an organization that will facilitate the achievement of his profit object.

Entrepreneurship

• Entrepreneurship is the capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit. (www.businessdictionary.com)

• The central point of entrepreneurship is innovation.

Who is an entrepreneur?

• An individual who takes risks and invest resources to make something unique or something new, designs a new way of making something that already exists, or creates new market.

• Any individual who creates a new product or services is an entrepreneur. • Those who introduce better ways of

doings things are also entrepreneurs.

Qualities Of Entrepreneurs

Reasonable risk- taker. Entrepreneurs enjoy challenges. But they are careful and calculating.

Self- confident. Entrepreneurs have strong faith in their abilities.

Hard workingInnovative. Entrepreneurs are creative. They do

things in new and different ways.Positive thinkers. Entrepreneurs are positive

thinkers. They think of success and bright sides.

Qualities Of Entrepreneurs

–Leader. Entrepreneurs are leads by the very nature of their functions. They are people who are task- oriented are achievers.»Leaders treat their fellowmen like human

beings. They respect human dignity, and are aware of other human needs like belongingness, security, fulfilment, and love. Entrepreneurs do not exploit their works or employees. Instead, entrepreneurs promote the welfare of their employees.

Introduction to Business

Forms of Business Organization

Forms of Business Organization

• Sole proprietorship• Partnership• Corporation• Cooperatives

Sole proprietorship

– is a business organization owned and usually operated by a single individual. This is the simples types of ownership. Business assets, earnings and debts are assumed by the owner. They are small entities such as repair shops, retail outlets, and service organizations.

Advantages:Retentions of all the profits to the owner,

except those for government in the form of taxes.

Ease of formation and dissolution in terms of minimum legal requirements like business registration and licenses.

Ownership flexibility where the owner can make decisions without consulting others.

Disadvantages:× Unlimited financial liability because there is no

legal distinction between the business and owner. Proprietor is liable for all debts of the business up to the extent of using personal funds.

× Limitations of financial resources to the owner’s personal funds, and loadable amount.

Disadvantages:× Management deficiency, since the manager is

also the owner, he performs a wide range of managerial and operational activities.

× Lack of long-term continuity which maybe caused by death, bankruptcy, retirement or change in personal interests of the owner.

Partnership

–is an association of two or more persons who operate a business as co-owners by voluntary legal agreement.

Forms of Partnership:• General partnership is one in which partners

are liable for business debts. • Limited partnership is composed of a partner

whose liability is limited to the amount of capital contributed, provided the partner plays no active role in the business.

Types of partners:

• General partner – a partner whose liability extends up to his personal properties

• Limited partner – a partner who is only liable to the extent of his contribution to business.

• Capitalist partner – partner that contributes money

• Industrial partner – partner that provides management service.

Advantages:Ease of formation.Complementary managerial skills.Expanded financial capability

Disadvantages:×Unlimited financial ability-except

in cases of limited partners.×Interpersonal conflicts.×Lack of continuity.×Complexity of dissolution

Corporation– an artificial being created by operation of law, having the right of succession, and the powers, attributes, and properties expressedly authorized by law or incidence to its existence.

• Stocks – shares or certificates of ownership• Stockholders – owners of stocks

• Corporation is a legal entity whose assets and liability are separate from those of its owners. Corporate ownership is represented by share of stock in the firm. Anyone who holds one or more shares of a corporation stock is considered a part-owner of the business. Shares can usually be both and sold on the open market.

Advantages:Limited financial risks.Specialized management

skills.Expanded financial capability.Economies of larger-scale

production

Disadvantages:× Difficult to organize× Strictly regulated and supervised by

the government× Some corporations are socially

irresponsible× Formal and impersonal employer-

employee relationship

Cooperatives

– a duly registered association of persons, with a common bond of interest, who have voluntarily joined together to achieve a lawful common social or economic end, making equitable contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with the universally accepted principles of cooperation

Universally Accepted Principles Of Cooperation Includes The Following:

1. Open and voluntary membership2. Democratic control3. Limited interest on capital4. Division of net surplus5. Cooperative education6. Cooperation with other cooperatives

Objectives of cooperatives:

• Encourage thrift and savings among members

• To generate funds and extend credit to the members for productive and provident purposes

• To encourage among members systematic production and marketing

• To provide goods and services and other requirements to members

Objectives of cooperatives:

• To develop expertise and skills among its members

• To acquire lands and provide housing benefits for the members

• To promote and advance economic, social, and educational status of the members

Objectives of cooperatives:

• To establish, own, lease or operate cooperative banks, cooperative wholesale and retail complexes, insurance and agricultural/industrial processing enterprises, and public market.

Types of Cooperatives:

1. Credit cooperative – promotes thrift among members; create funds to grant loans for productive and provident purposes

2. Consumer cooperative - procures and distributes commodities to its members and non-members

3. Producers cooperative - undertake joint production in agriculture and industry

Types of Cooperatives:

4. Marketing cooperative – engages in the supply of production inputs to members and markets their products.

5. Service cooperative – undertakes medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication and other services.

6. Multipurpose cooperative – combines two or more of the business activities of the different type of cooperative.