Business Basics

Better Business3rd Edition

Solomon (Contributing Editor) · Poatsy · Martin

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1

Why Study Business?

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Find a successful career (what do you want to be when you grow up?)

Be a successful owner

Be a better employee

Become a smarter consumer and investor

Business Basics

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A business is any entity that offers products to their customers to earn a profit.

Nonprofit organizations focus

on causes not profit

A profit is earned when a company’s revenue (the

money a business brings in) is greater than its expenses (the money a business pays

out).

What is a Business?

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• (my definition)…the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs.

• Important Components of Business

• Organized Effort of Individuals (Buyers, Sellers, and Resources)

• Product Elements

• Profit Motivation

• Customer Satisfaction

• Stakeholders

• Changing Business Environment

Organized Effort of Individuals

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Buyers• Consumers (people

who buy products for personal consumption)

• Business (organizations who buy products for to resell to others, use as part of their product, or help in the operation of their business)

• Government (organizations that purchase products for societal purposes, i.e. military, roads, park maintenance, etc.)

• Other (non-profit institutions, churches, libraries, etc.)

Sellers• Manufacturers

(businesses that assemble and make products, i.e. Apple, Kodak, Stone Container)

• Resellers (businesses that resell tangible products to customers or to the other businesses, i.e. Wal-Mart, Target, Lowes, Home Depot)

• Service Providers (businesses that provide intangible products or perform useful labor on behalf of their customers, i.e. insurance, banking, haircuts, cleaning service)

• Combination

Resources• Human (physical labor

and knowledge)• Natural Materials

(raw/natural materials)• Entrepreneurship

(Willingness to start business)

• Capital (Financial, Real-physical facilities)

• Technology (computers, smartphones, software, etc.)

• Intellectual (patents, copyrights, trademarks)

What Kinds of Products are Sold by Businesses?

• Good - refers to a physical product a business sells

• Service - refers to an intangible product that is bought

or sold

PRODUCTS CAN CONSIST OF BOTH GOOD AND SERVICE ELEMENTS!

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Spotlight on Profit

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Sales Revenue- Business Expenses

Profit (Loss)*

*Profit becomes property of its owners

What do you have when?• Revenue > Expenses• Expenses > Revenue

• Profit is what remains after all business expenses have been deducted from sales revenue.

• Revenue – Expenses = Profit• Sales Revenue = the money a business receive from

selling its products (product price * number of products sold)

• Expenses = the money a business spends trying to sell its products and operate

• A loss (negative profit) results when a firm’s expenses are greater than its revenues.

Profit Pursuit

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• The purposes of profit– To reward business owners for

producing goods and services consumers want

– Profit compensates for RISK • Non-Payment Risk• Business Failure Risk

– Entrepreneurs – People who risk their time, effort, and money to start and operate a business

– Is the pursuit of profit bad? Nick Woodman, Founder/CEO, GoPro

Stakeholders

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• Who are some common business stakeholders?–Customers - Government–Employees - Lenders–Owners - Community

“…all the different people or groups of people who are affected by the policies, decisions, and activities made

by an organization.”

Changing Business Environment

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• The business environment is dynamic and constantly changing

• Business have to stay abreast of its environment in order to capitalize on potential opportunities or minimize potential threats to its business

• What are some outside factors or influences that impact a business’ activities? Economic Factors Laws Technology Competition Social changes (attitudes, interests, and beliefs) Global influences

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

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How Can Social Media and Employee Empowerment Create Opportunities?

Social Media, such as Twitter and LinkedIn, build relationships with customers.

Employee Empowerment allows employees to solve customer concerns without management approval.

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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 - a movement toward a more

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

economy• Risks to the U.S.

economy

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Technological ChangesChallenges of technological changes:• Demands on time and capital• Changes to business operations

Benefits of technological changes: • Lower costs and improved productivity, security, and communications.• Telecommuting, teleconferencing and other

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E-Commerce• E-commerce takes several forms:

– B2C business to consumer– B2B business to business– C2C consumer to consumer

• Online security and privacy

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Types of Businesses:Local and Regional

• A local business - usually one of a kind, serves a limited surrounding area

• Regional businesses - serve a wider area although they do not serve a national or international market

• Challenges– Managing money– Undercapitalization– Controlling costs

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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 in which

they do business • Manage longer, more complex supply chain

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Types of Businesses: Multinational

• Multinational businesses - provide goods or services to international consumers or have suppliers or production facilities in other countries.

• Special challenges:• Differences in international laws • Cultural differences• Economic differences

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Taking Business Personally• 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 financial goals do you have?

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