Transcript Lecture 01

Introduction to Business
LECTURE 1:
Introduction to Business
MGT 100
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Introduction to Business
Course Objectives:
1. To provide students with the theoretical
background regarding basic business concepts so
that a framework is developed in to which
specialized fields can be studied.
2. To assist students in applying acquired skills and
knowledge to real-life situations.
3. To provide a virtual classroom environment that
enhances the quality of learning of the off campus
students.
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Introduction to Business
Course Policy
Course Description:
1. Understanding the business systems
2. Understanding the environment of business
3. Conducting business ethically and responsibly
4. Understanding entrepreneurship and new ventures
5. Managing the business enterprise
6. Organizing a business enterprise
7. Managing human resource
8. Motivating and leading employees
9. Understanding marketing processes and consumer behavior
10. Developing and pricing products
11. Distributing and promoting products
12. Understanding principles of accounting
13. Understanding financial and risk management
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Introduction to Business
Course Policy (Contd.)
Marks Distribution:
1.Assignments (04)
2.Quiz (04)
3.Sessional Exam 1
4.Sessional Exam 2
Marks
: 15
: 10
: 10
: 15
Internal Marks
: 50
5. Final Examination
: 50
Total
: 100
Passing Marks: 50
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Introduction to Business
Course Policy (Contd.)
Text Book:
Business Essentials, 8th Edition by Ricky W. Griffin
& Ronald J. Ebert, Prentice Hall
Reference Text:
Business.Today, Stephan P. Robbins, Harcourt College
Publishers
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Introduction to Business
Chapter 1:
Understanding Business Systems
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Introduction to Business (Chapter 1)
In this chapter we will:
• Define the nature of business
• Identify its goals and functions
• Discuss history of business
• Describe different types of global economic
systems
• Study demand and supply and its affect on
resource distribution
• Discuss private enterprise and various degree
of competition
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The Concept of Business and Profit
• Business
– An organization that provides goods or
services that are then sold to earn profits.
• Profits
– The difference between a business’s revenues
and its expenses. The rewards owners get for
risking their money and time.
• Consumer Choice and Demand
– The freedom of consumers to choose how to
satisfy their wants and needs.
– The freedom of business owners to decide
how to meet those wants and needs.
• Opportunity and Enterprise
– Success in business requires spotting a
promising opportunity and then developing a
good plan for capitalizing on it.
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The Concept of Business and Profit (cont)
• The Benefits of Business
– Provision of goods and services
– Employment of workers
– Innovation and opportunities
– Increased quality of life and standard of living
– Enhanced personal incomes of owners and
stockholders
– Tax payments support government
– Support for charities and community
leadership
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The Evolution of Business
• The Factory System and the Industrial Revolution
•Middle of the 18th century
• Manufacturing was changed – factory system
brought together material, worker in one place and
produced large quantities
• Low cost raw material
• Specialization of labor
•Mass production replaced a skilled worker with a semi
skilled worker trained to perform one task, aided by a
specialized equipment
•Increased output
•Laissez faire and the Entrepreneurial Era
•During the 19th century
•Government should not interfere in the economy – run
business without regulations
•Risk and entrepreneurship became the practice
•Difficult for competitors to enter the market
•Corporations controlled market
•Society demanded greater accountability
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The Evolution of Business (cont)
•The Production Era
•Early 20th century
•Further increase output by scientifically studying jobs and
defining one best way to perform
•Model of management was dubbed as scientific management
•Henry Ford introduced the assembly line
• Fixed workstations
• Increased task specialization
• Concepts of scientific management
• Moving the work to the worker
•Growth and assembly line came at the cost of worker freedom
•Rise of labor unions
•The Marketing Era
•After world war II
•Previously businesses had been production and sales oriented
•Now, businesses started to produce what customer wanted
• Choose what best suited their need by producing a
variety of products
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The Evolution of Business (cont)
•The Global Era
•The 1980’s saw
• Technological advances
• Computer technology
• Communication capabilities
• Global economy
• Advantages of other country resources
•The information Era
•Use of internet
•Small Vs large companies
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Economic Systems
• Economic System
– A nation’s system for allocating its resources
among its citizens, both individuals and
organizations
• Factors of Production
– Labor: Human resources – physical and
intellectual contribution
– Capital: Financial resources
– Entrepreneurs: Persons who risk starting a
business
– Physical resources: Tangible things used to
conduct business
– Information resources: Data and other
information used by businesses
• Market forecast, economic data, knowledge of
people
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Types of Economic Systems
• Planned Economy
– A centralized government controls all or
most factors of production and makes all or
most production and allocation decisions
for the economy.
• Market Economy
– Individual producers and consumers control
production and allocation by creating
combinations of supply and demand.
• Market
– A mechanism of exchange between buyers
and sellers of a good or service.
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Planned Economies
• Communism
– A system Karl Marx envisioned in
which individuals would contribute
according to their abilities and
receive benefits according to their
needs.
• The government owns and operates all
factors of production.
• The government assigns people to jobs
and owns all businesses and controls
business decisions.
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Market Economics
• Capitalism
– The government supports private ownership and
encourages entrepreneurship.
– Individuals choose where to work, what to buy, and
how much to pay.
– Producers choose who to hire, what to produce, and
how much to charge.
• Mixed Market Economy
– Features characteristics of both planned and market
economies.
– Privatization: The process of converting government
enterprises into privately owned companies.
– Socialism: The government owns and operates select
major industries such as banking and transportation.
Smaller businesses are privately owned.
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Economics of Market System
• Demand
– The willingness and ability of buyers to purchase a
product (a good or a service).
• Supply
– The willingness and ability of producers to offer a
good or service for sale.
• The Laws of Demand and Supply in a Market
Economy
– Demand: Buyers will purchase (demand) more of a
product as its price drops and less of a product as its
price increases.
– Supply: Producers will offer (supply) more of a
product for sale as its price rises and less of a
product as its price drops.
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Demand and Supply in a Market Economy
• Demand and Supply Schedule
– The relationships among different levels of
demand and supply at different price levels
as obtained from marketing research,
historical data, and other studies of the
market.
• Demand curve: How much product will be
demanded (bought) at different prices.
• Supply curve: How much product will be
supplied (offered for sale) at different prices.
• Market price (equilibrium price): The price at
which the quantity of goods demanded and the
quantity of goods supplied are equal.
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Surpluses and Shortages
• Surplus
– A situation in which the quantity
supplied exceeds the quantity
demanded
• Causes losses
• Shortage
– A situation in which the quantity
demanded will be greater than the
quantity supplied
• Causes lost profits
• Invites increased competition
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Private enterprise in a Market Economy
• Private Enterprise System
– Allows individuals to pursue their
own interests with minimal
government restriction.
• Elements of a Private Enterprise
System
– Private property rights
– Freedom of choice
– Profits
– Competition
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Degree of Competition
• Perfect Competition
– Prices are determined by supply and
demand because no single firm is powerful
enough to influence the price of its
product.
• All firms in an industry are small.
• The number of firms in the industry is large.
– Principles of perfect competition:
• Buyers view all products as identical.
• Buyers and sellers know the prices that others
are paying and receiving in the marketplace.
• It is easy for firms to enter or leave the market.
• Prices are set exclusively by supply and demand
and accepted by both sellers and buyers.
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Degree of Competition (cont)
• Monopolistic Competition
– There are numerous sellers trying to
differentiate their products from those of
competitors so as to have some control over
price.
– There are many sellers, though fewer than
in pure competition.
– Sellers can enter or leave the market easily.
– The large number of buyers relative to
sellers applies potential limits to prices.
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Degree of Competition (cont)
• Oligopoly
– An industry with only a few large sellers.
– Entry by new competitors is hard because
large capital investment is needed.
– The actions of one firm can significantly
affect the sales of every other firm in the
industry.
– The prices of comparable products are
usually similar.
– As the trend toward globalization continues,
most experts believe that oligopolies will
become increasingly prevalent.
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Degree of Competition (cont)
• Monopoly
– An industry or market that has only one
producer (or else is so dominated by one
producer that other firms cannot compete
with it).
• The sole supplier enjoys complete control over
the prices of its products; its only constraint is a
decrease in consumer demand due to increased
prices.
– Natural monopolies: Industries in which
one firm can most efficiently supply all
needed goods or services; typically allowed
and regulated by legislated acts and
governmental agencies.
• Example: Electric company
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