Chapter 1 Flashcards
What is business?
Business is the (1) organized effort of individuals to produce and sell, for a (2) profit, the (3)goods and services that satisfy society’s (3) needs, wants and desires.
What is business? Part 2
Organization => collective effort + common/collective goals + healthy working environment => special role of HRM (selection, onboarding, training), management and Leadership;
Profit (or a lack thereof) – the main (not the only!) criterion of (un)success => one of the #1 KEY indicators of sustainability!!!
Goods and services – types of business products => the backbone of any traditional economy;
Customer/consumer-oriented business (the “new marketing concept”)=> customization of your goods/services + making sure that all stakeholders are happy=> #2 KEY indicators of sustainability!!!
Functional Areas Of Business?
Functional Areas Of Business:
Marketing: The process of which a company tries to identify, inform, and satisfy the customers needs and desires efficiently and profitably, marketing is everything a company does to satisfy a customer needs.
Example: Market Research: Designing products to match what a consumer is looking for and go over things such as price and quality, they also decide the best method of delivering products and the best means of promoting them to attract and keep customers.
Accounting
Production/Operations
Finance
Human Resource Management
Four Ps of marketing mix?
Place
Price
Product
Promotion
This encompasses the factor of what the consumer wants, how the product or service meets these wants or fails to meets those wants, how the product or service is perceived in the world, how it stands out from the competition, and how the company that produces it interacts with its customers
Human resource/ Management?
It is a cycle:
They cover things such as careers, ability, hiring, management; management covers things such as recruitment and skill training
Human resources is essentially a filter looking at people’s work life and what they excel at and seeing if those people are the best people for the goal of their business
They cover all areas of hiring someone and fitting into the workforce
What is Financial Management?
Functions of Financial Management:
Businesses operate in the realm of money and every company must have some way of managing its finances understanding its cashflow and develop strategies on how to make the best use of monetary resources
Finance involves; planning for, obtaining, and managing a companies funds
Business owners need timely, accurate, and relevant financial information which is provided by accountants.
Accountants summarize and advise managers on financial matters.
Finance encompasses planning, obtaining, and managing a company’s funds, crucial for effective monetary resource utilization. Accountants play a vital role in providing timely, accurate, and relevant financial information, summarizing and advising managers on financial matters.
2 fields of accounting?
2 fields of accounting:
Financial Accounting: They prepare financial statements to help users both inside and outside the organization
Managerial Accounting: Originates in the need to control cost.
Production and Operations Functional Area?
Production and Operations Functional Area:
Production is needed for anything you are planning on selling
For services, this is usually one person providing oversight and ensuring consistency in the work.
For physical products, this is a quality assurance type deal.
Production and Operations Functional Area? Part 2
The operations department takes care of efficiencies and processes, ensure things work and that staff are properly trained.
Operation is what most people are initially good at, just kind of overlooking things and ensuring the team is functioning and this is what causes people to most likely start a business, as the person that starts the business is also most likely for the first little bit, the operations manager.
This can also be the failure of most businesses as the operator or the as the Project manager is more comfortable working than showing. This can lead to a lot of confusion and inevitably a failure of a company.
The main strategic goal of a successful business is managing the resources you have.
The primary strategic goal of a successful business is efficient resource management, which includes overseeing operations, training staff, and ensuring the team functions effectively, as the failure to do so can lead to confusion and business failure.
The company resources that are crucial to the business are the following ones?
The company resources that are crucial to the business are the following ones:
Human resources are one of the most crucial aspects of resources. They are the building blocks of any company.
Financial resources are also as important as these are the resources used for peoples salaries, company activities, and buying raw materials. The best outcome is using not necessarily as little but your financial resources efficiently to reach the target goals you have desired at all costs. You want to avoid getting too far in your financial resources as this will most likely lead to company failure.
Material resources are the tangible objects used in a company to help them reach their objectives. These can be touched or seen, they are dynamic in nature, and change with time (new tech over old tech) Some examples are like computers, furniture, real estate, things like that.
Informational and or intellectual resources are the intangible resources in the company that are used to help them achieve their goals. Theses cannot be touched or seen, This can be recipes for a restaurant. Like some format of solution for a tech company, it is impossible to put a direct value to intellectual resource. Is almost like an intellectual property. The value, I believe, comes from how the consumers absorb it. Examples: Software, company databases, brands, etc.
These are good building blocks for business as they help you plan and work towards a goal and hopefully see problems before they start.
Profit?
Profit is realized when the sales revenue surpasses the expenses tax and everything else that goes into conducting an activity.
Profit is different from sales as profit is what fuels accompany. You can be making a lot of sales but not be making profit as you could be selling to low to be sustainable.
If all the sales in a month, half a year or even a full year surpassed the expenses in the same timeframe then you have a profit.
The main goal is to have the highest margin profit as possible, the business owner, when you have a high profit margin, so higher profit than you’re spending, that’s where you get the side. If you cash it out and that’s what you get paid, or if you reinvest into your company to get even further growth.
Negative Profit: (A loss) - a firm’s expenses are greater than its sales revenue; 2 Risks
Internal risk: Personal bankruptcy (risks of ownership)
External risk: Employees, suppliers, and lenders not being
paid
Business Environment?
Attention: a business must operate within the parameters of a nation’s system => know the environment you are operating in!
Two categories of external components influencing a business environment:
Micro Environment - the business’s immediate external environment that influences its performance (e.g. customers, competitors, media, suppliers, intermediaries, partners, public.);
Macro Environment - remote environmental factors that influence an organization.
What is PESTEL? (Macro environmental factors)
Political factors comprise government policy, political stability, corruption, tax policy, and trade restrictions.
Economical factors comprise economic growth, exchange rate, interest rate, inflation rates, disposable income, and unemployment.
Social factors comprise population growth rate, age distribution, career attitudes, safety emphasis, health consciousness, lifestyle attitudes, and cultural barriers.
Technological factors comprise Technology incentives, Levels of innovation, automation, R&D activities, technological awareness.
Environmental factors comprise weather, climate, environmental policies, climate change, pressure from NGOs.
Legal factors comprise discrimination laws, Antitrust laws, employment laws, consumer protection laws, copyright and patent laws, health and safety laws.
- Political factors: Government policies and stability
- Economic factors: Economic growth and indicators
- Social factors: Population demographics and attitudes
- Technological factors: Technology incentives and innovation
- Environmental factors: Weather, climate, and regulations
- Legal factors: Antitrust, consumer, and employment laws
Two sections of economics?
Microeconomics - all about how individual actors make decisions;
Macroeconomics - focuses on the performance of economies – changes in economic output, inflation, interest and foreign exchange rates, and the balance of payments.
Factors of production
Factor #1 - Land (natural resources)
Natural resources - used in the production of heavy and light industry goods:
Hydrocarbons (oil + natural gas/LNG plus green energy)
Forests
Precious/rare earth minerals (Lithium, Colton, Platinum, Gold and Silver)
Land
Water (Clean drinking + For industrial purposes)
Factor #2 - Labor
Labor - The effort expended by an individual to bring a product or service to the market.
Things to consider:
Average population age
Average income
Creativity
Customs and traditions
The value of a workforce depends on the workers education, skill, and level of dedication.
Factor #3 - Capital
Capital - machines used in the operation of organizations + Financial capital.
The six types of capitals are financial Capital, Intellectual Capital, Human Capital, Manufacturing Capital, social and relationship capital, and Natural capital.
The income that comes from capital is known as interest
Factor #4 - Entrepreneurship
Entrepreneurship - The resources that organized land, labor and capital; The willingness to take risks + The knowledge + The ability to use the other factors of production efficiently.
This is the secret ingredient to use all the other factors to be successful
Each has an impact on the others but together it is essential
