chapter one what is business? © 2007 the mcgraw-hill companies, inc., all rights reserved....
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TRANSCRIPT
Chapter One
What is Business?
© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
McGraw-Hill/IrwinIntroduction to Business
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What is Business?
• Business - goal-directed behavior aimed at getting and
using productive resources to buy, make, trade, and sell goods and services that can be sold at a profit
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Key Business Terms
• Business Model - a company’s plan of action to use
resources to create a product that will give it a competitive advantage
• Competitive advantage - a company’s ability to offer customers a
product that has more value to them than similar products offered by other companies
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Key Business Terms
• Sales revenue - the amount of money or income that a
company generates from the sale of the product
• Profit - the total amount of money left over after
operating costs have been deducted from sales revenues
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Key Business Terms
• Capital - profit that is kept in a company and
invested in its business
• Wealth - the sum total of the resources, assets,
riches, and material possessions owned by people and groups in society
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Profit and Profitability
• Profitability - a measurement of how well a company is
making use of its resources relative to its competitors
• Profit - the difference between sales revenues and
operating costs
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Business as Commerce
• Trade - the exchange of products through the use
of money
• Barter - the exchange of one product for another
product
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Transaction Costs Related to Business
• Transaction Costs - the costs of bargaining, negotiating,
monitoring, and regulating exchanges between people in business
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Demand, Supply, and the Market Price
• Diminishing marginal utility - the principle that the value people receive
from an additional unit of a product declines as they obtain more of a product
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Demand, Supply, and the Market Price
• Law of demand - the principle that states as the price of a
product rises, consumers will buy less of it, and as the price of it falls, consumers will buy more of it
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Demand, Supply, and the Market Price
• Law of supply - the principle that states that as the price of
a product rises, producers will supply more of it, and that as the price of it falls, producers will supply less of it
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The Business Model and Profitability
• Industry - a group of companies that makes similar
products and competes for the same customers
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The Invisible Hand of the Market
• Invisible hand - the principle that the pursuit of self-interest
in the marketplace naturally leads to the improved well-being of society in general
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The Invisible Hand of the Market
• Monopoly - a situation in which one company controls
the supply of a product and can charge an artificially high price for it
• Human capital - a person’s stock of knowledge, skills,
experience, judgment, personality, and abilities
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Business Organizations
• Organizational structure - the framework of task and authority
relationships that coordinates people so they work towards a common goal
• Functional activities - the task-specific operations needed to
convert resources into finished goods and services sold to customers