INTRODUCTION TO BUSINESS INTRODUCTION TO BUSINESS

Chapter: 1

Foundations of Business and Economics

Part II

Shafayet Ullah

SECTIONS: A7

Stockholder Vs Stakeholder

StockholderStockholder is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. The shareholders are the owners of a corporation.

StakeholderStakeholders are those people who stand to gain or lose by the policies and activities of an organization.Example: Employees, Customers, Dealer, Suppliers, Bankers, Government leaders

DefinitionsDefinitions

3–3

Organizational StakeholdersOrganizational Stakeholders

Economic SystemEconomic System

The accepted process by which labor, capital and natural resources are organized to produce and distribute goods and services in a society.

CapitalismAn economic system in which all or most of the sources of production and distribution are privately owned and operated for profit. The founder of this system is Adam Smith.Example: USA, Europe, Japan, Canada.

SocialismAn economic system based on the premise that businesses should be owned by the state so that profits can be evenly distributed among the people. The founder of this system is Karl Marx.Example: Russia (former), China.

Economic SystemEconomic System

Economic SystemEconomic System

There are three basic types of Economies:1. Planned Economies2. Free Market Economies3. Mixed Economies

Economic SystemEconomic System1. Planned Economics Economic system in which the

government largely decides what goods and services will be produced, who will get then and how that economy will grow.

The government owns the productive resources, financial enterprises, retail stores and banks.Example: Soviet Union, Cuba, North Korea

Economic SystemEconomic System

2. Free Market EconomicsEconomic system in which decision about what to produce and in what quantities are decided by the market. That is by buyers and sellers negotiating prices for goods and services.Example: USA

Economic SystemEconomic System3. Mixed Economics

Economic system in which some allocation of resources are made by the market and some are made by the government.

This contains elements of both market and planned economic system. There are private enterprises and also is the government intervention. Both the government and the business enterprises produce and distribute goods and services.Example: Bangladesh, UK, India, etc.

Some Advantages and Some Advantages and Disadvantages Disadvantages

Type of Economy Advantages Disadvantages

The Planned Economy 1. Necessities are produces 1. Large Bureaucracy

2. Essential goods/ services 2. Mistakes in amounts of

eg. Education will be provided goods/ services produced.

for all the community 3. Little consumer choice

3. More equal distribution of 4. No profit motive

income and wealth 5. Little variety of goods/services

6. Loss of individual freedom

Some Advantages and Some Advantages and Disadvantages Disadvantages

Type of Economy Advantages Disadvantages

The Free Economy 1. Consumer choice exists 1. Too many luxuries produced 2. No bureaucracy for the rich/ wealthy.

3. Profit motive exists 2. Essential goods/ services, 4. Many small firms producing eg. education may not be a variety of goods produced

5. Less government 3. Ignores social costs interference 4. Monopolies may exist

5. Unemployment in declining industries

The Mixed Economy Combines the advantages of Combines the disadvantages of

other systems other systems