Business Chapter 1: Taking Risks & Making Profits

What Business Is

An activity that seeks to provide goods and services while operating at a profit

Goods

Physical product

Services (2)

• Non-physical products

• Actions or programs one pays for

Entrepreneur

Person who invests and risks their time & money into a business, hoping it does well.

Revenue

Total amount of money the business makes in any time period

Profit

The money a company earns & gets to keep after paying off all necessities

Loss

When a business has more costs than revenue: loses money

Risk

The chance an entrepreneur takes if the business fails.

Why entrepreneurs are important to the economy

Their innovation can improve the quality of life for consumers

Five Factors of Production

1. Land

2. Labor

3. Capital

4. Entrepreneurship

5. Knowledge

Land def & example (2)

• Natural resources

• Water

Labor def and examples (2)

• Physical work that goes into making products

• Workers, artist creation of a painting

Capital def & examples (2)

• Tools used to create products

• Machines, tools, buildings, etc

Entrepreneurship def & examples (2)

• People who take risk to use resources to start a new business

• Elon Musk, Jeff Bezos, etc

Knowledge def & examples (2)

• Used to determine which goods & services correspond to needs & desires

• Surveys, public opinion, etc (not really sure tbh)

Standard of Living

Amount of goods/services people can afford to buy with the money they have

Quality of Life def & examples (2)

• General wellbeing of society.

• “Needs and desires met?” etc

Difference between Standard of Living and Quality of Life (2)

• Standard = how much $ people have

• Quality = Amount of joy society holds

Stakeholders def & examples (2)

• Anyone who can gain or lose $ based on decisions a business makes

• Employees, stockholders, suppliers, dealers, bankers, etc)

Outsourcing

Working with outsider companies to do some or all functions of a firm

Nonprofit Organization def & examples (2)

• Uses their extra revenue to fund more services that the business can provide

• Charities, public schools, social causes

Advantages of Outsourcing (2)

• Profitable since people are paid less abroad

• More efficient

Potential Drawbacks of Outsourcing

Jobs are lost due to overseas competitors

The Business Environment

Surrounding factors that either help or hinder growth of a business

Economic & Legal Environment def & examples (2)

• The laws that make it easier/harder for a business to grow

• Contract laws, tradable currency, minimum taxes & regulations

Technological Environment def & examples (2)

• Everything that makes the business efficient to produce for customers

• Bar codes, databases, the internet

Productivity def & examples (2)

• Amount of output you generate based on how much you put in

• # of hours you worked

E-Commerce

Buying & selling goods online

Database

Electronic storage file for info

Identity Theft

Stealing someone’s personal info & using it for legal purposes

How tech changed business operations

Led to more efficiency & innovation

Competitive Environment def & examples (2)

• Companies compete with e/o for most profit by working on best quality or speed

• Great customer service, Temu=speed

Empowerment def & examples (2)

• Giving employees the tools they need to do their job well & quickly

• Frontline workers can make decisions to help their customers

Social Environment def + examples (2)

• To meet consumer demand & make sure distribution in on right path

• Diversity, family changes, demographic changes

Why is customer empowerment increasing?

To meet customer expectations to survive competitive environment

Demography def & examples (2)

• Stat. study of human popul. based on size, income & physical charact.

• Age, race, gender & income

How do demographic changes affect businesses?

Changes what consumers are demanding, supplies & production

Global Environment (2)

• Today, our trade & distributions are international

• Strives to improve standard of living in other countries

Climate Change

Movement of temp of Earth going up or down over time

Greening

Usually more eco friendly tools or practices

How are businesses responding to environmental concerns?

Using greening as a way to produce products that cause less harm to the environment

Evolution of US Business

Has become so productive that they need fewer workers than ever before to produce goods

Agricultural Era

Provided food for the US & much of the world through large-scale farming

Manufacturing Era

Began creating new tools & tech which led to elimination of many jobs.

Service Era

Centered around service firms that provide services in law, health, telecommunications, entertainment & finance