BUSI One - Chapter One Vocabulary

Exploring the Business Environment and Economics

Entrepreneurs like Tristan Walker (Walker & Company) often start with an idea and build successful businesses.
Walker's journey:
- Grew up in Queens, in a low-income environment.
- Excelled in sports, earned an economics degree and an MBA from Stanford.
- Worked in business development for Foursquare, then joined an on-residence program.
- Founded his company, which was later acquired by Procter & Gamble.
Many successful businesses started small (e.g., Whole Foods in Austin, TX, started in a garage and was later acquired by Amazon).

Definition of Business: An activity that seeks to provide goods or services to others while operating at a profit.
- Businesses sell goods (e.g., phones, tires, fuel) and services (e.g., cleaning, accounting, legal).
- The primary goal is to make a profit and sustain the business.

Revenue: The total amount of money a business takes in during a given period by selling goods and services, it is money coming in.
Profit: The amount of money a business earns above and beyond what it spends on salaries and other expenses.
- Formula: Profit = Revenue - Expenses
Loss: Occurs when a business's expenses are more than its revenues, which is unsustainable in the long term.

Entrepreneurs take risks to earn money, employ others, pay taxes, and contribute to their communities.
They improve the standard of living by providing goods and services.
Example: The creator of Scrub Daddy, who turned a discarded byproduct into a successful product after appearing on Shark Tank.
The risks taken should be proportional to the potential profit.

Definition: Anyone who gains or loses from the business's policies.
Examples of stakeholders for Target:
- Consumers, employees, stockholders, suppliers, dealers, retailers, bankers, community members, media, environmentalists, competitors, unions, elected government leaders.
Businesses must recognize and respond to the needs of their stakeholders, balancing competing demands.
Example: Paying employees more may reduce profits for stockholders.

Definition: An organization whose goals do not include making a personal profit for its owners or organizers; often strive for social gains.
Nonprofits are not subject to income tax.
Example: Goodwill is a nonprofit organization.

Economic and Legal Environment: freedom of ownership, contract laws, elimination of corruption, taxable currency, etc.
Technological Environment.
Competitive Environment: customer service, stakeholder recognition, employee service, concern for the environment.
Social Environment.
Global Business Environment.

Starting a business can be more difficult in some countries (e.g., India, with its time-consuming bureaucratic processes).
In Texas, no permit is needed to start a business, but registering the business name is required for tax purposes.

Demography impacts buying patterns as populations and tastes change.
Social Population example: Shift to new opportunities or the decline of other opportunities, according to the population shift.
The influence of immigrants introduces new items and spices.

Age distribution: largest group is 25-54, but the under-24 age group is also significant.
Race.
Diversity includes age, disability, genetic information, national origin, pregnancy, race, religion, and sex.
Age discrimination laws protect individuals 40 or older.

Definition of Economics: The study of how society employs resources to produce goods and services for consumption.
Macroeconomics: Concentrates on the operation of a nation's economy as a whole (e.g., the entire U.S. economy).
Microeconomics: Concentrates on the behavior of people and organizations in markets for particular products and services (e.g., a specific region like Austin, TX).

Command Economies:
- Socialism: Aims for social equality through programs like free education and healthcare. Financed by heavily taxing individuals and business owners those who make more money.
  - Brain Drain: occurs when high taxes cause skilled workers and business owners to leave for capitalistic countries.
  - Examples: Denmark (successful with a clean transportation system), Greece (debt crisis due to overspending).
- Communism: The government makes almost all economic decisions and controls major factors of production.
  - Restricts citizens' freedoms (e.g., religion, job changes, relocation).
  - Lacks incentives for business people to work hard.
  - Leads to the emergence of black markets to fill gaps in the controlled economy.
Free Market Economies
- Capitalism: Businesses operate for profit, and business people make decisions.
  - The U.S. is primarily capitalistic, but the government sets minimum wages and farm prices.

Adam Smith, the father of economics, proposed the Invisible Hand Theory:
- Freedom to own land or property and the right to keep business profits are essential.
- People work hard if they believe they will be rewarded.
- Self-directed gain leads to social and economic benefits for the whole company.
Basic Rights in Free Markets:
1. The right to own property.
2. The right to own a business and keep the profits.
3. Competition.
4. Freedom of choice.

Benefits: Encourages risk-taking and competition.
Faults: Can lead to income inequality and may not always benefit the elderly, disabled, or sick.
Greed can undermine the system if businesses take advantage of consumers.

Gross Domestic Product (GDP): The total value of final goods and services produced in the country in a given year.
- A strong GDP indicates a strong economy.
Unemployment Rate: The percentage of civilians at least 16 years of age who are unemployed and trying to find a job within the prior four weeks.
- Four to 5% is considered full employment.
- The pandemic significantly increased unemployment.
Inflation: A general rise in the price of goods or services over time, caused by too many dollars chasing too few goods.
- Rule of 72: If prices rise by 6% a year, they double in 12 years.
- Disinflation, deflation.

The Federal Reserve Bank manages monetary policy, controlling the money supply and interest rates.
The Fed loosens credit to help the economy and tightens credit to slow the economy or fight inflation.
Congress manages spending, but national debt remains high.