2019_Fuhrmann_B_Introduction_to_Business_and_Economics

WU Bachelor Program in Business and Economics

• Study Material for the Entrance Exam

• Author: Bettina Fuhrmann

Introduction

• This material is for students interested in the English WU bachelor study program in Business and Economics.

• Purpose: To explain basic concepts of business and economics, their interrelationships, and to serve as preparation for the entrance exam.

• Source: Based on the book "Introduction to Business and Economics" by Bettina Fuhrmann, 2019 edition.

• Acknowledgment: Thanks to various colleagues for their feedback and support in developing this text.

Contents Overview

• 1. Introduction to business matters

• 2. Basic economic concepts

  • 2.1 Being part of the economy

  • 2.2 Scarcity of resources and opportunity cost

  • 2.3 Economics is the study of economic decisions

  • 2.4 Exchanging goods and services creates a circular flow and division of labor

  • 2.5 Different economic systems

  • 2.6 Supply and demand

  • 2.7 Competition in the market

• 3. Business Types

  • 3.1 Factors of production

  • 3.2 Economic sectors (primary, secondary, tertiary)

  • 3.3 Profit-oriented vs. not-for-profit businesses

  • 3.4 Size of businesses

  • 3.5 Local, national, and international operations

  • 3.6 Importance of stakeholders

• 4. Forms of Business Ownership and Finance

• 5. Marketing

• 6. Accounting

• 7. Personnel Management

• 8. Writing a Business Plan

• 9. Case Studies

Key Economic Concepts

2.1 Being Part of the Economy

• Entrepreneurial participation in the economy through the provision of goods and services.

• Examples of needs: Computers for personal and professional use.

2.2 Scarcity of Resources and Opportunity Cost

• Definition: The limited availability of resources leads to economic decision-making between alternatives.

• Opportunity Cost: The cost of forgoing the next best alternative when making a decision (e.g., the income foregone from employment if one starts a business).

2.3 Economics as the Study of Economic Decisions

• Includes microeconomics (individual decision-making) and macroeconomics (national economy analysis).

2.4 Exchanging Creates Circular Flow

• Relationships between businesses, consumers, and government create a flow of money, goods, and services. Money acts as a medium of exchange, unit of account, and store of value.

2.5 Different Economic Systems

• Description of market economies (free market) vs. planned economies (government-controlled)

2.6 Supply and Demand

• Supply: Quantity of a good/services available; Demand: Quantity consumers are willing to buy.

• Market equilibrium occurs when supply equals demand.

2.7 Competition in the Market

• Types of market structures: Monopoly, oligopoly, and perfect competition.

Business Types

3.1 Factors of Production

• Key resources:

  • Labor

  • Land

  • Capital

  • Entrepreneurship

3.2 Economic Sectors

• Primary: Raw materials extraction.

• Secondary: Manufacturing.

• Tertiary: Services.

3.3 Profit vs. Not-for-Profit

• Profit-oriented businesses aim for profits to sustain operations.

• Not-for-profit organizations focus on providing services rather than generating profit.

3.4 Business Sizes

• Types: Micro, small, medium, and large enterprises.

3.5 Market Scope

• Local vs. National vs. International services and operations of businesses.

3.6 Stakeholders

• Definition: Any individual or group affected by business operations.

Business Ownership and Finance

4.1 Sole Proprietorship

• Owned and managed by one individual; profits reported on personal taxes.

4.2 Partnership

• Business owned and operated by two or more individuals, sharing profits, risks, and responsibilities.

4.3 Corporations

• Legal entities separate from owners; limited liability for shareholders; can raise capital through issuing shares.

4.4 Forms and Summary of Ownership

• Overview of various ownership structures and their pros and cons.

Marketing

5.1 Product Definition

• A product fulfills the needs and wants of customers through goods and services.

5.2 Marketing Objectives

• Customer satisfaction, unique selling proposition, market share increase, profitability goals.

5.3 Orientation Approaches

• Product vs. Market orientation: The focus of production on products alone vs. a broader customer need analysis

5.4 Responsibility and Sustainability

• The growing need for responsible business practices to avoid overconsumption.

5.5 Market Research

• Essential tool for understanding consumer needs, market dynamics, and competition.

Accounting

6.1 Balance Sheet

• Financial statement showing a business’s assets, liabilities, and owner’s equity at a specific time.

6.2 Other Financial Statement Components

• Income Statement (profit/loss), Cash Flow Statement (cash movements).

6.3 Financial Analysis

• Understanding profitability, liquidity, and efficiency through key financial ratios.

Conclusion

• This document encompasses the foundational concepts of business and economics essential for understanding the market and preparing for the entrance examination.