Things to know: y Make sure to label the graphs completely with the capital D or S at the end of the line. y Market Equlibrium: Occurs when both producers and consumer are willing to sell and buy a service at a specific price (when the two lines intersect) y Demand Schedule: A chart that shows the quantity demanded and the price provided.
y y y y y y y y y y y y y y
Supply schedule: A chart that demonstrates of Quantity supply correlates to price. Revenue Expenses = Profit (or loss) ~ Basic equation. A business is considered solvent when debts are paid and financial obligations are met. A non-profit organization operates strictly to help a community like a charity while a not-for-profit organization uses any surplus funds to improve service to its members. Decision making process: Determine the decision, identify the alternatives, evaluate the pros and cons of each alternative, make a decision and take action, evaluate the decision. Command Economy: Decisions on what, how, and to whom resources will be made/sold determined by the government. Market Economy: Decisions on what, how, and to whom resources will be made/sold determined by business people. Interdependent: Society and business rely on the goods and services provided by the thousands of different businesses to satisfy consumer needs and wants. Monopoly A single seller that controls the supply of a particular product within a market. Oligopoly A few sellers that control the supply of a particular product within a market. Perfect Competition Many sellers compete in supplying a particular product within a market. Disequilibrium A price where the buyers intentions are not consistent with those of the seller. Substitute in Consumption A product that can be used as a substitute for another product. Complement in Consumption A product used in conjunction with another product. Business cycle Goes from Trough (lowest level, many people unemployed, business not making profit), to Recovery (demand for goods and services increases, people start to spend more money), to Peak (economy is prosperous, prices of goods go up) to Recession (peak leads to overproduction, then layoffs, then decline in consumer spending)
Types of Businesses
Different forms of ownership: y Sole Proprietorship: when a business is run, owned and controlled by one person. When one person controls the company they have Unlimited Liability. Some advantages are that you can run the business the way you see it, easy to maintain, all profits go towards owner. Disadvantages are that funding has to be provided by the owned, the owner is inseparable from the business which makes them liable for any debts. y Partnership: A business operated by two or more people who share responsibilities, profit or losses of the business. Limited partners don t play an active role, only responsible for paying back amount invested if business fails. Advantages are it allows several people to share resources/experience, and increases productivity. Disadvantages are partners are responsible for each other debts, and may have different goals or ideas on how to do things. y Corporations: A business that is permitted special legal status that includes the business being entirely separate from the owners, owners are known as shareholders, public can become shareholders, has a board of directors. Some advantages are shareholders are not liable for debts, corporations offer tax advantages, shareholders only liable for their investments. Disadvantages are the corporation pays taxes on its income, expensive and time consuming to start up, amount of stocks determines influence on the company. y Co-operatives: A business owned by the workers or by members who buy the products/services offered. The motive for this type of business is service, not profit. An example of a retail co-operative is the Independent Druggists Association. y Franchise: In a franchise operation, the Franchiser licenses the rights to its name, operating procedure, etc. to another business, the franchisee. A franchisee basically buys a licence to operate a ready-made business. Some
advantages are bargaining power with suppliers and a high success rate. Some disadvantages are big businesses don t always make a profit, owning a franchise makes it difficult to get out of. Different types of businesses: y Retail: A business that buys goods and resells them to consumers. y Service: A business that tries to satisfy the needs and wants of consumers by providing a service such as cutting hair. y Manufacturing: produces a product and provides it to retailers, for example General Motors. y Crown: A business owned and operated by the government. People would choose to start a business because they want to be responsible for decisions and become the boss. If their business is successful, they will likely make more money than working for another person s business.
International Business
The benefits of international business are: Access to greater markets (customers in other parts of the world have differents needs and wants), cheaper labour, increased quality of goods, increased quantity, and access to more resources (three types of economic resources: natural, human, and capital. The Five Ps of International Business are Product, Price, Proximity, Preference, and Promotion. The hidden or social costs often associated with international trade include offshore outsourcing, human rights/labour abuses, and environmental degradation. Barriers to International Business Tariffs are a form of tax on certain types of imports, increases prices. Canadian products do not have tariffs, sold at lower price in order to protect domestic industries.
Costs of Importing and Exporting Flow of Goods and Services Balance of Trade countries try to import the same value of products that they export. Five ways to offset the risk of importing are measuring consumer interest, using care when selecting foreign supplies, learning about foreign partners culture, carefully scrutinizing the purchase agreement and then sign it, and checking goods for quantity and quality upon arrival. World Trade Organization (WTO) y The General Agreement on Tariffs and Trade (GATT) was signed by 23 nations. Grew to 115 member s before replaced by WTO in 1995.Is the principal international organization that deals with rules of trade. North American Free Trade Agreement (NAFTA) ~ Asia-Pacific Economic Corporation (APEC) ~European Union
Human Resources
Importance of Productivity; the more employees produce, the more profit the business makes. Importance of Skilled labour; produce a better product/service in less time. Importance of a positive attitude; Determining the need for a new employee; create staffing plan to avoid unnecessary hiring, forecast turnover rate which is the rate at which people
leave/retire. Job Training, tours the workplace, meets co-workers, learns how to do da job. Keeping good employees. Departures, dismissals, and retirements. Rights and responsibilities Employees have the right to be informed about known foreseeable hazards, help identify/resolve job related problems in safety and health, and refuse dangerous work if they have reasonable cause to believe that a situation constitutes a danger. Standards for employees includes minimum work age, hours of work, minimum wages, overtime, holiday, and vacation pay, paid public holidays, parental leave, individual termination of employment, recovery of unpaid wages. Rights of the employer are that they get to decide what their employment needs are, equire that employees have qualification/experience, hire, promote and assign qualifies people for positions, establish standards for evaluations, and set employment terms and conditions.
Management
The key role of management is to achieve organizational goals by deciding how to utilize human, financial, and material resource. The four main functions of management are planning (setting goals), organizing (arranging people and tasks to carry out objectives), leading(motivating, communicating and encouraging participation), and controlling (employee discipline, budgeting). Leadership styles: y Autocratic Leadership: Make all decisions and do not allow for employee participation. Used when quick decisions are necessary like for layoffs, closures. y Laissez-faire Leadership: Leaves employees alone to do their work. Gives employees independence. y Democratic Leadership: Employees encouraged to have a say in decision making, contribute their ideas. Most effective style to keep employees content and increase productivity. Managers are role models, respect and dignity spread through the organization if demonstrated by managers. Businesses need to be aware that they impact the environment, being eco-friendly creates a good public image. Ethical decisions that affect communities are made daily, contributing to charities improves the community.
Marketing
Can be divided into two major concepts: The Product concept and The Market concept. The four Ps of Marketing 1. Product Quality, design, features, and benefits. 2. Price Marketers need to know how much sales will go up or down when the price goes up or down. 3. Place Channels of Distribution the paths of ownership that goods follow as they pass from the producer to the consumer. Direct channels are when the business makes the product and sells directly to consumer. Indirect channels are when the business sells to an intermediary such as a retailer that then sells to consumer. 4. Promotion- Any attempt to sell a product, sales promotion encourages consumers to buy a product by using coupons, contests, premiums, samples, and special events. Two Cs of Marketing Competitive Market: other businesses that compete for consumer dollars. Direct competition is other sellers of similar products. Indirect competition is other spending needs that may draw the consumer away from the product. Consumer Market: Characteristics of people who buy the products. Demographics include age, gender, family life cycle, income, and ethnicity. Lifestyle include values, beliefs, and motivations.
Advertisers use eight categories to compare media and select the right one for their advertising: 1. Reach: The number of people who are exposed to a message 2. Frequency: the number of times the audience will view the audience 3. Selectivity: the ability of the medium to focus on a target audience 4. Durability: how long the advertisement will last 5. Lead-time: how fast the ad can be ready to run 6. Mechanical requirements: how complex it is to prepare the ads for the medium 7. Clutter: the competition for the audience s attention 8. Costs: the accumulated costs of running the advertisements. Marketing research tools can be primary data which is current information that has been collect from a firsthand source for a specific purpose (surveys, observations, studies). Secondary data is information that others have collected.
Accounting
The process of recording, analyzing, and interpreting the financial or economic activities of a business. Personal Equity or Net Worth: A person s assets after all liabilities are deducted. Owners Equity: The investment in the business or financial portion of the business that belongs to the owners. Assets Liabilities = Owner s Equity Income Statement: A financial statement that shows a business s profit (or loss) over a stated period of time. For a service business: Revenue Expenses = Net Income For a retail business: Revenue Cost of Goods sold = Gross Profit Gross Profit Expenses = Net Income Balance Sheet: A financial statement that shows the financial position of a business on a single, specific date. Formulas: Working Capital = Current Assets Current Liabilities Current Ratio = Current Assets / Total Current Liabilities Rate of Return on Net Sales = (Net Profit / Total Revenue) x 100% (Indicates % of sales kept as profit) Gross Profit Percentage = (Gross Profit / Total Revenue) x 100% (shows how much profit pays for expenses) Terms: Capital Gain: A tax on a substantial gain by selling corporation stocks. Gross Profit: Money left over after deducting the cost of goods from the revenue. Net Profit: Once expenses are deducted from the gross profit, the money left over. Matching Principle: Costs of doing business, matched with generated revenue. Margin: The difference between the cost of the product and the selling price.