Chapter 1 (page 4-19)
Taking Risks and making Profits within the Dynamic Business Environment
Business: Any activity that seeks to provide goods and services to others while operating at a profit. Profit is the amount of money a business earns above and beyond what it spends for salaries and other expenses needed to run the business operation. Goods are tangible products such as computers, food, clothing, cards appliances and services include intangible products which cannot be held in your hand such as education, health care, insurance, recreation, travel and tourism. Entrepreneur is a person who risks time and money to start and manage a business. (Sam Walton started Wal Mart, Bill Gates started Microsoft) Revenue is the total amount of money a business takes in during a given period by selling goods and services. Loss occurs when business expenses are more than its revenues. Risk is the chance an entrepreneur takes of losing time and money on business that may not prove profitable. Higher the amount of risk, higher is the profit. Standard of Living: The amount of goods and services people can buy with the money they have. Business provides employment, employees pay tax and the tax is used by the government to build the infrastructure. Quality of Life: The general well being of a society in terms of political freedom, a clean natural environment, education, health care, safety, free time and everything else that leads to satisfaction and joy that goods and services provide. High quality of life is a combined effort of business, non- profit organizations and government agencies. Stakeholders: All the people who stand to gain or lose by the policies and activities of a business. Stakeholders include customers, employees, stockholders, suppliers, dealers, bankers, and people in the surrounding community, environmentalists and government leaders. Non- profit organizations: An organization whose goals do not include making a personal profit for its owners or organizers (Schools, college, hospitals, charities, mosques, police force, RAB). Such organizations use their financial gains for social needs. Despite the efforts to satisfy all their stakeholders, business cannot do everything that is needed to make a community all it can be. Non-profit organization also made major contribution to the welfare of the society. Outsourcing: means contracting with other companies to do some or all of the function of the firm, like its production or accounting tasks. Social Entrepreneurs: are people who use business principles to start and manage organizations that are not for profit and help countries with their social issues. Example: night schools, sanitation programs, pure drinking water. Mohammad Yunus won the Nobel Prize for starting the Grameen bank, a micro lending organization that provides small loans to entrepreneurs too poor to qualify for traditional loans. Yunus has started 30 of what he calls social businesses that do not have profit as their goal.
Entrepreneurship versus working for others
Own the business
Freedom to succeed as well as freedom to fail
Do not receive any benefits such as paid vacation time, day care, a company car or health insurance. Working for others
Somebody else assumes entrepreneurial risk
Provides with benefits such as paid vacation and health insurance. The Importance of Entrepreneurs to the creation of wealth
Factors of production: The resources used to create wealth: land, labor, capital, entrepreneurship and knowledge. 1. Land: Land and other natural resources are used to make homes, cars and other products. 2. Workers: people have always been an important resource in producing goods and services, but many people are now being replaced by technology. 3. Capital: Not money. Money is used to buy factors of production but is not always considered as a factor by itself. Capital includes machinery, tools, buildings and other means of manufacturing. 4. Entrepreneurship:...
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