INTRODUCTION TO INTRODUCTION TO BUSINESSBUSINESS

FOUNDATIONS OF BUSINESS FOUNDATIONS OF BUSINESS AND ECONOMICSAND ECONOMICS

CHAPTER # 1CHAPTER # 1Part 2Part 2

Stockholder Vs Stakeholder Stockholder Vs Stakeholder

StockholderStockholder

Stockholder is an Stockholder is an individual or company individual or company (including a (including a corporation) that legally corporation) that legally owns one or more owns one or more shares of stock in a joint shares of stock in a joint stock company. The stock company. The shareholders are the shareholders are the owners of a corporation.owners of a corporation.

StakeholderStakeholder

Stakeholders are those Stakeholders are those people who stand to people who stand to gain or lose by the gain or lose by the policies and activities of policies and activities of an organization.an organization.

Example: Example: Employees, Employees, Customers, Dealer, Customers, Dealer, Suppliers, Bankers, Suppliers, Bankers, Government leadersGovernment leaders

Organizational StakeholdersOrganizational Stakeholders

3–3

Economic SystemEconomic System

The accepted process by which labor, capital and The accepted process by which labor, capital and natural resources are organized to produce and natural resources are organized to produce and distribute goods and services in a society.distribute goods and services in a society.

CapitalismAn economic system in which all or most of the sources of production and distribution are privately owned and operated for profit. The founder of this system is Adam Smith.

Example: USA, Japan, European Union, Canada

SocialismAn economic system based on the premise that businesses should be owned by the state so that profits can be evenly distributed among the people. The founder of this system is Karl Marx.

Example: Soviet Union, China

Economic SystemEconomic System

Economic SystemEconomic System

There are three basic types of Economies:There are three basic types of Economies:1.1. Planned EconomiesPlanned Economies2.2. Free Market EconomiesFree Market Economies3.3. Mixed EconomiesMixed Economies

Economic SystemEconomic System1. Planned Economics1. Planned Economics Economic system in which the government largely Economic system in which the government largely

decides what goods and services will be produced, decides what goods and services will be produced, who will get then and how that economy will grow.who will get then and how that economy will grow.

The government owns the productive resources, The government owns the productive resources, financial enterprises, retail stores and banks.financial enterprises, retail stores and banks.

Example: Soviet Union, Cuba, North KoreaExample: Soviet Union, Cuba, North Korea

Economic SystemEconomic System

2. Free Market Economics2. Free Market EconomicsEconomic system in which decision about what to Economic system in which decision about what to produce and in what quantities are decided by the produce and in what quantities are decided by the market. That is by buyers and sellers negotiating prices market. That is by buyers and sellers negotiating prices for goods and services.for goods and services.

Example: USAExample: USA

Economic SystemEconomic System3. Mixed Economics3. Mixed Economics

Economic system in which some allocation of resources Economic system in which some allocation of resources are made by the market and some are made by the are made by the market and some are made by the government.government.

This contains elements of both market and planned This contains elements of both market and planned economic system. There are private enterprises and also economic system. There are private enterprises and also is the government intervention. Both the government and is the government intervention. Both the government and the business enterprises produce and distribute goods the business enterprises produce and distribute goods and services.and services.

Example: Bangladesh, UK, India, etc.Example: Bangladesh, UK, India, etc.

Some Advantages and Some Advantages and Disadvantages Disadvantages

Type of Economy Advantages Disadvantages

The Planned Economy 1. Necessities are produces 1. Large Bureaucracy

2. Essential goods/ services 2. Mistakes in amounts of

eg. Education will be provided goods/ services produced.

for all the community 3. Little consumer choice

3. More equal distribution of 4. No profit motive

income and wealth 5. Little variety of goods/services

6. Loss of individual freedom

Some Advantages and Some Advantages and Disadvantages Disadvantages

Type of Economy Advantages Disadvantages

The Free Economy 1. Consumer choice exists 1. Too many luxuries produced 2. No bureaucracy for the rich/ wealthy.

3. Profit motive exists 2. Essential goods/ services, 4. Many small firms producing eg. education may not be a variety of goods produced

5. Less government 3. Ignores social costs interference 4. Monopolies may exist

5. Unemployment in declining industries

The Mixed Economy Combines the advantages of Combines the disadvantages of

other systems other systems

Thank you…Thank you…