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1
Introduction to BusinessIntroduction to Business
Lecturer:
Asep Hendrasyah, M.Pd,
Faculty of Business and ManagementDepartment of Management
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What Is Business?What Is Business?
An organization that provides goods and services to earn profits(Ebert & Griffin, 2005)A business is an enterprise that provides products or services desired by customers.(Jeff Madura, 2004)
Profits:The positive difference between revenues and expenses
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Economic Systems Around the WorldEconomic Systems Around the World
Economic SystemEconomic SystemA nation’s system for allocating its resources among its citizens
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Physical Resources
Labor Capital
Entrepreneurs
Factors of ProductionFactors of Production
InformationResources
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Factors of ProductionFactors of ProductionNatural Resources
Materials supplied by nature (such as land, water, mineral deposits, and trees)
Labor (or Human Resources)Physical and mental capabilities of people as they contribute to economic production
CapitalFunds needed to create and operate a business enterprise
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Factors of ProductionFactors of ProductionEntrepreneur
Person who starts a new business or makes the decisions that expand a small business
Physical ResourcesTangible things organizations use in the conduct of their business
Information ResourcesData and other information used by a business
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How Are Factors of Production Allocated?How Are Factors of Production Allocated?
Planned Economy: An economic system in which the government owns and operates all sources of production
Market Economy: An economic system in which buyers and sellers interact based on freedom of choice
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Circular Flow in a MarketEconomy
Circular Flow in a MarketEconomy
Figure 1–1
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Capitalism:A Fundamentally Market-Based EconomyCapitalism:A Fundamentally Market-Based Economy
Individuals Choose:Where to workWhat to buyHow much to pay
Producers Choose:Who to hireWhat to produceHow much to charge
Government supports private ownership and encourages entrepreneurship
Government supports private ownership and encourages entrepreneurship
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Mixed Economies: Planned and MarketMixed Economies: Planned and Market
The economies of most countries include both planned and market elements.Worldwide trend is toward more market elements.
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Socialism: Mixed Economy Socialism: Mixed Economy
SocialismA planned economic system in which the government owns and operates selected sources of production
Privatization: The process of converting government enterprises into privately owned companies
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Private Enterprise SystemPrivate Enterprise SystemIndividuals are free to pursue their own interests without government restriction.
Four Key Elements:Private Property RightsFreedom of ChoiceProfitsCompetition
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CompetitionCompetition
Competition motivates businesses to produce their products better or cheaper
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Degrees of CompetitionDegrees of CompetitionPure Competition
Market or industry characterized by numerous small firms producing an identical product
Monopolistic CompetitionMarket or industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors
OligopolyMarket or industry characterized by a handful of (generally large) sellers with the power to influence the prices of their products
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Degrees of CompetitionDegrees of Competition
MonopolyMarket or industry in which there is only one producer, which can therefore set the prices of its products
Natural MonopolyIndustry in which one company can most efficiently supply all needed goods or services
Natural MonopolyIndustry in which one company can most efficiently supply all needed goods or services
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Degrees of CompetitionDegrees of Competition
Table 1–1
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Understanding Economic PerformanceUnderstanding Economic Performance
KEY CONCEPTSBusiness Cycle Aggregate Output Standard of LivingGross Domestic Product (GDP)Gross National Product (GNP)
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Evaluating Economic Systems
Nearly every economic system has three broad goals:
Stability
Full Employment
Growth
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Economic GoalsEconomic Goals
StabilityCondition in which the balance between the money available in an economy and the goods produced in it are growing at about the same rate
InflationPhenomenon of widespread price increases throughout an economic system
RecessionPeriod characterized by decreases in employment, income, and production
DepressionParticularly severe and long-lasting recession
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Economic GoalsEconomic Goals
Full EmploymentEveryone who wants to work has an opportunity to do so
UnemploymentLevel of joblessness among people actively seeking work
Knowledge WorkersSkilled employees in high-tech industries
GrowthIncrease in the amount of goods and services produced by a nation’s resources
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Assessing Economic PerformanceAssessing Economic Performance
Gross National Product (GNP)The value of all goods and services produced by an economic system in a year regardless of where the factors of production are located
Real Gross National Product (real GNP)Gross national product adjusted for inflation and changes in the value of a country’s currency
Gross Domestic Product (GDP)The value of all goods and services produced in a year by a nation’s economy through domestic factors of production
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Assessing Economic PerformanceAssessing Economic PerformanceProductivity
Measure of economic growth that compares how much a system produces with the resources needed to produce it
Balance of TradeThe difference between a country’s exports to and imports from other counties
Budget DeficitSituation in which a government body spends more money than it takes in
National DebtTotal amount that a nation owes its creditors
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Three Major Forces of BusinessThree Major Forces of Business
1. The information revolution will continue to enhance productivity across all sectors of the economy, but most notably in such information-dependent industries as finance, media, and wholesale and retail trade.
2. New technological breakthroughs in such areas as biotechnology will create entirely new industries.
3. Increasing globalization will create much larger markets while also fostering tougher competition among global businesses; as a result, companies will need to focus even more on innovation and cost cutting.
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Projected Trends & PatternsProjected Trends & Patterns
1. The economy will maintain strong and consistent growth rates, perhaps exceeding 3 percent per year. New technological breakthroughs in such areas as biotechnology will create entirely new industries.
2. Inflationary surges and large budget deficits will become less likely.
3. Countries that encourage free trade, innovation, and open financial systems will prosper.
4. The most successful businesses will be those that are able most effectively to master new technologies and keep abreast of their competitors.
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Lessons to RememberLessons to Remember
Successful businesses do not require a great invention.
Many focus on making life more convenient for customers.
Some business ideas will fail—but entrepreneurs can learn from failures and make revisions.
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Impact of TechnologyImpact of Technology
Technology definedKnowledge or tools used to produce products and services
Information technologyRepresents over 1/3 of the growth in U.S. outputReduces cost of producing productsWorkers in technology industries earn more than workers in other industries.
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Impact of TechnologyImpact of Technology
E-business or e-commerceUse electronic communications to produce or sell products and services
Sales to individual customers B2B e-business: transactions between a business and its suppliersGenerates $301 billion in revenue and creates 1.2 million jobs each year
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Successful E-BusinessesSuccessful E-Businesses
Started out smallCreated to sell a product or service that was not offered by competitorsTransformed how traditional firms conducted business
Improved communication with customersImproved information flowImproved efficiencyComplemented traditional business operations
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E-Business ExamplesE-Business Examples
AmazonOnline seller of books, music and other productsLow overhead costs allow price discounting
Yahoo!Internet search engine and the most visited site on the WebOffers variety of services - free email, web page hosting, custom-designed start-up pagesGenerates revenue by selling advertising
eBayOnline auction service
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Key Functions of BusinessKey Functions of Business
Human Resources ManagementMeans by which employees and other resources are used by the firm
MarketingMeans by which products and services are developed, priced, distributed, and promoted to customers
FinanceMeans by which firms obtain and use funds for their business operations
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Key Functions of BusinessKey Functions of Business
AccountingSummary and analysis of the firm’s financial conditionUsed to make various business decisions
Information systemsInformation technology, people, and procedures that provide appropriate information to make effective decisions
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How Business Decisions Affect a Firm’s EarningsHow Business Decisions Affect a Firm’s Earnings
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Reference:Reference:
Ebert & Griffin, 2005, Business Essential, 5th
ed., Prentice Hall Inc.Jeff Madura, 2004, Introduction to Business, 3rd ed., South-Western.