Download Fundamentals of Business and Economics

Chapter 1
Understanding
the
Fundamentals
of Business
and
Economics
Copyright © 2009 Pearson Education Canada
1-1
Why Study Business?
• Learn what it takes to run a business
• Build business vocabulary
• Develop workplace skills
• Learn about a variety of jobs
• Appreciate today’s business career
Copyright © 2009 Pearson Education Canada
1-2
What Is a Business?
For-Profit
Non-Profit
Money Motive
Social Service
Ethical Conduct
Efficiency
Effectiveness
Social Responsibility
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1-3
Business Categories
Producing Goods
Capital intensive
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Providing Services
Labour intensive
1-4
Growth in the Service Sector
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1-5
Why Is the
Service Sector Growing?
• More disposable income
• Changing demographics and lifestyles
• Complex goods and new technologies
• Need for professional advice
• Low barriers to entry
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1-6
What Is an Economic System?
Scarce
Resources
Human
Resources
Capital
Entrepreneurs
Knowledge
Natural
Resources
Factors of Production
Goods
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Services
1-7
The New Economy
Old Economy
•Physical assets
General
Characteristics •Cost control
Technology
Workforce
Geography
Capital
New Economy
•Intellectual assets
•Adding value
•Mechanical
•Information
•Job-specific skills
•Transferable skills
•Lifelong learning
•Close to resources
•Near to collaborators
•Near to competitors
•Debt financing
•Venture capital
Copyright © 2009 Pearson Education Canada
1-8
Types of Economic Systems
Free-Market
System
Capitalism
Planned
System
Mixed
Capitalism
Socialism
Communism
Privatization
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1-9
How Does a Free-Market
Economic System Work?
Supply
and Demand
Government
Intervention
Competition
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1-10
Supply and Demand Relationship
$35
D
$30
Not enough
demand
Right price
makes supply &
demand equal
Price
E
$25
$20
S
Not enough
supply
$15
10
15
20
25
30
Quantity of Hats
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1-11
Copyright © 2009 Pearson Education Canada
1-12
Free-Market Competition
Pure
competition
Monopoly
Oligopoly
Monopolistic
competition
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1-13
Competitive Advantage
• Price
• Speed
• Quality
• Service
• Innovation
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1-14
The Role of Government
• Fosters competition
• Regulates industries
• Deregulates industries
• Protects stakeholder’s rights
• Contributes to economic stability
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1-15
Fostering Competition
Competition Act
Mergers and
acquisitions
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1-16
Regulating and
Deregulating Industries
Fair Competition
Business Ethics
Government
Regulation
Free
Competition
Working Conditions
Public Safety
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1-17
Protecting Stakeholders
Colleagues
Employees
Supervisors
•Competition Bureau
•Transport Canada
•National Energy Board
Society
Investors
•Health Canada
•Canadian Food Inspection Agency (CFIA)
•Canadian Radio-Television and Communications
Commission (CRTC)
Environment
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Customers
Suppliers
1-18
Contributing to
Economic Stability
Economic
Expansion
Recovery
Fiscal
Policy
Business
Cycle
Business
Cycle
Monetary
Policy
Recession
Revenue and
Spending
Economic
Contraction
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Interest
Rates
1-19
Monitoring Major
Economic Indicators
Interest rates
Housing starts
Unemployment
statistics
Durable-goods
orders
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1-20
Measuring Price Changes
Inflation
Purchasing Power
Deflation
Consumer Price
Index (CPI)
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1-21
Measuring National Output
Dollar Value
Gross Domestic
Product (GDP)
Gross National
Product (GNP)
Final goods
and services
Yes
Yes
Domestic businesses
Yes
Yes
Foreign-owned
businesses
Yes
No
Overseas operations
No
Yes
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1-22
Copyright © 2009 Pearson Education Canada
1-23
Monetary and Fiscal Policy
• Monetary Policy
– Actions taken by the Bank of Canada to regulate
the nation’s money supply
• adjusting interest rates
• conducting open market operations
• Fiscal Policy
– Use of government revenue and spending to
influence the business cycle
• adjusting tax rates
• changing government spending patterns
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1-24
Copyright © 2009 Pearson Education Canada
1-25
Challenges of Globalization
• Products and services
• Managing a small business
• Globalization and workforce diversity
• Ethics and social responsibility
• Technology and electronic commerce
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1-26