Module 1 – Overview of Business

What Is…?

• Business– An organization that provides goods and

services to earn profits

• Profit– The positive difference between revenues

and expenses

Physical Resources

Labor Capital

Entrepreneurs

Factors of Production

InformationResources

Knowledge workers

Knowledge

Types of economies

Planned Economy:

An economic system in which the government owns and operates all sources of production

Socialism is a planned economic system in which the government owns and operates selected sources of production

Market Economy:

An economic system in which buyers and sellers interact based on freedom of choice

Planned Economy

“Circular Flow in Market Economy”

OUTPUT MARKETS

Goods Services

INPUT MARKETS

LaborCapital

EntrepreneursPhysical Resources

Information Resources

HOUSEHOLDS

• Demand products in output markets

• Supply resources in input markets

FIRMS

• Supply products in output markets

• Demand resources in input markets

DEMAND

DEMAND SUPPLY

SUPPLY

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70%!

Mixed EconomiesPlanned and Market

• The economies of most countries include both planned and market elements

• Worldwide trend toward more market elements

– Or is it?????

State CapitalismPost 2007

•State capitalism–a system in which the state dominates markets primarily for political gain

–autocratic states reap the benefits of capitalist enterprise while maintaining a vice-grip on political freedom

•“capitalism for the wealthy”

Supply & Demand

Supply:

The willingness and ability of producers to offer a good or service for sale

Law of Supply:Producers will supply (offer) more of a product for sale as its price rises and less as its price drops

Supply & DemandDrive the US Economic System

Demand:

The willingness and ability of buyers to purchase a good or service

Law of Demand:

Buyers will demand (purchase) more of a product as its price drops and less as its price increases

Demand & Supply

Quantity of Pizzas Supplied

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Demand & Supply

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Demand & Supply

Quantity of Pizzas per Week

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Supply Curve

Equilibrium Price

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Business cycle

Balance sheet recession

Productivity

–The amount a system produces compared to the resources needed to produce it

–typically measured as a ratio of output per labor-hour

–Key to improving “standard of living”

Recessions & Depressions

Recession:

Aggregate output declines, unemployment increases

Depression:

Severe and long-lasting recession

Introduction to Business Studies

Marketing

Objectives and Strategy

Offshoring vs. outsourcing

Supply Chain

Make/Model Domestic-parts content Assembly location

Ford Taurus 90 percent ChicagoLincoln MKS 85 percent ChicagoToyota Sienna 85 percent Princeton, Ind.GMC Savana 1500 82 percent Wentzville, Mo.Chevrolet Express 1500 82 percent Wentzville, Mo.

Buick Lucerne 81 percent DetroitChevrolet Malibu 80 percent Kansas City, Kan.Honda Odyssey 80 percent Lincoln, Ala.Toyota Avalon 80 percent Georgetown, Ky.Toyota Tundra 80 percent San AntonioToyota Venza 80 percent Georgetown, Ky.Source: NHTSA, automaker data (2009 models)

Human Resources

Production/Operations Management

Accounting and Finance

External Influences