Business and Wealth Building Business at a profit Any activity that seeks to provide goods and services to others while operating Goods Tangible products such as computers food clothing cars and appliances Services Intangible products that can t be held in your hand such as education health care insurance recreation and travel Successfully filling a market need means you could make money for yourself Entrepreneur A person who risks time and money to start and manage a business Revenues Profits and Losses Revenue Total amount of money a business takes in during a given period by selling goods and services Profit Amount of money a business earns above and beyond what it spends for salaries and other expenses Loss When a business s expenses are more than its revenues Matching Risk with Profit Risk The chance an entrepreneur takes of losing time and money on a business that may not prove profitable Not all enterprises make the same amount of profit Businesses take risks but with big risks could come big profits Standard of Living and Quality of Life Standard of living The amount of goods and services people can buy with the money they have The United States has one of the highest standards of living in the world Workers in other countries may make more money but prices for products are higher Quality of life The general well being of a society in terms of its political freedom natural environment education health care safety amount of leisure and rewards that add to the satisfaction and joy that other goods and services provide High quality of life requires combined efforts of businesses nonprofits and government agencies Responding to the Various Business Stakeholders Stakeholders All the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address A primary challenge is to recognize and respond to the needs of stakeholders Outsourcing Contracting with other companies often in other countries to do some functions of a firm like production or accounting Many foreign companies are opening offices and factories in the United States called insourcing Using Business Principles in Nonprofit Organizations Nonprofit organization An organization whose goals do not include making a personal profit for its owners or organizers Nonprofit organizations use financial gains to meet social or educational goals The Importance of Entrepreneurs to the Creation of Wealth Positives to Being an Entrepreneur Negatives to Being an Entrepreneur Freedom to succeed Make own decisions Possible wealth Freedom to fail No paid vacations No health insurance The Five Factors of Production Factors of production The five resources used to create wealth 1 Land or natural resources 2 Labor workers 3 Capital 4 Entrepreneurship 5 Knowledge What makes rich countries rich today is entrepreneurship and knowledge The Business Environment Business Environment The surrounding factors that either help or hinder the development of businesses Five elements 1 Economic and legal environment 2 Technological environment 3 Competitive environment 4 Social environment 5 Global business environment The Importance of Entrepreneurs to the Creation of Wealth Positives to Being an Entrepreneur Freedom to succeed Negatives to Being an Entrepreneur Make own decisions Possible wealth Freedom to fail No paid vacations No health insurance The Five Factors of Production Factors of production The five resources used to create wealth 1 Land or natural resources 2 Labor workers 3 Capital 4 Entrepreneurship 5 Knowledge What makes rich countries rich today is entrepreneurship and knowledge The Business Environment Business Environment The surrounding factors that either help or hinder the development of businesses Five elements 1 Economic and legal environment 2 Technological environment 3 Competitive environment 4 Social environment 5 Global business environment The Economic and Legal Environment Government can promote entrepreneurship by 1 Allowing private ownership of businesses 2 Minimizing interference with the free exchange of goods and services 3 Passing laws that enable businesspeople to write enforceable contracts 4 Establishing a currency that s tradable in world markets 5 Minimizing corruption The Technological Environment Technology Everything from phones to computers and the various software programs that make business processes more effective efficient and productive How Technology Benefits Workers and You Productivity The amount of output you generate given the amount of input e g hours worked The Growth of E Commerce E commerce The buying and selling of goods over the Internet Business to consumer B2C and business to business B2B Using Technology to Be Responsive to Customers Database An electronic storage file for information Identity theft The obtaining of individuals personal information such as Social Security and credit card numbers for illegal purposes 5 Minimizing corruption