Chapter 1 a profit Entrepreneurship and Wealth Building Success in business is based on constantly adapting to the market Business any activity that seeks to provide goods and services to others while operating Goods tangible products such as computers food clothing cars appliances Services intangible products such as education health care insurance recreation and travel and tourism Entrepreneur a person who risks time and money to start and manage a business Revenues Profits and Losses Revenue the total amount of money a business takes in during a given period by selling goods and services o Revenue expenses net income Profit the amount of money a business earns above and beyond what it spends for salaries and other expenses needed to run the operation Loss occurs when a business s expenses are more than its revenues o About 80 000 businesses in the US close each year mostly due to losses Matching Risk with Profit Risk the chance an entrepreneur takes of losing time and money on a business that may not prove profitable Profit is over and above the money you pay yourself in salary Sometimes those that take the most risk will make the most profit Standard of Living and Quality of Life Businesses their employees pay taxes to the federal government to help their o Used to build hospitals schools libraries etc o Help keep the environment clean support people in need provide police and fire communities protection o Contributes to the standard of living and quality of life for everyone in the country o How tax rate is decided how much do we want to spend what s the value of all the real estate in the county what percent of taxes will match what we want to spend Standard of Living the amount of goods and services people can buy with the money they have o US is high b c a person in the US can buy more with the same amount of money than Germany or Japan due to wealth created by its businesses o It is important to find the right level of taxes and regulation Quality of Life refers to 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 o Maintaining a high quality of life requires the combined efforts of businesses nonprofit organizations and govt agencies o Working to build a higher standard of living may lower the quality of life 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 Chapter 1 o Include customers employees stockholders suppliers dealers bankers people in the surrounding community the media environmentalists and elected govt leaders o A challenge for organizations is to recognize and respond to the needs of their stakeholders all the functions of a firm Outsourcing contracting with other companies often in other countries to do some or o Moving production to other countries o Challenges having things made in other countries Insourcing creates many new US jobs and helps offset those being outsourced o When a company sets up facilities in the US Using Business Principles in Nonprofit Organizations Nonprofit Organization an organization whose goals do not include making a personal profit for its owners or organizers o Make a major contribution to the welfare of society o Often do strive for financial gains but use them to meet their social or educational goals rather than for personal profit o Not taxed Social entrepreneurs people who use business principles to start and manage not for profits and help address social issues Entrepreneurship Versus Working for Others One path is to rise through the ranks of large companies and have someone else assume the risks The other riskier path is to become an entrepreneur you assume the risk of failure Opportunities for Entrepreneurs Millions of people have taken the entrepreneurial challenge and succeeded o Hispanics Asians Pacific Islanders Women minority women and more The Importance of Entrepreneurs to the Creation of Wealth Factors of Production the resources used to create wealth o Land or natural resources o Labor workers o Capital Includes machines tools buildings or whatever else is used in the production of goods can you get loans o Entrepreneurship Combined with knowledge entrepreneurship makes countries rich They use what they ve learned to grow their businesses and increase The business environment either encourages or discourages wealth entrepreneurship o Knowledge o Ethical Governments The Business Environment Chapter 1 Business environment consists of the surrounding factors that either help or hinder the development of businesses Five elements o The economic and legal environment unemployment rate litigious legal state o The technological environment o The competitive environment o The social environment o The global business environment The Economic and Legal Environment People are willing to start new businesses if they believe the risk of losing their money is low Government can have a strong impact on risk o A govt can minimize spending and keep taxes and regulations to a minimum to o A govt can actively promote entrepreneurship by allowing private ownership or o One of the best things the govt of developing countries can do is to minimize interference with the free exchange of goods and services o Can lessen risks by passing laws that enable businesspeople to write enforceable favor business businesses contracts o Can establish a currency that s tradable in world markets Some other countries use the US dollar Venezuela Ecuador Zimbabwe o Can help minimize corruption in business and in its own ranks Capitalist system relies heavily on honesty integrity and high ethical standards o Capitalistic problem loans being given out to people that can t pay it back o 3 credit reporting agencies The Technological Environment Social media and technology has changed the way people communicate with one another How Technology Benefits Workers and You o An advantage of working for others is that the company often provides the tools and technology to make your job more productive o Technology includes phones copiers computers etc o Effectiveness means producing the desired result o Efficiency means producing goods and services using the least amount of resources input o Productivity the amount of output per hour you
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