MNGT1500

Introduction to
Business
Summary
AWM
Current Issues in
Contemporary
Business
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Chapter 1
What is Business?
Business: all prot-seeking activities and enterprises that provide goods and services
necessary to an economic system. The output is divided into two types: goods (tangible
goods, and services)
Simply to be described as: Buyer needs = Seller products
Prot: the rewards for businesspeople who take the risk involved to o!er goods and
services to customers. Accountants think of prots as the di!erence between a rms
revenues and the expenses it incurs in generating these revenues. Prots are also a
measure of how the company is doing. For long term success; businesspeople must deal
responsibly with employees, customers, suppliers, competitors, etc.
Non-Prot Organization: organizations that has primary objectives such as public
services rather than returning a prot to its owner. e.g: Public Library, museums, religious
organizations. Although they dont seek prot, but the managers face the same problems
as for managers in prot-seeking org. Some not-for-prot sell merchandise or set-up prot
generating arms to provide goods and services for which people are able to pay.
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Factors of ProductionProduction
The four basic inputs for e!ective operation; natural resources, capital, human resources,
and entrepreneurship.
Natural Resources: all productions inputs that are useful in their natural states, including
agricultural land, building sites, forests, and mineral deposits. Factor Payment: Rent.
Capital: production inputs consisting of technology, tools, information, and physical
facilities. Factor Payment: Interest. To remain competitive, a rm needs continuos
improvement in its capital, and the business needs money for these. The money source:
owner-investment, prot, or extended loan. This money goes to work building factories,
for: purchasing raw materials, hiring, training, and compensating workers.
Human Resources: production inputs consisting of anyone who works, including both the
physical labor and the intellectual inputs contributed by workers. Companies rely on their
employees as a valued source of ideas and innovation, as well as physical e!ort.
Entrepreneurship: the willingness to take risk to create and operate a business. An
entrepreneur is someone who sets up a business taking on nancial risk in the hope of
prot.
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The Private Enterprise System
The private enterprise system: an economics system that rewards rms for their ability
to identify and serve the needs and demands of customers. This system minimizes the
interference of government in the economy activities. A.K.A Capitalism.
Competition: the battle among businesses for consumer acceptance. Adam Smith
believed in the invisible hand, which regulates the competition, which will make the
consumers receive the best possible products and prices, because the less e"cient
producers will be gradually driven from the marketplace.
Competitive Di!erentiation: unique combination of organizational abilities, products, and
approaches that sets a company apart from competitors in minds of customers.
Basic rights in the private enterprise system:
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Six Eras in the History of Business
i. Consumer orientation: business philosophy that focuses rst on determining unmet
consumer wants and needs and then designing products to satisfy those needs.
ii. Branding: process of creating an identity in consumers minds for a good, service, or
company; a major marketing tool in contemporary business.
iii. Brand: name, term, sign, symbol, or some combination that identies the product of
one rm and di!erentiates them from competitors o!erings.
iv. Transaction management: building and promoting products in the hope that enough
customers will buy them to cover costs and earn prot.
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Era Main Characteristics Time Period
Clainolo Primarily agricultural Prior to 1776
Industrial revolution Mass production by semi-skilled workers, aided
by machines
1760 - 1850
Industrial entrepreneurship Advances in technology and increased demand
for manufactured goods, leading to enormous
opportunities
Late 1800s
Production Emphasis on producing more goods faster,
leading to production innovations such as
assembly lines
Through the 1920s
Marketing Consumer orientation, seeking to understand and
satisfy consumer needs and preferences of
consumer groups (i,ii,iii)
Since 1950s
Relationship rms seek ways to actively nature customer
loyalty by carefully managing every interaction (iv)
Began 1990s
Business Workforce
A skilled and knowledgeable worker is an essential resource for keeping pace with the
accelerating rate in changes in todays business world.
Changes in the Workforce
" Aging of the population and Shrinking Labor Pool
# Increasingly diverse workforce: blending individuals of di!erent genders, ethnic
backgrounds, cultures, religions, ages, and physical and mental abilities to enhance a
rms chance of success.
" Outsourcing and changing the nature of workforce
# Outsourcing: using outside vendors to produce goods and fulll services and
functions that were previously handled in-house or in-country.
# O!shoring: relocation of business processes to lower-cost locations overseas.
# Nearshoring: outsourcing production or services to locations near a rms home
base.
# Flexibility and Mobility: share work with 2 or more, some are not interested in
developing career, others are. The cubicle-lled o"ce will likely never become obsolete,
technology makes productive networking and virtual team e!orts possible by allowing
people to work where they choose and easily share knowledge.
" Innovation through collaboration: Businesses are increasingly focusing on
collaborations rather than individual work. Many rms now recognize the value of a
partnership with employees that encourages creative thinking and problem solving and
that rewards risk taking and innovation. Managers are trained to listen and respect
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The 21st Century Manager
Todays companies look for managers who are intelligent, highly motivated people with
ability to create and sustain a vision of how organization can succeed, and apply critical
thinking skills and creativity to business challenges.
Vision: the ability to understand marketplace needs and what an organization must do to
satisfy them.
Critical Thinking: ability to analyze and assess information to pinpoint problems or
opportunities.
Creativity: capacity to develop novel solutions to understand organizational problems.
The ability to lead change: Managers must be skilled at recognizing employees strengths
and motivating people to move toward common goals as members of a team. The
changes can come from external or internal sources, external as: feedbacks from
customers, international marketplace, economics trends. internal as: new company goals,
emerging employees needs, labor union demands, or production problems.
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What makes a company admired?
Company might be admired by the following: solid prots, stable growth, a safe and
challenging work environment, high quality goods and services, business ethics, and
social responsibility.
Business Ethics: the standards of conduct and moral values involving decisions made in
the work environment.
Social responsibility: a management philosophy that includes contributing resources to
the community, preserving the natural environment, and developing or participating in
nonprot programs designed to promote the well-being of the general public.
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Questions
What activity lies at the heart of every business endeavor? An exchange between
buyers and sellers.
What are the primary objectives of a not-for-prot organization? Place public services
above prots, although they need to raise money to operate and achieve their goals.
Identify the 4 basic inputs to an economic system. Natural resources, capital, human
resources, entrepreneurship.
List 4 types of capital. Technology, tools, information, and physical facilities.
What is an alternative term for private enterprise system? Capitalism.
What is the most basic freedom under the private enterprise system? The right to
private property.
What is an entrepreneur? someone who takes nancial risks of starting a business in the
hope of prot.
What was the industrial revolution? Began in the 1750s, the main characteristic was
mass production.
During what era was the idea of branding developed? The marketing era.
Dene outsourcing, o!shoring, and nearshoring.
" Outsourcing: using outside vendors to produce goods and fulll services and
functions that were previously handled in-house or in-country.
" O!shoring: relocation of business processes to lower-cost locations overseas.
" Nearshoring: outsourcing production or services to locations near a rms home
base.
Describe the importance of collaboration and employee partnership.
Businesses are focusing on collaboration rather than individual work, encourages
partnership between employer-employee, results in teamwork and creative thinking,
problem solving, and innovation.
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Why is vision an important managerial quality? Allows a rm to innovate and adapt to
meet marketplace changes.
What is the di!erence between creativity and critical thinking?
" Critical Thinking: ability to analyze and assess information to pinpoint problems or
opportunities.
" Creativity: capacity to develop novel solutions to understand organizational
problems.
Dene business ethics, and social responsibility.
" Business Ethics: the standards of conduct and moral values involving decisions
made in the work environment.
" Social responsibility: a management philosophy that includes contributing
resources to the community, preserving the natural environment, and developing or
participating in nonprot programs designed to promote the well-being of the
general public.
Identify 3 criteria used to judge if a company might be considered admirable.
Solid prots, business ethics, social responsibility, high quality goods and services.
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The Most Chanllenging
Economy in Decades
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Chapter 3
Microeconomics: The forces of demand and
supply
Economics: Social science that analyze the choices people and government make in
allocating scare resources.
Microeconomics: study of small economics units, consumers, families, and businesses.
Demand: willingness and ability of buyers to purchase goods and services. PdDi, PiDd.
Supply: willingness and ability of sellers to produce goods and services.PiSi, PdSd.
Demand Curve: graph of the amount of a product that buyers will purchase at di!erent
prices.
Supply Curve: graph that shows the relationship between di!erent prices and quantities
that seller will o!er for sale, regardless of demand.
Equilibrium price: prevailing market price at which you can buy an item. i.e: The
intersection point of D curve with S curve. EP shift with change in D or S curves.
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Factors
Demand Curve Shifts Demand Curve Shifts
Factors To the right To the left
Customers preferences increase decrease
Number of buyers increase decrease
Buyers incomes increase decrease
Price of substitute goods increase decrease
Price of complementary goods decrease increase
Future expectations become more optimistic pessimistic
Factors
Supply Curve Shifts Supply Curve Shifts
Factors
To the right To the left
Costs of inputs decrease increase
Costs of technologies decrease increase
Taxes decrease increase
Number of suppliers increase decrease
Macroeconomics: Issues for the Entire
Economy
Macroeconomics: study of a nations overall economic issues, such as how economy
maintains and allocates resources and how governments policies a!ect the standards of
living of its citizens.
The private enterprise system and competition
Planned Economics (Socialism and Communism): the government controls determine
business ownership, prots, and resource allocation to accomplish government goals
rather than those set by individual rms.
Socialism: economic system characterized by government ownership and operation
of major industries such as communications, but private owners operates some small
enterprises.
Communism: economic system in which all property would be shared equally to
people of a community under direction of a strong central government.
Mixed Economics: an economic system which draws from both Private and Planned.
Privatization: Conversion of government-owned property and operated companies to the
private sector.
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Characteristics
Types of competitions Types of competitions Types of competitions Types of competitions
Characteristics Pure competition
Monopolistic
competition Oligopoly Monopoly
Number of competitors Many Few to many Few No direct competition
Ease of entry into industry by
new rm
Easy Somewhat difcult Difcult
(high start-up cost)
Regulated by
Government
Similarity of goods/ services
offered by competitors
Similar
(homogeneous)
Different
(heterogeneous)
Similar / Different No close substitutes
Control over price by individual
rms
No Some Some Considerable in pure,
little in regulated
Evaluating Economic Performance
Business Cycle
Prosperity - High consumer condence, businesses expanding.
Recession - Cyclical economic contraction lasting for six months or longer.
Depression - Extended recession.
Recovery - Declining unemployment, increasing business activity.
Productivity (GDP - Gross Domestic Product) an important concern for every economy
is productivity, Productivity: relationship between the number of unit produced and the
number of human and other production inputs necessary to produce them.
GDP is the sum of all goods and services produced within a country during a specic time
period, typically a year.
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Depression
Prosperity
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R
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High
Low
Economic
Activity
Time
Price-Level Changes
Ination: rising the prices caused by a combination of excess consumer demand and
increase in price of raw materials, human resources, and other factors of production.
Core ination rate: rate of an economy after energy and food prices are removed.
Hyperination: economic situation characterized by high rise in prices.
Deation: opposite of ination, occurs when prices continue to fall.
Measuring Price Level Changes: using Consumer price index (CPI), which is a
measurement of monthly average change in prices of goods and services.
Employment Levels
Unemployment rate: percentage of total workforce actively seeking work but are
currently unemployed.
Four types of unemployment:
" Frictional unemployment: Temporarily not working but are looking for jobs.
" Seasonal unemployment: joblessness of workers in a seasonal industry, e.g: farms.
" Cyclical unemployment: Not working due to economic slowdown, jobcut.
" Structural unemployment: Not working due to no demand for skills, e.g: replaced
by robots.
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Managing the Economys Performance
Tools that a government uses to manage its economy performance & ght ination,
increase employment level & encourage growth. Government can raise funds by: taxes,
fees, and borrowing.
Monetary Policy: government actions to increase or decrease the money supply and
change banking requirements and interest rates to inuence bankers willingness to make
loans.
Expansionary monetary policy: increase the money supply in an e!ort to cut the
cost of borrowing, which encourages business decision makers to make new
investments, in turn stimulating employment and economic growth.
Restrictive monetary policy: decrease the money supply to restrict rising prices,
over expansion, and concern about overly rapid economic growth.
Fiscal Policy: government spending and taxation decisions designed to control ination,
reduce unemployment rate, improve general welfare of citizens, and encourage economic
growth.
Budget: organizations plan for how to raise and spend money during a given period
of time.
Budget decit: situation in which the government spends more than the amount of
money it raises through taxes.
National debt: money owed by government to individuals, businesses, and
government agencies who purchase Treasury (funds of institution) bills, Treasury
notes, and Treasury bonds sold to cover expenditure.
Budget surplus: excess funding, when government spend less than funds raised.
Balanced budget: total funds raised (tax, fees) = total spendings of the government.
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Questions
Dene microeconomics and macroeconomics.
Microeconomics: study of small economics units, consumers, families, and
businesses. Macroeconomics: study of a nations overall economic issues, such as
how economy maintains and allocates resources and how governments policies
a!ect the standards of living of its citizens.
Explain demand and supply curves.
Demand Curve: graph of the amount of a product that buyers will purchase at
di!erent prices. Supply Curve: graph that shows the relationship between di!erent
prices and quantities that seller will o!er for sale, regardless of demand.
How do factors of production inuence overall supply of goods and services?
A change in costs or availability in inputs can shift the entire curve to the right/left at
every price.
What is the di!erence between pure competition and monopolistic competition?
In Pure; the products are homogeneous and individual rms cant make signicant
change in price. In Monopolistic; the products are heterogeneous, thus, makes
individual rms have some control over price.
What is privatization?
The conversion of government properties to the private sector.
Describe the four stages of a business cycle.
Prosperity (low unemployment rate and strong consumer condence), Recession
(consumer postponing major purchases, layo!s, and decreased household savings),
Depression (economic slowdown continues in a downward spiral over long period),
Recovery (consumers spendings increase and business activities increase).
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What are some measures that economist use to determine the health of an
economy? GDP, general prices levels, core ination rate, CPI, and unemployment rate.
What is the di!erence between an expansionary monetary and restrictive monetary
policy? Expansionary; increase the money supply to cut the cost of borrowing. Restrictive;
reduce the money supply to curb rising prices, over expansion, and concerns about rapid
economic growth.
What are the three primary sources of government funds? Taxes, fees, and borrowing.
Does a balanced budget erase the federal budget? No, it doesnt erase the national
debt, but it also doesnt increases it.
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How the Managerial
Hierarchy Operates
within a Business
Organization
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Chapter 7
What is management?
Management: process of achieving organizational objectives through people and other
resources.
The management hierarchy:
Top management: Chief Executive o"cer, Chief Financial o"cer, Governor, Mayor.
# Develop Long-rang strategic plans.
# They are responsible for creating a vision for their organizations.
Middle management: Regional manager, Division head, Director, Dean.
# Focus on specic operations within the organization.
# They are responsible for developing detailed plans to implement the strategic
plans of top managers.
Supervisory (rst-line) management: Supervisors, Head of department.
# Responsible for assigning non-management employees to specic jobs and
evaluate their performance everyday.
# Focus on implementing middle managers plans and have short term goals (daily,
weekly or monthly).
Skills Needed for Managerial Success:
" Technical Skills: the ability to understand and use techniques, knowledge, and tools
and equipments of a specic discipline of the department.
" Human Skills: are interpersonal skills that enable managers to work e!ectively with and
through people, for overseas (local language is vital, cultural customs)
" Conceptual Skills: determines the managers ability to see the organization as a unied
whole and to understand how each part of the overall organization interacts with others.
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Managerial Functions:
" Planning: process of anticipating future events and conditions and determining courses
of action for achieving organizational objectives. E!ective planning helps business focus
its vision, avoid costly mistakes, and seize opportunities.
" Organizing: process of blending human and material resources through a formal
structure of tasks and authority; arranging work, dividing tasks among employees, and
coordinating them to ensure implementation of plans and accomplishment of objectives.
" Directing: guiding and motivating employees to accomplish organizational objectives.
" Controlling: function of evaluating an organizations performance against its objectives.
The four basic steps in controlling: establish performance standards, monitor actual
performance, compare actual performance with established standards, make
corrections where necessary.
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Primary type of planning Management Level Examples
Strategic Top management
Organizational objectives,
long-term plans.
Tactical Middle management
Quarterly / semiannual
plans, department policies.
Operational Supervisory management
Daily / Weekly plans, rules,
and procedure of each
department.
Contingency
Primary top, but all
contribute
Ongoing plans for actions
and communications in an
emergency.
Managers as Decision Makers
Decision making: process of 1. recognizing a problem or opportunity, 2. developing
alternatives, 3. evaluating alternatives, 4. selecting and implementing an alternative, and 5.
assessing the results.
Programmed Decisions: involves simple, common, and frequently occurring
problems for which solutions have been already determined. These decisions saves
the company time and money, because new decision dont have to be made each
time the situation arise.
Nonprogrammed Decisions: involves a complex and unique problem / opportunity
with important consequences for the organization. e.g: entering new market,
developing new product, etc.
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Managers as Leaders
Leadership: ability to direct or inspire people to attain certain goals. It involves the use of
inuence or power. Power could be from the leaders position in the company, or could be
from the leaders experience / expertise.
The way a leader use his power determines his style of leadership:
Autocratic leadership: is centered on the boss. Leaders makes their own decisions
without consulting the employees.
Democratic leadership: includes subordinates in decision-making process. This
leadership style centers on employees contribution. This comes with the concept of
empowerment (giving employees shared authority, responsibility, and decision
making with their manager).
Free-rein leadership: believe in minimal supervision, allowing subordinates to make
most of their own decisions. The leader communicate with employees frequently, as
the situation warrants.
Which leadership style is the best?
There is no best style, there is a best for each rm, depending on the situation.
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Organizational Structure
Organization: structured group of people working together to achieve common goals.
Steps in the Organizing process:
Types of organizational structure:
" Line organization: the oldest and the simplest,establishes a direct ow of authority from
the chief executive to employees. Everyone knows who is in charge, and decisions are
made quickly.
" Line and Sta! organization: combines the direct ow of of authority of a line org. with
sta! departments that support the line department. Line dept. participate directly in
decisions that a!ect the core of the operations, and the sta! dept. provide specialized
technical support.
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" Committee organization: structure that places authority and responsibility jointly in the
hands of a group of individuals rather than a single manager. Committee tends to act
slowly and conservatively, and may make decisions by compromising conicting
interests rather than choosing the best alternative. The structure is a part of a regular line
and sta! structure.
" Matrix organization: links employees from di!erent parts of the organization to work
together on specic projects, in this structure, an employee reports to two managers,
one is line manager and the other is the project manager. Called matrix because of
intersecting horizontal and vertical lines of authority. (ver. functional dept. & hor. project
instructions.)
Important terminology:
" Delegation: managerial process of assigning work to employees.
" Span of management: number of subordinate a manager supervise.
" Centralization: decision making controlled by top management.
" Decentralization: locates decision making at lower levels.
" Departmentalization: process of dividing work activities into units within the
organizations, Forms: Product, Geographical, Customer, Functional, Process.
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Questions
What is management? is the process of achieving organizational objectives through
people and other resources. The manager should combine technical, human, and
conceptional resources.
How do the jobs of top managers, middle managers, and supervisory managers
di!er? Page 20.
What is the relationship between the managers planning and controlling functions?
The basic purpose of controlling is to assess the success of the planning function.
Distinguish between programmed and nonprogrammed decisions.
Programmed decisions are simple and frequently happening, but the nonprogrammed
decisions require more individual evaluations.
What are the steps in decision-making process? 1. recognizing a problem or
opportunity, 2. developing alternatives, 3. evaluating alternatives, 4. selecting and
implementing an alternative, and 5. assessing the results.
How is leadership dened? directing or inspiring people to attain organizational goals.
Identify the styles of leadership as they appear along a continuum of greater or
lesser employee participation.
At one end of the continuum, autocratic leaders make decisions without consulting the
employees. In the middle continuum, democratic leaders ask employees for suggestions
and encourage participation. In the other end of the continuum, free-rein leaders leave
most decisions to their employees.
What is the purpose of an organization chart? An organizational structure is visual
representation of rms structure that illustrates job positions and functions.
What are the ve major forms of departmentalization? Product, Geographical,
Customer, Functional, Process.
What does span of management mean? number of subordinates a manager supervise.
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