INTRODUCTION TO

BUSINESS
The Role of Business in Economy
Business Defined- A business is an enterprise or
any lawful activity that provides products or
services desired by customers for profit
BUSINESS ORGANIZATION-
Sole Proprietorship- A business organization
owned by one individual
Advantage:
Easier to start
Least regulated
Single owner keeps all profits
Taxed once as personal income
Disadvantages:
Limited to life of owner
Equity capital limited to owners personal
wealth
Unlimited liability
Difficult to sell ownership interest
Partnership- a business organization owned by
two or more individuals but not more than
fifteen is a contract between two or more
persons bind themselves to contribute money,
property and industry into a common fund with
the intention of providing profit among
themselves. (Civil Code of the Philippines,
Article 1767)
Advantages:
Two or more owners
More capital available
Relatively easy to start
Income taxed once as personal income
Disadvantages:
Unlimited liability
General partnership
Limited partnership
Partnership dissolves when one partner dies or
wishes to sell
Difficult to transfer ownership
Corporation- An artificial being created by
operation of law, having the right of succession
and the powers and the powers, attributes and
properties expressly authorized by law or
incident to its existence(The Corporation Code
of the Philippines, Sec.2)
Advantages:
Limited liability
Unlimited life
Separation of ownership and management
Transfer of ownership is easy
Easier to raise capital
Disadvantages:
Separation of ownership and management
(agency problem)
Double taxation (income taxed at the corporate
rate and then dividends taxed at personal rate)
NATURE OF BUSINESS
Manufacturing/Industry-change basic inputs
into products that are sold to individual
customers.
Classification per Industry
Genetic agriculture, forestry, fish culture
Extractive-mining, lumbering
Construction airports, seaports, dams, hi-way
Commercial foods, automotive, apparel etc.
Merchandising/Commerce-engaged in buying
and selling of goods and services.
Classification as per Industry
Supermarkets
Dry Good Stores e.g. groceries, drugstore
Sari-Sari Store
Service- engaged in selling of services to
customers.
Classification as per Industry
Recreation Movie Houses, Theaters, Radio
Station, etc.
Personal Restaurant, Barber Shop,
Transportation, Hotel, etc.
Finance Banks, Investment Houses, Lending,
Company, etc.

Objectives of Business
Profit
Political Influence
Family Control of the Business
Community Involvement
Lifestyle
Organizing a Business
Reasons to Engage in Business
Provision of employment to people
Profits
Service to the community
Personal satisfaction
Means to earn a living
Achievement of power
Protection of ones self and family
Key Business Decisions
Product
What type of product should be produced?
Production
How should the product be produced?
Promotion
How should the product be promoted?
Financing
How should the company obtain funds to
finance the cost of producing the product?
Business Decisions



Key Stakeholders
Owners
Entrepreneurs
Co-owners
Stockholders
Creditors
Employees
Managers
Suppliers
Customers
Creating Business Idea- Identify a competitive
advantage.
Differentiate the product or service from
competitors.
Determine necessary resources.
Assess feasibility of the idea.
Key Function of Business-
ManagementMeans by which employees and
other resources are used by the firm
Marketing
Means by which products and services are
developed, priced, distributed, and promoted
to customers
Finance
Means by which firms obtain and use funds for
their business operations
Accounting
Summary and analysis of the firms financial
condition
Used to make various business decisions
Information systems
Information technology, people, and
procedures that provide appropriate
information to make effective decisions
How Business Decisions Affect a Firms Earning
Developing a Business Plan-Assess the Business
Environment
Economic environment
Industry environment
Global environment
Develop Management Plan
Organizational Structure
Production
Human Resources

Marketing Plan
Target Market
Product Characteristics
Pricing
Distribution
Promotion
Financial Plan
Financing
Feasibility
Online Resources- Advice and basic information
Yahoos Small Business site
American Express
Small Business Administration
Financing Options
Quicken Small Business
Garage.com
The Elevator
Business Planning Software