• Goods refer to the tangible consumable

commodities that are offered by the

companies to the customers in exchange for
money. They are the items that have physical
characteristics, i.e. shape, appearance, size,
weight, etc. It is capable of satisfying human
wants by providing them utility.
• A service is intangible -- something a customer
experiences but doesn't hold or retain.
• such as accounting, banking, cleaning,
consultancy, education, insurance, expertise,
medical treatment, or transportation.
Difference between Goods and Services

• Transfer of ownership: When buying a service,

the service ownership is not transferred to the
end customer. If you buy a car then the car is
yours. But if you buy a ticket for an airline,
then the airline is definitely not yours.
Difference between Goods and Services

• Nature: service is an intangible process that

cannot be weighed or measured, whereas a
good is a tangible output of a process that has
physical dimensions.
• Evaluation: Evaluation of goods is very simple
and easy. On the other hand evaluation of
service is complicated.
Difference between Goods and Services

• Return: Goods can be returned. Services

cannot be returned back once they are
provided.
• Storage: Goods can be stored for use in future.
Services cannot be stored.
Difference between Goods and Services
 Factors of Production
• Factors of production refer to resources used
in the production of goods and services. There
are four factors of production.
• Land
• Labor
• Capital
• Entrepreneurship
 Factors of Production
• Land: Land is the natural resources that can be used
to produce goods and services. Natural resources
are all resources growing on and under the earth’s
surface, such as trees, minerals, oils and gas.
• Labor: Labor is the total human resources required
to turn raw materials into goods and services. It
include all employees of the business from top
management through the entire organization
structure.
 Factors of Production
• Capital: Capital is the total equipment, machinery
and buildings used to produce goods and services.
Capital does not refer to simply money. Money by
itself is not productive: but when it purchases
equipment, building etc, it will become productive.
• Entrepreneurship: Entrepreneurship is the group of
skills and risk taking needed to combine the other
three factors of production to produce goods and
services.
Definition of Business Environment
• Business environment means the factors that have
direct or indirect, positive or negative influence on
the business performance and over which the
business has little control or sometimes no control.
• Business environment is full range of factors that
surrounding the business organization and
influence the activities or business performance.
Business environment also affects managerial
decisions and actions.
 Types of Business Environment
• The types of business environment are as
follows:
• 1. Internal element
• 2. external element
• Internal environment: the factors which are must
have inside the organization and directly influence
on the business activities of the organization is
called internal business environment. Components
of internal environment are as follows:
– Owners,
– board of directors,
– Managers
– Employees
– Culture
– Physical work environment
• External Environment: the factors which are
must have outside the organization and
indirectly influence on the business activities of
the organization is called external business
environment. External environment consists of
those factors that represent threat and
opportunity to a firm and thereby affects the
achievement of organization. So external
environment is everything outside an
organization that might affect it.
 Continue…
• Components of external environment are as follows:
– Economic factor
– Technological factor
– Political factor
– Legal factor
– Religious factor
– Socio- culture factor
– The labor market
– Competitors
– Customers
– Suppliers
– Regulators
 Economic systems
• Economic system is the method society uses to allocate

scarce resources or factors of production to produce the

goods and services to satisfy its needs. What

distinguishes one economic system from another is the

control of the factors of production. In the modern world

there are three primary types of economic systems.

 Capitalism
• The economic system in which most
businesses are owned and operated by
individuals is the free market system, also
known as capitalism. Business is conducted
with only limited government involvement.
The economies of the United States and other
countries, such as Japan, are based on
capitalism.
 Communism
• In communism economic system, the government
exerts control over the allocation and distribution of
all or some goods and services. The system with the
highest level of government control is communism.
• In theory, a communist economy is one in which the
government owns all or most enterprises. In
practice, pure communism is practically nonexistent
today, and only a few countries (North Korea and
Cuba ) operate under this economy system.
 Socialism
• Under socialism, industries that provide
essential services, such as utilities, banking,
and health care, may be government owned.
Government controls selected major
industries, such as transportation and health
care, Other businesses are owned privately.
Examples of socialist countries include Sweden
and France.
• Though it’s possible to have a pure communist
system, or a pure capitalist system, in reality
many economic systems are mixed. A mixed
market economy relies on both markets and
the government to allocate resources.
• Economists have identified four types of
competition—
– perfect competition,
– monopolistic competition,
– oligopoly, and
– monopoly.
• Perfect competition exists when there are many
consumers buying a standardized product from
many small businesses. Because no seller is big
enough or influential enough to affect price,
sellers and buyers accept the going price.
• For example, when a commercial fisher brings his
fish to the local market, he has little control over
the price he gets and must accept the going rate.
• In monopolistic competition, still have many sellers (as we
had under perfect competition). Now, however, they don’t
sell identical products. Instead, they sell differentiated
products—products that differ somewhat, or are perceived
to differ, even though they serve a similar purpose.
• Products can be differentiated in a number of ways,
including quality, style, convenience, location, and brand
name.
• Under monopolistic competition, therefore, companies
have only limited control over price.
• Oligopoly means few sellers. In an oligopolistic
market, each seller supplies a large portion of
all the products sold in the marketplace. In
addition, because the cost of starting a
business in an oligopolistic industry is usually
high, the number of firms entering it is low.
companies have some control over the prices
they charge.
• In perfect competition, there are many small
companies, none of which can control prices;
they simply accept the market price
determined by supply and demand. In a
monopoly, however, there’s only one seller in
the market. Such as electricity and gas
suppliers.