Management Notes
Chapter 1 Canadian Business System
- Business an organization that provides goods or services, to customers in order to make a profit
- Profit the difference between
o $$$ in (revenues or sales)
o $$$ out (costs or expenses)
- Profit is a fundamental reason for a business to exist
o Not all organizations are businesses (e.g. hospitals, universities, churches)
o These provide services but not for profit
- Loss
o When expenses are greater than revenues
o Example: it costs more money to produce the products and run the business than receiving the values of
goods
o Examples of loss making businesses:
- Purpose of business is to sell something and make a profit out of it
Economics: the study of how businesses, people make choices about
- What things to produce/consume
- How best to produce things
- How best to distribute wealth
- Factors of production - basic building blocks used to produce anything
o Labors: human beings (i.e. workers)
o Natural resources: raw materials found in ground, grown from earth, or harvested from nature (i.e. coal,
wheat, water, wood)
o Capital: money, or machines and technologies that money can buy (i.e. computers, phones, hammers,
tractors)
o Entrepreneur: the people who assemble and organize the other factors of production, the individuals
who make it all happen
- Economic systems
o How difference countries answer basic economic questions:
o Who should own or control the factors of production?
o What should be produced, with the factors of production?
- Command (planned) Economies
o Countries where:
- Market Economies
o Countries where: individuals own/control the factors of production
o Individuals make all/most of the decisions
- Economic Systems
o Countries differ as to how central the government is in running the economy
o (copy chart from powerpoint)
- Canada is a mixed Economy
o Majority of factors (farmland, forests, mines) owned by private individuals
o But government does intervene taxation and regulation)
o Government provides some services
- Mixed Economy 2 simple examples
o I decide where I work, I negotiate my salary with the University. But, the government taxes me
o Walmart (owned by Walton Family) sits in shopping mall next to LCBO (owned by Ontario Government)
1 | M a n a g e m e n t N o t e s How markets work: supply and demand
- Law of supply
o Producers will offer more of a product as its price increases, less as it drops
- Law of demand
o Consumers will buy more of a product as its price drops, less as it rises
Not all markets are the same:
- Ability of buyers to negotiate good prices, depends on number of sellers in the market
Perfect Competition
- Lots and lots of suppliers, and they are all small and must sell at the same price
- Example: carton of milk
Monopolistic competition
- Lots and lots of suppliers, most are small and almost the same thing and at the same price
- Example: coffee shop vs. Starbucks
Oligopoly
- Small number of suppliers (4 or 5)
- Each tries to differentiate itself
- Industry hard to enter, hard to exit
- They watch each other closely
- All are big/large
- Example: Canadian baking industry
Chapter 1 Textbook Notes
Business an organization that seeks to earn profits by providing goods and services
Profit the money that remains after a businesss expenses are subtracted from its revenues
Expenses the money a business spends producing its goods and services and generally running the business (Also
known as costs)
Revenues the money a business earns selling its products and services (also known as sales)
- Profits reward the owners for taking risks by investing their money and time
- Businesses must know what consumers want or need in order to make a profit
o Wont survive if there is no demand for its goods or services
- Healthy business climate contributes to our quality of life and standard of living
- Technology, service businesses and international opportunities keeps production, consumption and
employment growing
- Business profits enhance personal incomes while business taxes supports the government
o Other supports charities
Economic system the way in which a nation allocates its resources among its citizens
Who owns and controls the resources (factors of production)
Factors of production the resources used to produce goods and services
Labour, capital, entrepreneurs, natural resources and now information resources
Labour the mental and physical training and talents of people
Also known as human resources
People who work for a company
Employees who are well trained and knowledgeable can be a real competition advantage for a
company
Capital the funds needed to operate an enterprise
2 | M a n a g e m e n t N o t e s Needed to start a business and then to keep it running and growing
Major source: personal investment by owners that comes from
Individual entrepreneurs
Business partner
Stock buyers
Revenue (sales of product)
Entrepreneurs an individual who organizes and manages labour, capital and natural resources to produce goods and
services to earn a profit, but also runs the risk of failure
Natural Resources items used in the production of goods and services in their natural state, including land, water,
mineral deposits and trees
E.g. water, tree, land and mineral resources
Information Resources information such as market forecasts, economic data and specialized knowledge of employees
that is useful to a business and that helps it achieve its goals
Plays major role in todays societies
Command economy an economic system in which government controls all or most factors of production and makes all
or most production decisions
Market economy an economic system in which individuals control all or most factors of production and make all or
most production decisions
Control production and allocation decisions through supply and demand
Communism a type of command economy in which the government owns and operates all industries
Karl Maxx saw a society where citizens would contribute according to their abilities and receive
economic benefits according to their needs
He expected government ownership of production factors t be only temporary
Workers would own ownership when society had matured
Most countries had abandoned communism in favour of a more market based economy
Socialism a kind of command economy in which the government owns and operates the main industries, while
individuals own and operate less crucial industries
Small business such as clothing stores and restaurants may be privately owned
Workers are allowed to choose their occupation but most people tend to work for the
government
Extensive public welfare have resulted high taxes, thus socialism is declining in popularity
Market a mechanism for exchange between the buyers and sellers of a particular good and service
Buyer and seller enjoy freedom of choice of price and which product they would like to buy
Capitalism a kind of market economy offering private ownership of the factors of production and of profits from
business activity
Mixed market economy an economic system with elements of both a command economy and a market economy; in
practice, typical of most nations economies
Privatization the transfer of activities from the government to the public sector
Deregulation a reduction in the number of laws affecting business activity
Deregulations free company do what they want without government intervention (simplifies the
task of management
Evident in many industries such as airlines, pipelines, baking, trucking and
communication
Government as Customer
- Government buys different products and services from business firms
o Office supplies, computers, highways
- Largest purchases of advertising in Canada
- Many businesses depend on government purchasing
- Spends about a billion year
Government as Competitor
3 | M a n a g e m e n t N o t e s - Competes with business through Crown corporations
- Exist at both provincial and federal level
Government as Regulator
- Regulates business through many administrative boards, tribunals or commissions
- Federal level (Canadian Radio-television)
o Issues and renews broadcast licenses
- Provincial boards and commissions regulates business through their decisions
- Important reasons for regulating business
o Protects competition, protects consumers, achieves social goals and protects environment
Government as Taxation Agent
- Taxes are imposed and collected by federal, provincial a
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