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Lecture 01 - MGT03

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

MGTA03H3 Introduction to Management I BOVAIRD Sept. 12, 2011 Lecture 01 – Notes Chapter 1: Understanding the Canadian Business System Purpose of Chapter/Lecture: Main points of today’s lecture: - set the scene - definition of “business” - provide basic definitions - profit and loss - explain a few key theories - factors of production - economic systems Business: an organized effort (between one or more people), to make or sell something, to sell to customers, who need or want something, in order to make a profit. example – pizza business, lemonade stand Business: Characteristics Customers need and want things and they will pay for them. Examples : pizza – exists because they believe that people might be hungry lemonade – exists because they believe that people might be hungry Other terms: Revenues / Sales : - the money that comes in Costs / Expenses: - the money that goes out Profit: The difference between revenues (sales) and expenses (costs) EX. Business sells small, plain pizza Revenue ( sales ) = $6.00 less Expenses (costs) = $5.00 Profit = $1.00 Fundamental reason for a business to exist. Not all organizations are businesses: e.g. hospitals (aim to break-even), universities, churches. These do provide services: but not intended for profit Profit VS. Loss Loss: When expenses > sales ie. It costs more to produce the products, and run the business, than the business can generate through sales. Examples of loss-making businesses: - General Motors (2008) – loss of $31 bn - Chrysler (2008) – loss of $6 bn MGTA03H3 Introduction to Management I BOVAIRD Sept. 12, 2011 - Phoenix Coyotes Question: Why did GM not make a profit? ** Subprime Mortgage - dealing with collateral - banks loaning more than needed, hence people buy bigger mortgaged-houses that they can’t afford - people’s house values decreased, hence they don’t have enough to pay back ** check out Lehman Brothers Week 1: Key Points Chapter 1: to page 10 “Business” defined & characteristics “Profit” and “Loss” “Factors of Production” Economic Systems: - who controls factors Command VS Market economies Lecture 02 –Notes Chapter 01 ( Cont.) – Understanding the Canadian Business System Last week’s main points: This week’s main points Definition of “business” Factors of Production The “profit” motive Economic Systems Revenues or sales - Command Economies Costs or expenses - Market Economies Profit and Loss Supply and Demand Degrees of Competition Economics Economics: The study of how businesses, people make choices about: - What things to produce/consume - How best to produce things - How best o distribute wealth Factors of Production There are basic building blocks used to produce anything, known as “factors of production” Natural Resources – raw materials found in ground, grown from earth, or harvested from nature ex. Coal, wheat, water, wood Labour – Businesses need people. ie. Human beings, workers Capital – money, or machines and technologies that money can buy. ex. Computers, phones, hammers, tractors MGTA03H3 Introduction to Management I BOVAIRD Sept. 12, 2011 Entrepreneurs: The people who assemble and organize the other factors of production, the individuals who make it all happen - Term taken from two French words, entre and prendre ( enter and to take) - History of Reagan and Thatcher , the encouragement of citizens to take charge and start businesses to become rich - Bovaird – disagrees that entrepreneurs are part of the factors of productions, close, but not one of them. The spirit and motivation of these en
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