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Lecture

MGTA01H3 Lecture Notes - Pizza Hut, Factors Of Production, Economic System


Department
Management (MGT)
Course Code
MGTA01H3
Professor
Chris Bovaird

Page:
of 4
MGTA03H3: INTRO TO MANAGEMENT I
September 10, 2012 (Week 1)
Professor Chris Bovaird
E-mail: bovaird@utsc.utoronto.ca
Purchase of the textbook is mandatory. The textbook used for this course is BUSINESS
CUSTOM 2/E VOL. 1
Notes are available online on the UTSC Portal. Lectures will filmed and posted online.
Professor Bovaird is usually available in his office (Instructional Centre Room 266)
Mondays 1 PM - 3 PM
Tuesdays 11 AM - 1 PM
Thursdays 11 AM - 12 Noon
Important Events
In-Class Test
Approximate Date: Late September
Length: 45 Minutes
Format: 25-30 Multiple Choice Questions
Weight: 12.5%
Coverage: Chapters 1-2
Mid-Term Test
Approximate Date: Late October
Length: 1.5 Hours
Format: 35-45 Multiple Choice Questions and 2-4 Short Answer Questions
Weight: 35%
Coverage: Chapters 1-4 or 5
Test and examinations dates are arranged by the Registrar. Therefore, do not arrange
"parties" around that time.
There are weekly reviews which are worth 5%.
Buy "Top Hat Monocle" interactive software (online or UTSC Bookstore).
There 5-6 multiple choice questions posted to internet after lectures 2-10.
Use software app on smartphone to participate in weekly online review.
Total: 50 Multiple Choice Questions worth 5% of final grade.
Main points of today's lecture:
a) Definition of "business"
b) Profit and loss
c) Factors of production
d) Economic systems
Business: an organised effort, to make or sell something, to sell to customers, who need or
want something, in order to make a profit.
The main purpose of the business is for the business' organisers to satisfy the needs/wants
of a customer while also making a profit. If businesses can identify either unmet customer
needs or a better way of satisfying customer needs, they can be successful.
An example of a business would be Pizza Hut. This business would exist because people
might be hungry and Pizza Hut would attempt to take advantage of this by making a profit.
Lemonade stands can also be businesses. This business would exist because people might
be thirsty during the summer. As long as you satisfy the needs/wants of customers while
attempting to make a profit, you are a business.
Business: Characteristics
Customers need and want things and they WILL pay for them.
Business: Definitions
The $$$ that comes in from business conducted with customers is known as "Revenue" or
"Sales".
Customers pay to get something in return. Using the example of Pizza Hut, as mentioned
beforehand, the business must provide a pizza. In order to generate revenue, expense will
occur. For example...
Dough = 50 cents
Cheese = 50 cents
Mushrooms = 40 cents
Green peppers = 40 cent
Onions = 15 cents
Paper plates = 5 cents
Profit, or net income, is thus, the difference between the money in (revenue or sales) and
the money out (costs or expenses).
Profit: Simple example
A business sells small, plain pizza. It makes $6 and the expenses are $5. What is the profit?
Revenue (sales) = $6.00
Less: Expenses (costs) = $5.00
-----
Profit = $1.00
The profit is $1.
Profit is the fundamental reason for a business to exist. Not all organisations, however, are
businesses. For example, hospitals, universities and churches are not businesses. These do
provide services but are not intended for profit.
A major determination of how an organization operates is the kind of economic system that
helps define the country in which they do business.
Economic system: The way in a which a company distributes its resources among its
citizens.
What distinguishes one economic system from another are the factors of production.
Factors of production: The resources used to produce goods and services.
There are 4 types and some argue that there are 5 factors of production:
a) Labour: The people (human resources) who work for a company. Carrying out the
business of a company such as Imperial Oil requires labour with a variety of skills ranging
from geologists to managers.
b) Capital: The financial resources needed to operate an enterprise. Capital, which is
mostly funded by the investments of the owners, is required to start a new business and to
ensure its growth. Capital can be further increased from investments.
c) Entrepreneurs: People who accepts opportunities and risks by creating and operating
businesses.
d) Natural resources: Naturally-occurring items used in the productions of goods and
services.
e) 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. Through these means, businesses will be able to create new innovations and in turn,
increase their marketability.
There are two types of economic systems: command economies and market economies.
The two most basic forms of command economies are a) communism and b) socialism.
a) As proposed by the economist Karl Marx, communism is a system in which the
government owns and operates all sources of production. Marx believed that government
ownership of production factors would only be temporary and that once society had
matured, the government would "wither away". Most countries, however, have now
abandoned communism in favor of a market-based economy.
b) In the economic system known as socialism, the government owns and operates very
few major industries. The majority of companies are privately owned and as a result, are
part of the private sector. While those who live in a socialist environment are generally
allowed to pick their own occupation, most people work for the government. Many
government-operated enterprises are considered terrible, however, because many
management positions are filled based on political inclination as opposed to ability. Public
welfare systems have also resulted in high taxes. As a result, socialism is on the decline.