MGTA05 Lecture 1: Introduction to Management
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MGTA05 – Introduction to Management
•What’s a business?
•What is a profit?
•What resources do businesses use?
•Businesses and exchanges – the economic system
•The role of government
•Markets and how they work
•Competition and market structure
What is a Business?
•A business is
oAn economic organization
oProvides goods and services, or both, of value to customers
oIn exchange for money from customers
oWith the expectation of increasing the value for the owners of the business, usually in the form
oReceives a profit
•A business must have a profit that goes to its owners.
oI.e. UofT does not have owners, and therefore cannot purchase a part of the company. When
UofT makes a sale, it does not go to the ‘owners’ because there are none.
•A lot of companies run like a business but are not a business as they are not for a profit
oI.e. hospitals and public schools
•So a business
oPurchases inputs (materials and labour)
oCreates value by producing goods or services or both
oAllocates that value to various stakeholders
oRealizes that value in transactions with customers
•Businesses add value as they create their products and services
oA lot of people get value from the good or service
•The value is allocated to various parties: First Last
oSuppliers and consumers
oPublic at large
oOwners/investors as profit (At the very end, they are the last to receive value in the allocation
•For a product to be worth it, the value towards the consumers must outweigh the price
•How much value to allocate depends on the market
•To increase profit, reallocate the value that is produced, so that the input is less and the owners get more
oThere is a limit to reducing input towards making a product
•Why is this important?
oCreation of value
You must provide something customers want
You might even create the desire for a product that has not previously existed
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