MGTA01H3 Chapter : Management Test 1 Notes.docx

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Management (MGT)
Chris Bovaird

Management Chapter 1 Business: - An organization that produces or sells goods or services in an effort to make a profit. Profit - What remains after a businesss expenses have been subtracted from its revenues Expenses - Money spent on producing its goods and services and generally running the business. - Also known as costs Revenues: - Money earned from selling products and services. - Also known as sales Factors of Production: LENC - Basic resources that a country`s businesses use to produce goods and services. - 4 factors of production: labour, capital, entrepreneurs, natural resources - Information resources are often included as a fifth factor as well [NOT ON TEST] Labour: - Businesses need people - Ex. Human beings, workers Natural Resources: - Raw materials found in ground, grown from earth, or harvested from nature. - E.g. coal, wheat, water, wood Capital: - Money, or machines and technologies that money can buy - E.g. computers, phones, hammers, tractors Entrepreneurs: - The people who assemble and organize the other factors of production - The individuals who make it all happen Economic System 2 Types Command or Planned Economies GOVt - Gov`t own control factors of production - Gov`t makes all/most of decisions Market Economies: PEOPLE - Individuals own/control factors of production Planned Economies 2 Type Communist Economies 100% - Govt owns/controls all factors of production - Makes 100% of economic decisions - E.g. very few, probably North Korea Socialist Economies: >50% - Govt owns/controls majority of factors of production, including principal industries - Makes most of economic decisions - >50% Govt Market Economies 2 Types Capitalist Economies: 0% - Individuals owns/controls all factors of production - Individuals makes 100% of economic decisions - E.g. NONE - 0% Govt Mixed Market Economies <50% - Individuals own/controls majority of factors - Individuals make MOST of economic decisions - Govt regulate and tax, run some business - E.g. Canada, USA, UK, France, China - <50% Govt Privatization - Process of converting government enterprises into privately owned companies Deregulation: - Reduction in the number of laws affecting business activity and in the powers of government enforcement agencies - Frees companies to do what they want without government intervention How Government Influences Business: Government as Customer: - Govt buys thousands of different products and services from business firms, like office supplies, office buildings, computers etc. - Govt is also the largest purchaser of advertising in Canada. - Govt expenditures on goods and services amount to billions each year Government as Competitor: - Govt also competes with business through Crown corporations, which are accountable to a minister of parliament for their conduct - Crown corporations exist at both provincial and federal level, and account for a significant and wide variety of economic activity in Canada. Government as Regulator: - Federal and provincial govts in Canada regulate many aspects of business activity - Regulates business thru many administrative boards, tribunals, or commissions - Federal level, e.g. include Canadian and Radio-television and Telecommunication Commission [CRTC], which issues and renews broadcast licenses o Canadian Transport Commission [CTC] which makes decisions about route and rate applications for commercial and railway companies o Canadian Wheat Board regulates prices of wheat - Important reasons for regulating business activity include protection competition, protecting consumers, achieving social goals, and protecting the environment. Government as Taxation Agent: - Taxes imposed and collected by federal, provincial, and local governments - Revenue taxes: taxes whose main purpose is to fund government services and programs [e.g. income taxes] - Progressive revenue taxes: taxes levied at a higher rate on higher-income taxpayers and at a lower rate on lower-income taxpayers. - Regressive revenue taxes: taxes that cause poorer people to pay a higher percentage of income than richer people pay. o Levied at the same rate regardless of persons income o E.g. sales tax - Restrictive taxes: taxes levied to control certain activities that legislators believe should be controlled o E.g. taxes on alcohol, tobacco, and gasoline Government as Provider of Incentives - Federal, provincial, and municipal govts offer incentive programs that help stimulate economic development. - Also offer incentives thru the many services they provide to business firms thru government organizations o e.g. Export Development Corporation: assists Canadian exporters by offering export insurance against nonpayment by foreign buyers and long-term loans to foreign buyers of Canadian products), Energy, Mines and Resource Canada, and Statistics Canada - Other incentive programs, like municipal tax rebates for companies that locate in certain areas, deign assistance programs, remission of tariffs on certain advanced technology production equipment. - Govt incentive programs may or may not have the desired effect of stimulation economy o May also cause difficulties with our trading partners. Government as Provider of Essential Services - Federal, provincial, and municipal govt facilitate business activity thru wide variety of services they supply - Provides highways, postal service, minting of money, armed forces, and statistical data on which to base business decisions - Maintains stability thru fiscal and monetary policy - Provides streets, sewage, sanitation systems, police and fire department, hospitals, education - These activities create the kind of stability that encourages business activity.
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