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Chapter 1

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Management – Lecture 1 + 2 notes Chapter 1 o Definition of “business” - Organization, organized effort - Make a plan, think things through and sell something - Produces/provides/supplies/furnishes something - Customers – people who have needs and wants - Businesses recognize these needs and wants - Businesses does all this in order to make a profit - Vast majority of business employ 1-3 people at least o Profit and Loss - Profit is the money that comes in which is the result of successfully selling something. – “revenues/sales” - Customers pay and get something in return, they give money and get what they want - Money they invest in purchasing the supplies for their business is the money that comes in – “costs/expenses” - Profit is the difference between the money that comes in and the money that goes out. - Revenues(sales) = 6.00 Less expenses(costs) 5.00 Profit = 1.00 - Businesses exist to have more money at the end than what they started with. - Not every organized effort is a business - There are big worthy organizations but do not exist to have more money at the end - Provide services for society (hospitals, universities, churches) - Non profit organizations gain money through fundraisers, companies who decide to sponsor, auctions, these are all done in order to stabilize an organization. - Salaries tend to be lower than private and for profit organizations. - People go into non-profit for more emotional/social/political reasons - Non-profit does not pay taxes, money goes straight to the “cause” - Universities are an organized effort, provides a service and has customers - Why is it not a business? o Doesn’t make a profit and doesn’t remotely cover the cost o Charges included o Effort to raise the revenues but there’s no profit o Taxpayers allow for this establishment to exist o Tuitions pay for 30% of the “establishment” o There are for profit universities in the U.S o If it’s trying to make money it’s a business o It’s not a business if they’re just trying to cover the costs o Loss - Costs of running the business is more than what you bring in - Still a business, just not a successful one o Loss- making business - Business may not have loyal customers - Loss of innovation - Competitors - Technology may become obsolete o Example: blockbuster o In the VHS business o Slowing moved into DVD o By then it came around and it became available online - U.S banks are making a loss o Product = loans o Revenues/sales source = interest and paying the money back o They lent bad mortgages, to people who weren’t in the position o pay them back - General motors (2008) – loss of $31 bn - Chrysler (2008) – loss of $6 bn - Phoenix cayotes – no market for hockey due to location o Profitable Businesses - Microsoft - Google – valuable as the stock market, but trying to increase the revenues. Makes money through click on advertisements - RBC – most profitable bank - Most profitable in the whole world – Exxon Mobil (oil/petroleum) o Economics - Business – how you actually run a business, strategies and motivations - Economics – bigger picture and model based and why do people make the decisions they make and why they want what they want. - Why are there certain blah blah, why buy blah blah? - How to distribute wealth? o Factors of production - How you put together a business - Basic economic theory o Every business has building blocks, essential features are universal throughout every business, these are the factors of production. - 4 factors of production o Natural resources  Anything that comes from the ground (nature), what you harvest  Examples: coal, wheat, water and wood o Labour  You need people, workers  At least one human being o Capital  Money or machines that money can buy- computers, phones, tractors etc  Each business = 3 ingredients = natural resources+labour+capital = MORE $$ th  30 years ago = innovation of the 4 factor of production o Entrepreneurs or culture/society  People who assemble the basic ingredients  They’re the people who make the businesses happen  Belief that gov’t would make it all happen but central planning wasn’t quite efficient  1970s – politicians – Margaret thacher and Ronald Reagan  We need people who want t get rich and have ideas  Entrepreneurs control and make decisions of other people – “puppeteer”  Prof personally thinks – culture/society which values and encourages entrepreneurship is the 4 factor  Praise and encourage these people  Entrepreneurs – “part of the labour”  Belief
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