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MGTA01H3 (583)
Chapter 1

MGTA01H3 Chapter 1: Notes

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Department
Management (MGT)
Course
MGTA01H3
Professor
Bill Mc Conkey
Semester
Summer

Description
MGTA01 Chapter 1: What Is a Business? What is a Business? Business: An organized effort to provide the things that people need and want, and are willing to pay for. A business exists in order to satisfy those customer needs, and also to make a profit. Five Characteristics Common to All Businesses Businesses are Organized Efforts Organized efforts refers to one or more people having an idea, and putting time, thought, and effort into carrying out their idea People can discuss their ideas with others to see if it is appropriate to carry out Advertising businesses through posters, flyers, or other mediums Making a schedule to dedicate time to your business A Business Provides Things that People Need and Want A business responds to an occurring need or want Ex. McDonalds caters fast food to people who want inexpensive food served quickly A Business Must Try to Satisfy Customers Needs Businesses would not, and cant exist, without customers o Customers: The people who need or want, and are willing to pay for, the things that a business provides. Some businesses refer to customers as clients o Clients: People who use the services of a professional such as a lawyer, an accountant, or an architect. A Business Generates Revenue from Sales Revenue: Money that flows into a business every time it sells a product or a service to a customer Key issue with revenue is customers deciding whether the service they received is worth the payment, the customer agreeing and intending to pay, and actually doing it Costsexpenses: The money businesses spend to provide customers with products o Ex. A pizza company must purchase ingredients to make pizza to sell to customers o These expenses must be subtracted from the revenue o In addition, other costs for the businesses include maintaining factories and warehouses where the products are made, and creating advertisements that will be shown through various mediums Businesses Try to Make a Profit Profit: The positive benefit from running a business, specifically having greater revenue than costs o Calculated by subtracting the expenses from the revenue Profit motive: The idea that people will give up their time, energy, and money only if there is some incentive for them to do so. If there is no payback for their selfsacrifice and risk, rational people will save their time and money. o Essentially a business owners desire to receive some benefit from their business Loss: When the revenues that a business generates are not sufficient to cover all of the costs and expenses involved in running the business
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