Management Chapter 1
Definition of Business
An organized effort to make or sell something to customers who need or
want something in order to make profit
A lot of organizations don’t have profit motive eg family, church, schools
Profit: revenue- expenses
A company’s profit can be used to make more of the product and can invest
in research and employ people
Customers, employees, and investors benefit from profit.
A person that can plan and offer promising opportunity and being able to
follow it through can succeed.
Business produces most of the goods and services we consume, employees
people, provides business to other businesses.
Dependent upon the wealth and living standard of people
Technology, service business and international opportunities promise to
keep production, consumption and employment growing.
Economic systems around the world
- A Canadian business is different in many ways through out each country
since its dependent on type of economic system in that country.
Factors of Production
-the key difference between the economic systems is the way they manage
the factors of production.
-Factors of Production: the basic resources that a country’s business use to
produce goods and services. It includes: labour, capital, entrepreneurs and
-Mental and physical capabilities of people.
- humans as part of production
- people that are well trained and knowledgeable can be real competitive
advantage for a company.
-obtaining and using labour and other resources require capital
Capital: the funds needed to operate an enterprise
-major source of capital for a small business is owners personal
-investment can come from individual entrepreneurs or investors who
buy stocks. 3. Enterprises
-The people who accept the opportunities and risks involved in creating
and operating businesses and entrepreneurs.
4. Natural Resources
-Land, water, mineral deposits and threes
-all physical resources
eg: in order to obtain oil, land that contains oil must be found where
refineries and pipelines can be placed.
5. Information resources
- Information suck as market forecasts, economic data and specialized
knowledge of employees that is useful to a business and that helps it
achieve its goals.
- for example, a lot of businesses provide services for many people to
Types of Economic systems
- Different types of economics systems manage the factors of production in
- Economies differ in the way that decisions are made about production and
- There are various different types
1. Command Economies
-the government owns and operates all sources of production and makes
most of the decisions
- Two types: communism and socialism.
a. Communism: is a system in which the government owns and operates
all sources of production
b. socialism: a kind of command economy in which the government owns
and operates the main industries, while individuals own and operate less
Small business such as clothing stores and restaurants may be
Usually allowed to choose profession but most work for government
People working for the government are selected based on political
view rather than qualifications causing inefficiency of enterprises
2. Market Economy
-a mechanism for exchange between buyers and sellers of a particular
good or service
-individual owns/controls factors of production
- Buyers and sellers are free to price/ produce what they wish
-Capitalism: a kind of market economy offering private ownership of the
factors of production and of profits from business activity. -enterprises are allowed to decide what to build, price and how much to
3. Mixed Market Economy
-Individuals own/ control majority of factors individuals make most of
the economic decisions.
- eg: government regulates tax, run some business ( medicine sector,
-adopted market mechanisms through a process called Privatization
-Privatization: the government hands over a business to private
companies to run with a profit motive and more efficiently.
-another trend is deregulation: a reduction in number of laws affecting
Interactions between business and government
1. Government as customers
- government buys thousands of products and services form businesses while
many businesses depend on government as their main supplier.
- eg: battleships, helicopters, highways and water treatments
2. Government as a competitor
- government competes with businesses through Crow corporations
3. Government as a regulator
- Federal and provincial government regulate many aspects of business
- Government regulates: Canadian Radio-Television and telecommunications
- Reasons for regulating act