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Chapter 1

Thorough notes for Chapter One of Business, Vol. 1, 2e

Management (MGT)
Course Code
Chris Bovaird

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MGTA03 Business, Volume 1
R. Griffin, R. Ebert, F. Starke
Chapter 1 Understanding the Canadian Business System
The Concept of Business and Profit
A business is an organization that produces/sells goods or services in an effort
to make a profit. (Profit = Revenues Expenses)
What consumers want/need is important for business owners to take into
account because without the demand for their good/service their business will
not survive (no matter how efficient)
Someone who sees a promising opportunity (which always involves
goods/services that consumers need/want) and develops a good plan for
capitalizing on it will be able to succeed as a business
New forms of technology, service businesses, and international opportunities
keep production, consumption, and employment growing
Economic Systems Around the World
An economic system is the way in which a nation allocates its resources
among its citizens
Major determinant of how organizations operate: type of economic system
that characterizes the country that they do business in
Factors of Production
Factors of production are the basic resources that a business uses to produce
goods and services
Key difference between economic systems: the way in which their factors of
production are managed
oLabour the people who work for a company. Well-trained,
knowledgeable employees can be a competitive advantage for a
oCapital financial resources needed to operate an enterprise. For
small businesses, a major source of capital comes is personal
investments by owners. Revenue = key and ongoing source of capital
oEntrepreneurs the people who accept the opportunities and risks
involved in creating and operating businesses; the person who

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organizes and manages labour, capital, and natural resources to
produce goods/services to earn a profit
oNatural Resources items used in the production of goods/services
in their natural state (i.e. land, water)
oInformation Resources information such as market forecasts,
economic data, and specialized knowledge of employees that is useful to
a business and helps it achieve their goals
Types of Economic Systems
oCommand Economies economic system where the government
controls all or most factors of production and makes all or most
production decisions
2 most basic forms of command economies are communism
(government owns and operates all industries, - abandoned by
most countries) and socialism (less extreme, government owns
and operates only main industries, individuals operate less
crucial ones, - declining in popularity)
oMarket Economies economic system where individuals are in
charge and the government takes the back seat on issues regarding
production and decisions; buyers and sellers enjoy freedom of choice
Market mechanism for exchange between buyers and sellers
Capitalism kind of market economy that offers private
ownership of the factors of production and of profits from
business activity
oMixed Market Economies economic system with characteristics of
both a command and market economy; typical of most nations
Privatization process of converting government enterprises
into privately owned companies
Deregulation the 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
Interactions Between Business and Government
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