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Chapter 1-2

Chapter 1-2 Notes

Management (MGT)
Course Code
Chris Bovaird

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Business – an organization that seeks to earn profits by providing goods and service
Profit – the money that remains (if any) after [revenues - businesss expenses]
Expenses – the money a business spends producing its goods and services and
generally running the business
Revenues – the money a business earns selling its products and services
Succeed – 1) spot a promising opportunity
2) develop a good plan for capitalizing on it
The opportunity involves goods or services that consumers want or need
A healthy business climate also contributes directly to our quality of life and
standard of living. N4
New forms of technology, service businesses, and international opportunities
promise to keep production, consumption, and employment growing indefinitely.
Business taxes help to support governments at all levels
Many businesses support charities and provide community leadership
A variety of economic systems are found around the world, we will first consider
how the dominant ones operate.
Economic system – the way in which a nation allocates its resources among its
Factors of production – the resources used to produce goods and services: labour,
capital, entrepreneurs, and natural resources
Labour – the mental and physical training and talents of people; sometimes called
human resources
Employees who are well trained and knowledgeable can be a real competitive
advantage for a company
Capital – the funds needed to operate an enterprise
Investments can come from individual entrepreneurs, from partners who start
businesses together, or from investors who buy stock
Revenue from the sale of products is a key and ongoing source of capital once a
business has opened its doors
Entrepreneur – an individual who organizes and manages labour, capital, and natural
resources to produce goods and services to earn a profit, but who also runs the risk of

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Natural resources – items used in the production of goods and services in their
natural state, including land, water, mineral deposits, and trees
Include all physical resources, e.g. use crude oil, and also needs the land where
Information Resources – information such as market forecasts, economic data, and
specialized knowledge of employees that is useful to a business and that helps it
achieve its goals
While the production of tangible goods once dominated most economic systems,
it plays a major role
Much of what they do results in either the creation of new information or the
repackaging of existing information for new users and different audiences
America Online does not produce tangible products. Instead, it provides
numerous online services for its millions of subscribers in exchange for monthly
access fees.
Different types of economic systems manage the factors of production in
different ways
Economic systems also differ in the way that decisions are made about
production and allocation
Command economy – an economic system in which government controls all or most
factors of production and makes all or most production decisions
Individuals may be told where they can and cannot work
companies are told what they can and cannot purchase or how much they
pay for items
Communism – a type of command economy in which the government owns and
operates all industries
Marx envisioned a society in which individuals would ultimately contribute
according to their abilities and receive economic benefits according to their
Once society had matured, government would “wither away” and the
workers would gain direct ownership
Most countries have now abandoned communism in favour of a more
market-based economy
Socialism – a kind of command economy in which the government owns and
operates all industries
Less extensive command economic system
Smaller businesses (clothing stores and restaurants) privately owned

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Workers in socialist countries are usually allowed to choose their
occupations or professions
Large proportion generally works for the government
Many government-operated enterprises are inefficient, since management
positions are frequently filled based on political considerations rather than
on ability
Extensive public welfare systems have also resulted in very high taxes
Socialism is generally declining in popularity
Market Economies – a mechanism for exchange between the buyers and sellers of a
particular good or service
Both buyers and sellers enjoy freedom of choice
Capitalism – a kind of market economy offering private ownership of
the factors of production and of profits from business activity
Sanctions the private ownership of the factors of production and encourages
entrepreneurship by offering profits as an incentive
The economic basis of market processes is the operation of demand and
Market economy – an economic system in which individuals control all or most
factors of production and make all or most production decisions
Individuals – producers and consumers – control production and allocation
decisions through supply and demand
Mixed Market Economies – an economic system with elements of both a command
economy and a market economy; in practice typical of most nations’ economies
Privatization - the transfer of activities from the government to the public sector
e.g. (Air Canada, postal system)
The new enterprise reduced its payroll, boosted efficiency and productivity,
and quickly became profitable
Deregulationa reduction in the number of laws affecting business activity and
in the powers of government enforcement agencies
It frees companies to do what they want without government intervention
Simplifying the task of management
It is evident in many industries (e.g. airlines, pipelines, banking, trucking,
and communication)
How Government Influences Business
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