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RSM100Y1 (431)
Chapter 1

RSM100 Chapter 1 The Changing Faces of Business

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Rotman Commerce
Khan, Michael

RSM100-­‐John_Oesch-­‐textbook_notes-­‐created_by-­‐lavender.Y   Chapter  1  The  Changing  Faces  of  Business   1.1 Distinguish  between  business  and  not-­‐for-­‐profit  organizations   • Business:   ü profit-­‐seeking   activities/enterprises   that   provide   goods/services   necessary   to   an   economic  system  (e.g.  tangible  goods)   ü Improving  a  nation’s  standard  of  living     ü Profits:     Ø reward  for  business  people  who  take  the  risk  involved  to  offer  goods/services  to   customer   Ø Serve  as  incentives  for  people  to  start/expand  businesses   Ø To  succeed  in  the  long  run  -­‐-­‐-­‐  social  /  ethical  responsibilities   • Not-­‐for-­‐Profit  Organization   ü Primary  aims  are  public  service,  not  returning  a  profit  to  its  owners   ü Focus  on  GOALS,  but  need  to  raise  money  to  operate  /  achieve  social  goals   © E.g.  response  to  emergency     ü Private  Sectors  (museum,  library)  vs.  Public  Sectors  (govern.  agency,  labor  union)   ü Facts:  160,000  registered  in  Canada,       1.2 Factors  of  production  (4  basic  inputs  for  effective  operation)   • Natural  Resources:     ü are  useful  in  their  natural  states,  e.g.  land,  building  site,  forest,  mineral  deposits   ü Encana  Corporation  (leading  natural  gas  supply)   ü Barrick  Gold  Corporation  (gold  industry  leader)   • Capital     ü Consist  of  technology,  tools,  information,  physical  facilities   ü To   remain   competitive,   firms   need   to   continually   acquire/maintain/upgrade   its   capital   • Human  Resources   ü Anyone  who  works,  physical  labor  &  intellectual  inputs   ü Entrepreneurship:  willingness  to  take  risks  to  create  and  operate  a  business   © Entrepreneur:  someone  who  sees  an  opportunity  to  make  a  profit  and  then  take   actions  to  succeed       1.3 Private  enterprise  system,  including  basic  rights  and  entrepreneurship   • Private  enterprise  system     ü An  economic  system  that  rewards  firms  for  ability  to  identify/serve  needs/demands   ü Minimize  government  interference   ü Business  that  are  skillful  at  satisfying  customers  will  gain  access  to  necessary  factors   of  production  and  earn  profits   ü Also  known  as  Capitalism  (Adam  Smith,  wealth  of  nations)   © Economy  is  best  regulated  by  the  invisible  hand  of  competition  (battle  among   RSM100-­‐John_Oesch-­‐textbook_notes-­‐created_by-­‐lavender.Y   business  for  consumer  acceptance  lead  to  best  possible  products  and  prices)     ü Competitive  differentiation:   © unique  combination  of  organized  abilities,  products,  and  approaches  that  sets   one  company  apart  from  its  competitors  in  the  minds  of  customers   • Basic  Rights  in  the  private  enterprise  system   ü Private  property   © To  own/use/buy/sell  and  hand  down  land,  buildings,  machinery,  patents,  and   other  intangible  kinds  of  property   ü Profits   © All  after-­‐tax  profits   ü Freedom  of  choice   © To  choose  employment,  purchases,  investments,  discuss  wages,  join  labor  union   ü Competition   © Fair  competition  through  rules  /  laws   © Illegal:  price  discrimination,  fraud  in  financial  market,  deceptive  advertising   • The  Entrepreneurship  Alternative  –  drives  economic  growth     1.4 Six  eras  of  business  &  how  the  relationship  era  influences  contemporary  business   • Colonial  period:  (prior  to  1776)   ü primary  agricultural   • Industrial  revolution:  (1760-­‐1850)   ü mass  production  by  semiskilled  workers,  aided  by  machines   ü changed  from  independent  skilled  workers  to  factory  system     ü profit  from  large-­‐scaled  production,  increasing  use  of  machine   ü specialization  of  labor   ü transportation:  railroads   ü Transaction  management:  promoting  products  in  the  hope  that  enough  customers   will  buy  to  cover  costs  and  earn  profits   • Age  of  industrial
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