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RSM100Y1 (431)
Chapter 1

RSM100Y1 Chapter 1 Notes
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Department
Rotman Commerce
Course
RSM100Y1
Professor
Michael Khan
Semester
Fall

Description
RSM100Y1 Textbook Notes Chapter 1  Business: all profit-seeking activities and enterprises that provide goods and services necessary to an economic system (provides the means for improving a nation’s standard of living).  Profits: rewards for businesspeople who take the risks involved to offer goods and services to customers (incentive for people to start companies, expand them, and provide consistently high-quality competitive goods/services).  Not-for-profit Organizations: organizations whose primary aims are public service not returning a profit to its owners. o 160,000 + registered NFPO’s in Canada. o Operate in both public/private sectors. o Approx. half of their revenue comes from government grants (mostly provincial).  Factors of production: four basic inputs for effective operation: o Natural Resources (basic inputs required in any economic system) o Capital (firms need to continuously acquire, maintain and upgrade their capital) o Human Resources (effective, well-trained human resources can provide firms with a significant competitive edge) o Entrepreneurship: the willingness to take risks to create and operate a business. FACTOR OF PRODUCTION CORRESPONDING FACTOR PAYMENT Natural Resources Rent Capital Interest Human Resources Wages Entrepreneurship Profit  Private Enterprise System (capitalism): an economic system that rewards firms for their ability to identify and serve the needs and demands of customers.  Adam Smith (known as the father of capitalism): the economy is best regulated by the “invisible hand” aka competition (battle amongst business for consumer acceptance).  Competition Differentiation: the unique combination of organizational abilities, products, and approaches that sets one company apart from its competitors in the minds of customers.  Basic Rights in the PES: o Private Property: the most basic freedom under the PES, the right to own, use, buy, sell and hand down land, buildings, machinery, equipment, patents, individual possessions, and intangible kinds of property. o Profits: Businesses are entitled to all after-tax profits they earn through their activities. o Freedom Choice: a PES relies on citizens to choose their own employment, purchases, and investments (a private enterprise economy maximizes individual wealth by providing options). o Competition: PES allows fair competition by allowing the public to set the rules for competitive activity (Canadian government has laws to prohibit excessively aggressive competitive practices designed to remove the competition)  Entrepreneur: a person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business (PES needs entrepreneurs to exist).  99% of all new businesses are small businesses (employ -500 & income $30,00-5M).  Small businesses generate 45% of Canada’s economic output and create 80% of all new jobs. Six Eras in Business History 1. The Colonial Period (Before 1776)  Colonial society featured rural and agricultural production  Colonial cities functioned as marketplaces for farmers and craftspeople.  Economy depended on the output of farms.  Colonists depended on Europe for manufactured items and financial aid. 2. The Industrial Revolution (1760-1850)  Economy moved to a factory system that mass-produced items by using numerous semiskilled workers.  Profit was made from large-scale production and by increasing a company’s use of machines.  Began to buy in bulk (more savings).  Agriculture became mechanized.  New railroad systems aided in the increased pace of the revolution. 3. The Age of Industrial Entrepreneurs (Late 1800s)  Opportunities created from the IR increased entrepreneurship in Canada.  Inventors created new production methods and a virtually endless number of commercially useful products. (i.e. Alexander Graham Bell, his father Melville and friend Reverend Thomas Henderson started what is now known as Bell Canada Inc. in 1877)  Advanced the Canadian business system and increased the overall standard for living for Canadians. This created a new demand for manufactured goods. 4. The Production Era (Through 1920s)  Businesses began to focus on the activities needed to produce manufactured goods.  Work became more specialized, and huge, labour-intensive factories were common in North America.  Managers, who were trained in operating companies, were given the responsibilities of business owners (produced more goods using quicker methods).  Attention was on internal processes instead of external influences.  Marketing was rare.  Little attention paid to consumer wants/needs. 5. The Marketing Era (Since 1950s)  After The Great Depression, sales and advertising became important activities (selling meant marketing in this period).  Consumer Orientation: a business philosophy that focuses first on the consumers’ unmet wants and needs, and then designs products to meet those needs.  Branding: the process of creating in consumers’ minds an identity for a good, service, or company; a major marketing tool in contemporary business.  Brand: a name, term, sign, symbol, design, or some c
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