MGMT 1 Chapter 1: MGMT 1 – Chapter 1

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Grace Mc Laughlin

MGMT 1 – Chapter 1: Risks and Profits • Entrepreneurship and Wealth Building: o Success in business is based on constantly adapting to the market o Business: Any activity that seeks to provide goods and services to others while operating at a profit • Goods: Tangible products (products that can be held in hand) • Services: Intangible products (products that cannot be held in hand) o Entrepreneur: A person who risks time and money to start and manage a business o Revenues, Profits, and Losses: • Revenue: The total amount of money a business takes in during a given period by selling goods and services • Profit: The amount of money a business earns above and beyond what is spends for salaries and other expenses needed to run the operation • Loss: Occurs when a business’s expenses are more than its revenues o Matching Risk with Profit: • Risk: The chance an entrepreneur takes of losing time and money on a business that may not prove profitable • Huge risks often result in huge profits o Standard of Living and Quality of Life: • A nation’s businesses are part of an economic system that contributes to the standard of living and quality of life for everyone in the country • Standard of Living: Refers to the amount of goods and services people can buy with the money they have • Measured by: o Income o Quality and availability of employment o Class disparity o Poverty rate o Hours of work required to purchase necessities o Inflation rate o Cost of goods and services (Cost of Living) • Goods cost more in one country than in another because of higher taxes and stricter gov’t regulations • Quality of Life: Refers to the general well-being of a society in terms of its political freedom, natural environment, education, health care, safety, amount of leisure, and rewards that add to the satisfaction and joy that other goods and services provide • Measured by: o Freedom from slavery or torture o Equal protection under the law o Freedom from discrimination o Freedom of movement o Right to marry o Freedom of religion 2 o Right to education • Maintaining a high quality of life requires the combined efforts of businesses, nonprofit organizations, and government agencies o Responding to the Various Business Stakeholders: • Stakeholders: All the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address • Stockholders, Customers, Surrounding community, Environmentalists, Dealers, Employees, Government leaders, Suppliers, Media, and Bankers • A primary challenge for organizations of the 21 century will be to recognize and respond to the needs of their stakeholders • Outsourcing: Contracting with other companies to do some or all the functions of a firm o Using Business Principles in Nonprofit Organizations: • Nonprofit Organization: An organization whose goals do not include making a personal profit for its owners or organizers • Often strive for financial gains, but they use them to meet their social or educational goals rather than for personal profit • Entrepreneurship Versus Working for Others: o Two ways to succeed in business: • Rise through the ranks of a large company • Advantages: Benefits like paid vacation time and health insurance • To become an entrepreneur 3 • Advantages: Freedom, opportunity, and possible wealth o Opportunities for Entrepreneurs: • The number of Hispanic-owned businesses in the United States • Women now own over a third of all businesses • Businesse
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