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Chapter 1

MGMT 1 Chapter Notes - Chapter 1: Social Environment, Uniform Commercial Code, Nonprofit Organization


Department
Management
Course Code
MGMT 1
Professor
Thomas Eppel
Chapter
1

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CHAPTER 1: TAKING RISKS & MAKING PROFITS WITHIN THE DYNAMIC BUSINESS
ENVIRONMENT
ENTREPRENEURSHIP AND WEALTH BUILDING
-Business: any activity that seeks to provide goods and services to others while operating
at a profit
- To earn, provide desired goods, jobs, services to people
-Goods: tangible products (computers, food, clothing, etc)
-Services: intangible products (products that can’t be held in your hand education,
health care, insurance, etc)
- Need to reach customers
-Entrepreneur: person who risks time and money to start and manage a business
-Revenue: total amount of money a business takes in during a given period by selling
goods and services
-Profit: amount of money a business earns above and beyond what it spends for salaries
& other expenses needed to run operation
-Loss: when business’s expenses are more than its revenues
- Lose money over time shut down no work
-Risk: chance entrepreneur takes of losing time & money on a business that may not
prove profitable
- Starting business huge risks huge profits
- Entrepreneurs became wealthy & gave employment to people
- Walmart (Sam Walton): nation’s largest private employer
- Businesses & employers pay taxes to government to build public facilities
- Taxes: keep environment clean, support people, provide police & fire protection
- Part of economic system that contributes to standard of living & quality of life
-Standard of living: amount of goods and services people can buy with the money they
have
- Ex: U.S highest standards of living even if other countries on avg make more per
hour bc since prices in other countries more expensive, people buy less
- Cost more bc higher taxes & stricter government regulations
- High standard of living bc wealth created by businesses
-Quality of life: general well-being of a society in terms of its political freedom, natural
environment, education, healthcare, etc
- Combined efforts of businesses, nonprofit, gov agencies
-Stakeholders: people who stand to gain or lose by policies & activities of a business and
whose concerns the business needs to address
- Customers, employees, stockholders, suppliers, dealers, bankers, community
people, media, environmentalists, competitors, unions, critics, elected
government leaders
- Challenge: recognize & respond to the needs of stakeholders
-Outsourcing: contracting with other companies to do some/ all functions of a firm (i.e.
production or accounting tasks)
-Insourcing: foreign companies setting up design & production facilities in US
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- Ex: car brands, hyundai, toyota, honda
-Nonprofit organization: goals do not include making personal profit for its owners or
organizers (devoted to social causes)
- Financial gains to meet social/ educational goals
ENTREPRENEURSHIP VS. WORKING FOR OTHERS
- Two ways to succeed in business
- 1. Rise through ranks of large company
- Advantage: working for someone company’s entrepreneurial risk &
provides you with benefits (insurance, vacation)
- 2. riskier : become entrepreneur
- Freedom to succeed also means freefrom to fail
- Make own decisions, opportunity, possible wealth
- Don’t receive benefits (paid vacation time, day care, insurance). Provide it
yourself
- Women: of all businesses
-5 factors of production that contribute to wealth
- 1. Land (natural resources)
- 2. Labor (workers)
- 3. Capital (machines, tools, buildings, anything used in production of goods)
- Money is not a factor
- 4. Entrepreneurship (resources have little value unless entrepreneurs take risks)
- 5. Knowledge (info technology revolutionized business, to determine wants &
needs) most important factor
- What makes rich countries rich today: combination of entrepreneurship & effective use of
knowledge to increase wealth
- Economic & political freedom also matter
- Business environment either encourages or discourages entrepreneurship
explains why some states & cities are rich while others are poor
THE BUSINESS ENVIRONMENT
-Business environment: consists of surrounding factors that either help or hinder the
development of businesses. 5 elements:
- 1. Economic and legal environment
- 2. Technological environment
- 3. Competitive environment
- 4. Social environment
- 5. Global business environment
- Building the right business environment is foundation for social benefits of all
kinds
- Monitor environment carefully & adapt
- Economic and Legal Environment
- Start business if believe risk of losing money isn’t high
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