MGT101 - INTRODUCTION TO BUSINESS ADMINISTRATION

Introduction to Business AdministrationWhy Study Business?As business accelerates in the 21st century, new technologies, population shifts, an shrinking global barriers are altering the world at a frenetic pace. Change is the only Constant (change management is a business by itself)Business people are catalysts for many of these changes, creating new opportunities for individuals who are prepared to take action.Studying contemporary business will help you to prepare for the future.

Introduction to Business AdministrationWhy Study Business?Within the time frame of a few months, you will be introduced to how business operates and why many business graduates choose to start their own businesses rather than work for others (Being your own boss brings you one step closer towards self-actualization) You will get real insights about the various functional areas in a successful business and the professionals who build careers in each function.By the end of the course, you will understand how Marketing, Accounting,Production/Operation and Human Resource Management work together to provide competitive advantages for firms.

THE US BUSINESS SYSTEMConcept of BUSINESSProfit seeking activities of those engaged in purchasing or selling goods and services to satisfy societys needs and wants. (Definition of Profit - The difference between a businesss revenues and its expenses)Consists of all profit-seeking activities and enterprises that provide goods and services necessary to an economic system.An organisation that provides goods or services to earn profits.Some businesses produce tangible goods, such as automobiles, breakfast cereals, and computer chips;Others provide services, such insurance, music concerts, car rentals and lodging.

ECONOMIC SYSTEMEconomic systemA nations system for allocating its resources among its citizens

FACTORS OF PRODUCTIONResources used in the production of goods and services natural resources, labor, capital, and entrepreneurs LABOR [or HUMAN RESOURCES]The physical and mental capabilities of people as they contribute to economic production

CAPITALThe funds needed to create and operate a business enterprise

ENTREPRENEURSPeople who start new businesses and make the decisions that expand small businesses into large ones

NATURAL RESOURCESMaterials supplied by nature Eg. Land, water, mineral deposits, trees

TYPES OF ECONOMIC SYSTEMSPLANNED ECONOMYEconomy that relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions

MARKET ECONOMYEconomy in which individuals control production and allocation decisions through supply and demand

1. MARKETMechanism for exchange between buyers and sellers of a particular good or service

2. CAPITALISMMarket economy that provides for private ownership of production and encourages entrepreneurship by offering profits as an incentive

MIXED MARKET ECONOMIES1. Economic system featuring characteristics of both planned and market economics2. PRIVATIZATION* Process of converting government enterprises into privately owned companies3. SOCIALISM* Partially planned economic system in which the government owns and operates only selected major sources of production

MARKETS, DEMAND, SUPPLY

THE LAWS OF DEMAND AND SUPPLYDEMANDThe willingness and ability of buyers to purchase a good or service

SUPPLYThe willingness and ability of producers to offer a good or service

LAW OF DEMANDPrinciple that buyers will purchase [demand] more of a product as its price drops and less as its price increases LAW OF SUPPLYPrinciple that producers will offer [supply] more of a product for sale as its price rises and less as its price drops

DEMAND AND SUPPLY SCHEDULEAssessment of the relationships between different levels of demand and supply at different price levels

DEMAND CURVEGraph showing how many units of a product will be demanded [bought] at different prices

SUPPLY CURVEGraph showing how many units of a product will be supplied [offered for sale] at different prices

DEMAND CURVESPRICEQUANTITYD( $)8101212108

LAW OF DEMAND THE HIGHER THE PRICE OF A PRODUCT, THE LOWER THE QUANTITY DEMANDED OF THAT PRODUCT.THE LOWER THE PRICE OF A PRODUCT, THE HIGHER IS THE QUANTITY DEMANDED.CETERIS PARIBUS

POSITIVE EFFECT TOWARDS DEMAND T SHIRTSPRICE QTYQTY1281010101281214(+ EFFECT)PQTY1010($)12DD1

POSITIVE FACTORS OF DEMANDSEASONSECONOMYPURCHASING POWERCHANGES IN TASTES, HABIT & CUSTOMSINCREASE SIZE & STRUCTURE OF POPULATIONCHANGES IN THE PRICE OF RELATED GOODSADVERTISING & SALES PROMOTIONTECHNOLOGICAL ADVANCEMENT

LAW OF SUPPLYTHE HIGHER THE PRICE OF A PRODUCT, THE GREATER THE QUANTITY SUPPLIED OF THAT PRODUCT AND THE LOWER THE PRICE, THE LOWER IS THE QUANTITY SUPPLIED. (CETERIS PARISBUS)EXAMPLEIf the price of chicken increases, the quantity of chicken supplied will increase since the seller will sell more to earn more profit.

SUPPLY SCHEDULE & CURVEPRICEQTY1212101088QTYPRICE8810101212SSupply increases as prices Increases because :Established suppliers will supply more to gain greater profits.New suppliers will enter the Market to take advantage of higher prices attainable.

POSITIVE FACTORS OF SUPPLY-Supply Schedule & Supply curvePRICEQTYQTY1212141010128810PQTY101012SS1

POSITIVE FACTORS OF SUPPLY ?Improved technology-efficiency.Improved weather conditions-agricultural products.Improved workers skill & motivation.Reaction to an increase in demand.Prices of inputs decreasesGovernment intervention- subsidy, tax reduction etc.Increase in number of sellersGovernments liberal policy to stimulate growth. ( reducing interest rate)

MARKET PRICE [EQUILIBRIUM PRICE]Profit-maximizing price at which the quantity of goods demanded and the quantity of goods supplied are equal

SURPLUSSituation in which quantity supplied exceeds quantity demanded

SHORTAGESituation in which quantity demanded exceeds quantity supplied

EQUILIBRIUM PRICE AND OUTPUTQuantityPrice1234524681012ssDDSURPLUS S >DSHORTAGE D >SFigure 5.1 HOW EQUILIBRIUM PRICE AND QUANTITY ARE DETERMINED

PRIVATE ENTERPRISEPRIVATE PROPERTY RIGHTSThe right to buy, own, use, and sell almost any form of property FREEDOM OF CHOICEOne can choose what to buy and sellProducers can choose whom to hire and what to produce

TABLE 1.1 DETERMINANT OF EQUILIBRIUM PRICE AND QUANTITY OF PILOT PENS.

PRICE(RM)QUANTITYDEMANDED(units)QUANTITYSUPPLIED(units)MARKET CONDITIONSURPLUS/SHORTAGEMARKET PRICES521010-2 =8 SURPLUSFALLS4488-4 = 4 SURPLUSFALLS3666-6 = 0EQUILIBRIUM2844 8 = -4SHORTAGERISES11022- 10 = -8SHORTAGERISES

PROFITSAnticipated profits play a large role in individuals choices of the goods and services they will produce

COMPETITIONVying among businesses for the same resources or customers

DEGREE OF COMPETITIONPURE COMPETITIONMarket or industry characterized by numerous small firms producing an identical product

MONOPOLISTIC COMPETITIONMarket or industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors

OLIGOPOLYMarket or industry characterized by a handful of [generally large] sellers with the power to influence the prices of their products

MONOPOLYMarket or industry in which there is only one producer, which can therefore set the prices of its products

NATURAL MONOPOLYIndustry in which one company can most efficiently supply all needed goods or services

EVALUATING ECONOMIC SYSTEMS

ECONOMIC GOALSSTABILITYCondition in which the balance between the money available in an economy and the goods produced in it are growing at about the same rate

INFLATIONPhenomenon of widespread price increases throughout an economic system

RECESSIONPeriod characterized by decreases in employment, income, and production

DEPRESSIONParticularly severe and long-lasting recession

FULL EMPLOYMENTEveryone who wants to work has an opportunity to do so

UNEMPLOYMENTLevel of joblessness among people actively seeking work

GROWTHIncrease in the amount of goods and services produced by a nations resources

MEASURING ECONOMIC PERFORMANCE

GROSS NATIONAL PRODUCT [GNP]The value of all goods and services produced by an economic system in a year regardless of where the factors of production are located

REAL GNPGNP adjusted for inflation and changes in the value of a countrys currency

GROSS DOMESTIC PRODUCT [GDP]The value of all goods and services produced in a year by a nations economy through domestic factors of production

PRODUCTIVITYMeasure of economic growth that compares how much a system produces with the resources needed to produce it

BALANCE OF TRADEThe differences between a countrys exports to and imports from other countries

NATIONAL DEBTBUDGET DEFICITSituation in which a government body spends more money that it takes inNATIONAL DEBTTotal amount that a nation owes its creditors

MANAGING THE US ECONOMYFISCAL POLICIESGovernment economic policies that determine how the government collects and spends its revenues

MONETARY POLICIESGovernment economic policies that determine the size of a nations money supply

END OF CHAPTER 1