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University/Faculty Regulations
Minimum attendance in class : 75% No plagiarism in report/academic work and
writing (Merriam-Webster’s Collegiate Dictionary, Eleventh Edition, USA, 2003) to steal and pass off (the ideas or words of another) as one’s own to use (another’s production) without crediting the source to commit literary theft to present as new and original an idea or product derived from an
existing source No cheating in examination Please come on time!
Learning Objectives
The goal of a business The resources a business uses to produce
products/services The key stakeholders involve in a business The business environment The responsibilities of firms to their
customers, employees, stockholders, creditors, environment and their communities
What is Business?
A business is a person, partnership or corporation that seeks to provide goods and services to others at a profit Goods: tangible products (i.e. products that can be
touched), such as camera, food, computer, clothing, etc
• Business that provide goods are considered to be in the manufacturing sector of the economy
Services: intangible products (i.e. products that cannot be touched), such as education, insurance, travel, etc
• Business that provide services are considered to be in the service sector of the economy
What is the Service Sector?
Services Examples
Personal services Laundries, photographic studios, health clubs, beauty shops
Business services Accounting, consulting, equipment rental
Financial services Banking, insurance, real state agencies
Legal services Law firm
Educational services Schools, libraries
Automotive repair services and garages
Auto rental, parking lots, car washes
Amusement and recreation services Golf courses, video rentals
Etc ….
Where Profits Come From
A business receives revenue when it sells its products or services
It incurs expenses from paying its employees and when it purchases machinery or facilities
The difference between revenue and expenses is the profits (or earnings)
Profits go to the owners of the business, thus there is an incentive and reward for success
Profits are dependent upon 3 conditions:(1) Demand: there needs to be demand for your product or service
(2) Attract: you must attract customers (better/lower quality of service)
(3) Expenses: keep expenses low, thus reward will be higher profits
Government & Nonprofits
Free-Market economies: people are free to start a business and profit from it Business provide employment, which provides money for
employees and profits for businesses
In socialist countries, businesses were owned by governments and had no profit incentive
Nonprofit businesses serve specific causes and are not intended to make profits Examples: Churches, schools, hospitals
Types of Businesses
Local business A company is local if there
is only one outlet that serves a limited surrounding area
Have a small number of employees and are associated with the town or city in which they are located
Example: Bakmi Margonda Depok, etc
Regional business Serve a wide area
although they don’t serve a national or international market
Example: JOGER, DAGADU, etc
Challenge:
• managing money
• unfavorable economic conditions
• undercapitalization
Types of Businesses [2]
National business Has several outlets through-out the country but it doesn’t serve
an international market Challenge: state law, tax rate, complex supply chain Example: Sinar Mas
Multinational (International) Business Have expanded to provide goods or services to international
consumers or serve only one country, but have suppliers or production facilities in other countries
Have all been adapted to fit the culture of the country in which they are located
Challenge: every country has different corporate laws, business practices, law of the countries (export, import, safety regulations, quality control, copy rights, patent right), etc
Example: McDonald
Factors of Production
Natural Resources any resources that can be used in its natural form example: land
Human Resources the people who are able to perform the work
Capital machinery, equipment, tools and physical facilities
used by a business Entrepreneurship
creation of business ideas and willingness to accept risk
Technology
Technology is an enabler it enables firms to use their capital more effectively
Information Technology (IT) using information to produce products and services
more efficiently E-business or E-commerce
when firms use electronic communications to sell products or services
includes business transactions between a company and its customers, as well as suppliers
ElectronicBusiness
InformationTechnology
Stakeholders
Stakeholders: people who have an interest in a business Owners: the entrepreneurs or owners of the business Creditors: financial institutions or persons who
provide loans Employees: people hired to conduct business
operations Suppliers: companies where the business can obtain
materials required for the business Customers: company cannot survive without
customers
Owners
The entrepreneur the founder of the business and is usually the sole owner(s)
when the business initially starts operations. If a business has more than one owner then the investment, risk and profit are shared
Stockholder investors who purchase stock (a certificate representing
ownership in a firm)
Entrepreneur Stockholder
Creditors
Creditors provide loans to a company to help with its inception and growth
Creditors can be financial institutions (commercial banks) or individuals (investors) who provide loans
Business Environment
Social Environment social tendencies to which a business is exposed demographics are the characteristics of the population, which
change over time
Industry Environment conditions within the industry within which a firm operates will
also change over time, according to demand and competition
Economic Environment economic conditions will strongly impact the firm’s performance
Global Environment global conditions may directly or indirectly effect businesses
Business Decisions
Management – how will the company use employees and other human resources?
Marketing – how are products and services developed, priced, distributed and promoted?
Finance – how will the company obtain and use funds for operations?
Decisions are commonly based on data which come from accounting system (analysis of financial conditions) and Information System (provides appropriate information to those who need to make a decision)
Customers – Social Responsibility
Companies have a social responsibility when producing and selling products All production should be completed with customer
safety in mind• Example: warning labels on prescription drugs
should be used to prevent accidents that could result from misuse
Responsibility extends into the sales process as well • Example: a common problem is that product may
be overpriced because the salesperson is more interested in making a higher commission (rather than saving the customer money)
Responsibility to Employees
Employee Safety Safety in the workplace
must be ensured by the company
Example: safety glasses, steel-toed shoes, and back harnesses are required to worn for certain types of work Workplace
Safety
Responsibility to Employees [2]
Proper Treatment by other employees The workplace must allow for employees to be treated fairly The two main issues are:
• Diversity– sensitivity to various types of workers to avoid conflicts
or discrimination – Example: It is wrong for a company to hire a male, over
an equally qualified female, for a position that has traditionally been male dominated
• Sexual Harassment– prevention of unwelcome comments or actions of a
sexual nature – Example: emails or jokes told in the workplace that relate
to sexual situations
Ensuring Responsibility
Code of Responsibility This code was previously mentioned under
responsibilities toward customers The code should be used for guidance (as it will not
attempt to spell out recommended behaviors for every situation)
Grievance Policy Gives employees a chance to communicate if they feel
that they have not been given equal opportunity
Job Satisfaction
Responsibility to Stockholders
Employee Compensation many companies tie employee compensation to the
firm’s performance this solves some issues, but creates others
Stockholder Actions
Shareholder activism the active efforts of shareholders to influence
the management of a firm
Institutional Investors financial institutions that purchase large
amounts of stocks these types of investors have been the most
active example: insurance companies invest large
portions of their premiums in stocks
Responsibility to Community
Contributions companies often make contributions by sponsoring
local events example: many businesses prominently display
plaques of appreciation from the local school or sports team that they recently sponsored
Foundations firms will often create foundations through which
charitable contributions are made
Summary
Business use factors of production such as natural resources, human resources, capital and entrepreneurship
The key of stakeholders in business are owners, creditors, employees, suppliers and customers
Business are exposed to the social, industry, economic and global environments
The key types of business decisions are management, marketing and finance decisions
Firms have a responsibility to provide safe working conditions, proper treatment and equal opportunity for employees
Firms also have a responsibility to the owners/stakeholders, creditors, environment and local communities