BUSINESS ENVIRONMENT
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Describe the different types of global economic systems according to the means by which they control the factors of production through input and output markets. Show how markets, demand, and supply affect resource distribution. Identify the various degrees of competition in the economic system. Identify the factors used to evaluate the performance of an economic system.
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In business you get what you want by giving other people what they want. Alice Foote MacDougall
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An
organization that provides goods and services to earn profits
Profits:
The positive difference between revenues and expenses
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o o o o
produce most of the goods & services we consume employ most working people Create most new innovations Provide a vast range of opportunities for new businesses
Enhanced personal incomes of owners and stockholders o Support for charities and community leadership
o
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Domestic
business environment
Environment in which a firm conducts its
operations and derives its revenues (customers, suppliers, competitors)
Global
business environment
International forces that affect a business E.g. international trade agreements,
international economics conditions, political unrest
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Technological
Environment
All the ways by which firms create value
for their constituents Includes human knowledge, work methods, physical equipment, electronics and telecommunications
Political-legal
environment
Relationship between business and
government
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Sociocultural
Environment
Customs, values, and demographic
characteristics of the society in which an organization functions
Economic
Environment
Relevant conditions that exist in the
economic system in which a company operates
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Nations
system for allocating its resources among its citizens
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Labor
Capital
Information Resources
Entrepreneurs
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Physical resources
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Planned Economy:
An economic system in which the
government owns and operates all sources of production
Market Economy:
Individuals control production and allocation
decisions through supply and demand
Mixed Economy:
include both planned and market elements Worldwide trend is toward more market
elements
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Demand
means willingness and ability of buyers to purchase a product The law of demand states that buyers will purchase more of a product as its price drops and less as its price increases.
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Supply
means willingness and ability of producers / sellers to offer a good for sale. The law of supply states that producers will offer more of a product for sale as its price rises and less as its price drops
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$20 18 -
Price of Pizzas
16 14 12 10 864200 -
d an m De rve Cu
Su p Cu ply r ve
Equilibrium Price
1200 -
600 -
800 -
1400 -
Quantity of Pizzas per Week
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2000 1 14
400 -
1000 -
1600 -
1800 -
2-
Profits
motivate individuals to start business, competition motivates businesses to produce their products better or cheaper
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Table 11 Copyright 2005 Prentice Hall, Inc. All rights reserved.
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KEY CONCEPTS
Economic growth -- Aggregate output, standard of living, GDP, productivity Economic stability -- Inflation, unemployment
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Two related factors threaten stability:
INFLATION INFLATION
UNEMPLOYMENT UNEMPLOYMENT
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Recession:
Aggregate output
declines, unemployment increases
Depression: Expansion:
Severe and long-
lasting recession and jobs increase, the economy is in an expansion.
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When the production
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Stabilization
Policy:
Government policy designed to smooth out
fluctuations in the economy
Fiscal Policies Monetary Policies
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Three Major Forces:
The information revolution will continue to boost productivity. Technological breakthroughs will create new industries. Increasing globalization will create larger markets and tougher competition.
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