UNIT ONE – Business UNIT ONE – Business FundamentalsFundamentals

Chapter 1Chapter 1

Economic BasicsEconomic Basics

LESSON #1LESSON #1

Needs, Wants, and BusinessNeeds, Wants, and Business

What is a Business?What is a Business?

An organization that produces orAn organization that produces or sells sells goods or servicesgoods or services to satisfy to satisfy the the needs, wantsneeds, wants, and , and demandsdemands of of consumersconsumers for the purpose of for the purpose of making a making a profitprofit..

Examples: Examples:

Goods or ServicesGoods or Services

Goods Goods Tangible/physical item sold by the business.Tangible/physical item sold by the business. (i.e. Plasma TV from Best Buy)(i.e. Plasma TV from Best Buy)

Services Services Expertise or service provided to the Expertise or service provided to the

customer. customer. (i.e. haircut, physician annual check up, (i.e. haircut, physician annual check up,

legal legal advice, income tax return service) advice, income tax return service)

Goods and ServicesGoods and Services Restaurant (food and service)Restaurant (food and service)

Needs, Wants, and DemandsNeeds, Wants, and Demands

NeedsNeedsThings you must have in order to stay aliveThings you must have in order to stay alive(i.e. warmth in winter, clean water and air, food, (i.e. warmth in winter, clean water and air, food, shelter and medical care.)shelter and medical care.)

WantsWantsThe extrasThe extrasYou don’t need them to survive, but they make You don’t need them to survive, but they make life more pleasant and comfortablelife more pleasant and comfortable(i.e. that 62 inch plasma TV)(i.e. that 62 inch plasma TV)

Business TerminologyBusiness Terminology

ConsumersConsumers A general a term to describeA general a term to describe

anyone who purchases something anyone who purchases something from any business. from any business.

The people who purchase the The people who purchase the computers and those who have computers and those who have their computer repaired at a local their computer repaired at a local repair shop. repair shop.

CustomersCustomers The term used by a business to The term used by a business to

describe those consumers who shop at describe those consumers who shop at its business.its business.

Business TerminologyBusiness Terminology

ProducersProducers businesses that make goods or providebusinesses that make goods or provide services. services.

For example:For example:A computer manufacturer is a producer of goods;A computer manufacturer is a producer of goods;A computer-repair shop is a provider of a service.A computer-repair shop is a provider of a service.

Business TerminologyBusiness Terminology

ProfitProfit The money(income/revenue) that is left after allThe money(income/revenue) that is left after all

costs and expenses of running the business are costs and expenses of running the business are paid. paid.

Revenue/incomeRevenue/income The money the business collects from customersThe money the business collects from customers

when it makes a sale. (Price of shoes to the when it makes a sale. (Price of shoes to the customer is $100, not including taxes) customer is $100, not including taxes)

ExpensesExpenses The expenditures that are involved in running theThe expenditures that are involved in running the

business on a daily basis, such as wages and hydro business on a daily basis, such as wages and hydro as well as those things that get used up such as as well as those things that get used up such as paper and computer toner. paper and computer toner.

Business TerminologyBusiness Terminology

CostsCosts Amount of money required for each stage of production.Amount of money required for each stage of production.

For example the need to purchase other items such For example the need to purchase other items such as: as:

1. the cost of the goods a company is selling1. the cost of the goods a company is selling (inventory); (inventory);

2. the cost of the raw materials to used to2. the cost of the raw materials to used to manufacture the good being sold (cotton or manufacture the good being sold (cotton or steel) steel)

REVENUE – EXPENSES = Profit or (Loss)REVENUE – EXPENSES = Profit or (Loss)

Revenue (Revenue (Price of 1 pair of shoesPrice of 1 pair of shoes) $100) $100

Less: Cost of ShoesLess: Cost of Shoes 50 50

Less: Other daily expenses Less: Other daily expenses 3535

ProfitProfit 15 15

What does a Company do when it makes a profit?What does a Company do when it makes a profit?

Improve its goods and services and Improve its goods and services and reinvest the money back into the businessreinvest the money back into the business

Hire more people or give raises or Hire more people or give raises or bonusesbonuses

Business TerminologyBusiness Terminology

SolvencySolvency Means having the ability to pay your debts Means having the ability to pay your debts and meet your financial obligations. and meet your financial obligations.

A company may not make a profit but beA company may not make a profit but be still have enough money in the bank to still have enough money in the bank to pay of its debts and stay in business. pay of its debts and stay in business.

Insolvency – when a company does notInsolvency – when a company does not have the ability to pay off its debt have the ability to pay off its debt obligations. obligations.

What Impacts Consumer Needs What Impacts Consumer Needs and Wants?and Wants?

Personality and personal interests;Personality and personal interests; Individual abilities;Individual abilities;Individual priorities and values;Individual priorities and values;Individual’s stage of life;Individual’s stage of life;Family responsibilities;Family responsibilities;Trends and fads (may be impacted by Trends and fads (may be impacted by technology, media, businesses, the technology, media, businesses, the environment)environment)

Consumer Trends and FadsConsumer Trends and Fads

TrendsTrends

A general direction or change in A general direction or change in society that lasts a long time – 3 years society that lasts a long time – 3 years or moreor more

FadsFads

Changes that lead to temporary or Changes that lead to temporary or short-term adjustment - 6 months to a short-term adjustment - 6 months to a year)year)

Consumer TrendsConsumer Trends

The 1970’s began the trend of more The 1970’s began the trend of more women entering the workforce.women entering the workforce.

How did this impact changing consumer How did this impact changing consumer needs and wants?needs and wants?– demand for convenience food, extended demand for convenience food, extended

shopping and banking hours, convenient shopping and banking hours, convenient house-hold appliances, hotels including hair house-hold appliances, hotels including hair dryers and ironing boards.dryers and ironing boards.

Television TrendsTelevision Trends

Reality TV

Automobile TrendsAutomobile Trends

MINIVAN (90’s)

SUV (2000’S)

HYBRID

2010’S ??

Fashion TrendsFashion Trends

Trend ExamplesTrend Examples

Trends in TelevisionTrends in Television

Reality TV, Crime TV shows, Reality TV, Crime TV shows, Homeshopping networkHomeshopping network

Trends in AutomobilesTrends in Automobiles

Mini vans and SUV’sMini vans and SUV’s

Fashion TrendsFashion Trends

JeansJeans

Toy FadsToy Fads

Fashion FadsFashion Fads

Fad ExamplesFad Examples

Toy FadsToy Fads

Pokemon, Cabbage Patch Kids, Furbies, Pokemon, Cabbage Patch Kids, Furbies, Pogs, Skooters, Yoyos, Hula HoopsPogs, Skooters, Yoyos, Hula Hoops

Fashion FadsFashion Fads

tie dye, fluorescent clothes, knee warmerstie dye, fluorescent clothes, knee warmers

Needs and WantsNeeds and WantsMaslow’s Hierarchy of Needs and Personal Maslow’s Hierarchy of Needs and Personal

MotivationMotivation

Maslow’s Hierarchy of NeedsMaslow’s Hierarchy of Needs

PhysiologicalPhysiologicalPhysical survival needs: water, food, sleep, warmth, exercise, etc.Physical survival needs: water, food, sleep, warmth, exercise, etc.

Safety/SecuritySafety/SecurityPhysical safety, economic security, freedom from threatsPhysical safety, economic security, freedom from threats

Social(Belonging)Social(Belonging)Acceptance, be part of a group, indentification with a successful teamAcceptance, be part of a group, indentification with a successful team

Ego (Esteem)Ego (Esteem)Important projects, recognition and respect from others, prestige and Important projects, recognition and respect from others, prestige and statusstatus

Self-ActualizationSelf-ActualizationChallenging projects, opportunities for innovation and creativity, Challenging projects, opportunities for innovation and creativity, learning and creating at a high levellearning and creating at a high level

Where do Consumers and Producers Where do Consumers and Producers Meet?Meet?

The MarketThe MarketA market exits wherever consumers (buyers) A market exits wherever consumers (buyers) and producers (sellers) come together to do and producers (sellers) come together to do business.business.

Three Major Groups of MarketsThree Major Groups of Markets1.1. Consumer MarketConsumer Market2.2. Business-to-Business or Industrial MarketBusiness-to-Business or Industrial Market3.3. Stock Market (TBD later in the course)Stock Market (TBD later in the course)

Consumer MarketConsumer Market

Made up of all individuals or households Made up of all individuals or households who want goods and services for personal who want goods and services for personal consumption or use.consumption or use.

Business-to-Business or IndustrialBusiness-to-Business or Industrial MarketMarket

All the individuals and organizations that All the individuals and organizations that produce, sell, rent, or supply goods and produce, sell, rent, or supply goods and services to other businesses.services to other businesses.

For example, cash registers sold to the For example, cash registers sold to the grocery store, delivery vans sold to the grocery store, delivery vans sold to the flower shop, gas to the gas stations, etc.flower shop, gas to the gas stations, etc.

Types of BusinessTypes of Business

Most business fall into one of the fourMost business fall into one of the four categories: categories:

1. The Merchandising Business1. The Merchandising Business

2. The Service Business2. The Service Business

3. The manufacturing or Producing 3. The manufacturing or Producing BusinessBusiness

4. The Non-Profit Organization4. The Non-Profit Organization

The Merchandising BusinessThe Merchandising Business

Buys goods and resells them atBuys goods and resells them at a higher price for a profit. a higher price for a profit.

Examples:Examples:

The Service BusinessThe Service Business

sells a service to the publicsells a service to the public

it does not sell a product as its mainit does not sell a product as its main activity activity

usually provides skills or expertise andusually provides skills or expertise and the customer is involved in the delivery of the customer is involved in the delivery of the service the service

Note:Note:

Sometimes a service company will sell Sometimes a service company will sell products (i.e. hairdresser selling products (i.e. hairdresser selling shampoo), but it is a sideline and not the shampoo), but it is a sideline and not the main business.main business.

Sometimes a merchandising business will Sometimes a merchandising business will offer services (i.e. computer repair or offer services (i.e. computer repair or hemming clothes), but it is also just a hemming clothes), but it is also just a sideline and not the main business.sideline and not the main business.

The Manufacturing BusinessThe Manufacturing Business

Buys raw materials, Buys raw materials, converts them into a converts them into a product and sells product and sells these products to these products to earn a profit.earn a profit.

Consider a Consider a construction construction company, a paper company, a paper mill, or steel plant.mill, or steel plant.

The Producing BusinessThe Producing Business

Closely related to Closely related to manufacturingmanufacturing

Examples include Examples include farms who may farms who may produce milk, grain, produce milk, grain, etc. Other examples etc. Other examples include oil extraction, include oil extraction, mining, forestry, mining, forestry, hunting, and fishinghunting, and fishing

Non-Profit or Not-for-Profit Non-Profit or Not-for-Profit

OrganizationOrganization An organization that does not seekAn organization that does not seek

to make a profit, but instead to make a profit, but instead raises money/funds for a specific raises money/funds for a specific goal. (churches, charities, recreational goal. (churches, charities, recreational sports clubs) sports clubs)

Examples include: Canadian Cancer Foundation, Examples include: Canadian Cancer Foundation, Amnesty International, Junior Achievement etc.Amnesty International, Junior Achievement etc.

Channels of DistributionChannels of Distribution

A business can be classified by how it A business can be classified by how it delivers its goods to consumersdelivers its goods to consumers

Telephone marketingTelephone marketing

CataloguesCatalogues

E-commerceE-commerce

Large or Large or SmallSmall Business Business

Small or medium-sized business (SMB) is Small or medium-sized business (SMB) is a business that employs fewer than 500 a business that employs fewer than 500 people. people.

Over 1 million SMBs in CanadaOver 1 million SMBs in Canada Employ more than 60% of all CanadiansEmploy more than 60% of all Canadians Local, national, international in scopeLocal, national, international in scope