BUS101 - Module 1 Week 1 Role of Business

The purpose of a for-profit business is:

Return profits to the owners of the business

The American Red Cross raises money by asking for donations and selling t-shirts and other merchandise. The American Red Cross does not return its profits to the owners, but uses them to provide a public service. For this reason, the American Red Cross is:

a non-profit business

A(n) ________ is any activity that provides goods or services to consumers for the purpose of making a profit.

business

When an entrepreneur owns and runs a business, they assume risks that are offset by the potential of:

earning a profit

Capital is the only resource that:

has been produced

The factors of production include which of the following?

natural resources

Which of the following is one of the factors of production?

natural resources

At the time when products and services are produced or provided to customers, which functional area is responsible for ensuring that those products and services meet high quality standards?

operations

Natural resources would include which of the following?

wind

The purpose of a nonprofit business is:

Direct any and all profits to a charitable cause, service, or organization dedicated to helping others

Cathy starts a mobile car detailing business. After some initial growth, she hires two workers to help her keep up with customer demand. Cathy supplies the materials (soap, wax, etc.) for the operation which, in addition to paying the employees, constitutes her operating expenses. Cathy's revenues exceed her expenses and she donates 10% of her profits from her bank account to the local Humane Society. Is Cathy's business a for-profit or nonprofit?

It is a for-profit

Financial reports are created and used to evaluate the financial performance of the business. Which function is responsible for creating the reports?

finance

Alice takes her car to the dealership for a routine scheduled maintenance i.e., oil change, filter change, lubrication, and tire rotation. Alice receives a call from the dealership later that day stating that the technician discovered serious wear in her two front tires during the rotation and recommends replacing the tires. Alice agrees and tells the dealership that she will purchase two new tires and asks if they can be installed by the time she picks up her vehicle. Has the dealership provided a good or a service for Alice?

The dealership has provided both a good and a service.

Triangle.com has decided to implement a new, comprehensive Accounting system that takes advantage of cloud technology. Which of the following groups would be considered the primary stakeholder for this project?

The finance department

Denice invented a small, portable purse hook that allows a purse to be hung from a table and not touch the floor. She knows that there is a market for her purse hook and takes a loan out on her home to finance a small start-up company in Rock Creek, WI. As an entrepreneur, Denice's primary motivation for opening the business is:

The potential for making a profit if the business succeeds

Identify the four primary functional areas within a business and describe their contribution to the organization

The primary role of managers in business is to supervise other people's performance. Most management activities fall into the following categories: Planning: Managers plan by setting long-term goals for the business, as well short-term strategies needed to execute against those goals. Organizing: Managers are responsible for organizing the operations of a business in the most efficient way, enabling the business to use its resources effectively. Controlling: A large percentage of a manager's time is spent controlling the activities within the business to ensure that it's on track to achieve its goals. When people or processes stray from the path, managers are often the first ones to notice and take corrective action. Leading: Managers serve as leaders for the organization, in practical as well as symbolic ways. The manager may lead work teams or groups through a new process or the development of a new product. The manager may also be seen as the leader of the organization when it interacts with the community, customers, and suppliers. Operations is where inputs, or factors of production, are converted to outputs, which are goods and services. Operations is the heart of a business providing goods and services in a quantity and of a quality that meets the needs of the customers. Operations control the supply chain, including procurement and logistics. Marketing consists of all that a company does to identify customers' needs and design products and services that meet those needs. The marketing function also includes promoting goods and services, determining how the goods and services will be delivered, and developing a pricing strategy to capture market share while remaining competitive. In today's technology-driven business environment, marketing is also responsible for building and overseeing a company's Internet presence (e.g., the company website, blogs, social media campaigns, etc. Today, social media marketing is one of the fastest growing sectors within the marketing function. The goal of Sales is to close the revenue the company needs in order to operate profitably, especially in B2B businesses. Again, depending on the nature of the market and the company size, Sales functional areas can vary in structure and approach: inside/outside representation, vertical/horizontal focus, direct, etc. Sales works to exploit the leads created by Marketing and activities generated by the sales force itself. The Finance function involves planning for, obtaining, and managing a company's funds. Finance managers plan for both short-term and long-term financial capital needs and analyze the impact that borrowing will have on the financial well-being of the business. A company's finance department answers questions about how funds should be raised (loans vs. stocks), the long-term cost of borrowing funds, and the implications of financing decisions for the long-term health of the business. Accounting is a crucial part of the Finance functional area. Accountants provide managers with information needed to make decisions about the allocation of company resources. This area is ultimately responsible for accurately representing the financial transactions of a business to internal and external parties, government agencies, and owners/investors. Financial Accountants are primarily responsible for the preparation of financial statements to help entities both inside and outside the organization assess the financial strength of the company. Managerial accountants provide information regarding costs, budgets, asset allocation, and performance appraisal for internal use by management for the purpose of decision-making.

Which of the following is an example of a nonprofit organization?

United Way

Which of the following is an example of a for-profit business?

Walmart

The terms "profit," "loss," and "value" can be described by the following, respectively:

When revenue exceeds costs, when costs exceed revenue, the percieved benefits by a customer of price to the time and money spent

A hotel guest goes down to the snack shop in the hotel lobby and purchases a candy bar and a soda. The guest has purchased what from the snack shop?

a good

When a guest in a hotel purchases a toothbrush and toothpaste from the gift shop, the guest has purchased what from the hotel?

a good

A for-profit business exists to maximize profits for owners. In contrast, what type of business uses its profits to provide a public service?

a nonprofit business

The Susan G. Komen organization raises money for breast cancer research by asking for donations, organizing races, and selling t-shirts and other merchandise. Susan G. Komen does not return its profits to the owners, but uses them to provide a public service. For this reason, the Susan G. Komen organization is:

a nonprofit business.

External forces that affect businesses include:

advances in technology.

A business incurs a ________ if its costs associated with the operation of the business exceed the total sales revenue.

loss

When a business does not generate enough revenue to cover salaries, rent, and other expenses, it incurs a:

loss

Glenda opened a tax accounting business where she works with small businesses to manage their finances and prepare their records for tax season. Glenda's primary objective when she opened her business was:

making a profit

A motel provides both services and goods. Which of the following is an example of a good provided by a motel?

offering a bathrobe that you can purchase to take home with you

Which functional area of a business is responsible for converting the factors of production into goods and services?

operations

When it is discovered that Weeble Manufacturing has been polluting a local river by dumping its waste into the river, citizens and activists start to hold protest rallies at the front gate of the plant, demanding Weeble stop polluting and clean up the river. The management at Weeble will be reacting to changes in the ________ when it addresses these issues.

social environment

When a local business offers more products and extended hours after a large national retailer moves into the area, this business is reacting to changes in what type of environment?

the competitive environment

What type of environment impacts a business if low interest rates and government incentives are offered to open or expand businesses?

the economic environment

The low cost of labor in other countries around the globe is a factor that business must consider because they are impacted by:

the global business environment

Wells Fargo Bank recently took a big hit to its brand image and stock value when it was discovered that bank employees were opening new customer accounts without the consent or even knowledge of its' customers. Which of the external environments can this development be linked to?

the legal environment

The Micram company, which makes plastic containers, decides to relocate its operations to another state. The company is moving because the new state offers new business investment credits. Which external stakeholders will be affected by Micram closing its current location?

the local government

All of these are considered to be external forces that affect business EXCEPT:

traditional environment

What is an example of an external stakeholders in a business?

creditors

Which of the following are external stakeholders in a business?

creditors

When a company decides it will cut vacation time and increase production hours, which stakeholders will be most directly impacted?

employees

When a company decides it will start running a production shift on the weekends which stakeholders will be most directly impacted?

employees

How do we define the term "business"?

A business is any activity that provides goods or services for the purpose of making a profit.

Distinguish between for-profit and nonprofit businesses

A nonprofit or not-for-profit business is one that provides goods or services to consumers, but its primary goal is not to return profit to the owners of the business (as is the case with a for-profit business). Instead, it uses those profits to provide a public service, advance a cause, or assist others. The American Red Cross, the local SPCA, and the American Cancer Society are all examples of nonprofit businesses. They use any revenue generated from operations to support the continued mission of the organization. In addition, most nonprofits also rely on donations from individuals and businesses, grants, and government funding to help fund their work, since the revenue they raise rarely covers all their operating costs. Much of what differentiates a for-profit business from a nonprofit business goes on behind the scenes and isn't very visible to the customer. For example, a nonprofit organization is subject to government regulation and oversight in ways that differ significantly from a for-profit business: Nonprofits do not pay taxes on their revenue, but how their funds are disbursed and their operations are managed is tightly regulated.

Identify business stakeholders and describe their relationship with business organizations

A stakeholder is an individual or group that has a legitimate interest in a company, organization, or business. The Stanford Research Institute defines stakeholders as "those groups without whose support the organization would cease to exist." Stakeholders can affect or be affected by the actions (or inactions) of a business, and they can exist both within and outside of a business. The impact of a business on its stakeholders is a bit like the effect of dropping a stone into a pond. The decisions and actions of the business have a ripple effect that can extend beyond the pond and even reach those who are standing far away on the shore. Internal stakeholders are groups or people who work directly within the business, such as managers, employees, and owners. Managers and employees want to earn high wages and keep their jobs, so they have a vested interest in the financial health and success of the business. Owners want to maximize the profit the business makes as compensation for the risks they take in owning or running a business. External stakeholders are groups outside a business or people who don't work inside the business but are affected in some way by the decisions and actions of the business. Examples of external stakeholders are customers, suppliers, creditors, the local community, society, and the government. Customers want the business to produce quality products at reasonable prices. Shareholders have an interest in business operations since they are counting on the business to remain profitable and provide a return on their investment in the business. Creditors that supply financial capital, raw materials, and services to the business want to be paid on time and in full. Federal, state, and local governments need businesses to thrive in order to pay taxes that support government services such as education, police, and fire protection. The local community has a stake in the business because it provides jobs, which generate economic activity within the community. Society as a whole (as well as the local community) is concerned about the impact that business operations have on the environment in terms of noise, air, and water pollution. Society also has an interest in the business with regard to the safety of the goods and services produced by the business. Suppliers need the business to continue to buy their products in order to maintain their own profitability and long-term financial health.

Identify the external forces that shape the business environment

Economic environment Legal environment Competitive environment Technological environment Social environment Global environment Legal developments in our culture at large—for instance, the legalization of marijuana and same-sex marriage or the strengthening of privacy laws—can and do have an enormous impact on the way companies do business, on everything from what companies sell to how their products are manufactured, labeled, and marketed. How do businesses stay competitive and still maintain a level of profitability that allows them to be successful? The competitive environment has intensified with the development of new technologies, the opening up of When we refer to business technology we mean digital tools such as computers, telecommunications, and the Internet. The expansion of Internet access to virtually every corner of the world has forced many traditional brick-and-mortar businesses into e-commerce or online sales.foreign markets, and the rise of consumer expectations. The social environment of business encompasses the values, attitudes, beliefs, wants, and desires of the consuming public. The demographics that describe the American population by gender, age, ethnicity, location, occupation, education and income are constantly evolving. From a business perspective, it is a small world, and it's only getting smaller. Free trade among nations has allowed goods and services to flow across international borders more efficiently and cheaply. Formal trade agreements among nations have forged unprecedented links and interdependencies among economies.

A(n) ________ is a person who seeks to earn profits by assuming the risk of owning and running a business?

Enterpreneur

Jose opens a small graphic design firm in his hometown. As his business grows, he is fortunate to have a steady client base and a great location in the downtown business district. However, he is concerned that his current staff has run out of great ideas. John advertises for a new graphic designer with experience in the industry and a high degree of creativity. John is acquiring which factor of production?

Human resources

What function is responsible for ensuring that products and services which are produced or provided meet high quality standards?

Operations

Sea-Worthy is an ocean-shipping company. The company decided to develop their own internal ERP (Enterprise Resource Management) system since none of the existing commercial packages met the specific needs of their unique business segment. Halfway into development by their IT department, the company came to the realization that this system could be licensed to their competitors to offset their development cost and fund future enhancements. Which functional area of the company would be responsible for creating revenue from this internal system?

Marketing

Wilderness Canine is a gourmet dog food company founded in 2012. Wilderness Canine's founders believe that fresh, frozen dog food is healthier than dog food in bags or pouches, but the company struggled to get its product into the freezer section in grocery stores. The consumer was not accustomed to looking in the freezer for dog food. Which function was responsible for understanding consumer behavior and aligning product to consumer preferences?

Marketing/Sales

The primary goal of a for-profit business is to:

Maximize profits for owners

Caitlin is a gourmet chef who operates a seaside organic restaurant. Caitlin prefers to utilize only ingredients that she grows herself and she has decided to produce her own sea salt for her recipes. This would require the following four factors of production: Labor, in the form of her staff gathering and boiling; capital, in the form of buckets, filters, jars and stoves; entrepreneurship, in the form of Caitlin initiating the production of her own sea salt, and; ________, in the form of sea water and sun.

Natural resources

List and explain the four factors of production required to sustain a business

Natural resources (land) Labor (human capital) Capital (machinery, factories, equipment) Entrepreneurship (somebody who recognizes a profit opportunity) Natural resources have two fundamental characteristics: (1) They are found in nature, and (2) they can be used for the production of goods and services. In order to provide benefit, people first have to discover them and then figure out how to use them in the the production of a good or service. Examples of natural resources are land, trees, wind, water, and minerals. Labor refers to human resources (also called human capital)—physical or intellectual. You're adding to your own human resources right now by learning. You may possess certain human resources already—perhaps you have an athletic gift that enables you to play professional sports to earn a living, for example—but you can also develop them through job training, education, experience, and so on. Before we discuss capital, it's important to point out that money is not a resource. Remember that resources need to be productive. They have to be used to make something else, and money can't do that. Money certainly helps the economy move along more efficiently and smoothly, like grease for the economic machine. But in and of itself, it can't produce anything. It's used to acquire the productive resources that can produce goods and services. This confusion is understandable, given that businesspeople frequently talk about "financial capital," or "investment capital," which does mean money. Thus far we have looked at natural resources, human resources, and capital as three inputs needed to create outputs. The last one we need to consider is perhaps the most important: entrepreneurship. This resource is a special form of labor provided by an entrepreneur. An entrepreneur is someone who is willing to risk his or her time and money to start or run a business—usually with the hope of earning a profit in return. Entrepreneurs have the ability to organize the other factors of production and transform them into a business. Without entrepreneurship many of the goods and services we consume today would not exist.

What are the four factors of production needed by business to operate?

Natural resources, labor, capital, enterpreneurship

External stakeholders consist of the following groups:

Shareholders, customers, suppliers, community, and government

Explain the Concept of Business

So, what is this thing we call "business"? A business is any activity that provides goods or services to consumers for the purpose of making a profit. Examples of goods provided by a business are tangible items such as cars, televisions, or soda. A service is an action or work performed for monetary compensation. Services include things such as haircuts, hotel stays, or roller-coaster rides. The world of business today can be summed up in a single word: change. And not just change, but rapid change. In order to remain profitable and competitive, businesses are finding that they need to be more responsive than ever to customer needs. What is the business environment? In some ways it resembles the natural environment in which we live: It's all around us but not always noticeable. It includes things like technology, competitors (other businesses), advertising, regulations, consumer demands, and money.

An organization that provides goods or services for the purpose of making a profit is called a(n):

business.

Both for-profit and nonprofit organizations:

can earn revenues

Both kinds of organizations, nonprofit and for-profit:

can earn revenues.

Resources that can be used to produce other goods and services and have been produced are:

capital.

Burr Architecture is a commercial architecture firm founded by two brothers. As the company grew they took on additional partners and eventually sold stock in the company. By 2010 they had six employees, $500,000 in annual revenue, five projects underway, and plans to reinvest profits to fund expansion of the business. Based on the information provided about the company, what type of organization is Burr Architecture?

for-profit

Human intellect and creativity falls into which of the following four factors of production?

human resources

Varvitsiotis Architecture is a commercial architecture company founded in 1996. Their primary client base is private businesses and industries. They have little experience bidding on or designing projects for government entities, such as the Department of Defense or the State of Alabama. Recently, the U.S. government announced an economic stimulus program that is intended to jumpstart construction. However, these funds were allocated to public (government) projects where the firm currently does not have a presence. Which function in Varvitsiotis Architecture would have primary responsibility for defining a business strategy that would create success for the company in this environment?

management

Petite Palate is a gourmet baby food company founded in 2006. Petite Palate's founders believe that frozen baby food is healthier than baby food in jars or pouches, but the company struggled to get its product into the freezer section in grocery stores. The consumer was not accustomed to looking in the freezer for baby food. Which function was responsible for understanding consumer behavior and aligning product to consumer preferences?

marketing/sales

The amount a business earns after deducting what it spends for rent, salaries, and other expenses is:

profit