What is a Business?

1. What is a Business? • Is a garage sale a business? • Is a lemonade stand a business? • An organization that produces or sells goods or services to satisfy the needs and wants of consumers for the purpose of making a profit

2. Profit, Expenses, Costs • Profit is the income left over after all costs and expenses are paid • Expenses are those involved in running the business. For example wages (labour) • Costs are the amount of money required for each stage of producing the product. For example raw materials (tires to build a car)

3. What are needs and wants? • How do needs and wants differ? • What are some needs you have? • What are some wants you have?

4. Needs • A basic necessity • Essential for survival • Water, food, shelter… • What companies provide goods or services that are meeting your basic needs?

5. Wants • Not necessary for survival • Companies make you believe that all your wants are needs • How do they do this? • Marketing! • What are some of your wants? • Cell phone, blackberry

6. Goods and Services • A good (product) is something produced by a company that can be touched, it is tangible. • Examples are computers, books, TVs • How do goods differ from services? • Services are also produced by a company but cannot be touched, it is Intangible • Examples of services are flights, haircuts

7. Essential goods and services • Essential goods and services are things you need for survival • Food, clothing, shelter are essential goods • Heating, electricity, fire, 911 are essential services

8. Luxury goods and services • Luxury goods and services are enjoyable but not necessary for your survival • Luxury goods are home entertainment centres, swimming pools, expensive cars • Luxury services are the spa, limousine ride to airport, cruise to the Caribbean

9. What is Maslow? • It is a hierarchy of needs. • Maslow’s theory states that the basic level of the pyramid must be met first, before you have the need for the next level and so on. • If you don’t have your basic needs fulfilled, you won’t have the need for the next level. • Starts from the bottom and moves up.

10. Maslow’s Hierarchy of Needs

11. Physiological Needs • Basics needs • The lowest level of Maslow • Need for survival • Food, water, shelter,… • Goods and services?

12. Safety Needs • Needed for safety, protecting ourselves from harm • 911, police, fire, financial security • Goods and services?

13. Belonging • To have the need to feel as part of a group • Belonging to something • Friends and family • Goods and services? • (Ex: Going to the movies)

14. Esteem • To feel good about oneself • What goods and services make you feel good about yourself? • Ex: Designer Clothing

15. Self-actualization • To reach one’s full potential • The highest level of Maslow • Goods and services? • E.g: Donating Money • Higher Education

16. Smart Ideas Software Demo • Smart Ideas assignment • Examples

17. Factors of Production (economic resources) • What do companies need to produce a good or service? • Natural resources, human resource, capital resources • Natural resources are… • Human resources are… • Capital resources are…

18. Producer and Consumer • Producer (companies) produce the goods and services • We, the consumers (customers) buy the goods and services from the producer • Producers and consumers exchange to create a marketplace

19. Interdependence • Our society is interdependent • Producers and consumers rely on each other • Businesses rely on other businesses to make their product • Think of McDonalds?

20. How many of you would buy…

21. Why we buy? • Income – how much you make • Price – very important factor, how much you are willing to pay for the good or service • Status – to show off to your friends and family • Current trends – skinny jeans are in, peer pressure • Customs/habits – family, religion, culture • Safety – buy an alarm system to feel safe at night • Advertising/Promotion – the company did a good job at making you believe you really need it

22. Competition • What is competition? • Is competition good or bad for consumers? • What happens to the price of a product when there is more competition? • What companies are DIRECTLY competing with each other? • What companies are INDIRECTLY competing with each other?

23. Manufacturing vs. Retail • Manufacturing businesses produce a product from materials and usually do not sell directly to the consumer • Examples: Toyota, Whirlpool • Retail businesses sells goods directly to the consumer (buy goods from the manufacturer) • Examples: Wal-Mart, Shoppers Drug Mart

24. Private vs. Public Sector • Private sector are businesses that are individually owned and operated and their main purpose is to make profit • Public sector are businesses that are owned by the government and usually provide services e.g. healthcare, education • Public-private partnership are called P3s and are businesses that are shared by both individuals and the government e.g. William Osler Hospital

25. What does “Ethics” Mean to You? The principles of morality and proper conduct that people or businesses use to guide their behaviour Or more simply: the rules that help us tell the difference between right and wrong and encourage us to do the right thing.

26. Ethics • The difference between right and wrong • Ethical dilemma: you are faced with a situation and you are not sure what to do (bank machine gave you too much money) • Toyota knows that there is a problem with all Type A models – what should they do?

27. Keywords that relate to ethics • Values – tell us what we think is important, and this in turn helps us make decisions about right and wrong (examples: valuing trustworthiness, respect, responsibility) • Morals – rules we use to decide what’s good and bad (example: stealing is bad because it harms the person you steal from)

28. Where do we “get” ethics from? • Family • Community • Friends • Place of worship/ Religion • Role Models (Athletes, celebrities)

29. Corporate Social Responsibility (CSR) • Conducting business in a manner that is in line with society’s values • Companies that actively support communities through: charity, donations, innovative programs, protecting the environment, being truthful in advertising, fair labour policies etc. • e.g. Tim HortonsChildrens Camp, Ronald McDonald Charity Homes

30. What would you do if… • Group Activity • Groups of 3 • Go through the scenario, come to a decision by completing the group handout • You will present your situation to the class • Your learning skills will be assessed today

31. Impact of Business on Community • -Job creation • -Generation of wealth (other jobs are created) • -Skill development (training employees) • -Variety of products and services • -Standard of living improves (new technology) • -Community growth • -Corporate Social Responsibility (Tim Hortons Kids Camp)

32. What is Business Success? • Profit • Corporate Social Responsibility • Employee satisfaction • Customer satisfaction

33. Types of Business Ownership • How is a business defined? • How is a business organized? • Who is running the business? • How many people work at the business? • Types of business ownerships are: sole proprietorship, partnership, franchise, corporation

34. Sole Proprietorship • Owned by one person • Example: hairdresser, body shop • Advantages: own boss, all profit, own hours, no conflict, easy to start • Disadvantages: unlimited liability means if business fails and you owe people money, those people can come after your personal assets (your house, your car), long hours, high risk, have to know everything

35. Partnership • Owned by 2 or more people • Example: accounting firm, law firm • Advantages: more skills, more finance to start up, more help, perhaps less hours • Disadvantages: unlimited liability, shared profit, conflict

36. Franchise • Franchises look and feel the same, same name, same menu, same design, same operating procedures • Examples: Harvey’s, McDonalds, Tim Horton’s are all franchises • Franchisee:the owner of a franchise location • Franchiser: licenses the name to the owner and the owner runs the franchise

37. Franchise • Advantages: everything is ready to go, training is provided, menu is provided, brand name, customers know the business, marketing is done for you • Disadvantages: huge start up costs, must follow rules and procedures of company, long hours in the beginning, franchise fees

38. Corporation • It is a legal entity on its own • Usually lots of employees • Usually large in size • Often traded on the TSX, The Toronto Stock Exchange • Owned by the shareholders (bought shares) • What are shares? • Board of Directors and Management run the business • Ex: Wal-Mart, Apple

39. Corporation • Advantages: limited liability (creditors cannot come after your personal assets), legal entity, financing might be easier with shareholders • Disadvantages: costly to start, a lot of paperwork to start up, taxes, hard to manage employees

40. Demand (consumer) • Consumers CREATE demand for a good or service • As demand for the product goes up, price also goes up • What happens when we don’t buy a good? • Price falls • Product becomes obsolete

41. Law of Demand (Graph)

42. Supply (producer) • Producers create SUPPLY by producing a particular good or service • As quantity of supply of a product goes down, price goes up (less of it available) • What happens when there is not enough of a good or service? • Price goes up

43. Law of Supply (Graph)

44. Economic Systems • is the way government and businesses work together to produce goods and services • Pure Command – government controls everything, what is produced and by whom, little or no competition e.g. Cuba • Pure Market – actions of buyers and sellers control the market, consumers decide where to spend their money, lots of competition e.g. United States

45. Economic Systems cont’d • Modern Mixed Economy – both pure market and pure command • Government has control as well as the buyers and sellers • e.g. Canada has elements of both market and command

46. The Business Cycle • The economy is cyclical, goes through phases • The business cycle has four phases • Business cycles last 8-10 years • Stages are trough, recovery, peak, recession and then depression (unlikely)

47. Business Cycle Graph • on your own time, copy from page 72 in textbook with proper labels

48. International Business • Look your neighbour’s clothing label (ask their permission first) • Where is it made? • Businesses have expanded internationally • Why? • Export – product going out of country • Import – product coming into the country

49. Benefits of International Business • Access to bigger markets – more customers • Cheaper labour – Canada is expensive • Increased quality of goods - BMW • Increased quantity – new factory • Access to more resources – each country has a resource that is cheaper or better`

50. International Business • Look up the following terms online and record in your notes • Joint ventures • International franchises • Strategic alliances • Mergers • Multinationals