Is Any Activity That Provides Goods Or Services To Consumers For The Purpose Of Making A Profit

1.2 Getting Down to Business

Learning Objective

Identify the main participants of business, the functions that most businesses perform, and the external forces that influence business organization activities.

A business is any activity that provides goods or services to consumers for the purpose of making a profit. When Steve Jobs and Steve Wozniak created Apple Computer in Jobs's family garage, they started a business. The product was the Apple I, and the visitor's founders hoped to sell their computers to customers for more than it cost to brand and market them. If they were successful (which they were), they'd make a profit.

Before we keep, let'southward brand a couple of important distinctions apropos the terms in our definitions. First, whereas Apple produces and sells goods (Mac, iPhone, iPod, iPad), many businesses provide services. Your bank is a service company, every bit is your Internet provider. Hotels, airlines, law firms, motion-picture show theaters, and hospitals are besides service companies. Many companies provide both appurtenances and services. For example, your local car dealership sells goods (cars) and as well provides services (automobile repairs).

2d, some organizations are not set to make profits. Many are established to provide social or educational services. Such not-for-turn a profit (or nonprofit) organizations include the United Way of America, Habitat for Humanity, the Boys and Girls Clubs, the Sierra Society, the American Red Cross, and many colleges and universities. Nigh of these organizations, withal, role in much the aforementioned fashion as a business. They establish goals and work to meet them in an constructive, efficient manner. Thus, virtually of the business organisation principles introduced in this text also apply to nonprofits.

Business concern Participants and Activities

Allow's begin our discussion of business past identifying the principal participants of business and the functions that nigh businesses perform. So we'll stop this section by discussing the external factors that influence a business's activities.

Participants

Every business must have one or more than owners whose chief role is to invest money in the business concern. When a business organization is being started, it's generally the owners who polish the business thought and bring together the resources (coin and people) needed to turn the idea into a business concern. The owners besides rent employees to piece of work for the company and assist it achieve its goals. Owners and employees depend on a third group of participants—customers. Ultimately, the goal of any business is to satisfy the needs of its customers in order to generate a profit for the owners.

Functional Areas of Business

Effigy 1.1

A nurse working with a child on a hospital bed

Hospitals specialize in an intangible production—wellness care.

The activities needed to operate a business can be divided into a number of functional areas: management, operations, marketing, accounting, and finance. Let's briefly explore each of these areas.

Management

Managers are responsible for the work performance of other people. Management involves planning for, organizing, staffing, directing, and controlling a company'southward resource so that it tin can accomplish its goals. Managers plan past setting goals and developing strategies for achieving them. They organize activities and resource to ensure that company goals are met. They staff the organization with qualified employees and direct them to reach organizational goals. Finally, managers design controls for assessing the success of plans and decisions and have corrective action when needed.

Operations

All companies must convert resource (labor, materials, money, information, and so forth) into goods or services. Some companies, such equally Apple tree, convert resources into tangible products—Macs, iPhones, iPods, iPads. Others, such equally hospitals, convert resource into intangible products—health intendance. The person who designs and oversees the transformation of resources into goods or services is chosen an operations manager. This individual is likewise responsible for ensuring that products are of loftier quality.

Marketing

Marketing consists of everything that a company does to place customers' needs and designs products to run across those needs. Marketers develop the benefits and features of products, including price and quality. They also decide on the best method of delivering products and the all-time means of promoting them to attract and keep customers. They manage relationships with customers and brand them enlightened of the organization'south want and ability to satisfy their needs.

Accounting

Managers need accurate, relevant, timely financial information, and accountants provide it. Accountants measure, summarize, and communicate fiscal and managerial information and advise other managers on fiscal matters. In that location are ii fields of accounting. Financial accountants fix fiscal statements to help users, both inside and outside the organization, assess the financial force of the company. Managerial accountants prepare information, such equally reports on the cost of materials used in the production process, for internal use only.

Finance

Finance involves planning for, obtaining, and managing a visitor'southward funds. Finance managers address such questions equally the following: How much money does the company need? How and where volition it get the necessary money? How and when will it pay the coin back? What should it exercise with its funds? What investments should exist fabricated in plant and equipment? How much should be spent on inquiry and development? How should excess funds be invested? Proficient financial management is particularly of import when a company is first formed, because new business owners normally need to borrow money to get started.

Effigy 1.two Business concern and Its Environment

Business and Its Environment

External Forces that Influence Business Activities

Apple and other businesses don't operate in a vacuum: they're influenced by a number of external factors. These include the economy, authorities, consumer trends, and public force per unit area to act as adept corporate citizens. Figure 1.ii "Business and Its Surroundings" sums up the relationship among the participants in a concern, its functional areas, and the external forces that influence its activities. One industry that's clearly affected by all these factors is the fast-nutrient industry. A potent economic system ways people have more money to swallow out at places where food standards are monitored by a authorities agency, the Food and Drug Administration. Preferences for certain types of foods are influenced by consumer trends (eating fried foods might exist OK one year and out the next). Finally, a number of decisions made by the industry result from its desire to exist a good corporate denizen. For instance, several fast-food chains accept responded to environmental concerns past eliminating Styrofoam containers (Baron, 2006). As you move through this text, you'll learn more about these external influences on business. (Section 1.three "What Is Economic science?" will introduce in particular one of these external factors—the economy.)

Fundamental Takeaways

The principal participants in a business are its owners, employees, and customers.
Businesses are influenced past such external factors as the economic system, government, consumer trends, and public pressure to act every bit skilful corporate citizens.
The activities needed to run a concern can be divided into five functional areas:
1. Direction involves planning, organizing, staffing, directing, and decision-making resources to achieve organizational goals.
2. Operations transforms resources (labor, materials, money, and and so on) into products.
3. Marketing works to identify and satisfy customers' needs.
4. Finance involves planning for, obtaining, and managing company funds.
5. Accounting entails measuring, summarizing, and communicating financial and managerial information.

Exercises

(AACSB) Analysis
The Martin family has been making guitars out of its mill in Nazareth, Pennsylvania, factory for more than 150 years. In 2004, Martin Guitar was proud to produce its millionth instrument. Become to http://world wide web.martinguitar.com to link to the Martin Guitar Web site and read about the company's long history. Y'all'll discover that, even though it'due south a family-run company with a fairly unique product, information technology operates like any other company. Identify the main activities or functions of Martin Guitar's business and explain how each action benefits the company.
(AACSB) Analysis
Name four external factors that have an influence on business concern. Give examples of the means in which each factor tin can affect the business performance of two companies: Wal-Mart and Ford.

References

Baron, D., "Facing-Off in Public," Stanford Business, April 15, 2006, http://www.gsb.stanford.edu/news/bmag/sbsm0308/feature_face_off.shtml (accessed Jan 21, 2012).