A business provides goods and/or services with the main goal of making profit. Profit is the difference between revenue and expenses. The person who risks time and money to manage and start a business is named an entrepreneur. Entrepreneurs might risk losing time and money on a business. The reward of taking risk is profit. On the contrary, if the company has done not so well, this occurs in a loss (expenses>revenues). Secondly, there is another type of organization, called a non-profit organization. It´s goal is not making a personal profit for its owners or organizers.
Besides the entrepreneur , the stakeholders have a great interest in the development and profit of the company as well. Stakeholders are for example; customers, employees, stockholders and bankers. The challenge is to balance the needs of the stakeholders as best as possible. A decision of management can be ‘outsourcing’. This means that several functions are assigned outside organizations. This can be an example for conflict between stakeholders and management in a company (employment versus maximum profit).
The quality of life is the general well-being of a society in terms of education, health care, safety and political freedom. The standard of living is the amount of goods and services people can buy with the money they own. These are important factors which can create satisfaction/joy and determine the level of quality in your life.
Running a business can increase the standard of living as well as the quality of life. First of all, businesses can increase the level of wealth/quality in life because they provide employment for people. Secondly, tax is being paid by employees as well as by businesses. The government uses this money to build hospitals and for example schools. The wealth that businesses generate and the taxes that they pay, may help everyone in their communities. Which can lead to an increased quality of life.
Factors of production
Several factors of production are considered as the “building stones” of a company:
- Land: Natural resources
- Labour: Workers
- Capital: Everything that is used for production (i.e. tools, machines) except for money
- Entrepreneurship: People who are willing to take risk and invest time/money in a business
- Knowledge: Determining wants and needs and to respond to them efficiently
The business environment consists of surrounding factors that either develop or hinder business:
1) The global business environment: The global business environment is very important because it surrounds all other environmental influences (economic and legal etc). Two major environmental changes in the last years have been (1) the increase of free trade among nations and (2) the growth of international competition.
2) Economic and legal environment: The government can influence the level of risk of starting a business and can therefore increase entrepreneurship and wealth in a country. This is done by:, - (1) keep taxes and regulations to a minimum, (2) allow private ownership (3) establish a tradable currency. (4) eliminate corruption (5) establish laws that enable people to create contracts that are enforceable in court
3) Technological environment: Good technology has to be available and easily accessible. The use of internet, bar codes or databases can improve productivity significantly. On top of that, using technology can increase your responsiveness to customers. For example, bar codes can be used to display what products a consumer bought. This information is inserted in a database. A database is an electric storage file where information is kept about customers and their past purchases. Companies trade database information to know what the local population wants.
4) Social environment: Business have to respond to (1) demographic changes because they can affect business and can lead to new opportunities and threats. On top of that, businesses have to (2) hire a diverse workforce which represents the diversity of the customers and what they want. Finally, (3) the changing situations of families have a major effect on businesses as well. If you are a single parent, for example, it cost a lot of effort to work full-time and raise a family. Therefore businesses have to take such thing into account and offer special programs.
5) Competitive environment: If a business wants to stay competitive, it has to (1) meet stakeholders’ and employees’ wishes. On top of that, it is important that (2) the products or services exceed customers’ expectations. These days, an important goal for many companies is offering high quality products at competitive prices (3) with excellent customer service. Restructuring the organization and emphasizing on empowerment of frontline workers is also a part of customer service. It is not allowed to make mistakes in products (zero defects).
To meet the needs of customers, empowerment can be used. Empowerment is that you give employees more freedom, authority and responsibility to do their work.
E-commerce is purchasing and selling of goods and services over the internet. It can be divided in two major types of transactions; Business-to-consumer(B2C) and Business-two-business (B2B).
Technology is everything that makes business processes more effective, efficient and productive. That are for example software progams, phones and computers. You reach the highest efficiency if you use the least amount of recourses, when producing goods and services. Effectiveness is producing the desired result that you wanted to have. The third factor, productivity is the amount of output you generate, given the amount of input.
Goods are concrete products (which you can touch) such as a bike or for example pizza. However, services are intangible. Examples of services are education or treatment in a hospital.
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