CHAPTER 01

Foundations of Business

Course: Introduction to Business (BUS 1102)

Trimester: Fall 2022
Faculty: Jakowan
 What is Business?

• A Business is any organization or activity that

provides goods in an effort to earn profit.
• Business is the exchange of goods, services, or
money for mutual benefit or profit.
• Any activity that seeks to provide goods and services
to others while operating at a profit.

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Some Key Definitions

Profit Loss

Entrepreneurs Value

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 Contribution of Business

• Drives up the standard of living.

• Contributing to a higher quality of life.
• Creates employment opportunities.
• Contributes to society through innovation.

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 The History of Business

Industrial Entrepreneurship Production Marketing Relationship

Revolution Era Era Era Era

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 The History of Business
Industrial Revolution:
• The first industrial revolution began in Great Britain in the 1700s
and 1800s and was a time of significant innovation.

• Both Industrial Revolutions led to inventions that included the

telephone, the steam engine, the sewing machine, the X-ray, the
lightbulb, and the combustible engine.

• Working for businesses during the Industrial Revolution paid better

wages than agricultural work.

• Due to the innovation witnessed during the period, production

efficiency improved dramatically for businesses, leading to higher
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 The History of Business
Entrepreneurship Era:

• Large Scale entrepreneurs emerged in the second half of the

1800s, building business empires.

• Toward the end of the 1800s, the government stepped into

the business realm, passing laws to regulate business and
protect consumers and workers, creating more balance in the
economy.

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 The History of Business
Production Era:
• In the early part of the 1900s, major businesses focused on
further refining the production process and creating greater
efficiencies.

• Jobs became even more specialized, increasing productivity

and lowering costs and prices.

• In 1913, Henry Ford introduced the assembly line, which

quickly became standard across major manufacturing
industries.
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 The History of Business
Marketing Era :

• After World War II, the balance of power shifted away from
producers and toward consumers, flooding the market with
enticing choices.
• The marketing concept emerged: a consumer focus that
permeates successful companies in every department, at
every level.
• This approach continues to influence business decisions
today as global competition heats up to unprecedented levels.

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 The History of Business
The Relationship Era:

• Building on the marketing concept, today, leading-edge firms

look beyond each immediate transaction with a customer and
aim to build long-term relationships.

• One key tool is technology. Using the Web and other digital
resources, businesses gather detailed information about their
customers and use these data to serve them better.

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Factors of Production
Natural Resources

Capital

Human Resources

Entrepreneurship

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 Business Environment
The condition external to a business that offset its
operation. This includes market and economic
factors as well as physical, economic,
technological, social, legal and political.
Elements of Business Environment
1.Physical environment
2.Economic environment
3.Technological environment
4.Social and cultural environment
5.Political environment
6.Legal environment
1. Physical Environment
By physical element we mean the natural features
of a country. All the events and all the resources of
a country are called physical environment. The
elements of physical environment are its size,
location, climate, infrastructure and natural
endowments.
2. Economic Environment
• By economic environment we mean the characteristics of the
economic system in which the business operate.

• The elements of economic environment are-

-Desires, customers and markets
-Availability and cost of capital
-Availability and cost of labor
-Level of productivity
-Quality of availability of entrepreneur
-Market size
2. Economic Environment
Desire to grow is an important factor. From the desire
business create customers. Customers are people who
want the product or service that business offer and have
money to buy it. This puts pressure on a business to
produce what people want. The products and customers
help to develop market.

Business requires capital to operate. Capital must not cost

too much and it should be available to the businesses. It’s
cost must recovered by the price at which a product or
service is sold. Need for capital is affected by the changes
in technology and inflation.
2. Economic Environment
• One of the important element of economic environment
is labor. Labor must be available and the cost of labor
should be low.

• Productivity is usually measured by the total amount

produced per employee. Higher productivity helps to
improve the economic condition of the country and
capital improvement.
2. Economic Environment
• Entrepreneur is a person who sees an opportunity, gets
together a needed capital to start a business, taking the risk
of failure to get success in business. Availability of a good
quality entrepreneur helps to accelerate the economic
growth.

• The larger a market is (in terms of customers and

purchasing power) the more a given product is sold. The
product can be made more cheaply because large-scale
production is more economical. It helps to maintain the
freedom in international trade.
3. Technological Environment
By technological environment we mean the technical
expertise available in the country as well as the level of
sophistication of the technology used in the production of
goods and services. The impact of technology on business
are-

• Shorter product cycle

• New methods of processing
• Automation
• Retraining of workers
• Need for R& D
4. Social and Cultural Environment
A business enterprise operates in a society which provides
the resources it needs and consumes the goods and services
it produces. The business manager must understand the
characteristics of the social environment affecting his
operation.
The important elements of social and cultural environment
are-
• 1.Growth
• 2.Composition of population
• 3.Higher income and purchasing power
• 4.Custom, Religion, Tradition
5. Political Environment
It is difficult to separate the political environment of
business from legal environment. Laws and their
administration reflect the political environment. When
top management sets out to establish a new business ,
one of its first consideration is the political climate of the
area. Political stability is one of the most important factor
for a sound economic growth.
6. Legal Environment
Every business is caught in a complex web of laws,
regulation and rules. These legalities comprise the legal
environment of business. Some laws provide opportunities
as well threats to a business.
Law means a standard rule established by a society to
govern the behavior of their members. There are 3 major
sources of law-
1.Common law
2.Statutory law
3.Administrative law