MGT2131 Foundations of Business Organisations

The Concept of Business

Learning Objectives
After reading this chapter, you should be able to: Understand the concept of business and profit

Know the organisational boundaries Explain the importance of the environment to business and identify the factors used to evaluate the business environment

Describe the political-legal, economic,

The Meaning of Business

Business organisation that provides goods and services to earn profits

Profits difference between a business revenue and its expenses

Consumer choice and consumer demand Businesses exist to earn profits for owners Owners are likewise free to set up a new business, grow that business, sell it to other owners or even shut it down To pursue profits businesses must focus on providing what consumers want / need Consumers have the freedom of choice

The Meaning of Business

Opportunity and enterprise

There are always opportunities for businesses to be successful if they can identify either unmet consumer needs or better ways of satisfying consumer needs

Quality of life A healthy business climate contributes directly to the quality of life and standard of living of society by providing goods and services, employing individuals and adding to the quality of life of the company

Organisational Boundaries & Environments

Organisational boundary what separates the organisation from its environment External environment everything outside and organisations boundaries that might affect it

Economic Environment

The conditions of economic system in which an organisation operates

Economic growth
Aggregate output total quantity of goods and services produced by an economic system during a given period Business cycle the pattern of short-term ups (expansions) and downs (contractions) of an economy Standard of living the total quantity and quality of goods and services that can be purchased with the currency used in a particular economic system

Economic Environment

Economic stability
Condition in an economic system in which the amount of money available and the quantity of goods and services produced are growing at about the same rate produced are growing at about the same rate Factors that threaten stability Inflation widespread of price increase Unemployment level of joblessness among people actively seeking work Recession Depression a prolonged and deep recession

Technological Environment

Human knowledge, work methods, physical equipment, electronics and telecommunications and various processing systems that are used to perform business activities Product and service technologies

Technologies employed for creating products (goods and services) for customers Technology assist in decreasing cycle time the period of time a business takes to accomplish some recurring activity or function Business process technologies

Used to improve a firms performance of internal operations e.g. accounting, management information flows, etc.

Political-Legal Environment

Conditions reflecting the relationship between business and government, usually in the form of government regulation Political stability

Sociocultural Environment

Customer preferences and tastes Ethical compliance and responsible business behaviour