Business Unit 1
Types of Business Ownership
Sole proprietorship
Pros
One owner
Easy to establish
All profits goes to owner
Cons
Business is legally tied to the owner
- Can come after personal assets when sued
Owner is responsible for all debts and losses
(unlimited liability)
Partnerships
Pros
Are formed by 2+ individuals
General partners have all the same
responsibilities as a sole proprietor
No legal distinction between partnership and owners
Have a legal document
Easier loans
Shared responsibilities
Cons
Conflict between partners
Shared decision-making
Shared profits
Unlimited liability for general partners
Challenging to sell personal share
General partners
Responsible to the day-to-day operations
Unlimited liability
Each partnership MUST have at least one general partner
Limited partners
Responsibilities are limited to amount invested
They can only lose what they invest
Limited liability
Corporations
Pros
Limited liability
When corp needs $: issue shares
Easy to sell ownership
Might be easier to get loans
For shareholders: one vote per share
Cons
Timely, costly, and complicated.
paperwork to set up
Closely regulated
Extensively record keeping
Complicated decision making
(CEO & Board of Directors)
Private corporations
Limited in the number of shareholders
they may have (50 max)
Must obtain funds privately
Shares/bonds not sold to the public
Public corporations
Can have any number of shareholders
Sell shares/bonds to the public
Cooperatives
Pros
Equally owned by its various members
Members share the same goal
One vote per member - everyone has equal say
Limited peronal liability
patronage returns (profits divided up between members)
Sacings offered by type of cooperative
(keep prices down for consumers)
Cons
Management issues/disputes
Many different viewpoints to
consider when decision making
Board of Directors is sometimes unpaid
Only way to raise money is to attract new members (as well as selling your own G&S for profit)
Franchise
Pros
Brand recognition
Shared marketing costs (head office does ads)
Recieve training and support from head office
Cons
Expensive Franchise fees
Part of profits goes to head office
Less decision making control
Creating goods and services
A shortage in a factor a factor of production
will lead to higher prices or production of
an alternative
Factors of Production
Natural resources
Raw materials
Semi processed resources
Human resources
Uses people's skills
Management
Capital resources
Financial and Long-lived (machinery, tools, buildings) resources
Information
Maslow's heirarchy of needs
Self-actualization, creativity, meaningfulness
Self-esteem
Love and belongingness
Safety and security
Physiological needs
EVERYONE STARTS AT THE BOTTOM AND
WORKS THEIR WAY UP, NO SKIPPING
Maslow in business
Role of consumers
Producers/sellers
business that provides goods and services
Consumers
People who use goods and services
Marketplace
The location where producers
and consumers come together
Needs vs wants
Supply & Demand
Demand
Created by
Awareness that the good exsists
Available supply of G/S
Relevant Prices
Access to G/S
Quantity demanded
The quantity that consumers are
willing/able to purchase at a given price
Changes will remain on the demand curve
The demand curve itself remains unchanged
Can be cause by prices changing
Changes in Demand
Consumers' entire relationship
with price has changed
Not the result of price changes
Increase in demand
Same price, higher demand
Decrease in demand
Same price, less demand
Reasons for changes in demand
Change in income
Change in population
Change in consumer tastes/preferences
Change in consumers' expectations
Supply
When sellers/producers provide their
goods/services for consumers
The higher the price, the more profit
The higher the price increases,
the more they are willing to supply
Certeris Paribus: all other things being equal,
if price increases, profit increases
Quantity supplied
Direct relationship with price
Is the quantity of goods and
services that businesses are
willing to supply at a given price
Changes in supply
Seller's entire relationship
with price has changed
Entire supply curve must also change
Not the result of price changes
Increase: producers are willing to
supply more at every price
Decrease: producers are willing to
supply less at every price
Reasons for changes in supply
Change in the number of producers
Change in the cost of production
Changes in technology
Changes in the environment/nature
(disasters and stuff)
Equilibrium price
Where demand and supply curves intersect
At that price what consumers want to buy is exactly equal to what producers/sellers want to sell
Business Fundamentals
Business vs Organization
For-profit (Business)
Produces and sells Goods & Services
with the intention of making money
Not-for-profit (Organization)
Main purpose is not to make money
May still take in money to
help achieve their goals
Why we buy
Income & Price
Households with more income has the luxury of not only buying more expensive goods and services, but spending a smaller portion of their total income on necessities
Families with higher income
can enjoy more luxuries
Status
Some may choose to buy certain goods
to establish an image
These could be expensive products
Current Trends
Trends and fads change rapidly -
they may not remain the same in 1-5 years
Often applies to clothing, tech, and toys
Safety
Insurance, helmet, safety checks
Promotion & Advertising
Some brands are very good at advertizement
Today’s algorithms on social media
platforms tailor ads to your interests
Situational influences
When? holidays, special occasions
Where? we like to buy things at
places with a positive atmosphere
How? Different means of purchase. Cash, card. etc
Why? Unique reasons
State and moods? we sometimes
buy things based on our moods
Terms
Revenue
Money earned from selling G&S
Expenses
Costs for maintaining the business
Profit
Income after the expenses are paid
Goods
Items that have a monetary value ($)
and can be seen/touched (tangible)
Services
Assistance/help provided in
exchange for payment
Needs and wants
Types of businesses
Private sector
Individually owned/operated businesses
Goal is to make profit
Usually more efficient
Profit motive and competition drive innovation
Crown Corporations
Own and operated by government
Goal is to provide services to public
Public sector
Government employers
Employees of various levels are often
called "public servants"
Goal is to meet the needs of society
Services are more afforable
Highly regulated, making the slower
Privatization
A public owned business sold to a
private sector
Saves government's money
Better suited for private sector
The governemtn may stop providing
service and let the private sector
fill the gap.