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Business Fundamentals | Functions of a Business | Entrepreneurship | Finance | Summative Project


Basics of Economics | Business Types | Business Ethics/Social Responsibility | International Business


Business Fundamentals


Basics of Economics


What you need to remember:

What is a Business?

Profit or not? - Simply put a for-profit business is the goal to sell a product or service that will make the company money. If non-profit (or not-for-profit) has, as an end-goal, to supply the product/service to help a community.
  • For-profit: Most businesses want to supply a good/service to consumers and make money doing so. Profit is what's left after expenses and cost have been accounted for. The company is solvent if, after meeting debt and financial obligations there's money left (list of fastest growing businesses).
    • Revenue-Expenses = Profit (or loss)
  • Non-profit organization (NPO): raise financial capital for particular projects. Not-for-profit (NFP) organizations on the other hand will sell goods/services to meet the needs of their organization's members'. Most NFP are non-profit, but in some cases, NFP organizations can generate profit which can be then shared among the members, or to expand the organization. Co-operatives are a good example of NFP organizations that do this.

Business Size: there are several definitions for business size. According to Industry Canada small businesses employ almost 50% of the private workforce in Canada and tend to create about 1/3 of all jobs on a yearly basis. About 1/4 of the small businesses in Canada sell products (goods), but the vast majority provide services. Distribution of these goods/services is often 'bricks and mortar"-based, but a growing segment is internet-based (taking away from phone/catalogue-based distribution)
  • According to Canadian Industry Profiles, a small business is defined as one with revenue between $30,000 and $5 million. A medium business has revenues between $5 million and $25 million.
  • Statistics Canada defines small businesses as firms with less than 500 employees and less than $50 million in annual revenues.
  • The Canadian Council of Ministers of the Environment defines business size according to the number of employees. Small Business has less than 50 employees. Medium Business has 51 to 500 employees.

Forms of business Ownership: Classification of the type of business is informally based on how it is owned (and the type of job(s) it provides)
  • Sole proprietorship: owned by one person
  • Partnership: owned by two ore more partners
  • Corporation: an artificial entity created by law and owned by shareholders
  • Franchise: one business licenses another to use its name/procedure/product. Can also have hybrids (i.e. sole proprietorship/partnership etc. AND franchise)
  • Co-operative: owned by it's members who buy from the business.


Assignment # 1:- to be turned in to Mr. McIntyre's Handin folder for BBI2O

course_letterhead.png


Goal: You are to research a small or medium-sized business and address ALL of the points above. The summary should be about 1 full page long and be targeted at individuals who may consider investing in the company.

Of note: PLEASE remember the academic policies at SCHS (they can be read in your day planner or are available here). Of special note are pages 20-23 regarding academic policies such as late assignments, academic integrity and academic honesty. There will be ZERO tolerance for plagiarism in this course.

The summary should include:
1 - A course (business) letterhead that includes your name, your contact info (including address/phone number/email) [note:your information won't be used to solicit business and/or sold to other companies], the course title, the course code, my name (McIntyre) (see the example at right)
2- A summary of they business type including revenue, expenditures & profit (if available), company size, type of ownership.
3- Citations at the bottom of the assignment in the form of footnotes. You should have no less than 2 sources for your information.

Evaluation: [/33]

Absent
Below
expectation
Meets
expectation
Exceeds
expectation
Letterhead
0
1
2
3
Logo
0
1
2
3
Summary
- type of business
- business size
-type of ownership
- type of product
- revenue
-citation (referencing)
Bonus
expenditure/profit


0
0
0
0
0
0

1
1
1
1
1
2


1

2
2
2
2
2
4


2

3
3
3
3
3
6


3


Tools necessary:
  • your brain (no link necessary - hopefully)
  • writeup MS Word or Open Office (saved in Word 97-2003 format if you have a more modern version)
  • for logo design you'll need Photoshop (available as a trial at Adobe's site)
  • Google
  • Profiles Canada


Role of the Consumer:

Background: Most businesses produce a good or service for a consumer. More consumers = more profit for most businesses. Consumers and producers meet in marketplaces (which can be physical, or virtual (e.g. internet). Research on consumer behaviour is itself a thriving service.

#1 rule of business - the consumer (customer) is always right (except when they're wrong, but even still, they're right)!

Consumers influence decisions to produce goods/services, competition is what drives them to change goods/services to accommodate demand. When demand for a product tapers off and production is no longer profitable the product becomes obsolete. Businesses control pricing in that they can choose to charge whatever the market will bear. When consumers flex their purchasing power, they can choose where and what and how much they are willing to buy and for how much.

Homework Questions p 33-34 Q#2,6-8,13 homework for tomorrow.


Assignment #2 - to be turned in to Mr. McIntyre's Handin folder for BBI2O


Goal: In groups of 2-3 (determined by me) you are to quickly come up with a product/service. Research how much that product/service should be sold for (and what quantities). Your only goal is that you're targeting consumers with between $50-$100 for each unit of the product/service. Make sure to include in your pricing the raw cost of production (should it apply), and salaries. If the product/service is viable (i.e. you make profit with each sale transaction) and you've taken into account your capital expenditures you can quickly approach me, the investor, to see if you've won the competition. There will be marks based on ranking, as well as the report on your product/service.

Of note: PLEASE remember the academic policies at SCHS (they can be read in your day planner or are available here). Of special note are pages 20-23 regarding academic policies such as late assignments, academic integrity and academic honesty. There will be ZERO tolerance for plagiarism in this course.

Your product/service summary should include:
1 - A course (business) letterhead that includes your name, your contact info (including address/phone number/email) [note:your information won't be used to solicit business and/or sold to other companies], the course title, the course code, my name (McIntyre) (see the example at right)
2- What your product/service is. How you intend to make money at selling your product/service (i.e. rationale as to why your product/service is at the price-point it is from doing research).
3- Citations as to the price-point of your product/service at the bottom of the assignment in the form of footnotes.

Evaluation: [/18]

Absent
Below
expectation
Meets
expectation
Exceeds
expectation
Letterhead
0
1
2
3
Logo
0
1
2
3
Product
- clearly listed price-point to base your revenues on
- capital expenditure per item/unit
-- profit
-citation (referencing)


0
0
0
0

1
1
1
1

2
2
2
2

3
3
3
3


Tools necessary:

  • writeup MS Word or Open Office (saved in Word 97-2003 format if you have a more modern version)
  • Google


Starting a Business

Key questions/ideas

Link to successful entrepreneurship series video.

  • characteristics are people who are self-confident, who have a flair for innovation, who can work alone and who can manage others well
  • key factors include people who are risk-takers, problem-solvers and opportunity-aware
  • "ideas are a dime a dozen and execution is all that matters"


Business Start-ups
The following note discusses the various requirements for starting up one of our four (4) types of business. For each provide a rating and a reason for your choice

Manufacturing
Retail
Service
Franchise

A business that makes a product
A business that buys a product and resells it to customers
A business that does something for a person or business.
A contract to run an identical business in another location.
Start Up Costs
(Low, Medium, High)





Level of Skills Required
(Low, Medium, High)





Level of Risk
(Low, Medium, High)





Complexity of Production
(Low, Medium, High)





Resource Requirements
(Low, Medium, High)





Take-home Quiz

Consumer Needs and Wants


Maslow's Hierarchy of Needs
  • business sells goods/services to consumers to satisfy wants and needs.
  • you can choose a business that can sell a good/service to satisfy basic needs (i.e. food/water), or a business that is for WANTS rather than NEEDS
  • Needs are things that are necessary for survival (food/clothes/shelter)
  • Wants are things not necessary to survival, but are there to add 'value' or comfort to our lives.

external image Maslow_self_actualization.jpg

Activity:
Product
Need
Want
Explanation
Cellphone



Concert tickets



Blood pressure medication



Plumbing tools for a plumber



Vehicle to go to school



Bag of chips




Attracting Consumer Interest

Assuming there exists already a product/service that responds to the needs/wants of the customer it is up to the entrepreneur to figure out how they're going to attract customers.
key
price-quality_matrix_blank.png

research-research-research!
Bad business ideas:

Making Good Business Decisions

A classic example is how much inventory to carry to keep the customers happy. Business owners must make a myriad of decisions every day. At the end of the the day even the most informed owner must rely on a bit of luck. Motor & electronics dealerships are particularly affected by inventory decisions, being told that if they want to maintain exclusivity rights they have to carry an abundance of inventory (which ties up financial capital).

Five-step model to make a business decision.
  1. Determine what decision has to be made
  2. Identify alternatives
  3. Evaluate pros-cons of alternatives
  4. Make decision
  5. Evaluate decision (to change outcome for the future)

Homework Questions p 22 Q#10-13 homework for tomorrow.

Economic Resources & Systems

Also known as factors of production, are the means by which goods and services are made available to consumers. There are:
  1. natural resources - materials that come from the earth
  2. human resources - labour (HR)
  3. capital resources - things that require substantial investment, but remain in the business for a long time (equipment, tools, factories), also money.
To satisfy human society's wants and needs most businesses rely on other businesses (e.g. GM and Ontario's economy, clothing and crop producers). Interdependence is complicated, but may be studied using models (WoW as an economic system model). An economic system is a way of dealing with the selection, production and consumption of goods and services in society. Often government is involved (e.g. a way to ensure lithium is shared between manufacturing for Li-ion batteries).



Assignment #3 - Economic Systems - Country GDP/Resources Comparison


You are to compare:


Canada
Romania
Nigeria
Total population



GDP/capita



Labour force



% of population working in agriculture



% of population working in industry



% of population working in service



% of population living below the poverty line



Exports commodities



Exports in $



Export partners by %



Imports commodities



Imports in $



Import partners by %



Answer the following questions:

1 - What percentage of the population of each country is in the labour force?
2 - What are the similarities and differences between the three countries in terms of the percentage of the population that works in each type of industry?
3 - Why might the list of Canadian exports be so much longer than that of Romania?
4 - Why might some commodities appear on both a country's import and export list? Provide an example to explain your answer.
5 - Exports and imports total in the billions of dollars for each country. Explain what this tells you about our society.

Your submission should include:
1- The table at top
2- The questions answered
3- The standard submissions sheet with your logo/contact info.

Evaluation: [/14]

Absent
Below
expectation
Meets
expectation
Exceeds
expectation
Letterhead
0
present
Logo
0
present
- Table filled out
- Questions answered
0
0
2
2
4
4
6
6


Tools necessary:

  • writeup MS Word or Open Office (saved in Word 97-2003 format if you have a more modern version)
  • CIA Factbook


Supply & Demand

Demand - amount of a service or good that people are willing to buy at a particular price. As prices increase, demand drops, as prices decrease demand grows, this is known as the law of demand. A consumer first has to be aware of, or interested in a particular good or service in the first place (e.g. the microwave oven, bottled water) - hence marketing companies. Prices must be reasonable, and the good/service must be accessible (business location!!! - Stinson's gas in Richmond).

To examine what creates demand we look at the 4 C's of demand.
  1. Changing consumer income (as income increases, as does demand with some exceptions [e.g. grocery/restaurant])
  2. Changing consumer tastes (what types of clothes, electronics etc... come in, and go out of, fashion [cabbage patch dolls])
  3. Changing expectations for the future (psychological - people can think they know what's going to happen and change their buying habits accordingly [gas/food/water in disasters])
  4. Changes in population (increases in population mean increases in all things across the board. Must look at demographics, e.g. older populations demand different things from younger populations).

Supply on the other hand, is how much of a good/service is available at a price that consumers are willing to pay (tar sands). Law of supply: increased supply means increased prices. As prices increase, businesses are able to produce more goods/service and thus there's a greater supply (law of supply).

5 C's of Supply.

  1. Change in number of producers (more producers of a particular good/service means prices will have to drop to be competitive e.g. LCD screens)
  2. Change in price (if a price decreases, then some people stop producing it. This means that supply will drop. e.g. pulp & paper)
  3. Change in technology (a change in technology can reduction in costs of production will mean more people supplying e.g. computers, HDTV vs. BluRay)
  4. Change in future expectations (predictions in tastes/demands of consumers - surplus of New Coke)
  5. Change in production cost (if you can find cheaper natural or human resources (e.g. China), there is greater supply because more companies will start producing)

Price of a good/service is affected by both supply and demand. High prices mean little demand, which means oversupply, which generally results in lower prices. Think of spring sales of clothes (surplus of goods on the market - thus lower prices). During the summer, summer clothes prices will remain steadily high, but in the fall, when the demand drops off, the prices will suddenly drop again.

Video: Venture - Mukluk's in the UK
  1. Why do people follow trends?
  2. Have you ever wanted something because it's hard to get?
  3. Are knock-off's ok (as long as it's not fraud)?
  4. Why is a $2000 hand-bag worth that much money?

Homework p. 32, Q #19-21.

*special thanks to R. Edmondson for use of various course materials from the YRDSB