This document provides an overview of business and society. It defines business as the production and distribution of goods and services with the aim of earning profits. A business involves inputs, processes, and outputs to transform resources into final products. There are various types of businesses based on size, ownership, industry, and geographic area. A business' relationship with society is interdependent - business satisfies social needs while society provides resources and customers, but businesses can also negatively impact the environment and communities.
2. What Is Business?
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• It is a production and distribution of
goods and services with the aim of
earning profits
• The organized effort of individuals to
produce and sell, for a profit, the
goods and services that satisfy
customers’ and society’s needs.
• Any organization that uses resources
to produce a good or service
3. Nature of a business
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– Business activity involves
Inputs Processes Outputs
• Inputs are anything that flows in to the
business
Eg. are raw materials, components, machinery,
equipment, and labor
• Processes are collection of tasks that used to
transform inputs
• Outputs are the provision of final goods and
services
4. Inputs
• Land and natural resources include
fields to build factories on; energy
to power factory
• Labor includes employees needed
to operate machines, sell to
customers
• Capital includes plant and
machinery, computers, finance
• Entrepreneurs are People who are
prepared to invest in and manage a
business
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5. Products
– Product = anything that satisfies
customer needs and wants.
This can be:
– A “good”
• Something tangible
• E.g. a mobile phone
– A “service”
• Usually intangible
• Something other people
do for you
• E.g. the service you
receive when you stay in
a hotel
6. Types of goods
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– Consumer goods: are sold to
the general public and can be
durable or non-durable.
–Durable goods: consumer
goods that can be used over
time, repeatedly.
– Examples: televisions, t-
shirts, books, cars
– Non-durable goods: are
consumer goods that can
only be used once.
– Examples: food, drinks, and
candy
7. Continued..
• Capital Goods: are used
by industry to produce
other goods and services
• Examples: machinery,
cranes, dump trucks
• Consumer Service: Non-
tangible product that
sold to the consumer
• Examples: hotel rooms,
airplane tickets,
insurance
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8. Role and importance of Business
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• Providing employment opportunities
• Satisfying consumers’ needs and wants by producing
goods and providing services
• Generating income for people and the government
• Promoting economic growth and raising people’s
living standard
12. Based on industry
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• A group of businesses
that all produce similar
products is called an
industry
Example: Automobile
manufacturers and
automobile parts are the
Automobile Industry
• Separated into five
categories: primary,
secondary, tertiary,
quaternary, and quinary
13. Primary industry
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EXAMPLE
• Agriculture
• Fisheries
• Mining
• Foresting
and
• Quarrying
• All activities that directly extract or utilize natural
resources in the process of production
• Harvest natural resources that are later used to
manufacture products
14. Secondary Industry
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EXAMPLE
• Manufacturing
• Construction; and
• The supply of
electricity, gas,
and water
• All processes of turning raw materials into finished
goods or semi-finished goods
• Manufacture raw materials into finished products
15. Industry
• Gold and silver ores are
refined and made into jewelry
• Crude oil is refined into
machine oil and gasoline,
Wheat is milled into flour and
baked into breads and cookies
• Wheat is milled into flour and
baked into breads and cookies
• Technology innovations has
led to automation with
computer assisted design
• Production is increasing using
fewer workers
Secondary
industry
16. Tertiary industry
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EXAMPLE
wholesale, retail, and
import/export trade;
restaurants and
hotels; transport,
storage, and
communications;
financing, insurance,
real estate, and
business services
• All economic activities that provide services to
business and consumers
17. • Provide services to
consumers and other
businesses
• Often involves selling or using
products produced by
secondary industries
• Tertiary industries are rapidly
expanding creating job
opportunities in service
occupations
• Due to advances in
technology (including
electronics, communications,
and computer science and
aerospace), an aging
population, busy consumers
with less free time, and
consumer demand for higher
quality services
Tertiary
Industry
18. Quaternary industry
• Are tertiary sector but with a focus
on information processing.
• It emphasizes technology,
intellectual activities, processing of
symbols or symbolic objects such as
information, numbers, words, or
money.
• This industry has largely grown.
• Typical examples of quaternary
businesses include banks, insurance
businesses, media, researchers,
politicians
19. Quinary Industry
• The quinary industry, like the
quaternary sector, provides
services.
• Businesses in the quinary
industry provide services
such as education and health
care
• It includes also non-profit
organizations such as the
army and government
organizations such as health,
education, and police.
20. 20
• Wheat farm & flour mill producing bread
grocery store/cake shop consumers
Interdependence of industry –
Example 1
21. 21
timbering producing paper and
books book store consumers
Interdependence of industry –
Example 2
22. Types of business ownership
• Entrepreneurs need to understand the
advantages and disadvantages of various
types of businesses so that they can choose
the one that best suits their needs.
• Sole proprietorship
• Partnership
• Corporation
23. Sole Proprietorship
• A business owned and
managed by one individual
• The business and the owner are
one and the same in the eyes of
the law
The easiest and most popular
form of business ownership
25. Sole Proprietorship: Disadvantages
Incurs any losses
Unlimited liability/ is liable for the
debts of the business
Limited access to raising financial
capital
Small size-may have limited inventory
Limited managerial experience
Difficulty of attracting qualified
employees
Limited life
27. Types of Partnership
General vs Limited
The law requires that
all partnerships have
at least one general
partner.
A partnership may
be set up so that all
of the partners are
general partners.
General partner
A participant in a
partnership who has
unlimited personal liability
and takes full responsibility
for managing the business
28. Partnership types
• Some partnerships
include a limited
partner.
Limited partner
A partner in a business
whose liability is limited
to his or her investment;
a limited partner cannot
be actively involved in
managing the business
29. Partnership: Advantages
• Ease of start up
• Ease of management
• Sharing of risks
• Larger pool of capital
• Ability to attract limited
partners
• More efficient operations
that come from larger size
30. Partnership Disadvantages
• Unlimited liability of at least one
partner
• Limited life
• Lack of continuity
• Potential for personality and
authority conflicts
31. Corporations
• A corporation is a
business recognized by
the state as a legal entity
separate from its owners
(also known as
shareholders).
• A corporation can be
owned by individuals
and/or other entities,
and ownership is easily
transferable via the
buying and selling of
32. Corporations: Advantages
• Ease of raising financial
capital
• Limited liability for its
owners
• Board of directors can
hire professional
managers to run the firm
• Unlimited life
• Ease of transferring
ownership of the
corporation
33. Corporations: Disadvantages
• Double taxation of
corporate profits
• Difficulty and expense of
getting a charter
• Shareholders (owners)
have little voice in how
the
business is run
• Subject to more
government regulations
than others forms of
business
34. Influences on business
• Business can be affected by internal
and external factors
• Internal factors are related to all
aspects within the boundaries of nan
organization and generally are within
the control of the management
• External are factors beyond the
control of the organization.
35. Internal environment
These are factors from inside the
firm that could affect performance.
1. Finance available – without
money the firm may not be able
to do what they wish.
2. Ability of staff – the more
capable staff are the more
productive they will be
3. Information available – the
better the information the
better the decisions made.
36. Internal environment…
4. ICT Availability – this can
influence the quality and
quantity of what is produced
5. Ability of Management – good
managers will make good
decisions
6. Changes in Costs – increases in
wages or raw materials can
affect the profitability of the
firm
38. Political
• Laws passed in the a country
can affect the what a business
does.
• E.g. shops are not allowed to
sell alcohol to under 18 or the
smoking ban in public places.
• Failure to follow laws will result
in fines.
• Other ways the government
can influence is through setting
taxation rates and investment
in infrastructure.
39. Economic
• This includes changes in interest rates, exchange
rates, inflation and the economic cycle.
• If interest rates are high this could stop firms
from borrowing money also customers are less
likely to borrow or use credit cards to make
purchases.
• If the Birr is high against other currencies this
makes it hard to export goods abroad, reducing
the number of sales.
• If inflation is high, the prices of raw materials can
be expensive which can reduce profits.
• If the economy is in recession, people tend to be
unemployed or worried about losing their job,
therefore not spending money on luxury goods.
40. Social
Demographic changes
• This is to do with the size and
distribution of the population of
a country.
• E.g. if a country has an ageing
population, this has led to a rise
in products aimed at older
people and firms recruiting
older workers
41. Social…
Socio-cultural changes
• This is about changes in lifestyle and
attitude.
E.g. More women working has seen a
rise in ready meal and later opening
hours
• More concern about the
environment, forcing firms to maybe
use recycled products.
• People have more leisure time,
changes in attitude to single mothers
have also affected the types of
products offered.
42. Technological
• Firms need to keep up-to-date with
the latest technology in order to
remain competitive.
• Have seen a huge growth in e-
commerce (buying and selling online)
• Use of machinery in the production
process – more efficient and cheaper.
43. Environmental
• Firms are aware that they
have to be more
environmentally friendly, not
only because that is what
customers want, but can be
forced by the government to
do so.
• It can also include storms,
floods, noise.
• All these can affect how a
business operates.
44. Competitive
• What the competition is doing can
affect how a business operates.
• Firms now not only face domestic
competition but also foreign.
• Have to keep up or be better than
your competition to keep your
customers.
45. Market Structures
Type of market structure
influences how a firm
behaves:
• Pricing
• Supply
• Barriers to Entry
• Efficiency
• Competition
46. Market Structure
• Determinants of market structure
– Freedom of entry and exit
– Nature of the product – homogenous
(identical), differentiated?
– Control over supply/output
– Control over price
– Barriers to entry
47. Perfect Competition
• Free entry and exit to
industry
• Homogenous product
• Large number of buyers and
sellers – no individual seller
can influence price
• Sellers are price takers –
have to accept the market
price
• Perfect information available
to buyers and sellers
Is a market structure where many firms offer a
homogeneous product.
48. Imperfect /monopolistic competition
• Many buyers and sellers
• Products differentiated
• Relatively free entry and exit
• Each firm may have a tiny
‘monopoly’ because of the
differentiation of their product
• Firm has some control over
price
Examples – restaurants, building
firms – plasterers, plumbers,
etc.
Is a type of market structure where many companies
are present in an industry, and they produce similar
but differentiated products
49. Oligopoly – competition amongst the few
• Industry dominated by small
number of large firms
• High barriers to entry
• Products could be highly
differentiated
• Non–price competition
• Price stability within the
market
• Potential for collusion
• Abnormal profits
• High degree of
interdependence between
firms
Is a market structure with few firms and barriers to entry.
50. Society and business
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• Society may be defined as a community, a
nation, or a broad grouping of people having
common traditions, values, institutions, and
collective activities and interests
• Is a group of people involved in persistent
social interaction or large social grouping
sharing the same geographic or social
territory
• Human beings and the social structures they
collectively create
51. Relationship between business and society
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• Business and society are highly interdependent
• Systems theory helps us understand how business
and society, taken together, form an interactive
social system
• Each needs the other, and each influences the
other.
• They are both separate and connected.
• Business and society interrelated in a
macroenvironment as stakeholder
• Macroenvironment is the complete societal contest
in which the organization resides
52. Society as the macroenvironment
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Four segments of the
macroenvironments
1. Social environment: focus on
demographic, lifestyle and social
values
2. Economic environment: focus on
the economy
3. Political environment: focus on the
legislative process, election process
and the interaction between firms,
politics and government
4. Technological environment: focus
on the changes in technological
advancement.
53. The impacts of business activities on society
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• All business activity has
benefits and undesirable effects
on society
• These reasons are why
governments want to have
some control over the business
activities
• Governments tent to pass laws
that restrict undesirable
activities while supporting
54. Possible benefits of business
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• Production of useful goods
to satisfy customers wants
• Create employment
• Increase workers living
standards
• Introduction of new products
or process that reduces costs
and widen product range
• Taxes help to finance public
services
• Business can earn foreign
currency in exports and this
could be spent on imports
55. Possible undesirable effects
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• Business might ruin cheap but
beautiful areas
• Low wages and unsafe working
condition for workers b/c
business wants to lower costs
• Pollution
• Production of dangerous goods
• Monopiles
• Advertisement can mis lead
customer