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Understanding Business Summary
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Summary of 98 pages for the course Introduction to Business at EUR
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INTRODUCTION TO BUSINESSUnderstanding Business
Second Custom edition RSM Erasmus University
- William G. Nickels
- James M. McHugh
- Susan M.McHugh
Mitch Evers
,CHAPTER 1: TAKING RISKS AND MAKING PROFITS WITHIN THE DYNAMIC BUSINESS
ENVIRONMENT
ENTREPRENEURSHIP AND WEALTH BUILDING
Business: Any activity that seeks to provide goods and services to others while operating at a profit
Goods: Tangible products such as computers, food etc.
Services: Intangible products, such as education, health care, insurance, recreation etc.
Entrepreneur: A person who risks time and money to start and manage a business (often with the goal of
acquiring money)
REVENUES, PROFITS AN D LOSSES
Revenue: the total amount of money a business takes in during a given period by selling goods and services
Profit: The amount of money a business earns above and beyond what it spends for salaries and other
expenses.
Loss: When a business’s expenses are more than its revenues
MATCHING RISK WITH PROFIT
Risk: The chance an entrepreneur takes of losing time and money on a business that may not prove profitable
Those that take the most risk may make the most profit.
STANDARDS OF LIVING AND QUALITY OF LIFE
Businesses and employees pay taxes that are used on public facilities. Wealth made by businesses thus benefit
everyone in the communities.
Standard of living: the amount of goods and services people can buy with the money they have
Quality of life: the general well-being of a society in terms of freedom, environment, education, health care,
safety, leisure, rewards that add to the satisfaction.
RESPONDING TO VARIOU S BUSINESS STAKEHOLDERS
Stakeholders: all people who stand to gain or lose by the policies and activities of a business and whose
concerns the business needs to address (costumers, suppliers, employees, stockholders, dealers, bankers,
community, media, environmentalists, government)
It’s a balancing act to satisfy all the stakeholders
, Stockholder
Bankers Customers
Surrounding
Media
community
Stakeholders
of a
Typical US
Business
Environmen
Suppliers
talists
Government Dealers
leaders (retailers)
Employees
Outsourcing: Contracting with other companies (other countries, possible) to do some or all of the functions of
a firm, like its production or accounting taxes.
Insourcing: Foreign companies setting up facilities here (often design & production)
USING BUSINESS PRINCIPLES IN NONPROFIT O RGANIZATIONS
Nonprofit organizations also make a major contribution to the welfare of society.
Nonprofit organization: whose goals do not include making a personal profit for its owners or organizers
They do strive for financial gains, often, but use it to meet social or educational goals.
Social entrepreneurs: people who use business principles to start and manage not-for-profits and help address
social issues.
ENTREPRENEURSHSIP VERSUS WORKING FOR OTHERS
Advantages of working for others: someone else assumes the risk and provides you with benefits like paid
vacation and health insurance.
Advantages of entrepreneurship: freedom to make your own decisions, opportunity and possible wealth.
Businesses owned by minorities (also women) are growing.
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