Business Dimensions of Europe Summary Chapter 1
ES4E, Year 1, Semester 1, Term 2
Business Essentials, Ebert Ronald J., Chapter 1-4
What makes the gas crisis unusual is that it began with an
unusual mix of supply, demand and global forces.
Another major piece of the puzzle has been a surging global
economy that until recently caused a higher demand for oil
and gasoline.
Businesses organizations that provide goods or services
that are then sold to earn profits.
Profits the difference between a business’s revenues and its
expenses.
In a capitalistic system businesses exist to earn profits for
owners.
In choosing how to pursue profits, businesses must take into
account what consumers want and/or need. No matter how
efficient a business is, it won’t survive if there is no demand
for its goods or services.
Businesses produce most of the goods and services we
consume, and they employ most working people.
Business profits enhance the personal incomes of millions of
owners and stockholders, and business taxes help to support
governments at all levels.
External Business Environment: Economic, Technological,
Socio-Cultural, Domestic, Global and Political-Legal.
The external environment consists of everything outside an
organization’s boundaries that might affect it.
The external environment plays a major role in determining
the success or failure of any organization.
Managers must have a complete and accurate understanding
of their environment.
Businesses can also influence their environment.
The domestic environment refers to the environment in which
a firm conducts its operations and derives it revenues.
, The global environment refers to the international forces that
affect a business.
The technological environment generally includes all the ways
by which firms create value for their constituents. It includes:
human knowledge, work methods, physical equipment,
electronics and telecommunications, and various processing
systems that are used to perform business activities.
The political-legal environment reflects the relationship
between business and government, usually in the form of
government regulation of business. It is important for several
reasons. First, the legal system defines in part what an
organization can and can’t do. Likewise, various government
agencies regulate important areas, such as advertising
practices, safety and health considerations, and acceptable
standards of business.
The sociocultural environment includes the customs, mores,
values and demographic characteristics of the society in which
an organization functions.
Sociocultural processes also determine the goods and
services, as well as the standards of business conduct that a
society is likely to value and accept.
The economic environment refers to relevant conditions that
exist in the economic system in which a company operates.
An economic system is a nation’s system for allocating its
resources among its citizens, both individuals and
organizations.
A basic difference between economic systems is the way in
which a system manages its factors of production the
resources that a country’s businesses use to produce goods
and services.
Four (traditional) factors of production: labor, capital,
entrepreneurs and physical resources. In addition to these
traditional four factors, information resources are now
included as well.
Note that the concept of factors of production can also be
applied to the resources that an individual organization
manages to produce goods and services.
