Transcript Introduction to Business Lesson II

Ass. Prof. Özgür Kökalan
İstanbul Sabahattin Zaim University
Lesson Objectives
1.
Define the concept of Business
2. Difference between business and not-for-profit
organizations and identify the factors of production.
3. Describe the economic systems and explain how
competition and entrepreneurship contribute to the
system.
What is business?
Business: profit seeking activity that provides goods
and services to satisfy consumers’ needs.
Business: consists of all activities to serve goods and
services to the community with the purpose of profit
for surviving.
Profits: financial rewards received by a
businessperson for taking the risks involved in
creating and marketing want-satisfying goods and
services.
Business is so crucial (important) for economies.
Why?
 Business is so crucial (important) for economies.
Why?
 Business ( firm),

Offers necessities

Provides jobs

Pays taxes

Reinvests profits

Creates higher standard of living
 Organizations: deliberately established groups
working together in a systematic way for common
purpose
 There are two kinds of organization :
 Profit Seeking Organizations:

the main aim to take profit from their operations
 Not For Profit Organizations:

Businesslike establishments that have primary objectives
other than returning profits to their owners
The Corporate Angel
Network: A Not-for-Profit
Organization
Labor Intensive versus Capital
Intensive Businesses
Labor Intensive
Capital Intensive
rely on human
resources to
prosper
require large
amounts of money
or equipment to
start and to
operate
Factors of Production
Resources societies use to produce and distribute
goods and services. Businesses rely on five
factors of production to optimize profits.
What do we need to produce
something?
Human
Resources
Capital
Knowledge
Natural
Resources
Entrepreneurs
Factors of Production
Natural resources: assets useful in their natural state (land,
minerals, water, and forests).
Human resources: anyone involved in the production of
goods and services
Capital: resources such as money, equipment, and buildings
necessary for production of goods and services.
Entrepreneurs: innovative risk-takers who create and operate
new businesses
Knowledge: the collective intelligence of an organization
Which factor is the most important?
Economic System
 Economic System: Basic set of rules for allocating a
society’s resources
Answers three questions:



What to produce
How much to produce
Who gets what
 There are mainly four kinds of economic system in the
world. These are:




Free market economy ( Capitalism)
Communism
Socialism
Mixed Economy
Communism
 There are some characteristics of communism listed
below:

Governments control all or part of resources

Governments limit individuals’ freedom of choice

Government sets goals
 Examples: North Korea, Cuba
Socialism
 There are some characteristics of listed below:

Governments control major industiries in the country

It provides more individuals’ freedom of choice than
communism

Majority of people work for government owned industires. But
small business owned by private person is encouraged.
 Examples: Sweden, India, Syria, Israel
Mixed Economy
 There are some characteristics of listed below:

major industiries in the country are owned by both
government and individuals

It provides individuals’ freedom of choice in many areas

people work for both government owned industires and
private enterprises.
 Examples: Turkey, Romania, Italy, France
Free Market Economy ( Capitalism)
 In free market economics,
 Marketplace determines what goods and services get
produced.
Basic Rights in the Private Enterprise System
Free Market Economy
 Free market economy have three important rules.
These are:
Theory of Supply and Demand
Competition
Some Government Intervention
Theory of Supply and Demand
 According to free market economy, all things in
market are determined by supply and demand, not
by government. It is called as invisible hand.
 Supply; The number of products that businesses are willing
to sell at different prices at a specific time
 Businesses are willing to supply more of a good or service at higher
prices because the potential for profits is higher.
 Demand; The number of goods and services that
consumers are willing to buy at different prices at a specific
time.
 Consumers are usually willing to buy more of an item as its price
falls because they want to save money.
Supply Curve for Gasoline
Demand Curve for Gasoline
Equilibrium Point for Gasoline
Competition
 Market in which two or more suppliers of a product
serve the same customers.
 There are some kinds of competition in the market.
These are:
 Pure competition
 Monopolistic competition
 Oligopoly
 Monopoly
Pure Competition
In pure competition,
•
Multiple buyers and sellers exist
•
Nearly identical products/services
•
Low barriers to entry (sellers can easily enter and exit
the market place)
•
No single firm or group of firms can influence price
Example; Agriculture product
Monopolistic Competition
In monopolistic competition;

Varying degrees of competitive power

Most advanced free-market economies features
monopolistically competitive firms

Large number of sellers

Differentiated products—very similar—single
distinguishing feature
Example; Retailing
Oligopoly
In oligopoly,

Industry dominated by only a few sellers

Similar product are offered to consumer

Differentiatial is so importat.
Example: GSM operators in Turkey, Airline companies
in domestic lines.
Monopoly
In monopoly;

Single seller controls the supply of a good and
service

Ability to determine the price

There is no competition in the market
Example; TCDD