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1. Foundations of Business and Economics
Chapter # 1
LECTURE 1

3. The Birth of Business…
Over the year people have become more and more
dependent on others. We can’t produce all we need to
live in this society.
Once people exchange the surplus goods that they
have after their own consumption.
This is called Barter System.

5. Bartered Off !
 It is the direct exchange or act of
trading goods for another, between
two or more parties, without the use
of any medium of exchange like
money.
 Bartering benefits individuals,
companies and countries that see a
mutual benefit in exchanging goods
and services rather than cash, and it
enables those who are lacking hard
currency to obtain goods and
services

6. So…Let’s Get Down To “Business”
Business is the exchange of goods, services or money for the
mutual benefit or profit.
Who will produce what?
He who has skills and ability or
specialization in specific job will
produce or serve or involve in that
task.
International Opportunities
As the shortage of resources and as
they are not distributed equally all
over the world, people will go across
the border for international business.

7. Standard of Living
A measure of how well a person or family
is doing in terms of satisfying needs and
wants with goods and services.
Free Enterprise
It means that private businesses are able to
conduct business activities competitively
with minimal government regulation.
Inflation
Rate at which the general level of prices
for goods and services is rising and
purchase power is falling. (example:
inflation rate goes up to 2%)
So…Let’s Get Down To “Business”

8. Core of Business:
The Human Element
Business needs people as
owners, managers,
employees, and consumers.
People need business for the
production of goods and
services and the creation of
jobs, whether business is
transacted in Bangladesh,
USA, Japan or Ghana.

9. Owners
People, who own a business as well as those
who invest money in one, do so because they
expect to earn profit.
Managers
The person responsible for operating the
business may be the owner or a professional
manager employed by the owner. An owner-
manager is also called an entrepreneur.
Core of Business:
The Human Element
The owner-manager sets his/ her own
objectives, whereas a professional manager
attempts to achieve objectives set by others.

10. Employees
Employees supply the skills and abilities needed to provide a
product or service and to earn a profit. Most employees
expect to receive an reasonable wage or salary and to be
given regular increases in the amount they are paid for the
use of their skills and abilities.
Core of Business: The Human Element

11. Consumers
A consumer is a person or business who purchases a goods or
services for personal and organizational use. A business
enterprise attempts to satisfy consumer needs and desires
while earning a profit.
Core of Business: The Human Element

13. Business Objectives
Survival
Survival objective is an obvious objective. Other objectives can be accomplished
only if the business enterprise survives.
Growth
Growth is an objective because business does not stand still. Market share
increase, personal and individual development and increase productivity are
important growth objectives.
Social Responsibilities
In recent years, meeting social responsibilities has been recognized as important
objectives. Businesses, like each person in society, must accept their
responsibilities in areas such as pollution control, eliminating discriminatory
practices and energy conservation.

14. Profit
The profit objective plays the major role in business.
Business Profit
The difference between business income and business expenses
Business Objectives

15. Social Responsibility
Businesses, like each person in the society, must accept their
responsibilities towards the society in areas like pollution control,
energy conservation, eliminating discriminatory practices, etc.
Business Objectives

16. Activities Performed to
earn Business Profit:
 Risk Taking
Toyota invested millions of
dollars in promoting and
selling small cars in the US.
Today, this Japanese
corporation is the largest
small car seller in the US
market.
Business Objectives

17. Activities Performed to earn Business Profit:
 Evaluation of Demand
Business Objectives
- KFC - Domino’s Pizza - Boomers

18. Activities Performed to earn
Business Profit:
 Organized Management
Management of people,
technology, materials and
capital. Efficient planning ,
organizing, controlling,
directing , and staffing can
earn satisfactory profit.
Eg. Cola Cola , GP ,
Banglalink
Business Objectives

19. Opportunity Cost:
Something you given up in order to get something else.
Mr. Mahmud is working in Company X. Earning 10000 BDT per
month. His office is near to his house. But he could earn BDT per
month working in Company Y. which is far from his house.His
opportunity cost is 10000 BDT.
Business Objectives

20. Selling Price: All costs of making and selling a product,
including taxes
Economic Profit: What remains after the expenses and
opportunity costs are subtracted from income.
Business Objectives

21. Economics: The Foundation of Business
Economics
The study of how a society (people) chooses to use limited
resources to produce goods and services and to distribute
them to the people for consumption.
This definition raises certain issues that are key to
understanding economics:
 Resources
 Goods and Services
 Allocation of Resources and Products

22. Economics: The Foundation of Business
Resources
 Natural Resources
Resources provided in limited amounts by nature such as
oil, natural gas, minerals, timber and water. Natural
resources must be processed to become a product or to be
used to produce other goods and services.
Example - Trees must be processed into lumber before they
can be used to build homes, offices, schools, etc.

23. Economics: The Foundation of Business
Resources
 Capital Resources
Goods produced for the purpose of making other types of
goods and services. Some capital resources, called current
assets have a short life and are used up in the production
process.
Such as fuel, raw materials, paper, money.
Long-lived capital resources which can be used repeatedly in
the production process are called fixed capital.
Such as factory building, machineries, etc.

24. Economics: The Foundation of Business
Resources
 Labor Resources
Represent the human talent, skills and competence
available to a nation.
To have value in the labor force, individuals must be
trained to perform either skilled or semiskilled work.
This collection of human talent is the most valuable
national resource. Without human resources, no
productive use of either natural or capital resources is
possible.

25. Economics: The Foundation of Business
Resources

26. Economics: The Foundation of Business
Goods and Services
A nation’s resources are used to produce
goods and services that will meet people’s needs
and wants.
Needs: goods and services people must have
in order to survive. Example: food, clothing,
shelter, medical needs, etc.
Wants: are things they would like to have
but do not absolutely require for survival.
Example: luxury holidays, fast foods (Burgers,
Fries), etc.

29. Allocation of Resources
and Products
The process of choosing
how resources will be used
to meet a society’s needs
and wants and it also
includes the distribution of
products to customers.
Limited resources and
unlimited want - Supply of
Gas & Oil.
Economics: The Foundation of Business

30. Shareholder
Shareholder, also known as stockholder, is an individual or
company (including a corporation) that legally owns one or more
shares of stock in a joint stock company. The shareholders are the
owners of a corporation.
Stakeholder
Stakeholders are those people who stand to gain or lose by the
policies and activities of an organization.
Example: Employees, Customers, Dealer, Suppliers, Bankers,
Government leaders
SHAREHOLDER VS STAKEHOLDER

31. ORGANIZATIONAL STAKEHOLDERS

32. ECONOMIC SYSTEM
The accepted process by which
labor, capital and natural
resources are organized to produce
and distribute goods and services
in a society.

33. Capitalism
An economic system in which all
or most of the sources of
production and distribution are
privately owned and operated for
profit. The founder of this system
is Adam Smith.
Example: USA, Europe, Japan,
Canada.
ECONOMIC SYSTEM

34. Socialism
An economic system based on the premise that businesses should be
owned by the state so that profits can be evenly distributed among the
people. The founder of this system is Karl Marx.
Example: Russia (former), China.
ECONOMIC SYSTEM

35. SO…THE DIFFERENCE?

36. ECONOMIC SYSTEM
There are three basic
types of Economies:
1. Planned Economies
2. Free Market Economies
3. Mixed Economies

37. PLANNED ECONOMY
Economic system in which the government largely decides
what goods and services will be produced, who will get then
and how that economy will grow.
The government owns the productive resources, financial
enterprises, retail stores and banks.
Example: Soviet Union, Cuba, North Korea

38. FREE MARKET ECONOMY
Economic system in which decision
about what to produce and in what
quantities are decided by the market.
That is by buyers and sellers negotiating
prices for goods and services.
Example: USA

39. FREE MARKET ECONOMY
Economic system in which some allocation of resources
are made by the market and some are made by the
government.
This contains elements of both market and planned
economic system. There are private enterprises and also is
the government intervention. Both the government and the
business enterprises produce and distribute goods and
services.
Example: Bangladesh, UK, India, etc.

40. THE GOOD, THE BAD, AND THE UGLY
Type of Economy Advantages Disadvantages
The Planned Economy 1. Necessities are produces 1. Large Bureaucracy
2. Essential goods/ services 2. Mistakes in amounts of
eg. Education will be provided goods/ services produced.
for all the community 3. Little consumer choice
3. More equal distribution of 4. No profit motive
income and wealth 5. Little variety of
goods/services
6. Loss of individual
freedom

41. THE GOOD, THE BAD, AND THE UGLY
Type of Economy Advantages Disadvantages
The Free Economy 1. Consumer choice exists 1. Too many luxuries produced
2. No bureaucracy for the rich/ wealthy.
3. Profit motive exists 2. Essential goods/ services,
4. Many small firms producing eg. education may not be
a variety of goods produced
5. Less government 3. Ignores social costs
interference 4. Monopolies may exist
5. Unemployment in declining
industries
The Mixed Economy Combines the advantages of Combines the disadvantages of
other systems other systems

42. END OF LECTURE 1