Ebert Be10e Inppt01

Business
Environment
# 1
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1. Define the nature of business and identify its
main goals and functions.
2. Describe the external environments of business
and discuss how these environments affect the
success or failure of any organization.
3. Describe the different types of global economic
systems according to the means by which they
control the factors of production.
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4. Show how markets, demand, and supply affect
resource distribution in BD, identify the
elements of private enterprise, and explain the
various degrees of competition in the economic
system of BD.
5. Explain the importance of the economic
environment to business and identify the factors
used to evaluate the performance of an
economic system.
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The Concept of Business and Profit
• Business
– organization that provides goods or services to earn profits
• A business is defined as an organization or enterprising entity
engaged in commercial, industrial, or professional activities.
• Businesses can be for-profit entities or non-profit
organizations.
• Business types range from limited liability companies to sole
proprietorships, corporations, and partnerships.
• Some businesses run as small operations in a single industry
while others are large operations that spread across many
industries around the world.
• Apple and Walmart are two examples of well-known,
successful businesses.
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Characteristics of Business
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Types of Businesses
There are many ways to organize a business, and there are
various legal and tax structures that correspond with each.
Businesses are commonly classified and generally
structured as:
1. Sole Proprietorship: As the name suggests, a sole
proprietorship is owned and operated by a single person.
There is no legal separation between the business and the
owner, which means the tax and legal liabilities of the
business are the responsibility of the owner.
2. Partnership: A partnership is a business relationship between two or
more people who together conduct business. Each partner contributes
resources and money to the business and shares in the profits and losses
of the business. The shared profits and losses are recorded on each
partner's tax return.
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Types of Businesses
3. Corporation: A corporation is a business in which a group of
people acts as a single entity. Owners are commonly referred
to as shareholders who exchange consideration for the
corporation's common stock. Incorporating a business releases
owners of the financial liability of business obligations. A
corporation comes with unfavorable taxation rules for the
owners of the business.
4. Limited Liability Company (LLC): This is a relatively new
business structure and was first available in Wyoming in 1977
and in other states in the 1990s. A limited liability company
combines the pass-through taxation benefits of a partnership
with the limited liability benefits of a corporation.
8
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Business Sizes
Small Businesses
Mid-Sized Enterprises
Large Businesses
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Examples of Well-Known Businesses
1.Apple (AAPL) is known for its innovative

products, including its personal computers,
smart devices, and music and video streaming
services. Founded in 1977 by Steve Jobs and
Steve Wozniak.
2.Walmart (WMT) is one of the world's largest
retailers and operates as a multinational
corporation. The company was founded in
1962 by Sam Walton in Arkansas.
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Examples of Well-Known Businesses
Amazon: The largest online retailer, Amazon

sells a wide variety of products on its
ecommerce platform. It began as an online
bookseller and captured almost every
category of retail.
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Profits
✓ Revenue is the total amount of income
generated by the sale of goods or services
related to the company's primary
operations.
✓ Profit is the amount of income that remains
after accounting for all expenses, debts,
additional income streams, and operating
costs. Or
✓ difference between a business’s revenues
and its expenses
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The External Environment of Business
• External Environment
– everything outside an organization’s
boundaries that might affect it
– The external environment of a business, also
known as the macro environment, includes all
factors outside the reach of the business, that can
impact the operations of the business. External
factors influence the choices a business makes, as
they determine opportunities and risks.
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Dimensions of the External Environment
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Factors of Production
• Factors of production
– the resources that a country’s businesses use
to produce goods and services
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Economic Systems
• Economic system
– a nation’s system for allocating its resources
among its citizens, both individuals, and
organizations
– Economic systems refer to the means and
methods by which societies organize, distribute,
and utilize resources to address their economic
needs.
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Types of Economic Systems (cont.)
• Planned Economy:
• Control of Resources: The government or a central planning
authority owns and controls the means of production,
distribution, and resource allocation.
• Decision-Making: Economic decisions, such as what and
how much to produce, are centrally planned and directed by
the government.
• Price Determination: Prices are often set by the government
rather than being determined by market forces.
• Examples: The former Soviet Union and Maoist China are
historical examples of countries that implemented planned
economies.
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Market Economy:
• Control of Resources: Private individuals or businesses own
and control the means of production, and decisions are driven
by private enterprise.
• Decision-Making: Economic decisions are decentralized and
driven by individual consumers and businesses responding to
market forces (supply and demand).
• Price Determination: Prices are determined by market
forces, reflecting the interactions between buyers and sellers.
• Examples: The United States, the United Kingdom, and
many Western countries have market-oriented economies.
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• Mixed Economy:
• Control of Resources: Both the private sector and the
government play a role in ownership and control of resources.
• Decision-Making: Economic decisions are made by a
combination of market forces and government intervention.
• Price Determination: Prices are influenced by both market
forces and government policies.
• Examples: Many modern economies, including those of
Canada, Australia, and various European countries, are
considered mixed economies. They allow for private
enterprise and market forces but also have government
involvement in areas such as social welfare, education, and
infrastructure.
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Demand and Supply in a Market Economy
In a market economy, demand and supply are fundamental economic concepts
that play a central role in determining prices and quantities of goods and
services. Here's an overview of the differences between demand and supply:
1.Demand:
1. Definition: Demand refers to the quantity of a good or service that
consumers are willing and able to buy at different prices over a specific
period.
2. Factors Influencing Demand:
1. Price: There is an inverse relationship between price and quantity
demanded; as the price decreases, the quantity demanded typically
increases.
2. Income: Generally, as income increases, the demand for normal
goods increases.
3. Substitutes and Complements: The availability and prices of
substitutes and complements affect demand.
4. Tastes and Preferences: Consumer preferences and trends impact
demand.
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Supply
2. Supply:
• Definition: Supply is the quantity of a good or service that
producers are willing and able to offer for sale at different prices
over a specific period.
• Factors Influencing Supply:
• Price: There is a direct relationship between price and quantity
supplied; as the price increases, the quantity supplied typically
increases.
• Cost of Production: The costs involved in producing goods,
including raw materials, labor, and technology, influence the
supply.
• Technology: Advancements in technology can affect the
efficiency of production.
• Number of Producers: The number of producers in the market
can impact overallCopyright
supply.
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Private Enterprise and Competition
in a Market Economy
Private enterprise refers to economic activities conducted by
private individuals or companies rather than the government. In a
market economy, private enterprises are the primary drivers of
production, distribution, and the provision of goods and services.
Characteristics:
1. Ownership: Private enterprises are owned by individuals or
private entities, and decisions are made with the goal of
generating profits.
2. Decision-Making: Private businesses make decisions about
what to produce, how to produce, and at what price to sell based
on market conditions and profit motives.
3. Innovation: Private enterprises are often motivated to innovate
and improve efficiency to gain a competitive advantage
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Degrees of Competition
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Degrees of Competition (cont.)
• Different market structures describe the competitive environment

in which firms operate. Here are the key differences between
perfect competition, monopolistic competition, oligopoly, and
monopoly:
1. Perfect Competition:
A. Number of Firms: Many small firms exist in the market.
B. Product Differentiation: Products are identical or
homogenous.
C. Entry and Exit: Easy entry and exit of firms from the market.
D. Price Taker: Individual firms have no influence on the market
price; they take the market price as given.
E. Examples: Agricultural markets, commodity markets.
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Perfect Competition
2. Monopolistic Competition:
A. Number of Firms: Many small to medium-sized
firms exist.
B. Product Differentiation: Products are
differentiated, meaning they are similar but not
identical.
C. Entry and Exit: Relatively easy entry and exit.
D. Price Maker to Some Extent: Firms have some
degree of control over prices due to product
differentiation.
E. Examples: Restaurants, clothing stores, consumer
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3. Oligopoly:
A. Number of Firms: A small number of large firms
dominate the market.
B. Product Differentiation: Products may be homogenous or
differentiated.
C. Entry and Exit: Significant barriers to entry, and exit may
be difficult.
D. Price Interdependence: Firms are interdependent and
consider the actions of other firms when making pricing
and production decisions.
E. Examples: Automobile industry, airline industry, soft
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4. Monopoly:
A. Number of Firms: Only one firm dominates the entire
market.
B. Product Differentiation: Unique product with no close
substitutes.
C. Entry and Exit: High barriers to entry, making it
extremely difficult for new firms to enter the market.
D. Price Maker: The monopoly firm has significant control
over the market price.
E. Examples: Local utilities (natural gas, water), patented
pharmaceuticals.
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Economic Indicators
• Economic indicators
– statistics that show whether an economic
system is strengthening, weakening, or
remaining stable
– help assess the performance of an economy
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Economic Growth, Aggregate Output, and
Standard of Living
• Business cycle
– the pattern of short-term ups and downs (or
expansions and contractions) in an economy
• Aggregate output
– the total quantity of goods and services
produced by an economic system during a
given period
– primary measure of growth in the business
cycle
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Economic Growth, Aggregate Output, and
Standard of Living (cont.)
• Standard of living
– the total quantity and quality of goods and
services that they can purchase with the
currency used in their economic system
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Gross Domestic Product
Gross domestic product (GDP)

• refers to the total value of all goods and
services produced within a given period
by a national economy through domestic
factors of production
• measure of aggregate output
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Gross Domestic Product (cont.)
1.Bangladesh:
1. GDP (nominal, 2021): Around $370 billion USD.
2. GDP per capita (2021): Approximately $2,200 USD.
2.United States (USA):
1. GDP (nominal, 2021): Around $22 trillion USD.
3.India:
1. GDP (nominal, 2021): Approximately $2.9 trillion USD.
2. GDP per capita (2021): Around $2,100 USD.
4.China:
1. GDP (nominal, 2021): Around $17 trillion USD.
5.Vietnam:
1. GDP (nominal, 2021): Approximately $341 billion USD.
2. GDP per capita (2021): Around $3,500 USD.
6.Sri Lanka:
1. GDP (nominal, 2021): Around $84 billion USD.
2. GDP per capita (2021):
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Approximately
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$3,900 USD.
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Gross National Product
• Gross national product (GNP)

– refers to the total value of all goods and
services produced by a national economy
within a given period regardless of where the
factors of production are located
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Productivity
• Productivity
– measure of economic growth that compares
how much a system produces with the
resources needed to produce it
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Productivity (cont.)
• Balance of trade
– the economic value of all the products that a
country exports minus the economic value of
its imported products
– Positive or negative balance
• National Debt
– the amount of money the government owes
its creditors
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Economic Stability
• Stability
– condition in which the amount of money
available in an economic system and the
quantity of goods and services produced in it
are growing at about the same rate
• Inflation
– occurs when widespread price increases
occur throughout an economic system
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Economic Stability (cont.)
• Unemployment
– the level of joblessness among people
actively seeking work in an economic system
• Recession
– a period during which aggregate output, as
measured by GDP, declines
• Depression
– a prolonged and deep recession
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Managing the U.S. Economy
• Fiscal Policies
– policies used by a government regarding how
it collects and spends revenue
• Monetary Policies
– policies used by a government to control the
size of its money supply
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Managing the U.S. Economy (cont.)
• Stabilization Policy
– government economic policy intended to
smooth out fluctuations in output and
unemployment and to stabilize prices
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Applying What You’ve Learned
1. Define the nature of U.S. business and

identify its main goals and functions.
2. Describe the external environments of
business and discuss how these
environments affect the success or failure of
any organization.
3. Describe the different types of global
economic systems according to the means
by which they control the factors of
production.
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2012 Pearson
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Applying What You’ve Learned (cont.)
4. Show how markets, demand, and supply

affect resource distribution in the United
States, identify the elements of private
enterprise, and explain the various degrees
of competition in the U.S. economic system.
5. Explain the importance of the economic
environment to business and identify the
factors used to evaluate the performance of
an economic system.
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1.Top 10 Successful Bangladeshi Entrepreneurs :
https://businessinspection.com.bd/top-
successful-bangladeshi-entrepreneurs/
2.The Most Successful Business in Bangladesh: A
Ranking of Top Performers:
https://strawpoll.com/most-successful-business-
bangladesh
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Business

1.Apple (AAPL) is known for its innovative

Amazon: The largest online retailer, Amazon

• Different market structures describe the competitive environment

Gross domestic product (GDP)

• Gross national product (GNP)

1. Define the nature of U.S. business and

4. Show how markets, demand, and supply

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