BUSINESS ORGANIZATI 0 Dall W Pa CHAPTER 1 SLIDE 1 Philippine Copyright 2013 Rex Book Store, Inc.All Rights Reserved. No part of this Learning Device may be reproduced or distributed in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, Inc ExCHAPTER 1 SLIDE 2 Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, Inc. ‘ainCHAPTER 1 SLIDE 3 What is Business * Business is a general term, which includes all profit- seeking activities of enterprises that provide goods and services necessary to an economic system. * Inthe hope of making profits, businesses produce and market goods and services. ¢ In satisfying customers’ needs and wants, the firm will generate sales revenues which make profits possible. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 4 What is Profit * Profit is the money that remains after a firm deducts its expenses related to producing and marketing goods or services from its revenues. * The firm receives money arising out of sales, commissions, and the like. * Production costs (like those spent for direct materials, labor, and overhead) plus marketing costs (like those spent for advertising, salesmen’s commission, and the like) constitute the expenses that will be used to calculate profit. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 5 The Private Enterprise System * The private enterprise system is a feature of our market economy. ¢ Under this system, individuals are vested with the right to operate enterprise for private gain. * The institution of private property bestows on owners of property the right to use, exchange, or exploit their properties. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior from Rex Book Store, IncCHAPTER 1 SLIDE 6 ¢ Another distinct feature of our economic system is the right of inheritance. * Inthe event of the death of the enterprise owner, whatever financial gains accruing to the firm automatically transfers to the heirs, including the enterprise itself. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 7 The Private Enterprise System and the Entrepreneur ¢ The entrepreneur is the one assigned to perform the lead role in making the private enterprise system work. * When an unsatisfied economic need is recognized, the entrepreneur devises a plan and designs an organization that will facilitate the achievement of his profit objectives. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 8 * Even if the entrepreneur is aiming for profits, he may end up with losses. * Among the factors of production, he is the one who assumes the risk of either succeeding or failing. * The private enterprise system compensates the risk of financial loss with the possibility of making big profits. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 9 The Entrepreneur and Alternative Economic Systems * There are three distinct economic systems. 1. Capitalism; 2. Communism; and 3. Socialism. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be 0d reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior from Rex Book Store, IncCHAPTER 1 SLIDE 10 Capitalism Capitalism refers to that economic system in which the means of production, consisting of land and tangible goods, are owned privately. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, Inc* Capitalism has the following characteristics: BWNPR CHAPTER 1 SLIDE 11 private enterprise and freedom of choice; freedom to compete; limited role of government; prices set by the interaction of the economic forces of supply and demand; and profit motive. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 12 * Private enterprise refers to the ownership of property by a private individual for use in his own business. * Freedom of choice refers to the owner’s right to own, use, or dispose of his property as he sees fit. * The freedom to compete provides businesspersons the right to either engage or withdraw from a competitive situation with other businesspersons. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 13 * Under capitalism, the limited participation of government in actual business pursuits allows businesses to flourish. * The prices of commodities and resources under capitalism go up or down depending on supply and demand. * The profit motive is also a feature of capitalism. — Private individuals will produce goods or services to satisfy consumer wants but with the belief that the economy will allow them to make a profit out of the exercise. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 14 Land Labor Capital (Natural Resources) + (Human Resources) + (Financial Resources) | Entrepreneur | Production Process | Finished Goods and Services Figure 1. The Entrepreneur’s Task Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, Inc =CHAPTER 1 SLIDE 15 Economic System State Support to Entrepreneurship Figure 2. The Economic Systems and Entrepreneurship Concern Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without priorCHAPTER 1 SLIDE 16 Communism * The direct opposite of capitalism is communism where the means of production are owned by the society as a whole. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 17 * Communism is an economic system characterized by the following: 1. state ownership of economic resources; social and economic equality; 3. central planning for economic and social activities; and 4. no freedom of competition. N Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, Inc‘CHAPTER 1 SLIDE 18 Under communism, all economic resources are owned by the state, hence, ownership, control, use, and disposition remain as prerogatives of the state. In communist states, social classes and economic inequality are theoretically non-existent In contrast with individual exploitation of economic resources under capitalism, the communist state adheres to central planning for economic and social activities. As nobody is allowed to own economic resources, individuals are deprived of the first requisite for competition. Philippine Copyright 2013 Rex Book Stor. Inc. ll Rghts Reserved. No prof his Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 19 Socialism Midway between capitalism and communism is socialism, where the state owns only the essential industries like steel, utilities like water and power, transportations, and the like. All other types of businesses are open for exploitation by private persons. This characteristic provides limited options for the private individual in making profits. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 20 Capitalism: The Right System for Entrepreneurship * Capitalism provides the right environment for entrepreneurship. * Toa limited extent, it may also thrive under socialist conditions. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior ym Rex Book Store, Inc. per(CHAPTER 1 SLIDE 21 Rewards for Successful Entrepreneurship * The use of any of the factors of production entitles the own to receive some form of compensation. * The factors, which are used in making a commodity, consist of land, labor, and capital. To make them productive, however, a fourth factor is necessary— entrepreneurship. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior from Rex Book Store, IncCHAPTER 1 SLIDE 22 When land is used for production, the compensation paid to owners is called “rent” — the price paid per unit of time for the services of a durable good, in particular, land and building. For the effort of laborers, they are paid wages or salaries. Wages are usually determined ona piece-rate basis, while salaries are based on time- rate. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 23 ¢ Interest is the compensation paid to owners of invested capital. ¢ When all the factors of production are properly compensated, whatever is left as profits is regarded as income, which accrues to the entrepreneur. * The rate of compensation paid to the factors of production is limited to a large extent by industry norms or market forces. The profits accruing to the entrepreneur, on the other hand, are limited only by his skill and industry. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 24 Factors of Economic Limiting Factor for Production Reward Rewards Received Capital Industr dia . Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, Inc. CHAPTER 1 SLIDE 25 As the landowner earns rent for allowing use of his property, the owner of capital is paid interest for allowing use of his capital. The laborer at work earns wages for his effort, while the entrepreneur earns profits for making the right business decisions. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, Inc 2CHAPTER 1 SLIDE 26 Organization and Management Concepts * Business firms are organizations established to achieve certain objectives. * Theory and practice indicate that for modern business to succeed, effective applications of sound organization and management practice must be made. * It follows, then, that knowledge of organization and management theories must first be acquired. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 27 What is Management * Management is the systematic process of planning, organizing, staffing, directing, and controlling activities in an organization to achieve certain objectives. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 28 The Management Principles * There are various management principles applicable to managing a business enterprise. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 29 1. Division of labor. This means breaking a job down into specialized tasks to increase productivity. 3. Discipline. This provides uniform application of behavior to certain activities the outcome of which is readily predicted. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 30 4, Unity of command. This means that each employee must have only one supervisor. 5. Unity of direction. This means that the efforts of everyone in the organization must be coordinated and focused in the same direction. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 31 7. Remuneration. Employees should be paid fairly in accordance with their contribution to the organizational effort. 8. Centralization. Power and authority must be centralized as much as possible. 9. Scalar chain. This means that subordinates should observe the official chain of command unless authorized by their respective superiors to communicate with each (ohdit=a Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 32 11. Equity. This is the result of kindliness and justice and is a principle to guide management-employee rare 12. Stability of tenure. High employee turnover is counterproductive. To motivate employees to stay with the company, effective manpower planning and implementation are necessa Philippine Copyright 2013 Rex Book Store, Inc. AllRights Reserved. No par of this Learning Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 33 RP ryi4o 4 -em VLA 4-1anlal medaLeLel (OM la ole ct -<<3 employees to act on their own volition when confronted with an opportunity to solve a problem. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 34 WHAT IS AN ORGANIZATION Organizations deeply affect our lives that we seem not able to survive without them. When we send our children to school, we reckon with the organization running it. Organizations are responsible for providing us with ready meals at convenient locations. Charitable organizations provide assistance to the poor and the sick. Local governments are organizations that run the political affairs of provinces and municipalities. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 35 Organizations Government Private Corporate Non-corporate Profit-seeking Not-for-profit Figure 4. Types of Organizations Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 36 Organization Defined * Anorganization is an entity comprising a group of people, established to accomplish certain goals. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 37 The Function of Organization * There are certain objectives that the individual will find hard, if not impossible, to achieve. The mass production of cars, for instance, will be nearly impossible for a single person to undertake. Even if the job is performed by many persons acting independently, the manufacture of cars will be a very difficult activity. The variety of specialized tasks alone will overwhelm the individual worker if he is required to do all of them. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 38 Common Characteristics of Organizations Coordination of effort © When properly directed, persons working in coordination with others will produce better outputs than when they work independently. Common goal or purpose * In order to make the employees work with proper direction, they must be provided with a common goal or purpose. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 39 * When the total job is divided into manageable parts, workers will be more familiar with their assignments making them more proficient. Hierarchy of authority © When individuals work collectively, someone must be provided with authority to make sure that the assigned goals are achieved in the desired manner. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 40 The Entrepreneur and the Manager * The function of the entrepreneur is to create new business. Thus, his first concern is the identification of a business idea, not necessarily a new one. + After spending money, time, and effort to make the business a viable entity, the entrepreneur will now attempt to expand so that the funds invested in the organizational stage may be recouped. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 41 ¢ Efficiency, however, will require routinization of activities. ¢ Routinization and efficiency are the turf of the professional manager. This is where he comes in and continues the task initiated by the entrepreneur. ¢ The entrepreneur and the manager perform complimentary roles in making the business succeed. The former puts up a business firm, the latter keeps it going. Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, IncCHAPTER 1 SLIDE 42 Business Competitor’s Activity Activity Identify and seize |__| Unaware of Entre- opportunity preneur’s Move Entrepreneur’s Turf Assemble wis. Slowly becomes resources aware Start Becomes operation fully aware Expand Decides to Fae operation compete Manager’s Turf Maximize |... Starts profits operation Meet Shares in competition industry profits Figure 5. The Complementary Roles of the Entrepreneur and the Manager Philippine Copyright 2013 Rex Book Store. Inc.All Rights Reserved. No part of this Leaming Device may be reproduced or distrbuted in any form or by any means, or stored ina database retrieval system without prior permission from Rex Book Store, Inc