INTRODUCTION TO

BUSINESS
DR. DEVANI LAKSMI INDYASTUTI, MSI
GOALS OF BUSINESS
“PROFIT AS A MOTIVE TO UNDERSTAND BUSINESS”

WHERE PROFITS COMES FROM?

Profits depends on three condition:

-First, there needs to be a demand for the service that you
offer.
-Second, you need to attract customers, meaning that they choose you
instead of your competitors (other tutors).
-Third, to earn high profits, you need to keep your expenses low. If you
can run your business efficiently, your expenses should be relatively low,
and you will be rewarded with higher profits.
GOVERNMENT CAN INFLUENCE PROFIT MOTIVE

• SOCIALIST
INTENT TO NON PROFIT MOTIVES, BUSINESSES ARE LIMITED
• CAPITALIST, SUPPORTED BY FREE MARKET.
INTENT TO PROFIT MOTIVES
RESOURCES

• To produce a product or service, firms rely on the following factors of

production:
- Natural resources
- Human resources
- Capital
- Entrepreneurship
• natural resources
any resources that can be used in their natural form
• human resources
people who are able to perform work for a business
• capital
machinery, equipment, tools, and physical facilities used by a business
• technology
knowledge or tools used to produce products and services
• information technology
technology that enables information to be used to produce products and services

• electronic business (e-business) or electronic commerce (e-commerce)

use of electronic communications, such as the Internet, to produce or sell products and services
• entrepreneurship
the creation of business ideas and the willingness to take risk; the act of creating, organizing, and
managing a business
• entrepreneurs
people who organize, manage, and assume the risk of starting a business
THE WRONG REASON
STAKEHOLDERS
PEOPLE WHO HAVE AN INTEREST IN A
BUSINESS

Owners
Creditors
Employees
Suppliers
Customers

entrepreneurship is the act of

creating, organizing, and managing a business.
HOW OWNERSHIP SPREADS

An entrepreneur who creates a business initially serves as the sole owner.

Yet, in order to expand, the business may need more funding than the
entrepreneur can provide.
Consequently, the entrepreneur may allow other people to invest in the
firm and become coowners.
When the ownership of the firm is shared, the proportion of the firm
owned by the existing owners is reduced.
• stock
certificates of ownership of a
business
stockholders (shareholders)
investors who become partial
owners of firms by purchasing the
firm’s stock
• creditors
financial institutions or individuals
who provide loans
Firms hire employees to conduct their business operations.

managers
employees who are responsible for managing job assignments of other employees and making key
business decisions

Goals of Managers The goal of a firm’s managers is to maximize the firm’s value and, therefore, to maximize the value of the
firm’s stock.

dividends
income that the firm provides to
its owners
HOW BUSINESS DECISIONS AFFECT STAKEHOLDERS

The decisions of a business affect its performance, which in turn affects

all of its stake-holders.If it makes good business decisions, its profits will
be higher, and the entrepreneur who owns the business will receive
higher profits. It will have sufficient revenue to pay any interest
expenses on loans from creditors. It can afford to pay reasonable
compensation to its employees and may even want to hire more
employees if it expands over time. It can afford to continue to pay its
suppliers
and will be able to order more supplies in the future.
THE BUSINESS ENVIRONMENT

•Social Environment
Industry Environment
Economic Environment
Global Environment
• management
means by which employees and other resources (such as machinery) are used by the firm
•
marketing
means by which products (or services) are developed, priced, distributed, and promoted to customers
•
finance
means by which firms obtain and use funds for their business operations
•
accounting
summary and analysis of the firm’s financial condition
•
information systems
include information technology, people, and procedures that work together to provide appropriate
information to the firm’s employees so they can make business decisions
HOW SOME BUSINESS FUNCTIONS ENHANCE DECISION
MAKING

• Accounting Managers of firms use accounting to monitor their operations

and to report their financial condition to their owners or employees. They
can also assess the performance of previous production, marketing, and
finance decisions. They may even rely on accounting to detect inefficient
uses of business resources that can be eliminated. Consequently, a firm’s
accounting function can be used to eliminate waste, thereby generating
higher earnings.
Information Systems Firms use information systems to continually update
and analyze information about their operations. This information can be
used by the firm’s managers to make business decisions. In addition, the
information can be used by any employee within the firm who has access
to a personal computer. For example, FedEx uses information on its computer system to track deliveries and
determine when packages will arrive
at their destination.
HOW SOME BUSINESS FUNCTIONS ENHANCE DECISION
MAKING
• HRM Decision
How many employees should it hire?
What salary should it pay each employee?
What should be the job description of each employee?
To whom should each employee report within the business?
How should the business motivate its employees to perform well?
How should it use the space in its store?
Should it charge a late fee?

• Marketing Decision
What is the profile of the typical customer who will buy the products?
Should it charge for service?
What price should it be?
Should it allow a discount for frequent customers?
Should it consider distributing products by delivery or channels or through
the Internet?
Should it advertise its business? If so, where should it advertise?
HOW SOME BUSINESS FUNCTIONS ENHANCE DECISION
MAKING

• The typical finance decisions of this

firm are:
How much money should it borrow?
Where should it apply to obtain a loan?
Should it use some of the borrowed funds to expand?
How can it expand its business so that its value will increase?
INTEGRATING BUSINESS FUNCTIONS
• Many business functions are integrated, meaning that one
function is dependent on other functions. The management
decision about how volume of product will be sold influence the
finance decision about of how much money the business needs to
borrow, because volume of production will be more costly and
require more financing. Its marketing decision regarding pricing
and advertising may affect the demand for the products. If the
demand is high, the firm will require more employees to
provide customer service. Thus, the marketing decision influences
the management decision of how many employees to hire.
HOW BAD BUSINESS DECISIONS AFFECT THE PROFITS EARNED BY THE OWNERS