University/Faculty Regulations

Minimum attendance in class : 75%

No plagiarism in report/academic work and
writing (Merriam-Websters Collegiate
Dictionary, Eleventh Edition, USA, 2003)

to steal and pass off (the ideas or words of another) as ones own
to use (anothers production) without crediting the source
to commit literary theft
to present as new and original an idea or product derived from an
existing source

No cheating in examination
Please come on time!

Motives and Function of a

Business, Business Ethics and
Social Responsibility
(Chapter 1 & 2)

Learning Objectives
The goal of a business
The resources a business uses to produce
products/services
The key stakeholders involve in a business
The business environment
The responsibilities of firms to their
customers, employees, stockholders, creditors,
environment and their communities

Business Examples

Many mores

What is Business?
A business is a person, partnership or
corporation that seeks to provide goods and
services to others at a profit
Goods: tangible products (i.e. products that can be
touched), such as camera, food, computer, clothing,
etc
Business that provide goods are considered to be in the
manufacturing sector of the economy

Services: intangible products (i.e. products that

cannot be touched), such as education, insurance,
travel, etc
Business that provide services are considered to be in the
service sector of the economy

What is the Service Sector?

Services

Examples

Personal services

Laundries, photographic studios,

health clubs, beauty shops

Business services

Accounting, consulting, equipment

rental

Financial services

Banking, insurance, real state

agencies

Legal services

Law firm

Educational services

Schools, libraries

Automotive repair services and

garages

Auto rental, parking lots, car washes

Amusement and recreation services

Golf courses, video rentals

Etc .

Your Business Choice

Main Job
ai
M

b
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J

Side job (Sampingan)

Goals of a Business
Consumer

Owner

Needs

Profit

Opportunity Lower Price

Where Profits Come From

A business receives revenue when it sells its products or
services
It incurs expenses from paying its employees and when it
purchases machinery or facilities
The difference between revenue and expenses is the
profits (or earnings)
Profits go to the owners of the business, thus there is an incentive
and reward for success
Profits are dependent upon 3 conditions:
(1) Demand: there needs to be demand for your product or service
(2) Attract: you must attract customers (better/lower quality of service)
(3) Expenses: keep expenses low, thus reward will be higher profits

Where Profits Come From [2]

Attract

Demand

Expense

Revenue
- (Expense)
Profits

Government & Nonprofits

Free-Market economies: people are free to start a
business and profit from it
Business provide employment, which provides money for
employees and profits for businesses

In socialist countries, businesses were owned by

governments and had no profit incentive
Nonprofit businesses serve specific causes and are not
intended to make profits
Examples: Churches, schools, hospitals

Types of Businesses
Local business
A company is local if there
is only one outlet that
serves a limited
surrounding area
Have a small number of
employees and are
associated with the town or
city in which they are
located
Example: Bakmi Margonda
Depok, etc

Regional business
Serve a wide area although
they dont serve a national
or international market
Example: JOGER,
DAGADU, etc

Challenge:
managing money
unfavorable economic conditions
undercapitalization

Types of Businesses [2]

National business
Has several outlets through-out the country but it doesnt serve
an international market
Challenge: state law, tax rate, complex supply chain
Example: Sinar Mas

Multinational (International) Business

Have expanded to provide goods or services to international
consumers or serve only one country, but have suppliers or
production facilities in other countries
Have all been adapted to fit the culture of the country in which
they are located
Challenge: every country has different corporate laws, business
practices, law of the countries (export, import, safety regulations,
quality control, copy rights, patent right), etc
Example: McDonald

Factors of Production
Natural Resources
any resources that can be used in its natural form
example: land
Human Resources
the people who are able to perform the work
Capital
machinery, equipment, tools and physical facilities
used by a business
Entrepreneurship
creation of business ideas and willingness to accept
risk

Technology
Technology is an enabler
it enables firms to use their capital more effectively
Information Technology (IT)
using information to produce products and services
more efficiently
E-business or E-commerce
when firms use electronic communications to sell
products or services
includes business transactions between a company
and its customers, as well as suppliers
Information
Technology

Electronic
Business

Entrepreneurship
Creates

Accepts

IDEAS

RISK

Stakeholders
Stakeholders: people who have an interest in a
business
Owners: the entrepreneurs or owners of the business
Creditors: financial institutions or persons who
provide loans
Employees: people hired to conduct business
operations
Suppliers: companies where the business can obtain
materials required for the business
Customers: company cannot survive without
customers

Owners
The entrepreneur
the founder of the business and is usually the sole owner(s)
when the business initially starts operations. If a business has
more than one owner then the investment, risk and profit are
shared

Stockholder
investors who purchase stock (a certificate representing
ownership in a firm)

Entrepreneur Stockholder

Creditors
Creditors provide loans to a company to
help with its inception and growth
Creditors can be financial institutions
(commercial banks) or individuals
(investors) who provide loans

People in Business

Business Environment
Social Environment
social tendencies to which a business is exposed
demographics are the characteristics of the population, which
change over time

Industry Environment
conditions within the industry within which a firm operates will
also change over time, according to demand and competition

Economic Environment
economic conditions will strongly impact the firms performance

Global Environment
global conditions may directly or indirectly effect businesses

Business Decisions
Management how will the company use employees and
other human resources?
Marketing how are products and services developed,
priced, distributed and promoted?
Finance how will the company obtain and use funds for
operations?
Decisions are commonly based on data which come
from accounting system (analysis of financial conditions)
and Information System (provides appropriate
information to those who need to make a decision)

Decisions and Performance

Customers
Social Responsibility
Companies have a social responsibility when
producing and selling products
All production should be completed with customer
safety in mind
Example: warning labels on prescription drugs
should be used to prevent accidents that could
result from misuse
Responsibility extends into the sales process as well
Example: a common problem is that product may
be overpriced because the salesperson is more
interested in making a higher commission (rather
than saving the customer money)

Ensuring Responsibility

1 - Code of Responsibilities
2 - Monitor Complaints
3 - Customer Feedback

Government Regulations
Safety
Advertising
Competition

Responsibility to Employees
Employee Safety
Safety in the workplace
must be ensured by the
company
Example: safety glasses,
steel-toed shoes, and back
harnesses are required to
worn for certain types of
work

Safety

Workplace

Responsibility to Employees [2]

Proper Treatment by other employees
The workplace must allow for employees to be treated fairly
The two main issues are:
Diversity
sensitivity to various types of workers to avoid conflicts
or discrimination
Example: It is wrong for a company to hire a male, over
an equally qualified female, for a position that has
traditionally been male dominated
Sexual Harassment
prevention of unwelcome comments or actions of a
sexual nature
Example: emails or jokes told in the workplace that relate
to sexual situations

Types of Diversity
Religion

Gender

Age

Beliefs

Race

Ensuring Responsibility
Code of Responsibility
This code was previously mentioned under
responsibilities toward customers
The code should be used for guidance (as it will not
attempt to spell out recommended behaviors for every
situation)
Grievance Policy
Gives employees a chance to communicate if they feel
that they have not been given equal opportunity

Job Satisfaction

Responsibility to Stockholders
Employee Compensation
many companies tie employee compensation to the
firms performance
this solves some issues, but creates others

Stockholder Actions
Shareholder activism
the active efforts of shareholders to influence
the management of a firm

Institutional Investors
financial institutions that purchase large
amounts of stocks
these types of investors have been the most
active
example: insurance companies invest large
portions of their premiums in stocks

Responsibility to Creditors

Accurate Information
Payment

Pollution

Air

Land

Responsibility Conflicts

Environment

Profitability

Responsibility to Community
Contributions
companies often make contributions by sponsoring
local events
example: many businesses prominently display
plaques of appreciation from the local school or sports
team that they recently sponsored
Foundations
firms will often create foundations through which
charitable contributions are made

Summary
Business use factors of production such as natural
resources, human resources, capital and entrepreneurship
The key of stakeholders in business are owners,
creditors, employees, suppliers and customers
Business are exposed to the social, industry, economic
and global environments
The key types of business decisions are management,
marketing and finance decisions
Firms have a responsibility to provide safe working
conditions, proper treatment and equal opportunity for
employees
Firms also have a responsibility to the
owners/stakeholders, creditors, environment and local
communities

References

Madura, Jeff. Introduction To Business.

2007. Thomas South-Western. ISBN 0324-40711-4