Lecture 1

Introduction to
Business
Environment
# 1
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© 2015 Pearson
Pearson Education,
Education Limited. 1-1
Inc. Publishing as Prentice Hall
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.
Copyright
Copyright © 2012
© 2015 Pearson
Pearson Education,
Education Inc.
Limited. 1-2
Publishing as Prentice Hall
4. 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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© 2015 Pearson
Pearson Education,
Education Inc.
Limited. 1-3
The Concept of Business and Profit
• Business
– organization that provides goods or services
to earn profits
• Products
– Goods or services with tangible and intangible
characteristics that provide satisfaction and
benefits
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A Product Can Be…
Tangible goods
– Automobile
– Computer
– Phone
– Coat
Services
– Dry cleaning
– Doctor’s checkup
– Basketball game
– Concert
Ideas
– Professionals generate ideas for solving problems
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The Goal of Business
The goal of business is to earn a profit

$ The difference between what it costs to make
and sell a product and what a customer pays for
it
$10 sale – $8 to make = $2 profit
$ Earning profits contributes to society by
providing employment, which in turn provides
money that is reinvested in the economy
$ Profits must be earned in a responsible manner
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To Earn Profit…
Profit requires:
– Management Skills
– Marketing Expertise
– Financial Resources
– Abiding by the Law
– Adapting to Change
– Acting Ethically
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The External Environment of Business
• External Environment
– everything outside an organization’s
boundaries that might affect it
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Dimensions of the External Environment
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Domestic Business Environment is the environment in

which a firm conducts its operations and derives its
revenues.
Global Business Environment encompasses the
international forces that affect a business and
includes international trade agreements,
international economic conditions, and political
unrest.
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Pearson Education,
Education Inc.
Limited. 1-10
Technological Environment encompasses all the ways

by which firms create value for their constituents and
includes human knowledge, work methods, physical
equipment, electronics and telecommunications.
Political-Legal Environment is the relationship between
business and government.
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Pearson Education,
Education Inc.
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Sociocultural Environment includes the customs,

mores, values, and demographic characteristics of
the society in which an organization functions and
determines the goods and services, as well as the
standards of business conduct, that a society is likely
to value and accept.
Economic Environment includes relevant conditions
that exist in the economic system in which a
company operates.
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Pearson Education,
Education Inc.
Limited. 1-12
Factors of Production
• Factors of production
– the resources that a country’s businesses use
to produce goods and services
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Labor includes the physical and intellectual

contributions people make while engaged in
economic production and is also called human
resources.
Capital is the term used to describe the financial

resources needed to operate a business.
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Pearson Education,
Education Inc.
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An Entrepreneur is a person who accepts the risks and

opportunities entailed in creating and operating a
new business venture.
Physical resources are tangible things that

organizations use to conduct their business and
include natural resources and raw materials, offices,
storage and production facilities, parts and supplies,
computers, and peripherals.
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Pearson Education,
Education Inc.
Limited. 1-15
Information resources are data and other information

used by businesses and include market forecasts, the
specialized knowledge of people, and economic data.
Copyright
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© 2015 Pearson
Pearson Education,
Education Inc.
Limited. 1-16

Lecture 1

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Lecture 1

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Introduction to

The goal of business is to earn a profit

Domestic Business Environment is the environment in

Technological Environment encompasses all the ways

Sociocultural Environment includes the customs,

Labor includes the physical and intellectual

Capital is the term used to describe the financial

An Entrepreneur is a person who accepts the risks and

Physical resources are tangible things that

Information resources are data and other information

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