INTRODUCTION TO

BUSINESS

FOUNDATIONS OF BUSINESS
AND ECONOMICS

CHAPTER # 1
Part 2
 Stockholder Vs. Stakeholder

Stockholder
 Stockholder is an individual or
company (including a corporation)
that legally owns one or more
shares of stock in a joint stock
company. The shareholders are
the owners of a corporation.
Stakeholder
 Stakeholders are those people
who stand to gain or lose by the
policies and activities of an
organization.
 Example: Employees,
Customers, Dealer, Suppliers,
Bankers, Government leaders
Organizational Stakeholders

3–3
 Economic System

The accepted process by which labor, capital and natural

resources are organized to produce and distribute goods
and services in a society.
 Economic System
Capitalism
An economic system in which all or most of the sources of production
and distribution are privately owned and operated for profit. The founder
of this system is Adam Smith.

Socialism
An economic system based on the premise that businesses should be
owned by the state so that profits can be evenly distributed among the
people. The founder of this system is Karl Marx.
 Economic System

 There are three basic types of Economies:

1. Planned Economies
2. Free Market Economies
3. Mixed Economies
 Economic System
1. Planned Economics
Economic system in which the government largely decides what
goods and services will be produced, who will get then and how that
economy will grow.

The government owns the productive resources, financial

enterprises, retail stores and banks.

Example: Soviet Union, Cuba, North Korea etc.

 Economic System
2. Free Market Economics
Economic system in which decision about what to produce and in what
quantities are decided by the market. That is by buyers and sellers
negotiating prices for goods and services.

Example: USA, European union etc.

 Economic System
3. Mixed Economics
Economic system in which some allocation of resources are made by the
market and some are made by the government.
This contains elements of both market and planned economic system. There
are private enterprises and also is the government intervention. Both the
government and the business enterprises produce and distribute goods
and services.
Example: Bangladesh, UK, India, etc.
 Some Advantages and
Disadvantages
Type of Economy Advantages
The Planned Economy 1. Necessities are produces
2. Essential goods/ services
eg. Education will be provided
for all the community
3. More equal distribution of
income and wealth
Disadvantages
1. Large Bureaucracy
2. Mistakes in amounts of
goods/ services produced.
3. Little consumer choice
4. No profit motive
5. Little variety of goods/
services
6. Loss of individual freedom
 Some Advantages and
Disadvantages
Type of Economy Advantages
The Free Economy 1. Consumer choice exists
2. No bureaucracy
3. Profit motive exists
4. Many small firms producing
a variety of goods
5. Less government
interference
The Mixed Economy Combines the advantages of
other systems
Disadvantages
1. Too many luxuries produced
for the rich/ wealthy.
2. Essential goods/ services,
eg. education may not be
produced
3. Ignores social costs
4. Monopolies may exist
5. Unemployment in declining
industries
Combines the disadvantages of
other systems
End of Chapter# 1