Feb 20th First test

Unit 1 What is a Business

A business is an organization that sells goods or services(G&S) in exchange for money with the
goal of making profit. Examples of goods are products that can be seen or touched such as
cellphones, computers, shirts, etc. Services are also something they can sell such as activity or
advice such as Health Care, instruction from Coaches, music apps.

Needs/Wants

Needs: Items necessary or essential to maintain a basic standard of living such as Water, food
and shelter

Wants: Items that are helpful to have and make life more comfortable/enjoyable, but not needed
to survive such as a vacation.

Profits/Losses

Revenue: Money the business makes from selling its goods or services
Expenses: Costs required to generate values(i.e rent, wages, electricity, etc)

Non-profit business

Organizations that exist to help the community such as charities. Examples such as Red Cross is
prime example, Salvation army, church

Profit Formula
Profit or loss = revenue - expenses

The Role of the Consumer/Producer

Businesses are designed to satisfy consumer needs and wants.

Producers: Businesses that make goods/provide services such as products

Consumers are people who buy goods and services. The more consumers a business attracts, the
more profit it earns.
Marketplace is any location where producers and consumers come together to engage in the
buying or selling of goods and services such as Farmer’s markets, shopping malls, grocery stores
and online shopping.

Competition is when more than one company tries to sell a similar good or service to te same
customer. While this is good for consumers to have more than one option, it does make the
business work harder to keep the customers they have already.

As more and more competition enters the market, goods and services tend to improve in quality,
have more options and features, lower in price and sometimes better services.

Pricing power is when business are in control and charge high prices such as oil companies

Consumer purchasing power is when customers have the ability to choose where they will buy
the goods or services and how much they will pay for them such as price matching

Obsolete are items that consumers no longer require and are no longer purchased due to being
outdated such as iPods and DVDs

Entrepreneur

A person who starts a business to fill a need.

Pros: Own boss, make all decisions at the cost of being responsible for everything and stuck with
all losses

Supply and Demand

Interdependence: When businesses rely on Goods and services from other businesses in order to
operate. Eg. Dairy Queen for dairy farmers, plastic cups/forks, toppings

Demand: The quantity of goods/services that consumes want to buy at a certain price​

Law of Demand: as prices go down, demand goes up. Eg. boxing day sales, black Friday, Cyber
Monday.

Change in consumer income: More people earn -> more spend

Consumer preferences/tastes change: fashion, trends.

Change in population: More people -> more demand for goods and services.

Supply: quantity of a goods/services business are able to provide at a particular price

Law of supply: as prices go up, supply increases

Number of producers/competitorsL popular product -> more competitors enter market

Substitutes: Wheat prices fall so farmer switches to soy

Change in technology: reduces costs and allows more competitors to enter market

Change in production costs: higher costs on resources decreases supply

If demand is high and supply is low the price is high

If demand is low and supply is high then price is low

Business Cycles

Each cycle has 4 stages: Peak, recession, growth, recovery. Each phase usually lasts around 10
years

Phase One: Trough, Economic activity at its lowest level, many people unemployed and not
spending money, people with jobs are reluctant to spend money, causes a domino effect and
causes everyone to not spend money.

Phase Two: Recovery: Government lowers interest rates and adds stimulus money
Demand for goods and services will increase due to people and businesses having more money
Increase in demand means businesses increases productivity and hire more employees
Hired employees have more money to spend

Phase Three: Peak: Highest point in the cycle due to the economy. People have money on luxury
items and begin to invest in real-estate and stock. Demand for Goods and Services greater than
supply. Inflation occurs. Government stops stimulus and raises interest rates to stop
hyperinflation.
Phase Four: Recession: People spending less, results in companies making less. Workers get
unemployed. Economy slows. Business enters a trough phase. Severe recessions causes
depressions in high unemployment and price collapse.

Public/private sector

Private Sector: Companies owned and operated by individuals or shareholders to make a profit
Public Sector: Companies owned and operated by the government to provide a basic service not
for profit
Privatization: when public sector companies are sold to the private sector such as highway 407
Rogers Centre
Nationalization: Private companies are taken over by the government such as General Motors

Impact

Jobs: Businesses higher employers and provide benefits to improve QOL

Tax revenue: Businesses pay government property taxes and income taxes, HST
Improves social programs

Environmental/Social issues
Air, water and ground pollution
Labour rights and working conditions

Building communities: bankrupt businesses can destroy a town, charities, Gentrification

Gentrification:
Urban renewal development, people returning from suburbs back to inner city, property value
increases and displaces the poor

Types of Business ownerships

Sole proprietorship: One owner, decisions made easily and quickly, responsible for all areas,
inexpensive and easy to set up, tax benefits. Suffer everything.
Unlimited Liability -> difficult to raise money and have to use your own
Eg. Business consultants

Partnerships
More than one Owner, share costs, responsibilities and decision making. Sign a partnership
agreement which sets terms like how to share profits/responsibilities. Allows for different
perspectives/complementary skills. Unlimited liability
1.​ General partnerships
2.​ Private/limited partnership
Silent partner, takes part in the gains or losses but does not manage the business
Eg. Dentists, law firms

Co-Operatives(co-ops)

Businesses owned by workers or customers of the goods and services(pay membership fees)
Main purpose of co-ops is offering higher quality products. Pay no taxes. Each member has one
vote on how its run or who will be on the Board of Directors.
Profits of co-ops are distributed through limited liability or limited to a fixed sum. Over 10,000
co-ops exist in Canada. Eg Credit unions, dairy farmers of Ontario, Ocean Spray.

Corporations and Franchises

Public Corporation​
Ownership divided into many tiny pieces called shares/stock
Shareholders are owners. Shares are bought and sold on a stock market.
IPO(Initial Public Offering) to raise millions of dollars
BOD(Board of directors) elected by shareholders annually to run and manage the business. BOD
appoints upper management such as CEO(Chief Executive Officer), CFO(Chief Financial
Officer) and COO(Chief Operating Officer)

Shareholders have limited liability(can only lose on investment)

Disadvantages of corporations
Takes a long time to make decisions
Difficult to get listed on a stock market
Expensive to set up
Double taxation

Private Corporations: only a few people own shares and company not listed publicly such as
IKEA, LEGO
Crown corporations
Companies controlled and managed by federal and provincial governments such as Canada Post,
CBC, LCBO

Municipal corporations
Towns and cities such as Town of Aurora

Franchises
Owner of the Business, the franchiser licenses the right to name, design, location, marketing and
how it operates to an individual. Fees include: Right for brand, supplies, Advertising Fees,
portion of profits
Franchising allows firms to expand rapidly and remain consistent.
Eg. Holiday Inn, Canadian Tire, Subway

Business Ethics and CSR(Corporate Social Responsibility)

Ethics: Behavior that guides people to do the right thing(code of conduct).

Code of Ethics: Corporate document that outlines how employees should respond to moral
dilemmas.

CSR:
1.​ Safe/healthy work environment
2.​ Fair labour practices(salaries/benefits)
3.​ Honest Advertising
4.​ Honest Pricing
5.​ Protecting environment
6.​ Helping communities and charities.