Unit 1 - Business Basics
Learning Target 1: I can define what business is and its role in our economy
Chances are you have heard of Nike, Apple, Microsoft, Amazon, and Marriott. Chances are also good you know that they are businesses but what does that really mean? What is a business? Businesses have to have something such as a good or service of value they exchange with a customer / consumer in order to make a profit. Value is simply defined as satisfying a need. If a business does not satisfy a need or create value for the customer the business will need to find a new direction to take or possibly go out of business. Businesses are also global in nature regardless of where you live. Business owners or entrepreneurs who can identify opportunities and capitalize on them do very well as long as they adhere to some fundamental business concepts and are ethical with their practices.
There are two types of businesses for profit and not-for-profit businesses. For profit businesses make up the majority of businesses across the globe today. Not-for-profit business such as the Salvation Army and Goodwill Industries are organizations whose primary objective is to provide goods and services to society without the goal of making profit. Even though the goal of profit may not be the focus for not-profit-organizations it still plays a role as they still need to make sure their revenue exceeds their expenses otherwise they will not be able to continue over the long run.
Making a profit is fairly easy at the most basic level. Businesses must make sure the money received (revenue) from the sale of a good or service is greater than the expense of performing the service or producing the good. When expenses are greater than revenue a business will incur a loss. If a loss happens for an extended period of time a business more than likely will go out of business.
This leads us to the goal of every business and that is to make a profit while delivering value to the customer over time. When a business can deliver value to the customer the business will ultimately improve the standard of living and can contribute to a higher quality of life for its customers.
Watch the following video that shows some of the most famous business decisions which lead to losses. After you have watched this video write down 3 things you learned on what not to do as a business owner. Be prepared to turn your paper in and share it with the class.
As you can see entrepreneurs and businesses need to take risks. These risks range from starting the business by investing your own money to investing money to create a goods or service the business owner thinks the customer will buy. As with all risks there is no guarantee for profit and there is a probability the business / idea will fail. For most business risks the consumer determines the result of the risk. If the consumer does not see value in the product or service created they do not purchase it. If the consumer does not purchase it, the business does not acquire revenue which is needed to cover expenses in order to achieve profit.
Make The Connection: Find a business that has recently incurred a loss and explain what lead to the loss. Recommend three actions the business should take to offset the loss.
Show What You Know: Create a new product that will create value for a specific group of consumers.
What Would You Do? If your company is not doing well in terms of profit, what options do you have to improve profits?