Archive for the ‘Business’ Category
An organization that produces or distributes a good or service for profit is called business. Profit is the difference between earned income and costs. Every business engages in at least three major activities.
The first activity, production, involves making a product or providing a service. Manufacturing firms produce goods whereas service firms provide assistance to satisfy specialized needs through skilled workers such as doctors, travel agents, entertainers, and taxi drivers. Today the number of service firms far exceeds the number of manufacturing firms. For this reason, it is sometimes said that we live in a service society.
The second activity that businesses are involved in is marketing. Marketing deals with how goods or services are exchanged between producers and
consumers.
The third activity, finance, deals with all money matters related to running a business. Whether a business has one worker or thousands of workers, it is involved with production, marketing, and finance, The price that you pays for catcher’s mitt will be based in large part upon supply and demand for the glove. Supply of a product refers to the number of similar products that will be offered for sale at a particular time and at a particular price. Demand, on the other hand, refers to the number of similar products that will be bought at a given time at a given price.
Generally speaking, there are two major kinds of businesses—industrial and commercial. Industrial businesses produce goods that are often used by other businesses or organizations to make things. Mining ore for making metal products, manufacturing catchers’ mitts and tricycles, and constructing buildings are types of industrial businesses. Highly industrialized nations that produce thousands of products, such as the United States, Japan, and Germany, can be distinguished from third world nations that are underdeveloped, have few manufacturing firms, and have large numbers of poor people who possess few goods. Some of the third world nations have made progress by becoming developing nations.
Unlike industrial businesses, commercial businesses are engaged in marketing (wholesalers and retailers), in finance (banks and investment companies), and in furnishing services (dental services, sports centers, motels, and video rental shops). Services are intangible products that result from a high degree of labor input and that satisfy consumer needs.
For hundreds of years, American businesses led the way in producing new goods and services that were bought around the world. Consumers worldwide eagerly purchased exciting new products that were invented and made in the United States. Factories hummed with activity, workers from other countries arrived by the thousands to find jobs, and people spent their wages buying the goods that the firms produced. Many leaders from foreign countries also arrived to find out how American businesses were managed.
Over the last 25 years, however, the situation slowly changed. Other countries became industrialized after learning how to invent and produce new products for their consumers. Americans gradually began to purchase these foreign products. Foreign firms also learned how to use efficient methods for making goods. To satisfy the growing number of American buyers, foreign manufacturers concentrated on satisfying the American demand for higher-quality products with greater varieties and at lower prices.
American business leaders soon realized that other countries were producing goods and services at breakneck speed. It was time for change, a time to challenge foreign competitors, and a time to rely on America’s abundant human talent to meet the challenge of global competition. Global competition is the ability of profit-making organizations to compete with other businesses in other countries. Let’s look at what is happening to help America compete in a global economy.
Businesses often study themselves in terms of whether they are doing the right things and whether they are doing the right things well. Two terms are used to describe the two points.
First, effectiveness occurs when an organization makes the right decisions in deciding what products or services to offer customers or other users. Also included is making the right decisions in how to produce the products and deliver them to consumers.
Second, efficiency occurs when an organization produces needed goods or services quickly at low cost. Firms that provide products at the lowest cost while maintaining desired quality will succeed. Some firms are extremely efficient but very ineffective while others are effective but inefficient. Good managers focus on both effectiveness and efficiency at all times.