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1-2 Business and Economic Environments [CH 1

Chapter Overview

When you think about business, what comes to mind? Some will think of the
customer relations of selling products through stores that they frequent. Others will
think of the many jobs businesses hire for, theirs in particular, and what they do
while failing to make the connection of their duties and the customers who support
them through their purchases. The dreamers and idealists will conjure going into

“business for themselves”, but they struggle with what business. They dream of
“being their own boss”, “working for themselves”, never realizing that everyone has
a boss and that boss is their customers.
All of private enterprise, business, composes the nation’s economy. This nation’s
economy is not made up of what government says it is. Rather it is those individuals

engaged in private enterprise, engaging in exchanges, that create wealth. It is only
through private enterprise, the individual or the company, that wealth is actually
created.
Know that people do not start a business to provide jobs, rather to meet consumer
demands for goods and services.
Business survives when it meets the needs of its customers, which are the

consumers. When the customer base and their demands grow beyond the owner’s
individual capacity, then he must hire employees to meet the customer demands
(what they purchase). If the business cannot supply what the customer demands, or
cannot serve the customer, then the customer will go elsewhere.
business Business consists of all profit-seeking activities and enterprises that provide
All profit-seeking activities
and enterprises that provide goods and services to an economy, everything from conception to consumption.
goods and services to an There are businesses that produce tangible products, such as apples, oranges, tractors
economy. and automobiles, breakfast cereals, computers or computer chips. Others provide
services, such as insurance, travel accommodations, and lodging. Delta Airlines
profits provides nonstop flights to the world’s cities; domestic and international (Figure 1.1).
Difference between a
company's revenues Business and commerce is the economic life-blood of a nation; the commerce
(receipts) and expenses through which society's living standard improves, and profits are that mechanism for
(expenditures). accomplishing these goals. Accountants, businessmen, and people in general
Profit is the reward understand that profits are calculated as the difference between business revenues
successful business people (receipts) and expenses (expenditures). Profit is the reward successful business
receive who take on the risk people receive who take on the risk of business ownership and allows them to remain
of business ownership and
meeting the demands of in business providing goods and services to their consumers.
consumers. Successful business recognizes that to succeed in the long run and continue in a
community, the business owner must be equitable in his dealings with employees,
Equitable: Valid in equity as customers, suppliers, and competitors. Here is what Robert E. Wood, President of
distinct from law; fair and Sears, Roebuck from 1928 to 1954, said: "Business must account for its stewardship,
impartial. Doing what is said.

Figure 1.1 A Service-producing Business

Source: Courtesy of Delta Airlines

Learning to Do, Doing to Learn, Earning to Live, Living to Serve
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