Business fundamentals 

Chapter 1

Business = Individuals or organizations trying to earn a profit by providing products that satisfy people’s needs. 

Products = Goods or services with tangible and intangible characteristics that provide satisfaction and benefits.

A Product Can Be…

  • Tangible Goods = Automobile ,Computer ,Phone,Coat 

  • Services = Dry cleaning, Doctor’s checkup, Basketball game,Concert 

  •  Ideas = Professionals generate ideas for solving problems

The Goal of Business: The goal of business is to earn a profit.

 Earning profits contributes to society by providing employment, which in turn provides money that is reinvested in the economy. 

This are the steps to earn profit 

 Management Skills, Marketing Expertise, Financial Resources ,Product and Staff ,Abiding by the Law, Adapting to change and acting ethically. 

Nonprofit Organizations

  • Provide goods and services

  • Do not share the purpose of earning profits

  •  Engage in management, marketing and finance to reach goals


  • Groups that have a stake in the success and outcome of a business. 

Customers, employees, investors, government regulators, community, and society.


Management is concerned with: 

  • Developing plans o Coordinating employees’ actions 

  •  Organizing and motivating people. 

  • Acquiring, Developing and Using resources (including people) effectively and efficiently.

Economic Foundations of Business

  • Natural Resources= Land, forests, mineral, water, and other things not made by people.

  • Human Resources = The physical and mental abilities people use to produce goods and services.

  • Financial Resources = The funds used to acquire the natural and human

           resources needed to provide products.

  • Intangible Resources = Such as a good reputation for quality products or being socially responsible.

 Economic System = A description of how a particular society distributes its           resources to produce goods and services. 

3 types of economy:

Communism= like korea o cuba 

Socialism= like india or sweden 

Capitalism, or Free Enterprise= like Spain or Usa  

Forces of Supply and Demand

  • Forces of Supply: The number of products consumers are willing to buy at different prices at a specific time. 

  • Forces of demand :The number of products businesses are willing to sell at different prices at a specific time 

Measuring the Economy

Gross Domestic Product =The sum of all goods and services produced in a country during a year, Does not include profits from companies’ overseas operations

Budget Deficit=The condition in which a nation spends more than it takes in from taxes


An individual who risks his/her wealth, time and effort to develop for profit an innovative product or way of doing something.


Business Ethics

Business Ethics = Principles and standards that determine acceptable conduct in business

Acceptable behavior is determined by:  The organization, The individual’s personal principles , Customers and interest groups, Competitors ,Government regulators.

Managers: Must show a strong commitment to ethics and compliance. This “tone at the top” requires top managers to acknowledge their own role in supporting ethics and compliance

Social Responsibility

– A business’s obligation to maximize its positive impact and minimize its negative impact on society 

Ethics refers to individual’s or work group’s decisions and Social responsibility is the impact of the entire organization’s activities on society

The Role of Ethics in Business

Growing concerns about legal and ethical issues in business strengthen the public’s perceptions that ethical standards and the level of trust in business need to be raised.

Recent Legal and Ethical Issues= Subprime loans and foreclosures, Accounting fraud, Cybercrimes, Deceptive advertising, Unfair competitive practices.

Recognizing Ethical Issues

  • Ethical Issue= An identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical

Bullying = Associated with a hostile workplace when a person or group is targeted and is threatened, harassed, belittled, verbally abused, or overly criticized. Abusive or intimidating behavior is the most common ethical problem for employees.

Recognizing Ethical Issues

 Misuse of Company Time= Estimated to cost hundreds of billions a year in lost productivity 

Misuse of Company Resources = Company policies help prevent company resource abuse

 Conflict of Interest = Exists when a person must choose whether to advance their own interests or those of others. 

Fairness and Honesty for Employees 

Employees Must = Abide by the laws , Cause no harm through dishonesty , Use company resources fairly and honestly , Be aware of company policies , Recognize ethical behavior.

Fairness and Honesty for Companies

Companies Must= Use fair competition practices , Give full disclosure of potential harm by a product , Be truthful in advertising , Keep company secrets , Meet obligations and responsibilities , Avoid undue pressure forcing others to act unethically. 

Fairness and Honesty 

Plagiarism= Taking someone else’s work and presenting it as your own without mention of the source is another ethical issue.

Improving Ethical Behavior in Business

Individual standard and values, managers and co-workers influence, opportunity codes and compliance requirements. This tree steps involves Ethical and unethical choices in business. 

Whistleblowing:The act of an employee exposing an employer’s wrongdoing to outsiders like the media or government regulatory agencies. 

The Nature of Social Responsibility

  • voluntary responsibility, ethical responsibilities, legal responsibilities and economic responsibilities. 

Stages : Financial viability , Compliance with Legal and Regulatory Requirements, Ethics, Principles and Values and Philanthropic Activities. 

Corporate Citizenship= The extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their stakeholders. 

Social Responsibility Issues

The company’s responsibilities to owners and stockholders, Maintaining proper accounting procedures, Providing investors with all relevant information, Protecting owner’s rights and investments. 

Sustainability= Conducting activities in a way that allows for the long-term well-being of the natural environment, including all biological entities.  

Involves the assessment and improvement of business strategies, economic sectors, work practices, technologies and lifestyles so they maintain the health of the natural environment


Business in a changing world.

international Business = The buying, selling and trading of goods and services across national boundaries. 

Why Nations Trade

Absolute Advantage=A monopoly that exists when a country is the only source of an item, the only producer or the most efficient producer. 

Comparative Advantage = The basis of most international trade, when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items. 

Outsourcing= The transferring of manufacturing or other tasks  such as data processing to countries where labor and supplies are less expensive.

Trade between Countries

Exporting= The sale of goods and services to foreign markets.

Importing= The purchase of goods and services from foreign markets.

Balance of Trade

Balance of Trade=The difference in value between what a nation exports and its imports. 

 Trade Deficit= A nation’s negative balance of trade which exists when that country imports more products than it exports

 Balance of Payments= The difference between the flow of money into and out of a country.

International Trade Barriers

Free trade seldom exists= Economic barriers, Ethical, legal, and political barriers, Social and cultural barriers,Technological barriers. 

Infrastructure= The physical facilities supporting a country’s economic activities

Exchange Rate= The ratio at which one nation’s currency can be exchanged for another nation’s currency.

Laws and Regulations= A firm doing business abroad must understand and obey the laws of the host country. depends of the country you have different regulations

and laws. 

Import Tariff= A tax levied by a nation on goods imported into the country.

Exchange Controls= Regulations that restrict the amount of currency that can be bought or sold.

Tariffs and Trade Restrictions

Quota=Restriction on number of units of a particular product that can be imported into a country. 

Embargo= A prohibition on trade for a particular product. 

Dumping =The act of a country or business selling products at less than what it costs to produce them. 

Political Barriers= Political considerations affect international business daily. 

 Seldom in writing  change rapidly. Political unrest may create a hostile or even dangerous environment for foreign business.

 Cartel=  A group of firms or nations that agrees to act as a monopoly and not compete with each other in order to generate a competitive advantage in world markets. 

Social and Cultural Barriers= Different lenguaje , appropriate your body language , expressions depends in the nation you are , different perception of the time and national customs and holidays may be respected. 

Technological Barriers

Technological Advances=Are creating global marketing opportunities and Create new challenges and competition 

Changing Technologies=New competitors challenging U.S and  Out of the top five global PC companies, three are from countries in Asia 

European Union and Asia-Pacific Economic Cooperation

European Union= A union of European nations established in 1958 to promote trade among its members. 

Asia-Pacific Economic Cooperation= And international trade alliance that promotes open trade, economic and technical cooperation among member nations.

Exporting and Importing

Countertrade agreement= is a foreign trade agreement that involves bartering products for other products instead of currency.

Export agents= are middlemen that help companies by handling their international transactions.

Getting Involved in International Business 

Trading Company = A firm that buys goods in one country and sells them to buyers of another country.

Licensing= A trade agreement in which one company, the licensor allows another company ,the licensee to use its company name, products, etc.

Franchising=A form of licensing in which a company ,the franchiser agrees to provide a franchisee a name, logo, methods of operation, etc.

Offshoring and Joint Venture 

Offshoring = The relocation of business processes by a company, or subsidiary, to another country. 

Joint Venture= The sharing of the costs and operation of a business between a foreign company and a local partner.

Strategic Alliance and Direct Investment

Strategic Alliance = A partnership formed to create competitive advantage on a worldwide basis.

Direct Investment = The ownership of overseas facilities. 

Multinational Corporation= A corporation that operates on a worldwide scale, without significant ties to any one nation or region. 

International Business Strategies 

Multinational Strategy= A plan used by international companies that involves customizing products, promotion, and distribution according to cultural technological, regional, and national differences 

Global Strategy= A strategy that involves standardizing products promotion and distribution for the whole world as if it were a single entity

Tema 4

Sole Proprietorships

Businesses owned and operated by one individual; the most common form of business organization in the United States.


Ease and cost of formation , Allow a high level of secrecy , Owner keeps all profits, Flexibility and control of the business, Government regulation is minimal, Taxes paid only once and  Can be dissolved easily. 


Unlimited liability, Scarce external funding, Owners need diverse skills, Success is tied to the owner, Lack of qualified employees and  Higher taxation rate.


 A form of business organization defined by the Uniform Partnership Act as an association of two or more persons who carry on as co-owners of a business for profit.

General Partnership= Involves a complete sharing in both the management and the liability of the business.

Limited Partnership = Has at least one general partner, who assumes unlimited liability, and at least one limited partner whose liability is limited to his or her investment in the business. 

Articles of Partnership= Legal documents that set forth the basic agreement between partners. 

Advantages of Partnerships= Easy to organize,Availability of capital and credit,Combined knowledge and skills, Swift decision making,Government regulations are few.

Disadvantages of Partnerships=Unlimited liability,Responsible for each others’ decisions, A new agreement is needed if the partnership changes, Difficult to sell a partnership interest, Distribution of profits may be uneven,Cannot find external funding as easily as large corporations.


A legal entity, created by the state, whose assets and liabilities are separate from its owners.

Corporations are typically owned by many individuals and organizations who own shares of the business

Stock=Shares of the corporation that may be bought or sold or Can also be gifted or inherited. 

Dividends= Profits of a corporation that are distributed in the form of cash payments to the stockholders. 

Types of Corporations 

Domestic Corporation = If conducting business in the state in which it is chartered.

Foreign Corporation= If conducting business outside the state in which it is chartered.

Alien Corporation= If conducting business outside the nation in which it is incorporated.

Private Corporations and Initial Public Offering

Private Corporation= Owned by just one or a few people who are closely involved in managing the business, None of their stock is sold to the public, Private companies are not required to disclose financial information publicly. 

Initial Public Offering= Selling a corporation’s stock on public markets for the first time,  Done when a private corporation wishes to “go public” or to raise additional capital and expand. 

Public Corporations

A corporation whose stock anyone may buy, sell, or trade.(movistar)

Two types of public corporations= Quasi Public or State owned and Nonprofit 

Elements of a Corporation

Board of Directors= A group of individuals, elected by the stockholders to oversee the general operation of the corporation, who set the corporation’s long-range objectives.

Corporations issue two types of stock=Preferred Stock and Common Stock

Advantages= Limited liability, Ease of transfer of ownership,Perpetual life,Securing funding is easier than for other forms of business and Expansion potential. 

Disadvantages= Double taxation, Expensive to form,Disclosure of information to the government and the public, Owners and managers are not always the same and can have different goals. 

Other Types of Business Ownership

Limited Liability Company, Cooperatives or Co-ops

Trends in Business Ownership: Mergers

Horizontal merger,Vertical merger and Conglomerate merger

Leveraged Buyout= A purchase in which a group of investors borrows money from banks and other institutions to acquire a company (or a division of one), using the assets of the purchased company to guarantee repayment of the loan.