MGT101 - INTRODUCTION TO

BUSINESS ADMINISTRATION

Introduction to Business Administration

Why Study Business?

As business accelerates in the 21st century, new
technologies, population shifts, an shrinking global
barriers are altering the world at a frenetic pace.
Change is the only Constant (change management
is a business by itself)
Business people are catalysts for many of these
changes, creating new opportunities for individuals who
are prepared to take action.
Studying contemporary business will help you to
prepare for the future.

Introduction to Business Administration

Why Study Business?

Within the time frame of a few months, you will be

introduced to how business operates and why many
business graduates choose to start their own businesses
rather than work for others (Being your own boss brings
you one step closer towards self-actualization)
You will get real insights about the various functional
areas in a successful business and the professionals who
build careers in each function.
By the end of the course, you will understand how
Marketing, Accounting,Production/Operation and Human
Resource Management work together to provide
competitive advantages for firms.

THE US BUSINESS SYSTEM

Concept of BUSINESS

Profit seeking activities of those engaged in purchasing or selling

goods and services to satisfy societys needs and wants. (Definition of
Profit - The difference between a businesss revenues and its
expenses)
Consists of all profit-seeking activities and enterprises that provide
goods and services necessary to an economic system.
An organisation that provides goods or services to earn profits.
Some businesses produce tangible goods, such as automobiles,
breakfast cereals, and computer chips;
Others provide services, such insurance, music concerts, car rentals
and lodging.

ECONOMIC SYSTEM
Economic
A

system

nations system for

allocating its resources
among its citizens

FACTORS OF PRODUCTION

Resources used in the production of goods

and services natural resources, labor,
capital, and entrepreneurs

LABOR [or HUMAN RESOURCES]

The physical and mental capabilities of

people as they contribute to economic
production

CAPITAL

ENTREPRENEURS

The funds needed to create and operate a

business enterprise

People who start new businesses and make the

decisions that expand small businesses into large
ones

NATURAL RESOURCES

Materials supplied by nature Eg. Land, water,

mineral deposits, trees

TYPES OF ECONOMIC SYSTEMS

PLANNED ECONOMY

Economy that relies on a centralized government to

control all or most factors of production and to make
all or most production and allocation decisions

MARKET ECONOMY

Economy in which individuals control production and

allocation decisions through supply and demand

1. MARKET

Mechanism for exchange between

buyers and sellers of a particular good
or service

2. CAPITALISM

Market economy that provides for

private ownership of production and
encourages entrepreneurship by
offering profits as an incentive

MIXED MARKET ECONOMIES

1. Economic system featuring characteristics of
both planned and market economics
2. PRIVATIZATION
* Process of converting government
enterprises into privately owned companies
3. SOCIALISM
* Partially planned economic system in which
the government owns and operates only
selected major sources of production

MARKETS,
DEMAND,
SUPPLY

THE LAWS OF DEMAND AND SUPPLY

DEMAND

The willingness and ability of buyers to

purchase a good or service

SUPPLY

The willingness and ability of producers to

offer a good or service

LAW OF DEMAND

Principle that buyers will purchase

[demand] more of a product as its price
drops and less as its price increases

LAW OF SUPPLY

Principle that producers will offer [supply]

more of a product for sale as its price
rises and less as its price drops

 DEMAND

AND SUPPLY
SCHEDULE
Assessment

of the
relationships between
different levels of demand
and supply at different price
levels

DEMAND CURVE

Graph showing how many units of a

product will be demanded [bought] at
different prices

SUPPLY CURVE

Graph showing how many units of a

product will be supplied [offered for sale] at
different prices

DEMAND CURVES
PRICE
( $)
12
10
8
D
8

10

12

QUANTITY

LAW OF DEMAND

THE HIGHER THE PRICE OF A

PRODUCT, THE LOWER THE QUANTITY
DEMANDED OF THAT PRODUCT.
THE LOWER THE PRICE OF A
PRODUCT, THE HIGHER IS THE
QUANTITY DEMANDED.
CETERIS PARIBUS

POSITIVE EFFECT TOWARDS DEMAND T SHIRTS

PRICE
12
10
8

QTY
8
10
12

QTY (+ EFFECT)
10
12
14

P
($)
10
D1
D
10

12

QTY

POSITIVE FACTORS OF
DEMAND

SEASONS
ECONOMY
PURCHASING POWER
CHANGES IN TASTES, HABIT & CUSTOMS
INCREASE SIZE & STRUCTURE OF
POPULATION
CHANGES IN THE PRICE OF RELATED GOODS
ADVERTISING & SALES PROMOTION
TECHNOLOGICAL ADVANCEMENT

LAW OF SUPPLY
THE HIGHER THE PRICE OF A PRODUCT,
THE GREATER THE QUANTITY SUPPLIED
OF THAT PRODUCT AND THE LOWER THE
PRICE, THE LOWER IS THE QUANTITY
SUPPLIED. (CETERIS PARISBUS)
EXAMPLE
If the price of chicken increases, the quantity
of chicken supplied will increase since the
seller will sell more to earn more profit.

SUPPLY SCHEDULE & CURVE

PRICE
12
10
8

QTY
12
10
8

PRICE
S
12
10
8

10

12

Supply increases as prices

Increases because :
Established suppliers will
supply more to gain greater
profits.
New suppliers will enter the
Market to take advantage of
higher prices attainable.

QTY

POSITIVE FACTORS OF SUPPLY

-Supply Schedule & Supply curve
PRICE
12
10
8

QTY
12
10
8

QTY
14
12
10

S
S1

10

10

12

QTY

POSITIVE FACTORS OF
SUPPLY ?

Improved technology-efficiency.
Improved weather conditions-agricultural products.
Improved workers skill & motivation.
Reaction to an increase in demand.
Prices of inputs decreases
Government intervention- subsidy, tax reduction etc.
Increase in number of sellers
Governments liberal policy to stimulate growth.
( reducing interest rate)

 MARKET

PRICE
[EQUILIBRIUM PRICE]
Profit-maximizing

price at
which the quantity of goods
demanded and the quantity
of goods supplied are
equal

 SURPLUS
Situation

in which quantity supplied

exceeds quantity demanded

SHORTAGE
Situation

in which quantity
demanded exceeds quantity
supplied

EQUILIBRIUM
PRICE
AND
OUTPUT
Price
SURPLUS S >D

ss

DD
5
4
3
2
1

SHORTAGE D >S

1
12
Quantity
0
Figure 5.1 HOW EQUILIBRIUM PRICE AND QUANTITY
DETERMINED
2

PRIVATE ENTERPRISE

PRIVATE PROPERTY RIGHTS

The right to buy, own, use, and sell almost

any form of property

FREEDOM OF CHOICE

One can choose what to buy and sell

Producers can choose whom to hire and what
to produce

TABLE 1.1 DETERMINANT OF EQUILIBRIUM PRICE

AND QUANTITY OF PILOT PENS.
PRICE(RM)

QUANTITY
DEMANDED
(units)

QUANTITY
SUPPLIED
(units)

MARKET
CONDITION
SURPLUS/SHORTAG
E

MARKET
PRICES

10

10-2 =8
SURPLUS

FALLS

8-4 = 4
SURPLUS

FALLS

6-6 = 0

EQUILIBRIUM

4 8 = -4
SHORTAGE

RISES

10

2- 10 = -8
SHORTAGE

RISES

 PROFITS
Anticipated

profits play a large

role in individuals choices of the
goods and services they will
produce

COMPETITION
Vying

among businesses for the

same resources or customers

DEGREE OF COMPETITION

PURE COMPETITION

Market or industry characterized by numerous

small firms producing an identical product

MONOPOLISTIC COMPETITION

Market or industry characterized by numerous

buyers and relatively numerous sellers trying
to differentiate their products from those of
competitors

OLIGOPOLY

Market or industry characterized by a

handful of [generally large] sellers with the
power to influence the prices of their
products

MONOPOLY

Market or industry in which there is only

one producer, which can therefore set the
prices of its products

NATURAL

MONOPOLY
Industry

in which one
company can most
efficiently supply all
needed goods or
services

EVALUATING
ECONOMIC
SYSTEMS

ECONOMIC GOALS

STABILITY

Condition in which the balance between the

money available in an economy and the
goods produced in it are growing at about the
same rate

INFLATION

Phenomenon of widespread price increases

throughout an economic system

 RECESSION
Period

characterized by
decreases in employment,
income, and production

DEPRESSION
Particularly

severe and longlasting recession

 FULL

EMPLOYMENT

Everyone

who wants to work

has an opportunity to do so

UNEMPLOYMENT
Level

of joblessness among
people actively seeking work

 GROWTH
Increase

in the amount of goods

and services produced by a
nations resources

MEASURING
ECONOMIC
PERFORMANCE

GROSS NATIONAL PRODUCT [GNP]

The value of all goods and services

produced by an economic system in a year
regardless of where the factors of
production are located

REAL GNP

GNP adjusted for inflation and changes in

the value of a countrys currency

GROSS DOMESTIC PRODUCT [GDP]

The value of all goods and services

produced in a year by a nations economy
through domestic factors of production

PRODUCTIVITY

Measure of economic growth that

compares how much a system produces
with the resources needed to produce it

BALANCE OF TRADE

The differences between a countrys

exports to and imports from other countries

NATIONAL DEBT

BUDGET DEFICIT

Situation in which a government body spends

more money that it takes in

NATIONAL DEBT

Total amount that a nation owes its creditors

MANAGING THE US ECONOMY

FISCAL POLICIES

Government economic policies that determine

how the government collects and spends its
revenues

MONETARY POLICIES

Government economic policies that determine

the size of a nations money supply

END OF CHAPTER 1