CHAPTER 1: Motives and

Functions of a Business
1. Business Concept &
Definition
2. Stakeholders &
Shareholders
3. Business Environment

Business Defined
A business is an enterprise that
provides products or services
desired by customers.

The Nature of Business

To create profits by:
Selling products Cars, food,
clothing
Providing services Healthcare,
insurance

Products have both tangible and

intangible characteristics.

The Goal of Business

The primary goal of all business is to earn a profit.
Earning profits contributes to society by providing
employment, which in turn provides money that reinvested in
the economy.
But, not all organizations are business.
(Red Cross, Special Olympics are nonprofit organizations)

Business vs. Nonprofit

Organization
Business
An individual or
organization that tries
to earn a profit by
providing products
that satisfy peoples
needs, ex. CocaCola.

Nonprofit
Organization
Provides products,
especially services,
for some purpose
other than profits,
ex. Red Cross

To earn a profit, a person or organization needs:

management skills
marketing expertise
Stakeholder:
customers, employees, investors,
government regulators, the community and
society. Because these groups have a stake in
the success and outcomes of a business.

Stakeholders and
Shareholders

Stakeholders

A person, group, or
organization that has
direct or indirect stake in
an organization because
they can affect or be
affected by
the organization's actions
, objectives, and policies.

Board of
Directors and
Management

Employee

Employees
Competitor
Family
INTERNAL
STAKEHOLDE
R

Consumer
Distributor
EXTERNAL
STAKEHOLDER

Shareholders

Supplier
Community

Bank
Government

Shareholders
A shareholder or stockholder is
an individual or institution, including
a corporation that legally owns any part of
a share of stock in a public or private
corporation. Shareholders own the stock, but
not the corporation itself.

Companies or
Investment
Companies

INSTITUTIONAL
INVESTORS

Insurance

Person who buy

shares with
his/her personal
savings.

Banks
INDIVIDUAL
INVESTORS

From types of stock

Common-stockholder
- Temporary dividend.

Preferred-stockholder
- Fixed dividend.

-Own more than 50% of stock.

-Exerts complete control over the
company by being able to replace
theboard of directors and the
management.
-Have a bigger voting rights.
-Own less than 50% of
stock.
-Has less authority than
majority shareholder.
-Have less voting right.

Business Environment
Consists of all external and internal factors
that influence the complex interaction of
market, production and finance.
The most important factors:
SOCIO-ECONOMIC, TECHNOLOGICAL,
SUPPLIERS, COMPETITORS & GOVERNMENT

Features of Business
Environment

Totality of external forces

Specific and general forces
Dynamic Nature
Uncertainty

The External Environments of Business

The External Environments of Business