Essential Business Concepts and Corporate Ethics

Core Business Definitions

A resource is anything that people can use to make or obtain what they need or want.

A business must organize the people and equipment to provide a product. People within the organization manage the company's resources to produce the product.

Even if a business has natural resources, capital resources, and entrepreneurial resources, it still could not function without human resources.

Financial and Market Dynamics

The amount of money left over after a business has paid for the cost of producing its goods and services is called profit.

The contest between businesses to win customers is called competition. A person who selects, purchases, uses, or disposes of goods or services is called a consumer. The decision to stop manufacturing products is often because there is a decrease in demand.

Ethics and Social Responsibility

The duty to do what is best for the good of society is called social responsibility. A conflict of interest occurs when a business is tempted to put profits before social welfare.

Legal and Ethical Standards

• Equal Pay Act: Requires that men and women be paid the same wages for doing equal work.
• Environmental Protection Agency (EPA): A federal agency that enforces rules to protect the environment and control pollution.
• Code of Ethics: Professional groups such as doctors, lawyers, journalists, and teachers follow these standards.
• Americans with Disabilities Act (ADA): Bans discrimination against persons with physical or mental disabilities.

When companies conspire to control the market for a product, they are using unethical means to eliminate competition. An important ethical question is whether an action sacrifices long-term goals for short-term gains.

Business Structures and Operations

As a member of society, you are both a consumer and a producer.

• Sole Proprietorship: About three-fourths of all businesses in the U.S., including farms and home-based businesses, are organized this way. A serious disadvantage is that the owner has unlimited liability, or full responsibility for the company's debts.
• Partnership: A contract that outlines the rights and responsibilities in a partnership is called a partnership agreement.
• Corporation: A business owned by many people but treated by law as one person. To raise money for a corporation, you can sell stock, or shares of ownership.
• Franchise: As a franchise, Taco Bell has a contractual agreement to sell the company's products and services in a designated geographic area.

Types of Producers

Farmers, miners, and other types of producers gather raw products in their natural state. Manufacturers are businesses that make finished products out of processed goods. If you sell a product directly to the public, you are considered a retailer.