Ibrahim Sameer (MBA - Specialized in Finance, B.Com Specialized in Accounting & Marketing)

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1 Ibrahim Sameer (MBA - Specialized in Finance, B.Com Specialized in Accounting & Marketing)

2 Introduction What is your understanding about Business Studies?

3 Introduction The integration is achieved through the two themes that constitute the essence of Business Studies. The first theme is the relationship between the business organization and the environment in which it operates. The second theme developed in this subject is the process of decision making within the organization.

4 Economic System An economic system is a system of production and distribution of goods and services as well as allocation of resources in a society.

5 Types of Economic System

6 Market Economy / Free Market Economy Features All the resources in a market economy are privately owned by people and firms. Every business will aim to make as much profit as possible i.e. profit is the main motive. There is consumer sovereignty.

7 Market Economy / Free Market Economy Firms will only produce those goods which consumers want and are willing to pay for. Price is determined through the price mechanism. Eg: USA, Canada, Germany & UK

8 Advantages of Market Economy Market economies responds quickly to people s wants. There is wide variety of goods and services in the market. New and better methods of production are encouraged thus leading to lower cost of goods and services.

9 Disadvantages of Market Economy Public goods may not be provided for in Market economy, thus the government will have to interfere to provide these types of goods. Market economies encourage consumption of harmful goods. Prices are determined by the demand and supply of goods.

10 Disadvantages of Market Economy Social cost may not be considered while producing goods and services. It may lead to unemployment because machines will be more productive than men.

11 Planned Economy / Command Economy Features Government decides how all scarce resources were to be used. Government will decide what is to be produced, how much to be produced and how much should be charged for goods and services. Eg: China, Cuba & North Korea

12 Advantages of Planned Economy There is no competition between firms thus resulting in less wastage. Government ensures that everybody is employed. Less gap between poor and rich.

13 Disadvantages of Planned Economy Production of goods is decided by government thus there is no consumer sovereignty. Businesses usually are less efficient because of lack of profit motive.

14 Mixed Economy Features Mixed economy is a combination of market economy as well as government planning.

15 Mixed Economy It has both private sector and public sector. Some businesses are owned by private individuals while some businesses are owned by the government. Eg:

16 Mixed Economy Mixed economy attempts to overcome the disadvantages of a market economic system by using government intervention to control or regulate different markets.

17 Advantages of Mixed Economy State provides the essential services Private sector encouraged for profits Competition keeps prices low Consumer choice Inefficient business behavior controlled

18 Disadvantages of Mixed Economy Less efficient than private sector Excessive control over business activity can add costs and discourage enterprise.

19 Types of Industry There are three main types of industry in which firms operate. These sectors form a chain of production which provides customers with finished goods or services.

20 Types of Industry Primary Production Secondary Production Tertiary Production

21 Primary Production This involves acquiring raw materials. For example, metals and coal have to be mined, oil drilled from the ground, rubber tapped from trees, foodstuffs farmed and fishing. This is sometimes known as extractive production.

22 Secondary Production This is the manufacturing and assembly process. It involves converting raw materials into components, for example, making plastics from oil, building houses, bridges and roads.

23 Tertiary Production This refers to the commercial services that support the production and distribution process, eg insurance, transport, advertising, warehousing and other services such as teaching and health care.

24 Tertiary Production This refers to the commercial services that support the production and distribution process, eg insurance, transport, advertising, warehousing and other services such as teaching and health care.

25 Summary

26 Q & A

ESSENTIALS OF BUSINESS

ESSENTIALS OF BUSINESS Topic 01 Introduction to Business Introduction to Business The word business is actually derived from the idea of busy-ness. This idea of busy-ness quite accurately describes most