Source: Image of profit line, loss line, Creative Commons, Kelly Eddington; Image of crowd, office building, world, women on phone, blue jeans, images by Video Scribe, License held by Jeff Carroll; Image of hand holding paper, Public Domain, http://bit.ly/OcGLBF; Image of invisible hand, Public Domain, http://bit.ly/1pfSTC3.
Hi, I'm Jeff. And in this lesson, we'll begin our discussion of business by first asking and answering, what is business? So let's get started.
A business is an organization that attempts to earn a profit through the sale of goods or services. But in its simplest form, a business identifies and satisfies a need. Satisfying that need can often improve the quality of life in a society by offering greater choices of products and services and more opportunities for workers. Once you understand what a business is and how it operates, this knowledge can impact all aspects of your career.
A deeper understanding of what it takes for a business to succeed can also help you succeed in the workplace. You will become more aware as a consumer too. And the same skills that help improve the operation of a business can help improve the work we do in all aspects of our lives.
For example, a few areas that concern all businesses are profit. This is what remains after all business expenses have been deducted. In order to continue a business must either make money or create something of equivalent value for its owners and investors.
Loss, when expenses are greater than sales, there is a loss. This is the other side of profit. And a business that succeeds continually focuses on methods to reduce its losses.
The free enterprise system, this is a market system with little control and regulation of business by the government. Business exists within the system. And it's important for a business owners to be familiar with the forces that drive supply and demand.
Adam Smith, a philosopher in the 1700's described these forces as an invisible hand. This was a metaphor for the needs and wants of a society. These needs and wants translated into desire for the products and services of a business.
This invisible force would cause better businesses, products, and services to survive, while weaker ones failed. And that would improve society as a whole. A business can find opportunity by identifying a need or want that is not being met by other businesses, or a business can actually create a want, perhaps one the consumer did not even know they had.
This will often happen when new categories are created in the marketplace, such as when IBM, Apple, and other manufacturers created the personal computer industry. And as we learn about business, we'll also discuss two aspects of economic theory that can impact a business. The first is microeconomics.
This is an area of economic study that focuses on specific markets, choices, and behaviors that affect price, cost, and demand. Any evaluation of a business idea or formulation of a business sub-plan will always need to consider microeconomics. And macroeconomics, this is an area of study that focuses on the impact of variables on the economic infrastructure in its entirety on a regional, national, and global level.
When developing the strategy for a business, it's important to consider the environment in which the business is operating. And that is where macroeconomics comes in. Also, when we discuss business, the term entrepreneur is often used. This is a person who pursues a business venture with growth and expansion as a primary goal.
What makes entrepreneurs different is that they are rarely satisfied with the existing state of a business. They understand that even a successful business can fail if it relies too heavily on what worked in the past. The marketplace and the needs and wants of consumers are always changing. And entrepreneurs are excited by this fact, often because it allows them to use their creativity to develop new products and services to match the latest demands of the market.
Not all business owners are entrepreneurs, but it is often the entrepreneurs who create business models that break with tradition and create new markets. This has been true throughout the history of business. For example, Levi Strauss, the founder of the first company to manufacture denim blue jeans, was initially in business as a taylor.
Many of his customers use the denim that he sold to patch their pants. When one of his customers, Jacob Davis, came up with the idea to use rivets to strengthen those patches, they both agreed to go into business manufacturing pants made from denim with rivets to hold them together. It wasn't just the strength of the jeans that made Levi Strauss into the company it is today though. It was also the creative vision to understand that even people who didn't need workman jeans might want to wear those jeans to show their workman-like spirit.
In the current marketplace, Arianna Huffington is a good example of an entrepreneur. She identified a need for a single website where people can visit for their political news, often known as an aggregation site. The Drudge Report, a site that cadence to more conservative political views already existed. So she created the Huffington Post as a liberal alternative.
Notice how she used what already worked in the marketplace then expanded it to fit a need that was not being met. She didn't stop there. The Huffington Post also innovated by closely monitoring daily trends and providing many articles on the subjects that were popular.
She did this by enlisting contributions from a large number of article writers. Instead of a small writing staff, this generated considerable content. And out of that content some articles were shared in high numbers across social media, drawing even more readers to the site.
That is another aspect of an entrepreneur. They will often try many options, taking many swings at pitches. While many of those swings may not connect, the few that do becomes home runs for the business.
All right, nicely done. In this lesson, we learned what business is and how it can have a positive impact on a society and individual lives. We discussed micro and macroeconomic theory and how they intersect with business. And we talked about a few of the reasons entrepreneurship is important to business. In future lessons, we'll learn more detail about these areas, but for now thanks and have a great day.