Chapter 1
1.1
Production organizations → business, manufacture products and services and sell these to
consumers at a certain price
Economics → the relationship between consumers and business and the mutual
interactions between businesses.
- Economy → the ways in which people strive to optimize their prosperity: how can
the supply of products and services be optimized using minimum resources
- Microeconomics → the theory behind markets: how does the price mechanism work
in a particular market, such as the market for holiday travel? Determining factors
include the number of suppliers and customers in a particular market.
- Macroeconomics → economic problems that affect society as a whole such as
inflation and unemployment.
- Business economics → focuses on economic behavior in a production organization.
(also trade and services).
A company is a production organization:
- In a production organization, resources are combined and transformed into products
during a production process.
- Exists out of: Supplier market (where resources are obtained) and the retail market
(where manufactured goods or services are sold)
- Fixed assets → assets that remain in (service of) the company for extended periods
of time
- Capital → the raw materials and fixed assets used by a company
- Formal nature → rights and obligations of the participants laid down in writing: the
empowerment of shareholders, directors and employees are described in the
articles of association and in the job descriptions.
A company seeks to maximize its profit:
- Company participates in economy process with the intent to make its owners
“better off.”
- Striving for ‘value creation’ → the sales of the produced goods and services nee to
outweigh the price paid for the production factors (labor, raw materials, fixed assets)
at the supplier market.
- Owners are beneficiaries of the surplus in payment → the profit
Efficiency → the cost-effectiveness of the production process.
When a given quantity is produced at minimum costs. (costs)
Effectiveness → the ability to meet target objectives of the production process, or the
extent to which end products meets customer requirements. When the product is
appreciated by customers and customers are willing to pay for it. (sales revenue or
turnover)
Profit: the target → the activities are a means to an end
, Continuity → Maximizing profit at all cost is usually not given the highest priority: continuity
of a company also an important concern. Only a profitable company will have the required
financial resources to survive independently.
Mission statement → outlining their targets without addressing their drive for profit as a
prominent factor, instead focusing on environmental issues, job satisfaction for employees
etc.
1.2
Public sector → compromises the state provinces, municipalities and regional water
authorities. Providing public goods and services.
- Failure of the market mechanism: consumers cannot purchase a small piece of sea to
defense.
- Budget mechanism: government imposes compulsory contributions/taxes and
provides a budget to finance the production of public goods.
- Privatizing → the activities are separated from the government and must prove
themselves to be viable as a part of a market. (public transport, mail delivery etc.)
Private non-profit business → comprise a wide variety of organizations from amateur sports
clubs to charitable organizations. A fund-raising institution as it attempts to raise funds to
achieve a worthy social objective.
- Target is to provide certain facilities.
- Cannot exist by conducting business transactions and are not economically
independent. Depend on gifts like contribution, subsidies and inheritances.
- The assessment of the effectiveness is much more difficult than that of a company.
Profit cannot be used as a key indicator in the non-profit sector.
1.3
Agriculture and mining → with a relatively small quantity of raw materials, a large quantity
of end product is achieved.
Industry → create a physical, tangible product that did not yet exist before its production.
- Job production: production is customized. Each product is tailored to customer
requirements and products are made to order; a sale is agreed upon before
production starts. (no inventory)
- Mass productions: single type of product is produced in large quantities. Specific
customer requirements are not taken into account. (build op inventory)
- Batch-job production process: every customer gets a particular individual product,
but costs are saved by producing the components in larger quantities. (create your
own by different objects/products)
- Batch-mass production process: variety of models of the standard product are
produced. Different variants are produced.
Trade → do not produce new products. No transformation processes.
- Retail trade: supplies directly to the end user the consumer. Final link in the chain.
1.1
Production organizations → business, manufacture products and services and sell these to
consumers at a certain price
Economics → the relationship between consumers and business and the mutual
interactions between businesses.
- Economy → the ways in which people strive to optimize their prosperity: how can
the supply of products and services be optimized using minimum resources
- Microeconomics → the theory behind markets: how does the price mechanism work
in a particular market, such as the market for holiday travel? Determining factors
include the number of suppliers and customers in a particular market.
- Macroeconomics → economic problems that affect society as a whole such as
inflation and unemployment.
- Business economics → focuses on economic behavior in a production organization.
(also trade and services).
A company is a production organization:
- In a production organization, resources are combined and transformed into products
during a production process.
- Exists out of: Supplier market (where resources are obtained) and the retail market
(where manufactured goods or services are sold)
- Fixed assets → assets that remain in (service of) the company for extended periods
of time
- Capital → the raw materials and fixed assets used by a company
- Formal nature → rights and obligations of the participants laid down in writing: the
empowerment of shareholders, directors and employees are described in the
articles of association and in the job descriptions.
A company seeks to maximize its profit:
- Company participates in economy process with the intent to make its owners
“better off.”
- Striving for ‘value creation’ → the sales of the produced goods and services nee to
outweigh the price paid for the production factors (labor, raw materials, fixed assets)
at the supplier market.
- Owners are beneficiaries of the surplus in payment → the profit
Efficiency → the cost-effectiveness of the production process.
When a given quantity is produced at minimum costs. (costs)
Effectiveness → the ability to meet target objectives of the production process, or the
extent to which end products meets customer requirements. When the product is
appreciated by customers and customers are willing to pay for it. (sales revenue or
turnover)
Profit: the target → the activities are a means to an end
, Continuity → Maximizing profit at all cost is usually not given the highest priority: continuity
of a company also an important concern. Only a profitable company will have the required
financial resources to survive independently.
Mission statement → outlining their targets without addressing their drive for profit as a
prominent factor, instead focusing on environmental issues, job satisfaction for employees
etc.
1.2
Public sector → compromises the state provinces, municipalities and regional water
authorities. Providing public goods and services.
- Failure of the market mechanism: consumers cannot purchase a small piece of sea to
defense.
- Budget mechanism: government imposes compulsory contributions/taxes and
provides a budget to finance the production of public goods.
- Privatizing → the activities are separated from the government and must prove
themselves to be viable as a part of a market. (public transport, mail delivery etc.)
Private non-profit business → comprise a wide variety of organizations from amateur sports
clubs to charitable organizations. A fund-raising institution as it attempts to raise funds to
achieve a worthy social objective.
- Target is to provide certain facilities.
- Cannot exist by conducting business transactions and are not economically
independent. Depend on gifts like contribution, subsidies and inheritances.
- The assessment of the effectiveness is much more difficult than that of a company.
Profit cannot be used as a key indicator in the non-profit sector.
1.3
Agriculture and mining → with a relatively small quantity of raw materials, a large quantity
of end product is achieved.
Industry → create a physical, tangible product that did not yet exist before its production.
- Job production: production is customized. Each product is tailored to customer
requirements and products are made to order; a sale is agreed upon before
production starts. (no inventory)
- Mass productions: single type of product is produced in large quantities. Specific
customer requirements are not taken into account. (build op inventory)
- Batch-job production process: every customer gets a particular individual product,
but costs are saved by producing the components in larger quantities. (create your
own by different objects/products)
- Batch-mass production process: variety of models of the standard product are
produced. Different variants are produced.
Trade → do not produce new products. No transformation processes.
- Retail trade: supplies directly to the end user the consumer. Final link in the chain.
