Understand the definition of business, its risks and rewards

Evaluate the chances of starting and operating a business

In the Republic of Moldova

Study and Learn the Words:

English	English equivalents	Romanian	Russian
shares (n)		acţiuni, titluri de valoare	акции
free enterprise		iniţiativă liberă	частное предпринимательство
theme park	a large park where people go to enjoy themselves and where much of the entertainment is connected with one subject: e.g. A western-style theme park	parc de distracţie
shareholder (n)		acţionar	акционер
competition (n)		concurenţă	конкуренция
by-product (n)	a thing that happens as a result of sth else	produs secundar	побочный продукт
raw materials		materie primă	сырьё
to furnish		a aproviziona	предоставлять
to process		a prelucra	перерабатывать
tangible goods		bunuri materiale	материальные товары
legal advice		consultaţie juridică	юридическая консультация
automatic transmission		cutie de viteză automată	автоматическая коробка передач
power seats	seats whose position can be changed automatically
remote-control		telecomandă	дистанционное управление
side mirror		oglinda laterală	боковое зеркало
stick shift		cutie de viteză manuală	ручная коробка передач
to go rough	not to go well (about business)
sales revenue		venit din vânzări	доход от продаж
to deduct		a scădea	вычитать
challenge (n)		sarcina grea	трудная задача
to retail		a vinde cu amănuntul	продавать в розницу
to wholesale		a vinde angro, a vinde cu ridicata	продавать оптом
income (n)		venit	доход
outright (adv)	immediately
ownership (n)		proprietate, drept de proprietate	собственность, право собственности
to rent		a închiria, a da cu chirie, a arenda	арендoвать, давать в аренду

 

There are four types of economic systems:

1) Traditional economy is one in which economic behaviour is based primarily on tradition, custom and habit.

2) Command/planned economy is one in which some central authority or state determines economic behaviour.

3) Market economy is one in which markets play a dominant role in taking economic decisions process.

4) Mixed economy is one in which both free markets and governments have significant effects on the allocation of resources and the distribution of income.

Perhaps the most important characteristic of American business is the freedom of individuals to start a business, to work for a business, to buy or sell ownership shares in a business, and to sell a business outright. Within certain limits imposed mainly to ensure public safety, the owners of a business can produce any legal product or service they choose and sell it at any price they set. This system of business, in which individuals decide what to produce, how to produce it, and at what price to sell it, is called free enterprise. Itis rooted in the traditional and constitutional right to own property.

The American system of free enterprise ensures, for example, the right of Walt Disney to start an entertainment company, to hire an assortment of artists, and to experiment in developing theme parks. Their system gives the current executives at Disney and its shareholders the right to make a profit from the company's success, it gives Disney's management the right to compete with 20th Century Fox, and it gives movie-goers the right to choose between films produced by the two companies and many others. Competition like that between Disney and 20th Century Fox is a necessary and extremely important by-product of free enterprise. Because many individuals and groups can open businesses, there are sure to be a number of firms offering similar products. But a potential customer may want only one such product—say, a Jeep Cherokee or a Chevrolet S-10 Blazer—and not be interested in purchasing both. Each of the firms offering similar products must therefore try to convince the potential customer to buy its product rather than a similar item made by someone else. In other words, these firms must compete with each other for sales. Business competition, then, is essentially a rivalry among businesses for sales to potential customers. In free enterprise, competition works to ensure the efficient and effective operation of American business. Com­petition also ensures that a firm will survive only if it serves its customers well. Several airlines, for example, have failed because they were unable to serve customers as efficiently and effectively as their competitors did.

 

 

Business

Business is the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society's needs. The general term business refers to all such efforts within a society (as in "American business") or within an industry (as in "the steel business"). However, a business is a particular organization, such as American Airlines, Inc., or Sunnyside Country Store & Gas Pumps, Inc.

No person or group of persons actually organized American business as we know it today. Rather, over the years individuals have organized their own particular businesses for their own particular reasons. All these individual businesses, and all the interactions between these businesses and their customers, have given rise to what we call American business.

A person who risks his or her time, effort, and money to start and operate a business is called an entrepreneur. To organize a business, an entrepreneur must combine four kinds of resources: material, human, financial, and informational. Material resources include the raw materials used in manufacturing processes, as well as buildings and machinery. Human resources are the people who furnish their labour to the business in return for wages. The financial resource is the money required to pay employees, purchase materials, and generally keep the business operating. And information is the resource that tells the managers of the business how effectively the other resources are being combined and utilized.

Businesses are generally of three types. Manufacturing businesses (or manufacturers) are organized to process various materials into tangible goods, such as delivery trucks or towels. Service businesses produce services, such as haircuts or legal advice. And some firms—called middlemen —are organized to buy the goods produced by manufacturers and then resell them. For example, the General Electric Company is a manufacturer that produces clock radios. These products may be sold to a retailing middleman, which then resells them to consumers in its retail stores. Consumers are indi­viduals who purchase goods or services for their own personal use rather than to resell them.

All three types of businesses may sell either to other firms or to consumers. In both cases, the ultimate objective of every firm must be to satisfy the needs of its customers. People generally don't buy goods and services simply to own them; they buy products to satisfy particular needs. People rarely buy an automobile solely to store it in a garage; they do, however, buy automobiles to satisfy their need for transportation. Some of us may feel that this need is best satisfied by an air-conditioned BMW with stereo cassette player, automatic transmission, power seats and windows, and remote-control side mirrors. Others may believe that a Ford Taurus with a stick shift and an AM radio will do just fine. Both products are available to those who want them, along with a wide variety of other products that satisfy the need for transportation.

When firms lose sight of their customers' needs, they are likely to find the going rough. But when the businesses that produce and sell goods and services understand their customers' needs and work to satisfy those needs, they are usually successful.

In the course of normal operations, a business receives money (sales revenue) from its customers in exchange for goods or services. It must also pay out money to cover the various expenses involved in doing business. If the firm's sales revenue is greater than its expenses, it has earned a profit. So profit is what remains after all business expenses have been deducted from sales revenue. A negative profit, which results when a firm's expenses are greater than its sales revenue, is called a loss.

The profit earned by a business becomes the property of its owners. So in one sense profit is the return, or reward, that business owners receive for producing goods and services that consumers want.

Profit is also the payment that business owners receive for assuming the considerable risks of ownership. One of these is the risk of not being paid. Everyone else—employees, suppliers, and lenders—must be paid before the owners. And if there is nothing left over (if there is no profit), there can be no payments to owners. A second risk that owners run is the risk of losing whatever they have put into the business. A business that cannot earn a profit is very likely to fail, in which case the owners lose whatever money, effort, and time they have invested. For business owners, the challenge of business is to earn a profit in spite of these risks.

 

Verb collocations:

To run a business = to be in charge of a business (e.g. to run a hotel, to run a store)

To run a newspaper = to be the chief editor of a newspaper

To run a test = to do a test

To run a risk = to risk

To run a temperature = to have a temperature that is higher than normal.