Business & Economics

• The business cycle is the fluctuation between periods of economic growth (expansion) and recession.
• The script has been written for students who are interested in the English WU bachelor study programme Business and Economics and want to take the entry exam.
• The content of this script has been taken from the book "Fuhrmann, Bettina: Introduction to Business and Economics".
• The aim of this book is to explain some basic concepts of business and economics and their interrelationships to those who are interested but have little previous knowledge of business matters and economic issues.
• Business studies and economics are comprehensive, multifaceted and interdisciplinary scientific fields, hence a short introduction can only cover selected topics.
• It is the intention of this short introduction to provide a solid basis on which to build more knowledge as well as to spark an enduring interest in business and economics and motivate readers to learn more.
• The textbook profits from feedback from other business teachers who are experts in their respective fields.
• The textbook has been dedicated to all young learners who should understand – the sooner the better – that they are all an active part of the economy and there is no opting out of economic decisions.
• Employees, managers, and owners are stakeholders in a business as they depend on the business for their livelihood and are affected by its activities.
• Suppliers are important to a business and its production as timely deliveries of good quality and the correct quantity of supplies needed for production are crucial.
• Customers are stakeholders in a business as they depend on the business for their livelihood and are affected by its activities.
• Businesses need to act responsibly with the environment and the natural resources that they use.
• Awareness of the market and changes in the market, awareness of costs and profitability are crucial factors in the success of a business.
• Legal structure and financial structure of the business are important factors in the success of a business.
• If a supplier fails, a business cannot produce its goods or services.
• Communities, including local, national, and international, are stakeholders in a business as they depend on the business for their livelihood and are affected by its activities.
• Environmental responsibility is a crucial factor in the success of a business as it impacts the company's image and its ability to attract new customers.
• Fixed costs of €130,000 / €240 contribution per item = 541.67 items that it takes to cover the fixed costs.
• Break-even point: The level of output a business needs to produce and sell to break even, i.e., to start making profits.
• Total costs: Fixed costs and variable costs are considered.
• Product development: A new product is introduced into the existing market.
• Market development: An existing product is put into an entirely new market.
• Price: The second P, “Price”, is crucial and difficult to determine.
• Fixed costs: The costs that remain the same regardless of the output produced.
• Diversification: A new product is introduced into a new market with unknown costs and unknown demand.
• Variable costs: Costs that increase directly as output rises.
• Low-risk strategy: The business knows the product and the market.
• Total costs: Variable costs plus fixed costs.
• Break-even point can be reached more easily by increasing prices and/or by reducing variable costs.
• Government agencies, trade and/or industry associations or other businesses often conduct research that is available free of charge and might also serve the purpose of learning more about the market.
• Competition-based pricing: Prices are set based on the prices charged by the competition.
• Secondary information is based on existing research that has already been done by someone else (and maybe for some other purpose).
• Demand-based pricing: Prices are set based on how much customers are willing to pay.
• A business will try to learn more about: who its current and potential customers are, what the customers do with the products, where the customers buy the products, when the customers buy the products, and why customers choose a product or prefer another product.
• Contribution per item: The contribution of €240/item will contribute to the total fixed costs of the business (€130,000) and the profit.
• Market size can be expressed as a value (e.g. in euros) or as a quantity (number of pieces sold).
• Selling price: The price at which a product is sold.
• Cost-based pricing: Prices are set on the basis of costs.
• Small businesses often cannot afford this sort of market research.
• Contribution: The difference between selling price and variable cost per item that contributes to covering fixed costs.