14/9/2013
INTRODUCTION TO BUSINESS
CHAPTER 2:
EVOLUTION OF BUSINESS
Page 38
Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
Book – Introduction to Business – Gareth R. Jones WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
From barter (exchanging products) to money (coins) to capital (loans, interest rate)
From Feudalism (Aristocracy) to Mercantilism (trade across countries) and enterprise (craftspeople)
Technological progress led to the next major change in the business system. The INDUSTRIAL REVOLUTION (about 1850).
Major change in production and trade because of change in technology.
New and improved methods of planting and harvesting crops, breeding and rearing animals and fertilizing the land
The weaving going from handloom to steam powered. The steam engine also led to the development of steam trains and railways that speeded communication and travel and helped trading within a country or across borders. to Capitalism (people own resources and use them to engage in production, trade and the distribution of goods and services). Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
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WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
PROPERTY RIGHTS are the claims by people to own, use and sell the rights to valuable resources. Land had always been the most secure resource, hence the term PROPERTY RIGHTS implying control over land. Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
Book – Introduction to Business – Gareth R. Jones WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
ARISTOCRACY: In the past, monarchs, who were the largest landowners in a country, granted their most powerful supporters the rights to control (but not own) large land estates. Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
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WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
FEUDALISM: The business of economic system in which one class of people (aristocrats) control the rights to all valuable resources, including people, is known as FEUDALISM.
Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
Book – Introduction to Business – Gareth R. Jones WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
MONEY, CAPITAL AND COMMERCE
From Barter to Money:
Barter: e.g. 1 cow for 5 sheep or 10 sacks of corn for 1 cow
People started using money to overcome problems. Forces of supply and demand decide the price of goods.
Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
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WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
MONEY, CAPITAL AND COMMERCE
From Money to Capital:
Land and labor used to be the only important form of capital.
Then money also became an important form of capital.
Money could also be loaned to increase the owner’s future wealth. When capital is available in the form of money and not just in land or labor, it is much easier to borrow it to prospective borrowers.
INTEREST RATE is the price at which the capital will be loaned. A CAPITAL MARKET then emerges. Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
Book – Introduction to Business – Gareth R. Jones WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
MERCANTILISM (εμπορευματοποίηση) : TRADE AND ENTERPRISE
MERCANTILISM is the business system in which products are traded across markets and countries until they are put to their most highly value.
Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
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WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
THE GROWTH OF ENTERPRISE:
Craft Guilds and Occupational Specialization:
In every country, a skilled class of ARITSANS or CRAFTSPEOPLE existed.
Craftspeople, wanted to protect their property by binding together into CRAFT GUILDS. Guilds of goldsmiths, silversmiths, metal workers etc.
Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
Book – Introduction to Business – Gareth R. Jones WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
The INDUSTRIAL REVOLUTION (about 1850).
Major change in production and trade because of change in technology.
New and improved methods of planting and harvesting crops, breeding and rearing animals and fertilizing the land.
The weaving going from handloom to steam powered. The steam engine led to the development of steam trains and railways that speeded communication and travel and helped trading within a country or across borders. Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
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WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
THE INDUSTRIAL REVOLUTION:
Capitalism, Unionization and the Modern Class System:
In most industrialized countries, the industrial revolution also led to the development of modern class system.
Upper class: owners of capital (industrialists, merchants, bankers, lawyers ).
Upper Middle class: successful small business owners (doctors, entrepreneurs)
Lower Middle class: People who managed to get education, training, enterprise and then managed to own their own house or make an investment for a secure future.
Working class: workers who owned only their own labor.
Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
Book – Introduction to Business – Gareth R. Jones WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
THE INDUSTRIAL REVOLUTION:
Capitalism, Unionization and the Modern Class System:
CAPITALISM: is the economic, business and political system that allows the people to own resources and use them to engage in production, trade and the distribution of goods and services. Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
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WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
THE INDUSTRIAL REVOLUTION:
Capitalism, Unionization and the Modern Class System:
Women and children as young as 6 years old were employed because they were cheaper labor. The response of workers to these conditions was to band together in TRADE UNIONS. A trade union is a business organization that negotiates on behalf of its members to increase their wages and working conditions. Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
Book – Introduction to Business – Gareth R. Jones WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
THE CHANGING FORMS OF BUSINESS ORGANIZATION:
The joint stock Company:
One of the problems in mercantilsm was to attract investors because of the risk (e.g. the ship might sink). To overcome this problem, people invented a form o business organization known as the joint‐stock company. An entrepreneur raises capital by issuing stock certificates of ownership.
Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
Book – Introduction to Business – Gareth R. Jones 7
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WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
THE CHANGING FORMS OF BUSINESS ORGANIZATION:
The limited liability Company: If the company goes bankrupt, its suppliers can not seek the personal wealth of the stockholders but only the money that the stock holders initially invested. Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
Book – Introduction to Business – Gareth R. Jones WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
THE CHANGING FORMS OF BUSINESS ORGANIZATION:
The partnership : Professionals such as bankers, merchants, doctors, lawyers and accountants agree to pool their talent and resources to establish a company in which they are the only stockholders and owners. Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
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WEEK 2 :EVOLUTION OF BUSINESS
(chapter 2)
THE CHANGING FORMS OF BUSINESS ORGANIZATION:
Companies or partnerships can go public. This means that the shares can be sold to outside investors. A sole proprietorship: The business has no existence apart form its sole owner and its liabilities are the owners personal liabilities. The owner takes all the financial risks or income. Frequently, skilled people like dentists, lawyers or plumbers choose this route. Athina Kyriakidou Christofidou – Lecturer– Introduction to Business
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