Business Management Chapter 1 All businesses engage in 3 major activities: 1. Production – the making of a product or providing a service 2. Marketing – how goods or services are exchanged between producers and consumers 3. Finance – deals with all money matters related to running a business What we pay for something is based upon supply and demand Supply – the number of similar products that will be offered for sale at a particular time and at a particular price. Demand – the number of similar products that will be bought at a given time at a given price. 2 Types of Businesses: 1. industrial – these produce goods used by other businesses or organizations to make things. 2. commercial – engaged in marketing (wholesalers and retailers), in finance (banks and investment companies), and in furnishing services (medical offices, athletic centers, and motels) Changing Nature of Business Most businesses react quickly to change: Innovations: clothing used to be made from natural fibers; now scientists have invented synthetic fibers Computers: first there was only Apple; now there’s numerous types of computers Global Competition For years American businesses have led the way. Other countries bought everything from us. Over the last 30 years other countries have become more industrialized and have learned how to invent and produce better products for consumers. Now we buy from other countries. Achieving Effectiveness Business focus on making the right decisions about what products or services to offer customers and how to produce and deliver them. Firms today focus on gathering information from customers, studying their buying habits, testing new products with customers, and adding new features. Customers also want high-quality products. (ex. Buying foreign made cars) Achieving Efficiency Producing needed goods or services quickly and at a low cost. Efficiency is achieved in 3 ways: 1. Specialization of effort – hiring people specialized in a particular field/trade. 2. Better technology and innovation 3. Reorganization – letting employees make some decisions Chapter For 1 TEST Friday Study: Notes (from today) Your outline you created last week Vocabulary Study Guide Business Growth and Prosperity The first measure of a nation’s economic wealth is the gross domestic product (GDP). It’s the total market value of all goods and services produced in a country in a year. Income that escapes being recorded in the GDP is referred to as the underground economy. The The total GDP for the U.S. is around $10 trillion. second measure is individual well-being. (how financially stable we are) Entrepreneurship Businesses are growing because of people wanting to own their own business. Small businesses are booming because they are fairly cheap to start. Small Ex.: businesses have few employees. restaurants, gift shops, gas stations, bakeries, etc. Growth of Franchises One popular way to launch a small business is to start a franchise. The franchisee pays 3 to 8 percent of weekly sales to the franchisor. Franchises employ over eight million people and account for nearly half the retail store sales in the country. Risks of Ownership: The success of a business depends on the management. If a business is well managed, it has a better chance of earning money. All entrepreneurs face risk – competition from other businesses, changes in prices, changes in style, competition from new products, and changes that arise from economic conditions. Owner’s have Obligations: 1. To Customers 2. To Workers 3. To Management 4. To Competitors 5. To Investors 6. To the Public The Community also has an obligation to a local business to help it thrive. Intrapreneurship An intrapreneur is an employee who is given funds and freedom to create a special unit or department within a company in order to develop a new product, process, or service. Some of the largest corporations in the U.S. provide intrapreneurship opportunities. By so doing, valuable employees provide the company with innovative products and services. Employee stock ownership plan permits employees to buy stock within the company. ASSIGNMENT: Read Case Study 1-1 on page 26 and answer the questions. Read Case Study 1-2 on page 27 and answer the questions. One paper for the partnership, be sure to put both names on it. BOTH DUE AT THE END OF CLASS.