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Business in a
Changing World
Chapter 1
The Dynamics of Business and
Economics
McGraw-Hill/Irwin
Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.
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Crocs focuses on core competencies
Market opportunities, timing, and
circumstances
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The Nature of Business
What is a business?
Individuals or organizations trying to
earn a profit by providing products that
satisfy people's needs.
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The Nature of Business
What is a product?
A good or service with tangible and
intangible characteristics that provide
satisfaction and benefits
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Products
Tangible Goods & Services
Tangible Goods
Services
Automobile
Computer
Loaf of bread
Television
Dry cleaning
Photo processing
Checkup at doctor’s
Movie star performance
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The Primary Goal of Business
Earn a Profit
The difference between what it costs
to make and sell a product and what a
customer pays for it.
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The Primary Goal of Business
PROFIT -The reward for the risks that
businesses take in providing products.
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Non-Profit Organizations
Not all organizations are businesses.
Nonprofit organizations provide goods
and services but do not have the
fundamental purpose of earning
profits.
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Maintaining Profitability
Quality products
Efficient operations
Management skills
•Planning
•Organizing
•Controlling
•Leading
Profitability
Marketing Expertise
•Products
•Price
•Promotion
•Distribution
Social responsibility
Business ethics
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Stakeholders
Customers, employees, investors, government regulators,
community and society. Those that have a stake in the success
and outcomes of a business are considered stakeholders.
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Stakeholders & the Environment
Environmentally Friendly Practices
•Hewlett-Packard
•Cummins, Inc.
•Diversity Pipeline Alliance
•Home Depot
•U-Haul
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The People & Activities of Business
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The People & Activities of Business
Management – Focus on employees
•Coordinating employee’s actions
•Organizing people for efficiency
•Motivating employees toward business goals
.
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The People & Activities of Business
Management – Production and Manufacturing
•Plan activities
•Organize staff
•Control tasks
.
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The People & Activities of Business
Marketing – Focus on satisfying customers
•Determine what products customers want
•Plan and develop products
•Determine distribution
•Determine place
•Determine promotion
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The People & Activities of Business
Marketing & Promotion
•Advertising
•Personal selling
•Sales promotion
•Publicity
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The People & Activities of Business
Finance – Primary responsibility of owners
•Obtaining money
•Using money effectively
•Accountants, stockbrokers, bankers
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Why Study Business
•Develop Skills for career success
•Understand business activities
•Importance of profitability
•Individual businesses
•Local and regional economic impact
•Global economic impact
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Why Study Business
Business impact
•Purchase raw materials
•Hire employees
•Attract capital
•Create products
•Fuel the global economy
•Contribute to society
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The Economic Foundations of Business
Distribution of resources for the production of
goods and services within a social system.
Resources -•Natural resources (land, forests, minerals, water)
•Human resources (labor)
•Financial resources (capital)
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Factors of Production -Natural, human, and financial resources used to produce
goods and services --
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Economic Systems
How a society distributes its resources to produce
goods and services
Central issue of economics –
•How to fulfill an unlimited demand for goods and
services with a limited supply of resources
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Economic Systems
How a society distributes its resources to produce
goods and services
Three Important questions –
1. What types and quantities of goods/services will
satisfy consumer needs?
2. How will goods/services be produced? By whom?
With what resources?
3. How are goods/services distributed to consumers?
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Comparison of Communism, Socialism, and Capitalism
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Economic Systems
Communism
A society in which the people without regard to
class, own all the nation’s resources.
•China
•North Korea
•Cuba
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Economic Systems
Socialism
System in which the government owns and operates
basic industries but individuals own most businesses.
•Sweden
•India
•Israel
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Economic Systems
Capitalism
Free Enterprise – individuals own and operate majority
of businesses providing goods and services
•United States
•Japan
•Australia
•Canada
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Economic Systems
Pure Capitalism
Modified Capitalism
Free Market -- All economic decisions made without
government intervention (pure capitalism)
Government intervenes and regulates business to
some extent (modified capitalism)
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Economic Systems
Mixed Economies
No country practices pure capitalism or pure
socialism/communism. Economic systems
contain various elements of government
intervention
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Supply & Demand
Distribution of resources and products
determined by supply and demand
Demand -- number of goods/services consumers
buy at given price at a specific time
Supply -- number of products businesses will sell
at different prices at a specific time
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Forces of Supply & Demand
Price at which number of products supplied equal amount of products
consumers are willing to buy at a specific time = equilibrium price
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Nature of Competition
Rivalry among businesses for consumers’
dollars.
Pure competition – many small businesses in
same product market
Monopolistic competition – small number of
businesses little difference in products
Oligopoly– very few businesses selling a product
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Economic Cycles and Productivity
Expansion and Contraction
Economic Expansion – economy is growing and
consumers are spending money
Economic Contraction – spending declines,
layoffs, economy slows down
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Economic Cycles
•Inflation– condition characterized by continuing
rise in prices
•Recession– decline in production, employment,
and income
•Unemployment– % population wants to work
but unable to find jobs
•Depression– unemployment very high;
consumer spending low; business output sharply
reduced
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Overall Unemployment Rate
U.S. Civilian Labor Force 1920 - 2007
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Measuring the Economy
•Gross Domestic Product (GDP)
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Evaluating Our Nation’s Economy
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Entrepreneurship
Risk, innovation, creativity,
reward
Bill Gates
Michael Dell
Frederick Smith
Ben & Jerry’s
Sam Walton
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Ethics & Social Responsibility
Business reputation depends on profit AND
ethical conduct and responsibility
Enron
MCI WorldCom
Emission Standards
Global Warming
Going “Green”
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