1 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. 1-3 Crocs focuses on core competencies p Market opportunities, timing, and circumstances 1-4 The Nature of Business What is a business? Wh ti b i ? Individuals or organizations trying to g y g earn a profit by providing products that satisfy people'ss needs. satisfy people needs 1-5 The Nature of Business What is a product? Wh ti d t? A good or service with tangible and g g intangible characteristics that provide satisfaction and benefits satisfaction and benefits 1-6 Products Tangible Goods & Services g Tangible Goods Services Automobile A t bil Computer L f fb d Loaf of bread Television Dry cleaning D l i Photo processing Ch k Checkup at doctor’s td t ’ Movie star performance 1-7 The Primary Goal of Business EEarn a Profit P fit The difference between what it costs to make and sell a product and what a customer pays for it customer pays for it. 1-8 The Primary Goal of Business PROFIT PROFIT ‐‐ The reward for the risks that businesses take in providing products. 1-9 Non‐Profit Organizations Not all organizations are businesses. Nonprofit organizations provide goods Nonprofit organizations provide goods and services but do not have the f ndamental p rpose of earning fundamental purpose of earning profits. 1-10 Maintaining Profitability Quality products Efficient operations Management skills •Planning •Organizing •Controlling •Leading Profitability Marketing Expertise Marketing Expertise •Products •Price •Promotion •Distribution Social responsibility p y Business ethics 1-11 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 and outcomes of a business are considered stakeholders. 1-12 Stakeholders & the Environment Environmentally Friendly Practices •Hewlett‐Packard •Cummins, Inc. C i I •Diversity Pipeline Alliance y p •Home Depot •U‐Haull 1-13 The People & Activities of Business The People & Activities of Business 1-14 The People & Activities of Business Management – Focus on employees Management – Focus on employees •Coordinating employee’s actions •Organizing people for efficiency •Organizing people for efficiency •Motivating employees toward business goals . 1-15 The People & Activities of Business Management – Production and Manufacturing Management – Production and Manufacturing •Plan activities •Organize staff •Organize staff •Control tasks . 1-16 The People & Activities of Business The People & Activities of Business Marketing – Focus on satisfying customers •Determine Determine what products customers want what products customers want •Plan and develop products •Determine distribution •Determine distribution •Determine place •Determine promotion 1-17 The People & Activities of Business The People & Activities of Business Marketing & Promotion •Advertising Personal selling selling •Personal •Sales promotion •Publicity P bli i 1-18 The People & Activities of Business The People & Activities of Business Finance – Primary responsibility of owners Finance Primary responsibility of owners •Obtaining money •Using money effectively Ui ff ti l •Accountants, stockbrokers, bankers 1-19 Why Study Business Why Study Business •Develop Skills for career success •Understand business activities d db i i ii •Importance of profitability po ta ce of p of tab ty •Individual businesses •Local and regional economic impact L l d i l i i t •Global economic impact 1-20 Why Study Business Why Study Business Business impact •Purchase raw materials P h i l •Hire employees •Attract capital Create products products •Create •Fuel the global economy •Contribute to society C t ib t t i t 1-21 The Economic Foundations of Business The Economic Foundations of Business Distribution of resources for the production of p goods and services within a social system. Resources ‐‐ Resources •Natural resources (land, forests, minerals, water) •Human resources (labor) H (l b ) •Financial resources (capital) 1-22 Factors of Production ‐‐ Natural, human, and financial resources used to produce goods and services ‐‐ 1-23 Economic Systems Economic Systems How a society distributes its resources to produce y p goods and services C t li Central issue of economics – f i •How to fulfill an unlimited demand for goods and services with a limited supply of resources 1-24 Economic Systems 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 yp q g / satisfy consumer needs? 2. How will goods/services be produced? By whom? g / p y With what resources? 3. How are goods/services distributed to consumers? g / 1-25 Comparison of Communism, Socialism, and Capitalism Comparison of Communism, Socialism, and Capitalism 1-26 Economic Systems Economic Systems Communism A society in which the people without regard to y p p g class, own all the nation’s resources. •China •North Korea •Cuba 1-27 Economic Systems Economic Systems Socialism System in which the government owns and operates basic industries but individuals own most businesses. •Sweden •India •Israel 1-28 Economic Systems Economic Systems Capitalism Free Enterprise – individuals own and operate majority of businesses providing goods and services fb i idi d d i •United States •Japan •Australia •Canada 1-29 Economic Systems 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) some extent (modified capitalism) 1-30 Economic Systems Economic Systems Mixed Economies No country practices pure capitalism or pure No country practices pure capitalism or pure socialism/communism. Economic systems contain various elements of government contain various elements of government intervention 1-31 Supply & Demand Supply & Demand Distribution of resources and products determined by supply and demand determined by supply and demand Demand ‐‐ number of goods/services consumers y g p p buy at given price at a specific time Supply ‐‐ number of products businesses will sell at different prices at a specific time 1-32 Forces of Supply & Demand 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 consumers are willing to buy at a specific time = equilibrium price 1-33 Nature of Competition Nature of Competition Rivalry among businesses for consumers’ dollars. dollars Pure competition – many small businesses in p same product market Monopolistic competition – small number of b i businesses little difference in products littl diff i d t Oligopoly– very few businesses selling a product 1-34 Economic Cycles and Productivity Economic Cycles and Productivity Expansion and Contraction Economic Expansion – economy is growing and p g y consumers are spending money Economic Contraction – spending declines, layoffs, economy slows down 1-35 Economic Cycles •Inflation– Inflation condition characterized by continuing condition characterized by continuing rise in prices •Recession– decline in production, employment, and income •Unemployment– % population wants to work but unable to find jobs but unable to find jobs •Depression– unemployment very high; consumer spending low; business output sharply reduced 1-36 Overall Unemployment Rate Overall Unemployment Rate U.S. Civilian Labor Force 1920 ‐ 2007 1-37 Measuring the Economy Measuring the Economy •Gross Gross Domestic Product (GDP) Domestic Product (GDP) 1-38 Evaluating Our Nation’ss Economy Evaluating Our Nation Economy 1-39 Entrepreneurship Risk, innovation, creativity, reward Bill Gates Michael Dell Michael Dell Frederick Smith Ben & Jerry’s Sam Walton Sam Walton 1-40 Ethics & Social Responsibility Ethics & Social Responsibility Business reputation depends on profit AND ethical conduct and responsibility ethical conduct and responsibility Enron MCI WorldCom MCI WorldCom Emission Standards Global Warming Going “Green” Going Green 1-41