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