UNIT 1:
BUSINESS AND ITS ENVIRONMENT
Business and Its Environment
2

Part 1: Characteristics of Business

Part 2: Social and Ethical Environment of Business

Part 3: Economic Environment of Business

Part 4: International Environment of Business
Part 2: Social & Ethical Environment of
Business
3



Section 1: Human Resources
Section 2: Societal Values
Section 3: Ethical Issues
Human Resources
4
Objectives
 Describe the changing nature of the U.S.
population and how this impacts businesses.
 Explain the issues that businesses face with the
U.S. labor force
Human Resources
5

Terms
•Baby Boom
•Baby Bust
•Frost Belt
•Sun Belt
•Rust Belt
•Labor Force
•Labor Participation Rate
•Glass Ceiling
•Sticky Floor Syndrome
•Comparable Worth
Introduction
6

U.S. sits a top world’s economic, technical and political power


World’s largest economy
Sophisticated and modern




Production
Transportation
Communication
High Standard of Living
All of these achievements because of enormous resources this
country possess:




Ingenuity of its people
Democratic form of government
Social system that rewards individual initiative
Public polices that encourage innovation
Introduction (Cont.)
7

Problem still persist with regards to
Discrimination
 Crime and violence
 Environmental protection
 Ethical conduct and
 Social responsibility



Business is apart of total society, the positives and
negative of society affects business. Similarly businesses
affect society.
One cannot study business principles and management
without also having an understanding of the social
forces that shape business
Introduction (Cont.)
8


People are a firm’s most important resource
Recent study of top managers
 Found
that finding and retaining qualified workers was
more important than
 Finance
 Technology
 Product
Innovation
 International Business

Workers help achieve the goals set by the company
Introduction (Cont.)
9


The challenges faced by a business are closely
related to those experienced by the workers.
In particular, such issues as those caused by changes
in population and lifestyles have a direct bearing
on business operations and on the well-being of the
nation.
Population
10

GDP cannot increase unless there are enough people to
provide the necessary labor and to purchase the good and
services produced.


GDP of a country must grow faster than the population



Population stats help companies predict what kinds and how
much good and services to produce
This shows an improvement in the living standard
Information about size and character tics of the population
are important to business planning.
Information can be obtained from the U.S. Census Bureau

www.census.gov
Growing Population
11

U.S. has grown steadily over the years
 Determined
by the birth rate, death rate, and
immigration into the country
 Because of better health care and improved public
health systems people are living longer
 Also annually American accepts more legal immigrants
than any other country.
 Also,
many immigrants enter the U.S. illegally to seek a
better life

What % of US population will be Hispanic by
2050?
Population
12
Population in Millions
350
300
250
200
Population in Millions
150
100
50
0
1
2
3
4
5
6
7
8
9
Changing Population
13


Currently, more than 80% of Americans can be
racially classified as Caucasian
With higher birth rates among Hispanic and African
Americans, and recent immigration, their proportions
in the population have been growing
Changing Population
14

What does this change in population groups mean
to the work force or business?
Changing Population
15

Changes in the birth rate have caused shifts in the
number of people in different age groups.

Baby Boom – Extremely higher birth rate during

1945-1965. There is a higher % of people in the
population that are 42-62 years of age.
Then there was a low birth-rate period that
followed the boom period. This is called the Baby
Bust period.
Changing Population
16


The Baby Bust period has created a shortage of
young workers, called “busters”
This shortage will drastically increase when the
boomers retire in large numbers
Changing Population
17

For businesses to be successful:
 Offer
goods and services needed by people of
different ages and racial groups

What are some examples?
Moving Population
18



On average, every year, 1 out of 5 Americans
changes his/her address
People will move short distances, often from cities to
suburbs
Or can move long distances from the Frost Belt to
the Sun Belt
Frost Belt – The colder northern half of the country
 Sun Belt – The warmer southern half of the nation

Moving Population
19


As businesses relocate, so do people to find or even
keep a job
Many factory jobs have relocated to southeastern
states, where wage rates are lower than in the Rust
Belt
 Rust Belt – The north central and northeastern states
where the major manufacturing firms once dominated
Moving Population
20

The moving from city to suburbs, north to south, has
caused many unintended consequences
 Cities
lose the financial ability to provide high-quality
services
 As a result, poverty and crime have increased in large
cities

When companies move from the Rust Belt, they
leave behind unemployed workers, closed factories,
decaying towns, and homeless people
 CHECKPOINT
21
1. What factors are influencing shifts in the U.S.
population?
Labor Force
22

As the population grows so does the labor force

Labor Force – includes most people aged 16 or
over who are available for work, whether
employed or unemployed
 Many
people that are considered in the labor force,
but are not actively seeking employment, such as
students and full-time homemakers.
Labor Force (Cont.)
23

Bureau of Labor Statistics reports
 140
Million in Labor Force

Labor Participation Rate – the percentage of the

adult population that is in the labor force.
In the last three decades the Labor Participation
Rate has rose considerably, why?
Labor Force (Cont.)
24


1976 – 46% of women worked outside the home
2005 – 60%
 Choosing
not to marry
 Delaying marriage
 Marry and pursue career before or while having
children.
Labor Force (Cont.)
25


The growth of the economy, changes in population
and where people live, and technological advances
have created a variety of new jobs.
Creating new jobs is a great strength of the
American economy
 Most
are in the service industry
 Computer
programming
 Banking and insurance
 Leisure
 Food services and
 Health care
Labor Force (Cont.)
26



Computer have created large numbers of technical jobs
– applications and programming
Innovation with internet affect the ways businesses now
operate – communication to sales
Rapid growth in computer industry has led to a shortage
of qualified workers, in turn, has led to high wages for
those with the necessary education and skills
Labor Force
27



Many new jobs require more skills, which means
workers have to be educated
Some jobs require little training and no education,
therefore pay low wages
Some jobs have been completely eliminated
because they can be automated
Labor Force (Cont.)
28


For various reasons, including lack of financial
resources, public schools in many areas are failing
to provide the quality of education historically
expected of high school graduates. High school
graduates are particularly deficient in math,
computer, social, and communication skills.
Businesses sometimes have to provide remedial
education in basic skills for newly hired workers.
FACTS & figures
29

1966
 Women
earned $0.58 for every dollar a man earned
for similar work


Has risen a half penny each year since then
2004
 Women
earned $0.765 for every dollar a man earned
for similar work

Nearly every year the difference in earnings
narrows somewhat
Poverty
30


Prosperity in America is not shared equally
12-15% of the population in any given year live in
poverty
 Poorly
housed
 Clothed
 Fed
Poverty
31



Richest 20% have continued to earn money over the
last 30 years
The income of the lowest 20% has remained about
the same
Thus, the gap between the rich and poor is
widening
Poverty
32

Elderly have been helped by
 Social


Security
Many children still live in poverty because they
reside in households where one or more parents do
not have the education and skills to hold highpaying jobs.
“THE STRONGEST INFLUENCE ON INCRESED
INCOME IS INCREASED EDUCATION” – “Business
Principles and Management Pg. 34
Equal Employment
33



Equality for all is one of the basic principles on which the
U.S. was founded
Some groups still find it difficult to have equal employment
Laws have been passed to outlaw discrimination on the basis
of








Race
Gender
National Origin
Color
Religion
Age
Handicap and
Other characteristics
Equal Employment
34


Some groups, predominantly women and racial
minorities, find it difficult to advance
Glass Ceiling – Even when these groups find jobs,
people in these groups may encounter difficulties in
being promoted above a certain level
 An
invisible barrier to job advancement
Equal Employment
35

Many women and members of racial minority groups
are employed in entry level jobs




With little hope for advancement
These are low paying jobs requiring little skill and
education
The inability of these workers to move up from these
jobs is referred to as the sticky floor syndrome
Higher education and redesigning the jobs offer
the best opportunities for workers to escape
from this predicament
Comparable Worth
36
Studies show that men tend to earn more than
women do.
 But men and woman also tend to hold different
types of jobs that pay differently
 But what happens when the jobs are not the same
but require similar levels of training and
responsibility?
 Comparable worth means paying workers
equally for jobs with similar buy not identical job
requirements.

Comparable Worth
37



Also called “Equal pay for comparable work”
The jobs compared maybe drastically different
For example, Legal Secretary and Carpenter
 If
it can be determined that these two jobs require the
same education and amount of training, the pay scale
should be the same for the two jobs
Comparable Worth
38

To determine whether work is of equal value
analysts compare factors such as
 Special
skills
 Physical strength
 Job dangers
 Responsibility and
 Education
Comparable Worth
39

It is not easy to determine the specific factors that
measure the worth of jobs
 Should
physical strength, for instance, be used to
compare the worth of a legal secretary to a carpenter
 If few applicants are available for the carpenter’s
position and many are available for legal secretaries,
is it fair to pay legal secretaries more than carpenters?
Comparable Worth
40


It is very difficult for employers to design and
implement comparable worth plans
States have passed laws that promote using
comparable worth for determining wages in
government jobs
 CHECKPOINT
41
2. List the factors influencing the U.S. Labor Force.
Review Assessment
42
3. The U.S. labor force includes
People aged 16 and over who are available for work
b) Employed people aged 16 and over
c)
Unemployed people aged 16 and over
d) All of the above
4. When people encounter difficulties in being promoted to
management about a certain level they have encountered
a)
a)
b)
c)
d)
A glass ceiling
A promotion ceiling
A sticky floor
A legal barrier
Review Assessment
43
5. What factors are contributing to the growth of the
U.S. population?
6. What has caused the decline in the number of
young workers in recent years?
Part 2: Social & Ethical Environment of
Business
44



Section 1: Human Resources
Section 2: Societal Values
Section 3: Ethical Issues
Societal Values
45
Objectives
 Discuss how the values of Americans have
changed
 Explain how businesses have adapted to
changing values
 Describe the dilemma posed by the need for
business to grow and the need to protect the
natural environment.
Societal Values
46

Terms
•Generation X
•Net Generation
•Telecommute
•Recycling
Societal Values Introduction
47

Change is constant in our society
 New
Products
 New Ideas
 New ways of doing things
 New attitudes

In recent decades, societal values have been
undergoing change at a fast pace
Changing American Values
48

Major change in American families today?
#
of children living with both parents continues to
decline
 Rising

divorce rate and single mothers
Birth rate has declined
 Women
delay marriage
 Pursue careers outside the home
Changing American Values
49



Traditional definition “Family” consisting of working
husband, a homemaker wife, two kids, and a dog is
now the exception.
Fewer than 25% of families today fit this
description
Often both parents work to support the family, as
must single parents
Changing American Values
50



Because of increased competition in the economy,
businesses are striving to produce more while
keeping costs low.
Employers have increased their demands on
employees, making it very stressful
For dual career households, especially those with
children, the quality of home life often suffers.
Changing American Values
51



Job insecurity discourages workers from taking
vacations or time off
Instead they work longer hours to meet their job
requirements
Factors such as these have strained the employeeemployer relationship
Changing American Values
52

Generation X – workers from the post-baby-boom
generation
 Feel
less loyal to a particular employer than did earlier
generations
 They expect to change jobs many times during their
working career
 As do people from the Net Generation

Net Generation – those born between 1977 and
1997
Changing American Values
53

Competent women who were stopped by the glass
ceiling, often quit their jobs to start their own
business
 Woman
now operate a majority of new small
businesses
Changing American Values
54

With men and women working side-by-side
 Workplace
romance has increased
 So has sexual harassment cases

With parent(s) working, dining in has been replaced
with dining out.
 American
consumers spend more on restaurant meals
than on groceries
Changing American Values
55


Disturbing increase in unpredictable and
unprovoked violence through the use of guns, often
by young people
Workplaces, schools, churches, and transportation
systems are all possible places for random gunfire
killing and injuring innocent people
 Has
led to expanding personal-security business in the
form of personal and home protective gadgets, guns,
guards, gated communities, and prison construction.
Changing American Values
56



U.S. also is labeled as being lawsuit happy.
Individuals, groups, and organizations are quick to
file lawsuits
Lawsuits can be very expensive
 Businesses
try to be very careful with respect to the
safety of their products and the impact of their
operations on employees, customers, and the overall
society.
Employer Responses
57



A changing society affects individuals as well as
organizations
When individuals are distracted by problems in
their personal lives, this may affect their job
performance
To attract and retain competent workers, employers
have taken action to improve the way work is done,
to assure healthier and safer working conditions,
and to help workers deal with some personal
problems
Redesigning Jobs
58

Repetitive jobs tend to bored employees resulting in
 Productivity
drops, low morale, late to work, call in sick,
or even quitting to find a more excite work


Companies are redesigning jobs to make them
varied and challenging
Some organizations employees learn a variety of
jobs and regularly switch jobs within the same
organization
 Increases
worker’s interest
 Enables employees to fill in for coworkers who may be
absent
Redesigning Jobs
59


Workers now often participate in job decisions.,
provide suggestions, and serve on committees that
look for ways to improve work quality
Often work in teams
 Can

improve morale and quality of work
Businesses also try to improve job satisfaction
through empowering workers to make important
decisions
Improving Health and Safety
60



U.S. is facing an obesity epidemic that is negatively
affecting employees’ health
Businesses are starting to operate wellness and
fitness programs
Why??
Improving Health and Safety
61


A physically unfit employee is absent more and is
less productive than a fit employee
Businesses are starting to provide
 Incentives
to smokers to quit
 Memberships to health clubs
 Counseling services for stress or emotional problems
 Payment for treatment of drug, alcohol and other
addiction

Employers thereby reduce medical and insurance
costs
Family-Friendly Practices
62



Employers are working to help with changes in
employees’ family life
By law, employers provide unpaid leave to
employees to take care of their sick children or
parents, or to give birth to, adopt, or take care of
newborn children
Some companies will even provide on site day-care
or pay for day-care
Family Friendly Practices
63

Some employers provide flexible working schedules
to accommodate family
Advances in communication technology in the form
of Internet, e-mail, mobile phones, and fax have led
many businesses to allow workers to telecommute.

Telecommuters work from home or on the road,

staying in contact with their employers electronically
 CHECKPOINT
64
7. Describe how employers are reacting to changing
societal issues.
Natural Resource Issues
65


With a growing population, mean there is more
waste and garbage
Also, the increasing demand for products places
great pressure on natural resources, such as land,
water, air, minerals, and forests.
 Affects
habitats of wild animals and lives of native
people

Both business and society have to address these
resource issues
Managing the Environment
66

Preserving the natural environment and properly
disposing of consumer and industrial waste have
become major concerns in our society.
 We
have shifted our focus to reducing the growth of
waste and to recycling

Recycling – reusing products and packaging
whenever possible
Managing the Environment
67

Trying to limit our use of nonrenewable resources
 Oil,

natural gas, and iron ore
At the same time, tying to use more renewable
resources
 Electricity
wind
generated from the sun, from water, and from
Managing the Environment
68

Pollution-control goals work against Energy
conservation goals
 Example:
 There
is an abundance of coal which pollutes worse
than Natural Gas, which is in short supply.

Some companies have to decide which is better of
the two evils
Managing the Environment
69


Pollution dangers have become more and more
apparent
Major cities can be covered in smog from industries
and vehicles
 Residents

suffer from breathing problems
Some rivers and waterways have had chemical
contaminants that have killed fish and wild life
 In
some places has even entered the food chain
Controlling Environmental Pollution
70

Government and businesses have had to tighten
pollution standards
 Government
created Environmental Protection Agency
(EPA) in 1974 to help control and reduce pollution in the
basic areas of air, water, solid waste, pesticides, noise,
and radiation.
Controlling Environmental Pollution
71

EPA Enforces:
 Clean
Air Act
 Clean Water Act
 Resource Recovery Act
 Federal Water Pollution Control Act
 Federal Environmental Pesticide Control Act
 Noise Control Act
 Resource Conservation and Recovery Act

Laws have been passed to require engines to be
both fuel-efficient and less polluting
Controlling Environmental Pollution
72

In the aftermath of Exxon Valdez accident


Large oil spill along coast of Alaska in 1989
Environmentalists and Socially minded groups formed
Coalition of Environmentally Responsible Economies to
encourage companies to behave responsibly
Created 10 environmental guidelines, named CERES
Principles
 Asked companies to voluntarily follow guidelines, there is no
law holding companies to them


Sun Oil Company (Sunoco) was the first to promise
CERES Principles
73
1.
2.
3.
4.
5.
Protect the environment from the release of pollutants,
especially hazardous substances that may damage the
environment
Conserve nonrenewable natural resources through efficient
use and careful planning
Minimize the creation of waste, especially hazardous waste,
and dispose of such material in a safe, responsible manner
Make every effort to use environmentally safe and
sustainable energy sources to meet organizational needs.
Reduce environmental, health, and safety risks to employees
and surrounding communities
CERES Principles (Cont.)
74
6.
7.
8.
9.
10.
Sell products that cause as little damage to the environment as possible
and are safe to use
Accept responsibility for any harm the company causes to the
environment, correct damages made to the environment, and compensate
injured parties
Keep the public informed of incidents relating to operations that harm the
environment or pose health or safety hazards.
Appoint one person to represent environmental interests to serve on the
highest-level decision-making committee that represents owner interests
Produce and publicize a yearly self-evaluation of progress toward
implementing these principles and meeting all applicable laws
worldwide.
www.ceres.org
 CHECKPOINT
75
8. List natural resources issues impacting businesses
and describe how these businesses are reacting to
them.
Review Assessment
76
9. Which of the following is not true for the Net
Generation?
They expect to change jobs many times during their
careers
b) They were born between 1977-1997
c)
They are the post-baby-boom generation
d) They feel less loyal to a particular employer
10. Pollution can, in part, be controlled through
a)
a)
b)
c)
d)
Recycling
EPA Regulations
Following CERES Principles
All of the Above
Review Assessment
77
11. Identify a list of employer practices that have
enhanced the quality of work life for employees.
12. Give at least two examples of how environmental
goals can be at odds with energy conservation
goals.
Part 2: Social & Ethical Environment of
Business
78



Section 1: Human Resources
Section 2: Societal Values
Section 3: Ethical Issues
Section 3: Ethical Issues
79
Objectives
 Describe how ethics relates to business practice
 Suggest ways in which businesses can be
socially responsible
Section 3: Ethical Issues
80

Terms
•Ethics
•Business Ethics
•Code of Ethics
•Social Responsibility
•Stakeholders
•Nongovernmental
organizations (NGOs)
Ethical Issues Introduction
81


Laws provide a minimum standard for behavior for
people and businesses to follow
Many behaviors are neither allowed nor disallowed
by law

What determines some of these behaviors is Ethics

Ethics – refers to standards of moral conduct that
individuals and groups set for themselves, defining
what behavior they value as right or wrong
Ethical Issues Introduction
82

Ethical behavior is closely linked to personal values
 Underlying
beliefs and attitudes that individuals or
groups possess

To determine if something is ethical
 Must
ask, “Is the action right or is it wrong, regardless
of what the laws state?”

Ethical conduct goes beyond state and federal laws
Business Ethics
83

A collection of principles and rules that define right
and wrong conduct for an organization is called
Business Ethics
 Not all businesses have the same rules of
ethical behavior


What is viewed as right and wrong vary from manager to
manager, business to business, and country to country
If the conduct is viewed favorable to the largest
number of people, it is considered ethically desirable
Business Ethics
84

Some companies even hire Chief Ethics Officers
 Their
job is to ensure that workers are trained in how to
comply with a company's ethics policies

Some companies have created Code of Ethics

Code of Ethics – is a formal, published collection

of values and rules that reflect the firm’s philosophy
and goals
Having such a code removes or reduces opportunities
for unethical conduct
Business Ethics
85

Some issues Code of Ethics may deal with:
 Accepting
Business gifts
 Respecting employee privacy
 Using company property for personal use
 Maintaining confidentiality
 Business
confidentiality means keeping sensitive company
information secret
Business Ethics
86




Ethic Codes are communicated through memos,
newsletters, posters, and employee manuals
Organizations establish procedures for when the
code(s) are violated
To be effective, must be supported throughout the
whole organization. Top-Level managers, down.
Codes are ineffective if they are not enforced
Ethical Dilemmas
87



Philosophers have debated the issue of right and
wrong for centuries
“What is the value or worth of a specific behavior
for society as a whole?”
The best behavior is that which does the most good
for the most people
Ethical Dilemmas
88




Should a lumber company cut down a forest if doing so
would endanger a rare species of bird?
Should old drilling be permitted off a coast, thus
destroying its natural beauty?
Should a business hire a woman to win support from
women’s groups?
How businesses handle these issues determines whether
they are acting in an ethical manner

Notions of what is right and wrong change over time,
Answer are often not clear-cut
Ethical Dilemmas
89

Values also differ between countries
 Sometimes
problems arise for firms involved in
international business


Business may have to decide between the ethical
practices of the other country and of their home
country
Example - Japan
 CHECKPOINT
90
13. Describe why ethics is important to a business.
Social Responsibility of Business
91

A question often raised: “What is business’s
responsibility to help solve society’s problems?”
 This
is not simple
 Profit
motive of a business often collides with what is good for
society
 Example:
Should businesses accept lower profit, for
instance, in order to keep jobs in a declining community?
 The business is put on the spot to decide for themselves
what is right and wrong
Social Responsibility of Business
92


The primary goal of business is to……..
Even though is this a main goal in business today,
another business goal is also emphasized – Social
Responsibility
 Social Responsibility – refers to the duty of a
business to contribute to the well-being of society
Social Responsibility of Business
93

A business depends on society for
 Resources
 Opportunities
 Rights

Therefore, they have an obligation to the
communities in which they operate
Social Responsibility of Business
94


A large of the society to a business are the
stakeholders
Stakeholders – are any individuals or groups that
are affected by the firm’s actions
 Owners,
Customers, suppliers, employees, creditors,
government, and the public

They expect a business to be responsible and
responsive to their interests
Social Responsibility of Business
95



Being responsible and responsive to stakeholders
can mean a variety of different things depending
on the organization
Stakeholders usually believe that a business has the
resources to contribute to a community’s well-being
Good deeds normally transfer into favorable
publicity, which in turn means for sales and profit
Social Responsibility of Business
96

“The business of business is business”
 Milton
 Two

Friedman – Renowned economist
sided coin – Explain??
Questions are also raised about the ability of a
business to solve social problems
 Does
a manager know how to solve drug abuse?
 Should a business be responsible for promoting a
sporting event in the community
Social Responsibility of Business
97

No matter the answers to these questions
 It
is now widely recognized that business has an
important responsibility to its stakeholders

Also recognized that by getting involved socially,
the business advances its own interests
Social Responsibility of Business
98

Some businesses review their social programs
regularly
 The
review shows
 what
the business is doing to fulfill its social responsibilities
 Its success in accomplishing its goals
 And plans for pursuing future activities
Social Responsibility of Business
99

Along with stakeholders, the conduct of businesses is
being increasingly and closely examined by various
independent groups known as nongovernmental
organizations (NGOs)
 These
groups may specialize in particular issues
 Workplace
discrimination
 Environmental protection

NGOs influence businesses through lobbying,
publicity, and pressure tactics to alter their activities.
The Future
100

Given the fast face of change today, society and
business will face different issues in the future
 It
is difficult to predict the future, but trends provide
hints of what may be in store in the years to come


As discussed earlier, the racial and ethical mix of
the labor force will continue to change
Computers continue to change the way businesses
operate
The Future
101

Businesses are becoming more and more involved in
providing social services to the community
 In
the past have been the responsibility of families,
government, or individual


More conscious of the environment and human rights
issues
As societal values change, each business will
continue to shape and be shaped by the society in
which it operates
102
14. List the reasons that a business needs to be
concerned about social responsibility issues.
103
15. Which of the following is not related to the concept of
ethics?
Ethics refers to standards of moral conduct
b)
Ethical behavior is closely linked to personal values
c)
Ethics always shows what is right and what is wrong
d)
Ethics helps define what behavior is seen as right and wrong
16. The duty of a business to contribute to the well-being of society is
called
a)
Business ethics
b)
Social responsibility
c)
Constituency analysis
d)
Business responsibility
a)
104
17. Because businesses are established for making
profits, the only way to ensure that they behave
ethically is to have strong laws that require them
to do so. Do you agree with this statement? Justify
your answer.
18. Explain how a business can ensure that its code of
ethics will be effective.