Monday afternoon
Evolution of Business, Globalization,
Ethics, Entrepreneurship, and Forms
of Business Ownership
The Name Game
• Name Game for Tuesday - Your assignment is to
position your name (first, last, both, nickname—
whatever) in our mind in such a way that we
remember it by the end of class tomorrow (and if
you’re really good—the rest of the
summer!). You will have 60 seconds to
accomplish your goal. You do not need to turn in
anything written, but you do need to use some
sort of prop that will help us remember
you. Remember, there are 40 (or so) other
students competing for space in our minds, so be
creative.
How to Read the WSJ
• First Section
– Front Page
• First two columns
• Bottom center story
• Marketplace
– Page 2 index
– Steve Wynn
– Last page is usually Sports
• The Count
• Money & Investing
• Personal Journal
– On Mondays, there is no Personal Journal, just a special section
– Tuesday is Health and Fitness
– Friday is the Weekend Jounral
Important Reminder
• Snack today at 2:30!
Today’s Dynamic Business Environment
VSB Strategy (page 5, item 2)
• Innovate delivery to effectively prepare
ethical, creative leaders with strength in
technology-enabled analytics and
decision‐making for a complex global
economy.
• The four words highlighted above are the four
pillars of our approach to business education
The EVOLUTION of BUSINESS
The Evolution of
U.S. Business
LG8
Agriculture Era
Manufacturing Era
Service Era
Information-Based Era
The AGRICULTURAL ERA
•
In the 1800s, the
agricultural industry led
economic development.
•
Technology, like the
harvester and cotton gin,
changed the farming
industry making it more
efficient.
•
This led to fewer farmers
with larger farms.
The MANUFACTURING ERA
LG8
•
•
Industrialization in the 19th and 20th centuries,
moved jobs from farms to factories.
As technology improved productivity, fewer
workers were needed in factories.
The SERVICE ERA
LG8
• Services make up more 70% of the U.S. economy.
• Since the mid-1980s, the service industry
generated almost all the increases in employment.
• More high-paying jobs in service than goodsproducing industries.
The INFORMATION
TECHNOLOGY ERA
•
Information technology will affect all sectors of
the economy:
- Agricultural
- Industrial
- Service
Demographics
• Population shifts are creating opportunities for some
and limiting others. (e.g., aging population)
• Diversity has grown from just recruiting minority and
female workers.
• Growth of single-parent households have encouraged
businesses to implement programs such as family
leave and flextime.
Globalization
1. Growth of global competition
2. Increase of free trade among nations
3. More efficient distribution systems and
communication advances.
4. China’s GDP passes Japan
5. Sustainability
– Many companies are shifting their practices to save energy
and produce products that cause less harm to the
environment. This process is called greening.
6. Thomas Friedman video – outstanding!!
GDP: BRIC Countries vs. US (2008)
WSJ Article 09/08/2010
• Divided by Two-Track Economy
– Companies with a large portion of their revenue
abroad are expected to fare better than those
dependent on the US economy
• Exxon, Intel, HP, Coke, McD’s versus
• Home Depot, AT&T, Travelers, BofA, Verizon
• We’re Number 1(1)!
Importing and Exporting
• Importing -- Buying products from another country.
• Exporting -- Selling products to another country.
• The U.S. is the largest importing and the third
largest exporting nation in the world.
• What countries do you think are the two biggest
exporters?
– Exports
– Imports
Comparative and Absolute Advantage
•
Comparative Advantage -- A country should sell the products it produces most efficiently
and buy from other countries the products it cannot produce as efficiently.
•
Absolute Advantage -- A country has a monopoly on producing a specific product or is
able to produce it more efficiently than all other countries.
•
“To produce the wine in Portugal, might require only the labour of 80 men for one year, and to
produce the cloth in the same country, might require the labour of 90 men for the same time. It
would therefore be advantageous for her to export wine in exchange for cloth. This exchange
might even take place, notwithstanding that the commodity imported by Portugal could be
produced there with less labour than in England. Though she could make the cloth with the labour
of 90 men, she would import it from a country where it required the labour of 100 men to produce
it, because it would be advantageous to her rather to employ her capital in the production of wine,
for which she would obtain more cloth from England, than she could produce by diverting a
portion of her capital from the cultivation of vines to the manufacture of cloth.” Ricardo, 1821
•
Suppose that in a particular city the best lawyer happens also to be the best secretary, that is he
would be the most productive lawyer and he would also be the best secretary in town. However, if
this lawyer focused on the task of being a lawyer and, instead of pursuing both occupations at
once, employed a secretary, both the output of the lawyer and the secretary would increase, as it
is more difficult to be a lawyer than a secretary.
Outsourcing
• Outsourcing -- Purchasing goods and services from
sources outside a firm rather than providing them
within the company.
• U.S. firms have outsourced payroll functions,
accounting, and manufacturing for years.
• With the growth of global markets, companies have
been shifting to offshore outsourcing – outsourcing
with other countries.
Ethics
• Ethics -- The standards of moral
behavior; behaviors that are accepted by
society as right versus wrong.
STAKEHOLDERS
• Stakeholders -- All the people who stand to gain
or lose by the policies and activities of a business
and whose concerns the businesses need to
address.
• Who are Stakeholders?
-
-
Customers
Employees
Stockholders
Suppliers
Dealers
Community Members
- Media
- Elected Officials
- Environmentalists
-
Ethical Failures in Business
• Enron: One executive is serving a 24 year sentence for accounting
fraud while another will be released in October 2011.
• Arthur Andersen: Convicted of tampering with witnesses, the
company was dissolved and about 28,000 people lost their jobs.
• Tyco International: Two executives stole $600 million from the
company and are scheduled to be released from prison in 2030.
• Adelphia Communication: Two executives were convicted of
conspiracy, bank and securities fraud and given sentences of 15 and
20 years.
• WorldCom: Former CEO was convicted of fraud, conspiracy and
false filings and sentenced to 25 years.
Ethics Starts at the Top
• Trust between workers and managers must be
based on fairness, honesty, openness, and moral
integrity.
• Leadership can help instill corporate values in
employees.
– American Eagle values
Factors Influencing Managerial Ethics
Individual
•
•
•
•
Values
Work Background
Family Status
Personality
Organizational
• Top Level
Management
Philosophy
• Firm’s Reward
System
• Job Dimensions
Environmental
• Competition
• Economic
Conditions
• Social/Cultural
Institutions
Corporate Ethics Codes
• An increasing number of companies have adopted written codes of
ethics.
• Apple Conduct Policy, Google Code of Conduct, Google Ten Things
We Know to be True
Corporate Social Responsibility
• Corporate Social Responsibility (CSR) -- The concern
businesses have for the welfare of society.
• CSR is based on a commitment to integrity, fairness,
and respect.
• CSR proponents argue that businesses owe their
existence to the societies they serve and cannot exist
in societies that fail.
Corporate Responsibility and Policy
• Corporate Responsibility -- Includes
everything from hiring minority workers to
making safe products, minimizing pollution,
using energy wisely, and providing a safe
work environment.
– American Eagle
• Corporate Policy -- The position a firm takes
on social and political issues.
America’s Most Admired Companies
• And the winners are…
• http://money.cnn.com/magazines/fortune/m
ostadmired/2011/full_list/
• A closer look at Starbucks and CSR
The Case Against CSR
• http://online.wsj.com/article/SB1000142405274870333800
4575230112664504890.html
– “But social welfare isn't the driving force behind these trends.
Healthier foods and more fuel-efficient vehicles didn't become
so common until they became profitable for their makers.
Energy conservation didn't become so important to many
companies until energy became more costly. These companies
are benefiting society while acting in their own interests; social
activists urging them to change their ways had little impact. It is
the relentless maximization of profits, not a commitment to
social responsibility, that has proved to be a boon to the public
in these cases.”
• Friedman – “The Social Responsibility of Business is to
Increase its Profits.”
Corporate Philanthropy and
Social Initiatives
• Corporate Philanthropy -- Includes
charitable donations.
• Corporate Social Initiatives -- Includes
enhanced forms of corporate philanthropy.
Charitable Giving as % of GDP
Society and the Environment
• The green movement emerged as concern
about global warming increased.
• Many companies are trying to minimize
their carbon footprints – the amount of
carbon released during an item’s
production, distribution, consumption and
disposal.
Responsibility and the Environment
• Environmental efforts may increase costs but
can offer good opportunities.
• The emerging renewable-energy and energyefficiency industries account for 8.5 million
U.S. jobs.
• By 2030, as many as 40 million “Green” jobs
will be created.
• Happy Planet Index
You and the Environment
• It’s not necessary to radically change your lifestyle to
make an ecological difference. Here are a few ways to
you can make small changes to help.
•
•
•
•
•
•
•
•
•
Become a vegan
Buy a reusable grocery bag
Buy energy efficient light bulbs
Recycle more
Drive fewer miles or ride your bike
Use less water
Run less electrical equipment
Buy local produce
Buy a hybrid car
Ethics and You
• Plagiarizing from Internet materials is the most
common form of cheating in schools today.
• Studies found a strong relationship between
academic dishonesty and dishonesty at work.
ENTREPRENEURSHIP
• Accepting the risk of starting and running a business.
Why Take the Risk?
• Opportunity
• Profit
• Independence
• Challenge
Entrepreneurship Videos
•
•
•
•
YouTube video
Think Different
Gary Vaynerchuk video (first 6:30)
TED Video
The UPS and DOWNS of Entrepreneurship
•
The UPS
– The freedom to succeed.
– Make your own decisions.
– High possibility of wealth.
– Hire your own staff.
•
The DOWNS
– The freedom to fail.
– No paid vacations
– No health insurance.
– No daycare
• 10 Reasons You Should Never Get a Job
What Does It Take to be an
Entrepreneur?
• Self-directed
• Self-nurturing
• Action-oriented
• Highly energetic
• Tolerant of uncertainty
• TED video
New York Times Article
•
a thin line separates the temperament of a promising entrepreneur from a person who
could use, as they say in psychiatry, a little help.
•
He works from 8 a.m. until 10 p.m., seven days a week; he can work 96 hours in a row;
•
The attributes that make great entrepreneurs, the experts say, are common in certain
manias, though in milder forms and harnessed in ways that are hugely productive.
Instead of recklessness, the entrepreneur loves risk. Instead of delusions, the
entrepreneur imagines a product that sounds so compelling that it inspires people to
bet their careers, or a lot of money, on something that doesn’t exist and may never sell.
•
Humanity and interpersonal skills are always helpful for recruiting talent and raising
money
•
“I’m addicted to the act of winning, the process. When you are in the act of winning,
everything is great. Once you’ve won, that’s boring. It’s cool, it’s better than having lost,
but it’s boring.”
SOCIAL ENTREPRENEURSHIP:
RESPONSIBLE and PROFITABLE
• Social entrepreneurship is the work of a social entrepreneur.
A social entrepreneur is someone who recognizes a social
problem and uses entrepreneurial principles to organize,
create, and manage a venture to make social change (a social
venture). Whereas a business entrepreneur typically
measures performance in profit and return, a social
entrepreneur focuses on creating social capital. Thus, the
main aim of social entrepreneurship is to further social and
environmental goals. However, whilst social entrepreneurs are
most commonly associated with the voluntary and not-forprofit sectors , this need not necessarily be incompatible with
making a profit.
• Tom’s Shoes
ENTREPRENEURIAL TEAMS
• Entrepreneurial team -- A group of experienced
people from different areas of business who join to
form a managerial team with the skills to develop,
make and market a new product.
• An entrepreneurial team (Steve Jobs, Steve
Wozniak, and Mike Markkula) was key to Apple’s
success. Video 1 (:22-1:34), Video 2, Video 3
Small Business
•
Small Business -- Independently owned and operated, not dominant in
its field of operation and meets certain standards of size.
• Businesses are “small” in relationship to other businesses in their
industries.
• There are 26.8 million small businesses in the U.S.
• Of all nonfarm business in the U.S., almost 97% are considered
small.
• Small businesses account for over 50% of the GDP.
• Small businesses generate 60-80% of new jobs.
• About 80% of U.S. workers first jobs were in small business.
THEY DID WHAT?
Famous Business Failures
• Tommy Hilfiger – First store went bankrupt
• Milton Hershey – First confectionary failed
• H.J. Heinz – Company went bankrupt six years after
start
• Walt Disney – First film company went bankrupt
• Henry Ford – First two car companies failed
• L.L. Bean – Almost went bankrupt in first year
Source: World Features Syndicate, 2009.
Outsourcing Your Small Business
• The latest outsourcing trend is using the Internet
to find affordable labor around the world.
• Elance provides small businesses with a hub to
find low-cost contractors. (SMM example)
• Get Friday
• Outsourcing Your Life – Tim Ferriss, author of The
4-Hour Workweek and The 4-Hour Body, Elance
video, “Ted” video; New York Times article
Online Businesses
• Web-based businesses have more unique products than most brick
and mortar stores.
• Online sales reached $165.9 billion in 2007, 8% of all retail sales.
• Affiliate Marketing -- An Internet-based marketing strategy in which
a business rewards individuals or other businesses for each visitor
or customer the affiliate sends to its website.
• Turbulence Training, Raw Vegan, VitaMix
Business Plans
•
Business Plan -- A detailed written statement that describes the nature
of the business, the target market, the advantages the business will
have over competition, and the resources and owners qualifications.
• A business plan forces potential owners to be specific about what
they will offer.
• A business plan is mandatory for talking with bankers or
investors.
•
A good executive summary catches interest and tempts potential
investors to read on.
•
Getting the plan into the right hands is almost as important as getting
the right information in it.
Business Plan Pro
There are many sources of help for starting your own business…
•
•
Tuesday morning: Major Forms of
Ownership
• Sole Proprietorship -- A business owned, and
usually managed, by one person.
• Partnership -- Two or more people legally agree to
become co-owners of a business.
• Corporation -- A legal entity with authority to act and
have liability apart from its owners.
Forms of Business Ownership
How Owners Affect Corporate
Management
The BIG BOYS of BUSINESS
America’s Largest Corporations
• By Market Value
• By Revenues
• By Employees, 2
• Apple store stats, 2
Advantages of Corporations
• Limited liability
• Ability to raise more money for investment
• Size
• Perpetual life
• Ease of ownership change
• Ease of attracting talented employees
• Separation of ownership from management
Disadvantages of Corporations
• Initial cost
• Extensive paperwork
• Double taxation
• Two tax returns
• Size
• Possible conflict with stockholders and board of
directors