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Nickels
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McGraw-Hill/Irwin
Understanding Business, 8e
McHugh
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McHugh
Managing
Within The
Dynamic
Business
Environment:
Taking Risks
and Making
Profits
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CHAPTER
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1
1-1
1-1
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Business & Entrepreneurship
•
•
•
•
Business
Profit
Entrepreneur
Match Risk With Profit
• Revenue
• Loss
• Standard of Living/Quality
of Life
• Stakeholders
• Nonprofit Organizations
1-2
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Objectives of Business
Survival
Growth
Profit
Social
Responsibility
1-3
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Creating Wealth:
Factors of Production
•
•
•
•
•
Land
Labor
Capital
Entrepreneurship
Knowledge
1-4
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Business Environment
Global
Business
Social
Economic &
Legal
Technology
Competitive
1-5
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Economic &
Legal Environment
$ Minimum taxes and regulations
$ Freedom of ownership
$ Contract laws
$ Tradable currency
$ Elimination/minimization of
corruption
1-6
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Government Takeover
• Crude oil price per barrel:
2000
2006
Mid $20 range
Mid $70 range
• Russia, Venezuela, and Bolivia have
asserted greater state control over its oil
or natural gas assets
• Which country will be next?
Source: wtrg.com; Cumberland Times-News, May 3, 2006
1-7
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Corrupt Countries
Least Corrupt
1. Iceland
2. Finland
3. New Zealand
Most Corrupt
1. Bangladesh
2. Chad
3. Haiti
Source: Transparency International, 2005; www.transparency.org
1-8
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Technological Environment
• Productivity
• E-Commerce
• Responsiveness
to Customer
1-9
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Identity Theft
• Total number of identity theft
victims in 2005 – 255,565
• Top four ways how victims
information was misused:
1.
2.
3.
4.
Credit card fraud
Phone/utilities fraud
Bank fraud
Employment-related fraud
Source: Identity Theft: Victim Complaint Data, 2005, Federal Trade Commission; www.consumer.gov/idtheft
1-10
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ID Theft—Protective Steps
• “Focus on the cheap and easy way
to keep an eye on your accounts”
•
•
•
•
Free Credit Reports
Guard Your Number
Shred
Bug Congress
 To pass ultimate protection: A credit
freeze anytime you want one.
Source: Money, August 2005
1-11
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Competitive Environment
• Customer
Expectations
• Restructure/Empower
1-12
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Consumer Trends
• U.S. Bottled Water Sales in Past 15
Years Increased more than fourfold to $9.8 Billion
• From October 2004 to September
2005, top bottle water flavors were:
Blend, Lemon, Lime, and Apple
Source: Business & Economic Review, Jan.-Mar. 2002; Beverage Marketing Corporation, bottledwater.org, 2004 stats;
Productscan Online; datamonitor.com, November 9, 2005
1-13
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Social Environment
• Diversity/Multicultural
• Aging/Graying of
America
• Two-Income Families
• Single-Parent Families
1-14
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U.S. Household Size
5
4.5
4
3.5
3
Number of
2.5
Persons
2
1.5
1
0.5
0
1900
1940
1980
2000
2004
Source: U.S. Census Bureau
1-15
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Buying Power of
Diverse Groups
•
•
•
•
•
•
Women
$3,700 Billion
African Americans
761 Billion
Hispanic Americans
686 Billion
Gay Men & Lesbians
610 Billion
Asian Americans
397 Billion
Native Americans
51 Billion
Sources: National Organization on Disability Employability; U.S. Pan Asian American Chamber of Commerce; DiversityInc.com; U.S. Census Bureau; The Augusta Chronicle,
October 22, 2005; Selig Center for Economic Growth, 2005.
1-16
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21st Century
Diversity Issues
• Race
• Age
• Gender
• Language
• Ethnicity
• Religion
• Disability
• Sexual
Orientation
Source: U.S. Equal Employment Opportunity Commission
1-17
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Immigration
• In 2005, roughly 35 million immigrants
lived in the U.S. as compared to less
than 25 million 10 years ago.
• According to a November 2005 poll,
60 percent of Americans favor a
barrier built along the US-Mexico
Border.
• About 49 percent believe that a child
born to an illegal alien in the U.S.
should be granted a US citizenship
Source: Center for Immigration Studies; RasmussenReports.com
1-18
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Older Americans Working
80%
70%
60%
50%
40%
30%
20%
10%
0%
Female
Male
55-59
Source: USA Today
60-64
65+
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Americans Living Longer
• U.S. life expectancy rises to a
record high 77.9 years
• The number of deaths dropped
by 50,000 in 2004 from 2003,
the steepest decline since 1938
2500000
2000000
1500000
U.S.
Deaths
1000000
• By 2005, about one in eight
Americans will be 65 or older.
By 2025, it will be nearly one in
five.
500000
0
1900s
2004
Source: Investor’s Business Daily, December 8, 2003; Cumberland Times-News, April 20, 2006; U.S. Centers for Disease
Control and Prevention; U.S. Census
1-20
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Exurbs:
Growth of Outer Suburbs
• Northeasterners are moving south and
west, and west coast residents are
moving inland.
• The states that gained the most
residents: Florida, Arizona, Nevada
• The states that lost the most residents:
New York, California, Illinois
Source: Cumberland Times-News, April 21, 2006; U.S. Census Bureau
1-21
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Global Environment
• International Competition and Free Trade
• Improvements in Transportation
and Communication
• War & Terrorism
• Global Changes
1-22
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The Economic
Cost of Disaster
Disaster
Costs
Hurricane Katrina – 2005 (estimate)$ 200 B
Kobe, Japan Earthquake -- 1995
100 B
September 11, 2001 Attacks
70 B
Northridge, CA Earthquake – 1994
44 B
Hurricane Andrew – 1992
35 B
Source: Business 2.0 , November 2002; MSNBC.com, September 10, 2005.
1-23
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Does Global Experience
Help Your Career?
No Response
5%
19%
Unnecessary
Somewhat
20%
56%
Very
Helpful
Source: USA Today
1-24
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Evolution of
American Business
• Agricultural/Manufacturing
• Service Industries
• Future???
1-25
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Trends in Business
• Rise of Information &
Communication
Technology
• Globalization
• Doing Business 24/7
• Educated Consumers
• Self-Directed,
Empowered
Employees
• Communication Skills
• Decision-Making Skills
• Aging Workforce
• Teamwork
• Increasing Diversity
• Leadership
• Pyramid vs. Web
• Continual Learning
Source: Keying In- Newsletter of the National Business Education Association, March 2003
1-26
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Leveraging
Diverse Workforce
• According to the Society for Human
Resources’ survey, about 70 percent of the
respondents actively leverage workforce
diversity through:
• Ensuring leadership development programs reach
all employees (40%)
• Meeting the needs of diverse customers (39%)
• Integrating diversity into the organization’s business
strategy (35%)
• Increasing innovation by tapping
employees of all backgrounds (34%)
Source: SHRM Weekly Survey, August 3, 2004
1-27
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Skill Level Required
58%
Average Skill
Level: 3.6
40%
2%
Level 1
Level 2
Level 3
Level 4
Level 5
Level 6
Source: Hudson Institute as reported in Arnold Packer, “Retooling the American Worker,” Washington Post
1-28
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Current Skill Level
70.5%
Average Skill
Level: 2.6
16.1%
6.6%
6.8%
Level 1
Level 2
Level 3
Level 4
Level 5
Level 6
1-29