Chap001 Modified

part

Ferrell Hirt Ferrell

 A CHANGING WORLDEIGHTH EDITION

1

FHF

Copyright © 2011 by The McGraw-H ill Companies, Inc. Al l r ights reserved.McGraw-Hill/Irwin

part

CHAPTER 3 Business in a Borderless World

CHAPTER 2 Business Ethics and Social Responsibility

1

CHAPTER 1 The Dynamics of Business and Economics

FHF

Business in a

Changing World

Outline

• The nature of business

• The goal of business

• The people

• The major activities (management, marketingand finance)

• Why study business?

• The economic foundation of business

• Economic cycles and productivity

FHF

What is a business?

Individuals or organizations trying to earn a profit byproviding products that satisfy people's needs.

The Nature of Business 

1-3

What are the benefits of abusiness?

- Produce most of the goods and services weconsume

- Employ most working people

- Contributes to the quality of life and standardof living for people in a society

- Enhances the personal income of ownersand stakeholders

- Some businesses support charities andprovide community leadership also

FHF

What is a product?

 A good or service with tangible and intangiblecharacteristics that provide satisfaction andbenefits. 

The Nature of Business 

1-4

FHF

Products: Tangible

Goods & Services

ServicesDry cleaning

Photo processing

Checkup at doctor ’s

Musical concert

Tangible Goods   Loaf of bread

  Television

  Automobile

  Computer

1-5

FHF

The Primary Goal

of Business

Earn a profit

The difference between what it costs to make and sell a product

and what a customer pays for it.

1-6

Videos 

• Business Explainer - Impossible Task

http://www.youtube.com/watch?v=DK7QfNrLRcg 

[ ]

FHF

Profit Is

The difference between what itcosts to make and sell a productand what a customer pays for it

1-7

FHF

Non-Profit Organizations 

Not all organizations are for-profit businesses

Nonprofit organizations

Provide goods and services but

Do not have the fundamental purpose of earning profits

Founded by Bill Daniels, a pioneer in cable television

Provides grants and scholarships to students, educationalinstitutions and businesses in the Rockies region

1-8

[ ]

FHF

Stakeholders

Customers, employees, investors, governmentregulators, community and society. Those thathave a stake in the success and outcomes of a

 business are considered stakeholders

1-9

FHF

The People and Activities

of Business 

1-10

FHF

The Activities of Business 

Management  – Focus on employees

Motivating employees toward business goals

Coordinating employee’s actions

Organizing people for efficiency

1-11

FHF

Management: Production and

Manufacturing 

Another element of

management

Plan activities

Organize staff

Control tasks of the

organization

1-12

• Steve Jobs talks about managing peoplehttp://www.youtube.com/watch?v=f60dheI4ARg 

FHF

Marketing 

Focus on sat is fy ing customers

o Determine what products customers want

o Plan and develop products

o Determine:

Distribution

Place

Promotion

Price

1-13

FHF

Axe 

o Target market is young men looking for a date

o Uses multimedia promotional approach

YouTube

Facebook

Twitter

Viral Marketing

o To promote the fragrance, Axe Music, Unilever staged concerts around thecountry featuring major music acts

1-14

FHF

Finance 

Finance is the primaryresponsibility of owners

Obtaining money

Using money effectively

 Accountants, stockbrokers, bankers

1-15

FHF

Why Study Business? 

o Develop skills for career success

o Understand business activities

o Learn the importance of profitability

Individual businesses

Local and regional impact

Global economic impact

1-16

FHF

Business Impact 

Purchase raw materials

Hire employees

 Attract capital

Create products

Fuel the global economy

Contribute to society

1-17

FHF

The Economic Foundations

of Business 

Economics

• Distribution of resources for the production of goods andservices within a social system

Resources (sometimes called factors of production) 

• Natural resources (land, forests, minerals, water)

• Human resources (labor)

• Financial resources (capital)

• Intangible (good reputation, quality products)

1-18

FHF

Economic Systems 

How a society distributes its resourcesto produce goods and services

 Central issue of economics

How to fulfill an unlimited demand for goods andservices with a limited supply of resources

1-19

FHF

Economic Systems 

Three Important Questions:

1. What types and quantities of goods/serviceswill satisfy consumer needs?

2. How will goods/services be produced? Bywhom? With what resources?

3. How are goods/services distributed toconsumers?

1-20

Videos 

• Basics of Economics I The Great Courses

http://www.youtube.com/watch?v=QHsIKZCAa6s 

• Ten Principles of Economics

http://www.youtube.com/watch?v=zCxPPu6AwgM 

FHF

Communism 

 A society in which the people, withoutregard to class, own all the nation’sresources.

China

North Korea

Cuba

1-22

FHF

Socialism 

System in which the government ownsand operates basic industries butindividuals own most businesses.

Sweden

Israel

India

1-23

FHF

Capitalism 

Free Enterprise

Individuals own and operatemajority of businesses providinggoods and services

United StatesJapan Australia

1-24

FHF

Pure Capitalism vs

Modified Capitalism 

Pure Capitalism

Free Market

 All economic decisions made withoutgovernment intervention

Modified Capitalism

Government intervenes and regulates businessto some extent

1-25

[ ]

FHF

Mixed Economies

No country practices pure capitalism, socialism,or communism. Economic systems can be

mixtures and often contain various elements ofgovernment intervention

1-26

Centrally-planned        -     

Free market

N. Korea China Brazil Japan USA

Cuba Russia India Germany Canada

Vietnam S. Korea

France UK

FHF

Comparison ofCommunism, Socialism, and Capitalism 

1-21

FHF

The Free-Enterprise System 

Many large economies are free-enterprise  – Even China applies free-enterprise principles

o Basic individual and business rights

Right to own property

Right to earn profits and use them as onewishes (within constraints of law)

Right to make business decisions

Right to choose (careers, what goods/servicesto purchase, etc.)

1-27

Private enterprise system

 A system that allows individuals to pursue theirown interests with minimal governmentrestrictions. It requires the presence of fourelements:

1) Private property rights (including intellectualproperty)

2) Freedom of choice

3) Making profits and having entrepreneurship

4) Competition

FHF

Supply and Demand 

Distribution of resources and products isdetermined by supply and demand

Demand 

Number of goods/services consumers buy at a given priceat a specific time

Supply

Number of products businesses will sell at different pricesat a specific time

1-28

FHF

Forces of Supply & Demand 

Equi l ib r ium Pr ice = Pr ice at which n umber o f products suppl ied equal

amount of prod ucts con sumers are wi l l ing to bu y at a speci f ic t ime

1-29

FHF

Nature of Competition 

Competition

Rivalry among businesses for consumers’ dollars

Pure Competition

Many small businesses in same product market

Monopolistic Competition

Small number of businesses

Little difference in products (Asprin)

Oligopoly

Very few businesses selling a product (air industry)

Monopoly

1-30

FHF

Economic Cycles &

Productivity 

Economic Expansion

Economy is growing and consumers are spendingmoney

Economic Contraction

Spending declines, layoffs, economy slows down

1-31

Economic Indicators

• Gross Domestic Product (GDP)

 A total value of all goods and servicesproduced within a given period by a nationaleconomy through domestic factors ofproduction.

Economic Indicators

• Gross National Product (GNP)

The total value of all goods and servicesproduced by a national economy within agiven period regardless of where the factorsof production are located.

FHF

Overall Unemployment Rate 

1-32

FHF

Economic Cycles 

Inflation

Condition characterized by continuing rise in prices

Recession

Decline in production, employment, and income

Depression

Unemployment very high; consumer spending low; businessoutput sharply reduced

Unemployment

% of population that wants to work but unable to find jobs

1-33

FHF

The 2008-2010 Recession 

The wors t recess ion sin ce the Great Depress ion

Collapse of many financial institutions

 AIG

Bear Stearns

Washington Mutual

Merrill Lynch

Stock market dropped 50%

Highest mortgage default rate in history

Unemployment exceeded10%

Personal savings rates increased

Government spent $750 billion on financial institutions, and $789 billion on an economicstimulus package

1-34

FHF

Measuring the U.S. Economy:

GDP 

1-35

FHF

Evaluating the

U.S. Economy 

1-36

FHF

A Brief History of the

U.S. Economy 

The early economy

The Industrial Revolution

The manufacturing economy

The marketing economy

The service economy

The new digital economy

1-37

FHF

Entrepreneurship 

Entrepreneur: An individual who risks his/her

wealth, time and effort to develop for profit an

innovative product or way of doing something.

Entrepreneurship requires:

Risk

Innovation

Creativity

Reward

1-38

Websites and Videos

• What is an Entrepreneur?

http://www.youtube.com/watch?v=lZKhZmvJuZY 

• Steve Jobs' Advice for Entrepreneurs

http://www.youtube.com/watch?v=gxo2rGr7Yfg 

• Tribute to Steve Jobs Think Different

http://www.youtube.com/watch?v=LuLw9_JEAsw 

FHF

The Role of Government

in the U.S. Economy 

Modified Capitalism

o The government regulates industry to encouragecompetition and protect stakeholders likeconsumers, employees, or the environment

o Laws force businesses to adhere to governmentstandards

o Government agencies like the U.S. FederalReserve Board or the Department of Commerceoccasionally intervene to regulate the economyand spur growth

1-39

FHF

Ethics & Social Responsibility

in Business 

Business ethics refers to standards andprinciples used by society to defineappropriate behavior at work

Stakeholders increasingly demand thatbusinesspeople behave ethically andsocially responsibly

Business reputation depends on profitand ethical conduct and  socialresponsibility

1-40

FHF

Ethical Business Certifications 

Only natural ingredients Cradle to Cradle certified Means products are designed with materials

that can be infinitely reused Every product is inspected by the

Environmental Protection and Encouragement Agency Reviews ingredients for safety

Offset CO2 emissions created from productionand travel

1-41

FHF

Can You Learn Business

in a Classroom? 

 Yes!!!To be success ful in bus iness, you need:

Knowledge

Skills

Experiences and  

Good judgment

1-42