See Learning Objective 1.1: Define and explain business and its basic terms. See text pages: 2-4 The Importance of Studying Business Business can be defined as a person, partnership, or cooperation that seeks to provide goods and services to others at a profit. Defining Business Businesses provide people with the opportunity to become wealthy. Owning a business if you are willing to be an entrepreneur or working for a business if you have managerial talents can help you meet this goal. Profit, Revenue, Loss, and Risk and Reward Profit is the amount of money a business earns above and beyond what it pays out for salaries and other expenses. Expenses are the monies paid for covering the cost of items needed in operating a business Revenue is the total amount of money a business takes in during a given period by selling goods and services. A loss occurs when a business’s expenses are more than its revenues. If a business loses money over time, it will likely have to close. Risk is the chance an individual or organization takes of losing time and money on a business that may not prove profitable. Standard of living can be defined as the quality and quantity of products available to people and how these goods are distributed over the population. Even among companies that do make a profit, not all make the same amount. Those companies that take the most risk may make the most profit. In order to decide the best choice for you, you have to calculate the risks and the potential rewards of each decision. A Reward is the gratification as a result of some action. The more risks you take, the higher the rewards may be.
See Learning Objective 1.2: Explain the evolution of business in the United States See text page: 5-9 Evolution of American Business Businesses in the United States have become very productive. Due to use of machines and better ways of manufacturing Used to be focused on agriculture Progress in the Agricultural and Manufacturing Industries The United States has seen strong economic development since the 1800s. The agricultural industry led the way, providing food for the United States and much of the world. Agriculture is still a major industry in the United States. What has changed is that the millions of small farms that existed previously have been replaced by some huge farms, and some small but highly specialized farms. Many farmers who lost their jobs were retrained and went to work in factories. The manufacturing industry, like agriculture, has also used technology to become more productive. Individuals are of having their basic needs met, while corporations are reaping gigantic profits. Outsourcing: Assigning functions such as accounting or production to outside organization (within or outside the country) Progress in Service Industries Many workers who could no longer find employment in manufacturing have been able to find jobs in the service industry. Although recently service-sector growth has slowed, it remains the largest area of growth. Another bit of good news is that there are more high-paying jobs in the service sector than in the goods-producing sector.
See Learning Objective 1.3: Describe different classifications of business. See text pages: 9-10 Business are classified on three basic things Their size Their profit motive And if they are manufacturing or service companies-in other words, their sector.
See Learning Objective 1.3: Describe different classifications of business. See text pages: 9-10 The first type of classification is by size Although there are really no concrete measures, generally in business we use the number of employees as a measure. Revenue generated can also be a measure. Microenterprise Usually single owner Usually less than five employees Some can be home based SME Definitions vary based on type of industry Usually 1-50 employees for small, while medium has 51-500 employees Small businesses are very important to economy, as they represent 99.7% of employer firms Large Businesses Most businesses start as SME and move to become a large business More than 500 employees Can be domestic or international
See Learning Objective 1.3: Describe different classifications of business. See text pages: 9-10 Second type of classification is by profit motive. A for profit organization are motivated to earn profits, while a non-profit organization are not driven by profits, but still need to make money in order to survive. Non-Profit Organization goals do not include making a personal profit for owners or organizers Any money earned from business goes back into activities within the organization Examples include Howard Hughes Medical Institute. They conduct biomedical research and provide grants in science education
See Learning Objective 1.3: Describe different classifications of business. See text pages: 9-10 Manufacturing Concerns of many Americans about job losses due to moving manufacturing overseas Since the early 1900’s manufacturing has become easier with use of new machines But, we are shifting to a service economy as it gets too expensive to produce products in the United States Service Intangible products Ones you can’t hold in your hand Auto repair shops Education Health care Travel are all examples
See Learning Objective 1.4: Describe the five elements of the business environment. See text pages: 11-21 The Business Environment Businesspeople must keep reading to know what is happening in each environment that could affect their business The business environment could help a business do better, or it could cause the business to struggle
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: The Five Parts of the Business Environment The business environment consists of the surrounding factors that either help or hinder the development of businesses. The five elements in the business environment are: The economic and legal environment. The technological environment. The competitive environment. The social environment. The global environment. Business owners who are not aware of the environment around them necessarily have less success than those who are aware.
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: 11-16 The Economic Environment Businesses do not operate in a vacuum but rather within a framework of laws and economic forces. People start businesses if they believe they can make a decent living from it, achieve their goals and the risk of losing their money is not too great. Fear of losing a job or not having enough causes people to change their buying habits Part of the entrepreneurs’ risk involves the economic system and how government works with or against businesses. Entrepreneurs are looking for an acceptable return on investments (ROI). Return on investment is the money gained from taking a business venture risk. The Legal Environment If the government takes away much of what a business earns through high taxes, the ROI may no longer be worth the risk. Overall, a businessperson will benefit if he or she has an awareness of the laws affecting business. Laws such as tax laws, permits, licenses needed and laws to protect workers are all important things to know when running a business.
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: 11-14 What Can Government Do? One way for government to actively promote entrepreneurship is to allow private ownership of businesses. All around the world today, governments that previously owned most businesses are selling those businesses to private individuals to create more wealth. Governments can lessen the risks of entrepreneurship by passing laws that enable businesspeople to write contracts that are enforceable in court. The Uniform Commercial Code (USS), for example, covers things like contracts and warranties. A government can also establish a currency that is tradable in world markets. Tradable currency is money that is allowed to be exchanged for another country’s money. There are many laws in the United States to minimize corruption, and businesses can flourish as a result. Nonetheless, corrupt and illegal activities at some U.S. companies negatively affect the business community and the economy as a whole. “One of the biggest threats to the U.S. economy… is the wholesale undermining of investor confidence in the stock market as a result of corporate deceptions like those of Enron.” Lapses in the ethical environment have placed new emphasis on the need for laws restraining businesspeople from committing unethical and/or illegal acts, and such laws have recently been passed. The Board of directors is a group that oversees the activities of a corporation. It Generally represents a mix—a small number of company executives and a greater number of outsiders. Because the board of directors is the entity that overseas the entire operations of a company, it is a serious ethical lapse to engage in this kind of behavior. The capitalist system relies heavily on honesty, integrity, and high ethical standards. The Capitalist system is one in which the companies and businesses are owned by the citizens instead of the government.
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: 14-16 The Technological Environment Since prehistoric times, human have felt the need to create tools that make their jobs easier. Businesses always have been affected and even transformed by technological developments. Few technological changes have had a more comprehensive and lasting impact on businesses than the recent emergence of information technology (IT): Computers, modems, the Internet, cell phones, and so on. This section will discuss some of the concerns and awareness businesspeople should have involving technology. Increased Productivity Technology means everything from phones and computer, to medical imaging devices, personal digital assistants, and the various software programs that make business processes more effective, efficient, and productive. Effectiveness means producing the desired result. Efficiency means producing goods using the least amount of resources, which are something used in the production of goods. Productivity is the amount of output you generate given the amount of input. Technology affect people in all industries, including farming. One reason that workers make more money in the United States than in most other countries is that they have access to technology that allows them to be more productive. Keep in mind, however, that increased productivity sometimes results in labor shifts or job losses.
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: 15 Making Buying and Selling Easier One of the most important recent environmental changes f interest to business people is the growth of e-commerce – the buying and selling of goods over the Internet. There are two major types of e-commerce transactions: business-to-consumer (B2C) and business-to-business (B2B). B2C is a business that produces products to sell directly to the consumer. B2B is a business that produces products to sell to another business. B2B e-commerce is already at least five times as big as B2C e-commerce. The rise of Internet marketing came so fast and furious that it drew hundreds of competitors into the fray. Success will come to those e-commerce businesses that offer quality products at good prices with great service. Responsiveness to Customers Businesses succeed or fail largely because of the way they treat their customers. The businesses that are most responsive to customer wants and needs are more likely to succeed than those that do nor respond to customers. One way traditional retailers can respond to the Internet revolution is to use technology to reach customers. Businesses mark goods with Uniform Product Codes (UPCs) – the series of lines and numbers that you see on most consumer packaged goods. Bar codes cab be used to tell retailers what product you bought, in what size and color, and at what price. A database is an electronic storage file where information is kept The use of databases enables stores to carry only merchandise that the local population wants, and thus to maintain smaller inventory, saving them money. Emergence of social networking such as Twitter, My Space and Facebook Companies can take advantage of this to make purchases and receive information about the products the company offers.
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: 16-17 Value Companies must always know what competitors are doing, so they can provide the most value to customers. A customer driven organization is one that provides high value to customers and great customer service, too. Employee empowerment allows the staff member to make decisions, rather than always being “told” what to do. Employees who are empowered are generally more motivated to provide great customer service.
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: 17-19 The Social Environment The U.S. Population is going through major changes, significantly affecting how people live, where they live, what they buy, and how they spend their time. Demographic are statistics about the human populations in regard to size, density, marital status, and other characteristics. Diversity The management of diversity is an important concern for business people. An increasing percentage of the U.S. population in the future will be minorities—according to the U.S. Census Bureau, by the year 2050, non-Hispanic whites will be a slim majority. Businesses are concerned about having a diverse workforce for tow main reasons. First, a business can better serve customers with a diverse workforce. Second, a diverse work environment brings about new, fresh ideas and perspectives. A diverse workforce is better overall for companies. This affect each of us in the workforce because we will need to work with people of various ages, races, and backgrounds in order to be successful where we work. The boomers (born between 1946 and 1964), Generation X (born between 1965 and 1980), and Generation Y (born after 1981) comprise different attitudes and present challenges at work. Aging Consumers Another social issue and concern is the fact that Baby Boomers are growing older; and as they retire there will be more jobs than people qualified to fill those jobs. According to the U.S. Census Bureau, there are now over 50 million citizens ages 60 and older, and this number is going to increase. Businesses that cater to the aging baby Boomers will have the opportunity for exceptional growth in the near future.
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: Dual Incomes Dual-income families also play a role in the societal changes in the United States. One result of this trend is a host of programs that companies have implemented in response to the demands of bust two-income families. With more dual-income families in the workforce, many employers provide child care benefits of some type. Along with day care costs, individual employee needs and lifestyles have led companies to offer what are called cafeteria-style benefits packages, which enable families to choose from a menu of benefits. Man companies are increasing the number of part-time workers, which enable mothers and fathers to sty home part of the say with children and still earn income. Single Parents The rapid growth of single-parent households has had a major effect on businesses as well. Many single parents struggle with the work-life balance, and they have encouraged businesses to implement programs such as family leave and flextime.
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: 19-21 The Global Environment Two important environmental changes in recent years have been the growth of international competition and the increase of free trade among nations. Free trade is the reduction of barriers to trade, such as elimination of tariffs on goods brought into another country. Cooperation among businesses has the potential to create rapidly growing world markets that can generate prosperity beyond most people’s expectation. It is extremely important to note that all sizes of businesses compete in the global marketplace. Technology has made this much easier through online selling and international shipping. The threat of wars and terrorism on a worldwide level adds greatly to organizational costs, including the costs of security personnel, security equipment, and insurance.
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: 22 Stakeholder a person or company that stands to gain or lose from the activities of a business. Important thing to remember about stakeholders is that we are all stakeholders. If we own stock in a company, we are a stakeholder. If we live in the community where a business operates, we are also a stakeholder. Examples of Stakeholders discussed in next few slides. Competitors and Customers Competitor Contending for same customer Need to offer value to entice customers Greater competition than ever in today’s business world
Customer An individual or business that is going to purchase a good A customer driven organization is one that has high quality, high value and focuses on the customer
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: 22 Suppliers, Distributors and Special Interest Groups A supplier is one that provides goods, services or other to a company For example, Dell has many suppliers they use to provide the various components in making a computer Distributors are people or companies that sell products for another company. For example, Staples is a distributor for Dell Special Interest Groups are groups of people with a common interest to work together to promote some change PETA is an example of a social interest group.
See Learning Objective 1.4: Describe the five elements of the business environment. See Text pages: 22 The Internal Environment Employees are a companies biggest asset Empowerment of employees is an important way to keep and motivate them Culture the culture of a company is something that sets its business apart from another For example, Microsoft has a culture of teamwork and quick thinking employees Owners have legal rights to the assets of a company. Shareholder is someone who owns stock (or a piece of) a company A stakeholder is anyone who stands to gain or lose from the success or failure of a company Stakeholders might include suppliers, customers, people living in the community where the company operates.
See Learning Objective 1.5: Understand your options in the world of business in the future. Text on pages: 23 Your Future in Business We are in the midst of an information-based global revolution that will alter all sectors of the economy agricultural, industrial, and service. Entrepreneurship vs. Working for Others There are two ways to succeed in a business. One is to work for others, get experience and skills, and rise up through the ranks. The other riskier path is to start your own business. Working for Other Businesses As you graduate from college and choose a company, large or small, to work for; you may be happy to know hat the earning power of a college graduate far outpaces that of less-educated individuals. Once you have the experience, either working for a large or small firm, you will have the ability and the opportunity, id that is your desire, to start your own business. Entrepreneurial Challenge Millions of people from all over the world have taken the entrepreneurial challenge and succeeded. Women also have the same opportunity to engage in entrepreneurship as do men, and entrepreneurship is an attractive career path for an increasing number of women. Creation of Wealth Over time, economists have developed five factors that seem to contribute to wealth. They are called factors of production: Land Labor Capital Entrepreneurship knowledge What makes rich countries rich today is a combination of the last two factors.
See Learning Objective 1.5: Understand your options in the world of business in the future. Text on pages: 24-25 Working for a Nonprofit Organization or a Government Agency Despite their efforts to satisfy all their stakeholders, businesses cannot do everything that is needed to make a community all it can be. Nonprofit organizations also make major contributions to the welfare of the society. A Nonprofit organization is an organization whose goals do no include making a personal profit for its owners or organizers. Social entrepreneurs are people who use business principles to start and manage organizations that are not for profit and help alleviate social problems. A government agency is an organization accountable for overseeing explicit government functions. The concepts and principles that makes businesses more effective and efficient are applicable in government agencies and nonprofit organizations as well. Why Study Business? Studying business concepts are applicable to any career path They can Help you get a solid job and long career Add to standard of living and quality of life Help achieve goals and fulfill dreams Help you become a more informed consumer Hel you become an entrepreneur Help create wealth