1. contemporary business environment (ITB ECO)
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1. contemporary business environment (ITB ECO)

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1. contemporary business environment (ITB ECO) 1. contemporary business environment (ITB ECO) Presentation Transcript

  • PART 1 UNDERSTANDING THE CONTEMPORARY BUSINESS ENVIRONMENT Copyright 2004 Prentice Hall, Inc.
  • CHAPTER 1 Understanding the Business System Copyright 2004 Prentice Hall, Inc.
  • Chapter Outline
    • The Concept of Business and the Concept of Profit
    • Economic Systems Around the World
    • The Economics of a Market System
    • A Short History of Business in the U.S.
    Copyright 2004 Prentice Hall, Inc. View slide
  • The Concept of Business and the Concept of Profit
    • Business is an organization that provides goods or services to earn profits
    • Profits represent the difference between a business’s revenues and its expenses
    Copyright 2004 Prentice Hall, Inc. View slide
  • Economic Systems Around the World An economic system is a nation’s system for allocating its resources among its citizens. Copyright 2004 Prentice Hall, Inc.
  • What Are Factors of Production? Resources used in the production of goods and services—labor, capital, entrepreneurs, physical resources and information resources Copyright 2004 Prentice Hall, Inc.
  • Factors of Production
    • Labor (or Human resources ) are the physical and mental capabilities of people as they contribute to economic production
    • Capital are the funds needed to create and operate a business enterprise
    Copyright 2004 Prentice Hall, Inc.
  • Factors of Production
    • Entrepreneur is an individual who accepts the risks and opportunities involved in creating and operating a new business venture
    • Physical resources are tangible things organizations use in the conduct of their business
    Copyright 2004 Prentice Hall, Inc.
  • Factors of Production Copyright 2004 Prentice Hall, Inc.
    • Information resources are data and other information used by business
    Can you name any others?
  • Types of Economic Systems Copyright 2004 Prentice Hall, Inc.
    • Planned economy
    • Market economy
    • Mixed market economy
  • Types of Economic Systems Copyright 2004 Prentice Hall, Inc.
    • Planned economy relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions. The Kremlin is shown above.
  • Types of Economic Systems Copyright 2004 Prentice Hall, Inc.
    • Market economy relies on individuals to control production and allocation decisions through supply and demand
  • Types of Economic Systems Copyright 2004 Prentice Hall, Inc.
    • Mixed market economy features characteristics of both planned and market economies
  • What Is Communism? Copyright 2004 Prentice Hall, Inc. Planned economy in which the government owns and operates all factors of production
  • What Is a Market? Copyright 2004 Prentice Hall, Inc. Mechanism for exchange between the buyers and sellers of a particular good or service
  • Input and Output Markets
    • Input market is a market in which firms buy resources from supplier households
    • Output market is a market in which firms supply goods and services in response to demand on the part of households
    Copyright 2004 Prentice Hall, Inc.
  • What Is Capitalism? Copyright 2004 Prentice Hall, Inc. Market economy that provides for private ownership of production and encourages entrepreneurship by offering profits as an incentive
  • Circular Flow in a Market Economy Copyright 2004 Prentice Hall, Inc.
  • Mixed Market Economies
    • Privatization is the process of converting government enterprises into privately owned companies
    • Socialism is a partially planned system in which the government owns and operates selected major industries
    Copyright 2004 Prentice Hall, Inc.
  • The Economics of a Market System Copyright 2004 Prentice Hall, Inc. Understanding a country’s complex economic system is essential to understanding the environment in which a country’s businesses operate.
  • Demand and Supply in a Market Economy
    • Demand is the willingness and ability of buyers to purchase a good or service
    • Supply is the willingness and ability of producers to offer a good or service for sale
    Copyright 2004 Prentice Hall, Inc.
  • The Laws of Supply and Demand
      • The law of demand: Buyers will purchase ( demand ) more of a product as its price drops and less as its price increases.
      • The law of supply: Producers will offer ( supply ) more of a product for sale as its price rises and less as its price drops.
    Copyright 2004 Prentice Hall, Inc.
  • What Is a Demand and Supply Schedule? Copyright 2004 Prentice Hall, Inc. Assessment of the relationships among different levels of demand and supply at different price levels
  • Demand and Supply Curves
      • A demand curve is a graph showing how many units of a product will be demanded ( bought ) at different prices.
      • A supply curve is a graph showing how many units of a product will be supplied ( offered for sale ) at different prices.
    Copyright 2004 Prentice Hall, Inc. Price Quantity Price Quantity
  • What Is the Market Price (or Equilibrium Price)? Copyright 2004 Prentice Hall, Inc. Profit-maximizing price at which the quantity of goods demanded and the quantity of goods supplied are equal
  • Copyright 2004 Prentice Hall, Inc.
  • Surpluses and Shortages
    • Surplus is a situation in which quantity supplied exceeds quantity demanded
    • Shortage is a situation in which quantity demanded exceeds quantity supplied
    Copyright 2004 Prentice Hall, Inc. Surplus Shortage
  • Private Enterprise and Competition in a Market Economy
    • Private enterprise is an economic system that allows individuals to pursue their own interests without undue governmental restriction. Four elements:
      • Private Property Rights
      • Freedom of Choice
      • Profits
      • Competition
    Copyright 2004 Prentice Hall, Inc.
  • Private Enterprise and Competition in a Market Economy
    • Competition occurs when two or more businesses vie for the same resources or customers. Four degrees:
      • Perfect Competition
      • Monopolistic Competition
      • Oligopoly
      • Monopoly
    Copyright 2004 Prentice Hall, Inc.
  • Degrees of Competition Copyright 2004 Prentice Hall, Inc.
  • A Short History of Evolution Business in the Western World The landscape of business in the western world has evolved over the course of many decades. Copyright 2004 Prentice Hall, Inc.
  • The Factory System and the Industrial Revolution Major mid-18 th century change in production characterized by a shift to the factory system, mass production and the specialization of labor Copyright 2004 Prentice Hall, Inc.
  • Laissez-Faire and the Entrepreneurial Era Period during the 19 th century in which improvements in the U.S. banking system and the nation’s infrastructure and the rise of the entrepreneur on a grand scale were hallmarks Copyright 2004 Prentice Hall, Inc.
  • The Production Era Period during the early 20 th century in which U.S. business focused primarily on improving productivity and manufacturing efficiency Copyright 2004 Prentice Hall, Inc.
  • The Marketing Era Post-World War II period in which production continued to increase, technology advanced and the standard of living rose Copyright 2004 Prentice Hall, Inc.
  • What Is the Marketing Concept? Idea that a business must focus on identifying and satisfying consumer wants in order to be profitable Copyright 2004 Prentice Hall, Inc.
  • The Global Era Period throughout the 1980s in which the continuation of technological advances in production, computer technology, information systems and communications capabilities was experienced Copyright 2004 Prentice Hall, Inc.
  • The Internet Era
    • Ways the Internet affects business:
      • The Internet will give a dramatic boost to trade in all sectors of the economy.
      • The Internet will help to level the playing field between larger and smaller enterprises regardless of their products.
      • The Internet holds considerable potential as an effective and efficient networking mechanism.
    Copyright 2004 Prentice Hall, Inc.