2. understanding the environments of business - itb - ayesha aman - Economics

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itb - ayesha aman - Economics

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2. understanding the environments of business - itb - ayesha aman - Economics

  1. 1. CHAPTER 2 Understanding the Environments of Business Copyright 2004 Prentice Hall, Inc.
  2. 2. Chapter Outline <ul><li>Organizational Boundaries and Environments </li></ul><ul><li>The Economic Environment </li></ul><ul><li>The Global Economy in the 21 st Century </li></ul><ul><li>The Technological Environment </li></ul><ul><li>The Political-Legal Environment </li></ul><ul><li>The Sociocultural Environment </li></ul><ul><li>The Business Environment </li></ul>Copyright 2004 Prentice Hall, Inc.
  3. 3. Organizational Boundaries and Environments All businesses— regardless of their size, location or mission— operate within a larger external environment. Copyright 2004 Prentice Hall, Inc.
  4. 4. What Is the External Environment? Everything outside an organization’s boundaries that might affect it Copyright 2004 Prentice Hall, Inc.
  5. 5. What Is an Organizational Boundary? That which separates the organization from its environment Copyright 2004 Prentice Hall, Inc.
  6. 6. Dimensions of the External Environment Copyright 2004 Prentice Hall, Inc.
  7. 7. What Is the Economic Environment? Conditions of the economic system in which an organization operates Copyright 2004 Prentice Hall, Inc.
  8. 8. Key Goals of a Country’s Economic System <ul><li>Economic Growth </li></ul><ul><ul><li>Aggregate Output and Standard of Living </li></ul></ul><ul><ul><li>Gross Domestic Product </li></ul></ul><ul><ul><ul><li>Real Growth Rate </li></ul></ul></ul><ul><ul><ul><li>GDP per Capita </li></ul></ul></ul><ul><ul><ul><li>Real GDP </li></ul></ul></ul><ul><ul><ul><li>Purchasing Power Parity </li></ul></ul></ul><ul><ul><li>Productivity </li></ul></ul><ul><ul><li>Balance of Trade </li></ul></ul><ul><ul><li>National Debt </li></ul></ul><ul><li>Economic Stability </li></ul><ul><ul><li>Inflation </li></ul></ul><ul><ul><ul><li>Measuring Inflation: The CPI </li></ul></ul></ul><ul><ul><li>Unemployment </li></ul></ul><ul><ul><ul><li>Recessions and Depressions </li></ul></ul></ul>Copyright 2004 Prentice Hall, Inc.
  9. 9. Aggregate Output and Standard of Living <ul><li>Business cycle is a pattern of short-term ups and downs ( expansions and contractions ) in an economy </li></ul><ul><li>Aggregate output is the total quantity of goods and services produced by an economic system during a given period </li></ul><ul><li>Standard of living is the total quantity and quality of goods and services that a country’s citizens can purchase with the currency used in their economic system </li></ul>Copyright 2004 Prentice Hall, Inc.
  10. 10. Gross Domestic Product <ul><li>GDP , or gross domestic product , is the total value of all goods and services produced within a given period by a national economy through domestic factors of production </li></ul><ul><li>GNP , or gross national product , is the total value of all goods and services produced by a national economy within a given period regardless of where the factors of production are located </li></ul>Copyright 2004 Prentice Hall, Inc.
  11. 11. What Is Purchasing Power Parity? Principle that exchange rates are set so that the prices of similar products in different countries are about the same Copyright 2004 Prentice Hall, Inc.
  12. 12. What Is Productivity? Measure of economic growth that compares how much a system produces with the resources needed to produce it Copyright 2004 Prentice Hall, Inc.
  13. 13. What Is Balance of Trade? Economic value of all the products that a country exports minus the economic value of imported products Copyright 2004 Prentice Hall, Inc.
  14. 14. What Is National Debt? Amount of money that a government owes its creditors Copyright 2004 Prentice Hall, Inc.
  15. 15. What Is Stability? Condition in an economic system in which the amount of money available and the quantity of goods and services produced are growing at about the same rate Copyright 2004 Prentice Hall, Inc.
  16. 16. What Is Inflation? Occurrence of widespread price increases throughout an economic system Copyright 2004 Prentice Hall, Inc.
  17. 17. When Did the Cost of a Hamburger Go Up? Copyright 2004 Prentice Hall, Inc.
  18. 18. Measuring Inflation: The CPI Measure of the prices of typical products purchased by consumers living in urban areas Copyright 2004 Prentice Hall, Inc.
  19. 19. Selected CPI Values Copyright 2004 Prentice Hall, Inc.
  20. 20. What Is Unemployment? Level of joblessness among people actively seeking work in an economic system Copyright 2004 Prentice Hall, Inc.
  21. 21. Recessions and Depressions <ul><li>Recession is a period during which aggregate output, as measured by real GDP, declines </li></ul><ul><li>Depression is a particularly severe and long-lasting recession </li></ul>Copyright 2004 Prentice Hall, Inc.
  22. 22. Managing the Economy <ul><li>Fiscal policies determine how the government collects and spends its revenues </li></ul>Copyright 2004 Prentice Hall, Inc.
  23. 23. Managing the Economy Copyright 2004 Prentice Hall, Inc. <ul><li>Monetary policies determine the size of a nation’s monetary supply </li></ul>
  24. 24. Managing the Economy Copyright 2004 Prentice Hall, Inc. <ul><li>Stabilization policy embraces both fiscal and monetary policies—the goal is to smooth out fluctuations in output and unemployment and to stabilize prices </li></ul>
  25. 25. The Global Economy in the 21 st Century <ul><li>Major forces driving the economy: </li></ul><ul><li>The information revolution will continue to enhance productivity across all economic sectors. </li></ul><ul><li>New technological breakthroughs will create entirely new industries. </li></ul><ul><li>Increasing globalization will create much larger markets while fostering tougher competition among global businesses. </li></ul>Copyright 2004 Prentice Hall, Inc.
  26. 26. Internet Users per 1,000 People Copyright 2004 Prentice Hall, Inc.
  27. 27. Information -Technology Spending Copyright 2004 Prentice Hall, Inc.
  28. 28. The Export Resurgence Copyright 2004 Prentice Hall, Inc.
  29. 29. What Is Technology? All the ways by which firms create value for their constituents Copyright 2004 Prentice Hall, Inc.
  30. 30. Product and Service Technologies Technologies employed for creating products—both physical goods and services—for customers Copyright 2004 Prentice Hall, Inc.
  31. 31. Business Process Technologies <ul><li>Business process technologies are used not so much to create products as to improve a firm’s performance of internal operations. </li></ul><ul><ul><li>Enterprise Resource Planning , or ERP , is a large-scale information system for organizing and managing a firm’s processes across product lines, departments and geographic locations </li></ul></ul>Copyright 2004 Prentice Hall, Inc.
  32. 32. ERP Applications Copyright 2004 Prentice Hall, Inc.
  33. 33. What Is the Political-Legal Environment? Conditions reflecting the relationship between business and government Copyright 2004 Prentice Hall, Inc.
  34. 34. What Is the Sociocultural Environment? Conditions including the customs, mores, values and demographic characteristics of the society in which an organization functions Copyright 2004 Prentice Hall, Inc.
  35. 35. Customer Preferences and Tastes <ul><li>Customer preferences and tastes vary both across and within national boundaries. </li></ul><ul><li>Consumer preferences can vary widely within the same country. </li></ul><ul><li>Consumer preferences and tastes change over time. </li></ul>Copyright 2004 Prentice Hall, Inc.
  36. 36. The Business Environment <ul><li>Redrawing Corporate Boundaries </li></ul><ul><ul><li>Core competencies are the skills and resources with which an organization competes best and creates the most value for owners </li></ul></ul><ul><ul><ul><li>Disruption management is a method by which some organizations are responding to crises in their environments </li></ul></ul></ul>Copyright 2004 Prentice Hall, Inc.
  37. 37. Emerging Challenges and Opportunities in the Business Environment <ul><li>Outsourcing is the strategy of paying suppliers and distributors to perform certain business processes or to provide needed materials or services </li></ul><ul><li>Viral marketing is a strategy of using the Internet and word-of-mouth marketing to spread product information </li></ul><ul><li>Business process management is an approach by which firms move away from department-oriented organization and toward process-oriented team structures that cut across old departmental boundaries </li></ul>Copyright 2004 Prentice Hall, Inc.
  38. 38. The Aftermath of 9/11 <ul><li>Resilience of U.S. institutions </li></ul><ul><li>Flexibility and strength—and flaws– inherent in the U.S. political and economic systems </li></ul><ul><li>Government as provider of homeland security </li></ul><ul><li>Issues of workplace security </li></ul>Copyright 2004 Prentice Hall, Inc.

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