2. part
Business in a
1
Changing World
CHAPTER 1 The Dynamics of Business and Economics
CHAPTER 2 Business Ethics and Social Responsibility
CHAPTER 3 Business in a Borderless World
FHF
3. The Nature of Business
What is a business?
Individuals or organizations trying to earn a profit by
providing products that satisfy people's needs.
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4. The Nature of Business
What is a product?
A good or service with tangible and intangible
characteristics that provide satisfaction and benefits.
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5. 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.
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6. Profit Is:
The difference between what it
[ costs to make and sell a product
and what a customer pays for it
]
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7. 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
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8. Stakeholders
Customers, employees, investors, government
[ regulators, community and society. Those that
have a stake in the success and outcomes of a
business are considered stakeholders
]
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10. The Activities of Business
Management – Focus on employees
Motivating employees toward business goals
Coordinating employee’s actions
Organizing people for efficiency
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11. Management: Production and
Manufacturing
Another element of
management
Plan activities
Organize staff
Control tasks of the
organization
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12. Marketing
Focus on satisfying customers
o Determine what products customers want
o Plan and develop products
o Determine:
Distribution
Place
Promotion
Price
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13. Finance
Finance is the primary responsibility
of owners
Obtaining money
Using money effectively
Accountants, stockbrokers, bankers
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14. 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
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15. Business Impact
Purchase raw materials
Hire employees
Attract capital
Create products
Fuel the global economy
Contribute to society
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16. The Economic Foundations
of Business
Economics
• Distribution of resources for the production of goods and
services 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)
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17. Economic Systems
How a society distributes its resources to
produce goods and services
Central issue of economics
How to fulfill an unlimited demand for goods and services
with a limited supply of resources
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18. Communism
A society in which the people, without
regard to class, own all the nation’s
resources.
China
North Korea
Cuba
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19. Socialism
System in which the government owns and
operates basic industries but individuals own
most businesses.
Sweden
Israel
India
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20. Capitalism
Free Enterprise
Individuals own and operate majority
of businesses providing goods and
services
Australia Japan United States
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21. Pure Capitalism vs
Modified Capitalism
Pure Capitalism
Free Market
All economic decisions made without government
intervention
Modified Capitalism
Government intervenes and regulates business to
some extent
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22. Mixed Economies
No country practices pure
[ capitalism, socialism, or communism. Economic
systems can be mixtures and often contain
various elements of government intervention
]
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23. The Free-Enterprise System
o Basic individual and business rights
Right to own property
Right to earn profits and use them as one
wishes (within constraints of law)
Right to make business decisions
Right to choose (careers, what goods/services
to purchase, etc.)
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24. Supply and Demand
Distribution of resources and products is
determined by supply and demand
Demand
Number of goods/services consumers buy at a given price
at a specific time
Supply
Number of products businesses will sell at different prices
at a specific time
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25. 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
Oligopoly
Very few businesses selling a product
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26. Economic Cycles &
Productivity
Economic Expansion
Economy is growing and consumers are spending
money
Economic Contraction
Spending declines, layoffs, economy slows down
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27. Economic Cycles
Inflation
Condition characterized by continuing rise in prices
Recession
Decline in production, employment, and income
Depression
Unemployment very high; consumer spending low; business
output sharply reduced
Unemployment
% of population that wants to work but unable to find jobs
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28. 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
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29. 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
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30. The Role of Government
in the U.S. Economy
Modified Capitalism
o The government regulates industry to encourage
competition and protect stakeholders like
consumers, employees, or the environment
o Laws force businesses to adhere to government
standards
o Government agencies like the U.S. Federal
Reserve Board or the Department of Commerce
occasionally intervene to regulate the economy
and spur growth
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1-30
31. Ethics & Social Responsibility
in Business
Business ethics refers to standards and
principles used by society to define
appropriate behavior at work
Stakeholders increasingly demand that
businesspeople behave ethically and
socially responsibly
Business reputation depends on profit
and ethical conduct and social
responsibility
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1-31
32. Can You Learn Business
in a Classroom?
Yes!!!
To be successful in business, you need:
Knowledge
Skills
Experiences and
Good judgment
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1-32
Editor's Notes
Most people, when they think of products, think of tangible goods. Products can be goods or services, which are intangible.
No matter how interested in social responsibility or environmentalism a business is, the primary goal of business is to make a profit. Without a profit, the business will not survive and will not be able to do any good for anyone.
Production and manufacturing is another area in which managers must be involved. Managers plan activities, organize staff and control the tasks required to carry out the organization’s work.
Marketing is more than just advertising. It involves all the activities required to develop and produce goods and services that satisfy consumers. Marketers conduct research, plan and develop products, and develop a marketing strategy and marketing mix for the products.
No matter where students’ careers lead them, a solid knowledge of business is helpful. Even in the nonprofit sector, many of the same concerns (such as marketing and accounting) play a role.
Businesses can have positive impacts on local and global economies. They create jobs and stimulate the economy; they also provide the goods and services people and organizations need.
There are many different kinds of resources that are essential to different businesses. Resources are called factors of production because they are what is needed to produce goods and services. Intangible resources are not factors of production, but they can help in building a successful business. Intangible resources might be the goodwill stakeholders have toward an ethical company, or a positive reputation for producing quality products.
The world has many different permutations of economic systems, as each society seeks to determine the best fit for them.
In Marxian Communism, everyone contributes what he/she is able and receives benefits according to need. In reality, Communist countries often struggle with shortages of basic goods, high prices, and low standards of living with little political freedom..
Central planning determines the amount of basic goods to be produced and how they are distributed. Small businesses and individuals produce other goods and services based on quantity demanded and availability of resources.
Competition and the forces of supply and demand determine which goods are produced, the quantity, distribution and price.
Even the United States has a modified capitalism system
No economic system in its pure form is practical. Therefore, most nations have developed a mix of economic systems that suits their needs.
Without these rights, businesses cannot function effectively because they will not be sufficiently motivated to succeed.
Free-enterprise systems are most concerned with the forces of supply and demand. A communist system, for example, would not be concerned with this concept because most prices are set artificially, regardless of supply.
Competition takes different forms depending on the industry and the type of product being sold.
Inflation (a continuing rise in prices) is a risk of rapid economic expansion.Recessions often characterized by rising unemployment levels– something that can make recover slower and more difficult.
Economies expand and contract in response to numerous factors– changes in consumer, business and government spending, wars or political instability, natural disasters, etc.
Early economy: Mostly an agricultural economyIndustrial Revolution: Machines and job specialization increased speed and efficiency of productionManufacturing economy: Industrialization brought it about; devoted to producing goods and servicesMarketing economy: Emerged as businesses became more concerned with the needs and wants of consumersService economy: Quality of life improved in 20th century and people hired others to perform services that made their lives easierNew digital economy: Advanced technology and the Internet have changed the pace of life and how we conduct business
Bill Gates and Warren Buffett are highly successful entrepreneurs. Can you think of others? Why are entrepreneurs important to the economy?
As mentioned earlier, the U.S. does not practice a pure form of free market capitalism. Some elements (such as the financial system) are monitored and modified though regulation and intervention.
It is increasingly important that businesses engage in social responsibility initiatives, and that they be concerned with ethics. Ethical misconduct and the ensuing loss of sales and reputation can be a death blow to a company.