Chapter one (fundamental of business)


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  • A business tries to earn a profit by providing products that satisfy people’s need. The outcome of its efforts are products that have both tangible and intangibles characteristics that provide satisfaction and benefits. When you purchase a product, you are buying the benefits and satisfaction you think the product will provide.
  • To earn a profit, a person or organization needs management skills to plan, organize and control the activities of the business and to find a develop employees so that it can make products consumer will buy. A business also need marketing expertise to learn what products consumers need and want and to develop, manufacture, price, promote and distribute those products. To achieve and maintain profitability, business have found that they must produce quality products, operate efficiently, and be socially responsible and ethical in dealing with customers, employees, investors, government regulators, the community and society. Because these groups have a stake in the success and outcomes of a business, there are sometimes called stakeholder.
  • Natural resources are the thing that not made by people such as land, forest, mineral and water. Human resources are the physical and mental abilities that people use to produce goods and services; also called labor. The funds used to acquire the natural and human resources needed to provide products; also called as capital known as financial resources. Since natural, human and financial resources are used to produce goods and services, they also called as factors of production. The firm can also have intangible resources such as a good reputation for quality products or being socially responsible. The goal is to turn the factors of production and intangible resources into a competitive advantage.
  • Poland and Hungary for example want to trade with Western nations so that they can acquire new technology and techniques to revitalize their formerly communist economies which goods and services a nations sell depends on what resources it has available.
  • Chapter one (fundamental of business)

    1. 1. CHAPTER ONE BUSINESS IN CHANGING WORLD Prepared by: Thomas Joluis
    2. 2. COURSE OUTLINE 1. The Dynamic of Business and Economics 2. Business Ethics and Social Responsibility 3. Business in a Borderless World
    3. 3. 1. The Dynamic of Business and Economics A solid understanding of business is necessary for anyone who wants to start their own company or work in business field.
    4. 4. The Nature of Business • To create profits by: – Selling products – Cars, food, clothing – Providing services – Healthcare, insurance • Products have both tangible and intangible characteristics.
    5. 5. The Goal of Business • The primary goal of all business is to earn a profit. • Earning profits contributes to society by providing employment, which in turn provides money that reinvested in the economy. • But, not all organizations are business. (Red Cross, Special Olympics are nonprofit organizations)
    6. 6. Business vs. Nonprofit Organization Business An individual or organization that tries to earn a profit by providing products that satisfy people’s needs, ex. Coca-Cola. Nonprofit Organization Provides products, especially services, for some purpose other than profits, ex. Red Cross
    7. 7. To earn a profit, a person or organization needs: management skills marketing expertise Stakeholder: customers, employees, investors, government regulators, the community and society. Because these groups have a stake in the success and outcomes of a business.
    8. 8. The economic foundations of business Economics is the study of how resources are distributed for the production of goods and services within a social system. 3 types of resources: Natural land, forests, etc. (not made by people) Human physical/mental abilities used by people to produce goods and services Financial funds necessary to acquire needed natural and human resources
    9. 9. What Is An Economic System? • The way a society distributes its resources to produce goods and services. • Addresses the issue of how to fulfill unlimited demand with limited supply of resources.
    10. 10. Types of Economic Systems • Communism • Socialism • Capitalism
    11. 11. Comparison of Communism, Socialism, and Capitalism Communism Socialism Capitalism Business Ownership Most businesses are owned and operated by the government. The government owns and operates major industries; individuals own small businesses. Individuals own and operate all businesses. Competition None. The government owns and operates everything. Restricted in major industries; encouraged in small business. Encouraged by market forces and government regulations. Profits Excess income goes to the government. Profits earned by small businesses may be reinvested in the business; profits from government-owned industries go to the government. Individuals are free to keep profits and use them as they wish.
    12. 12. Communism Socialism Capitalism Product availability and price Consumers have a limited choice of goods and services; prices are usually high. Consumers have some choice of goods and services; prices are determined by supply and demand. Consumers have a wide choice of goods and services; prices are determined by supply and demand. Employme nt options Little choice in choosing a career; most people work for government- owned industries or farms. Some choice of careers; many people work in government jobs. Unlimited choice of careers.
    13. 13. Economic Systems and Where They Occur Communism: Socialism: Capitalism: China Sweden United States North Korea India Canada Cuba France Australia Vietnam Israel Japan
    14. 14. Mixed Economies Most countries of the world have elements of more than one economic system.
    15. 15. The Free-Enterprise System • Individuals can own property and pass it on to their heirs. • People and businesses can earn profits and use them as they wish. • Individuals and businesses can determine how their businesses operate. • Individuals can choose their career, where to live, and what to buy.
    16. 16. Supply and Demand • Supply: – The number of products business is willing to sell at different prices at a specific time. – An upward sloping curve on a graph. • Demand: – The number of goods and services that customers are willing to buy at different prices at a specific time. – A downward sloping curve on a graph.
    17. 17. Supply, 50 Demand, 10 0 10 20 30 40 50 60 10 20 30 40 50 Price(RM) Quantity (unit) Equilibrium price of Plastic Chair
    18. 18. 2. Business Ethics and Social Responsibility Comparison of Business Ethics and Social Responsibility Business Ethics: The principles and standards that define acceptable conduct in business. Social A business’s obligation to Responsibility: maximize its positive impact and minimize its negative impact on society.
    19. 19. Ethical Issue An identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical. © FAST FACT: The most common types of observed misconduct are lying, withholding information, and abusive / intimidating behavior.
    20. 20. Business law • refers to the laws and regulations that govern the conduct of business. • Many problems and conflicts in business can be avoided by owners, manager and employees know more about business law and the legal system. • Business ethics, social responsibility, and law together act as a compliance system, requiring the businesses an employee’s act responsibly to society.
    21. 21. The role of ethics in business Ethical conduct builds trust among individuals and in business relationships, which validate and promotes confidence in business relationships.
    22. 22. Ethical Issue Categories abusive and intimidating behavior conflict of interest  fairness and honesty  communications  misuse of company resources  business associations.
    23. 23. Abusive and intimidating behavior • Physical threats • False accusations • Profanity • Insults /Yelling /Harshness • Unreasonableness to ignoring someone
    24. 24. Conflict of interest Occurs when a person must choose whether to advance their own personal interest or those of others. • Bribes – payments, gifts, or special favours intended to influence the outcome of a decision
    25. 25. Fairness and honesty Are at the heart of business ethics and relate to the general values of decision makers. • Disobey the law • Discriminating • Harm the customer, employees, clients or competitors • Disclosure information • Cheating
    26. 26. Communications False and misleading advertising and deceptive personal-selling tactics anger customers and may cause a business to fail.
    27. 27. Misuse of company resources ‘steal’ office hour – late arrival, early leaving, long lunch break, inappropriate sick days, excessing socializing, engaging personal activities (online shopping while on the job)
    28. 28. Business associations • Disclosure information of the company • Plagiarism – the act of taking someone else’s work and presenting is as your own without mentioning the sources
    29. 29. Three Factors that Influence Business Ethics Individual Standards and Values Opportunity: Codes and Compliance Requirements Managers’ and Coworkers’ Influence Ethical/Unethical Choices in Business
    30. 30. Codes of Ethics • Formalized rules and standards that describe what a company expects of its employees. FAST FACTS: Written ethics standards are more often found in larger companies than smaller ones.
    31. 31. In order to develop code of ethics, there are key thing that must be consider. • Create a team to assist with the process of developing the code (include management and non-management employees from across departments and functions). • Solicit input from employees from different departments, functions, and region to compile a list of common questions and answers to include in the code document.
    32. 32. • Make certain that the headings of the code sections can be easily understood by all employees. • Avoid referencing specific U. S laws and regulations or those of specific countries, particularly for codes that will be distributes to employees in multiple regions.
    33. 33. • Hold employee group meetings on a complete draft version (including graphics and pictures) of the text using language that everyone can understand. • Inform employees that they will receive a copy of the code during an introduction session. • Let all employees know that they will receive future ethics training which will, in part, cover the important information contain in the code document.
    34. 34. Whistleblowing The act of an employee exposing the employer’s wrongdoing to outsiders, such as the media or government regulatory agencies.
    35. 35. The Nature of Social Responsibility Four Dimensions: 1. Economic – earn profits 2. Legal – comply with the law 3. Ethical – not just “for profit” only 4. Voluntary & Philanthropic – promote human welfare and goodwill
    36. 36. The Pyramid of Social Responsibility Ethical Responsibilities being ethical; doing what is right, just, and fair; avoiding harm Voluntary Responsibilities being a “good corporate citizen”; contributing to the community and quality of life Legal Responsibilities obeying the law (society’s codification of right and wrong) Economic Responsibilities being profitable
    37. 37. Corporate citizenship is the extent to which business meet the legal, ethical, economic and voluntary responsibilities placed on them by their various stakeholders. It involves the activities and organizational process adopted by business to meet their social responsibilities.
    38. 38. Social responsibility issues Relations Issues Relations with owners and stockholders Fair information Protecting the owner right’s and investment Employee relations Discriminations / equal opportunity Safety and welfare Consumer relations Consumerism Customer right Sustainability issues Pollution Alternative energy Community relations Charity
    39. 39. Discussion Discuss in your group. . . Detect some of the ethical issues that may arise in business. ( 5 marks) Specify how business can promote ethical behaviour by employees. ( 5 marks)
    40. 40. Detect some of the ethical issues that may arise in business. ( 5 marks) An ethical issue is an identifiable problem, situation or opportunity requiring a person or organization to choose among several actions that must be evaluated as right or wrong. Ethical issues can be categorized in the context of their relation with: 1. conflict of interest 2. fairness and honesty 3. Communications 4. business associations.
    41. 41. Specify how business can promote ethical behaviour by employees. ( 5 marks) Business can promote ethical behaviour by employees by limiting their opportunity to engage in misconduct. 1. Formal codes of ethics, 2. Ethical policies 3. Ethics training programs Reduce the incidence of unethical behaviour by informing employees what is expected of them and providing punishment for those who fail to comply.
    42. 42. 3. Business in a Borderless World International business refers to the buying, selling, and trading of goods and services across national boundaries.
    43. 43. Why nation trade Nation and business engage in international trade to obtain raw materials and goods that are otherwise unavailable to them or are available elsewhere at a lower price than that at which they themselves can produce. A nation, or individuals and organizations from a nation, sell surplus materials and goods to acquire funds to buy the goods, services and idea its people need.
    44. 44. Absolute Advantage Absolute advantage exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item. Example: DeBeers Consolidated Mines, Ltd. (virtually controls the world’s diamond trade).
    45. 45. Comparative Advantage Comparative advantage occurs when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items. Example: U.S. agricultural commodities, such as corn and wheat.
    46. 46. Importing & Exporting Selling to foreign markets Buying from foreign markets
    47. 47. Balance of trade • Balance of trade is the difference in value between its exports and imports. • If the country have import more products than exports, it has negative balance of trade or also known as trade deficit. However, if the country exports more products than import, it has trade surplus.
    48. 48. Balance of payments The difference between the flow of money into and out of country. ( balance of trade, foreign investments, foreign aid, loans, military expenditures, and money spent by tourists) • A country with a trade surplus generally has a favorable balance of payments because it is receiving more money from trade with foreign countries than it is paying out. • When a country has trade deficit, more money flows out of country than into it. If more money flows out of the country than into it from tourism and others sources, the country may experience declining production and higher unemployment, because there is less money available for spending.
    49. 49. International Barriers • Economic • Legal/political • Social/cultural • Technological
    50. 50. Economic Barriers • The level of a country’s economic development – Industrialized nations – U.S., Japan, Great Britain – Less-developed countries – Costa Rica • The level of existing infrastructure • Currency exchange rates
    51. 51. Political & Legal Barriers • Laws and regulations • Tariffs and trade restrictions – Import tariffs, exchange controls, quotas, embargos, anti-dumping regulations • Political barriers – Political instability, cartels
    52. 52. Social & Cultural Barriers • The overall culture of a country • The culture of the marketplace • The culture of “how business is practiced” Think globally, but act locally
    53. 53. Technological Barriers Varying levels of technological development and infrastructure
    54. 54. Group Discussions Briefly explain four (4) international barriers in trading & provide examples.