Part 1 Business in a Changing World

Transcription

1 Part 1 Business in a Changing World 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

2 1-2 CHAPTER 1 The Dynamics of Business and Economics APPENDIX A Guidelines for the Development of the Business Plan CHAPTER 2 Chapter Titles Business Ethics and Social Responsibility APPENDIX B The Legal and Regulatory Environment CHAPTER 3 Business in a Borderless World

3 1-3 Learning Objectives LO 1-1 LO 1-2 LO 1-3 LO 1-4 LO 1-5 LO 1-6 Define basic concepts such as business, product, and profit. Identify the main participants and activities of business and explain why studying business is important. Define economics and compare the four types of economic systems. Describe the role of supply, demand, and competition in a free enterprise system. Specify why and how the health of the economy is measured. Trace the evolution of the American economy and discuss the role of the entrepreneur in the economy. LO 1-7 Evaluate a small-business owner s situation and propose a course of action.

4 1-4 The Nature of Business Business Individuals or organizations who try to earn a profit by providing products that satisfy people s needs Products Goods or services with tangible and intangible characteristics that provide satisfaction and benefits

5 1-5 A Product Can Be Tangible Goods Automobile Computer Phone Coat Services Dry cleaning Doctor s checkup Basketball game Concert Ideas Professionals generate ideas for solving problems

6 1-6 The Goal of Business The goal of business is to earn a profit $ The difference between what it costs to make and sell a product and what a customer pays for it $10 sale $8 to make = $2 profit $ Earning profits contributes to society by providing employment, which in turn provides money that is reinvested in the economy $ Profits must be earned in a responsible manner

7 1-7 Nonprofit Organizations Nonprofit Organizations Provide goods and services Do not share the purpose of earning profits Engage in management, marketing and finance to reach goals

8 1-8 To Earn a Profit Management Skills Acting Ethically Marketing Expertise Profit Adapting to Change Financial Resources Abiding by the Law

9 1-9 Stakeholders ~ Groups that have a stake in the success and outcomes of a business ~ Customers, employees, investors, government regulators, and community. ~ To achieve and maintain profitability, businesses must produce quality products, operate efficiently, and be socially responsible and ethical in dealing with stakeholders Consumers are often willing to pay more for products they perceive as environmentally-friendly

10 1-10 Sprint s Buyback Program Concerns about landfills becoming high-tech graveyards plague many electronics firms Sprint was the first wireless company to have a buyback program for customers to turn in their used mobile devices in exchange for up to $300 in credit Cleans and updates the device Sells them as refurbished phones at a lower cost Reached developing markets because these devices are in high demand for an affordable price Unusable devices are sent to a 3 rd party for recycling The EPA has recognized the program as one of the best

11 1-11 Overview of the Business World

12 1-12 Management Management is concerned with: o Acquiring o Developing o Using resources (including people) effectively and efficiently Control Tasks Plan Managers Organize Staff

13 1-13 Marketing Determine customer needs Plan and develop product The focus of all marketing activities is satisfying customers Determine place Determine promotion Determine distribution Determine price

14 1-14 Finance The owner is primarily responsible for obtaining financial resources for the operation of the business, including: Obtaining money Using money effectively

15 1-15 Why Study Business? Develop skills for career success Become a well-informed consumer and member of society Business career opportunities: Marketing Human resources management Information technology Finance Production and operations Wholesaling and retailing And more

16 1-16 Bill Daniels Bill Daniels founded Cablevision, building his first cable TV system in 1953 and is considered the father of cable television He established a foundation that currently has funding of $1.1 billion Supports diversity of causes from education to business ethics Created Young Americans Bank for children to learn about financial responsibility Remains the world s only carter bank for young people Created Daniels College of Business through donation of $20 million to University of Denver

17 1-17 Economics Economics The study of how resources are distributed for the production of goods and services within a social system The Young Americans Bank in Denver is the only bank in the world that lends money to individuals under the age of 22

18 1-18 Economic Foundations of Business Natural Resources Land, forests, mineral, water, and other things not made by people Human Resources also called Labor The physical and mental abilities people use to produce goods and services Financial Resources also called Capital The funds used to acquire the natural and human resources needed to provide products Intangible Resources Such as a good reputation for quality products or being socially responsible

19 1-19 Economic Systems Economic System A description of how a particular society distributes its resources to produce goods and services All economic systems must address these 3 important issues: 1. What goods and services, and how much of each, will satisfy consumers needs? 2. How will goods and services be produced, who will produce them, and with what resources will they be produced? 3. How are the goods and services to be distributed to consumers?

20 1-20 Communism Communism First described by Karl Marx as a society in which the people, without regard to class, own all the nation s resources On paper it appears efficient, but in practice, these economies suffer from: low standards of living critical shortages of consumer goods high prices corruption and little freedom C H I N A C U B A

21 1-21 Socialism Socialism An economic system in which the government owns and operates basic industries but individuals own most businesses Most socialist countries are democratic and recognize individual freedoms The socialist system may allow a higher standard of living and is more stable; but taxes and unemployment are generally higher in socialist countries S W E D E N I S R A E L I N D I A

22 1-22 Capitalism Capitalism, or Free Enterprise An economic system in which individuals own and operate the majority of businesses that provide goods and services Pure capitalism or free-market system happens when all economic decisions are made without government intervention; also called laissez-faire capitalism Modified capitalism differs from pure capitalism in that the government intervenes and regulates business to some extent C A N A D A U S A J A P A N

23 1-23 Comparison of Communism, Socialism, and Capitalism

24 1-24 Mixed Economies No country practices pure capitalism, socialism, or communism Mixed Economies Economies made up of elements from more than one economic system No country practices a pure form of any economic system, although most favor one system over others China and Russia have used state capitalism to advance the economy, integrating the powers of the state with the advantages of capitalism

25 1-25 Modified Capitalism Modified capitalism differs from pure capitalism in that the government intervenes and regulates business to some extent Enforces antitrust laws and monitors businesses to ensure fair competition One way of regulating business is through laws Federal Trade Commission Act created the Federal Trade Commission Importance of government s role in economy

26 1-26 The Free-Enterprise System Many large economies are free-enterprise including the U.S., Canada and Japan An entrepreneur presents his idea for a new product. Entrepreneurs are more productive in free-enterprise systems. Many communist and socialist countries apply free-enterprise principles including China and Russia Free enterprise allows a company to succeed or fail on the basis of market demand

27 1-27 Individual and Business Rights Basic individual and business rights which must exist in order to motivate companies to succeed Right to own property Right to earn profits and use them as one wishes Right to determine business operations Right to choose Career to pursue Where to live or where to locate a business What goods/services to purchase and more

28 1-28 The Forces of Supply and Demand Supply The number of products businesses are willing to sell at different prices at a specific time The number of products consumers are willing to buy at different prices at a specific time Demand

29 1-29 Equilibrium Price Equilibrium price is the price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time

30 1-30 Supply and Demand Critics of supply and demand say the system does not distribute resources equally The forces prevent sellers who have to sell at higher prices and buyers who cannot afford to buy goods at the equilibrium price from participating in the market

31 1-31 Marriott International Competition should improve the quality of the goods and services available or reduce prices Marriott International went from small root beer stand in 1927 to its current status of 3,900 high-quality hotels in 72 countries If treat employees well then they would provide good service to customers Competing to attract younger travelers with: Reinvented lobbies with amenities Convenient ways to check in and out Significantly expanding in Africa and Asia capitalizing on new market opportunities

32 1-32 The Nature of Competition Competition is the rivalry among businesses for consumer s dollars Pure Competition Monopolistic Competition Oligopoly Monopoly The market structure that exists when there are many small businesses selling one standardized product Fewer businesses than in a pure competition and the differences among the goods they sell are small The market structure that exists when there are very few businesses selling a product The market structure that exists when there is only one business providing a product in a given market

33 1-33 Economic Cycles and Productivity May lead to inflation a continuing rise in prices May lead to recession a decline in production, employment and income Economic expansion occurs then an economy is growing and people are spending more money; their purchases stimulate the production of goods and services, which in turn stimulates employment Economic contraction is a slowdown of the economy characterized by a decline in spending and during which businesses cut back on production and lay off workers

34 1-34 Economic Cycles and Productivity (cont.) Recessions are often characterized by rising levels of Unemployment the condition in which a percentage of the population wants to work but is unable to find jobs Deflation occurs when rising unemployment stifles demand, forcing prices down Severe recession may turn into a Depression a condition of the economy in which unemployment is very high, consumer spending is low, and business output is sharply reduced

35 1-35 Hyperinflation Inflation can be harmful if individuals incomes do not increase at the same pace as rising prices, reducing their buying power The worst case of hyperinflation occurred in Hungary in 1946 At one point, prices were doubling every 15.6 hours One of the most recent cases of hyperinflation occurred in Zimbabwe Suffered from hyperinflation so severe that its inflation percentage rate rose into the hundreds of million The elimination of the Zimbabwean dollar and certain price controls, the inflation rate began to decrease

36 1-36 Measuring the Economy Gross Domestic Product (GDP) The sum of all goods and services produced in a country during a year Does not include profits from companies overseas operations Budget Deficit The condition in which a nation spends more than it takes in from taxes U.S. budget deficit has recently grown to record levels; remedies include raising taxes or reduce spending

37 1-37 Gross Domestic Product (GDP) In 2008 the System of National Accounts (SNA) serves as a set of standards by which to measure economic activity in every country Overseen by the United Nations (UN) Broadened the definition of assets to include intellectual property (IP) such as patents Over the last decade investments in research and development have spurred new products that have contributed to the GDP making them an important asset While the calculations are still difficult, Canada and the United States have included IP in their GDP Other countries are expected to follow

38 1-38 Evaluating Our Economy See the U.S. Public Debt to the Penny

39 1-39 The American Economy Early Economy Industrial Revolution Manufacturing and Marketing Economies Service and Digital Economy Agricultural economy People produced everything they needed at home New technologies and factories Factories combined material, machines and workers Assembly line production and concern with customer needs The U.S. is a service economy and technology is leading us into a new digital economy DID YOU KNOW? Approximately 59 percent of adult women are engaged in the workforce

40 1-40 Mobile Payment Systems Google Wallet is a mobile payments system Allows users to store their credit card or debit card information When checking out at stores, users can bring up the app and use the information to pay for their purchases Apple Inc. has released its version of a mobile payment system called Apple Pay

41 1-41 The Role of the Entrepreneur 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

42 1-42 The Role of Government in the American Economy The U.S. economy is best described as modified capitalism because: The government regulates industry to encourage competition and protect stakeholders like consumers, employees, or the environment Laws force businesses to adhere to government standards Government agencies like the U.S. Department of Commerce or the Federal Reserve Board occasionally intervene to regulate the economy and spur growth

43 1-43 The Role of Ethics and Social Responsibility in Business Business ethics are standards set by society Stakeholders demand ethical and socially responsible behavior Reputation depends on profit and ethics and social responsibility

44 1-44 Can You Learn Business in a Classroom? Absolutely! To be successful in business, you need: Knowledge Skills Experiences and Good judgment

45 1-45 Solve the Dilemma Mrs. Acres Homemade Pies Produces specialty pies and sells them in local supermarkets and family restaurants In each of the first six months sold 2,000 pies for $4.50 each netting $1.50 profit/pie Had problems keeping up with demand To meet demand expanded operations, borrowed money, and increased staff Production and sales increased to 8,000 pies/month, and profits soared to $12,000 per month

46 1-46 Solve the Dilemma Mrs. Acres Homemade Pies (cont.) Shelly has several options: Maintain current production levels and raises prices Expand the facility and staff while maintaining the current price Contract the production of the pies to a national chain, giving Shelly a percentage of profits with minimal involvement Discussion Questions Explain and demonstrate the relationship between supply and demand for Mrs. Acres Pies. What challenges does Shelly face as she considers the 3 options? What would you do in Shelly s position?

47 1-47 Discussion? What is the fundamental goal of business? Do all organizations share this goal?? Who are the main participants of business? What are the main activities? What other factors have an impact on the conduct of business in the United States?? Explain the terms supply, demand, equilibrium price, and competition. How do these forces interact in the American economy?? List and define the various measures governments may use to gauge the state of their economies. If unemployment is high, will the growth of GDP be great or small?