Lesson 4 - Motivations of Business

Transcription

1 Lesson 4 - Motivations of Business Private Enterprise System: The US Economy is Private rather than Public Most of the resources and businesses are owned by individuals, not the government. Individuals make decisions about what they buy, where they work, and what enterprises (businesses) they are involved in. This is also known as the Free Enterprise System since people are free to make their own decisions.

2 Capitalism: The USA is rather unique. We adhere to a system called Capitalism. Capitalism is an economic and political system in which a country's trade and industry are controlled by private owners for profit. In other countries, things can be quite different.

3 Other Economic and Political Systems Communism: Communism is a system in which goods are owned in common and are available to all as needed. Socialism: Socialism is a system in which the government owns and administers the means of production and distribution of goods and services.

4 Features of the Private Enterprise System: 1. Freedom to buy. You can buy whatever you want so long as you can pay for it. 2. Freedom to produce and sell. You are free to produce any goods and services that are legal. 3. Freedom to choose a job. You choose the type of work you perform.

5 Motivation: The forces that cause businesses and consumers to act. The three freedoms are the motivations for economics in America. Freedom to Buy Freedom to Produce and Sell Freedom to Choose a Job

6 Motivations that drive business: In more specific business terms, businesses in the free enterprise are motivated by 3 things. 1. Satisfying the needs and wants of buyers: Needs and wants create demand for goods and services. 2. Competition: Contest between businesses to win consumers 3. Profit: Amount of money left over after a business pays its costs of production.

7 Satisfying the Needs & Wants of Buyers Businesses exist because consumers have needs & wants. Businesses will produce according to what consumers want. The level of a good or service which consumers desire is called Demand. Businesses will also produce what they can sell and afford to make. This is level of production is called Supply. There must be a balance met between what consumers want and what producers can make. We ll look at this in more depth in a later lesson.

8 Competition The contest or rivalry between businesses to win customers. Businesses compete in different ways: 1. Price having the lowest priced product 2. Features having the most innovative or numerous functions 3. Quality being the best in class Competition promotes efficiency and quality.

9 Profit The amount of money left over after a business has paid for the cost of production. Profit is the motivation for starting a business. Businesses must be careful of making too much in profits for they can lose customers if they charge too high of a price. To make things even more complicated, they can lose customers if they charge too little. The low price items might be viewed as cheap or of inferior quality. Setting price and profit can be tricky business indeed.

10 Who Benefits from Business? Major Stakeholders of Business 1. Business Owners 2. Employees 3. Government 4. General Society A stakeholder is anyone who has a stake in something, anyone who stands to gain or lose. Business benefits everyone. It is what makes our economy strong. Healthy Businesses = A Healthy Economy But how does it benefit each stakeholder?

11 Business Owners Benefit from Business Ways Business Owners Benefit 1. They gain income. They can in turn support themselves and their families. 2. They achieve the satisfaction of being their own boss. 3. They have the knowledge that they are providing a needed good or service.

12 Employees Benefit from Business Ways Employees Benefit 1. They earn the money they need to pay for their needs and wants. 2. They learn a skill or trade which they will be able to for a lifetime. 3. They often gain employer sponsored health insurance.

13 Government Benefits from Business Ways Government Benefits 1. All consumer spending funnels back into the government in the form of taxes; sales taxes, income taxes, etc. Because people are employed, the government gains money from the tax on their earnings and purchases. 2. Taxes pay for roads, schools, and police protection.

14 Society Benefits from Business Ways Society Benefits 1. The citizens receive employment opportunities. Small businesses provide approximate 70% of the jobs in America. 2. When people are employed they can buy goods and services. It s why we can lead the good life during periods of expansion and recovery.

15 Business & Society With great power comes great responsibility. Businesses have the duty of social responsibility. Social Responsibility: The idea that businesses should act in a responsible and fair way toward their employees and society as a whole. Doing business entails doing things ethically and morally for employees, society, and the environment.

16 Business & Society Main Areas of Social Responsibility: 1. Employment 2. Community Involvement 3. Environmental Issues

17 Social Responsibility Employment & Social Responsibility This includes all issues dealing with hiring, firing, and promoting practices. It includes things like: Discrimination Harassment Wage Disputes Working Conditions Fair Labor Standards

18 Social Responsibility Community Involvement & Social Responsibility Business alone is not enough. It s expected that a business will give back to the community which supports it. This often takes the form of: Food Banks Metro United Way Habitat For Humanity Event Sponsorship Employee & Family Scholarships And many, many, more

19 Social Responsibility Environmental Issues & Social Responsibility Businesses are required to eliminate or reduce hazards. Failure to do so will likely bring the attention of the EPA Environmental Protection Agency. This often is seen through: The promotion of recycled products. The reduction of emissions from plants and equipment. Producing energy efficient goods. Ensuring proper disposal of hazardous or toxic material.

20 Social Responsibility Recycling & Social Responsibility Green Products: Items produced with less negative impact on the environment. Green products are safe for the environment. They are often biodegradable, nontoxic, renewable and/or sustainable and meet government specifications to use such a classification.

21 Social Responsibility Why s it so important? How bad can it really be? A Civil Action Movie Case Study In-Class Assignment: Take very good notes and keep these questions in mind as you view the film. 1. What companies are involved? 2. What have they done? 3. What harm has it caused? 4. Have they acted in a socially responsible manner? 5. What happens to everyone involved? 6. How did their business actions affect their companies, their employees, their community, the government, and society as a whole?