* * Managing Within The Dynamic Business Environment: Taking Risks and Making Profits * * Nickels McHugh McHugh CHAPTER

Transcription

1 McGraw-Hill/Irwin Understanding Business, 8e Nickels McHugh McHugh Managing Within The Dynamic Business Environment: Taking Risks and Making Profits The McGraw-Hill Companies, Inc., All Rights Reserved. CHAPTER

2 Learning Objectives Business Profit Entrepreneurship Risk and Rewards Profit Revenue Loss Standard of Living/Quality of Life Stakeholders Nonprofit Organizations 1-2

3 Business & Entrepreneurship A BUSINESS is any entity that seeks to provide goods and services to others while operating at a profit. PROFIT is the amount a business earns above and beyond what it spends for salaries and other expenses. An ENTREPRENEUR is a person who risks time and money to start and manage a business. Businesses provide people with the opportunity to become wealthy. 1-3

4 MATCHING RISK WITH PROFIT PROFIT is revenue minus expenses. REVENUE is the total amount of money a business takes in during a given period by selling goods and services. A LOSS occurs when a business s expenses are more than its revenues. Approximately 80,000 businesses in the U.S. fail each year, although this number may be overstated. RISK is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable. (what does it mean that : REWARDS AND RISK ARE RELATED. The more risks you take, the higher the rewards may be. 1-4

5 STANDARD OF LIVING AND QUALITY OF LIFE. Entrepreneurs provide employment for other people. They PAY TAXES that are used for schools, hospitals, and other facilities. Businesses are a part of an economic system that helps to create a higher standard of living and quality of life for everyone. STANDARD OF LIVING refers to the amount of goods and services people can buy with the money they have. QUALITY OF LIFE refers to the general well-being of a society in terms of political freedom, a clean natural environment, education, health care, free time, and everything else that leads to satisfaction and joy. 1-5

6 BUSINESS STAKEHOLDERS. Explain how each of the following is important to the business. Stakeholders include Customers. Employees. Stockholders. Suppliers. Bankers. Local community. Environmentalists. Elected leaders. 1-6

7 Objectives of Business Survival Growth Profit Social Responsibility 1-7

8 Creating Wealth: Factors of Production Land: Natural resources Labor: Workers Capital: Machines, tools, and buildings; but not money Entrepreneurship: Time & Risk Knowledge: Education & Creativity 1-8

9 ENTREPRENEURSHIP VERSUS WORKING FOR OTHERS. What are two ways to succeed in the business world? Rise up through the ranks of a large company. Start your own business. 1-9

10 Business Environment Global Business Economic & Legal Social Technology Competitive 1-10

11 Economic & Legal Environment Why is it important for firms to conduct business Freely? $ Minimum taxes and regulations $ Freedom of ownership $ Contract laws $ Currency regulations $ Elimination/minimization of corruption 1-11

12 The economic and legal environment. 1. People are willing to take the risk of starting businesses if they feel that the risk is not too great. 2. Entrepreneurs are looking for a high Return on investment (ROI) 3. Governments can lessen the risk of starting a businesses. (How so?) 4. Corrupt and illegal activities negatively affect the business community and the economy. (Explain?) 1-12

13 THE TECHNOLOGICAL ENVIRONMENT. 1. The Internet and E-Commerce is a major force in business today. (Almost a necessity) 2. Technology greatly improve productivity. What are some of the latest technology innovations you can think about? 3. Farmers use technology to increase production and profit. 1-13

14 THE COMPETITIVE ENVIRONMENT. 1. Quality products and Outstanding service at competitive prices. 2. Competing by exceeding customer expectations. (Delivery and set up) 3. Business is becoming customer-driven. 4. Successful companies are those that listen to customers. 1-14

15 THE SOCIAL ENVIRONMENT 1. An increasing number of population in the future will be minorities. 2. How did businesses respond to this trend? Businesses have responded by hiring a more diverse workforce. 3. The number of older worker is increasing. (WHY?) 4. Two-income families is also increasing. 5. Single-Parent Families is increasing. 1-15

16 THE GLOBAL ENVIRONMENT. Growth of international competition. Competition from global companies producing better-quality products has hurt many U.S. industries. Countries such as China and Mexico can produce quality goods at low prices. Why? Their workers are paid less than U.S. workers. 1-16

17 Least Corrupt 1. Denmark 2. Finland 3. New Zealand 4. Singapore 5. Sweden Corrupt Countries Most Corrupt 1. Somalia 2. Iraq 3. Haiti 4. Sudan 5. Afghanistan What impact does corruption have on business? Businesses do not flourish creating a very negative business environment Which countries tend to be most corrupt? Most corrupt countries tend to be the developing third world countries. 1-17

18 U.S. Household Size 1. What trend do you see here? 2. Why is that important to businesses? Number of Persons Source: U.S. Census Bureau

19 Buying Power of Diverse Groups One general advertisement for all consumers misses potential market opportunities. Women African Americans Hispanic Americans Gay Men & Lesbians Asian Americans Native Americans $3,700 Billion 761 Billion 686 Billion 610 Billion 397 Billion 51 Billion 1-19

20 21 st Century Diversity Issues Social issues facing American Business in the 21st Century. Race Gender Ethnicity Disability Age Language Religion Sexual Orientation Why is it important for business to understand these issues? Businesses can identify new opportunities 1-20

21 Older Americans Working Why are older American working longer? 80% 70% 60% 50% 40% 30% Female Male 20% 10% 0% Source: USA Today

22 Americans Living Longer U.S. life expectancy rises to a record high 77.9 years The number of deaths dropped by 50,000 in 2004 from 2003, the steepest decline since 1938 By 2005, about one in eight Americans will be 65 or older. By 2025, it will be nearly one in five s 2004 U.S. Deaths Source: Investor s Business Daily, December 8, 2003; Cumberland Times-News, April 20, 2006; U.S. Centers for Disease Control and Prevention; U.S. Census 1-22

23 Checking for Understanding Why is it important for firms to conduct business Freely? How can government help small businesses? What is the downfall of not having a presence online? What are some of the ways that businesses have responded to a change in demographics? 1-23

24 Global Environment International Competition and Free Trade Improvements in Transportation and Communication War & Terrorism Global Changes 1-24

25 The Economic Cost of Disaster Disaster Costs Hurricane Katrina 2005 (estimate)$ 200 B Kobe, Japan Earthquake September 11, 2001 Attacks Northridge, CA Earthquake 1994 Hurricane Andrew B 70 B 44 B 35 B Source: Business 2.0, November 2002; MSNBC.com, September 10,

26 Does Global Experience Help Your Career? 5% No Response 19% Unnecessary Somewhat 20% 56% Very Helpful Source: USA Today 1-26

27 Evolution of American Business Agricultural/Manufacturing Service Industries Future??? 1-27

28 Rise of Information & Communication Technology Globalization Trends in Business Doing Business 24/7 Educated Consumers Aging Workforce Increasing Diversity Pyramid vs. Web Self-Directed, Empowered Employees Communication Skills Decision-Making Skills Teamwork Leadership Continual Learning Source: Keying In- Newsletter of the National Business Education Association, March

29 Leveraging Diverse Workforce According to the Society for Human Resources survey, about 70 percent of the respondents actively leverage workforce diversity through: Ensuring leadership development programs reach all employees (40%) Meeting the needs of diverse customers (39%) Integrating diversity into the organization s business strategy (35%) Increasing innovation by tapping employees of all backgrounds (34%) Source: SHRM Weekly Survey, August 3,

30 Skill Level Required Average Skill Level: % 40% 2% Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Source: Hudson Institute as reported in Arnold Packer, Retooling the American Worker, Washington Post 1-30

31 Current Skill Level 70.5% Average Skill Level: % 16.1% 6.6% Level 1 Level 2 Level 3 Level 4 Level 5 Level

32 True or False STANDARD OF LIVING refers to the general well-being of a society in terms of political freedom, a clean natural environment, education, health care, free time, and everything else that leads to satisfaction and joy. 1-32

33 True or False QUALITY OF LIFE refers to the amount of goods and services people can buy with the money they have. 1-33

34 Please make your selection A) Customers B) Suppliers C) Employees D) All of the above 1-34