introduction to management chapter 1
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Business Essentials, 8th Edition
Ebert/Griffin
Global Edition
Introduction to Management
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Planning, organizing, directing,and controlling businessoperations.
Includes various theories andpractical applications used tomaintain business sustainability
through the management ofcapital, financial, and humanresources
Business Management
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1. Business
2. Profits3. Consumer Choice and
Demand
4. Opportunity and Enterprise
The Concept of Business
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The Benefits of Business
Provide goods and services Employ workers which results in
increased quality of life and standard ofliving
Innovation and opportunities
Enhanced personal incomes of ownersand stockholders
Support for charities and communityleadership
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External Environment
Everything outside an organizationsboundaries that might affect it
1. Domestic Business,
2. Global Business,
3. Technological,
4. Political-legal,
5. Sociocultural, And
6. Economic Environments
The External Environments ofBusiness
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1. Domestic Business Environment
The environment in which a firm conducts
its operations and derives its revenues by: Seeking to be close to customers
Building relationships with suppliers
Distinguishing itself from competitors
The External Environments ofBusiness (cont.)
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2. Global Business Environment
The international forces that affect abusiness:
International trade agreements
International economic conditions
Political unrest
International market opportunities
Suppliers
Cultures
Competitors
Currency values
The External Environments ofBusiness (cont.)
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3. Technological Environment
All the ways by which firms createvalue for their constituents:
Human knowledge
Work methods
Physical equipment
Electronics and telecommunications
Various business activity processing systems
The External Environments ofBusiness (cont.)
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Political-Legal Environment The relationship between business and the
government; laws regulate what anorganization can and cannot do in manyareas including:
Products Advertising practices
Safety and health considerations
The External Environments ofBusiness (cont.)
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Sociocultural Environment
The customs, mores, values, anddemographic characteristics of the
society
The standards of business conduct asociety is likely to accept
The External Environments ofBusiness (cont.)
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Economic Environment
The relevant conditions that exist in theeconomic system in which a companyoperates.
The External Environments ofBusiness (cont.)
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Economic System A nations system for allocating its resources amongits citizens, both individuals and organizations
Factors of Production Labor
Capital
Entrepreneurs
Physical resources
Information resources
Economic Systems
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Planned Economy
Market Economy
Two Types of EconomicSystems
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Planned Economy
- Communism individualscontribute according to their abilitiesand receive benefits according to theirneeds.
Types of Economic Systems
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Market Economics
Capitalism
Market Mixed Market Economy
Privatization
Socialism
Types of Economic Systems(cont.)
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1. Demand2. Supply
The Laws of Demand and Supply in aMarket Economy
Demand: Buyers will purchase (demand) moreof a product as its price drops and less of a
product as its price increases.
Supply: Producers will offer (supply) more of aproduct for sale as its price rises and less of aproduct as its price drops.
The Economics of Market Systems
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Demand and Supply Schedule
The relationships among different levels of
demand and supply at different price levels Demand curve: How much product will be
demanded (bought) at different prices.
Supply curve: How much product will be
supplied (offered for sale) at different prices.
Market price (equilibrium price): The price atwhich the quantity of goods demanded and thequantity of goods supplied are equal.
Demand and Supply in aMarket Economy
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Copyright 2011 Pearson Education1-18
Demand and Supply (cont.)
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Copyright 2011 Pearson Education1-19
Demand and Supply (cont.)
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Surplus A situation in which the quantity
supplied exceeds the quantity demanded
Shortage
A situation in which the quantity
demanded will be greater than thequantity supplied
Demand and Supply (cont.)
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Private Enterprise System Allows individuals to pursue their own
interests with minimal governmentrestriction.
Elements of a Private EnterpriseSystem Private property rights
Freedom of choice Profits
Competition
Private Enterprise in a MarketEconomy
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These are the four degrees of perfectcompetition.
1. Perfect Competition.2. Monopolistic Competition.3.
Oligopoly.4. Monopoly.
Degrees of Competition
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1. Perfect Competition
No single firm is powerful enough toinfluence the price of its product.
All firms in an industry are small.
The number of firms in the industry is large.
For example gas stations sell almost identicalproducts at almost identical prices, but are not perfectcompetition. (The cost of setting up a gas station isnot low; gas stations compete on the basis of location,not just price, etc.)
Degrees of Competition
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2. Monopolistic Competition
Numerous sellers try to differentiate theirproducts from those of competitors in an
attempt to influence price. There are many sellers, though fewer
than in pure competition.
Sellers can enter or leave the marketeasily.
The large number of buyers relative tosellers applies potential limits to prices.
Degrees of Competition(cont.)
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3. Oligopoly An industry with only a few large sellers.
Entry by new competitors is hard becauselarge capital investment is needed.
The actions of one firm can significantlyaffect the sales of every other firm in theindustry.
The prices of comparable products are
usually similar. As the trend toward globalization continues,
most experts believe that oligopolies willbecome increasingly prevalent.
Degrees of Competition(cont.)
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Monopoly
An industry or market that has only oneproducer (or else is so dominated by one
producer that other firms cannot competewith it).
Natural monopolies: Industries in whichone firm can most efficiently supply allneeded goods or services.
Degrees of Competition(cont.)
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Economic Indicators
Statistics that show whether an economicsystem is strengthening, weakening, orremaining stable
Economic Indicators
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1. Economic growth indicators2. Economic stability indicators.
3. Business Cycle
4. Aggregate Output
5. Standard of Living
6. Gross Domestic Product (GDP)
7. Gross National Product (GNP)
8. Real Growth Rate9. Real GDP
10. Nominal GDP
11. GDP per Capita
12. Purchasing Power Parity
There are 22 of EconomicIndicators:
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13. Productivity14. Balance of Trade
15. National Debt
16. Stability
17. Inflation
18. Consumer Price Index (CPI)
19. Unemployment
20. Cyclical Unemployment21. Recession
22. Depression
Economic Indicators (cont.)
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Fiscal Policy The ways in which a government collects (taxes) and
spends revenues.
Monetary Policy The manner in which a government controls its money
supply.
Stabilization Policy Coordinating fiscal and monetary policies to smooth
fluctuations in output and unemployment and to stabilizeprices.
Managing the U.S. Economy
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All rights reserved. No part of this publication may be reproduced,stored in a retrieval system, or transmitted, in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise,without the prior written permission of the publisher. Printed in theUnited States of America.
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