ppt chapter01

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McGraw-Hill/IrwinUnderstanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.

Nickels McHugh McHugh

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C H A

P T E R *

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ManagingWithin The

Dynamic

BusinessEnvironment:

Taking Risksand Making

Profits



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Business & Entrepreneurship

• Business• Profit

• Entrepreneur

• Match Risk With Profit• Revenue

• Loss

• Standard of Living/Quality

of Life• Stakeholders

• Nonprofit Organizations



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• Business is any activity that seeks to providegoods and services to others while operating at aprofit.

• Profit is the is the amount a business earns aboveand beyond what it spends for salaries and otherexpenses.

• Entrepreneur is a person who risks time andmoney to start and manage a business.

• Businesses provide people with the opportunity tobecome wealthy.

• In addition, businesses provide necessities such asfood, housing, and medical care.



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• Match Risk With Profit• 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• REVENUE – EXPENSES = PROFIT

• Entrepreneurs PROVIDE EMPLOYMENT for otherpeople.

• They also PAY TAXES that are used for schools,hospitals, and other facilities.

• Businesses are a part of an economic system thathelps to CREATE A HIGHER STANDARD OF LIVING

and quality of life for everyone.



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• Standard of Living/Quality of Life refers to theamount of goods and services people can buy withthe money they have.

• QUALITY OF LIFE refers to the general well-being of a society in terms of political freedom, aclean natural environment, education, health care,safety, free time, and everything else that leads tosatisfaction and joy.

• Stakeholders are all the people who stand to gainor lose by the policies and activities of a business.• Stakeholders include customers, employees, stockholders,

suppliers, bankers, and people in the local community,

environmentalists, and elected leaders.



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• The challenge for companies in the 21st century will beto BALANCE, as much as possible, THE NEEDS OFALL STAKEHOLDERS.

• To stay competitive, businesses may OUTSOURCE jobs to

other countries.• OUTSOURCING assigning various functions, such as

accounting, production, security, maintenance, and legalwork, to outside organizations.

• Outsourcing may cause more HARM TO THE COUNTRY

than GOOD FOR THE COMPANY.

• Many companies have set up design and productionfacilities known as INSOURCING.

• The decision whether to outsource or to insource is based

on what is best for all the stakeholders.



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• USING BUSINESS PRINCIPLES IN NONPROFITORGANIZATIONS

• NONPROFIT ORGANIZATIONS—such as governmentagencies, public schools, charities, and social causes—make a

major contribution to the welfare of society.• A NONPROFIT ORGANIZATION is an organization whose

goals do not include making a personal profit for its owners ororganizers.

• SOCIAL ENTREPRENEURS are people who use businessprinciples to start and manage organizations that are not forprofit and help countries with their social issues.

• You need the SAME SKILLS to work in nonprofit organizationsthat you need in business, including information management,leadership, marketing, and financial management.



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Objectives of Business

Survival

GrowthSocial

ResponsibilityProfit



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Business Classifications

• Goods producing

• May be capital-

intensive.• Service businesses

• Generally considered

labor-intensive.

The malls are a great place

to find service businesses.



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Why Growth in Service Sector• More disposable income.

• The targeting of changingdemographic patterns andlifestyle trends.

• Needed to support complexgoods and new technology.

• Companies seekingprofessional advice toremain competitive.

• Barriers are low to entry fore-commerce.

• Growth of internet.

New advertising technology

is the big screen customer

interactive TV in shopping malls.



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• The FACTORS OF PRODUCTION arethe resources used to create wealth:

• LAND (or natural resources)

• LABOR (workers)

• CAPITAL (e.g., machines, tools, and buildings; but not money —money is used to buy factors of production)

• ENTREPRENEURSHIP

• KNOWLEDGE



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• Some experts believe that the most important

factor of production is KNOWLEDGE.• Workers in the high-tech industries in

California’s Silicon Valley are often called

KNOWLEDGE WORKERS.

• What makes rich countries rich is not land,labor, or capital; it is a combination ofENTREPRENEURSHIP and the effective use

of KNOWLEDGE.• Entrepreneurship also helps make some states

and cities rich while others remain relativelypoor.



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The BUSINESS ENVIRONMENT is thesurrounding factors that either help or hinderthe development of business; they are:

•The economic and legal environment•The technological environment

•The competitive environment•The social environment•The global business environment

Businesses grow and prosper in a healthyenvironment



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Business Environment

Global

Business

Social

Competitive

Technology

Economic &

Legal



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Economic &

Legal Environment$ GOVERNMENTS CAN LESSEN THE

RISK of starting a businesses and

increasing entrepreneurship and wealth by:$ Minimum taxes and regulations$ Freedom of ownership$ Contract laws$ Tradable currency$ Elimination/minimization of corruption



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• Productivity

• E-Commerce

• Responsiveness to Customer

Technological Environment



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TECHNOLOGY means everything from phones

and copiers to computers, medical imagingdevices, personal digital assistants, and varioussoftware programs that make business processesmore efficient and productive.

•EFFECTIVENESS means producing the desired result.•EFFICIENCY means producing goods and servicesusing the least amount of resources.•PRODUCTIVITY is the amount of output you generategiven the amount of input (e.g. hours worked.)•Tools and technology greatly improve productivity.•Farmers use high technology to increase productionand profit.

HOW TECHNOLOGY BENEFITS WORKERS AND YOU.



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Competitive Environment

• CustomerExpectations

• Restructure/Empower

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• Making quality products is notenough to stay competitive in worldmarkets—now you have to offer

QUALITY PRODUCTS andOUTSTANDING SERVICE atcompetitive prices.

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• COMPETING BY EXCEEDING CUSTOMEREXPECTATIONS

• Customers today want good quality at low

prices and great service.• Business is becoming CUSTOMER-

DRIVEN— customers’ wants and needs

come first.• Successful companies must LISTEN TO

CUSTOMERS to determine their wants andneeds and then adjust their products,policies, and practices to meet thesedemands.

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Types of Competition

• Pure Competition: Multiple buyers andsellers exist. No one group or groups canbecome large enough to influence prices.

• Monopoly: There is only one produce ofa product in a given market.

• Oligopoly: Industry is dominated by only

a few producers.• Monopolistic Competition: Large number

of sellers, none can dominate the market.

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Social Environment

• Diversity/Multicultural

• Aging/Graying of

America

• Two-Income Families

• Single-Parent Families

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21st CenturyDiversity Issues

• Race

•Gender

• Ethnicity

• Disability

• Age

•Language

• Religion

• Sexual Orientation

Source: U.S. Equal Employment Opportunity Commission

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Global Environment

• International Competition and Free Trade

• Improvements in Transportation

and Communication

• War & Terrorism

• Global Changes

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• Rise of Information &

Communication

Technology

• Globalization• Doing Business 24/7

• Educated Consumers

• Aging Workforce

• Increasing Diversity

Trends in Business

Source: Keying In- Newsletter of the National Business Education Association, March 2003

• Self-Directed,

Empowered

Employees

• Communication Skills

• Decision-Making Skills

• Teamwork

• Leadership

• Continual Learning

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• THE WORLD’S RICHEST PEOPLE

Rank Name Age Worth Country of Residence ($billions) Citizenship

1 William Gates III 49 46.5 United States United States, WA, Medina2 Warren Buffett 74 44.0 United States United States, NE, Omaha

3 Lakshmi Mittal 54 25.0 India United Kingdom, London

4 Carlos Slim Helu 65 23.8 Mexico Mexico, Mexico City

5 Prince Alwaleed Bin 48 23.7 Saudi Arabia

6 Ingvar Kamprad 78 23.0 Sweden Switzerland, Lausanne

7 Paul Allen 52 21.0 United States United States, WA, Seattle

8 Karl Albrecht 85 18.5 Germany Mülheim an der Ruhr

9 Lawrence Ellison 60 18.4 United States United States, CA, Silicon V.

10 S Robson Walton 61 18.3 United States United States, AR, Bentonville

Source: Keying In- Newsletter of the National Business Education Association, March 2003

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