© 2009 South-Western, a division of Cengage Learning1

Chapter 1: BUSINESS NOW

Change is the Only Constant

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• What is the role of business in the economy?

• How has business evolved?

• What is the role of non-profits in the economy?

• What are the core factors of production?

• What are the elements of the environment affecting business?

• How are business trends impacting careers?

LOOKING AHEAD

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MOVING AT BREAKNECK SPEED

In the last decade:– The players have changed– What consumers want has changed– How we buy has changed

1965 1985 1995 2007

1.General Motors2.Exxon Mobil3.Ford Motor4.General Electric5.Mobil6.Chrysler7.US Steel8.Texaco9.IBM10.Gulf Oil

1.Exxon Mobil2.General Motors3.Mobil4.Ford Motor5.Texaco6.IBM7.DuPont8.AT&T9.General Electric10.Amoco

1.General Motors2.Ford Motor3.Exxon Mobile4.Wal-Mart5.AT&T6.General Electric7.IBM8.Mobil9.Sears Roebuck10.Altria Group

1.Wal-Mart2.Exxon Mobil3.General Motors4.Chevron5.ConocoPhillips6.General Electric7.Ford Motor 8.Citigroup9.Bank of America10.AIG

Source:http://money.cnn.com

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A business is any activity that provides goods and services in an effort to earn profit.

Non-profit organizations focus

on causes not profit

BUSINESS BASICS

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Profit is the financial reward that comes from starting and running a business.

the money that a business earns in sales (or revenue), minus expenses

BUSINESS BASICS

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NONPROFIT PARTNERSHIPS

Many nonprofits work with businesses to improve the quality

of life in society.

Companies support their missions and improve society.

The Business of Doing Good

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ENTREPRENEURIAL SPIRIT

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CREATIVITY MATTERS

• Creativity is important to the economy – with global competition, the stakes are

high

• Many of the latest inventions have come from companies– this trend is likely build momentum as

global competition intensifies

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INVENTIONS WITH IMPACT

Source: Encyclopedia Britannica

Laptop

Viagra

Camcorder

Cat Litter

Bikinis

Muzak

Disposable Diapers

Kool-Aid Astroturf

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THE EVOLUTION OF BUSINESS

Industrial Revolution

1700-mid 1800s

Entrepreneurship Era

Mid 1800s

Production Era

Early 1900s

Marketing Era

1950s

Relationship Era

Mass Production

Factories

Work Specialization

Efficiency

Industrial Titans

Wealth Creation

Increase in Living Standard

Manipulation/Competition

Exploitation

Assembly Line

Refining Production

Productivity Gains

Decrease Costs

Hard Sell

No Customer Focus

Consumer Power

Growth in Consumerism

Product Differentiation

Customer Focus

Long-term Relationships

Satisfied Customers

Use of Technology

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FACTORS OF PRODUCTION

• Businesses rely on some combination of these factors

• Entrepreneurship is a key factor– Most growing economies

support and promote entrepreneurship

Natural Resources

Human Resources

Capital

Entrepreneurship

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THE ELEMENTS OF THE BUSINESS ENVIRONMENT

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DYNAMIC, CONSTANT AND ENGAGING, CHANGE

• Companies must respond quickly and creatively– New Products– Integrating Technology– Creating Technologies– New Businesses– Innovative Processes– New Target Markets…..

““

When the change on the

outside exceeds the

change on the inside, the end

is near.”

- Jack Welch

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ECONOMIC ENVIRONMENT

• Government takes an active role to support businesses– Low Federal Tax Structure

– Small Business Administration

– Federal Trade Commission

– Legislation & Enforceable Contracts

Economic VulnerabilitiesCEO/Worker Pay Gap

Consumer DebtFederal Debt

Free Enterprise and Fair Competition Flourish in the United States

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COMPETITIVE ENVIRONMENT

• Today’s competition is intense

• Companies must focus on customer satisfaction– Build Long-Term Relationships– Provide Value– Customer Satisfaction = Profitability– Cheap Doesn’t Equal Value

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COMPETITIVE PRINCLIPLES

1.Avoid your competitors’ strengths and exploit their weaknesses. Don’t try and beat them at their game.

2.Always be a little paranoid. Never underestimate your competition.

3.Competitors will usually get better when pushed.

4.Competitors are sometimes irrational when pushed.

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COMPETITION IS CHANGING

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SOCIETY CHANGES

• What are our changing values and beliefs?

• How does the integration of other cultures change/add to values and beliefs?

• What demographic influences are changing the environment globally?

Companies must respond to these changes in the products they sell and how they sell them.

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AND CHANGES……

Teens today are much less

likely than their parents to

categorize people by race,

religion, and sexual orientation.

They’re more likely to notice

similarities and differences in

core values.

Source: Diversity in Word and Deed: Most Teens Claim Multicultural Friends, press release from Teenage Research Unlimited, November 10, 2004, TRU Website, http://www.teenresearch.com/PRview.cfm?edit_id=278.

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SOCIAL ENVIRONMENT

• Diversity

• Aging Population

• Rising Worker Expectations

• Ethics & Social Responsibility

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GENERATION C

• Creating Content• Customizing Products

– Websites– Blogs– Photos– Ringtones– Music– Movies

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TECHNOLOGICAL ENVIRONMENT

• Technology has transformed businesses and consumers

• How Companies Do Business– Telecommunications– Robotics– Flexible Manufacturing– Alternative Selling/eCommerce

• How Consumers Shop– Online Information/Content– Alternative Buying/eCommerce

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TECHNOLOGICAL ENVIRONMENT

More than 724,000 Americans report that

eBay is their primary or secondary source of

income,And an additional 1.5

million people say that they supplement their incomes by selling on

eBay.

Source: US Postal Service News Release, July 21, 2005. http://www.usps.com/communications/news/press/2005/pr05_062.pdf.

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GLOBAL ENVIRONMENT

Terrorism is more of a threat today

Job Migration

China and India’s economies are

growingTechnology

Free Trade

Blurred lines between countries/world

Technology is linking customers/suppliers

worldwide

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GLOBAL ENVIRONMENT

According to investment bank CLSA, China

manufactures 80% of the world’s clocks and watches, 50% of its cameras, 30% of its microwave ovens, a

quarter of its washing machines, and a fifth of its

refrigerators.

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COOLEST BRANDS

Nike 30.8%

Sony 15.9%

Adidas 15.1%

BMW 10.1%

Microsoft 9.0%

Coca-Cola 8.9%

IBM 8.2%

According to Chinese college students

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BUSINESS AND YOUMAKING IT PERSONAL

What are your passions?

What are business careers that encompass your

passions?

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LOOKING BACK

• Define business and the role of business in the economy.

• Explain the evolution of modern business.

• Discuss the role of non-profit organizations in the economy.

• Outline the core factors of production and how they impact the economy.

• Describe today’s business environment and discuss each dimension.

• Explain how current business trends impact your career choices.