Foundations of Business 3e Pride, Hughes, & Kapoor

Who are these people? What do they have in common?

Ben Franklin

JD Rockefeller

Henry Ford

Walt Disney

Ray Kroc

Sam Walton

Mary Kay Ash

George Lucas

Oprah

Steve Jobs

Bill Gates

Mark Zuckerberg

Warren Buffett

Who are these people? What do they have in common?

They all had…  A unique idea  A unique talent  An entrepreneurial spirit  Failures  Help

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 18 Learning Objectives 1. Discuss what you must do to be successful in the world of business. 2. Define business and identify potential risks and rewards. 3. Define economics and describe the two types of economic systems: capitalism and command economy. 4. Identify the ways to measure economic performance. 5. Examine the four different phases in the typical business cycle. 6. Outline the four types of competition. 7. Summarize the factors that affect the business environment and the challenges American businesses will encounter in the future.

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 19 Free Enterprise …the system of business in which individuals are free to decide what to produce, how to produce it, and at what price to sell it. “ “

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 20 …the organized effort of individuals to produce/sell, for a profit, the goods and services that satisfy people/society’ s needs. Business… “ “ Do it: Motivated by Profit Do it: By effectively combining the resources of… Human Resources Material Resources Informational Resources Financial Resources Definition of Business

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 21 Founding Fathers

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 22 …the study of how wealth* is created and distributed**. Economics EconomicsSpiri Giants Weekt “ “ 3 World Economic Systems Capitalism – Adam Smith – Individual’s own Laissez Faire – French for “Let is be” Invisible Hand – the pursuit of personal interests will guide… Socialism Governments own important resources A little private ownership, occupation choice Communism – Karl Marx Classless Society Government over individual No Occupation choice What is Economics? Macroeconomics – the choices of countries Microeconomics – the choices of individuals

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 23 Advocated a “Classless” Society Father of Socialism Called for working class to use violence Published the “Communist Manifesto” in 1848 Karl Marx

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 24 What are the big differences in the 3 world economic systems? 1 - Who owns the resources 2 - Government intervention 3 - Freedom Recap

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 25 If you were going to the doctor for a check up, what things would he/she look at to determine if you were healthy? PARTNER QUESTION

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 26  Leading Economic Indicators Gross domestic product (GDP/ Real GDP) Inflation Rate Deflation Rate Unemployment Rate Consumer price index (CPI) Producer price index (PPI) Measuring Economic “Health” Economics Primary Goal: Economic Health and Growth

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 27 GDP in Current Dollars and in Inflation-Adjusted Dollars (Real GDP)

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 28 Common Measures Used to Evaluate a Nation’s Economic Health or “sickness” More ways to measure the health and growth of an Economy

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 29 What can a nation do to turn things around when it’s economy is sick? Class Question?

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 30 …the recurrence of periods of growth and recession in a nation’s economic activity. Ask: Are we in a down Business Cycle? “ “ First thing to do…  Peaks  Contraction  Recession  Depression  Troughs  Expansion  Recovery  Booms

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 31  Monetary Policy (The Federal Reserve) Federal Reserve (our central bank) decisions that determine the size of the supply of money in the nation and the level of interest rates  Fiscal Policy (the President’s Budget) Government influence on the amount of savings and expenditures accomplished by altering the tax structure and changing the levels of government spending Government Actions in Recession/Depression Second and Third things to consider to promote growth…

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 32 …a shortfall created when the federal government spends more in a fiscal year than it receives. Federal Deficit “ “ “We then must borrow the money from other countries, raise taxes, or cut government spending” The strategy of Deficit Spending – John Maynard Keynes

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 33 KE Recap Video on GDP and Business Cycle

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 34 Four Different Types of Competition Next Subject: Competition – the key to effective Free Enterprise

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 35 Supply Curve and Demand Curve Market Equilibrium

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 36  Perfect Competition Many buyers, many sellers – agriculture produce  Monopolistic Competition A market situation in which there are many buyers along with a relatively large number of sellers Product differentiation  The process of developing and promoting differences between one’s products and all competitive products  Most product we buy are produced in a monopolistic market situation. So, the ability to distinguish your product from the other is critical to sales/revenues  The York College Sports Teams T-shirt Situation The 4 Types of Competition

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 37  Oligopoly Competition A market (or industry) situation in which there are few sellers (Automobile, airlines, cereal, tractors)  Monopoly A market (or industry) with only one seller, and there are barriers to keep other firms from entering the industry (by law… they are illegal) Natural monopoly: an industry that requires a huge investment in capital and within which any duplication of facilities would be wasteful The 4 Types of Competition

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 38 Since the inception of our country, economists have been striving to increase the “standard of living” for our people. Standard of Living – the degree of wealth, material comfort, and satisfaction available to a person or community. Barter – Trading goods for goods Domestic System – Trading raw materials to households where they were turned into finished products Factory System – Finished products created in factories and sold to end consumers. “Specialization” was born. American Business Development

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 39 American Business Today Early business development Watch the Video Business development in the 1900s A new century: 2000 and beyond The current business environment – Mobile and Global American Business Today

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 40  Quiz over Chapter 1  Chapter 2 – Business Ethics NEXT TIME