The Modern Business Environment Part 1 The Modern Business Environment

Current Issues in Contemporary Business Chapter 1 Current Issues in Contemporary Business

Chapter Objectives Distinguish between business and not-for-profit organizations and identify the factors of production. Describe the private enterprise system and explain how competition and entrepreneurship contribute to the system. Identify the six eras of business and explain how the relationship era influences contemporary business. Describe how technology is changing the way businesses operate and complete. Relate the importance of quality and customer satisfaction to efforts to create value for customers. Explain how productivity affects competitiveness in the global market.

What is Business? All profit-seeking activities and enterprises that provide goods and services necessary to an economic system. Profits—rewards for businesspeople who take the risks involved to offer goods and services to customers. Consists of all profit-seeking activities and enterprises that provide goods (tangible items) and services necessary to an economic system 1. Provides the means through which standards of living improve 2. An exchange between a buyer, who recognizes the need for a good or services, and a seller, who receives money for the good or service 3. Provides profits or rewards for businesspeople, who take risks in blending people, technology and information to create and market want-satisfying goods and services 4. Businesspeople also recognize social and ethical responsibilities to employees, customers, suppliers, competitors, government and the general public

What is Business? Any activity that seeks to provide goods and services to others while operating at a profit.

Not-for-Profit Organizations Businesslike establishments that have primary objectives other than returning profits to their owners. For example: The Corporate Angel Network: A Not-for-Profit Organization providing flights to cancer patients in need Not-for-Profit Organizations – primary objectives other than returning profits to owners, such as public service 1. Private sector, such as museums, libraries, business associations, charitable and religious organizations, and most college and universities 2. Government agencies, political parties and labor unions 3. Revenues come from a wide array of sources, including: a. individual donations b. memberships c. government grants d. gift-shop sales (profit centers within the non-profit) e. special fund-raising events, which also increase public awareness of the not-for-profit 4. Require work in all the business functions, such as marketing and human resources, as do for-profit organizations, and face many of the same business challenges, including determining methods to increase revenue

Factors of Production Four basic inputs for effective operation: Factors of Production – four basic inputs required for effective operation. 1. Natural Resources – all product inputs that are useful in their natural state, such as: a. agricultural land b. building sites c. forests d. mineral deposits 2. Capital, includes: a. technology – machinery and equipment as production lines, telecommunications and basic inventions. b. tools c. information d. physical facilities e. money 3. Human Resources – anyone who works, encompassing both physical labor and intellectual contributions. 4. Entrepreneurship – the willingness to take risks to create and operate a business.

The Importance of Entrepreneurs to the Creation of Wealth Five factors of Production: Land Labour Capital Entrepreneurship Knowledge

Land: Land and other natural resources that are used to make homes, cars and other products

Labour: People have always been an important resource in producing goods and services, but many people are now being replaced by technology.

Capital: Capital includes machines, tools, buildings, and other means of manufacturing

Entrepreneurship: All the resources in the world have little value unless entrepreneurs are willing to take the risk of starting businesses to use those resources

Knowledge: Information technology has revolutionized business, making it possible to quickly determine wants and needs and to respond with desired goods and services

The Private Enterprise System Economic system that rewards businesses for their ability to perceive and serve the needs and demands of customers. Competition—battle among businesses for consumer acceptance An economic system that rewards businesses for their ability to perceive and serve the needs and demands of consumers 1. Minimizes government interference in economic activity 2. Also called capitalism, and was first identified by Adam Smith in his 1776 book, The Wealth of Nations, in which he described the invisible hand of competition 3. Competitive differentiation, is the unique combination of organizational abilities and approaches that set a company apart from competitors in the minds of consumers

Basic Rights in the Private Enterprise System Certain rights critical to the operation of capitalism are available to citizens living in a private enterprise or capitalistic society, including: 1. The right to private property – the right to own, use, buy, sell and bequeath most forms of property, including land buildings, machinery, equipment, inventions, and various intangible kinds of property 2. The right of business owners to all profits (after taxes) earned by the enterprise 3. The right or freedom of citizens to choose their own place of employment, purchases and investments, which maximizes human welfare and happiness 4. The right to fair competition by allowing the public to establish the rules for competitive activity

The Entrepreneurship Alternative Entrepreneur—risk taker in the private enterprise system. Many of the Internet companies we know today got their start as entrepreneur ventures (and many failed). HotJobs.com is now a Yahoo company The Entrepreneurship Alternative - individuals who are willing to take risks in the private enterprise system 1. Results in economic growth in the U.S. economy a. one in seven current organizations began operating within the current year b. more than one in every five new jobs has been created by new small businesses c. nearly 12 million U.S. employees currently work for businesses with fewer than ten employees 2. Entrepreneurs find novel ways to use natural resources, technology, and other factors of production 3. Entrepreneurs are also important to existing large companies by enhanced flexibility, improved innovation and new market opportunities 4. Entrepreneurs have also been significant in U.S. history by creating new industries, developing successful business methods and improved U.S. standing in the global markets

Six Eras in the History of Business

The Relationship Era transaction management: building and promoting products in the hope that enough customers will buy them to cover costs and earn profits. relationship era business era in which firms seek ways to actively nurture customer loyalty by carefully managing every interaction.

The Relationship Era Managing Relationship through Technology Strategic Alliances The Green Advantage

What Makes a Company Admired? Solid profits? Stable growth? Safe and challenging work environment? Commitment to social responsibility? You decide!

Google- “ENRON”