Characteristics of Business BellWork Indicate what you think an industrial business is and a commercial business means. Chapter 1 Characteristics of Business

Chapter 1 Characteristics of Business ©2008 Thomson/South-Western

Lesson 1.1 The Nature of Business Objectives Explain the nature of business activities. Describe the general types of businesses. Chapter 1 Characteristics of Business

Characteristics of Business Business and Profit Business — an organization that produces or distributes a good or service for profit Profit — difference between earned income and costs Chapter 1 Characteristics of Business

Characteristics of Business THE NATURE OF BUSINESS Business activities – Engages in at least 3 Production: involves making a product or providing a service. Manufacturing firms create products that customers purchase to satisfy needs, whereas service firms use the skills of employees to offer activities and assistance to satisfy customers needs. Marketing: includes the activities between business and customers involved in buying and selling goods and services Finance: deals with all the money matters involved in running a business. Chapter 1 Characteristics of Business

Characteristics of Business Types of Businesses Two Major kinds of Businesses Industrial business: produce goods used by other businesses or organizations to make things. Ex: companies that mine coal or ore and that extract oil and gas from the earth. (This provides resources for use by other companies and consumers) Farmers and other agricultural producers are also considered industrial businesses because they grow crops and raise livestock needed for the food we eat and used in the manufacture of a variety of products we use every day. Chapter 1 Characteristics of Business

Characteristics of Business Types of Businesses Two major kinds of businesses Industrial businesses Commercial businesses: are engaged in marketing (wholesalers & retailers), in finance (banks and investment companies), and in providing services (medical offices, fitness centers, and hotels) as their primary business activities. Chapter 1 Characteristics of Business

Type of Commercial Business Service businesses: a type of commercial business that use mostly labor to offer mostly intangible products to satisfy consumer needs. What is an intangible product? What are examples of service businesses? Chapter 1 Characteristics of Business

Characteristics of Business Industry Industry is a term often used to refer to all businesses within a category doing similar work. Ex: publishing industry, automotive industry, and even the government can be considered an industry, because it provides fire and police protection, libraries and schools, and many other services required by the citizens the government serves. Chapter 1 Characteristics of Business

Characteristics of Business Chapter 1 Characteristics of Business

Characteristics of Business Review Questions An organization that produces or distributes goods or services for a profit is A producer A manufacturer A business An industry Answer: A Business Chapter 1 Characteristics of Business

Characteristics of Business Review Questions A lawn-mowing business is an example of A service business An industrial business A manufacturing business A marketing business Answer: A service business Chapter 1 Characteristics of Business

Characteristics of Business Review Questions How do commercial businesses support the work of industrial businesses? Commercial businesses use the resources that industrial businesses have mined or extracted from the earth. Chapter 1 Characteristics of Business

Assignment With a partner, look up four different jobs that you are interested in and determine if they are an industry business or a commercial business (remember a service business is part of commercial businesses). Indicate why it is either commercial or industrial. Also state what ”industry” it is. (Remember that “industry” is a word used to refer businesses that do similar work). After you have completed this indicate other jobs that are in the same industry. Make your work nice and neat please !

Objectives/Exit Ticket Explain the nature of business activities. Describe the general types of businesses. Chapter 1 Characteristics of Business

Lesson 1.2 Changes Affecting Business Objectives Describe how innovations affect businesses. Identify the impact global competition has had on U.S. businesses. Discuss ways in which businesses can improve their business practices. Chapter 1 Characteristics of Business

Characteristics of Business Innovation Innovation: something entirely new Innovations affect the kinds of products and services offered for sale by other businesses. Ex: Clothes used to just be made from natural fibers, such as cotton. Chemical researchers developed synthetic fibers, such as rayon, nylon, and polyester. Now consumers have more choices in clothing and other fabric products. Innovations also affect business operations. Ex: Computers help businesses design and manufacture products as well as keep track of billing, inventory, & Customer Info. Chapter 1 Characteristics of Business

Impact of Global Competition on Business Global competition: the ability of businesses from one country to compete with similar businesses in other countries. One of the biggest challenges facing American businesses today is competing in the global economy. Identify two major types of changes that present challenges to business. U.S. businesses face increased global innovation and competition. Chapter 1 Characteristics of Business

Focusing on the Right Things Businesses often study their own operations to determine whether they are doing the right things and doing the right things well. Two terms are used to describe best business practices. Achieving effectiveness — making the right decisions about products or services to offer and the best ways to produce and deliver them Achieving efficiency — producing products and services quickly, at low cost, without wasting time and materials Chapter 1 Characteristics of Business

Achieving Effectiveness Knowing what customers want is critical to business success and to achieving effectiveness. Since there are so many choices for most products, which have been produced by many businesses, consumers can usually choose among the products offered by both domestic and foreign goods. Domestic goods: products made by firms in the U.S Foreign goods: products made by firms in other countries. Chapter 1 Characteristics of Business

Achieving Effectiveness Cont. Businesses today focus efforts on gathering information from consumers, studying their buying habits, testing new products with prospective customers, and adding new features to existing products. Customers today are increasingly concerned about the quality of products they buy. The concept TQM (Total Quality Management) is a commitment to excellence that is accomplished by teamwork and continual improvement of work procedures and products

Achieving Efficiency Not only must firms do the right thing, such as offering high-quality products, but they must also produce their products efficiently. Efficiency is measured by output– the quantity produced within a given time. Productivity, on the other hand, refers to producing the largest quantity in the least amount of time by using efficient methods and modern equipment.

Characteristics of Business Achieving Efficiency Efficiency is achieved in three ways: Specialization of effort workers becoming specialized at a certain task, which improves quality while increasing the amount produced Better technology and innovation Includes equipment, manufacturing processes, and materials from which products are made. Chapter 1 Characteristics of Business

Characteristics of Business Achieving Efficiency Reorganization of work activities Third and most challenging way to increase efficiency. Empowerment is letting workers participate in determine how to perform their work tasks and offer ideas on how to improve the work process of the company. Empowerment dramatically changed the role of the worker. Chapter 1 Characteristics of Business

Characteristics of Business Questions Why must companies be concerned about both effectiveness and efficiency? Customers expect high quality at low cost, and global competition requires both effectiveness and efficiency. The ability of businesses from one country to compete with similar businesses in other countries is known as Global competition Chapter 1 Characteristics of Business

Characteristics of Business Questions Cont. Which of the following is NOT one of the ways companies can achieve efficiency? Specialization of effort Reducing prices charged to customers Better technology and innovation Reorganization of all work activities Chapter 1 Characteristics of Business

Characteristics of Business Assignment Work on the “Focus On” on page 13 Your answers should be well thought out and in lined with what we have learned so far. I am looking for certain things while I am reading your answers. You need to write the question and the your answer nice and neatly underneath it. DO not write sloppy. This assignment is due at the end of class. Chapter 1 Characteristics of Business

Objectives/Exit Ticket Describe how innovations affect businesses. Identify the impact global competition has had on U.S. businesses. Discuss ways in which businesses can improve their business practices. Chapter 1 Characteristics of Business

Characteristics of Business BellWork What factors contribute to business? Chapter 1 Characteristics of Business

Lesson 1.3 The Contributions of Business Objectives Identify two ways a nation measures its economic growth and prosperity. Describe the benefits of business ownership to the nation and individuals. Chapter 1 Characteristics of Business

The Contributions of Business Business growth and prosperity The United Stated is a very prosperous nation, which is mostly due to business growth. Lets take a look at the two ways in which a nation measures its economic wealth and its benefits to citizens. Chapter 1 Characteristics of Business

Gross Domestic Product Gross domestic product (GDP) (chief measure of a nation’s economic wealth)— total market value of all goods and services produced in a country in a year. Whenever a products or services are purchased, the total dollar amount is reported to the federal government. Income that escapes being recorded in the GDP is referred to as the underground economy. Chapter 1 Characteristics of Business

Individual Well-Being Individual well-being (second measure of a nation’s wealth) — home ownership, consumer products, self-improvement, savings What does GDP measure? The total market value of all goods and services produced in a country in a year. Chapter 1 Characteristics of Business

COUNTRIES WITH LARGEST GDPs Chapter 1 Characteristics of Business

The Contributions of Business Entrepreneurship: someone who starts, manages, and owns a business Business ownership Popularity of small businesses Growth of franchise businesses Risks of ownership Obligations of ownership Intrapreneurship Studying business principles and management Chapter 1 Characteristics of Business

Popularity of Small Businesses Small business is a term used to describe companies that are operated by one or few individuals. Considered the largest amount of businesses being operated in the U.S. Chapter 1 Characteristics of Business

Growth of Franchise Business A popular way to launch a small business Franchise: a legal agreement in which an individual or small group of investors purchases the right to sell a company’s product or service under the company’s name and trademark. Two parties to a franchise agreement: Franchisor: the parent company of a franchise agreement the provides the product or service Franchisee: the distributor of a franchised product or service Chapter 1 Characteristics of Business

Risk of Ownership The success of a business depends greatly on managerial effectiveness. Risk: the possibility of failure Risk is one of the characteristics of business that all entrepreneurs face Risk involves competition from other businesses, changes in prices, changes in style, competition from new products, and changes that arise from economic conditions. One out of every four to five businesses fails within three years

Obligations of Ownership Anyone who starts a business has a responsibility to the entire community in which the business operates. A business that fails creates an economic loss that is shared by others in the community. A business that is successful have economic and social responsibilities.

Intrapreneurship Is an employee who is given funds and freedom to create a special unit or department within a company in order to develop a new product, process, or service. Enjoy running the operations with little to no interference from upper management. Employees benefit because they risk neither their salaries nor their savings to launch a new business.

Studying Business Principles and Management Whether you plan to operate a business of your own, move into a top management position in a large company, or work as a valuable and valued employee for a company, you benefit from being well informed about the production, marketing, and financial activities of the business. What is the main difference between an entrepreneur and an intrapreneur? Someone who starts, manages, and owns a business (entrepreneur). Employee who is given funds and freedom to create a special unit

Characteristics of Business Question An example of income that would be included in the underground economy but not included in the GDP is Small-business profits Income generated by oil and gas production Income from the sale of services Cash paid for work that is not reported on taxes Chapter 1 Characteristics of Business

Characteristics of Business Assignment Complete “Case In Point 1-1 – 1-2” on pages 25 and 26 or the end of chapter review on pages 23 & 24 (complete #s 1- 27) Chapter 1 Characteristics of Business

Objectives/Exit Ticket Identify two ways a nation measures its economic growth and prosperity. Describe the benefits of business ownership to the nation and individuals. Chapter 1 Characteristics of Business