Business Basics Better Business 2nd Edition Solomon (Contributing Editor) · Poatsy · Martin © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-2 chapter 1

Learning Objectives 1.What are profits, and how do for-profit and not-for-profit organizations compare? 2.What is the difference between a good and a service, and what are the factors of production? 3.How do competition, the social environment, globalization, and technological growth challenge and provide opportunities to business owners? 4.What are the four types of businesses? 5.How do sole proprietorships, partnerships, corporations, and limited liability companies (LLCs) differ from one another as forms of business? 6.How do life skills translate to the business environment? © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-3

Basic Business Definitions Businesses- entities that offer products to their customers to earn a profit Profit- when a company’s revenue (the money it brings in) is greater than its expenses (the money it pays out) Good- refers to a physical product a business sells Service- refers to an intangible product that is bought or sold Not-for-profit organizations- businesses that do not pursue profits, but instead seek to service the community through social, educational, or political means © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-4

Benefits of Businesses The proprietor benefits from earned profits Society benefits from goods and services provided Communities benefit from the employment opportunities Generate income and spending in the economy Businesses contribute to the quality of life by creating higher standards of living for society © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-5

The Factors of Production Labor Natural resources Capital oReal capital oFinancial capital Entrepreneurs Technology © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-6

How Does Competition Influence Business? Competition arises when two or more businesses contend with one another to attract customers and gain an advantage. Competition forces companies to - Improve their product offerings - Lower their prices - Aggressively promote their brands - Focus on customer satisfaction - Employers seek workers who have interpersonal, communication, and decision-making skills © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-7

How Does the Social Environment Affect Businesses? Baby Boomers: An aging population - Business opportunities - Providing for retirees Increasing diversity - Workforce development - Consumer demographics The Green Movement - Environmental concerns - New product opportunities © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-8

Globalization Globalization is a movement toward a more interconnected and interdependent world economy Multinational enterprises Off shoring Benefits to the U.S. economy - Lower prices for goods - Increased competition stimulates innovation Risks to the U.S. economy - U.S. jobs lost to overseas workers - Increased competition - Fluctuation in the dollar value - Security and patent protection concerns - Unstable political climates in foreign countries © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-9

Technological Changes Challenges of technological changes: The pace of technology is expensive and time consuming Advancements in technology are changing the foundation and focus of how many businesses are run Benefits of technological changes: Lower costs and improved productivity, security, and communications. Telecommuting, teleconferencing and other tools help human relations and globalization. The Internet aids company operations. - E-commerce (B2B and B2C) streamline sales. - Businesses must provide online security and privacy © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-10

Types of Businesses: Local and Regional A local business is usually one of a kind, relies on local consumers to generate business, and serves a limited surrounding area Regional businesses serve a wider area although, like local companies, they do not serve a national or international market (i.e. Wawa). Managing money is the most significant special challenge of these businesses -Poor financial planning -Unfavorable economic conditions Undercapitalization occurs when a business owner cannot gain access to adequate funding Taxes and insurance costs must be taken into consideration © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-11

Types of Businesses: National A national business has several outlets throughout the country and provides goods or services to virtually all U.S. residents, no matter where in the country they live Special challenges: Budget and finances Must be aware of all state laws in every state they do business in Manage longer, more complex supply chain © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-12

Types of Businesses: Multinational Multinational businesses are businesses that have expanded to provide goods or services to international costumers or serve only one country but have suppliers or production facilities in other countries Special challenges: Different countries’ laws Cultural differences ‾ Business hours ‾ Workweek schedules ‾ Values and customs relating to business etiquette ‾ Violating local taboos ‾ Wage differences ‾ Language barriers Economic differences © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-13

Types of Business Ownership © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-14 Sole Proprietorship Partnership Corporation LLC

The Players in Business Ownership A corporate stakeholder is someone who is affect by a company’s actions or who has an interest in what the company does. Stakeholders include: employees, shareholders, investors, suppliers, and society at large Some stakeholders are only remotely affected by the business Sole proprietorships usually have fewer stakeholders than large corporations © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-15

Taking Business Personally Are you a sole proprietorship or a partnership? How do you receive funding? What are your expenses? How does the social environment affect your life? How does globalization affect your life? How do you keep up with new technology? What sort of e-commerce do you use? How do you keep your “business” secure What types of goals do you have? © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-16

Chapter Summary 1.What are profits, and how do businesses and not-for-profit organizations compare? 2.What is the difference between a good and a service, and what are the factors of production? 3.How do competition, the social environment, globalization, and technological growth challenge provide opportunities to business owners? 4.What are the four types of businesses? 5.How do sole proprietorships, partnerships, corporations, and LLCs differ from one another as forms of business? 6.How do life skills translate to the business environment? © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-17

© 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-18