****** 1-1 McGraw-Hill/Irwin Understanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Nickels McHugh McHugh ** 1 CHAPTER * ** Managing Within The Dynamic Business Environment: Taking Risks and Making Profits

****** 1-2 Learning goals Describe the relationship of business’s profit to risk assumption and discuss how business and nonprofit organizations add to the standard of living and quality of life for all.Describe the relationship of business’s profit to risk assumption and discuss how business and nonprofit organizations add to the standard of living and quality of life for all. Explain the importance of entrepreneurship to the wealth of an economy.Explain the importance of entrepreneurship to the wealth of an economy. Examine how the economic environment and taxes affect businesses.Examine how the economic environment and taxes affect businesses. Illustrate how the technological environment has affected businesses.Illustrate how the technological environment has affected businesses. Identify various ways in which businesses can meet and beat competition.Identify various ways in which businesses can meet and beat competition. Demonstrate how the social environment has changed and tell what the reaction of the business community has been.Demonstrate how the social environment has changed and tell what the reaction of the business community has been. Analyze what businesses must do to meet the global challenge, which includes war and terrorism.Analyze what businesses must do to meet the global challenge, which includes war and terrorism. Review how trends from the past are being repeated in the present and what such trends will mean for tomorrow’s college graduate.Review how trends from the past are being repeated in the present and what such trends will mean for tomorrow’s college graduate.

****** 1-3 Business & Entrepreneurship BusinessBusiness ProfitProfit EntrepreneurEntrepreneur Match Risk With ProfitMatch Risk With Profit RevenueRevenue LossLoss Standard of Living/Quality of LifeStandard of Living/Quality of Life StakeholdersStakeholders Nonprofit OrganizationsNonprofit Organizations

****** 1-4 Objectives of Business Survival Growth Social Responsibility Profit

****** 1-5 Creating Wealth: Factors of Production LandLand LaborLabor CapitalCapital EntrepreneurshipEntrepreneurship KnowledgeKnowledge

****** 1-6 Business Environment

****** 1-7 Economic & Legal Environment $Minimum taxes and regulations $Freedom of ownership $ Contract laws $ Tradable currency $ Elimination/minimization of corruption

****** 1-8 Corrupt Countries Least Corrupt 1.Iceland 2.Finland 3.New Zealand Most Corrupt 1.Bangladesh 2.Chad 3.Haiti Source: Transparency International, 2005;

****** 1-9 ProductivityProductivity E-CommerceE-Commerce Responsiveness to CustomerResponsiveness to Customer Technological Environment

****** 1-10 Identity Theft Total number of identity theft victims in 2005 – 255,565Total number of identity theft victims in 2005 – 255,565 Top four ways how victims information was misused:Top four ways how victims information was misused: 1.Credit card fraud 2.Phone/utilities fraud 3.Bank fraud 4.Employment-related fraud Source: Identity Theft: Victim Complaint Data, 2005, Federal Trade Commission;

****** 1-11 ID Theft—Protective Steps “Focus on the cheap and easy way to keep an eye on your accounts”“Focus on the cheap and easy way to keep an eye on your accounts” Free Credit ReportsFree Credit Reports Guard Your NumberGuard Your Number ShredShred Bug CongressBug Congress  To pass ultimate protection: A credit freeze anytime you want one. Source: Money, August 2005

****** 1-12 Competitive Environment Customer ExpectationsCustomer Expectations Restructure/EmpowerRestructure/Empower

****** 1-13 U.S. Bottled Water Sales in Past 15 Years Increased more than four- fold to $9.8 BillionU.S. Bottled Water Sales in Past 15 Years Increased more than four- fold to $9.8 Billion From October 2004 to September 2005, top bottle water flavors were:From October 2004 to September 2005, top bottle water flavors were: Blend, Lemon, Lime, and Apple Consumer Trends Source: Business & Economic Review, Jan.-Mar. 2002; Beverage Marketing Corporation, bottledwater.org, 2004 stats; Productscan Online; datamonitor.com, November 9, 2005

****** 1-14 Social Environment Diversity/MulticulturalDiversity/Multicultural Aging/Graying of AmericaAging/Graying of America Two-Income FamiliesTwo-Income Families Single-Parent FamiliesSingle-Parent Families

****** 1-15 U.S. Household Size Source: U.S. Census Bureau

****** 1-16 Buying Power of Diverse Groups Sources: National Organization on Disability Employability; U.S. Pan Asian American Chamber of Commerce; DiversityInc.com; U.S. Census Bureau; The Augusta Chronicle, October 22, 2005; Selig Center for Economic Growth, Women $3,700 Billion Women $3,700 Billion African Americans 761 Billion African Americans 761 Billion Hispanic Americans 686 Billion Hispanic Americans 686 Billion Gay Men & Lesbians 610 Billion Gay Men & Lesbians 610 Billion Asian Americans 397 Billion Asian Americans 397 Billion Native Americans 51 Billion Native Americans 51 Billion

****** st Century Diversity Issues Race Race Gender Gender Ethnicity Ethnicity Disability Disability Age Age Language Language Religion Religion Sexual Orientation Sexual Orientation Source: U.S. Equal Employment Opportunity Commission

****** 1-18 Immigration In 2005, roughly 35 million immigrants lived in the U.S. as compared to less than 25 million 10 years ago.In 2005, roughly 35 million immigrants lived in the U.S. as compared to less than 25 million 10 years ago. According to a November 2005 poll, 60 percent of Americans favor a barrier built along the US-Mexico Border.According to a November 2005 poll, 60 percent of Americans favor a barrier built along the US-Mexico Border. About 49 percent believe that a child born to an illegal alien in the U.S. should be granted a US citizenshipAbout 49 percent believe that a child born to an illegal alien in the U.S. should be granted a US citizenship Source: Center for Immigration Studies; RasmussenReports.com

****** Older Americans Working Source: USA Today

****** 1-20 Americans Living Longer U.S. life expectancy rises to a record high 77.9 yearsU.S. life expectancy rises to a record high 77.9 years The number of deaths dropped by 50,000 in 2004 from 2003, the steepest decline since 1938The number of deaths dropped by 50,000 in 2004 from 2003, the steepest decline since 1938 By 2005, about one in eight Americans will be 65 or older. By 2025, it will be nearly one in five.By 2005, about one in eight Americans will be 65 or older. By 2025, it will be nearly one in five. Source: Investor’s Business Daily, December 8, 2003; Cumberland Times-News, April 20, 2006; U.S. Centers for Disease Control and Prevention; U.S. Census

****** 1-21 Exurbs: Growth of Outer Suburbs Northeasterners are moving south and west, and west coast residents are moving inland.Northeasterners are moving south and west, and west coast residents are moving inland. The states that gained the most residents: Florida, Arizona, NevadaThe states that gained the most residents: Florida, Arizona, Nevada The states that lost the most residents: New York, California, IllinoisThe states that lost the most residents: New York, California, Illinois Source: Cumberland Times-News, April 21, 2006; U.S. Census Bureau

****** 1-22 Global Environment International Competition and Free TradeInternational Competition and Free Trade Improvements in Transportation and CommunicationImprovements in Transportation and Communication War & TerrorismWar & Terrorism Global ChangesGlobal Changes

****** 1-23 Disaster Costs Hurricane Katrina – 2005 (estimate)$ 200 B Kobe, Japan Earthquake B September 11, 2001 Attacks 70 B Northridge, CA Earthquake – B Hurricane Andrew – B The Economic Cost of Disaster Source: Business 2.0, November 2002; MSNBC.com, September 10, 2005.

****** % Does Global Experience Help Your Career? 20% 56% Source: USA Today 5% Very Helpful Somewhat Unnecessary No Response

****** 1-25 Evolution of American Business Agricultural/ManufacturingAgricultural/Manufacturing Service IndustriesService Industries Future???Future???

****** 1-26 Rise of Information & Communication TechnologyRise of Information & Communication Technology GlobalizationGlobalization Doing Business 24/7Doing Business 24/7 Educated ConsumersEducated Consumers Aging WorkforceAging Workforce Increasing DiversityIncreasing Diversity Pyramid vs. WebPyramid vs. Web Trends in Business Source: Keying In- Newsletter of the National Business Education Association, March 2003 Self-Directed, Empowered EmployeesSelf-Directed, Empowered Employees Communication SkillsCommunication Skills Decision-Making SkillsDecision-Making Skills TeamworkTeamwork LeadershipLeadership Continual LearningContinual Learning

****** 1-27 Leveraging Diverse Workforce According to the Society for Human Resources’ survey, about 70 percent of the respondents actively leverage workforce diversity through:According to the Society for Human Resources’ survey, about 70 percent of the respondents actively leverage workforce diversity through: Ensuring leadership development programs reach all employees (40%)Ensuring leadership development programs reach all employees (40%) Meeting the needs of diverse customers (39%)Meeting the needs of diverse customers (39%) Integrating diversity into the organization’s business strategy (35%)Integrating diversity into the organization’s business strategy (35%) Increasing innovation by tapping employees of all backgrounds (34%)Increasing innovation by tapping employees of all backgrounds (34%) Source: SHRM Weekly Survey, August 3, 2004

****** 1-28 Skill Level Required Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Source: Hudson Institute as reported in Arnold Packer, “Retooling the American Worker,” Washington Post Average Skill Level: 3.6 2% 58% 40%

****** 1-29 Current Skill Level Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Average Skill Level: % 70.5% 6.6% 16.1%