Introduction To Business Bus& 101 Chapter 01 Introduction To Business

Goals: What is the relationship between profit and risk. How do businesses & entrepreneurs add to the wealth of an economy and increase the standard of living and quality of life? Compare entrepreneurs to working for others How do taxes and economic environment affect businesses? How has technology affected businesses? How can businesses meet and beat their competitors? What has been the reaction to the changing social environment? What must businesses do to meet the global challenge? What business trends from the past can help us plan for the future?

Business Terms Entity: Business: Nonprofit organization: An entity could be a business, a nonprofit company, a college, or other Business: Any activity that seeks to provide goods and services to others for a profit Nonprofit organization: An organization whose goals do not include making a personal profit for its owners or organizers Examples: Churches and Temples Washington Boomerang Club

Business Terms Goods: Services: Tangible items like shoes, cars, food, etc. Services: Intangible things like preparing a tax return, tutoring, fixing a car, etc.

Business Terms Entrepreneurs: Entrepreneurs are people who take risks in order to implement new ideas that will solve existing problems in the hopes of gaining profit (or for benefits for nonprofit) Entrepreneurs see the problem and then have good ideas that can solve the problem

Business Terms Economic: Economy: The production, distribution, and consumption of goods and services Economy: The system or range of economic activity in a country, region, or community

Business Terms Revenue: Expense: Profit or Loss = Revenues - Expense Cash in or the promise to pay cash later (accounts receivable) that a business receives for the sale of goods or services. Expense: The cost spent by a business (cash out or the promise to pay cash out later (accounts payable)) to run the business. Profit or Loss = Revenues - Expense

Profit Profit or Net Income = Revenue – Expenses (Revenues are greater than Expense) Loss or Net Loss = Revenue – Expenses (Expense are greater than Revenues)

Risk: The chance that you may lose time or money while running a business. The higher the risk the greater the profit or loss may be. Do Entrepreneurs take risk? How about the Banks, Investment Firms, Insurance Companies and Hedge Funds in the 2007-2010 Financial Crisis?

Businesses Provide Benefits For Society Provide Jobs for Employees Provide Products and Services for people to buy Pay Taxes (hopefully) so that governments can: Hire fire and police people Provide Schools and Parks Assist people in need For more about companies not paying taxes type “US corporations pay little tax” into Google.

Businesses and Employees pay taxes so the government can: Build schools and roads and parks Hire fire men/women and police Keep the environment healthy Help people in need Laws to Promote Private Property Courts to Enforce Contracts If this does happen, then the profit from business helps to increase the: Standard of Living Quality of Life

Standard of living: The amount of goods and services you can buy with the money you have If you have more money than someone else, but can buy less, the standard of living would be lower for you than for the person who could buy more. $7.00 Beer in Japan / $3 beer in the USA Problems with measuring the Standard of living: http://en.wikipedia.org/wiki/Standard_of_living

Quality of life: The general well-being of a society in terms of: Political freedom A clean natural environment Education Health care Safety Free time Everything else that leads to satisfaction and joy (that does not harm others) Quality of life comes from a combined efforts amongst businesses, nonprofits and government agencies

2007-2010 Financial Crisis What has happened to the Standard of Living & Quality of Life during this period?

Stakeholders: Everyone who stands to gain or lose from a businesses’ conduct

Outsourcing & Insourcing Contacting with other companies to do tasks for the business such as production or accounting Insourcing Firms from other countries setting up design or production facilities in the US

Outsourcing: Contracting with other companies to do various business functions such as accounting or production. Outsourcing can: Help business focus on what it does best Reduce costs and increase profit Cause communities to lose jobs

Entrepreneurs: Entrepreneurs are people who take risks in order to implement new ideas that will solve existing problems in the hopes of gaining profit. Entrepreneurs see the problem and then have good ideas that can solve the problem.

Entrepreneurs: Entrepreneurs must work hard to implement the new idea and create a business or other entity Entrepreneurs take great risks when they start a new business or other entity It is usually very hard to translate the new idea into a successful business or other entity Entrepreneurs are the engine behind any successful economy because they: Solve problems Start Businesses Help to generate profit and wages Help to increase standard of Living And Quality Of Life

Compare entrepreneurs to working for others No entrepreneurial risk Benefits (pay, insurance…) Entrepreneurs Good idea to solve problem  Great risks = Great Benefits or Loose it all

Factors of Production: Resources used to Create Wealth Land Any natural resource Labor (workers) Capital Buildings, computers, machines NOT CASH (cash buys the factors of production) Entrepreneurship Land, Labor, Capital, Knowledge are of little good with out an entrepreneur to: See problem Have idea Take risk of starting business Knowledge (Effective use of knowledge)

Why Are Some Countries/ States/ Cities Wealthier Than Others? Countries that encourage entrepreneurship tend to be wealthier Ways to encourage entrepreneurship: Legal systems that protect private property, help to enforce contacts, discourage bribery Financial markets that can get help startup entrepreneurial companies – loans or stock. Others…

Business Environment: Surrounding factors that help or hinder the development of businesses: The economic and legal environment The technological environment The competitive environment The social environment: Global Business Environment

Business Environment: The economic and legal environment (ways government can foster entrepreneurship): Freedom of ownership Contract laws Elimination of corruption Tradable currency (If you did not have one you could not buy from other counties) Minimum taxes and regulations required to provide a high quality of life

Business Environment: The technological environment: Information Technologies (computers, cell phones, internet) Spreadsheets The default computer program for the business world Databases Store raw data and create useful information Bar codes Automate transactions, accounting and data collection The Internet Information and commerce

Technology: Things that make running a business more effective, efficient and productive such as: Machines Phones Medical Devices Spreadsheets and Databases Internet History: the wheel and the telescope are technological elements

Effective & Efficient: Producing the desired result Efficient: Obtain goal with the fewest resources (time, work, materials)

Productivity: The amount of output you generate given the amount of input Productivity goes up when you produce the same amount of output with fewer inputs. Example: In 1980, summarizing customers sales purchases for the year (accounting task) may have taken 5 hours; whereas in 2010, with the use of a spreadsheet this job could take as little as five minutes.

Average per capita GDP (Gross Domestic Product) (Total Value of all final goods & services)/(Number of people in Country) For more info: http://en.wikipedia.org/wiki/Gross_domestic_pr oduct

E-commerce: The buying and selling of goods and services over the internet B2C Business to Customer (Amazon.com) B2B Business to Business (Coloradoboomerangs.com)

Database: Stores raw data Creates useful information for decision making Example: Search data base for customers who have low sales or who have not made purchases in a while so that you can contact them and try to make a sale

Spreadsheet: Calculations and data analysis can be made in programs like Excel Excel is the most used program in the business world and for most jobs it is required that you know how to use it.

Identity Theft Obtaining private information such as Social Security & Credit Card numbers to use for illegal purposes

Business Environment: The competitive environment: Customer Service Stakeholder recognition Employee Service Concern for the environment

Competition: To compete in the World Economy you must: Delight the customer Have a customer and stakeholder orientation Create profits with a social orientation Demonstrate proactive ethics Create quality products/service and provide service after the sale Have a customer focus

Empowerment: Giving frontline workers the responsibility, authority, and freedom to respond quickly to customer needs. This requires that employees be trained properly so that they can respond to customer needs without consulting a manager

Business Environment: The social environment: Diversity Demographic change Family changes Global Business Environment Global Competition & Free Trade Transportation and Communications have contributed to an increase Decreases Cost But has it decreased quality?

21st Century Diversity Issues Race Age Language Religion Sexual Orientation Gender See Learning Goal 6: Demonstrate how the social environment has changed and tell what the reaction of the business community has been. 21st Century Diversity Issues This slide acknowledges the social issues facing American Business in the 21st Century. Gender is increasingly becoming an influence on business. It’s estimated that 80-85% of all consumer goods are influenced by women. (Source: Business Trends) Ask the student why it’s important for business to understand these issues? (Understanding these issues can often identify opportunities that have been missed in the past due to lack of knowledge and understanding of diversity.) Ethnicity Disability Source: U.S. Equal Employment Opportunity Commission

Buying Power of Diverse Groups Women $3,700 Billion African Americans 761 Billion Hispanic Americans 686 Billion Gay Men & Lesbians 610 Billion Asian Americans 397 Billion Native Americans 51 Billion See Learning Goal 6: Demonstrate how the social environment has changed and tell what the reaction of the business community has been. Buying Power of Diverse Groups This slide identifies the opportunities for demographers and savvy marketers to capture the looming potential of these consumer categories. By 2007, the Selig Center for Economic Growth projects buying power at: Hispanics $926.1 Billion African-Americans 852.8 Asians 454.9 Native-Americans 57.3 Point out to the students that differences in (buying power) and spending by race and ethnic groups suggest that one general advertisement for all consumers misses potential market opportunities. 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, 2005.

Demography: The statistical study of the human population with regard to its size, density, and other characteristics such as race, gender, and income. Businesses must understand demography in order to provide or not provide the products and services that people may want. Example: A company may need to close a store if the population in that area declines, or a company may need to add products if the demography changes

Change: Because the rate of change has increased, businesses and workers must change also. Continuing education and training is required to keep up with the times

Global Environment International Competition and Free Trade Improvements in Transportation and Communication War & Terrorism Global Changes See Learning Goal 7: Analyze what businesses must do to meet the global challenge, which includes war and terrorism. See text page: 18-20

Making customers happy and managing cash flow are amongst the most important daily tasks of any competitive business

1) What is the relationship between profit and risk. The more risk the greater the profit and losses Entrepreneurs take a big risk when they try to start a business. If they are successful they can have great profits. If the business fails, they may lose all their money and time invested

2) How do businesses & entrepreneurs add to the wealth of an economy and increase the standard of living and quality of life? When an entrepreneur creates a business or nonprofit, they provide a solution to a problem. By solving a problem, the entrepreneur and business can increase both the standard of living and quality of life. The standard of living can be increased by providing profit to the owner and wages to the employees. The quality of life can be increased by providing the solution in itself and also by providing tax revenues for the government that can be used for education, parks and similar endeavors.

3) Compare entrepreneurs to working for others No entrepreneurial risk Benefits (pay, insurance…) Entrepreneurs Good idea to solve problem  Great risks = Great Benefits or Loose it all

4) How do taxes and economic environment affect businesses? Taxes can have two major effects: 1) they provide revenues so that the government can protect private property and enforce contacts; 2) they can deter business from making investments if the taxes are too high. The economic environment can have positive or negative impacts on businesses. On the positive side, low interest rates can help business borrow to make capital investments. On the negative side, low interest rates and easy credit without sufficient regulation can lead to a housing market and debt market bubble that could pop and lead to recession, which in turn could hurt business activity.

5) How has technology affected businesses? From more efficient farming equipment to spreadsheets to help with accounting and marketing, technology helps to increase productivity. The continual change in technology has also meant that businesses and governments must continually retrain employees.

6) How can businesses meet and beat their competitors? Delight the customer Have a customer and stakeholder orientation Create profits with a social orientation Demonstrate proactive ethics Create quality products/service and provide service after the sale Have a customer focus

7) What has been the reaction to the changing social environment? The reaction of business has been slow, but inevitable. As the demographics change, businesses must change, or they will not survive. Businesses have change location, changed products and service and have changed internal policies to meet these changes.

8) What must businesses do to meet the global challenge? Compete with businesses around the world while keeping customers happy (quality of product and customer service) and employees satisfied (outsourcing)

9) What business trends from the past can help us plan for the future? Farming  Manufacturing  Service  Information In a changing world, be flexible and be willing to learn new things

Entrepreneurs Entrepreneurs Entrepreneurs = Engine of any economy See Problems Have an Idea that can help to solve the problem Take the risk of starting a business Risk = future uncertainty Risk = could be great gains or losses Get funding to start business (in this case debt is usually good) New business = new jobs + new goods & services for people New Business pay taxes to help government with costs associated with: Legal System, Police, firemen, Social Security… Everyone is better off Entrepreneurs = Engine of any economy Schumpeter: “Continuous Gail of Creative Destruction”

History Tax History: http://www.infoplease.com/ipa/A0005921.html Over the last century starting overall government spending in the United States has increased substantially from about seven percent of GDP in 1902 to about 35 percent of GDP in 2010 Federal Government spends money on all sorts of things: Federal Revere started in 1913 Social Security Act was enacted in 1935 Medicare and Medicaid in 1960s

GDP GDP = Gross Domestic Product GNP = Gross National Product or Uses numbers from within borders GNP = Gross National Product or GNI = Gross National Income In addition to numbers from within borders, this includes income from overseas GCP per capital (Totals goods)/Population (Kids included) GDP/(Labor Force) is a more common measure for productivity