Developing a Business Mindset Chapter 1

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Learning Objectives Explain the concept of adding value in a business and identify the major types of businesses List three steps you can take to help make the leap from a consumer to a business professional Discuss the five major environments in which every business operates Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Learning Objectives (cont.) Explain the purpose of the six major functional areas in a business enterprise Summarize seven of the most important business professions Identify seven components of professionalism Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Understanding What Businesses Do Any profit-seeking organization that provides goods and services designed to satisfy customers’ needs Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Adding Value to Satisfy Customers A good way to understand what any business does is to view it as a system for satisfying customers by transforming lower-value inputs into higher-value outputs (see Exhibit 1.1) Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Adding Value: the Business of Business Revenue Money a company brings in through the sale of goods and services Business model A concise description of how a business intends to generate revenue Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Adding Value: the Business of Business Profit Money left over after all the costs involved in doing business have been deducted from revenue Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Competing to Attract and Satisfy Customers Competitive advantage Some aspect of a product or company that makes it more appealing to target customers Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Identifying Major Types of Businesses Not-for-profit organizations Organizations that provide goods and services without having a profit motive, these are also called nonprofit organizations Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Identifying Major Types of Businesses Goods-producing businesses Companies that create value by making “things,” most of which are tangible Service businesses Companies that create value by performing activities that deliver some benefit to customers Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Risk and Reward The relationship between risk and reward is fundamental to every modern economy. A company needs to see some promise of reward before it will decide to accept the risks involved in creating and selling products. However, to ensure responsible behavior, these risks need to stay attached to those decisions, meaning if a decision turns out to be bad, that company would suffer the consequences. If the risk gets disconnected from the decision—meaning someone else will suffer if the decision turns out bad—a situation known as moral hazard is created. A significant recent example of this problem involved home-mortgage companies lending money to homeowners who were practically guaranteed to default on their loans but then selling those loans as investments and thereby transferring the risk of non-payment to someone else. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Risk and Reward The relationship between risk and reward is fundamental to every modern economy. A company needs to see some promise of reward before it will decide to accept the risks involved in creating and selling products. However, to ensure responsible behavior, these risks needs to stay attached to those decisions, meaning if a decision turn out bad, that company should suffer the consequences. If the risk gets disconnected from the decision—meaning someone else will suffer if the decision turns out bad—a situation known as moral hazard is created. A significant recent example of this problem involved home-mortgage companies lending money to homeowners who were practically guaranteed to default on their loans but then selling those loans as investments and thereby transferring the risk of nonpayment to someone else. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Risk and Reward Goods-producing businesses are often capital-intensive businesses Service businesses tend to be labor-intensive businesses Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Risk and Reward Barrier to entry Any resource or capability a company must have before it can start competing in a given market Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Seeing Business from the Inside Out Business mindset A view of business that considers the myriad decisions that must be made and the many problems that must be overcome before companies can deliver the products that satisfy customer needs Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall The Business Mindset Your experiences as a consumer have taught you a great deal about business already. Now the challenge is to turn those experiences around and view the world from a manager’s perspective. Examples of how a business professional approaches some of the questions you’ve asked as a consumer are illustrated in Exhibit 1.3. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Positive and Negative Effects of Business Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

The Multiple Environments of Business Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Recognizing the Multiple Environments of Business Social environment Trends and forces in society at large Stakeholders Internal and external groups affected by a company’s decisions and activities Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Recognizing the Multiple Environments of Business (cont.) Technological environment Forces resulting from the practical application of science to innovations, products, and processes Disruptive technologies Those that fundamentally change the nature of an industry Can be powerful enough to create or destroy entire companies. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Recognizing the Multiple Environments of Business (cont.) Economic environment The conditions and forces that affect the cost and availability of goods, services, and labor and thereby shape the behavior of buyers and sellers Legal and regulatory environment Laws and regulations at local, state, national, and even international levels Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Recognizing the Multiple Environments of Business Market environment A company’s target customers, the buying influences that shape the behavior of those customers, and competitors that market similar products to those customers Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Major Functional Areas in a Business Enterprise Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Identifying the Major Functional Areas in a Business Enterprise Research and development (R&D) Functional area responsible for conceiving and designing new products Information technology (IT) Systems that promote communication and information usage through the company or that allow companies to offer new services to their customers Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Identifying the Major Functional Areas in a Business Enterprise (cont.) Manufacturing, production, or operations An area where the company makes whatever it makes (for goods-producing businesses) or does whatever it does (for service businesses) Purchasing, logistics, facilities management Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Identifying the Major Functional Areas in a Business Enterprise (cont.) Marketing charged with identifying opportunities in the marketplace working with R&D to develop the products to address those opportunities creating branding and advertising strategies to communicate with potential customers, and setting prices Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Identifying the Major Functional Areas in a Business Enterprise (cont.) Finance and accounting responsible for virtually every aspect of a firm’s finances ensuring that the company has the funds it needs to operate monitoring and controlling how those funds are spent drafting reports for company management and outside audiences such as investors and government regulators Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Identifying the Major Functional Areas in a Business Enterprise (cont.) Human resources (HR) responsible for recruiting, hiring, developing, and supporting employees Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Exploring Careers in Business Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Achieving Professionalism The quality of performing at a high level and conducting oneself with purpose and pride Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Elements of Professionalism Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Communicating Effectively Listen actively Provide practical information Give facts rather than vague impressions Don’t present opinions as facts Present information in a concise and efficient manner Clarify expectations and responsibilities Offer compelling, persuasive arguments, and recommendations Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Applying What You’ve Learned Explain the concept of adding value in a business and identify the major types of businesses List three steps you can take to help make the leap from consumer to business professional Discuss the five major environments in which every business operates Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Applying What You’ve Learned Explain the purpose of the six major functional areas in a business enterprise Summarize seven of the most important business professions Identify seven components of professionalism Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

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