Section 5.1

1. What a business is 2. The basic functions of business 3. How to distinguish businesses from each other based on general characteristics 4. The importance of e-commerce 5. The concept of derived demand 6. The major types of businesses that comprise the industrial market

 What is Business?  Business is all the activities involved in producing and marketing goods and services  Called companies or businesses  Every company seeks to satisfy economic needs by planning, organizing, and controlling resources in order to produce and market goods or services

 Two Primary Functions:  The production and the marketing of goods and services  Both functions depend heavily on the activity called management  Management – Is used to plan, organize and control available resources to reach company goals

Production is the process of:  Creating, growing, manufacturing, or improving on goods and services  Songwriter – creates a song  Farmer – grows wheat  Ford Motor Company – manufactures cars

When goods or services are created, they must be sold in the marketplace  Marketplace exists whenever a product is sold to a customer- when an exchange takes place between two or more people  The exchange process is the focus of the broad range of activities called marketing!

 All resources used; labor, capital, natural resources – must be brought together (organized) through management to achieve company goals  Management has several meanings:  Money or anything that can be sold for cash quickly  Also means to get credit or borrow money  As a supporting function of management, finance means money management

 Businesses come in a variety of shapes and sizes and are classified differently  Size – large or small  Profit Orientation – Profit or Non-Profit  Market (served) consumer or industrial  Type of Product – Goods, services, or something else

 Small Business – one that is operated by only one or a few people and have less than 100 employees  Mom & Pops  Neighborhood Stores  Florists/Gift Shops  Delicatessens  They make up about 95% of all U.S. businesses are classified as small businesses  They employ over half of the private sector workforce (nongovernment)

 A Large business is usually considered one that has more than 1000 employees  Companies are usually national or global  They have many different departments

Domestic Markets have buyers in a single country  The Global Market is the exchange of goods and services among nations  The internet, along with faster transportation has made it much easier to do business globally  The trend is moving from domestic markets to global markets  Established companies that have domestic success for many years are now facing international competition  ~they must “get with the program” to stay competitive

 Profit is the motivating factor in starting a business in a market economy, however, its not the only motivator  Service Organizations – NonProfit – are not operated to make a profit; they want to make a difference in peoples lives’  Examples:  YMCA/ YWCA  Boys/Girls Clubs of America  Ronald McDonald House

 NonProfits still must hire employees and pay the costs and expenses of running the business  All remaining income (after paying expenses) goes to the charitable cause. No profit is made

 Public Sector – Not intended to make a profit  Most local, state, and federal government agencies fall into this category  Public Schools  Public Libraries Public sector organizations buy one-third of all goods and services sold in the U.S. each year Government Agencies are usually required to buy the least expensive product that meets minimum specifications Businesses not associated with the government are part of the Private Sector

 Goods – tangible things you can touch  Services – intangible; dry-cleaning, haircuts, mall security, etc.  In the 1990s, a whole new service opened up; The Internet!!  Internet Service Providers  Web page designers  Telecommunication Providers  American Businesses will continue to grow in the early 21 st Century; however, growth will be in service industries rather than manufacturing  The internet will continue to grow and shape business

 Industrial or Business to Business Market- is based on; derived from the demand for consumer goods and services  The demand for industrial goods derived  Marketers of industrial goods need to be aware of how their markets will change as a result of changes in the consumer market  When consumers buy more cars. The derived demand for auto components (tires, batteries, etc) increases

 Extractors – Businesses that take something from the earth or sea; agriculture, forestry, fishing and mining  Construction Companies – Build structures; houses, buildings or manufacturing plants  Manufacturing plants – producing goods to sell to other manufacturers or wholesalers and retailers. Called business to business marketing

 Wholesalers – Buy their goods from manufacturers and resell them to industrial users, other wholesalers and retailers. Also called distributors  Retailers – Buy their goods from wholesalers or directly from manufacturers and resell them to the consumer market. Caters to the consumer

 Has become a whole new category of business  The buying and selling of goods and services through the use of electronic networks, usually the internet  Can also be classified as any activity that uses electronic communication in the exchange of goods and services  Began before the internet in 1996 (but 20 times faster); scanners for grocery items, debit cards etc.

1. What is a business? 2. What are the basic functions of business? 3. How do you distinguish businesses from each other? 4. What is the importance of e-commerce? 5. What is the concept of derived demand? 6. What are the major types of businesses that comprise the industrial market?

 Objectives: 1. The areas in which businesses are thought to have social responsibilities 2. The ways business activities impact our environment 3. Ethics defined & how marketers make ethical choices 4. Consumerism 5. Current workplace trends and employee concerns

Other than following the law and paying taxes, should businesses have any other social responsibility ? Most consumers feel business should act in a sociably responsible manner and consider the social and environmental consequences of their actions Social Responsibility – businesses are part of a larger society and should be held accountable to that society for their actions

Ben and Jerry’s – donates 7.5 % of its pretax earnings to the disadvantaged and needy  They also contribute to groups that strive for social change and environmental issues  McDonalds  Funds Ronald McDonald houses around the country  Medical Research, diabetes, MS, Salvation Army, etc

 Laws govern many environmental issues that affect us:  Prohibit improper disposable of medical, chemical, and other hazardous wastes Air and Water Pollution – EPA to help protect the environment from pollution. Clean Air Act – Vehicles must pass emission testing and use unleaded gas to protect people and animals from the harmful effects of lead

Conservation and Recycling – The price and availability of oil is greatly affected by political and economic disruptions; this makes it unpredictable Exploring other fuels has become necessary, car manufacturers are producing smaller cars that are more fuel efficient Some fuels create less pollution More companies and households are recycling… plastic bottles……….

Green Marketing – Companies make an effort to produce and promote environmentally safe products. They are marketed as:  Ozone-Safe  Recyclable  Environmentally Friendly  Biodegradable This helps to create customer loyalty, there are a lot of people/consumers willing to pay more money for products that are environmentally friendly

Ethics – Guidelines for good behavior ; the way you act when no one is looking  Knowing the difference between right and wrong and doing the right thing  Ethical behavior is fair and takes everyone's well-being into account

 Bait and Switch Advertising – Advertising a particular product that a store doesn’t have in stock and switching them to a (higher) price product  Selling unsafe products is prohibited. But……….. The sale of alcohol and cigarettes are often glamorized. Is this ethical?

1. Is the practice right, fair and honest? 2. What would happen if the product were marketed differently? 3. What practice will result in the greatest good for the greatest amount of people? Product Recalls – Some businesses will voluntarily take products off the shelf and recall then before the Consumer Product Safety Commission forces them to do so. Tylenol………..

The societal effort to protect consumer rights by putting legal, moral, and economic pressure on business Began in the early 1900’s focused on product purity, postal rates and banking 1930’s – 1950’s – Concentrated on product safety, labeling, misrepresentation, deceptive advertising, consumer refunds and bank failures

1960’s – 1980’s – Greatest growth in consumerism and involved all areas of marketing. President John F. Kennedy created the Consumer Bill of Rights The Bill stated that consumers have four basic rights:

1. To be informed and protected against fraud, deceit, and misleading statements, and to be educated in the wise use of financial resources 2. To be protected from unsafe products 3. To have a choice of goods and services 4. To have a voice in product and marketing decisions made by government and business

1960’s to 1970’s – Ralph Nader – Unsafe at any Speed – Focused on the Automobile Industry & what it could do to make cars safer The Federal Trade Commission – expanded its role to include consumer complaints Containers have become recyclable in response to consumers concerns over the environment

Employee Issues have become the center of concern since the 1990s Flextime Telecommuting Family Leave Help for the Physically Challenged Health Care Reform On-Site Child Care

Flextime – Allows workers to choose their work hours. Early Start, Early finish/ 4 day workweeks Telecommuting – Working from home, usually by computer Family Leave – Legally required by federal law for large employers. Workers are entitled for up to 12 weeks of nonpaid family leave every two years

Help for the Physically Challenged – Mandated by The Americans with Disabilities Act of 1990 – Employers must provide physically challenged people with the same job opportunities and work site access that others have Health Care Reform – Most people have insurance through their jobs; How to cover these people has become a National Health Care debate.

On-Site Child Care – This has grown in popularity with the increase in two-income families. When this benefit is provided in any form, it tends to reduce employee turnover Other Concerns: Sexual Harassment – Unwelcome Sexual attention or the creation of an intimidating, hostile or offensive working environment Computer Privacy and Security

Many employers track employee computer use to ensure that computers are being used appropriately and for work related use only Employee monitoring is more widespread than ever …………….