© Prentice Hall, 2004Business In Action 2eChapter Understanding the Fundamentals of Business and Economics

© Prentice Hall, 2004Business In Action 2eChapter Why Study Business? Learn what it takes to run a businessLearn what it takes to run a business Build business vocabularyBuild business vocabulary Develop workplace skillsDevelop workplace skills Learn about a variety of jobsLearn about a variety of jobs Appreciate today’s business careerAppreciate today’s business career

© Prentice Hall, 2004Business In Action 2eChapter What Is a Business? For-Profit –Money motive Not-for-profit –Social service

© Prentice Hall, 2004Business In Action 2eChapter Categories of Business Producing goods –Capital intensive Providing services –Labor intensive

© Prentice Hall, 2004Business In Action 2eChapter Growth in the Service Sector Manufacturing Construction Agriculture Mining Wholesale and retail Transportation and utilities Finance and insurance Other services Goods-Producing Sector Service-Producing Sector

© Prentice Hall, 2004Business In Action 2eChapter Why Is the Service Sector Growing? More disposable income Changing demographics and lifestyles Complex goods and technologies Need for professional advice Low barriers to entry

© Prentice Hall, 2004Business In Action 2eChapter What Is an Economic System? Five production factors –Human resources –Capital –Entrepreneurs –Knowledge –Natural resources

© Prentice Hall, 2004Business In Action 2eChapter The New Economy General Characteristics Physical Assets Cost Control Intellectual Assets Adding Value Technology Mechanical Information Workforce Job-Specific Skills Transferable Skills Lifelong Learning Geography Close to Resources Near to Collaborators Near to Competitors Capital Debt Financing Venture Capital New EconomyOld Economy

© Prentice Hall, 2004Business In Action 2eChapter Types of Economic Systems Free-market system –Capitalism –Mixed capitalism Planned system –Socialism –Communism

© Prentice Hall, 2004Business In Action 2eChapter How Does a Free-Market System Work? Supply and demand Competition Government intervention

© Prentice Hall, 2004Business In Action 2eChapter Effects of Higher Airfare on Demand Increase use of corporate or chartered aircraft Reduce attendance at conventions and conferences Use alternative airports Reduce number of employees traveling Reduce number of domestic trips Increase Saturday-night stayovers Promote teleconferencing and videoconferencing

© Prentice Hall, 2004Business In Action 2eChapter Supply and Demand Relationship High price reduces demand Low price reduces supply Right price balances supply and demand

© Prentice Hall, 2004Business In Action 2eChapter Free-Market Competition Pure competition Monopoly Oligopoly Monopolistic competition

© Prentice Hall, 2004Business In Action 2eChapter Competitive Advantage Price Speed Quality Service Innovation

© Prentice Hall, 2004Business In Action 2eChapter The Role of Government Fosters competitionFosters competition Regulates industriesRegulates industries Deregulate industriesDeregulate industries Protects stakeholder’s rightsProtects stakeholder’s rights Contributes to economic stabilityContributes to economic stability

© Prentice Hall, 2004Business In Action 2eChapter Fostering Competition Antitrust legislation Mergers and acquisitions

© Prentice Hall, 2004Business In Action 2eChapter Regulating and Deregulating Industries Fair competition Business ethics Working conditions Public safety

© Prentice Hall, 2004Business In Action 2eChapter Protecting Stakeholders Federal Trade Commission (FTC) Food and Drug Administration (FDA) Federal Aviation Administration (FAA) Interstate Commerce Commission (ICC) Securities and Exchange Commission (SEC)

© Prentice Hall, 2004Business In Action 2eChapter Contributing to Economic Stability Business cycle –Economic expansion –Economic contraction Fiscal policy –Revenue and spending Monetary policy –Interest rates

© Prentice Hall, 2004Business In Action 2eChapter Monitoring Major Economic Indicators Interest rates Housing starts Unemployment statistics Durable-goods orders

© Prentice Hall, 2004Business In Action 2eChapter Measuring Price Changes Consumer Price Index Purchasing power –Inflation –Deflation

© Prentice Hall, 2004Business In Action 2eChapter Measuring National Output Gross National Product (GNP) Gross Domestic Product (GDP) Dollar Value YesYes Final Goods and Services YesYes Domestic Businesses NoYesForeign-OwnedBusinesses YesNo Overseas Operations

© Prentice Hall, 2004Business In Action 2eChapter Challenges of Globalization Products and servicesProducts and services Managing a small businessManaging a small business Globalization and workforce diversityGlobalization and workforce diversity Ethics and social responsibilityEthics and social responsibility Technology and electronic commerceTechnology and electronic commerce