part 1 FHF Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

part CHAPTER 3 Business in a Borderless World CHAPTER 2 Business Ethics and Social Responsibility 1 CHAPTER 1 The Dynamics of Business and Economics FHF

What is a business? Individuals or organizations trying to earn a profit by providing products that satisfy people's needs. The Nature of Business 1-3

FHF What is a product? A good or service with tangible and intangible characteristics that provide satisfaction and benefits. The Nature of Business 1-4

FHF Products: Tangible Goods & Services Services Dry cleaning Photo processing Checkup at doctor’s Musical concert Tangible Goods  Loaf of bread  Television  Automobile  Computer 1-5

FHF The Primary Goal of Business Earn a profit  The difference between what it costs to make and sell a product and what a customer pays for it. 1-6

[] FHF Profit Is: The difference between what it costs to make and sell a product and what a customer pays for it 1-7

FHF Non-Profit Organizations Not all organizations are for-profit businesses Nonprofit organizations  Provide goods and services but  Do not have the fundamental purpose of earning profits  Founded by Bill Daniels, a pioneer in cable television  Provides grants and scholarships to students, educational institutions and businesses in the Rockies region 1-8

[] FHF Stakeholders Customers, employees, investors, government regulators, community and society. Those that have a stake in the success and outcomes of a business are considered stakeholders 1-9

FHF The People and Activities of Business 1-10

FHF The Activities of Business Management – Focus on employees  Motivating employees toward business goals  Coordinating employee’s actions  Organizing people for efficiency 1-11

FHF Management: Production and Manufacturing Another element of management Plan activities Organize staff Control tasks of the organization 1-12

FHF Marketing Focus on satisfying customers o Determine what products customers want o Plan and develop products o Determine:  Distribution  Place  Promotion  Price 1-13

FHF Axe o Target market is young men looking for a date o Uses multimedia promotional approach YouTube Facebook Twitter Viral Marketing o To promote the fragrance, Axe Music, Unilever staged concerts around the country featuring major music actsAxe Music 1-14

FHF Finance Finance is the primary responsibility of owners  Obtaining money  Using money effectively  Accountants, stockbrokers, bankers 1-15

FHF Why Study Business? o Develop skills for career success o Understand business activities o Learn the importance of profitability  Individual businesses  Local and regional impact  Global economic impact 1-16

FHF Business Impact  Purchase raw materials  Hire employees  Attract capital  Create products  Fuel the global economy  Contribute to society 1-17

FHF The Economic Foundations of Business Economics Distribution of resources for the production of goods and services within a social system Resources (sometimes called factors of production ) Natural resources (land, forests, minerals, water) Human resources (labor) Financial resources (capital) Intangible (good reputation, quality products) 1-18

FHF Economic Systems How a society distributes its resources to produce goods and services  Central issue of economics  How to fulfill an unlimited demand for goods and services with a limited supply of resources 1-19

FHF Economic Systems Three Important Questions: 1. What types and quantities of goods/services will satisfy consumer needs? 2. How will goods/services be produced? By whom? With what resources? 3. How are goods/services distributed to consumers? 1-20

FHF Comparison of Communism, Socialism, and Capitalism 1-21

FHF Communism A society in which the people, without regard to class, own all the nation’s resources.  China  North Korea  Cuba 1-22

FHF Socialism System in which the government owns and operates basic industries but individuals own most businesses.  Sweden  Israel  India 1-23

FHF Capitalism Free Enterprise  Individuals own and operate majority of businesses providing goods and services United StatesJapan Australia 1-24

FHF Pure Capitalism vs Modified Capitalism Pure Capitalism  Free Market  All economic decisions made without government intervention Modified Capitalism  Government intervenes and regulates business to some extent 1-25

[] FHF Mixed Economies No country practices pure capitalism, socialism, or communism. Economic systems can be mixtures and often contain various elements of government intervention 1-26

FHF The Free-Enterprise System Many large economies are free-enterprise – Even China applies free-enterprise principles o Basic individual and business rights  Right to own property  Right to earn profits and use them as one wishes (within constraints of law)  Right to make business decisions  Right to choose (careers, what goods/services to purchase, etc.) 1-27

FHF Supply and Demand Distribution of resources and products is determined by supply and demand Demand  Number of goods/services consumers buy at a given price at a specific time Supply  Number of products businesses will sell at different prices at a specific time 1-28

FHF Forces of Supply & Demand Equilibrium Price = Price at which number of products supplied equal amount of products consumers are willing to buy at a specific time 1-29

FHF Nature of Competition Competition  Rivalry among businesses for consumers’ dollars Pure Competition  Many small businesses in same product market Monopolistic Competition  Small number of businesses  Little difference in products Oligopoly  Very few businesses selling a product 1-30

FHF Economic Cycles & Productivity Economic Expansion Economy is growing and consumers are spending money Economic Contraction Spending declines, layoffs, economy slows down 1-31

FHF Overall Unemployment Rate 1-32

FHF Economic Cycles Inflation  Condition characterized by continuing rise in prices Recession  Decline in production, employment, and income Depression  Unemployment very high; consumer spending low; business output sharply reduced Unemployment  % of population that wants to work but unable to find jobs 1-33

FHF The Recession The worst recession since the Great Depression  Collapse of many financial institutions AIG Bear Stearns Washington Mutual Merrill Lynch  Stock market dropped 50%  Highest mortgage default rate in history  Unemployment exceeded10%  Personal savings rates increased  Government spent $750 billion on financial institutions, and $789 billion on an economic stimulus package 1-34

FHF Measuring the U.S. Economy: GDP 1-35

FHF Evaluating the U.S. Economy 1-36

FHF A Brief History of the U.S. Economy  The early economy  The Industrial Revolution  The manufacturing economy  The marketing economy  The service economy  The new digital economy 1-37

FHF Entrepreneurship Entrepreneur: An individual who risks his/her wealth, time and effort to develop for profit an innovative product or way of doing something. Entrepreneurship requires: Risk Innovation Creativity Reward 1-38

FHF The Role of Government in the U.S. Economy Modified Capitalism o The government regulates industry to encourage competition and protect stakeholders like consumers, employees, or the environment o Laws force businesses to adhere to government standards o Government agencies like the U.S. Federal Reserve Board or the Department of Commerce occasionally intervene to regulate the economy and spur growth 1-39

FHF Ethics & Social Responsibility in Business Business ethics refers to standards and principles used by society to define appropriate behavior at work Stakeholders increasingly demand that businesspeople behave ethically and socially responsibly Business reputation depends on profit and ethical conduct and social responsibility 1-40

FHF Ethical Business Certifications Only natural ingredients Cradle to Cradle certified  Means products are designed with materials that can be infinitely reused Every product is inspected by the Environmental Protection and Encouragement Agency  Reviews ingredients for safety Offset CO 2 emissions created from production and travel 1-41

FHF Can You Learn Business in a Classroom? Yes!!! To be successful in business, you need: Knowledge Skills Experiences and Good judgment 1-42