Chapter 1 Characteristics of Business

Lesson 1.1 The Nature of Business Goals Explain the nature of business activities. Describe the general types of businesses. Chapter 1 Characteristics of Business

Characteristics of Business Business and Profit Business — an organization that produces or distributes a good or service for profit Profit — difference between earned income and costs Chapter 1 Characteristics of Business

Characteristics of Business THE NATURE OF BUSINESS All business engage in at least three major activities. Production Making a product or service to sell. Manufactures must create products that customers purchases that satisfy needs. Marketing Activities between business and customers involved in buying and selling goods and services. Finance All money matters involved in running a business. No matter the size of a business, one or 1000 employees, it involves production, marketing and finance. Chapter 1 Characteristics of Business

Characteristics of Business Supply and Demand Price is determined by both supply and demand. Supply—number of similar items for sale at a particular price at a particular time. Price when large supply? Price when low supply? Large supply, low price. Low supply, high price. Demand—number of similar products that will be bought at a given price at a given time. Price when many buyers? Price when few buyers? Many buyers, high price. Few buyers, low price. Chapter 1 Characteristics of Business

Types of businesses Industrial Commercial businesses Produce goods or services used by other business or organizations to produce goods. examples—companies that extract oil, coal, iron ore, agriculture Industrial business provide resources to be used by other companies to make their goods or services. Commercial businesses Firms engaged in marketing, finance and furnishing services. Service businesses Must use skills of employees to offer activities and assistance to satisfy customer needs.

Characteristics of Business COMMON BUSINESS TERMS TO KNOW Can You Explain Them All? • Manufacturing • Industry • Supply • Demand • Service firm • Industrial firm • Commercial firm • Third-world nation • Domestic goods • Foreign goods Chapter 1 Characteristics of Business

Lesson 1.2 Changes Affecting Business Goals Describe how innovations affect businesses. Identify the impact global competition has had on U.S. businesses. Discuss ways in which businesses can improve their business practices. Chapter 1 Characteristics of Business

Changes Affecting Businesses Innovation Impact of global competition Focusing on the right things Effectiveness Efficiency Quality Chapter 1 Characteristics of Business

Innovation Innovation is something entirely new! Innovations affect the types of products and services business offer. i.e. from book. Clothing used to be made from natural fibers, now many made from synthetic materials. i.e. from book. Computers changed the way companies do business. Involved in every key aspect of business. i.e. from book. Internet allows small business to compete nationally and globally. How about innovations that affect entertainment? Ipod Cell phone Tablet Computer Movies—3D, Green Screen, Computer Animation Cable TV Wireless Internet Satelite Radio On Demand TV/Movies/Music Downloads VS CD VS Album

Global Competition Global competition— The ability to compete with similar business in other countries. Huge challenge for American business. American businesses must find ways to use resources (raw materials and personnel) better. Be familiar/know customs, religions, traditions and languages of foreign countries you want to do business in.

Triple Threat Focusing on the right things Effectiveness Efficiency Quality Effectiveness and Efficiency Study own operations to determine whether you are doing the right things and doing the right things well. Triple threat—effectiveness, efficiency, quality! Maintaining quality while increasing efficiency and effectiveness is a difficult challenge for business managers.

Characteristics of Business Effectiveness You must know what your customers want. Achieving effectiveness — making the right decisions about products or services to offer and the best ways to produce and deliver them Chapter 1 Characteristics of Business

Information Age—What do customers want? Business spend millions of dollars by gathering information from customers, studying their buying habits and testing new products. Business spend millions of dollars by examining customers preferences. What are some examples of information collected by business? Business spend millions of dollars on customer loyalty. What are some steps business do in order to help maintain customer loyalty. 1—new designs, colors, understandable instructions, etc. 2—warranties, post sale follow-up, treating them like they are special. Treating them like your business depends on them, really, it does. Without your customers, you will have no business. Similar products are sold everywhere! You want them to come back to you! Chapter 1 Characteristics of Business

WAYS TO ACHIEVE EFFECTIVENESS Focus attention on customers’ needs. Provide excellent customer service. Offer high-quality goods and services. Chapter 1 Characteristics of Business

Characteristics of Business Achieving Efficiency Efficiency– Producing products and services quickly at low cost, without wasting time and materials. Producing products at the lowest cost while maintaining the quality customers expect will usually succeed. Efficiency is measured by output—the quantity produced with a a given time. Productivity refers to producing the largest quantity in the least amount of time using efficient methods and modern equipment. Chapter 1 Characteristics of Business

Characteristics of Business EFFICIENCY Efficiency is achieved in three ways: Specialization of effort Having employees becoming experts in one area. Increase quality and increase production. Not everyone needs to be an expert in every area. Better technology and innovation Products can be produced better and faster. Products increase in quality through innovation by weighing less and lasting longer. (Continued on next slide) Chapter 1 Characteristics of Business

Characteristics of Business Efficiency continued. Reorganization of work activities Downsize—reducing the variety of goods or services offered OR reducing the number of employees. Empowerment—allowing workers to participate in determine how to perform their work tasks and offer ideas on how to improve work processes. Better trained and motivated employees allowed a reduction in the number of managers needed. Re-Engineering—redesigning work flow. Chapter 1 Characteristics of Business

Characteristics of Business EFFECTIVENESS AND EFFICIENCY Business Guideposts • Effectiveness: Doing the right things. • Efficiency: Doing the right things well. Quality: Work well and work for a long time. Chapter 1 Characteristics of Business

Lesson 1.3 The Contributions of Business Goals Identify two ways a nation measures its economic growth and prosperity. Describe the benefits of business ownership to the nation and individuals. Chapter 1 Characteristics of Business

The Contributions of Business Business growth and prosperity Gross domestic product (GDP) — total market value of all goods and services produced in a country in a year. Figure 1-2. Underground Economy Illegal nature. Activities not taxed. People in underground economy will still demand government services. What services? Individual well-being — home ownership, consumer products, self-improvement, savings Chapter 1 Characteristics of Business

COUNTRIES WITH LARGEST GDPs Chapter 1 Characteristics of Business

The Contributions of Business Business ownership Two reasons for success growth of the US economy. Desire to own ones own business Ease of startup. Entrepreneur Someone who starts, manages and owns a business. Chapter 1 Characteristics of Business

Characteristics of Business Small Businesses Popularity of small businesses Defined as a company with one or a few employees. Largest type of business in US today. Half of all people employed are by a small business Ice's. Restaurants, gas stations, bakeries, others? Most large corporations began as a small business. Government encourages individuals to become entrepreneurs. Few government regulations preventing startup Small business may have a facility, or done from home, or strictly over the internet. Chapter 1 Characteristics of Business

Characteristics of Business Franchise Businesses Growth of franchise businesses Defined as an legal agreement when an investor purchases the rights to sell a companies product or service. Franchisor? Franchisee? Costs of a Franchise: Franchisee pays an Initial Fee Franchisee pays a percentage of Sales Franchisee gets assistance is selecting location Franchisee gets exclusive rights to sell product in a geographic region Franchisee gets time tested policies, procedures and training Lower failure rate! Chapter 1 Characteristics of Business

Characteristics of Business Risks of Ownership Risks of ownership Entrepreneur assumes risk of failure or success. Success or failure greatly depends on managerial effectiveness. 1 of 5 business fail within the first 3 years. ½ cease operations within 6 to 7 years. Figures include voluntary closures. Selling to someone else. Change of type of ownership. 18% of small business failed in first 8 years. 28% closed voluntarily. See figure 1-4 for causes of business failures Chapter 1 Characteristics of Business

Obligations of Ownership Responsible to community. A failed business affects the community. Loss of employment, money owed, etc. Responsibilities: To Customers To Employees To Management To Competitors To Investors To the Public Chapter 1 Characteristics of Business

Characteristics of Business INTRAPRENEURSHIP Intrapreneur — an employee who is given funds and freedom to create a special unit or department within a company in order to develop a new product, process, or service Limits risk to individual, funded by company. Employee operates with freedom from upper management. Chapter 1 Characteristics of Business

Why Study Management? Be an entrepreneur! Top Management in a company! Be a supervisor! Be a knowledgeable valued employee!