McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 1-1 NickelsMcHughMcHugh With help from Jason!! Nickels Cover

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 1-2 Chapter 11 Managing Within The Dynamic Business Environment: Taking Risks and Making Profits 1-2

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 1-3 Learning Goals 1.Basic Business Terms: including profit and risk 2.Entrepreneurship creating wealth 3.Business Environment: economic & legal 4.Business Environment: technological 5.Business Environment: competitive 6.Business Environment: social 7.Business Environment: global 8.Evolution of American Business

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved ) Business & Entrepreneurship BusinessBusiness ProfitProfit EntrepreneurEntrepreneur Match Risk With ProfitMatch Risk With Profit RevenueRevenue LossLoss Standard of Living/Quality of LifeStandard of Living/Quality of Life StakeholdersStakeholders Nonprofit OrganizationsNonprofit Organizations

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 1-5 Definitions Business: Any activity that seeks to provide goods and services to others while operating at a profit.Business: Any activity that seeks to provide goods and services to others while operating at a profit. Entrepreneur: A person who risks time and money to start an manage a business.Entrepreneur: A person who risks time and money to start an manage a business. Revenue: The total amount of money a business takes in during a given period by selling goods and services.Revenue: The total amount of money a business takes in during a given period by selling goods and services.

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 1-6 Definitions Expenses: Costs involved in operating a businessExpenses: Costs involved in operating a business Profit: The amount of money a business earns above and beyond what it spends for salaries and other expenses.Profit: The amount of money a business earns above and beyond what it spends for salaries and other expenses. Loss: When a business's expenses are more than its revenues.Loss: When a business's expenses are more than its revenues.

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 1-7 Definitions Risk: The chance an entrepeneur takes of losing time and money on a business that may not prove profitable.Risk: The chance an entrepeneur takes of losing time and money on a business that may not prove profitable. Standard of Living: The amount of goods and services people can buy with the money they have.Standard of Living: The amount of goods and services people can buy with the money they have. Quality of life: The general well-being of a society in terms of political freedom, a clean natural environment, education, health care, safety, free time, and everything else that leads to satisfaction and joy.Quality of life: The general well-being of a society in terms of political freedom, a clean natural environment, education, health care, safety, free time, and everything else that leads to satisfaction and joy.

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 1-8 Definitions Shake holders: All the people who stand to gain or lose by the policies and activities of a business.Shake holders: All the people who stand to gain or lose by the policies and activities of a business. Non-profit Organization: An organization whose goals do not include making a personal profit for its owners or organizers.Non-profit Organization: An organization whose goals do not include making a personal profit for its owners or organizers. Entrepreneur: A person who risks time and money to start and manage a business.Entrepreneur: A person who risks time and money to start and manage a business.

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 1-9 Stakeholders Bankers Suppliers Government leaders Employees Dealers (retailers) Environmentalists Surrounding community Customers Stockholders

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Objectives of Business Survival Growth Social Responsibility Profit

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved ) Creating Wealth: Factors of Production Land Labor Capital Entrepreneurship Knowledge

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Business Environment

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved ) Economic & Legal Environment $Freedom of ownership $ Contract laws $ Tradable currency $ Elimination of corruption $ Minimum taxes and regulation

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved ProductivityProductivity E-CommerceE-Commerce Responsiveness to CustomerResponsiveness to Customer Technology: 1. Information technology 2. Databases 3. Bar codes 4. The internetTechnology: 1. Information technology 2. Databases 3. Bar codes 4. The internet 4) Technological Environment

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Technological Enviornment TechnologyTechnology Productivity enhanced by technologyProductivity enhanced by technology E-commerce: B2B vs B2C, lower transaction costs, traditional firms will increasingly use too as channel for advertising, info, services and salesE-commerce: B2B vs B2C, lower transaction costs, traditional firms will increasingly use too as channel for advertising, info, services and sales

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved ) Competitive Environment Customer ExpectationsCustomer Expectations SpeedSpeed Restructure/EmpowerRestructure/Empower Concern for Natural EnvironmentConcern for Natural Environment

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Competitive Enviornment Delight the customer with quality goods, excellent service and priceDelight the customer with quality goods, excellent service and price Delight the Stakeholders tooDelight the Stakeholders too Profit and also social orientationProfit and also social orientation Proactive ethicsProactive ethics Quality and service orientationQuality and service orientation

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Restructuring & Empowerment SupportSupport MotivateMotivate Train employees and give them more authorityTrain employees and give them more authority

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Bottled Water Sales in Past 10 Years Tripled to $5.7 Billion (Women Majority of Drinkers) Who is Shopping Online? Americans38% French10% Britons25% Spaniards 4% Canadians24% Poles 3% Japanese20% Consumer Trends Source: Business & Economic Review, Jan.-Mar. 2002

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved ) Social Environment Diversity/MulticulturalDiversity/Multicultural Aging/Graying of AmericaAging/Graying of America Two-Income FamiliesTwo-Income Families TelecommutingTelecommuting Single-Parent FamiliesSingle-Parent Families

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Buying Power of Diverse Groups Women $3,700 Billion Hispanic Americans 550 Billion African Americans 500 Billion Gay Men & Lesbians 450 Billion Asian Americans 254 Billion Native Americans 35 Billion Sources: National Organization on Disability Employability; U.S. Pan Asian American Chamber of Commerce; DiversityInc.com; U.S. Census Bureau

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. U.S. Ethnic Composition Source: Census Bureau

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved st Century Diversity Issues Race Gender Ethnicity DisabilityAgeLanguage Religion Sexual Orientation Source: U.S. Equal Employment Opportunity Commission

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. The Aging of America Source: Census Bureau

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. % U.S. Population by Age Source: Census Bureau

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Older Americans Working Source: USA Today

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Growth of Dual-Income Households Source: USA Today

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Wives Outearn Husbands All Couples* 30.7%All Couples* 30.7% Two-Income Couples 24.1%Two-Income Couples 24.1% *3% Involve Salaries $75,000+ *3% Involve Salaries $75,000+ Source: CNNMoney, 3/3/03.

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved ) Global Environment International Trade: quality goods produced in other countries too.International Trade: quality goods produced in other countries too. Cooperation with business abroad will expand trade and the world economy and should help all countries.Cooperation with business abroad will expand trade and the world economy and should help all countries. Business in Third World countriesBusiness in Third World countries War and TerrorismWar and Terrorism

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved % Does Global Experience Help Your Career? 20% 56% Source: USA Today 5% Very Helpful Somewhat Unnecessary No Response

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved ) Evolution of American Business AgriculturalAgricultural ManufacturingManufacturing Service IndustriesService Industries Future???Future???

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Evolution of American Business GoodsGoods Services becoming a much more important part of the economyServices becoming a much more important part of the economy Services industries provides most new jobsServices industries provides most new jobs But increasing productivity means less workers/staff needed: same pattern in agriculture, then manufacturing and now in services.But increasing productivity means less workers/staff needed: same pattern in agriculture, then manufacturing and now in services.

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Rise of Information & Communication Technology Globalization Doing Business 24/7 Educated Consumers Aging Workforce Increasing Diversity Pyramid vs. Web Trends in Business Source: Keying In- Newsletter of the National Business Education Association, March 2003 Self-Directed, Empowered Employees Communication Skills Decision-Making Skills TeamworkLeadership Continual Learning

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Skill Level Required Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Source: Hudson Institute as reported in Arnold Packer, “Retooling the American Worker,” Washington Post Average Skill Level: 3.6 2% 58% 40%

McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Current Skill Level Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Average Skill Level: % 70.5% 6.6% 16.1%