1. Chapter 1 Characteristics of Business

2. Lesson 1.1 The Nature of Business
Objectives
Explain the nature of business activities.
Define in your own words the term ‘profit.’
Describe the general types of businesses.

3. Goals of Most businesses
Business – An organization that produces or distributes a good or service for profit
Profit – the difference between earned income (ie: sales) and costs (ie: expenses)
The goal of MOST companies
Non-Profit – A company where profits are not the main motivator of the business
The goal is Impact – Community service / volunteer work

4. 2. THE NATURE OF BUSINESS ACTIVITIES
Centers around THREE Main Business activities
Production – making a product OR providing a service
Manufacturing companies – create products that customers use
Service companies – use the skills of employees to offer activities and assistance to customers
Which do you think we have more of?!?
Marketing – activities between business and customers involved in buying and selling goods and services
Examples
Finance – Deals with all of the money matters involved in running a business

5. Basics of Supply and Demand
Supply – the number of similar products that will be offered for sale at a particular time and at a particular price
Demand – the number of similar products that will be bought at a given time at a given price
Scenarios

6. Checkpoint!
What is the difference between a manufacturing firm and a service firm?
Name the 3 major business activities every company engages in.

7. Types of Businesses Two main TYPES of businesses
Industrial – produce goods used by other businesses or organizations to make things
Manufacturing, Construction, Agricultural
Commercial – engaged in the three main types of business activities
Service, retail, wholesale
Industry – term used to refer to all businesses within a category doing similar work
Examples

8. Checkpoint! Complete Assessment 1.1 on page 6
Explain the three main types of business activities.
Define in your own words the term ‘profit.’
Describe the general types of businesses.

9. 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.

10. 5. Changes Affecting Businesses
Innovation – developing something NEW
Affects the KINDS of products / services offered
Examples – cell phones
Affects business operations
Examples – computers

11. Impact of Global Competition on Business
For years, the US led the way in producing new goods and services
In the past 50 years, other countries have become industrialized and now compete with cheaper products
Global Competition – the ability of businesses from one country to compete with similar businesses in other countries

12. Checkpoint!
Identify two major types of changes that present challenges to business.
Who are global competitors with the US? What products are they producing to compete with the US?

13. 7. Focusing on the Right Things
Effectiveness – making the right decisions about what products or services to offer customers and the best ways to produce and deliver them
Efficiency – producing products and services quickly, at a low cost, without wasting time and materials

14. Achieving Effectiveness
KNOW what your customers want
Businesses spend MILLIONS of dollars analyzing buying patterns and customer satisfaction
Domestic goods – products made by US firms
Foreign goods – products made by firms in other countries

15. TRIVIA!
Name the company that is responsible for the largest oil spill in US history.

16. Think about it… Customers want QUALITY
How does this apply to the automotive industry?
How does this apply to electronics?
TQM emerged – Total Quality Management – a commitment to excellence by continual improvement

17. Achieving Efficiency
Measured by output – the quantity produced within a given time
Productivity – producing the largest quantity in the least amount of time by using efficient methods and modern equipment
Three main methods
Specialization of Effort
Better technology and innovation
Reorganization of work activities

18. Specialization
When workers specialize, they become expert at their assigned tasks
Can include the use of an assembly line
What specialization do you think occurs within a large automobile repair shop?
What specializations are you aware of in the medical field?

19. Technology and Innovation
Includes equipment, manufacturing processes, and materials from which products are made
Allows for items to be made faster and usually cheaper

20. Reorganization of Work
Downsizing – Reducing the amount and variety of goods and services produced and the number of employees needed to produce them
Laying off workers
Dropping unprofitable products
Increasing the use of technology

21. Re-engineering – redesigning the work flow throughout an organization
Empowerment – letting workers participate in determining how to perform their work tasks and offer ideas on how to improve the work process
Work quality and efficiency improves
Can cut down on middle management
Re-engineering – redesigning the work flow throughout an organization

22. Trivia!
How old was Bill Gates when he founded Microsoft?

23. Checkpoint!
Why must companies be concerned about both effectiveness and efficiency?
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.
Complete Assessment 1.2 on page 12
Focus on Dell – page 13, 1-3
Innovation Timeline – Create a Timeline with your favorite invention from each decade, beginning with 1930
Give the product, inventor, and specific year invented

24. 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.

25. 13. The Contributions of Business
We measure business growth and prosperity in two ways:
Gross domestic product (GDP) — total market value of all goods and services produced in a country in a year
Individual well-being — home ownership, consumer products, self-improvement, savings

26. GDP Types of transactions that are not reported
Working ‘under the table’
Illegal activities (selling drugs)
A teen hired to babysit or cut grass for a neighbor
*All referred to as the underground economy
5% of the GDP in a strong economy
20% of the GDP in a slow economy

27. Which 3 countries in the world have the highest GDP?
Trivia!
Which 3 countries in the world have the highest GDP?

28. COUNTRIES WITH LARGEST GDPs

29. Individual Well-Being
% of families that own their home
% of people who own flat-screen TVs, washer / dryer, refrigerator, cell phones, etc.
Investments in self-improvement: education, exercise and fitness

30. Checkpoint!
What does gross domestic product measure?

31. 16. The Contributions of Business
Business ownership – few government controls, so many new businesses
Popularity of small businesses
Growth of franchise businesses
Risks of ownership
Obligations of ownership
Intrapreneurship
Studying business principles and management

32. Franchises
A legal agreement in which an individual or small group of investors purchases the right to sell a company’s product or service under the company’s name and trademark
Examples
Franchisor – the parent company
Franchisee – the distributor of a franchised product

33. How does it work? Examples
Franchisee pays an initial fee (usually $100,000) plus a % of sales (usually 3-8%) to the franchisor
Franchisor gives special training and advice on location selection and operations
Significantly smaller failure rate!
Examples

34. What is the fastest growing franchise, as of April 2009?
Trivia!
What is the fastest growing franchise, as of April 2009?

35. Risks of Ownership Risk – the possibility of failure
Competition from other businesses
Changes in prices
Changes in style
Competition from new products
Economic conditions

36. Quick Stats… 1 in 4 businesses fails within the first 2 years
Half fail within 6 to 7 years
Who assumes the risks of a business?!?

37. Obligations of Ownership
To customers
To employees
To management
To competitors
To investors
To the public

38. 20. 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
What are the advantages of this compared to entrepreneurship?

39. To Do…
1.3 Assessment on page 21
Case 1-1 on page 25