1. Foundations in Business

2. Foundations in Business
Introduction

3. A simpler time…..
Meet Bob

4. Bob goes fishing every morning
Work: He creates something of value for his family through fish. (He has created wealth for his family)
Benefit: He and his family eat fish and live.
Costs: - They are sick of fish.
- The fish stink after a day or two.
(benefit vs. cost)

5. Too many fish…... Bob’s wife and children become cranky.
Risa is a corn grower - she has too much corn - and wants some fish.
Transaction: An exchange fish for corn both Risa and Bob are better off (profit).

6. Bob keeps fishing... Bob wants a fishing pole made by George.
George doesn’t want fish - he wants corn.
Risa still has fish and doesn’t want more - she wants cookies.
Fred has cookies and he wants fish:
Fish – cookies – corn – pole
Value - function of scarcity and need

7. Evil Ralph - The net fisher
Ralph loves to fish and he’s good at it.
His net catches 10 times more fish in less time.
Bob curses the new technology. (technological innovation)
Ralph gives everyone 2 times the number of fish Bob does. (What happens to value of Bob’s fish?)
Bob decides to get up earlier and fish with three poles. (process innovation)

8. An earlier start & 3 poles ...
Bob doubles his catch - Before: 10 fish in 5 hours = 2 fish / hour Now: fish in 5 hours = 4 fish / hour (Increased productivity)
Evil Ralph the net fisher fish in 4 hours = 25 fish / hour
Bob can’t compete – Bob has to respond … but how?

9. What should Bob do?
Bob could kill Ralph, but that would be really wrong.
Bob could cut Ralph’s nets, but that would also be unfair.
But -- while Bob is thinking - He carves a bird for his wife.

10. Birds…. Risa wants Bob to do something about the stinking fish.
Risa sees Bob’s bird carving and wants to trade.
Her friends see Risa’s bird and they want to trade also.

11. Stop fishing - start birds
Competition - invisible hand of the market
Efficient allocation of resources
An inefficient fisher becomes an efficient bird carver
Community -
more products (2x as many fish)
new products (additional wealth)

12. Business and Creating Wealth
In a private enterprise system:
Individuals (acting in their own self-interest) will compete to participate in transactions in a market.
The terms of the transaction (price and quantity) will be determined by the supply of and demand for that good or service.
This system will produce an efficient allocation of resources (greater productivity), the lowest price, and pressure for innovation (technological and procedural).

13. Creating Wealth-transactions
Exchanges occur only when you are made better off (wealth)
Competition to be a part of exchanges results in:
Pressure for lower prices
Pressure for newer / better products
Pressure for more efficient ways to do things

14. To manage the economic part of your life...
You have to understand :
- How the system works (basic principles)
- The current complexity
To be an informed as:
- An owner
- An employee
- A consumer
- A citizen
Stakeholders

15. Change is the Only Constant
Chapter 1: BUSINESS NOW
Change is the Only Constant

16. MOVING AT BREAKNECK SPEED
1965
1985
1995
2013
General Motors
Exxon Mobil
Ford Motor
General Electric
Mobil
Chrysler
US Steel
Texaco
IBM
Gulf Oil
DuPont
AT&T
Amoco
Exxon Mobile
Wal-Mart
Sears Roebuck
Altria Group
JP Morgan
Berkshire Hathaway
Wells Fargo
Bank of America
Apple
Citigroup
Chevron
Discuss the the changes that took place from were much greater.
Prompt students to discuss what they spend money on; was that something that consumers purchased 5, 10 years ago? How are the products and especially services they buy different than in the past? How much do they spend on cell phone service? Internet service? These are all “new” inventions that are actually changing how we buy (and sell) everything. They are changing business.
The players have changed
What consumers want has changed
How we buy has changed
In the last decade:
Source:

17. Gross Income Profit People
1954
$ 570M
$ 59M
50,225
1964
$ 3.23B
$ 431M
149,834
1974
$12.67B
$1.83B
292,350
1984
$45.93B
$5.48B
394,930
1994
$64.05B
$3.02B
219,839
2004
$96.50B
$8.40B
329,009
2012
$104.50B
$17.60BB
434,246

18. Non-profit organizations focus on causes not profit
BUSINESS BASICS
A business is any activity that provides goods and services in an effort to earn profit.
Profit is the financial reward that comes from starting and running a business… the money that a business earns in sales (or revenue), minus expenses.
Discuss the concentration of US industry in services.
Examples of non-profits: United Way, Planned Parenthood, Red Cross, YMCA, USAID. Discuss the role non-profits play in the economy.
Non-profit organizations focus on causes not profit

19. The Business of Doing Good
© The Studio Dog/Photodisc/Getty Images
Many nonprofits work with businesses to improve the quality of life in society.
Business-like establishments whose primary goal is not profits.
Employ 1 out of 10 workers.
Contribute to the economy
Work with businesses to improve quality of life

20. ENTREPRENEURIAL SPIRIT – Richest Americans
People who risk their time, money, and other resources
to start and manage a business are entrepreneurs.
Rank
Name
Net Worth ($mil)
Source 1
Bill Gates
$67 B
Microsoft 2
Warren Buffett
$53.5 B
Berkshire Hathaway 3
Larry Ellison
$43 B
Oracle 4
Charles Koch
$34 B
Diversified 5
David Koch 6
Christy Walton
$28.2 B
Wal-Mart 7
Michael Bloomberg
$27 B
Bloomberg LP 8
Jim Walton
$26.7 B 9
Sheldon Adelson
$26.5 B
Casinos 10
Alice Walton
$26.3 B 11
S. Robson Walton
$26.1 B 12
Jeff Bezos
$25.2 B
Amazon.com 13
Larry Page
$23 B
Google 14
Sergey Brin
$22.8 B 15
Carl Icahn
$20 B
Leveraged Buyouts
Source: The Forbes

21. CREATIVITY MATTERS Entrepreneurs
create wealth for themselves
ripple effect enriches everyone around them
Creativity is important to the economy
with global competition, the stakes are high
Many of the latest inventions have come from companies
this trend will likely build momentum as global competition intensifies

22. THE EVOLUTION OF BUSINESS
Long-term
Relationships
Satisfied Customers
Use of Technology
Consumer Power
Growth in
Consumerism
Product Differentiation
Customer Focus
Assembly Line
Refining Production
Productivity Gains
Decrease Costs
Hard Sell
No Customer Focus
Industrial Titans
Wealth Creation
Increase in Living Standard
Manipulation/Competition
Exploitation
Mass Production
Factories
Work Specialization
Efficiency
Industrial Revolution
1700-mid 1800s
Entrepreneurship Era
Mid 1800s
Production Era
Early 1900s
Marketing Era
1950s
Relationship Era

23. (machines, tools, buildings, information, technology)
FACTORS OF PRODUCTION
Human Resources (physical & mental)
Capital
(machines, tools, buildings, information, technology)
Natural Resources (land, fresh water, wind, minerals, etc.)
Entrepreneurship
(Risk takers, opportunists)
Businesses rely on some combination of these factors
Entrepreneurship is a key factor
Most growing economies support and promote entrepreneurship
Discuss each factor of production.
Highlight the key role entrepreneurs as risk takers and innovators play in strong economic systems

24. DYNAMIC, CONSTANT AND ENGAGING, CHANGE
Companies must respond quickly and creatively
New Products
Integrating Technology
Creating Technologies
New Businesses
Innovative Processes
New Target Markets…..
Business
Competitive Environment
Social Environment
Economic Environment
Global Environment
Technological Environment
Discuss ways in which companies respond. Highlight the quote and who Jack Welch is. Use the quote to further discuss the importance of managers responding to the changing environment.

25. 2008 Economic Crisis
The stock market tumbled and millions lost their jobs
Housing prices plummeted and foreclosures reached record levels
Economic turmoil in the U.S. spread around the world
The economy began to recover in 2009 although unemployment remained high
The Federal Reserve took steps to encourage a turnaround
President Barack Obama spearheaded economic stimulus to create jobs, build infrastructure and stabilize the economy
The stimulus also added to the debt

26. ECONOMIC ENVIRONMENT
Free Enterprise and Fair Competition Flourish in the US
Government takes an active role to support businesses
Federal Tax Structure
Small Business Administration
Federal Trade Commission
Legislation & Enforceable Contracts
Economic Vulnerabilities
CEO/Worker Pay Gap
Consumer Debt
Federal Debt
The US economy has favorable systems and support for business as free enterprise is a key driver of the economy. But the US economy and strong with a solid foundation, there are economic vulnerabilities. Note that many states are extremely “business-friendly”

27. COMPETITIVE ENVIRONMENT
Today’s competition is intense
Companies must focus on customer satisfaction
Build Long-Term Relationships
Provide Value
Customer Satisfaction = Profitability
Cheap Doesn’t Equal Value
Competitive Principals
Avoid your competitors’ strengths and exploit their weaknesses.
Don’t try and beat them at their game.
Always be a little paranoid. Never underestimate your competition.
Competitors will usually get better when pushed.
Competitors are sometimes irrational when pushed.
Highlight the Jack Trout quote on today’s competition. Note the companies that do this well: Google, Southwest Airlines and Toyota (from the text).

28. SOCIETY CHANGES What are our changing values and beliefs?
How does the integration of other cultures change/add to values and beliefs?
What demographic influences are changing the environment globally?
Companies must respond to these changes in the products they sell and how they sell them.

29. SOCIAL ENVIRONMENT Diversity Aging Population
Rising Worker Expectations
Ethics & Social Responsibility

30. Population Projections for Tarrant County 2000-2040

31. TECHNOLOGICAL ENVIRONMENT
Technology has transformed businesses and consumers
How Companies Do Business
Telecommunications
Robotics
Flexible Manufacturing
Alternative Selling/eCommerce
How Consumers Shop
Online Information/Content
Alternative Buying/eCommerce
Some industries have responding slower than others while some remain at the cutting edge. Think about successful companies and how they use technology. Think about companies that are suffering financially, what opportunities have they ignored?

32. GLOBAL ENVIRONMENT Technology Free Trade Technology is linking
customers/suppliers
worldwide
China and India’s
economies are
growing
Terrorism is more
of a threat today
While the world is becoming more global amongst rapid change, there are advantages and disadvantages and at the same time the multiprong threat of terrorism and job loss.
Job Migration
Blurred lines between
countries/world

33. FOUNDATION SIMULATION
Assessment & Analysis

34. Foundation Simulation
$40 Million electronic sensor manufacturer.
Market dominated by handful of firms.
No outside competitors or substitutes.
Benign environment.

35. Applications

36. Functional Areas
R&D
Marketing
Production
Finance HR
TQM