1. 1 BUSINESS Ferrell Hirt Ferrell A CHANGING WORLD part EIGHTH EDITION
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McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. 1 Business in a Changing World part
In this first chapter we will examine the basic concepts of business, product and profit. We will identify the main participants and activities of business and explain why studying business is important. We will consider the four types of economic systems, and describe the role of supply, demand, and competition in the free enterprise system. Finally, we will explore the various ways that economists gauge the health of an economy.
CHAPTER 1 The Dynamics of Business and Economics
CHAPTER 2 Business Ethics and Social Responsibility
CHAPTER 3 Business in a Borderless World
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3. What is a business? The Nature of Business
Individuals or organizations trying to earn a profit by providing products that satisfy people's needs.
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4. What is a product? The Nature of Business
A good or service with tangible and intangible characteristics that provide satisfaction and benefits.
Most people, when they think of products, think of tangible goods. Products can be goods or services, which are intangible.
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5. Products: Tangible Goods & Services
Loaf of bread
Television
Automobile
Computer
Services
Dry cleaning
Photo processing
Checkup at doctor’s
Musical concert
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6. 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.
No matter how interested in social responsibility or environmentalism a business is, the primary goal of business is to make a profit. Without a profit, the business will not survive and will not be able to do any good for anyone.
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7. [ ] Profit Is: The difference between what it
costs to make and sell a product
and what a customer pays for it
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8. 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
The Daniels Fund is a nonprofit that is dedicated to serving businesses, educational institutions and individuals primarily in Colorado, New Mexico, Utah and Wyoming. Although it was a nonprofit, the funding came from Bill Daniels, who became wealthy in the cable television and telecommunications industries. The profits from his businesses now help provide scholarships and other funding to students and businesses.
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9. 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
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10. The People and Activities of Business
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11. The Activities of Business
Management – Focus on employees
Motivating employees toward business goals
Coordinating employee’s actions
Organizing people for efficiency
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12. Management: Production and Manufacturing
Another element of management
Plan activities
Organize staff
Control tasks of the organization
Production and manufacturing is another area in which managers must be involved. Managers plan activities, organize staff and control the tasks required to carry out the organization’s work.
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13. Marketing Focus on satisfying customers
Determine what products customers want
Plan and develop products
Determine:
Distribution
Place
Promotion
Price
Marketing is more than just advertising. It involves all the activities required to develop and produce goods and services that satisfy consumers. Marketers conduct research, plan and develop products, and develop a marketing strategy and marketing mix for the products.
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14. Axe Target market is young men looking for a date
Uses multimedia promotional approach
YouTube
Facebook
Twitter
Viral Marketing
To promote the fragrance, Axe Music, Unilever staged concerts around the country featuring major music acts
Click on the title hyperlink to access the brand’s website. Click on Axe Music to access a New York Times article about Axe’s promotional efforts.
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15. Finance Finance is the primary responsibility of owners
Obtaining money
Using money effectively
Accountants, stockbrokers, bankers
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16. Why Study Business? Develop skills for career success
Understand business activities
Learn the importance of profitability
Individual businesses
Local and regional impact
Global economic impact
No matter where students’ careers lead them, a solid knowledge of business is helpful. Even in the nonprofit sector, many of the same concerns (such as marketing and accounting) play a role.
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17. Business Impact Purchase raw materials Hire employees Attract capital
Create products
Fuel the global economy
Contribute to society
Businesses can have positive impacts on local and global economies. They create jobs and stimulate the economy; they also provide the goods and services people and organizations need.
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18. 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)
There are many different kinds of resources that are essential to different businesses. Resources are called factors of production because they are what is needed to produce goods and services.
Intangible resources are not factors of production, but they can help in building a successful business. Intangible resources might be the goodwill stakeholders have toward an ethical company, or a positive reputation for producing quality products.
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19. 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
The world has many different permutations of economic systems, as each society seeks to determine the best fit for them.
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20. Economic Systems Three Important Questions:
What types and quantities of goods/services will satisfy consumer needs?
How will goods/services be produced? By whom? With what resources?
How are goods/services distributed to consumers?
All economic systems, no matter how they handle the distribution of resources, are concerned with 3 central questions.
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21. Comparison of Communism, Socialism, and Capitalism
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22. Communism
A society in which the people, without regard to class, own all the nation’s resources.
China
North Korea
Cuba
In Marxian Communism, everyone contributes what he/she is able and receives benefits according to need. In reality, Communist countries often struggle with shortages of basic goods, high prices, and low standards of living with little political freedom..
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23. Socialism
System in which the government owns and operates basic industries but individuals own most businesses.
Sweden
Israel
India
Central planning determines the amount of basic goods to be produced and how they are distributed. Small businesses and individuals produce other goods and services based on quantity demanded and availability of resources.
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24. Capitalism Free Enterprise
Individuals own and operate majority of businesses providing goods and services
Competition and the forces of supply and demand determine which goods are produced, the quantity, distribution and price.
Australia
Japan
United States
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25. Pure Capitalism vs Modified Capitalism
Free Market
All economic decisions made without government intervention
Modified Capitalism
Government intervenes and regulates business to some extent
Even the United States has a modified capitalism system
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26. Mixed Economies [ ]
No economic system in its pure form is practical. Therefore, most nations have developed a mix of economic systems that suits their needs.
No country practices pure capitalism, socialism, or communism. Economic systems can be mixtures and often contain various elements of government intervention
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27. The Free-Enterprise System
Many large economies are free-enterprise – Even China applies free-enterprise principles
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.)
Without these rights, businesses cannot function effectively because they will not be sufficiently motivated to succeed.
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28. 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
Free-enterprise systems are most concerned with the forces of supply and demand. A communist system, for example, would not be concerned with this concept because most prices are set artificially, regardless of supply.
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29. 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
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30. Nature of Competition Competition Pure Competition
Rivalry among businesses for consumers’ dollars
Pure Competition
Many small businesses in same product market (MILK)
Monopolistic Competition
Small number of businesses
Little difference in products, no dominator (LANDSCSAPING)
Oligopoly
Dominated by a small number of sellers (CELL PHONES)
Competition takes different forms depending on the industry and the type of product being sold.
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31. Economic Cycles & Productivity
Economic Expansion
Economy is growing and consumers are spending money
Economic Contraction
Spending declines, layoffs, economy slows down
Inflation (a continuing rise in prices) is a risk of rapid economic expansion.
Recessions often characterized by rising unemployment levels– something that can make recover slower and more difficult.
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32. Overall Unemployment Rate
During recessionary times, such as in , unemployment rates tend to go up. When the economy is growing rapidly, unemployment generally falls. Unemployment can reduce spending on consumer goods as consumers have less disposable income, which can set off a spiral of economic contraction.
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33. Economic Cycles Inflation Recession Depression Unemployment
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
Economies expand and contract in response to numerous factors– changes in consumer, business and government spending, wars or political instability, natural disasters, etc.
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34. The 2008-2010 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
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35. Evaluating the U.S. Economy
This table (Table 1.3 in the text) shows some of the ways by which analysts evaluate the U.S. economy
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36. 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
Early economy: Mostly an agricultural economy
Industrial Revolution: Machines and job specialization increased speed and efficiency of production
Manufacturing economy: Industrialization brought it about; devoted to producing goods and services
Marketing economy: Emerged as businesses became more concerned with the needs and wants of consumers
Service economy: Quality of life improved in 20th century and people hired others to perform services that made their lives easier
New digital economy: Advanced technology and the Internet have changed the pace of life and how we conduct business
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37. 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
Bill Gates and Warren Buffett are highly successful entrepreneurs. Can you think of others? Why are entrepreneurs important to the economy?
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38. The Role of Government in the U.S. Economy
Modified Capitalism
The government regulates industry to encourage competition and protect stakeholders like consumers, employees, or the environment
Laws force businesses to adhere to government standards
Government agencies like the U.S. Federal Reserve Board or the Department of Commerce occasionally intervene to regulate the economy and spur growth
As mentioned earlier, the U.S. does not practice a pure form of free market capitalism. Some elements (such as the financial system) are monitored and modified though regulation and intervention.
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39. 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
It is increasingly important that businesses engage in social responsibility initiatives, and that they be concerned with ethics. Ethical misconduct and the ensuing loss of sales and reputation can be a death blow to a company.
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40. 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 CO2 emissions created from production and travel
Being certified that a business is ethical or good for the environment can help improve reputation and sales. These organizations tend to have fewer ethical misconduct disasters and are more trusted by customers.
Method Products, Inc. is a home and personal care company that takes the greatest care to be ethical and eco-friendly.
Click on the logo to access the company’s homepage.
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41. Can You Learn Business in a Classroom?
Yes!!!
To be successful in business, you need:
Knowledge
Skills
Experiences and
Good judgment
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