2. Developing a Business Mindset
Chapter 1

3. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Learning Objectives
Explain the concept of adding value in a business and identify the major types of businesses
List three steps you can take to help make the leap from a consumer to a business professional
Discuss the five major environments in which every business operates
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4. Learning Objectives (cont.)
Explain the purpose of the six major functional areas in a business enterprise
Summarize seven of the most important business professions
Identify seven components of professionalism
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5. Understanding What Businesses Do
Any profit-seeking organization that provides goods and services designed to satisfy customers’ needs
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6. Adding Value to Satisfy Customers
A good way to understand what any business does is to view it as a system for satisfying
customers by transforming lower-value inputs into higher-value outputs (see Exhibit 1.1)
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7. Adding Value: the Business of Business
Revenue
Money a company brings in through the sale of goods and services
Business model
A concise description of how a business intends to generate revenue
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8. Adding Value: the Business of Business
Profit
Money left over after all the costs involved in doing business have been deducted from revenue
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9. Competing to Attract and Satisfy Customers
Competitive advantage
Some aspect of a product or company that makes it more appealing to target customers
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10. Identifying Major Types of Businesses
Not-for-profit organizations
Organizations that provide goods and services without having a profit motive, these are also called nonprofit organizations
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11. Identifying Major Types of Businesses
Goods-producing businesses
Companies that create value by making “things,” most of which are tangible
Service businesses
Companies that create value by performing activities that deliver some benefit to customers
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12. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Risk and Reward
The relationship between risk and reward is fundamental to every modern economy. A company needs to
see some promise of reward before it will decide to accept the risks involved in creating and selling products.
However, to ensure responsible behavior, these risks need to stay attached to those decisions, meaning if a
decision turns out to be bad, that company would suffer the consequences. If the risk gets disconnected from the
decision—meaning someone else will suffer if the decision turns out bad—a situation known as moral hazard
is created. A significant recent example of this problem involved home-mortgage companies lending money
to homeowners who were practically guaranteed to default on their loans but then selling those loans as
investments and thereby transferring the risk of non-payment to someone else.
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13. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Risk and Reward
The relationship between risk and reward is fundamental to every modern economy. A company needs to
see some promise of reward before it will decide to accept the risks involved in creating and selling products.
However, to ensure responsible behavior, these risks needs to stay attached to those decisions, meaning if a
decision turn out bad, that company should suffer the consequences. If the risk gets disconnected from the
decision—meaning someone else will suffer if the decision turns out bad—a situation known as moral hazard
is created. A significant recent example of this problem involved home-mortgage companies lending money
to homeowners who were practically guaranteed to default on their loans but then selling those loans as
investments and thereby transferring the risk of nonpayment to someone else.
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14. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Risk and Reward
Goods-producing businesses are often capital-intensive businesses
Service businesses tend to be labor-intensive businesses
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15. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Risk and Reward
Barrier to entry
Any resource or capability a company must have before it can start competing in a given market
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16. Seeing Business from the Inside Out
Business mindset
A view of business that considers the myriad decisions that must be made and the many problems that must be overcome before companies can deliver the products that satisfy customer needs
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17. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
The Business Mindset
Your experiences as a consumer have taught you a great deal about business already. Now the challenge is to
turn those experiences around and view the world from a manager’s perspective. Examples of
how a business professional approaches some of the questions you’ve asked as a consumer are illustrated in Exhibit 1.3.
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18. Positive and Negative Effects of Business
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19. The Multiple Environments of Business
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20. Recognizing the Multiple Environments of Business
Social environment
Trends and forces in society at large
Stakeholders
Internal and external groups affected by a company’s decisions and activities
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21. Recognizing the Multiple Environments of Business (cont.)
Technological environment
Forces resulting from the practical application of science to innovations, products, and processes
Disruptive technologies
Those that fundamentally change the nature of an industry
Can be powerful enough to create or destroy entire companies.
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22. Recognizing the Multiple Environments of Business (cont.)
Economic environment
The conditions and forces that affect the cost and availability of goods, services, and labor and thereby shape the behavior of buyers and sellers
Legal and regulatory environment
Laws and regulations at local, state, national, and even international levels
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23. Recognizing the Multiple Environments of Business
Market environment
A company’s target customers, the buying influences that shape the behavior of those customers, and competitors that market similar products to those customers
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24. Major Functional Areas in a Business Enterprise
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25. Identifying the Major Functional Areas in a Business Enterprise
Research and development (R&D)
Functional area responsible for conceiving and designing new products
Information technology (IT)
Systems that promote communication and information usage through the company or that allow companies to offer new services to their customers
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26. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Identifying the Major Functional Areas in a Business Enterprise (cont.)
Manufacturing, production, or operations
An area where the company makes whatever it makes (for goods-producing businesses) or does whatever it does (for service businesses)
Purchasing, logistics, facilities management
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27. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Identifying the Major Functional Areas in a Business Enterprise (cont.)
Marketing
charged with identifying opportunities in the marketplace
working with R&D to develop the products to address those opportunities
creating branding and advertising strategies to communicate with potential customers, and setting prices
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28. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Identifying the Major Functional Areas in a Business Enterprise (cont.)
Finance and accounting
responsible for virtually every aspect of a firm’s finances
ensuring that the company has the funds it needs to operate
monitoring and controlling how those funds are spent
drafting reports for company management and outside audiences such as investors and government regulators
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Identifying the Major Functional Areas in a Business Enterprise (cont.)
Human resources (HR)
responsible for recruiting, hiring, developing, and supporting employees
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30. Exploring Careers in Business
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31. Achieving Professionalism
The quality of performing at a high level and conducting oneself with purpose and pride
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32. Elements of Professionalism
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33. Communicating Effectively
Listen actively
Provide practical information
Give facts rather than vague impressions
Don’t present opinions as facts
Present information in a concise and efficient manner
Clarify expectations and responsibilities
Offer compelling, persuasive arguments, and recommendations
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34. Applying What You’ve Learned
Explain the concept of adding value in a business and identify the major types of businesses
List three steps you can take to help make the leap from consumer to business professional
Discuss the five major environments in which every business operates
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

35. Applying What You’ve Learned
Explain the purpose of the six major functional areas in a business enterprise
Summarize seven of the most important business professions
Identify seven components of professionalism
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