1. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 1 Foundations in Business

2. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 1 Introduction Foundations in Business

3. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 1 A simpler time….. Meet Bob

4. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. An earlier start & 3 poles... Bob doubles his catch - Before: 10 fish in 5 hours = 2 fish / hour Now: 20 fish in 5 hours = 4 fish / hour (Increased productivity) Evil Ralph the net fisher - 100 fish in 4 hours = 25 fish / hour Bob can’t compete – Bob has to respond … but how?

9. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

15. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 1 Chapter 1: BUSINESS NOW Change is the Only Constant

16. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Trends in a Twitter-Ready Format The median household income in the U.S. is roughly $50,000. The top 40% of Americans earn 75% of the money. Four in ten kids are born to single moms. By 2010, birthrates had dropped to an all-time record low. Sixty percent of Americans now live in the South and West Regions. Twenty-six percent of men make six or more cell phone calls a day. 16 Source: Twitter-Ready Consumer Trends you need to know by Matt Carmichael, AdvertisingAge magazine, October 20, 2010, accessed January 13, 2010

17. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MOVING AT BREAKNECK SPEED 1965198519952013 1.General Motors 2.Exxon Mobil 3.Ford Motor 4.General Electric 5.Mobil 6.Chrysler 7.US Steel 8.Texaco 9.IBM 10.Gulf Oil 1.Exxon Mobil 2.General Motors 3.Mobil 4.Ford Motor 5.Texaco 6.IBM 7.DuPont 8.AT&T 9.General Electric 10.Amoco 1.General Motors 2.Ford Motor 3.Exxon Mobile 4.Wal-Mart 5.AT&T 6.General Electric 7.IBM 8.Mobil 9.Sears Roebuck 10.Altria Group 1.JP Morgan 2.Berkshire Hathaway 3.Exxon Mobil 4.General Electric 5.Wells Fargo 6.Bank of America 7.Apple 8.Citigroup 9.Chevron 10.Wal-Mart Source:http://money.cnn.com The players have changedWhat consumers want has changedHow we buy has changed

18. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Gross IncomeProfitPeople 1954$ 570M$ 59M 50,225 1964$ 3.23B$ 431M149,834 1974$12.67B$1.83B292,350 1984$45.93B$5.48B394,930 1994$64.05B$3.02B219,839 2004$96.50B$8.40B329,009 2012$104.50B$17.60BB434,246

19. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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. Non-profit organizations focus on causes not profit

20. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Business of Doing Good 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 © The Studio Dog/Photodisc/Getty Images

21. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ENTREPRENEURIAL SPIRIT – Richest Americans Source: The Forbes 400 2012 People who risk their time, money, and other resources to start and manage a business are entrepreneurs. RankName Net Worth ($mil) Source 1Bill Gates$67 BMicrosoft 2Warren Buffett$53.5 BBerkshire Hathaway 3Larry Ellison$43 BOracle 4Charles Koch$34 BDiversified 5David Koch$34 BDiversified 6Christy Walton$28.2 BWal-Mart 7Michael Bloomberg$27 BBloomberg LP 8Jim Walton$26.7 BWal-Mart 9Sheldon Adelson$26.5 BCasinos 10Alice Walton$26.3 BWal-Mart 11S. Robson Walton$26.1 BWal-Mart 12Jeff Bezos$25.2 BAmazon.com 13Larry Page$23 BGoogle 14Sergey Brin$22.8 BGoogle 15Carl Icahn$20 BLeveraged Buyouts

22. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

23. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 I ndustrial Titans Wealth Creation Increase in Living Standard Manipulation/ Competition Exploitation Mass Production Factories Work Specialization Efficiency Entrepreneurship Era Mid 1800s Production Era Early 1900s Marketing Era 1950s Relationship Era Industrial Revolution 1700-mid 1800s

24. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FACTORS OF PRODUCTION Businesses rely on some combination of these factors Entrepreneurship is a key factor  Most growing economies support and promote entrepreneurship Natural Resources (land, fresh water, wind, minerals, etc.) Entrepreneurship (Risk takers, opportunists)

25. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

26. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2008 Economic Crisis 26 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

27. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ECONOMIC ENVIRONMENT 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 Free Enterprise and Fair Competition Flourish in the US

28. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 1.Avoid your competitors’ strengths and exploit their weaknesses. Don’t try and beat them at their game. 2.Always be a little paranoid. Never underestimate your competition. 3.Competitors will usually get better when pushed. 4.Competitors are sometimes irrational when pushed.

29. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. COMPETITION IS CHANGING: Global Brand Champions Source: Best Global Brands 2012 Brand Value USD $ Millions 2012LogoName20122011 1Apple70,60529,543 2Google47,46344,294 3Microsoft45,81242,805 4IBM39,13536,157 5Walmart38,32036,220 6Samsung38,19721,511 7GE33,21430,504 8Coca-Cola31,08225,807 9Vodafone30,04430,674 10Amazon.com28,66517,780 11AT&T28,37928,884 12Verizon27,61627,293

30. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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.

31. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. SOCIAL ENVIRONMENT Diversity Aging Population Rising Worker Expectations Ethics & Social Responsibility

32. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Population Projections for Tarrant County 2000-2040

33. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. TECHNOLOGICAL ENVIRONMENT Technology has transformed businesses and consumers How Companies Do Business  Telecommunications  Robotics Robotics  Flexible Manufacturing  Alternative Selling/eCommerce How Consumers Shop  Online Information/Content  Alternative Buying/eCommerce

34. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The World Wide Web has Transformed Business e-Commerce growth has slowed since the recession  20%+ growth in the past 5 years  Companies connect with suppliers and distributors  Online experiences can be customized Within five years, there will probably be more mobile Web users than desktop users. 34 © iStockphoto.com/hohos Source: http://www.businessweek.com/smallbiz/content/nov2010/sb20101112_047190.htm, accessed, January 17, 2011

35. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Terrorism is more of a threat today China and India’s economies are growing Job Migration GLOBAL ENVIRONMENT Technology Free Trade Blurred lines between countries/world Technology is linking customers/suppliers worldwide

36. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Leadership at The Office Video Here 36

37. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Gather Around the Water Cooler: Let’s Talk 37 © iStockphoto.com/DNY59 What role does leadership play in managing constant change? What characteristics are required of leaders today? What role does trust play in managing change? Leading?

38. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Assessment & Analysis FOUNDATION SIMULATION

39. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FOUNDATION SIMULATION  $40 Million electronic sensor manufacturer.  Market dominated by handful of firms.  No outside competitors or substitutes.  Benign environment.

40. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Applications

41. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FUNCTIONAL AREAS R&D Marketing Production Finance HR TQM

42. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FOUNDATION HOMEWORK 1.Register online at www.capsim.com www.capsim.com 2.Teams will be completed by September 18.

43. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

45. We need six (6) team leaders to Create a Company in the next week Everyone else will later Join a Company

46. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. After teams are final September 6 th, Company Name changes can be made