1. © Prentice Hall, 2005Business In Action 3eChapter 1 - 1 Understanding the Fundamentals of Business and Economics

2. © Prentice Hall, 2005Business In Action 3eChapter 1 - 2 Why Study Business? Learn what it takes to run a businessLearn what it takes to run a business Build business vocabularyBuild business vocabulary Develop workplace skillsDevelop workplace skills Learn about a variety of jobsLearn about a variety of jobs Appreciate today’s business careerAppreciate today’s business career

3. © Prentice Hall, 2005Business In Action 3eChapter 1 - 3 What Is a Business? For-Profit –Money motive Not-for-profit –Social service

4. © Prentice Hall, 2005Business In Action 3eChapter 1 - 4 Categories of Business Producing goods –Capital intensive Providing services –Labor intensive

5. © Prentice Hall, 2005Business In Action 3eChapter 1 - 5 Growth in the Service Sector Manufacturing Construction Agriculture Mining Wholesale and retail Transportation and utilities Finance and insurance Other services Goods-Producing Sector Service-Producing Sector

6. © Prentice Hall, 2005Business In Action 3eChapter 1 - 6 Why Is the Service Sector Growing? More disposable income Changing demographics and lifestyles Complex goods and technologies Need for professional advice Low barriers to entry

7. © Prentice Hall, 2005Business In Action 3eChapter 1 - 7 What Is an Economic System? Five production factors –Human resources –Capital –Entrepreneurs –Knowledge –Natural resources

8. © Prentice Hall, 2005Business In Action 3eChapter 1 - 8 The New Economy General Characteristics Physical Assets Cost Control Intellectual Assets Adding Value Technology Mechanical Information Workforce Job-Specific Skills Transferable Skills Lifelong Learning Geography Close to Resources Near to Collaborators Near to Competitors Capital Debt Financing Venture Capital New EconomyOld Economy

9. © Prentice Hall, 2005Business In Action 3eChapter 1 - 9 Types of Economic Systems Free-market system –Capitalism –Mixed capitalism Planned system –Socialism –Communism

10. © Prentice Hall, 2005Business In Action 3eChapter 1 - 10 How Does a Free-Market System Work? Supply and demand Competition Government intervention

11. © Prentice Hall, 2005Business In Action 3eChapter 1 - 11 Effects of Higher Airfare on Demand Increase use of corporate or chartered aircraft Reduce attendance at conventions and conferences Use alternative airports Reduce number of employees traveling Reduce number of domestic trips Increase Saturday-night stayovers Promote teleconferencing and videoconferencing

12. © Prentice Hall, 2005Business In Action 3eChapter 1 - 12 Supply and Demand Relationship High price reduces demand Low price reduces supply Right price balances supply and demand

13. © Prentice Hall, 2005Business In Action 3eChapter 1 - 13 Free-Market Competition Pure competition Monopoly Oligopoly Monopolistic competition

14. © Prentice Hall, 2005Business In Action 3eChapter 1 - 14 Competitive Advantage Price Speed Quality Service Innovation

15. © Prentice Hall, 2005Business In Action 3eChapter 1 - 15 The Role of Government Foster competitionFoster competition Regulate industriesRegulate industries Deregulate industriesDeregulate industries Protect stakeholder’s rightsProtect stakeholder’s rights Contribute to economic stabilityContribute to economic stability

16. © Prentice Hall, 2005Business In Action 3eChapter 1 - 16 Fostering Competition Antitrust legislation Mergers and acquisitions

17. © Prentice Hall, 2005Business In Action 3eChapter 1 - 17 Regulating and Deregulating Industries Fair competition Business ethics Working conditions Public safety

18. © Prentice Hall, 2005Business In Action 3eChapter 1 - 18 Protecting Stakeholders Consumer Product Safety Commission (CPSC) Environmental Protection Agency (EPA) Equal Opportunity Employment Commission (EEOC) Federal Communications Commission (FCC) Federal Aviation Administration (FAA) Federal Energy Regulation Commission (FERC)

19. © Prentice Hall, 2005Business In Action 3eChapter 1 - 19 Protecting Stakeholders Federal Highway Administration (FHA) Federal Trade Commission (FTC) Food and Drug Administration (FDA) Interstate Commerce Commission (ICC) Occupational Safety and Health Administration (OSHA) Securities and Exchange Commission (SEC)

20. © Prentice Hall, 2005Business In Action 3eChapter 1 - 20 Contributing to Economic Stability Business cycle –Economic expansion –Economic contraction Fiscal policy –Revenue and spending Monetary policy –Interest rates

21. © Prentice Hall, 2005Business In Action 3eChapter 1 - 21 The FED and Money Supply Reserve requirements Discount rate Open-market operations Selective credit controls

22. © Prentice Hall, 2005Business In Action 3eChapter 1 - 22 Fiscal Policy: Revenues Income taxes Real property taxes Sales taxes Excise taxes Payroll taxes

23. © Prentice Hall, 2005Business In Action 3eChapter 1 - 23 Fiscal Policy: Expenditures Increasing purchases Creating new programs

24. © Prentice Hall, 2005Business In Action 3eChapter 1 - 24 Monitoring Economic Performance Interest rates Housing starts Unemployment statistics Durable-goods orders

25. © Prentice Hall, 2005Business In Action 3eChapter 1 - 25 Measuring Price Changes Consumer Price Index Purchasing power –Inflation –Deflation

26. © Prentice Hall, 2005Business In Action 3eChapter 1 - 26 Measuring National Output Gross National Product (GNP) Gross Domestic Product (GDP) Dollar Value YesYes Final Goods and Services YesYes Domestic Businesses NoYesForeign-OwnedBusinesses YesNo Overseas Operations

27. © Prentice Hall, 2005Business In Action 3eChapter 1 - 27 Challenges of Globalization Products and servicesProducts and services Managing a small businessManaging a small business Globalization and workforce diversityGlobalization and workforce diversity Ethics and social responsibilityEthics and social responsibility Technology and electronic commerceTechnology and electronic commerce