Business questions - due in 14 hours
combs
Chap001_1.pptx
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Chapter One
Taking Risks and Making Profits within the Dynamic Business Environment
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
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Profile
A 17-year-old high school student
Reopened small town’s only grocery store
Borrowed $22,000 to buy building & fixtures
Worked to save $10,000 to stock the store
Worked 90-100 hours per week
Paid off loan in one year
NICK GRAHAM Main Street Market
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
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Entrepreneurship and
Wealth Building
Goods -- Tangible products such as computers, food, clothing, cars and appliances.
Services -- Intangible products that can’t be held in your hand like, education, healthcare, insurance, recreation and travel.
Success in business is often based on the strategy of finding a need and filling it.
GOODS and SERVICES
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
It is important to make sure that students understand the difference between goods and services. Emphasize that goods are tangible (can be held or touched) like Nike athletic shoes while services are intangible (cannot be held in your hand) like a haircut.
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Entrepreneurship and
Wealth Building
Business -- Any activity that seeks to provide goods and services to others while operating at a profit.
Entrepreneur -- A person who risks time and money to start and manage a business.
Successfully filling a market need means you could make money for yourself and provide jobs for others.
BUSINESS and ENTREPRENEURSHIP
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
In the United States the entrepreneur is held in high regard. Most students have heard of Sam Walton, and Michael Dell but it often adds to the classroom experience if they understand how these entrepreneurs started their businesses. Sam Walton, an entrepreneur, started Wal-Mart with just one store in Arkansas in the 1960s. Michael Dell got his start building computers in his University of Texas dorm room ultimately leading to the creation of Dell, Inc.
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Revenues, Profits and Losses
Revenue -- The total amount of money a business takes in during a given period by selling goods and services.
Profit -- The amount of money a business earns above and beyond what it spends for salaries and other expenses.
Loss -- Occurs when a business’ expenses are more than its revenues.
REVENUE, PROFIT AND LOSS
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
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Matching Risk with Profit
Risk -- The chance an entrepreneur takes of losing time and money on a business that may not prove profitable.
Businesses take risks, but with great risks could come great profit.
RISK
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
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Businesses Add to the Standard of Living and Quality of Life
Taxes are used to provide:
Hospitals
Schools
Libraries
Playgrounds
Roads
Fire Protection
Police Protection
Environmental Programs
Support for People in Need
HOW IS TAX MONEY USED?
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
Entrepreneurs provide jobs for others and the taxes they pay benefit the community.
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Businesses Add to the Standard of Living and Quality of Life
Quality of Life -- The general well-being of a society in terms of its political freedom, natural environment, education, healthcare, safety, amount of leisure and rewards that add to personal satisfaction.
QUALITY of LIFE
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
The more money businesses create, the more is available to improve the quality of life for all citizens.
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Responding to the Various Business Stakeholders
Stakeholders -- All the people who stand to gain or lose by the policies and activities of a business and whose concerns the businesses need to address.
Who are Stakeholders?
Customers
Employees
Stockholders
Suppliers
Dealers
Community Members
Media
Elected Officials
Environmentalists
STAKEHOLDERS
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
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Responding to the Various Business Stakeholders
Outsourcing -- Contracting with other companies (often in other countries) to do some of the firm’s functions
Insourcing -- Foreign companies opening offices and factories in the United States.
OUTSOURCING and INSOURCING
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
Outsourcing is the contracting with other companies to do some of the firm’s functions. As the slide states these companies are often in other countries. For example, Dell Computers and many other companies outsource support services to call centers in India and other Asian nations. This can be an emotional issue and one that students often do not understand. When discussing this topic with students it is important for students to understand that outsourcing has occurred for years and does not always involve a company from the United States locating jobs in another country.
Once students understand outsourcing from the pervious slide the concept of insourcing can be discussed. In the previous slide the examples of Toyota and Honda were used but other companies have used insourcing. For example, Hyundai operates plants in the United States. Its design and engineering headquarters are in Detroit, and they produce cars in Montgomery, Alabama. All of which employ American workers. Insourcing benefits the American worker such as when Toyota and Honda decided to build automobile manufacturing plants in Kentucky and Ohio rather than in Japan.
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Using Business Principles in Nonprofit Organizations
Nonprofit Organization -- An organization whose goals are for the betterment of the community, not financial gains.
NONPROFIT ORGANIZATIONS
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
Nonprofits use the same principles and skills you will learn in this class.
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Using Business Principles in Nonprofit Organizations
WELL-KNOWN NONPROFITS in the UNITED STATES
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See Learning Goal 1: Describe the relationship between profit and risk and show how businesses and nonprofit organizations can raise the standard of living for all.
Nonprofits in the United States
This slide provides a listing of well-known nonprofit organizations in the United States.
Some of the better known nonprofit organizations include: Salvation Army, United Way and the American Red Cross.
Ask students to identify smaller local nonprofit organizations and discuss how they contributed the community’s quality of life.
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Progress Assessment
What’s the difference between revenue and profit?
What’s the difference between standard of living and quality of life?
What’s risk? How is it related to profit?
What do the terms stakeholders, outsourcing and insourcing mean?
PROGRESS ASSESSMENT
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1) Revenue is the total amount of money a business takes in during a given period of time. Profit is the amount of money a business earns above and beyond what it spends for salaries and other expenses during a given period.
2) Standard of living is the amount of good and services a person can buy with the money they have. Quality of life refers to the general well being of society in terms of its political freedom, natural environment, education, health care, safety, amount of leisure, and rewards that add to the satisfaction and joy that other goods and services provide.
3) Risk is the chance an entrepreneur takes in losing time and money on a business that may not prove profitable. Usually, entrepreneurs willing to take the most risk with make the highest profit.
4) Stakeholders are all the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address. Outsourcing is contracting with other companies (often in other countries) to do some or all the functions of a firm, like its production or accounting tasks. Insourcing is when foreign companies set up design and production facilities in the United States.
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Entrepreneurship Versus Working for Others
The UPS
The freedom to succeed.
Make your own decisions.
High possibility of wealth.
Hire your own staff.
The DOWNS
The freedom to fail.
No paid vacations.
No health insurance.
No daycare.
THE UPS and DOWNS of ENTREPRENEURSHIP
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See Learning Goal 2: Compare and contrast being an entrepreneur and working for others.
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Art for a Cause, a company that creates and sells hand-painted tools and furniture, employs special needs children and adults throughout Michigan.
The company donates a portion of its profits to local charities.
HIRING PEOPLE with SPECIAL NEEDS (Spotlight on Small Business)
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See Learning Goal 2: Compare and contrast being an entrepreneur and working for others.
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The Importance of Entrepreneurs to the Creation of Wealth
Land
Labor
Capital
Entrepreneurship
Knowledge
Entrepreneurs use what they’ve learned to grow their businesses and increase wealth.
FIVE FACTORS of PRODUCTION
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See Learning Goal 2: Compare and contrast being an entrepreneur and working for others.
This slide provides the opportunity to open a discussion on the creation of wealth. Before showing the slide ask students to work in pairs to discuss the reasons for different levels of wealth around the world. Once the discussions have reached a conclusion you can show the slide giving students an insight into wealth creation.
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Progress Assessment
What are some of the advantages of working for others?
What benefits do you lose as an entrepreneur? And what do you gain?
What are the five factors of production? Which ones seem to be the most important for creating wealth?
PROGRESS ASSESSMENT
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1) Working for others someone else assumes the entrepreneurial risk and provides you with benefits (life health insurance, vacation time, etc.)
2) You have the freedom to make your own decisions, opportunity, and potential for wealth while sacrificing the benefits working for others often provides.
3) The factors of production are: land, labor, capital, entrepreneurship, and knowledge. Of these, entrepreneurship and knowledge seem to be the most important.
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The Business Environment
TODAY’S DYNAMIC BUSINESS ENVIRONMENT
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The Economic
and Legal Environment
A government can promote business by…
Minimizing spending and keeping taxes and regulations to a minimum.
Allowing private ownership of businesses.
Minimizing interference with the free exchange of goods and services.
Passing laws that enable businesspeople to write enforceable contracts.
Establishing a currency that’s tradable in world markets.
Minimizing corruption.
GOVERNMENT’S ROLE in BUSINESS
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See Learning Goal 3: Analyze the affect of the economic environment and taxes on businesses.
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The Economic
and Legal Environment
Least Corrupt
Denmark
New Zealand
Sweden
Singapore
Most Corrupt
Somalia & Myanmar (tie)
Iraq
Haiti
Afghanistan
Sources: Forbes.com, June 2008 and Transparency International, 2009.
CORRUPTION WORLDWIDE
LG3
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See Learning Goal 3: Analyze the affect of the economic environment and taxes on businesses.
Corrupt Countries
Transparency International conducts and publishes the corruption studies annually.
The most corrupt countries on the list include Somalia and Myanmar. The least corrupt country is Denmark.
Ask the students - What impact does corruption have on business? Responses may include: Businesses do not flourish and capitalism and economic independence is suppressed creating a very negative business and social environment. Most corrupt countries tend to be the developing countries.
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You’re doing a project at home that requires paper, pens and other materials available at work. You’ve noticed other employees taking home these materials and you’re thinking of doing the same.
What is the problem with this situation?
What are your alternatives?
What are the consequences of each alternative?
What path will you choose?
Is it ethical?
ETHICS BEGINS with YOU (Making Ethical Decisions)
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See Learning Goal 3: Analyze the affect of the economic environment and taxes on businesses.
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How Technology Benefits Workers and You
Technology -- Everything from phones to copiers and the various software programs that make businesses more effective, efficient and productive.
Effectiveness -- Producing the desired result.
Efficiency -- Producing goods and services using the least amount of resources.
Productivity -- The amount of output you generate given the amount of input (example: hours you work).
BENEFITS of TECHNOLOGY
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See Learning Goal 4: Describe the effect of technology on business.
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The Growth of E-Commerce
E-Commerce -- The buying and selling of goods on the Internet.
B2C: Business to Consumer
B2B: Business to Business
E-COMMERCE
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See Learning Goal 4: Describe the effect of technology on business.
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Using Technology to Be Responsive
Databases -- An electronic storage file that enables stores to monitor what you buy and helps them know what to carry in stock.
Identity Theft -- Gathering of individuals’ personal information, such as Social Security and credit card numbers, for illegal purposes.
DATABASES and IDENTITY THEFT
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See Learning Goal 4: Describe the effect of technology on business.
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Using Technology to Be Responsive to Customers
Follow these steps to help protect yourself:
Protect your Social Security Number.
Shred financial documents and items with personal information.
Don’t give out personal information unless you know who you are dealing with.
Use strong passwords.
Never click links in suspicious emails.
Monitor your credit report.
Source: Federal Trade Commission, www.ftc.gov October 2008.
PROTECT YOURSELF from IDENTITY THEFT
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See Learning Goal 4: Describe the effects of technology on businesses.
Identity Theft
The number of ID theft cases are rising every year. The Federal Trade Commission estimates that 9 million people per year have their identities stolen.
About 39% of the victims were between the ages of 18-39 (The same age group of many students.)
Approximately 16% of the victims had a personal relationship with the thief.
4. Top five States for identity theft (per capita): Arizona, California, Nevada, Texas, and Florida.
(Source: Identity Theft--Victim Complaint Data, 2007, Federal Trade Commission; www.consumer.gov/idtheft)
Ask the students – How often do they throw mail or other documents with their personal information away without shredding it? (It is becoming imperative that we shred all documents with personal info and keep the sharing of private info such as credit card, bank account info, and social security numbers to a very limited number of people.)
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The Competitive Environment
Customers want quality products at a good price with excellent customer service.
Because business is more customer-driven, some managers give frontline employees more decision-making power.
Empowerment -- Giving frontline workers the responsibility, authority, and freedom to respond quickly to customer requests.
USING EMPOWERMENT to COMPETE in TODAY’S MARKET
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See Learning Goal 5: Demonstrate how businesses can meet and beat competition.
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The Social Environment
and Managing Diversity
Population shifts are creating opportunities for some and limiting others.
Diversity has grown from just recruiting minority and female workers.
Growth of single-parent households have encouraged businesses to implement programs such as family leave and flextime.
U.S. POPULATION CHANGES
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See Learning Goal 6: Analyze the social changes affecting businesses.
When discussing the demographic changes experienced in this country over the past 30 years it often helps to use the grocery store as an example. The grocery store has evolved from a market selling primarily raw materials used to produce a meal into stores that now serve pre made products which simply involve “heating and eating.” Why? Some would argue this change has more to do with the two income and single-parent household than any other environmental factor. Engaging students in this discussion is often useful to their understand of how businesses must adapt to changing demographic circumstances.
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Source: U.S. Census Bureau, www.census.gov, March 2009.
The Social Environment
and Managing Diversity
WHO WILL SUPPORT SOCIAL SECURITY? Number of Workers per Retiree
LG6
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See Learning Goal 6: Analyze the social changes affecting businesses.
Social Security
The number of workers per retiree has dropped dramatically since 1950.
Ask the students - what impact will the decline of the number of workers per retiree have on businesses in the future? (Businesses in the future will have fewer younger workers and might need to alter their hiring practices in order to attract older workers.)
3. If time permits, the discussion can be expanded to include the effects on government and individuals. (In the future government might have to raise taxes and reduce benefits for individuals or use a means test in an effort to prevent social security payments from bankrupting the government.)
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The Social Environment
and Managing Diversity
Demography -- The statistical study of the population in terms of size, density and characteristics like, age, race, gender and income.
DEMOGRAPHY
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See Learning Goal 6: Analyze the social changes affecting businesses.
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The Social Environment
Source: U.S. Census Bureau, www.census.gov, October 2008.
DEMOGRAPHY of the U.S. by AGE
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See Learning Goal 6: Analyze the social changes affecting businesses.
Demography of the U.S.
This slide highlights the age of the population in the United States.
Demography is the statistical study of the human population in terms of its size, density, and other characteristics such as age, race, gender, income, etc.
The slide gives insight into the aging of the population with 66% of the population older than 25 years old.
Ask the students how the aging of the population will impact businesses? (Businesses will need to reexamine their approach to marketing and human resources in order to meet the challenges facing them. While some businesses will fail other new businesses will emerge creating new opportunities. )
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The Social Environment
Source: Newsweek, www.newsweek.com, January 2009.
DEMOGRAPHY of the U.S. by RACE in 2005
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See Learning Goal 6: Analyze the social changes affecting businesses.
Demography of the U.S.
This slide highlights the ethnic breakdown of the population in the United States.
Diversity has come to mean much more than recruiting and keeping minority and female employees. Businesses today must understand workers and their various cultures.
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The Social Environment
Source: Newsweek, www.newsweek.com, January 2009.
DEMOGRAPHY of the U.S. by RACE in 2050
LG6
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See Learning Goal 6: Analyze the social changes affecting businesses.
Demography of the U.S.
This slide expands on the previous slide giving insight into the changing ethnic landscape of the United States.
Legal and illegal immigrants have had a dramatic effect on many states.
Many local services such as health care and education are making efforts to adapt. Some changes include changing signs, brochures and websites to reflect this change in demographics.
Ask the students - What changes have they noticed in their particular city? (Answers may vary but might include bilingual signs in government offices, and the use of emergency room translators in local hospitals)
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The Global Environment
Growth of global competition
Increase of free trade among nations
More efficient distribution systems and communication advances.
IMPORTANT CHANGES to the GLOBAL ENVIRONMENT
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See Learning Goal 7: Identify what businesses must do to meet the global challenge, including war and terrorism.
Yes, the world is more integrated, but can terrorism and an economic crisis like the one which began in 2007 decrease economic cooperation and free trade among nations? This question is at the same time alarming and thought provoking. Given recent events, asking students this question will get them thinking about the world and how events in far away places can impact their lives.
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The Global Environment
Wars, like those in Iraq and Afghanistan, cost billions of dollars.
Tax money is diverted.
Cost of security goes up.
Cost of insurance goes up.
INCREASING COSTS of the GLOBAL ENVIRONMENT
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See Learning Goal 7: Identify what businesses must do to meet the global challenge, including war and terrorism.
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The Ecological Environment
Climate Change -- Movement of the temperature of the planet over time.
Many companies like GE, Coca Cola, British Airways and Shell are shifting their practices to save energy and produce products that cause less harm to the environment. This process is called greening.
GLOBAL GREENING
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See Learning Goal 7: Identify what businesses must do to meet the global challenge, including war and terrorism.
Links go to each company website’s “green” section.
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It’s not necessary to radically change your lifestyle to make an ecological difference. Here are a few ways to you can make small changes to help.
Buy a reusable grocery bag
Buy energy efficient light bulbs
Recycle more
Drive fewer miles or ride your bike
Use less water
Run less electrical equipment
Buy local produce
Buy a hybrid car
GETTING INVOLVED PERSONALLY (Thinking Green)
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See Learning Goal 7: Identify what businesses must do to meet the global challenge, including war and terrorism.
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Progress Assessment
What are four ways the government can foster entrepreneurship?
What’s the difference between effectiveness, efficiency and productivity?
What’s empowerment?
What are some of the major issues affecting the economy today?
PROGRESS ASSESSMENT
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1) The government can foster entrepreneurship by:
Allowing private ownership of business
Passing laws that enable businesses to write enforceable contracts.
Establishing a currency that tradable in world markets.
Minimize corruption in business and in its own ranks.
2) Effectiveness means producing the desired results. Efficiency means producing goods and services using the least amount of resources. Productivity is the amount of output you generate given the amount of input, such as the number of hours you work.
3) Empowerment is allowing workers to make decisions essential to producing high-quality goods and services.
4) Technology changes, identity theft, changing demographics, diversity, climate change, war and terrorism are just several issues.
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The Evolution of U.S. Business
Agriculture Era
Manufacturing Era
Service Era
Information-Based Era
The EVOLUTION of BUSINESS
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See Learning Goal 8: Review how past trends are being repeated in the present and what they mean for tomorrow’s college graduate.
This slide along with the next four gives students a sense of perspective into the evolution of the United States economy.
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Progress in the Agricultural Industry
In the 1800s, the agricultural industry led economic development.
Technology, like the harvester and cotton gin, changed the farming industry making it more efficient.
This led to fewer farmers with larger farms.
The AGRICULTURAL ERA
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See Learning Goal 8: Review how past trends are being repeated in the present and what they mean for tomorrow’s college graduate.
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Progress in the Manufacturing Industry
Industrialization in the 19th and 20th centuries, moved jobs from farms to factories.
As technology improved productivity, fewer workers were needed in factories.
The MANUFACTURING ERA
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See Learning Goal 8: Review how past trends are being repeated in the present and what they mean for tomorrow’s college graduate.
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Progress in the Service Industry
Services make up more 70% of the U.S. economy.
Since the mid-1980s, the service industry generated almost all the increases in employment.
More high-paying jobs in service than goods-producing industries.
The SERVICE ERA
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See Learning Goal 8: Review how past trends are being repeated in the present and what they mean for tomorrow’s college graduate.
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Your Future in Business
Information technology will affect all sectors of the economy:
Agricultural
Industrial
Service
The INFORMATION TECHNOLOGY ERA
LG8
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See Learning Goal 8: Review how past trends are being repeated in the present and what they mean for tomorrow’s college graduate.
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Progress Assessment
What major factor caused people to move from farming to industry and from industry to the service sector?
What does the future look like for tomorrow’s college graduates?
PROGRESS ASSESSMENT
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1) Efficiencies in agricultural led to the reduction in farms and growth in industry caused workers to leave the farm and come to the cities. The growth of efficiencies in production had the same effect as in agriculture. As factories became more efficient and technologically driven, workers migrated to the service sector.
2) The information-based global revolution will alter all sections of the economy. It will be an interesting opportunity for college graduates.
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Chart1
| 1950 |
| 1960 |
| 1970 |
| 1980 |
| 1990 |
| 2000 |
| 2010 |
| 2020 |
| 2030 |
| 2040 |
Sheet1
| Workers per Retiree | Series 2 | Series 3 | |
| 1950 | 7 | 2.4 | 2 |
| 1960 | 5.75 | 4.4 | 2 |
| 1970 | 5.5 | 1.8 | 3 |
| 1980 | 5 | 2.8 | 5 |
| 1990 | 4.75 | ||
| 2000 | 4.75 | ||
| 2010 | 4.5 | ||
| 2020 | 3.5 | ||
| 2030 | 2.5 | ||
| 2040 | 2 |
Chart1
| Under 5 - 7% |
| 5 to 14 - 14% |
| 15 to 24 - 14% |
| 25 to 44 - 28% |
| 45 to 64 - 25% |
| over 65 - 13% |
Sheet1
| Age | |
| Under 5 - 7% | 7% |
| 5 to 14 - 14% | 14% |
| 15 to 24 - 14% | 14% |
| 25 to 44 - 28% | 28% |
| 45 to 64 - 25% | 24% |
| over 65 - 13% | 13% |
Chart1
| White - 67% |
| Hispanic - 14% |
| Black - 13% |
| Asian - 5% |
Sheet1
| Race | |
| White - 67% | 67 |
| Hispanic - 14% | 14 |
| Black - 13% | 13 |
| Asian - 5% | 5 |
| To resize chart data range, drag lower right corner of range. |
Chart1
| White - 47% |
| Hispanic - 29% |
| Black - 13% |
| Asian - 9% |
Sheet1
| Race | |
| White - 47% | 47 |
| Hispanic - 29% | 29 |
| Black - 13% | 13 |
| Asian - 9% | 9 |
| To resize chart data range, drag lower right corner of range. |
