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Nickels_12e_UB_PPT_Student_Ch01.pptxChapter 1
Taking Risks and Making Profits within the Dynamic Business Environment
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Learning Objectives
LO 1-1 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all.
LO 1-2 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth.
LO 1-3 Analyze the effects of the economic environment and taxes on businesses.
LO 1-4 Describe the effects of technology on businesses.
LO 1-5 Demonstrate how businesses can meet and beat competition.
LO 1-6 Analyze the social changes affecting businesses.
LO 1-7 Identify what businesses must do to meet global challenges, including war and terrorism.
LO 1-8 Review how past trends are being repeated in the present and what those trends mean for tomorrow’s college graduates.
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Business and Wealth Building 1 of 7
LO 1-1
Business — Any activity that seeks to provide goods and services to others while operating at a profit.
Goods — Tangible products such as computers, food, clothing, cars, and appliances.
Services — Intangible products (that can’t be held in your hand) such as education, health care, insurance, recreation, and travel.
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Business and Wealth Building 2 of 7
LO 1-1
Successfully filling a market need means you could make money for yourself.
Entrepreneur — A person who risks time and money to start and manage a business.
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Business and Wealth Building 3 of 7
LO 1-1
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 — When a business’s expenses are more than its revenues.
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Business and Wealth Building 4 of 7
LO 1-1
Matching Risk with Profit
Risk — The chance an entrepreneur takes of losing time and money on a business that may not prove profitable.
Not all enterprises make the same amount of profit.
Businesses take risks, but with big risks could come big profits.
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Business and Wealth Building 5 of 7
LO 1-1
Standard of Living and Quality of Life
Standard of living — The amount of goods and services people can buy with the money they have.
The United States has one of the highest standards of living in the world.
Workers in other countries may make more money, but prices for products are higher.
Quality of life — The general well-being of a 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.
High quality of life requires combined efforts of businesses, nonprofits, and government agencies.
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Business and Wealth Building 6 of 7
LO 1-1
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 business needs to address.
A primary challenge is to recognize and respond to the needs of stakeholders.
Outsourcing — Contracting with other companies (often in other countries) to do some of the functions of a firm, like production or accounting.
Many foreign companies are opening offices and factories in the United States, which is called insourcing.
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Figure 1.1 A Business and Its Stakeholders
LO 1-1
Source: John Mackey and Raj Sisodia, Conscious Capitalism (Boston, MA: Harvard Business Review Press, 2013).
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Business and Wealth Building 7 of 7
LO 1-1
Using Business Principles in Nonprofit Organizations
Nonprofit organization — An organization whose goals do not include making a personal profit for its owners or organizers.
Nonprofit organizations use financial gains to meet social or educational goals.
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The Importance of Entrepreneurs to the Creation of Wealth 1 of 2
LO 1-2
The Positives to Being an Entrepreneur
The freedom to succeed
Make your own decisions
Possible wealth
The Negatives to Being an Entrepreneur
The freedom to fail
No paid vacations
No health insurance
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The Importance of Entrepreneurs to the Creation of Wealth 2 of 2
LO 1-2
The Five Factors of Production
Factors of production — The resources used to create wealth.
The five factors:
Land (or natural resources)
Labor (workers)
Capital
Entrepreneurship
Knowledge
What makes rich countries rich today is entrepreneurship and knowledge.
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Figure 1.2 The Five Factors of Production
LO 1-2
Source: Drucker Institute, druckerinstitute.com, April 2017.
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The Business Environment 1 of 8
LO 1-2
Business environment — The surrounding factors that either help or hinder the development of businesses.
Economic and legal environment
Technological environment
Competitive environment
Social environment
Global business environment
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Figure 1.3 Today’s Dynamic Business Environment
LO 1-2
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The Business Environment 2 of 8
LO 1-3
The Economic and Legal Environment
Government can promote entrepreneurship by:
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
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The Business Environment 3 of 8
LO 1-4
The Technological Environment
Technology — Everything from phones to computers and the various software programs that make business processes more effective, efficient, and productive.
How Technology Benefits Workers and You
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 (e.g., hours worked).
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The Business Environment 4 of 8
LO 1-4
The Technological Environment continued
The Growth of E-Commerce
E-commerce — The buying and selling of goods over the Internet.
Business-to-consumer (B2C)
Business-to-business (B2B)
Using Technology to Be Responsive to Customers
Database — An electronic storage file for information.
Identity theft — The obtaining of individuals’ personal information, such as Social Security and credit card numbers, for illegal purposes.
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The Business Environment 5 of 8
LO 1-5
The Competitive Environment
Customers want good quality products at low prices with great customer service.
Because business is more customer-driven, some managers give frontline employees more decision-making power.
Empowerment — Giving frontline workers the responsibility, authority, freedom, training, and equipment they need to respond quickly to customer requests.
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The Business Environment 6 of 8
LO 1-6
The Social Environment
Demography — The statistical study of the human population with regard to its size, density, and other characteristics such as age, race, gender, and income.
Managing Diversity
Diversity has grown from just recruiting minority and female workers.
The Increase in the Number of Older Citizens
People aged 65 to 74 are currently the richest demographic group.
Retired people will be draining the economy of wealth due to Social Security.
The Increase in the Number of Single-Parent Families
Growth of single-parent households has encouraged businesses to implement programs such as family leave and flextime.
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The Business Environment 7 of 8
LO 1-7
The Global Environment
Globalization has grown due to efficient distribution systems and communication systems such as the Internet.
War and Terrorism
They have drained trillions of dollars from the U.S. economy.
Money was diverted to the war effort.
Adds to the cost of insurance and security.
How Global Changes Affect You
As businesses expand to serve global markets, new jobs will be created.
Rapid changes create a need for continuous learning.
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The Business Environment 8 of 8
LO 1-7
The Global Environment continued
The Ecological Environment
Climate change — The movement of the temperature of the planet up or down over time.
Greening — The trend toward saving energy and producing products that cause less harm to the environment.
Many companies say the evidence for climate change is overwhelming.
General Electric, Coca-Cola, Shell, Nestlé, DuPont, Johnson & Johnson, British Airways, Shanghai Electric
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The Evolution of U.S. Business 1 of 2
LO 1-8
Progress in the Agricultural and Manufacturing Industries
In the 1800s, the agricultural industry led economic development.
Technology, like the harvester and cotton gin, made large-scale farming successful.
This led to fewer farmers with larger farms.
Industrialization in the 19th and 20th centuries moved jobs from farms to factories.
As technology improved productivity, fewer workers were needed in factories.
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The Evolution of U.S. Business 2 of 2
LO 1-8
Progress in Service Industries
Services make up over 80 percent of the value of the U.S. economy.
Since the mid-1980s, the service industry generated almost all the increases in employment.
There are more high-paying jobs in service industries.
Your Future in Business
We’re in the midst of an information-based global and technical revolution.
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Appendix of Long Image Descriptions
©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
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Appendix 1 Figure 1.1 A Business and Its Stakeholders
Typical U.S. business stakeholders are:
Stockholders
Customers
Surrounding community
Environmentalists
Dealers (retailers)
Employees
Government leaders
Suppliers
Media
Bankers
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Appendix 2 Figure 1.3 Today’s Dynamic Business Environment
A circle shows Business Management and Job Creation in the center. Surrounding this are four quadrants for the four environments.
The Economic and Legal Environment:
Freedom of ownership
Contract laws
Elimination of corruption
Tradable currency
Minimum taxes and regulation
The Technological Environment:
Information technology
Databases
Bar codes
The Internet
The Social Environment:
Diversity
Demographic changes
Family changes
The Competitive Environment:
Customer service
Stakeholder recognition
Employee service
Concern for the environment
The global business environment affects the economic, legal, and technological environments.
Global competition and free trade affect the competitive environment.
The quality imperative affects the social environment.
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