BUS110-Chapter 1 Business Foundations PDF

Part 1 Business in a Changing World Chapter 1 ©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. ...

Part 1 Business in a Changing World Chapter 1 ©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.  Part 1 Business in a Changing World CHAPTER 1 The Dynamics of Business and Economics CHAPTER 2 Business Ethics and Social Responsibility CHAPTER 3 Business in a Borderless World 2 ©McGraw-Hill Education.  Learning Objectives LO 1-1 Define basic concepts such as business, product, and profit. LO 1-2 Identify the main participants and activities of business and explain why studying business is important. LO 1-3 Define economics and compare the four types of economic systems. LO 1-4 Describe the role of supply, demand, and competition in a free-enterprise system. LO 1-5 Specify why and how the health of the economy is measured. 3 ©McGraw-Hill Education.  The Nature of Business Business – Individuals or organizations who try to earn a profit by providing products that satisfy people’s needs The outcomes of its efforts are products. Products – Goods or services with tangible and intangible characteristics that provide satisfaction and benefits 4 ©McGraw-Hill Education.  A Product Can Be… Tangible goods – Automobile – Computer – Smartphone – Coat Services – Dry cleaning – Doctor’s checkup – Movie – Sports event Ideas – Professionals generate ideas for solving problems 5 ©McGraw-Hill Education.  The Goal of Business The goal of business is to earn a profit. The difference between what it costs to make and sell a product and what a customer pays for it $10 sale – $8 to make = $2 profit Earning profits contributes to society by creating resources that support our social institutions and government. Businesses that create profits, pay taxes, and create jobs are the foundation of our economy. Profits must be earned in a responsible manner 6 ©McGraw-Hill Education.  Nonprofit Organizations Nonprofit Organizations – Provide goods and services – Do not share the purpose of earning profits – Engage in fund raising – Engage in management, marketing and finance to reach goals 7 ©McGraw-Hill Education.  To Earn a Profit Profit requires: To earn a profit, a person or organization needs management skills to plan, organize, and control the activities of the business and to find and develop employees so that it can make products consumers will buy. A business also needs marketing expertise to learn what products consumers need and want and to develop, manufacture, price, promote, and distribute those products. Additionally, a business needs financial resources and skills to fund, maintain, and expand its operations. Other challenges for businesspeople include abiding by laws and government regulations; Acting in an ethical and socially responsible manner; and adapting to economic, technological, political, and social changes. 8 ©McGraw-Hill Education.  Stakeholders Groups that have a stake in the success and outcomes of a business Includes customers, employees, investors, government regulators, and community To achieve and maintain profitability, businesses must produce quality products, operate efficiently, and be socially responsible and ethical in dealing with stakeholders 9 ©McGraw-Hill Education.  Overview of the Business World Jump to Appendix 1 long image description 10 ©McGraw-Hill Education.  Management Management is concerned with: Developing plans Coordinating employees’ actions Organizing and motivating people Using resources (including people) effectively and efficiently 11 ©McGraw-Hill Education.  Marketing The focus of all marketing activities is satisfying customers. Determine customer needs Plan and develop © Chance Yeh/Contributor/Getty Images product Determine price Determine place (distribution) The Aflac duck ad uses humor in its Determine promotion advertising to promote the insurance company. 12 ©McGraw-Hill Education.  Finance The owner is primarily responsible for obtaining financial resources for the operation of the business, including: ✓ Obtaining money ✓ Using money effectively 13 ©McGraw-Hill Education.  Why Study Business? ▪ Develop skills for career success ▪ Business career opportunities ▪ Marketing ▪ Human resources management ▪ Information technology ▪ Finance ▪ Production and operations ▪ Wholesaling and retailing ▪ Become a well-informed consumer and member of society 14 ©McGraw-Hill Education.  Economic Foundations of Business Economics Natural resources Human resources (also called labor) Financial resources (also called capital) Intangible resources 15 ©McGraw-Hill Education.  Economic Systems Economic system – A description of how a particular society distributes its resources to produce goods and services – All economic systems must address three important issues: 1. What goods and services, and how much of each, will satisfy consumers’ needs? 2. How will goods and services be produced, who will produce them, and with what resources will they be produced? 3. How are the goods and services to be distributed to consumers? 16 ©McGraw-Hill Education.  Communism 1 of 2 Communism – First described by Karl Marx as a society in which the people, without regard to class, own all the nation’s resources – On paper it appears efficient, but in practice, these economies suffer from: Low standards of living Critical shortages of consumer goods High prices Corruption and little freedom 17 ©McGraw-Hill Education.  Socialism Socialism – An economic system in which the government owns and operates basic industries, but individuals own most businesses – Most socialist countries are democratic and recognize basic individual freedoms – The socialist system may allow a higher standard of living and is more stable; but taxes and unemployment are generally higher in socialist countries 18 ©McGraw-Hill Education.  Capitalism Capitalism, or Free Enterprise – An economic system in which individuals own and operate the majority of businesses that provide goods and services – Pure capitalism or free-market system happens when all economic decisions are made without government intervention; also called laissez-faire capitalism – Modified capitalism differs from pure capitalism in that the government intervenes and regulates business to some extent 19 ©McGraw-Hill Education.  Mixed Economies No country practices pure capitalism, socialism, or communism Mixed Economies – Economies made up of elements from more than one economic system – No country practices a pure form of any economic system, although most favor one system over others – China and Russia have used state capitalism to advance the economy, integrating powers of the state with advantages of capitalism 20 ©McGraw-Hill Education.  The Free-Enterprise System Many large economies are free-enterprise—including the U.S., Canada and Japan Many communist and socialist countries apply free- enterprise principles—including China and Russia Free enterprise allows a company to succeed or fail on the basis of market demand © JGI/Jamie Grill/Blend Images LLC An entrepreneur presents her idea for a new product. Entrepreneurs are more productive in free-enterprise systems. 21 ©McGraw-Hill Education.  Individual and Business Rights Basic individual and business rights which must exist in order for free enterprise to work Right to own property Right to earn profits and use them as one wishes Right to determine business operations Right to choose ✓ Career to pursue ✓ Where to live or where to locate a business ✓ What goods/services to purchase and more 22 ©McGraw-Hill Education.  The Forces of Supply and Demand Demand – The number of goods and services consumers are willing to buy at different prices at a specific time Supply – The number of products businesses are willing to sell at different prices at a specific time 23 ©McGraw-Hill Education.  Equilibrium Price Equilibrium price - the price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time 24 ©McGraw-Hill Education.  The Nature of Competition 1 of 2 Competition is the rivalry among businesses for consumer’s dollars Pure competition – The market structure that exists when there are many small businesses selling one standardized product Monopolistic competition – Fewer businesses than in a pure competition environment and the differences among the goods they sell are small 25 ©McGraw-Hill Education.  The Nature of Competition 2 of 2 Oligopoly – The market structure that exists when there are very few businesses selling a product Monopoly – The market structure that exists when there is only one business providing a product in a given market 26 ©McGraw-Hill Education.  Economic Cycles and Productivity 1 of 3 Economic expansion occurs when an economy is growing and people are spending more money; their purchases stimulate the production of goods and services, which in turn stimulates employment. – This may lead to inflation – a continuing rise in prices Economic contraction is a slowdown of the economy characterized by a decline in spending and during which businesses cut back on production and lay off workers. – This may lead to recession – a decline in production, employment and income 27 ©McGraw-Hill Education.