Chapter 1 Notes PDF

I. Business and Wealth Building A. BASIC CONCEPTS: 1\. Success in business depends on consistently adapting to changes in the market. 2\. A ***[business]*** is any activity that seeks to provide goods and services to others while operating at a profit.. a\. ***[Goods]*** are tangible products su...

I. Business and Wealth Building A. BASIC CONCEPTS: 1\. Success in business depends on consistently adapting to changes in the market. 2\. A ***[business]*** is any activity that seeks to provide goods and services to others while operating at a profit.. a\. ***[Goods]*** are tangible products such as computers, food, clothing, cars, and appliances. b\. ***[Services]*** are intangible products that can't be held in your hand, such as education, health care, insurance, recreation, and travel and tourism. 3\. Successfully filling a need will earn you income. B. Revenues, Profits, and Losses 1\. ***[REVENUE]*** is the total amount of money a business takes in during a given period by selling goods and services. 2\. ***[PROFIT]*** is the amount a business earns above and beyond what it spends for salaries and other expenses. 3\. A ***[LOSS]*** occurs when a business's expenses are more than its revenues. 4\. Over 175,000 businesses in the U.S. fail each year. C. **Matching Risk with Profit** 1\. ***[RISK]*** is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable. 2\. *The text uses the example of selling hot dogs during the summer---paying for supplies, rent, salaries, and only then making a profit.* D. STANDARD OF LIVING AND QUALITY OF LIFE 1\. Entrepreneurs **PROVIDE EMPLOYMENT** for other people. 2\. They also **PAY TAXES** that are used for schools, hospitals, and other facilities. 3\. Businesses are part of an economic system that helps **create a higher STANDARD OF LIVING** and quality of life for everyone. 4\. ***[STANDARD OF LIVING]*** is the amount of goods and services people can buy with the money they have. 5\. Potential businesspeople must find a location with the right level of taxes and regulations. 6\. ***[QUALITY OF LIFE]*** is the general well-being of a society in terms of 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. 7\. The combined efforts of businesses, nonprofit organizations, and government agencies are required to maintain a high quality of life. E. RESPONDING TO THE VARIOUS BUSINESS STAKEHOLDERS 1. ***[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. 2. Stakeholders include customers, employees, stockholders, suppliers, bankers, people in the local community, environmentalists, and elected leaders. 3. A challenge for companies of the 21st century will be to recognize and respond to the needs of their stakeholders. 4. To stay competitive, businesses may **outsource** jobs to other countries. a. ***[Outsourcing]*** means contracting with other companies (often in other countries) to do some or all of the functions of the firm, like its production or accounting tasks. b. Many foreign companies have set up design and production facilities here in the United States, a practice known as **insourcing**. c. The decision whether to outsource or to insource is based on what is best for all the stakeholders. F. USING BUSINESS PRINCIPLES IN NONPROFIT ORGANIZATIONS 1\. **Nonprofit organizations**---such as government agencies, public schools, charities, and social causes---make a major contribution to the welfare of society. a\. A ***[NONPROFIT ORGANIZATION]*** is an organization whose goals do not include making a personal profit for its owners or organizers. You need the **SAME SKILLS** to work in nonprofit organizations that you need in business, including information management, leadership, marketing, and financial management. II\. THE IMPORTANCE OF ENTREPRENEURS TO THE CREATION OF WEALTH A. THERE ARE TWO WAYS TO SUCCEED IN BUSINESS: 1\. One way is to **RISE UP THROUGH THE RANKS** of a large company. 2\. The riskier path is to **START YOUR OWN BUSINESS.** B. THE FIVE FACTORS OF PRODUCTION 1\. The ***[FACTORS OF PRODUCTION]*** are the resources used to create wealth: a\. **LAND** *(or natural resources)* b\. **LABOR** *(workers)* c\. **CAPITAL** i\. This includes machines, tools, buildings, or whatever is used in the production of goods, but not money. ii\. Money is used to buy factors of production. d\. **ENTREPRENEURSHIP** e\. **KNOWLEDGE** 2\. Some experts, including the late Peter Drucker, believe that the most important factor of production is **KNOWLEDGE.** 3\. Some countries are rich in land or labor, but these aren't critical to wealth creation. 4\. What makes rich countries rich is a combination of **entrepreneurship** and the effective use of **knowledge**. III\. THE BUSINESS ENVIRONMENT A. The *[BUSINESS ENVIRONMENT]* consists of the surrounding factors that either help or hinder the development of business; they are: 1\. The economic and legal environment. 2\. The technological environment. 3\. The competitive environment. 4\. The social environment. 5\. The global business environment. 6\. Businesses that create jobs and wealth grow and prosper in a healthy environment. B. THE ECONOMIC AND LEGAL ENVIRONMENT 1\. People are willing to risk starting businesses if they feel that the risk is acceptable. 2\. **GOVERNMENTS CAN LESSEN THE RISK** of starting a business and increasing entrepreneurship and wealth by: a\. Minimizing spending and keeping **taxes and regulations** to a minimum. b\. Allowing **private ownership** of business. c\. Passing **laws** that enable businesspeople to write enforceable contracts. d\. Establishing a **currency** that is tradable in world markets. e\. **MinimizING corruption** in business and government. 3\. **CORRUPT AND ILLEGAL ACTIVITIES** negatively affect the business community and the economy. 4\. Ethics is important to the success of a business. 5\. Governments from different countries can work together to allow entrepreneurship to thrive. 6\. The United Nations adopted **SUSTAINABLE DEVELOPMENT GOALS** to end poverty and improve lives. C. THE TECHNOLOGICAL ENVIRONMENT 1\. Few technological changes have had a more lasting impact on businesses than **INFORMATION TECHNOLOGY (IT).** 2\. Technological innovations have changed how people communicate with one another. 3\. **HOW TECHNOLOGY BENEFITS WORKERS AND YOU** a\. ***[TECHNOLOGY]*** means everything from phones to computers, mobile devices, medical imaging machines, robots, the Internet, social media, and various software programs and apps that make business processes more efficient and productive. i\. **Effectiveness** means producing the desired result. ii\. **Efficiency** means producing goods and services using the least amount of resources. b\. ***[PRODUCTIVITY]*** is the amount of output you generate given the amount of input (such as hours worked). c\. Farmers use technology to increase production and profit. 4\. **THE GROWTH OF E-COMMERCE** a\. ***[E-COMMERCE]*** is buying and selling of goods online. b\. There are two types of e-commerce transactions: i\. **BUSINESS-TO-CONSUMER (B2C)** ii\. **BUSINESS-TO-BUSINESS (B2B)** c\. **B2B E-COMMERCE** consists of selling goods and services from one business to another. 5\. **USING TECHNOLOGY TO BE RESPONSIVE TO CUSTOMERS** a\. The businesses that are most responsive to customer wants and needs will succeed. b\. Businesses can use technology *(such as bar codes on products)* to become more responsive. c\. A ***[DATABASE]*** is an electronic storage file for information; one use of databases is to store vast amounts of information about consumers. d\. Databases also allow stores to carry fewer items and less inventory. e\. However, gathering personal information about people has led to ***[identify theft]***, obtaining individuals' personal information, such as Social Security and credit card numbers, for illegal purposes. f\. The Federal Trade Commission says that millions of Americans are victims of identity theft each year. D. THE COMPETITIVE ENVIRONMENT 1\. Making quality products is not enough to stay competitive in world markets---now you have to offer quality products and outstanding service at competitive prices. 2\. **COMPETING BY EXCEEDING CUSTOMER EXPECTATIONS** a\. Customers today want good quality at low prices plus great service. b\. Business has become more **CUSTOMER-DRIVEN**--- customers' wants and needs come first. c\. Successful companies must **LISTEN TO CUSTOMERS** to determine their wants and needs and then adjust their products, policies, and practices to meet these demands. 3\. **COMPETING BY RESTRUCTURING AND EMPOWERMENT** a\. To meet the needs of customers, firms must enable their frontline workers to **respond quickly to customer requests.** b\. ***[EMPOWERMENT]*** is giving frontline workers the responsibility, authority, freedom, training, and equipment they need to respond quickly to customer requests. c\. It sometimes takes years to restructure an organization to empower numbers. E. THE SOCIAL ENVIRONMENT 1\. ***[DEMOGRAPHY]*** is the statistical study of the human population in regard to its size, density, and other characteristics, such as age, race, gender, and income. 2\. **MANAGING DIVERSITY** a\. Today diversity includes seniors, people with disabilities, people with different sexual orientations, singles, religious people, and so on. b\. The number of legal and illegal **immigrants** has had a dramatic impact on cities and businesses. 3\. **THE INCREASE IN THE NUMBER OF OLDER CITIZENS** a\. U.S. citizens aged **75 and older** are the **RICHEST** demographic group in U.S. society. b\. By 2030, over 20% of the population will be over 65-years-old. c\. Career opportunities of providing goods and services for older adults include medicine, nursing homes, home health care, and more. d\. Paying Social Security to seniors will drain huge amounts of money from the economy. e\. Soon there will be **less money coming into** the Social Security system than will **be going out.** 4\. **The Increase in the Number of Single-Parent Families** a\. One-third of children in the U.S. live with a single parent. **b. SINGLE PARENTS** have encouraged businesses to implement family-friendly programs such as **family leave and flextime**. 5\. **THE RISE OF GEN Z'S ECONOMIC INFLUENCE** a\. **Generation Z** (those born after the mid-1990s) will soon be the largest group of consumers in the world, accounting for as much as \$143 billion in spending power in the U.S. F. THE GLOBAL ENVIRONMENT 1\. Two important environmental changes in recent years have been the **growth of global competition** and the **increase of free trade** among nations. a\. Improvements in efficient distribution systems and online communication systems have led to more trade. b\. World trade, **globalization**, has significantly improved living standards around the world. c\. World trade has both benefits and costs, as will be discussed in Chapter 3. 2\. **WAR AND TERRORISM** a\. Recent wars have drawn **TRILLIONS** of dollars from the American economy. b\. The threat of terrorism makes people more fearful and cautious and adds to business' organizational costs. c\. Businesspeople benefit from a peaceful and prosperous world. a\. Expanding global commerce will create many career opportunities for college graduates. b\. Students must prepare themselves to compete in changing global environments. 4\. The Ecological Environment a\. ***[CLIMATE CHANGE]*** is the movement of the temperature of the planet up or down over time. b\. ***[Greening]*** is saving energy and producing products that cause less harm to the environment. IV\. THE EVOLUTION OF U.S. BUSINESS A. American businesses have become so productive that fewer workers are needed in the industrial sector to produce goods. B. PROGRESS IN THE AGRICULTURAL AND MANUFACTURING INDUSTRIES 1\. The use of **TECHNOLOGY** made the agricultural industry so **PRODUCTIVE** that the number of farmers dropped from about a third of the population to less than 1%. 2\. **AGRICULTURE** is still a major industry in the U.S., but fewer and larger farms have replaced millions of small farms**.** 3\. Many farmers lost their jobs in the 19^th^ and 20^th^ centuries and went to work in factories. 4\. Now **TECHNOLOGY** is making manufacturing more productive and workers again losing their jobs. C. PROGRESS IN THE SERVICE INDUSTRIES 1\. The fastest growing firms provide services in areas like law, health, telecommunications, entertainment, and finance. 2\. **Services** make up about 85% of the value of the workers in the U.S. 3\. There are more high-paying jobs in the service sector than in the goods-producing sector. D. **PROGRESS IN THE INFORMATION AGE** 1\. In the Information Age, a significant portion of a company\'s value is based on its intellectual capital. a\. **Intellectual capital** includes employee knowledge and skills that can be used to create new products, attract new customers, and increase profits. b\. Intellectual expertise encourages innovation. **E. YOUR FUTURE IN BUSINESS**