Chapter 1: The Dynamics of Business and Economics PDF

Chapter 1: The Dynamics of Business and Economics Andrea Rizzi © McGraw Hill, LLC  Because learning changes everything. ® Chapter 1 The Dynamics of Business and Economics © McGraw Hill...

Chapter 1: The Dynamics of Business and Economics Andrea Rizzi © McGraw Hill, LLC  Because learning changes everything. ® Chapter 1 The Dynamics of Business and Economics © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Learning Objectives 1-1 Define basic concepts such as business, product, profit, and economics. 1-2 Identify the main participants and activities of business. 1-3 Explain why studying business is important. 1-4 Compare the four types of economic systems. 1-5 Describe the role of supply, demand, and competition in a free- enterprise system. 1-6 Specify why and how the health of the economy is measured. 1-7 Outline the evolution of the American economy. 1-8 Explain the role of the entrepreneur in the economy. 1-9 Evaluate a small-business owner’s situation and propose a course of action. © McGraw Hill, LLC 4  The Nature of Business 1 Businesses—Individuals or organizations who try to earn a profit by providing products that satisfy people’s needs. Products include: Tangible goods. Automobile, smartphone, jeans. Service. Dry cleaning, telemedicine visit, movie, sports event. Idea. Accountants, attorneys. © McGraw Hill, LLC 5  Products and services examples © McGraw Hill, LLC 6  The Nature of Business 2 The Goal of a Business Goal is to earn a profit. While maintaining social responsibility. Business has to pay for all expenses necessary to operate. Nonprofit organizations. Do not share the purpose of earning profits. May provide goods or services. Engage in fund-raising. Engage in management, marketing, and finance to reach goals. Stakeholders—Groups that have a stake in the success and outcomes of a business. © McGraw Hill, LLC 7  Profit © McGraw Hill, LLC 8  The Nature of Business 3 The People and Activities of Business Management. Planning, organizing, leading, and controlling. Marketing. Focus of all marketing activities is satisfying customers. Finance. Refers to all activities concerned with obtaining money and using it effectively. © McGraw Hill, LLC 9  Figure 1.1 Overview of the Business World Access the text alternative for slide images. © McGraw Hill, LLC 10  POLLING QUESTION 1 Who is responsible for all the activities designed to provide goods and services that satisfy consumers’ needs and wants? A. managers B. marketers C. investors D. competitors © McGraw Hill, LLC 12  The Economic Foundations of Business 1 Economics—The study of how resources are distributed for the production of goods and services within a social system. Resources. Natural resources. Human resources (labor). Financial resources (capital). Intangible resources. © McGraw Hill, LLC 13  The Economic Foundations of Business 2 Economic Systems—A description of how a particular society distributes its resources to produce goods and services. Communism. Socialism. Capitalism (free enterprise). Pure capitalism (free-market system). Modified capitalism. Mixed economies. © McGraw Hill, LLC 14  Table 1.1 Comparison of Communism, Socialism, and Capitalism 1 Topic Communism Socialism Capitalism Business Most businesses The government Individuals own ownership are owned and owns and operates and operate all operated by the some basic businesses. government. industries; individuals own businesses. Competition Government Restricted in basic Encouraged by controls industries; market forces and competition and encouraged in other government the economy. business. regulations. Profits Excess income Profits earned by Individuals and goes to the businesses may be businesses are government. The reinvested in the free to keep profits government business; profits from after paying taxes. supports social government-owned and economic industries go to the institutions. government. © McGraw Hill, LLC 15  Table 1.1 Comparison of Communism, Socialism, and Capitalism 2 Topic Communism Socialism Capitalism Product Consumers have Consumers have Consumers have a availability and a limited choice of some choice of wide choice of goods price goods and goods and and services; prices services; prices services; prices are determined by are usually high. are determined supply and demand. by supply and demand. Employment Little choice in More choice of Unlimited choice of options choosing a career; careers; many careers. most people work people work in for government- government owned industries jobs. or farms. © McGraw Hill, LLC 16  The Economic Foundations of Business 3 The Free-Enterprise System Many large economies are free-enterprise, such as U.S., Canada, and Japan. Many communist and socialist countries apply free- enterprise principles, such as China and Russia. Allows a company to succeed or fail on the basis of market demand. © McGraw Hill, LLC 18  The Economic Foundations of Business 4 The Free-Enterprise System Continued Basic individual and business rights must exist 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 a career, where to live or locate a business, what goods/services to purchase, and more. © McGraw Hill, LLC 19  The Economic Foundations of Business 5 The Forces of Supply and Demand Demand—The number of goods and services that consumers are willing to buy at different prices at a specific time. Supply—The number of products that businesses are willing to sell at different prices at a specific time. 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. © McGraw Hill, LLC 20  Figure 1.2 Equilibrium Price of Handmade Rugs Access the text alternative for slide images. © McGraw Hill, LLC 21  Does anyone recognize the person in the picture? Access the text alternative for slide images. © McGraw Hill, LLC 22  The Economic Foundations of Business 6 The Nature of Competition Competition—the rivalry among businesses for consumers’ dollars. Four types of competitive environments: Pure competition. Monopolistic competition. Oligopoly. Monopoly. © McGraw Hill, LLC 23  POLLING QUESTION 3 The airline industry has what type of competitive environment? A. Pure competition B. Monopolistic competition C. Oligopoly D. Monopoly © McGraw Hill, LLC 24  Read and answer - 5’ © McGraw Hill, LLC 25  The Economic Foundations of Business 7 Economic Cycles and Productivity Economic expansion. Inflation—a condition characterized by a continuing rise in prices. Economic contraction. Recession—a decline in production, employment and income. Unemployment—a percentage of the population wants to work but is unable to find jobs. Depression—unemployment is very high, consumer spending is low, and business output is sharply reduced. © McGraw Hill, LLC 26  Figure 1.3 Annual Average Unemployment Rate, Civilian Labor Force, 16 Years and Over Sources: Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey,” http://data.bls.gov/timeseries/LNS14000000 (accessed July 20, 2021). Access the text alternative for these images. © McGraw Hill, LLC 27  The Economic Foundations of Business 8 Economic Cycles and Productivity Continued Measuring the economy. Gross domestic product (GDP)—the sum of all goods and services produced in a country during a year. Budget deficit—the condition in which a nation spends more than it takes in from taxes. © McGraw Hill, LLC 28  Figure 1.4 Change in U.S. Gross Domestic Product Source: U.S. Department of Commerce Bureau of Economic Analysis, “National Economic Accounts,” www.bea.gov/national/index.htm#gdp (accessed July 20, 2021). Access the text alternative for these images. © McGraw Hill, LLC 29  Table 1.2 How Do We Evaluate Our Nation’s Economy? Unit of Measure Description Trade balance The difference between our exports and our imports. If the balance is negative, as it has been since the mid-1980s, it is called a trade deficit and is generally viewed as unhealthy for our economy. Consumer Price Measures changes in prices of goods and services purchased for Index consumption by typical urban households. Per capita income Indicates the income level of “average” Americans. Useful in determining how much “average” consumers spend and how much money Americans are earning. Unemployment rate Indicates how many working-age Americans are not working who otherwise want to work. Inflation Monitors price increases in consumer goods and services over specified periods of time. Used to determine if costs of goods and services are exceeding worker compensation over time. Worker productivity The amount of goods and services produced for each hour worked. © McGraw Hill, LLC 30  The American Economy 3 A Brief History of the American Economy The early economy. The Industrial Revolution. The manufacturing and marketing economies. The service and new digital economy. © McGraw Hill, LLC 33  The American Economy 4 Technology and the Economy Technology—includes the methods and processes creating applications to solve problems, perform tasks and make decisions. Artificial intelligence (AI). Big data. Blockchain. Drones. © McGraw Hill, LLC 34  Example: road map of the evolution of cellular technology © McGraw Hill, LLC 35  Figure 1.5 AI in Relation to Its Enablers Access the text alternative for these images. © McGraw Hill, LLC 36  AI is the villain? In movies AI is the villain! Blade Runner The supreme Intelligence in Captain Marvel Terminator But AI is about computers learning form information provided and can be defined as “a system’s ability to interpret external data correctly, to learn from such data, and to use those learnings to achieve specific goals and tasks through flexible adaption” (Kaplanm&Haenlein, 2019) © McGraw Hill, LLC 37  AI © McGraw Hill, LLC 38  Big Data 4 factors big data developed (Caesarius & Hohenthal, 2022): 1. Development of information technology system 2. Internet 3. Social media 4. Internet of things Bid Data refers to the increasing complexity and granularity of information with key characteristics (7Vs): - Volume (the quantity of data) - Velocity (the speed at which data is created) - Variety (the different types of data) - Veracity (the accuracy and trustworthiness of the data) - Variability (how insights vary or change over time as data is reinterpreted) - Visualization (the patterns and trends that can be seen in the data) - Value (how data generates business value through useful insight) © McGraw Hill, LLC 39  Application of Big Data Airlines: British Airways uses data to analyse flights, including identifying trends and patterns which could improve performance Financial Services: UBS has over 70,000 employees and uses data to support their human resources function Gaming: playstation uses data to improve games by analysing customer behaviour Toys: LEGO uses data to improve the shopper experience by monitoring online forums and from this feedback to their teams to take action to optimize their website © McGraw Hill, LLC 40  Value of big data and advanced analytics © McGraw Hill, LLC 41  Blockchain: Don Tapscott’s view © McGraw Hill, LLC 42  Blockchain in AWS © McGraw Hill, LLC 43  amazon drone delivery © McGraw Hill, LLC 44  The American Economy 5 The Role of the Entrepreneur Entrepreneurs—an individual who risks money, time, and effort to develop for profit an innovative product or way of doing something. Let the free-enterprise system help them to succeed. Change business practices through new technology and innovative management techniques. © McGraw Hill, LLC 45  The American Economy 7 The Role of Ethics and Social Responsibility in Business Promote public confidence in corporate America. Foster business ethics. Encourage socially responsible behavior. Push for diversity in workforce. Enhance reputation and drive profits. © McGraw Hill, LLC 49  Solve the Dilemma – 5’ Mrs. Acres Homemade Pies 1 © McGraw Hill, LLC 51  Solve the Dilemma Mrs. Acres Homemade Pies 1 The company produces specialty pies and sells them in local supermarkets and family restaurants In each of the first six months, 2,000 pies sold for $4.50 each, netting $1.50 profit per pie. Had problems keeping up with demand. To meet demand: expanded operations, borrowed money, and increased staff. Production and sales increased to 8,000 pies per month and profits to $12,000 per month. © McGraw Hill, LLC 52  Solve the Dilemma Mrs. Acres Homemade Pies 2 Shelly has several options: Maintain current production levels and raise prices. Expand facility and staff while maintaining the current price. Contract the production of pies to a national chain, giving Shelly a percentage of profits with minimal involvement. © McGraw Hill, LLC 53  Solve the Dilemma Mrs. Acres Homemade Pies 3 Critical Thinking Questions 1. Explain and demonstrate the relationship between supply and demand for Mrs. Acres Homemade Pies. 2. What challenges does Shelly face as she considers the three options? 3. What would you do in Shelly’s position? © McGraw Hill, LLC 54