Business Essentials Textbook PDF

1 Business Essentials 1-1 Thirteenth Edition, Global Edition Chapter 1 The Global Business Environment...

1 Business Essentials 1-1 Thirteenth Edition, Global Edition Chapter 1 The Global Business Environment Copyright © 2023 Pearson Education, Ltd.  1-2 Introduction Political, technological, cultural, and economic forces have created enormous challenges for Lidl Stiftung & Co. KG, throughout the years. All businesses are subject to the influences of economic forces. But these same economic forces also provide astute managers and entrepreneurs with opportunities for profits and growth. In this chapter, we discuss how managers must contend with the challenges and opportunities resulting from these forces. Copyright © 2023 Pearson Education, Ltd  1-3 Learning Objectives (1 of 2) 1-1 Define the nature of global businesses, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 1-2 Describe the different types of global economic systems according to the means by which they control the factors of production. Copyright © 2023 Pearson Education, Ltd  1-4 Learning Objectives (2 of 2) 1-3 Show how markets, demand, and supply affect resource distribution in the global market, identify the elements of private enterprise, and explain the various degrees of competition in the global economic system. 1-4 Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 1-5 Learn about the skills you will gain through this text. Copyright © 2023 Pearson Education, Ltd  1-5 The Concept of Business and Profit Business – organization that provides goods or services to earn profits Profits – difference between a business’s revenues and its expenses Copyright © 2023 Pearson Education, Ltd  1-6 The External Environment of Business External Environment – everything outside an organization’s boundaries that might affect it Copyright © 2023 Pearson Education, Ltd  1-7 Dimensions of the External Environment Copyright © 2023 Pearson Education, Ltd  1-8 The External Environments of Business (1 of 2) Domestic Business Environment - the environment in which a firm conducts operations and derives revenues Global Business Environment - international forces that affect a business and includes international trade agreements, international economic conditions, and political unrest Technological Environment - ways by which firms create value for their constituents Copyright © 2023 Pearson Education, Ltd  1-9 The External Environments of Business (2 of 2) Political-Legal Environment - the relationship between business and government Sociocultural Environment - includes the customs, mores, values, and demographic characteristics of the society and determines the business standards that a society is likely to value and accept The Economic Environment - includes relevant conditions that exist in the economic system in which a company operates Copyright © 2023 Pearson Education, Ltd  1-10 Economic Systems Economic system – a nation’s system for allocating its resources among its citizens, both individuals and organizations Copyright © 2023 Pearson Education, Ltd  1-11 Factors of Production (1 of 2) Labor (Human Resources) includes the physical and intellectual contributions people make while engaged in economic production and is also called human resources or human capital. Capital is the term used to describe the financial resources needed to operate a business. An Entrepreneur is a person who accepts the risks and opportunities entailed in creating and operating a new business venture. Copyright © 2023 Pearson Education, Ltd  1-12 Factors of Production (2 of 2) Physical resources - tangible things that organizations use to conduct their business and include natural resources and raw materials Information resources - data and other information used by businesses and include market forecasts, the specialized knowledge of people, and economic data Copyright © 2023 Pearson Education, Ltd  1-13 Types of Economic Systems (1 of 3) Planned Economy – an economy that relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions Communism – a political system in which the government owns and operates all factors of production Socialism – a planned economic system in which the government owns and operates only selected major sources of production Copyright © 2023 Pearson Education, Ltd  1-14 Types of Economic Systems (2 of 3) Market economy – individual producers and consumers control production and allocation by creating combinations of supply and demand Capitalism – a system that sanctions the private ownership of the factors of production and encourages entrepreneurship by offering profits as an incentive Copyright © 2023 Pearson Education, Ltd  1-15 Types of Economic Systems (3 of 3) Mixed market economy – features characteristics of both planned and market economies Privatization – process of converting government enterprises The People’s Republic of China is moving into privately owned towards a mixed market economy companies Copyright © 2023 Pearson Education, Ltd  1-16 Demand and Supply in a Market Economy Demand – the willingness and ability of buyers to purchase a product (a good or a service) Supply – the willingness and ability of producers to offer a good or service for sale Copyright © 2023 Pearson Education, Ltd  1-17 Surpluses and Shortages Surplus – a situation in which quantity supplied exceeds quantity demanded Shortage – a situation in which quantity demanded exceeds quantity supplied Copyright © 2023 Pearson Education, Ltd  1-18 Demand and Supply (1 of 2) Copyright © 2023 Pearson Education, Ltd  1-19 Demand and Supply (2 of 2) Copyright © 2023 Pearson Education, Ltd Private Enterprise and Competition in a 1-20 Market Economy (1 of 3) Private property rights – one that allows individuals to pursue their own interests with minimal government restriction – private property rights, freedom of choice, profits, and competition Copyright © 2023 Pearson Education, Ltd Private Enterprise and Competition in a 1-21 Market Economy (2 of 3) 1. Private enterprise system – ownership of the resources used to create wealth is in the hands of individuals 2. Freedom of choice – you can sell your labor to any employer you choose Copyright © 2023 Pearson Education, Ltd Private Enterprise and Competition in a 1-22 Market Economy (3 of 3) 3. Profits – the lure of profits leads some people to abandon the security of working for someone else and assume the risks of entrepreneurship 4. Competition – occurs when two or more businesses vie for the same resources or customers Copyright © 2023 Pearson Education, Ltd  1-23 Degrees of Competition (1 of 5) Table 1.1 Degrees of Competition Perfect Monopolistic Characteristic Competition Competition Oligopoly Monopoly Example Local farmer Stationery store Steel industry Public utility Number of competitors Many Many, but fewer Few None than in perfect competition Ease of entry into Relatively Fairly easy Difficult Regulated by industry easy government Similarity of goods or Identical Similar Can be similar or No directly services offered by different competing competing firms goods or services Level of control over None Some Some Considerable price by individual firms Copyright © 2023 Pearson Education, Ltd  1-24 Degrees of Competition (2 of 5) For perfect competition to exist, two conditions must prevail: 1. all firms in an industry must be small, and 2. the number of firms in the industry must be large Copyright © 2023 Pearson Education, Ltd  1-25 Perfect Competition 1. The products of each firm are so similar that buyers view them as identical to those of other firms. 2. Both buyers and sellers know the prices that others are paying and receiving in the marketplace. 3. Because each firm is small, it is easy for firms to enter or leave the market. 4. Going prices are set exclusively by supply and demand and accepted by both sellers and buyers. Copyright © 2023 Pearson Education, Ltd  1-26 Degrees of Competition (3 of 5) Monopolistic Competition – market or industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors Copyright © 2023 Pearson Education, Ltd  1-27 Degrees of Competition (4 of 5) Oligopoly – market or industry characterized by a handful of (generally large) sellers with the power to influence the prices of their products Copyright © 2023 Pearson Education, Ltd  1-28 Degrees of Competition (5 of 5) Monopoly – market or industry in which there is only one producer that can therefore set the prices of its products Natural Monopoly – industry in which one company can most efficiently supply all needed goods or services Copyright © 2023 Pearson Education, Ltd  1-29 Economic Indicators Economic indicators – statistics that show whether an economic system is strengthening, weakening, or remaining stable – help assess the performance of an economy Copyright © 2023 Pearson Education, Ltd Economic Growth, Aggregate Output, and 1-30 Standard of Living (1 of 2) Business cycle – the pattern of short-term ups and downs (or expansions and contractions) in an economy Aggregate output – the total quantity of goods and services produced by an economic system during a given period – primary measure of growth in the business cycle Copyright © 2023 Pearson Education, Ltd Economic Growth, Aggregate Output, and 1-31 Standard of Living (2 of 2) Standard of living – the total quantity and quality of goods and services that they can purchase with the currency used in their economic system Copyright © 2023 Pearson Education, Ltd  1-32 Gross Domestic Product (1 of 3) Gross domestic product (GDP) – refers to the total value of all goods and services produced within a given period by a national economy through domestic factors of production – measure of aggregate output Copyright © 2023 Pearson Education, Ltd  1-33 Gross Domestic Product (2 of 3) Table 1.2 U.S. GDP and GDP per Capita 2019 GDP 2019 GDP: Real 2019 GDP per Capita: ($ Trillion) Growth Rate (%) Purchasing Power Parity $18.64 2.9% $57,226 GDP (gross domestic product) Copyright © 2023 Pearson Education, Ltd  1-34 Gross National Product Gross national product (GNP) – refers to the total value of all goods and services produced by a national economy within a given period regardless of where the factors of production are located Copyright © 2023 Pearson Education, Ltd  1-35 GDP and GDP per Capita Copyright © 2023 Pearson Education, Ltd  1-36 Gross Domestic Product (3 of 3) Nominal GDP – gross domestic product (GDP) measured in current dollars or with all components valued at current prices Purchasing Power Parity – the principle that exchange rates are set so that the prices of similar products in different countries are about the same Copyright © 2023 Pearson Education, Ltd  1-37 World Prices of a Big Mac Copyright © 2023 Pearson Education, Ltd  1-38 Productivity (1 of 2) Productivity – measure of economic growth that compares how much a system produces with the resources needed to produce it Copyright © 2023 Pearson Education, Ltd  1-39 Productivity (2 of 2) Balance of trade – the economic value of all the products that a country exports minus the economic value of its imported products – Positive or negative balance National Debt – the amount of money the government owes its creditors Copyright © 2023 Pearson Education, Ltd  1-40 The Balance of Trade Copyright © 2023 Pearson Education, Ltd  1-41 Economic Stability (1 of 2) Stability – condition in which the amount of money available in an economic system and the quantity of goods and services produced in it are growing at about the same rate Inflation – occurs when widespread price increases occur throughout an economic system Consumer Price Index (CPI) – a measure of the prices of typical products purchased by consumers living in urban areas Copyright © 2023 Pearson Education, Ltd  1-42 Economic Stability (2 of 2) Unemployment – the level of joblessness among people actively seeking work in an economic system Recession – a period during which aggregate output, as measured by GDP, declines Depression – a prolonged and deep recession Copyright © 2023 Pearson Education, Ltd  1-43 Managing the Global Economy (1 of 2) Fiscal Policies – policies used by a government regarding how it collects and spends revenue Monetary Policies – policies used by a government to control the size of its money supply Copyright © 2023 Pearson Education, Ltd  1-44 Managing the Global Economy (2 of 2) Stabilization Policy – government economic policy intended to smooth out fluctuations in output and unemployment and to stabilize prices Copyright © 2023 Pearson Education, Ltd Coronavirus: The Global 1-45 Economic Impact of Disease Copyright © 2023 Pearson Education, Ltd  1-46 Applying What You’ve Learned (1 of 2) 1-1 Define the nature of global businesses, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 1-2 Describe the different types of global economic systems according to the means by which they control the factors of production. Copyright © 2023 Pearson Education, Ltd  1-47 Applying What You’ve Learned (2 of 2) 1-3 Show how markets, demand, and supply affect resource distribution in the global market, identify the elements of private enterprise, and explain the various degrees of competition in the global economic system. 1-4 Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 1-5 Learn about the skills you will gain through this text. Copyright © 2023 Pearson Education, Ltd Copyright This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials. Copyright © 2023 Pearson Education, Ltd