*

*
*
** Managing
Within The *

CHAPTER
Dynamic
Business
Environment:
Taking Risks
1
and Making
Nickels
* McHugh
* McHugh Profits
1-1
McGraw-Hill/Irwin
Understanding Business, 8e
1-1
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
*
* Business & Entrepreneurship
*
• Business
• Profit
• Entrepreneur
• Match Risk With Profit
• Revenue
• Loss
• Standard of Living/Quality
of Life
• Stakeholders
• Nonprofit Organizations

1-2
*
* Objectives of Business
*

Survival

Profit Social
Growth Responsibility

1-3
*
* Creating Wealth:
* Factors of Production
• Land
• Labor
• Capital
• Entrepreneurship
• Knowledge

1-4
*
* Business Environment
*

Global Economic &

Business Legal

Social Technology

Competitive

1-5
*
* Economic &
* Legal Environment
$ Minimum taxes and regulations
$ Freedom of ownership
$ Contract laws
$ Tradable currency
$ Elimination/minimization of
corruption
1-6
*
* Government Takeover
*
• Crude oil price per barrel:
2000 2006
Mid $20 range Mid $70 range

• Russia, Venezuela, and Bolivia have

asserted greater state control over its oil
or natural gas assets

• Which country will be next?

Source: wtrg.com; Cumberland Times-News, May 3, 2006

1-7
*
* Corrupt Countries
*
Least Corrupt Most Corrupt
1. Iceland 1. Bangladesh
2. Finland 2. Chad
3. New Zealand 3. Haiti

Source: Transparency International, 2005; www.transparency.org

1-8
*
* Technological Environment
*

• Productivity

• E-Commerce

• Responsiveness
to Customer

1-9
*
* Identity Theft
*
• Total number of identity theft
victims in 2005 – 255,565
• Top four ways how victims
information was misused:
1. Credit card fraud
2. Phone/utilities fraud
3. Bank fraud
4. Employment-related fraud
Source: Identity Theft: Victim Complaint Data, 2005, Federal Trade Commission; www.consumer.gov/idtheft

1-10
*
* ID Theft—Protective Steps
*
• “Focus on the cheap and easy way
to keep an eye on your accounts”
• Free Credit Reports
• Guard Your Number
• Shred
• Bug Congress
 To pass ultimate protection: A credit
freeze anytime you want one.
Source: Money, August 2005

1-11
*
* Competitive Environment
*

• Customer
Expectations

• Restructure/Empower

1-12
*
* Consumer Trends
*
• U.S. Bottled Water Sales in Past 15
Years Increased more than four-
fold to $9.8 Billion

• From October 2004 to September

2005, top bottle water flavors were:
Blend, Lemon, Lime, and Apple
Source: Business & Economic Review, Jan.-Mar. 2002; Beverage Marketing Corporation, bottledwater.org, 2004 stats;
Productscan Online; datamonitor.com, November 9, 2005

1-13
*
*
*
Social Environment
• Diversity/Multicultural
• Aging/Graying of
America
• Two-Income Families
• Single-Parent Families

1-14
*
* U.S. Household Size
*

5
4.5
4
3.5
3
Number of
2.5
Persons
2
1.5
1
0.5
0
1900 1940 1980 2000 2004

Source: U.S. Census Bureau

1-15
*
* Buying Power of
* Diverse Groups
• Women $3,700 Billion
• African Americans 761 Billion
• Hispanic Americans 686 Billion
• Gay Men & Lesbians 610 Billion
• Asian Americans 397 Billion
• Native Americans 51 Billion

Sources: National Organization on Disability Employability; U.S. Pan Asian American Chamber of Commerce; DiversityInc.com; U.S. Census Bureau; The Augusta Chronicle,
October 22, 2005; Selig Center for Economic Growth, 2005.

1-16
*
* 21st Century
* Diversity Issues
• Race • Age
• Gender • Language
• Ethnicity • Religion

• Disability • Sexual
Orientation
Source: U.S. Equal Employment Opportunity Commission

1-17
*
* Immigration
*
• In 2005, roughly 35 million immigrants
lived in the U.S. as compared to less
than 25 million 10 years ago.

• According to a November 2005 poll,

60 percent of Americans favor a
barrier built along the US-Mexico
Border.

• About 49 percent believe that a child

born to an illegal alien in the U.S.
should be granted a US citizenship

Source: Center for Immigration Studies; RasmussenReports.com

1-18
*
* Older Americans Working
*
80%
70%
60%
50%
40% Female
30% Male
20%
10%
0%
55-59
60-64
Source: USA Today
65+
*
* Americans Living Longer
*
• U.S. life expectancy rises to a
record high 77.9 years 2500000

• The number of deaths dropped 2000000

by 50,000 in 2004 from 2003, 1500000

the steepest decline since 1938 U.S.
1000000 Deaths

• By 2005, about one in eight 500000

Americans will be 65 or older.
By 2025, it will be nearly one in 0
five. 1900s 2004

Source: Investor’s Business Daily, December 8, 2003; Cumberland Times-News, April 20, 2006; U.S. Centers for Disease
Control and Prevention; U.S. Census

1-20
*
* Exurbs:
* Growth of Outer Suburbs
• Northeasterners are moving south and
west, and west coast residents are
moving inland.
• The states that gained the most
residents: Florida, Arizona, Nevada
• The states that lost the most residents:
New York, California, Illinois

Source: Cumberland Times-News, April 21, 2006; U.S. Census Bureau

1-21
*
* Global Environment
*
• International Competition and Free Trade

• Improvements in Transportation
and Communication

• War & Terrorism

• Global Changes

1-22
*
* The Economic
* Cost of Disaster
Disaster Costs
Hurricane Katrina – 2005 (estimate)$ 200 B

Kobe, Japan Earthquake -- 1995 100 B

September 11, 2001 Attacks 70 B

Northridge, CA Earthquake – 1994 44 B

Hurricane Andrew – 1992 35 B

Source: Business 2.0 , November 2002; MSNBC.com, September 10, 2005.

1-23
*
* Does Global Experience
* Help Your Career?
No Response
5%

19%
Unnecessary 56%

Very
Somewhat Helpful
20%

Source: USA Today

1-24
*
* Evolution of
* American Business
• Agricultural/Manufacturing

• Service Industries

• Future???

1-25
*
* Trends in Business
*
• Rise of Information & • Self-Directed,
Communication Empowered
Technology Employees
• Globalization
• Communication Skills
• Doing Business 24/7
• Decision-Making Skills
• Educated Consumers
• Aging Workforce • Teamwork
• Increasing Diversity • Leadership
• Pyramid vs. Web • Continual Learning

Source: Keying In- Newsletter of the National Business Education Association, March 2003

1-26
*
* Leveraging
* Diverse Workforce
• According to the Society for Human
Resources’ survey, about 70 percent of the
respondents actively leverage workforce
diversity through:
• Ensuring leadership development programs reach
all employees (40%)
• Meeting the needs of diverse customers (39%)
• Integrating diversity into the organization’s business
strategy (35%)
• Increasing innovation by tapping
employees of all backgrounds (34%)
Source: SHRM Weekly Survey, August 3, 2004

1-27
*
*
*
Skill Level Required
58%
Average Skill
Level: 3.6 40%

2%

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6

Source: Hudson Institute as reported in Arnold Packer, “Retooling the American Worker,” Washington Post

1-28
*
* Current Skill Level
*

70.5%
Average Skill
Level: 2.6

16.1%
6.6%
6.8%

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6

1-29