part

1
Ferrell Hirt Ferrell

A CHANGING WORLD
EIGHTH EDITION

FHF

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
 part

Business in a
1
Changing World
CHAPTER 1 The Dynamics of Business and Economics

CHAPTER 2 Business Ethics and Social Responsibility

CHAPTER 3 Business in a Borderless World

FHF
 The Nature of Business

What is a business?
Individuals or organizations trying to earn a profit by
providing products that satisfy people's needs.

FHF

1-3
 The Nature of Business

What is a product?
A good or service with tangible and intangible
characteristics that provide satisfaction and benefits.

FHF

1-4
 Products: Tangible
Goods & Services

Tangible Goods
 Loaf of bread
 Television Services
 Automobile Dry cleaning
 Computer Photo processing
Checkup at doctor’s
Musical concert

FHF

1-5
 The Primary Goal
of Business

Earn a profit
 The difference between what it costs to make and sell a
product and what a customer pays for it.

FHF

1-6
 Profit Is:

The difference between what it

[ costs to make and sell a product
and what a customer pays for it
]
FHF

1-7
 Non-Profit Organizations

Not all organizations are for-profit businesses

Nonprofit organizations
 Provide goods and services but
 Do not have the fundamental purpose of earning profits

 Founded by Bill Daniels, a pioneer in cable television

 Provides grants and scholarships to students, educational

institutions and businesses in the Rockies region

FHF

1-8
 Stakeholders

Customers, employees, investors, government

[ regulators, community and society. Those that

have a stake in the success and outcomes of a
business are considered stakeholders
]
FHF

1-9
The People and Activities
of Business

FHF

1-10
 The Activities of Business

Management – Focus on employees

 Motivating employees toward business goals
 Coordinating employee’s actions
 Organizing people for efficiency

FHF

1-11
 Management: Production and
Manufacturing

Another element of
management
 Plan activities
 Organize staff
 Control tasks of the
organization

FHF

1-12
 Marketing

Focus on satisfying customers

o Determine what products customers want
o Plan and develop products
o Determine:
 Distribution
 Place
 Promotion
 Price

FHF

1-13
 Axe
o Target market is young men looking for a date

o Uses multimedia promotional approach

 YouTube

 Facebook

 Twitter

 Viral Marketing

o To promote the fragrance, Axe Music, Unilever staged concerts around the
country featuring major music acts

FHF

1-14
 Finance

Finance is the primary

responsibility of owners
 Obtaining money
 Using money effectively
 Accountants, stockbrokers, bankers

FHF

1-15
 Why Study Business?

o Develop skills for career success

o Understand business activities
o Learn the importance of profitability
 Individual businesses
 Local and regional impact
 Global economic impact

FHF

1-16
 Business Impact

 Purchase raw materials

 Hire employees
 Attract capital
 Create products
 Fuel the global economy
 Contribute to society

FHF

1-17
 The Economic Foundations
of Business

Economics
• Distribution of resources for the production of goods and
services within a social system

Resources (sometimes called factors of production)

• Natural resources (land, forests, minerals, water)
• Human resources (labor)
• Financial resources (capital)
• Intangible (good reputation, quality products)

FHF

1-18
 Economic Systems

How a society distributes its resources to

produce goods and services
 Central issue of economics
 How to fulfill an unlimited demand for goods and
services with a limited supply of resources

FHF

1-19
 Economic Systems

Three Important Questions:

1. What types and quantities of goods/services will
satisfy consumer needs?
2. How will goods/services be produced? By
whom? With what resources?
3. How are goods/services distributed to
consumers?

FHF

1-20
 Comparison of
Communism, Socialism, and Capitalism

FHF

1-21
 Communism

A society in which the people, without

regard to class, own all the nation’s
resources.
 China
 North Korea
 Cuba

FHF

1-22
 Socialism

System in which the government owns

and operates basic industries but
individuals own most businesses.
 Sweden
 Israel
 India

FHF

1-23
 Capitalism

Free Enterprise
 Individuals own and operate
majority of businesses providing
goods and services

Australia Japan United States

FHF

1-24
 Pure Capitalism vs
Modified Capitalism

Pure Capitalism
 Free Market
 All economic decisions made without
government intervention
Modified Capitalism
 Government intervenes and regulates business to
some extent

FHF

1-25
 Mixed Economies

No country practices pure capitalism, socialism,

[ or communism. Economic systems can be

mixtures and often contain various elements of
government intervention
]
FHF

1-26
 The Free-Enterprise System

Many large economies are free-enterprise –

Even China applies free-enterprise principles
o Basic individual and business rights
 Right to own property
 Right to earn profits and use them as one wishes
(within constraints of law)
 Right to make business decisions
 Right to choose (careers, what goods/services to
purchase, etc.)

FHF

1-27
 Supply and Demand

Distribution of resources and products is

determined by supply and demand
Demand
 Number of goods/services consumers buy at a given price at
a specific time
Supply
 Number of products businesses will sell at different prices at
a specific time

FHF

1-28
 Forces of Supply & Demand

Equilibrium Price = Price at which number of products supplied equal

amount of products consumers are willing to buy at a specific time

FHF

1-29
 Nature of Competition

Competition
 Rivalry among businesses for consumers’ dollars
Pure Competition
 Many small businesses in same product market
Monopolistic Competition
 Small number of businesses
 Little difference in products
Oligopoly
 Very few businesses selling a product

FHF

1-30
 Economic Cycles &
Productivity

Economic Expansion
Economy is growing and consumers are spending
money

Economic Contraction
Spending declines, layoffs, economy slows down

FHF

1-31
Overall Unemployment Rate

FHF

1-32
 Economic Cycles

Inflation
 Condition characterized by continuing rise in prices
Recession
 Decline in production, employment, and income
Depression
 Unemployment very high; consumer spending low; business output
sharply reduced
Unemployment
 % of population that wants to work but unable to find jobs

FHF

1-33
 The 2008-2010 Recession
The worst recession since the Great Depression
 Collapse of many financial institutions
 AIG
 Bear Stearns
 Washington Mutual
 Merrill Lynch
 Stock market dropped 50%
 Highest mortgage default rate in history
 Unemployment exceeded10%
 Personal savings rates increased
 Government spent $750 billion on financial institutions, and $789 billion on an economic
stimulus package

FHF

1-34
Measuring the U.S. Economy:
GDP

FHF

1-35
Evaluating the
U.S. Economy

FHF

1-36
 A Brief History of the
U.S. Economy

 The early economy

 The Industrial Revolution
 The manufacturing economy
 The marketing economy
 The service economy
 The new digital economy

FHF

1-37
 Entrepreneurship

Entrepreneur: An individual who risks

his/her wealth, time and effort to develop for
profit an innovative product or way of doing
something.
Entrepreneurship requires:
 Risk
 Innovation
 Creativity
 Reward

FHF

1-38
 The Role of Government
in the U.S. Economy

Modified Capitalism
o The government regulates industry to encourage
competition and protect stakeholders like consumers,
employees, or the environment
o Laws force businesses to adhere to government
standards
o Government agencies like the U.S. Federal Reserve
Board or the Department of Commerce occasionally
intervene to regulate the economy and spur growth

FHF

1-39
 Ethics & Social Responsibility
in Business
Business ethics refers to standards and
principles used by society to define
appropriate behavior at work
Stakeholders increasingly demand that
businesspeople behave ethically and
socially responsibly
Business reputation depends on profit and
ethical conduct and social responsibility

FHF

1-40
 Ethical Business Certifications

 Only natural ingredients

 Cradle to Cradle certified
 Means products are designed with materials
that can be infinitely reused
 Every product is inspected by the Environmental
Protection and Encouragement Agency
 Reviews ingredients for safety
 Offset CO2 emissions created from production and
travel

FHF

1-41
 Can You Learn Business
in a Classroom?

Yes!!!
To be successful in business, you need:
Knowledge
Skills
Experiences and
Good judgment
FHF

1-42