Part 1

Business in
a Changing
World

McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
 The Dynamics of Business and
CHAPTER 1
Economics

Guidelines for the Development of the

APPENDIX A
Business Plan

CHAPTER 2 Business Ethics and Social Responsibility

APPENDIX B The Legal and Regulatory Environment

CHAPTER 3 Business in a Borderless World

1-2
 Learning Objectives
LO 1-1 Define basic concepts such as business, product, and profit
LO 1-2 Identify the main participants and activities of business
and explain why studying business is important
LO 1-3 Define economics and compare the four types of
economic systems
LO 1-4 Describe the role of supply, demand, and competition in a
free enterprise system
LO 1-5 Specify why and how the health of the economy is
measured
LO 1-6 Trace the evolution of the American economy and
discuss the role of the entrepreneur in the economy
LO 1-7 Evaluate a small-business owner’s situation and propose
a course of action
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 Enter the World of Business
Apple Stores: The Future of Retail?
•Much of Apple’s success is due to their innovative products;
yet they also leave a mark on the world of retailing
•Good store design along with a relaxed atmosphere and
hands-on testing, contribute to the store’s success
•Two identified keys to their success is delight the customer
and avoid selling but instead listen and assist
•Apple has been so successful in retail, other stores are
adopting its retail strategies
? Why is Apple having such a profound impact on the retail store
experience?
? How is Apple integrating its products into the retail store
experience?
? Describe Apple’s approach to customer service 1-4
 The Nature of Business
Business
• Individuals or organizations trying to earn a
profit by providing products that satisfy people’s
needs

Products
• Goods or services with tangible and intangible
characteristics that provide satisfaction and
benefits

1-5
 A Product Can Be…

Tangible
Services Ideas
Goods
• Automobile • Dry cleaning • Professionals
• Computer • Doctor’s generate
• Phone checkup ideas for
• Coat • Basketball solving
game problems
• Concert

1-6
 The Goal of Business

The goal of business is to earn a profit

$ The difference between what it costs to make and sell a product
and what a customer pays for it

$10 sale – $8 to make = $2 profit

$ Earning profits contributes to society by providing employment,

which in turn provides money that is reinvested in the economy
$ Profits must be earned in a responsible manner

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 To Earn a Profit
Management
Skills

Acting Marketing
Ethically Expertise

Profit
Adapting to Financial
Change Resources

Abiding by Product
the Law and Staff

1-8
Nonprofit Organizations
Engage in
Do not share management,
Provide
the purpose marketing
goods and
of earning and finance
services
profits to reach
goals

1-9
 Stakeholders
~ Groups that have a stake in the
success and outcome of a business
~ Customers, employees, investors,
government regulators, community,
and society
~ To achieve and maintain profitability,
businesses must produce quality
products, operate efficiently, and be
socially responsible and ethical in
dealing with stakeholders

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People and Activities of Business
con người và các hoạt động kd

1-12
 People and Activities of Business
Plan

Management is
concerned with:
o Acquiring
o Developing Control
Tasks Managers Organize

o Using
resources (including
people) effectively and
efficiently Staff

1-13
 People and Activities of Business
Determine Plan and
customer develop
needs product

Determine Determine
The focus of place distribution
all marketing
activities is
satisfying
customers Determine Determine
promotion price

1-15
People and Activities of Business
The owner is primarily
responsible for obtaining
financial resources for the
operation of the business,
including:
 Obtaining money
 Using money effectively

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 Why Study Business?

• Develop skills Business career opportunities:

for career  Marketing
success  Human resources management
• Become a  Information technology
well-informed  Finance
consumer and  Production and operations
member of  Wholesaling and retailing
society  And more

1-18
 Economic Foundations of Business

Economics
• The study of how resources
are distributed for the
production of goods and
services within a social
system

1-19
Economic Foundations of Business
Natural Resources
• Land, forests, mineral, water, and other things not
made by people
Human Resources – also called Labor
• The physical and mental abilities people use to
produce goods and services
Financial Resources – also called Capital
• The funds used to acquire the natural and human
resources needed to provide products
Intangible Resources
• Such as a good reputation for quality products or
being socially responsible

1-20
 Economic Systems

Economic System
• A description of how a particular society distributes
its resources to produce goods and services
All economic systems must address these 3 important issues:
1. What goods and services, and how much of each, will
satisfy consumers’ needs?
2. How will goods and services be produced, who will produce
them, and with what resources will they be produced?
3. How are the goods and services to be distributed to
consumers?

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Economic Systems

1-24
 Economic Systems

• First described by Karl Marx as a society in which

the people, without regard to class, own all the
nation’s resources
• On paper it appears efficient, but in practice, these
Communism economies suffer from:
• low standards of living
• critical shortages of consumer goods
• high prices
• corruption and little freedom

N
K C
O C
O H
R U
R I
T B
E N
H A
A A

1-25
 Economic Systems

• An economic system in which the government owns and

operates basic industries but individuals own most
businesses
Socialis • Most socialist countries are democratic and recognize

m individual freedoms
• The socialist system may allow a higher standard of
living and is more stable; but taxes and unemployment
are generally higher in socialist countries

S I I
W S N
E R D
D A I
E E A
N L

1-26
 Economic Systems

• An economic system in which individuals own and operate

the majority of businesses that provide goods and services
Capitalis • Pure capitalism or free-market system happens when all
economic decisions are made without government
m, or Free intervention; also called laissez-faire capitalism
Enterprise • Modified capitalism differs from pure capitalism as the
government intervenes and regulates business to some
extent

C J
A U A
N S P
A A A
D N
A

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 Economic Systems

No country practices pure capitalism, socialism, or communism

• Economies made up of elements
Mixed from more than one economic
system
Economie • No country practices a pure form of
s any economic system, although
most favor one system over others

China and Russia have used state capitalism to

advance the economy, integrating the powers of the
state with the advantages of capitalism

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Free-Enterprise System

Many large economies are free-

enterprise – including the U.S.,
Canada and Japan
Many communist and socialist
countries apply free-enterprise
principles – including China and
Russia
Free enterprise allows a
company to succeed or fail on
the basis of market demand

1-29
 Free-Enterprise System
Basic individual and business rights which must
exist in order to motivate companies to succeed
► Right to own property
► Right to earn profits and use them as one wishes
► Right to determine business operations
► Right to choose
 Career to pursue
 Where to live or where to locate a business
 What goods/services to purchase and more

1-30
Forces of Supply and Demand
The number of
products businesses
are willing to sell at
Supply different prices at a
specific time

The number of
products consumers Demand
are willing to buy at
different prices at a
specific time

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 Equilibrium Price

Equilibrium price is
the price at which
the number of
products supplied
equals the amount
of products
consumers are
willing to buy at a
specific time

1-32
 The Nature of Competition
Competition is the rivalry among businesses for consumer’s dollars
Pure Monopolistic
Oligopoly Monopoly
Competition Competition
• The market • Fewer • The market • The market
structure that businesses structure that structure that
exists when than in a exists when exists when
there are pure there are there is only
many small competition very few one business
businesses and the businesses providing a
selling one differences selling a product in a
standardized among the product given market
product goods they
sell are small

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Consider Ethics and Social Responsibility
Demand Eclipses Supply: Bluefin Tuna
•Bluefin tuna is very popular; however, its supply is being
reduced through global overfishing and pollution
•U.S. placed it on its watch list
•Many fisherman currently fish more than the legal quota
•May require official protection if unable to police fishing and
preserve habitats
?Why is the price of Bluefin tuna skyrocketing?
?What are the ethical issues involved in selling Bluefin tuna?
?Why might the U.S. be reluctant to place the Bluefin tuna on
the endangered species list? What are some of the
consequences of acting too slowly or too quickly in their
assessment?
1-35
Economic Cycles and Productivity
Economic expansion occurs then
May lead to an economy is growing and people
inflation – a are spending more money; their
continuing purchases stimulate the production
rise in prices of goods and services, which in
turn stimulates employment

May lead to Economic contraction is a

recession – slowdown of the economy
a decline in characterized by a decline in
production, spending and during which
employment
businesses cut back on production
and income
and lay off workers

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 Economic Cycles and Productivity
Recessions are often characterized by rising levels of
Unemployment – the condition in which a percentage of the
population wants to work but is unable to find jobs
Deflation occurs when rising unemployment stifles demand,
forcing prices down
Severe recession may turn into a
Depression – a condition of the economy
in which unemployment is very high,
consumer spending is low, and business
output is sharply reduced

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Annual Average Unemployment Rate, Civilian Labor Force 16
Years and Over

1-40
 Economic Cycles and Productivity

Here

Here

You can see what the U.S. government currently owes—down to the penny—by
going to the website for the Bureau of the Public Debt, www.publicdebt.treas.gov/

1-41
 Measuring the Economy

Gross • The sum of all goods and services

Domestic produced in a country during a year
Product • Does not include profits from companies’
(GDP) overseas operations

• The condition in which a nation spends

Budget more than it takes in from taxes
• U.S. budget deficit has recently grown to
Deficit
record levels; remedies include raising
taxes or reduce spending

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Growth in U.S. GDP

1-43
Comparative Analysis

1-44
Evaluating Our Economy

1-45
 Going Green
City Governments Set the Standard for Green Living
•Large Cities Climate Leadership Group (C40) goal to reduce
greenhouse gas emissions to 75% of their 1990 levels within
a decade
•Governments intervene in the economy through regulations
designed to promote competition and protect consumers,
employees, and the environment
•C40 cities are taking different steps to reduce their
environmental impact
? Why might it take longer to pass sustainability laws in capitalistic
nations than in socialistic or communistic nations?
? What are some of the impacts such laws might have on
business?
? Why are such different cities agreeing to pass these laws?
1-46
 The American Economy

Early Industrial Manufacturing Service and

Economy Revolution and Marketing Digital
Economies Economy
• Agricultural • New • Assembly • The U.S. is
economy technologie line a service
• People s and production economy
produced factories and concern and
everything • Factories with technology
they needed combined customer is leading
at home material, needs us into a
machines new digital
and workers economy

1-47
Popular Internet Activities

1-48
 The Role of the Entrepreneur
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

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Government in the American Economy
The U.S. economy is best described as modified
capitalism because:
◄ The government regulates industry to encourage
competition and protect stakeholders like consumers,
employees, or the environment
◄ Laws force businesses to adhere to government
standards
◄ Government agencies like the U.S. Federal Reserve
Board or the Department of Commerce occasionally
intervene to regulate the economy and spur growth

1-50
Ethics and Social Responsibility in Business

Business ethics
are standards set
by society

Stakeholders Reputation
demand ethical depends on profit
and socially and ethics and
responsible social
behavior responsibility

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Can You Learn Business in a Classroom?
Absolutely!
To be successful in business, you
need:
Knowledge
Skills
Experiences and
Good judgment

1-52
The Organization of This Book

1-53
 Solve the Dilemma
Mrs. Acres Homemade Pies
•Shelly Acres used a family recipe to start a small business
•The business was very successful and Shelly expanded; now
she has several options:
1. Maintain current production levels and raise prices
2. Expand facility and staff while maintaining current price
3. Contract production to a restaurant chain, earning
Shelly a percentage of profits with minimal involvement
? Explain and demonstrate the relationship between supply and
demand for Mrs. Acres Homemade Pies
? What challenges does Shelly face as she considers the three
options?
? What would you do in Shelly’s position?
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