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Ferrell Hirt Ferrell

BUSINESS

A CHANGING WORLDEIGHTH EDITION

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

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CHAPTER 3 Business in a Borderless World

CHAPTER 2 Business Ethics and Social Responsibility

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CHAPTER 1 The Dynamics of Business and Economics

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Business in aChanging

World

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What is a business?Individuals or organizations trying to earn a

profit by providing products that satisfy people's needs.

The Nature of Business

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What is a product?A good or service with tangible and intangible

characteristics that provide satisfaction and benefits.

The Nature of Business

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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.

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Profit Is:

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

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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

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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

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The People and Activities of Business

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The Activities of Business

Management – Focus on employeesMotivating employees toward business

goals

Coordinating employee’s actions

Organizing people for efficiency

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Management: Production and Manufacturing

Another element of managementPlan activitiesOrganize staffControl tasks of

the organization

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Marketing

Focus on satisfying customerso Determine what products customers want

o Plan and develop products

o Determine:

Distribution

Place

Promotion

Price

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Finance

Finance is the primary responsibility of owners

Obtaining money

Using money effectively

Accountants, stockbrokers, bankers

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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

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Business Impact

Purchase raw materials

Hire employees

Attract capital

Create products

Fuel the global economy

Contribute to society

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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)

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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

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Communism

A society in which the people, without regard to class, own all the nation’s resources.

China

North Korea

Cuba

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Socialism

System in which the government owns and operates basic industries but individuals own most businesses.

Sweden

Israel

India

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Capitalism

Free Enterprise Individuals own and operate

majority of businesses providing goods and services

United StatesJapanAustralia

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Pure Capitalism vs Modified Capitalism

Pure CapitalismFree Market

All economic decisions made without government intervention

Modified CapitalismGovernment intervenes and regulates

business to some extent

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Mixed Economies

No country practices pure capitalism, socialism, or communism. Economic systems can be mixtures and often

contain various elements of government intervention

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The Free-Enterprise System

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.)

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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

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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

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Economic Cycles & Productivity

Economic ExpansionEconomy is growing and consumers are spending money

Economic ContractionSpending declines, layoffs, economy slows down

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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

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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

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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

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The Role of Government in the U.S. Economy

Modified Capitalismo 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

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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

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Can You Learn Business in a Classroom?

Yes!!!To be successful in business, you need:Knowledge

Skills

Experiences and

Good judgment

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