Participating in the Dynamic Business Environment Chapter 1 Participating in the Dynamic Business Environment Chapter 1 THE FUTURE OF BUSINESS Gitman & McDaniel 5th Edition Each day in America thousands of new businesses are born and a rare few will become the next Microsoft or e-Bay. Most will never see their first anniversary. The survivors are those that understand trends that affect all businesses, and then successful adapt to those trends. Prepared by Deborah Baker Texas Christian University

Learning Goals 1 How do businesses and not-for-profit organizations help create our standard of living? 2 How are social trends, such as more women entering the workforce, affecting business? 3 How are demographic trends creating new opportunities for business? 4 What are the primary features of the world’s economic systems? 5 How can technological effectiveness help a firm reach its goals? 6 What are the trends in global competition? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

not-for-profit organizations help create our standard of living? Learning Goal 1 1 How do businesses and not-for-profit organizations help create our standard of living? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

THE NATURE OF BUSINESS Businesses Provide… 1 Chapter 1 THE NATURE OF BUSINESS 1 A business is an organization that strives for a profit by providing goods and services desired by its customers. Businesses Provide… … Goods and services that are the basis of our standard of living … Jobs, goods and services that help determine our quality of life Businesses meet the needs of consumers by providing countless goods and services that are desired by customers. Goods are tangible items manufactured by businesses. Services are intangible offerings that can’t be held, touched, or stored. Thus, businesses create the goods and services and services that are the basis of our standard of living. The standard of living is measured by the output of goods and services people can buy with the money they have. The U.S. has one of he highest standards of living in the world. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Profit 1 Revenue Costs Profit The money a company Chapter 1 Profit 1 The money a company earns from providing services or selling goods to customers. Revenue less Expenses that a company incurs from creating and selling goods and services. Costs When a company uses its resources intelligently, it can often increase sales, hold costs down, and earn a profit. There is generally a direct relationship between risks and profit. equals The money left over after all expenses are paid. Profit Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Not-for-Profit Organizations Chapter 1 Not-for-Profit Organizations 1 A not-for-profit organization Is an organization that exists to achieve some other goal than the usual business goal of profit. Not-for-profit organizations account for 28% of economic activity In the U.S. Government is the largest not-for-profit group. Not all organizations strive to make a profit. A not-for-profit organization exists to achieve some goal other than the usual business goal of profit. Examples are The United Way, the American Cancer Society, and the Sierra Club. Most hospitals, zoos, museums, and charities are also not-for-profit organizations. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Factors of Production 1 Natural Resources Labor Capital Chapter 1 Factors of Production 1 Natural Resources Labor Knowledge Capital Entrepreneurship Factors of production are the resources used to create goods and services. Four traditional factors of production are common to all productive activity: natural resources, labor, capital, and entrepreneurship. A fifth factor, knowledge, is gaining in importance. Knowledge is the combined talents and skills of the workforce. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

TRENDS IN BUSINESS The Environment of Business 1 Demographic Change Chapter 1 TRENDS IN BUSINESS 1 Entrepreneurs Managers Workers Customers Demographic Change Global Competition Evolving Economic Systems Emerging Technology Social The Environment of Business Certain environmental conditions that affect a business cannot be controlled. These conditions are constantly changing and include social change, demographics, economic conditions, technology, and global competition. Successful owners and managers must continuously study these conditions, and adapt their businesses. No one business is large or powerful enough to create major changes in the external environment. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

such as more women entering the workforce, affecting business? Learning Goal 2 2 How are social trends, such as more women entering the workforce, affecting business? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

SOCIAL TRENDS 2 Attitudes Social Factors Values Lifestyles Chapter 1 SOCIAL TRENDS 2 Social Factors Attitudes Values Lifestyles Social change is the most difficult environmental factor to forecast, influence or integrate into business plans. Social factors include our attitudes, values, and lifestyles. A lifestyle is the way people decide to live their lives. A component lifestyle is a lifestyle made up of a complex set of interests and choices. People are choosing products and services that meet diverse needs and interests rather than conforming to traditional stereotypes. The growth of dual-income families has resulted in increased purchasing power. Approximately 64 percent of all females between 16 and 65 years old are now in the workforce. Growth of Component Lifestyles Increase in Two-Income Families Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

How are demographic trends creating new opportunities Learning Goal 3 3 How are demographic trends creating new opportunities for business? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

DEMOGRAPHIC TRENDS 3 Age Race Demography Ethnicity Location Chapter 1 demography is the study of people’s vital statistics, such as their age, race and ethnicity, and location. Demographics also determine the size and composition of the workforce. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Key Age Groups 3 Generation Y Generation X Baby Boomers Chapter 1 Key Age Groups 3 Generation Y Generation X Baby Boomers Older Consumers Born between 1979-1994 Born between 1965-1978 Born between 1946-1964 Over 60 years of age Those individuals in Generation Y were born between 1979 and 1994. They are 60 million strong with an immense marketing impact. Companies that sell toys, videos, software, and clothing have boomed in recent years. Gen Yers lead relatively quiet lives and are a notoriously fickle consumer group, demanding the latest trends in record time. Generation X, born between 1965 and 1978, consists of 40 million consumers. It is the first generation of latchkey children, and are savvy and cynical consumers. Time is at a premium, and Xers spend more than any other age group for personal services. Baby Boomers represent 42 percent of all U.S. households and control 50 percent of consumer spending. This group totals 78 million people. Today’s mature consumers—those over 60 years of age—are wealthier, healthier, and better educated than those of earlier generations. Aging consumers create obvious opportunities, such as clothes without zippers or buttons. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Diversity in America U.S. is becoming a multicultural society Chapter 1 Diversity in America 3 U.S. is becoming a multicultural society Minorities constitute one-third of the nation’s population Minorities control $1 trillion in annual spending Diversity is emerging as a priority goal for visionary leaders who embrace the fact that the U.S. is becoming a multicultural society. In 2000, minorities constituted one-third of the nation’s population and controlled $1 trillion in annual spending. Part of the reason for the shift in demographics is immigration. Additionally, the U.S. is reaping the benefits of highly educated foreigners. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

What are the primary features of the world’s economic systems? Learning Goal 4 4 What are the primary features of the world’s economic systems? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

EVOLVING GLOBAL ECONOMIC SYSTEMS Chapter 1 EVOLVING GLOBAL ECONOMIC SYSTEMS 4 Capitalism Command Economy Socialism Mixed Economies The private enterprise system Communism Government ownership /control More than one system A capitalist system guarantees certain economic rights: the right to own property, to make a profit, to make free choices, and the right to compete. In a capitalist system, competition is good for businesses and consumers, leading to better and more diverse products, stable prices, and increased producer efficiency. The complete opposite to capitalism is a command economy, characterized by government ownership of virtually all resources and economic decision making. North Korea and Cuba are he best remaining examples of command economies. Socialism is an economic system in which the basic industries are owned by the government or by the private sector under strong government control. Socialist countries typically provide citizens with a higher level of services, such as health care and unemployment benefits, so consequently taxes and unemployment may be quite high. Canada, Great Britain, and Sweden are also called mixed economies; that is, they use more than one economic system. Exhibit 1.2 summarizes key factors of the world’s economic systems. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

How can technological effectiveness help a firm reach its goals? Learning Goal 5 5 How can technological effectiveness help a firm reach its goals? Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Technological Trends Microelectromechanical systems (MEMS) Chapter 1 Technological Trends 5 Microelectromechanical systems (MEMS) Nanotechnology Internet The application of technology can stimulate growth under capitalism or any other economic system. Technology is the application of science and engineering skills and knowledge to solve production and organizational problems. Productivity is the amount of goods and services one worker can produce. American business is becoming better at using technology to create change. During the next five years, microelectromechanical systems are likely to replace more expensive in computer hardware, automobile engineers, assembly lines, etc. Nanotechnology is the coming wave of miniaturization and molecular electronics. The Internet has had a tremendous impact on the ways companies conduct business in the past decade. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

Learning Goal 6 What are the trends in global competition? 6 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved

TRENDS IN GLOBAL COMPETITION Chapter 1 TRENDS IN GLOBAL COMPETITION 6 Advances in technology and communications Improvements in productivity The impact of terrorism on global business global competition is driving changes in the way business is conducted. World exports will reach $11 trillion by 2005. Advances in technology and communications have allowed more companies to participate in global business. For example, Gillette manufactures in 57 locations in 28 countries and markets in over 200 countries. Terrorism has profoundly impacted American business and created uncertainty among consumers. Most important, however, the American system worked. The flexibility and strength built into the American political and economic systems carried the country through its darkest times since World War II. Gross Domestic Product (GDP) is the total market value of all final goods and services produced within a nation’s borders in a year. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved