FHF Ferrell Hirt Ferrell M: Business 2 nd Edition

FHF 1 Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin The Dynamics of Business and Economics

The Nature of Business FHF What is an Organization? Two or more individuals working together for the purpose of accomplishing goals, objectives and standards. 1-5

The Nature of Business FHF What two types of Organizations exists? Not for Profit (Non-Profit) For Profit (Business) 1-6

The Nature of Business FHF What is a BUSINESS? An individual or organization that works for the goal of making a PROFIT by providing products or services to consumers. 1-7

The Nature of Business FHF What are PRODUCTS and/or SERVICES? Items, goods, or acts of behavior with tangible and intangible characteristics that provide benefits, satisfaction and/or usefulness to customers. 1-8

Products: Tangible Goods & Services FHF Tangible Products Loaf of bread Television Automobile Computer Services Dry cleaning Photo processing Checkup at doctor’s Musical concert 1-9

The Primary Goal of Business FHF Earn a PROFIT The difference between what it costs to make and sell a product and what a customer pays for it. 1-10

[ ] The difference between what it costs to make and sell a product and what a customer pays for it Profit Is FHF 1-11

Non-Profit Organizations The Rainforest Alliance works to protect tropical rainforests and encourage sustainable business and development practices Not all organizations are for-profit businesses Nonprofit organizations provide goods and services but do not have the fundamental purpose of earning profits FHF 1-12

] [ People or organizations who have a stake in or are affected by the outcomes (behavior, failures, successes) of an organization or business. This includes owners, investors, employees, customers, communities, regulators, and society. Stakeholders FHF 1-13

FHF The People and Activities of Business 1-14

The Activities (Functions) of Business FHF Management Marketing Finance Information Technology 1-15

The Activities (Functions) of Business FHF Management: The process of planning, organizing, leading and controlling and organization’s financial, human, information and physical resources for the purpose of accomplishing goals, objectives and standards in an effective and efficient manner. 1-16

Management FHF Two Major Areas of Management Operations (Production and Manufacturing) Human Resources 1-17

Marketing FHF Marketing: The activities and process involved in the Marketing Mix (4 P’s), including Product/Service planning Pricing Promoting Placing (Distribution) 1-18

Finance FHF Finance: The activities and process involved in the; Acquisition of capital Acquisition and Disbursement of funds and financial assets Financial Record Keeping 1-19

INFORMATION TECHNOLOGY PROCESSES AND APPLICATIONS THAT CREATE NEW METHODS TO SOLVE PROBLEMS, PERFORM TASKS AND MANAGE COMMUNICATIONS (INFORMATION)

ii

Why Study Business? FHF Develop skills for career success Understand business activities Learn the importance of profitability Individual businesses Local and regional impact Global economic impact 1-22 Why Study Business?

Business Impact FHF Purchase raw materials Hire employees Attract capital Create products Fuel the global economy Contribute to society 1-23

The Economic Foundations of Business FHF Economics Distribution of resources for the production of goods and services within a social system Resources Natural resources (land, forests, minerals, water) Human resources (labor, mgt, owners, govmt) Financial resources (capital, bldgs, eqipment) 1-24

[ ] Natural, human, and financial resources used to produce goods and services Factors of Production FHF 1-25

Economic Systems FHF The interaction of resources as 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 1-26

Economic Systems FHF 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? 1-27

FHF Comparison of Communism, Socialism, and Capitalism 1-28

Communism FHF A society in which the people without regard to class, own all the nation’s resources. China North Korea Cuba 1-29

Socialism FHF System in which the government owns and operates basic industries but individuals own most businesses. Sweden Israel India 1-30

Capitalism FHF Free enterprise Individuals own and operate majority of businesses providing goods and services United StatesJapanAustralia 1-31

Pure Capitalism versus Modified Capitalism FHF Pure Capitalism Free Market All economic decisions made without government intervention Modified Capitalism Government intervenes and regulates business to some extent 1-32

[ ] No country practices pure capitalism or pure socialism/communism. Economic systems contain various elements of government intervention Mixed Economies FHF 1-33

Mixed Economies FHF Help obtain national economic objectives China ‣ The Communist government encourages entrepreneurship and private investment ‣ Foreign companies operate in China United States ‣ Capitalist, but the government took majority ownership in auto companies, banks, and insurance companies during the economic crisis 1-34

Supply and Demand FHF Distribution of resources and products is determined by supply and demand Demand Number of goods/services consumers buy at given price at a specific time Supply Number of products businesses will sell at different prices at a specific time 1-35

Forces of Supply & Demand FHF Price at which number of products supplied equal amount of products consumers are willing to buy at a specific time = equilibrium price 1-36

Nature of Competition FHF 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 1-37

Economic Cycles & Productivity FHF Economic Expansion Economy is growing and consumers are spending money Economic Contraction Spending declines, layoffs, economy slows down 1-38

TABLE X Overall Unemployment Rate FHF 1-39

Economic Cycles FHF 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 1-40

The Recession FHF 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 reached 10% by late 2009 Personal savings rates increased Government spent $750 billion on financial institutions, and $789 billion on an economic stimulus package 1-41

Measuring the U.S. Economy: GDP FHF 1-42

Lowe’s versus Home Depot FHF What do you think is Home Depot’s target market?Home Depot’s What about Lowe’s? Are they different?Lowe’s 1-43

TABLE X Evaluating the U.S. Economy FHF 1-44

A Brief History of the U.S. Economy FHF The early economy The industrial revolution The manufacturing economy The marketing economy The service economy The Internet-based economy 1-45

Entrepreneurship FHF 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 1-46

The Role of Government in the U.S. Economy FHF Modified Capitalism 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 1-47

Ethics & Social Responsibility FHF Stakeholders increasingly demand that businesspeople behave ethically and socially responsibly Business reputation depends on profit and ethical conduct and social responsibility 1-48

Green Small Business FHF IceStone New York's IceStone takes recycled glass and concrete to make durable surfaces like countertops. The company had used Cradle to Cradle Certification from design firm MBDC for its process of creating durable surfaces from recycled glass and concrete. Here's how they do it. 1-49

Can You Learn Business in a Classroom? FHF Yes!!! To be successful in business, you need: knowledge skills experiences and good judgment 1-50

FHF 1-51