1. * * Chapter One Taking Risks and Making Profits within the Dynamic Business Environment Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

2. Why study business? For help in choosing a career To be a successful employee To improve your management skills To start your own business To become a better informed consumer and investor

3. * * Profile A 17-year-old high school student Reopened small town’s only grocery store Borrowed $22,000 to buy building & fixtures Worked to save $10,000 to stock the store Worked 90-100 hours per week Paid off loan in one year NICK GRAHAM Main Street Market 1-3

4. * * Entrepreneurship and Wealth Building Goods -- Tangible products such as computers, food, clothing, cars and appliances. Services -- Intangible products that can’t be held in your hand like, education, healthcare, insurance, recreation and travel. Success in business is often based on the strategy of finding a need and filling it. GOODS and SERVICES LG1 1-4

5. * * Entrepreneurship and Wealth Building Business -- Any activity that seeks to provide goods and services to others while operating at a profit. Entrepreneur -- A person who risks time and money to start and manage a business. Successfully filling a market need means you could make money for yourself and provide jobs for others. BUSINESS and ENTREPRENEURSHIP LG1 1-5

6. Famous Entrepreneurs – worldwide Bill Gates Steve Jobs Warren BuffetWho is he? Oprah Winfrey

7. Famous Entrepreneurs – Bangladesh Muhammad Yunus Fazle Hasan Abed Latifur Rahman Kaniz Almas

8. Steve Jobs Company: Apple Sales: $108.2 billion Market Value: $546 billion Employees: 63,300 Advice: Say no to focus groups and market research.

9. Company: Microsoft Sales: $69.9 billion Market Value: $273.5 billion Employees: 90,000 Advice: Find very smart people and create small teams.

10. Larry Page and Sergey Brin Company: Google Sales: $37.9 billion Market Value: $203.2 billion Employees: 32,500 Advice: Spare no expense on innovation.

11. 7. Mark Zuckerberg Company: Facebook Sales: $3.71 billion Market Value: $75 billion-$100 billion (estimate) Employees: 3,200 Advice: Embrace paranoia.

12. Narayana Murthy The outsourcer: Murthy at the Infosys campus in Bangalore in 2002 Company: Infosys Sales: $6.0 billion Market Value: $32 billion Employees: 145,088 Advice: Sacrifice today, cash in tomorrow.

13. Muhammad Yunus Lifting lives through loans: Yunus in Bangladesh in 1998 Company: Grameen Bank Advice: Small gifts can equal big impacts.

14. * * Revenues, Profits and Losses Revenue -- The total amount of money a business takes in during a given period by selling goods and services. Profit -- The amount of money a business earns above and beyond what it spends for salaries and other expenses. Loss -- Occurs when a business’ expenses are more than its revenues. REVENUE, PROFIT AND LOSS LG1 1-14

15. * * Businesses Add to the Standard of Living and Quality of Life Quality of Life -- The general well-being of a society in terms of its political freedom, natural environment, education, healthcare, safety, amount of leisure and rewards that add to personal satisfaction. Standard of Living: The amount of goods and services people can buy with the money they have. QUALITY of LIFE LG1 1-15

16. * * Businesses Add to the Standard of Living and Quality of Life Stakeholders- : All the people who stand to gain or lose by the policies and activities of a business. Stakeholders include customers, employees, stockholders, suppliers, government etc. LG1 1-16

17. Non-profit organizations- An organization whose goals do not include making a personal profit for its owners or organizers ( school, college, hospital, charity etc.) Outsourcing: contracting with other companies to do some or all of the function of the firm

18. Social Entrepreneurs Social Entrepreneurs are people who use business principles to start and manage organizations that are not for profit and help countries with their social issues. Social Entrepreneurs- Mohammad Yunus

19. * * Businesses Add to the Standard of Living and Quality of Life Entrepreneurship Own the business Freedom to succeed as well as freedom to fail Do not receive any benefits such as paid vacation time, day care, a company car or health insurance. Working for others Somebody else assumes entrepreneurial risk Provides with benefits such as paid vacation and health insurance. Entrepreneurship VS Working for others LG1 1-19

20. Factors of production The resources used to create wealth: land, labor, capital, entrepreneurship and knowledge.

21. * * The Importance of Entrepreneurs to the Creation of Wealth 1. Land : Land and other natural resources are used to make homes, cars and other products. 2. Labor : People have always been an important resource in producing goods and services FIVE FACTORS of PRODUCTION LG2 1-21

22. * * The Importance of Entrepreneurs to the Creation of Wealth 1. Capital: Capital includes machinery, tools, buildings and other means of manufacturing. 2. Entrepreneurship: Entrepreneurs use what they’ve learned to grow their businesses and increase wealth. 3. Knowledge: Information technology has revolutionized business FIVE FACTORS of PRODUCTION LG2 1-22

23. Business environment consists of the surrounding factors that either help or hinder the development of business. There are five elements of the business environment: – The economic & legal environment – The technological environment – The competitive environment – The social environment – The global environment

24. * * The Business Environment TODAY’S DYNAMIC BUSINESS ENVIRONMENT LG2 1-24

25. * * The Economic and Legal Environment A government can promote business by… 1. Minimizing spending and keeping taxes and regulations to a minimum. 2. Allowing private ownership of businesses. 3. Minimizing interference with the free exchange of goods and services. 4. Passing laws that enable businesspeople to write enforceable contracts. 5. Establishing a currency that’s tradable in world markets. 6. Minimizing corruption. GOVERNMENT’S ROLE in BUSINESS LG3 1-25

26. * * How Technology Benefits Workers and You Technology -- Everything from phones to copiers and the various software programs that make businesses more effective, efficient and productive. Effectiveness -- Producing the desired result. (doing the right things) Efficiency -- Producing goods and services using the least amount of resources. (doing thing rights ) Productivity -- The amount of output you generate given the amount of input (example: hours you work). E-Commerce-- The buying and selling of goods and services over the internet.(B2B, B2C) BENEFITS of TECHNOLOGY LG4 1-26

27. * * How Technology Benefits Workers and You Universal Product Code to scan what product was bought, in what size and color and at what price. A scanner at the checkout counter can read that information and put it into a database. Database is an electronic storage file where information is kept. One use of database is to store vast amount of information about customers (name, address, telephone numbers) Identity theft: Unfortunately, the legitimate collection of personal customer information also opens the door to identity theft. Identity theft is the obtaining of individual personal information for illegal purpose BENEFITS of TECHNOLOGY LG4 1-27

28. * * The Competitive Environment Focus on quality Main goal: zero defects – no mistakes in making products. Offer both high quality product and outstanding services at competitive price. Customer is King Competitive Environment LG5 1-28

29. * * The Social Environment and Managing Diversity Demography Diversity has grown from just recruiting minority and female workers. Two income families Social Environment LG6 1-29

30. * * The Global Environment 1. Growth of global competition 2. Increase of free trade among nations 3. More efficient distribution systems and communication advances. IMPORTANT CHANGES to the GLOBAL ENVIRONMENT LG7 1-30

31. * * The Global Environment Wars, like those in Iraq and Afghanistan, cost billions of dollars. Tax money is diverted. Cost of security goes up. Cost of insurance goes up. INCREASING COSTS of the GLOBAL ENVIRONMENT LG7 1-31

33. Here are five life lessons that we can learn from Ma’s talk: Think ahead. “We got successful today not because we did a great job today—we had a dream 15 years ago,” said Ma, whose company, Alibaba, recently had the biggest IPO ever at nearly $25 billion.the biggest IPO ever at nearly $25 billion. Money isn’t happiness—it’s responsibility. “When I graduated, I earned $20 a month, which was fantastic,” said Ma, who taught English in China after college. “When you have one million dollars, you’re a lucky person. When you have 10 million dollars, you’ve got trouble, a lot of headaches. When you have more than one billion dollars, or a hundred million dollars, that’s a responsibility you have—it’s the trust of people on you, because people believe you can spend money better than the others.” Expect the unexpected. “Life is like a box of chocolates,” Ma said, drawing from a line from one of his favorite films, Forrest Gump. “You never know what you’re going to get.”one of his favorite films, Forrest Gump.

34. You don’t need connections to achieve success. “We don’t have a rich father or a powerful uncle,” said Ma, who started Alibaba out of his apartment in Hangzhou, China. “We only have the customers that support us.” To change the world, invest in youth. “The secret here is helping those who want to be successful,” Ma said. “Help young people. Help small guys. Because small guys will be big. Young people will have the seeds you bury in their minds and when they grow up they will change the world.”

36. A clever startup does not try to compete directly with an incumbent. It picks a seemingly unimportant market which it can monopolise. The classic example is facebook, which began with Ivy league student bodies, but today’s other giants also focused on things others cared little about. Source: The Economist