1. The Framework of Contemporary Business
Chapter 1
The Framework of Contemporary Business

2. What is Business?
Profit-seeking activities and enterprises provide goods and services necessary to an economic system.
Profit is the reward for businesspeople who take the risk involved to offer goods and services to customers.
Business is the nation’s engine for growth.
Consists of all profit-seeking activities and enterprises that provide goods (tangible items)?? and services?? as well as create employment necessary to an economic system
1. Provides the means through which standards of living improve
2. An exchange between a buyer, who recognizes the need for a good or services, and a seller, who receives money for the good or service
3. Provides profits or rewards for businesspeople, who take risks in blending people, technology and information to create and market want-satisfying goods and services

3. What is Business?
Accounting definition of profit: Revenue – expense Serves as a primary motive to start business and expand them. Without profits, no business can survive. To be successful in the long run, companies must behave ethically at every aspect.
4. Businesspeople also recognize social and ethical responsibilities to employees, customers, suppliers, competitors, government and the general public

4. Not-for-Profit Organizations
Business like establishments that have primary objective to provide public service other than returning profits to their owners.
For example: The Corporate Angel Network: A Not-for-Profit Organization providing flights to cancer patients in need
Private sector, such as libraries, business associations, charitable and religious organizations, and most college and universities
Public sector, such as Government agencies, political parties and labor unions
Sources of fund??
1. Private sector, such as libraries, business associations, charitable and religious organizations, and most college and universities
2. Public sector, such as Government agencies, political parties and labor unions
3. Revenues come from a wide array of sources, including:
a. individual donations
b. memberships
c. government grants
d. gift-shop sales (profit centers within the non-profit)
e. special fund-raising events, which also increase public awareness of the not-for-profit
4. Require work in all the business functions, such as marketing and human resources, as do for-profit organizations, and face many of the same business challenges, including determining methods to increase revenue

5. Not-for-Profit Organizations
1. Private sector, such as libraries, business associations, charitable and religious organizations, and most college and universities
2. Public sector, such as Government agencies, political parties and labor unions
3. Revenues come from a wide array of sources, including:
a. individual donations
b. memberships
c. government grants
d. gift-shop sales (profit centers within the non-profit)
e. special fund-raising events, which also increase public awareness of the not-for-profit
4. Require work in all the business functions, such as marketing and human resources, as do for-profit organizations, and face many of the same business challenges, including determining methods to increase revenue

6. Factors of Production Natural Resources Capital Human Resources
Economic systems require certain inputs for successful operation and production.
Natural Resources
Capital
Human Resources
Entrepreneurship
- Natural resources include all production inputs that are useful in their natural state. Agriculture, land, building sites, forest and mineral deposits are examples.
- Capital includes technology, tools, information and physical facilities. To remain competitive, a firm’s capital must continually acquired, maintained and upgraded. Source???? Investment, bank loan, stock market, etc.
- Human resources includes anyone who works for a firm. Human resources includes physical labor and intellect.
- Entrepreneurship is the willingness to take risks to create and operate a business.

7. The Private Enterprise System
Economic system determines how goods and services are produced, distributed, and consumed
The Private Enterprise System is an economic system that rewards firms for their ability to serve the needs of consumers
Minimizes government intervention
Communism is another example of an economic system where there is government controls on business ownership, profits and resources.
No business exists/operates in vacuum.
Communism is another example of an economic system where there is government controls on business ownership, profits and resources.

8. The Private Enterprise System
Capitalism – another name for private enterprise system. Adam Smith is the father of capitalism in his 1776 book, The Wealth of Nations, in which he described that an economy is best regulated by the “invisible hand” of competition, the battle among businesses for consumer acceptance. Failure to have competitive differentiation leads businesses to collapse.
To compete, each firm must find a competitive differentiation – the unique combination of organizational abilities, products, and approaches.
Hence, consumers obtain best possible products and prices.

9. Basic Rights in the Private Enterprise
Certain rights critical to the operation of capitalism are available to citizens living in a private enterprise or capitalistic society, including:
1. The right to private property – the right to own, use, buy, sell and bequeath most forms of property, including land buildings, machinery, equipment, inventions, and various intangible kinds of property
2. The right of business owners to all profits (after taxes) earned by the enterprise
3. The right or freedom of citizens to choose their own place of employment, purchases and investments, which maximizes human welfare and happiness
4. The right to fair competition by allowing the public to establish the rules for competitive activity. However, US has passed laws to discourage “cutthroat” competition.

10. The Entrepreneurship Alternative
The risk-taker in the private enterprise system.
Fuels the economy
Provides innovation
Creates employment or self-employment
Entrepreneurial thinking is important inside of large firms for flexibility, innovation and new market opportunities. This is called intrapreneurship.
The willingness of individuals to start a new venture drives economic growth and keeps pressure on existing companies to continue to satisfy customers.
If no one takes economic risks, the private enterprise system will not exist.

11. Strategic Alliances and Partnerships
A strategic alliance
is a partnership
formed to create
a competitive
advantage for both
parties.
A partnership is an
affiliation of two or
more companies that
help each other
achieve common
goals.
Partnerships and strategic alliances allow organizations to take advantage of available opportunities.

12. Today’s Business Workforce*
Dedicated workers who can foster strong ties with customers
Capable of high-quality production
Ability to compete in global markets
Technologically conscious and focussed
A skilled and knowledgeable workforce is an essential resource for keeping pace with the changing business world.
A first-class workforce can be the foundation of a firm’s competitive differentiation, providing important advantages over competing business.

13. Changes in the Workforce-Outsourcing*
Offshoring is the
relocation of business
processes to lower
cost locations
overseas.
Outsourcing is using
outside vendors to
produce goods or
fulfill services and
functions that were
previously handled
in-house or in-country.
The nature of work is changing. The manufacturing industry is declining while the service industry is growing. Firms must rely heavily on well-trained service workers with knowledge, technical skills, the ability to communicate and deal with people, and a talent for creative thinking. More service jobs like call centers are being outsourced.

14. The 21st Century Manager*
Vision: the ability to perceive marketplace needs and what an organization must do to satisfy them
Critical Thinking: ability to analyze and assess information in order to pinpoint problems or opportunities
Creativity: capacity to develop novel solutions to perceived organizational problems – to see better and different ways of doing business
Ability to Lead Change: Must guide employees and organizations through the changes brought about by technology, marketplace demands, and global competition
Creativity can be fostered by:
•brainstorming ideas and building upon earlier ideas, rather than critiquing or criticizing them
•rearranging current thinking
•cultivating curiosity, openness, risk and energy in meeting new people or situations
•learning from failures
Ability to lead Change
a. Must be able to recognize employee strengths and how to motivate people toward common goals
b. Factors requiring change may be both internally or externally driven
1. external could be feedback from customers, developments in the international marketplace, new technologies
2. internal factors could be new company goals, emerging employees needs, labor-union demands or production problems

15. What Makes a Company Admired*
Solid profits
Stable growth
Safe and challenging work environment
High-quality goods and services
Business ethics and social responsibility
You decide!
There are a variety of things that make a company admired. As you learn more about business, you will decide for yourself what makes a company admired.

16. What Makes a Company Admired
Business Ethics—conduct and moral values involving right and wrong actions arising in the work environment.
Social Responsibility—a management philosophy that highlights the social and economic effects of managerial decisions.
Companies enhance their image and relationship with society by participating in social responsibility programs