1. Characteristics of Business
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Characteristics of Business
6.1 The Nature of Business
6.2 Changes Affecting Business
6.3 The Contributions of Business

2. 6.1 The Nature of Business GOALS
Explain the nature of business activities.
Describe the general types of businesses.
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3. Management of Business Activities
Business – an organization that produces or distributes a good or service for profit
Profit is the difference between earned income and costs
Production – involves making a product or providing a service
Manufacturing firms create products that customers purchase to satisfy needs
Service firms use the skills of employees to offer activities and assistance to satisfy customer needs
Service firms exceed the number of manufacturing firms
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4. Management of Business Activities
Marketing – activities between business and customers involved in buying and selling goods and services
Finance – all the money involved in running a business
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5. Management of Business Activities
Supply and Demand
Supply - the number of similar products that will be offered for sale at a particular time & at a particular price
Demand - the number of similar products that will be bought at a given time at a given price
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6. Types of Businesses
Goods-producing businesses – produce goods used by other businesses, organizations, or consumers
Companies that mine coal & extract oil from the earth provide resources that are used by other companies & consumers
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7. Types of Businesses
Service businesses – type of business that use mostly labor to satisfy customers
Examples include firms engaged in marketing (wholesale and retailers), in finance (banks & investment companies), and in providing services (medical offices, fitness centers, & hotels)
Industry – businesses in a category doing similar work
Examples: automotive, school, health, government, movie/film
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8. Expected Employment in Major Industries by 2018
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9. 6.2 Changes Affecting Business
GOALS
Describe how innovations affect businesses.
Identify the impact global competition has had on U.S. businesses.
Discuss ways in which businesses can improve their business practices.
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10. Innovation’s Impact on Management
Innovation - something entirely new
Effects of innovation is the kind of products & services offered for sale by other businesses
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11. Impact of Global Competition on Business Management
Global competition - the ability of businesses from one country to compete with similar businesses in other countries
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12. Focusing Management on the Right Things
Effectiveness – making the right decisions about what products or services to offer customers and the best way to produce & deliver them
Efficiency – producing products & services quickly, at low cost, without wasting time & materials
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13. Focusing Management on the Right Things
Achieving effectiveness
Knowing what customers want
Domestic goods – products made by firms in the United States
Foreign goods – products made by firms in other countries
Total quality management (TQM) – a commitment to excellence accomplished by teamwork & improvement of work procedures
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14. Focusing Management on the Right Things
Achieving efficiency
Output – the quantity produced within a given time
Productivity – producing the largest quantity in the least amount of time by using efficient methods and modern equipment
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15. Focusing Management on the Right Things
Achieving efficiency
Specialization
When workers specialize, they become experts at their assigned tasks, this improves efficiency
Technology and innovation
With new discoveries and inventions, better-quality goods & services are built at a faster pace & lower cost
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16. Focusing Management on the Right Things
Achieving efficiency
Reorganization of work
Challenging way to increase efficiency
Empowerment – letting workers participate in determining how to perform their work tasks & offer ideas on how to improve the work process
Firms find the the quality of work often improves
Re-engineering – redesign the work flow throughout the organization
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17. 6.3 The Contributions of Business
GOALS
Identify two ways a nation measures its economic growth and prosperity.
Describe the benefits of business ownership to the nation and individuals.
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18. Business Growth and Prosperity
Gross domestic product (GDP) – the total market value of all goods and services produced in a year
GDP is the chief measure of a nation’s economic wealth
Compared year to year and also with GDP of other countries
In 2010, GDP in US reached $14.7 trillion, China is close to America in terms of GDP
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19. Business Growth and Prosperity
Underground economy – income that escapes being recorded in the GDP
Working full or part-time for cash
Size concerns government due to its illegal nature & activities are not taxed
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20. Business Growth and Prosperity
Individual well-being is the second measure of nation’s wealth
US Department of Commerce gathers information that reveals the financial well-being of US citizens
66% families live in homes they own
80% of adults carry cell-phones in the US and families are giving to children under the age of 10
Human Development Index (HDI) measures life expectancy, education, and gross national product
In 2010, US ranks 4th after Norway, Australia, & New Zealand
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21. Business Growth and Prosperity
Even though America is doing well economic and social problems exist
Job shortages, layoffs, lack of skills causes income to drop
Low income causes it difficult to buy homes, send children to college, save for retirement
Over 14% of American families had income below the poverty level of $22,000 for a family of four
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22. Business Ownership
Entrepreneur – someone who starts, manages, & owns a business
Popularity of small business
Almost anyone who wishes to do so may start a business
Small business describes companies that are operated by one or a few individuals
In the US about half of all employed people work for small businesses
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23. Business Ownership Growth of franchise business
Franchise – a legal agreement in which and individual or small group of investors purchases the rights to sell a company’s product or service under the company’s name and trademark
Franchisor – the parent company of a franchise agreement that provides the product or service
Franchisee – the distributor of a franchised product or service
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24. Business Ownership Growth of franchise business
In a franchise agreement, the franchisee pays an initial fee—often $100,000 or more—to the franchisor & a percentage –usually 3 to 8 % of sales
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25. Business Ownership Growth of franchise business
In return, the franchisee gets assistance in selecting a location for the store or building, operating procedures & policies, & exclusive rights to sell the franchised product or service
Services are valuable to inexperienced business owners
5-10% of franchised business fail, the failure rate is far lower than the failure rate of nonfranchised new businesses
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26. Business Ownership Risks of ownership
Success depends on managerial effectiveness
Risk is the possibility of failure
The Service Core of Retired Executives (SCORE) reports up to 70% of new firms with employees survive at least two years, & half survive for five years
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27. Business Ownership Obligations of ownership
Responsible to the entire community
Economic and social responsibility
Customers, employees, investors, competitors and the public
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