1 Business in a Changing World Chapter The Dynamics of Business and Economics McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc All rights 1-3 Crocs focuses on core competencies Market opportunities, timing, and circumstances 1-4 The Nature of Business What is a business? Individuals or organizations trying to earn a profit by providing products that satisfy people's needs 1-5 The Nature of Business What is a product? A good or service with tangible and intangible characteristics that provide satisfaction and benefits 1-6 Products Tangible Goods & Services Tangible Goods Services Automobile Computer Loaf of bread Television Dry cleaning Photo processing Checkup at doctor’s Movie star performance 1-7 The Primary Goal of Business Earn a Profit The difference between what it costs to make and sell a product and what a customer pays for it 1-8 The Primary Goal of Business PROFIT -The reward for the risks that businesses take in providing products 1-9 Non-Profit Organizations Not all organizations are businesses Nonprofit organizations provide goods and services but not have the fundamental purpose of earning profits 1-10 Economic Systems Communism A society in which the people without regard to class, own all the nation’s resources •China •North Korea •Cuba 1-27 Economic Systems Socialism System in which the government owns and operates basic industries but individuals own most businesses •Sweden •India •Israel 1-28 Economic Systems Capitalism Free Enterprise – individuals own and operate majority of businesses providing goods and services •United States •Japan •Australia •Canada 1-29 Economic Systems Pure Capitalism Modified Capitalism Free Market All economic decisions made without government intervention (pure capitalism) Government intervenes and regulates business to some extent (modified capitalism) 1-30 Economic Systems Mixed Economies No country practices pure capitalism or pure socialism/communism Economic systems contain various elements of government intervention 1-31 Supply & Demand Distribution of resources and products 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 1-32 Forces of Supply & Demand Price at which number of products supplied equal amount of products consumers are willing to buy at a specific time = equilibrium price 1-33 Nature of 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 1-34 Economic Cycles and Productivity Expansion and Contraction Economic Expansion – economy is growing and consumers are spending money Economic Contraction – spending declines, layoffs, economy slows down 1-35 Economic Cycles •Inflation– condition characterized by continuing rise in prices •Recession– decline in production, employment, and income •Unemployment– % population wants to work but unable to find jobs •Depression– unemployment very high; consumer spending low; business output sharply reduced 1-36 Overall Unemployment Rate U.S Civilian Labor Force 1920 - 2007 1-37 Measuring the Economy •Gross Domestic Product (GDP) 1-38 Evaluating Our Nation’s Economy 1-39 Entrepreneurship Risk, innovation, creativity, reward Bill Gates Michael Dell Frederick Smith Ben & Jerry’s Sam Walton 1-40 Ethics & Social Responsibility Business reputation depends on profit AND ethical conduct and responsibility Enron MCI WorldCom Emission Standards Global Warming Going “Green” 1-41 ... •Individual businesses •Local and regional economic impact •Global economic impact 1-20 Why Study Business Business impact •Purchase raw materials •Hire employees •Attract capital •Create products... •Motivating employees toward business goals 1-15 The People & Activities of Business Management – Production and Manufacturing •Plan activities •Organize staff •Control tasks 1-16 The People & Activities... Organizations Not all organizations are businesses Nonprofit organizations provide goods and services but not have the fundamental purpose of earning profits 1-10 Maintaining Profitability Management skills