part

Ferrell Hirt Ferrell

A CHANGING WORLD
EIGHTH EDITION
1
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Copyright 2011 byTheMcGraw-Hill Companies, I nc. All rights reserved. McGraw-Hill/I rwin
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CHAPTER 3 Business in a Borderless World
CHAPTER 2 Business Ethics and Social Responsibility
1
CHAPTER 1 The Dynamics of Business and Economics
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Business in a
Changing World
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What is a business?
Individuals or organizations trying to earn a profit by
providing products that satisfy people's needs.

The Nature of Business
1-3
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What is a product?
A good or service with tangible and intangible
characteristics that provide satisfaction and benefits.
The Nature of Business
1-4
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Products: Tangible
Goods & Services

Services
Dry cleaning
Photo processing
Checkup at doctors
Musical concert
Tangible Goods
Loaf of bread
Television
Automobile
Computer

1-5
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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.
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The difference between what it
costs to make and sell a product
and what a customer pays for it
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Non-Profit Organizations
Not all organizations are for-profit businesses
Nonprofit organizations
Provide goods and services but
Do not have the fundamental purpose of earning profits


Founded by Bill Daniels, a pioneer in cable television
Provides grants and scholarships to students, educational
institutions and businesses in the Rockies region
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Stakeholders

Customers, employees, investors, government
regulators, community and society. Those that
have a stake in the success and outcomes of a
business are considered stakeholders
1-9
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The People and Activities
of Business

1-10
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The Activities of Business
Management Focus on employees
Motivating employees toward business goals
Coordinating employees actions
Organizing people for efficiency
1-11
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Management: Production and
Manufacturing
Another element of
management
Plan activities
Organize staff
Control tasks of the
organization

1-12
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Marketing
Focus on satisfying customers
o Determine what products customers want
o Plan and develop products
o Determine:
Distribution
Place
Promotion
Price
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Axe
o Target market is young men looking for a date
o Uses multimedia promotional approach
YouTube
Facebook
Twitter
Viral Marketing
o To promote the fragrance, Axe Music, Unilever staged concerts around the country
featuring major music acts
1-14
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Finance
Finance is the primary responsibility
of owners
Obtaining money
Using money effectively
Accountants, stockbrokers, bankers
1-15
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Why Study Business?
o Develop skills for career success
o Understand business activities
o Learn the importance of profitability
Individual businesses
Local and regional impact
Global economic impact
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Business Impact
Purchase raw materials
Hire employees
Attract capital
Create products
Fuel the global economy
Contribute to society
1-17
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The Economic Foundations
of Business
Economics
Distribution of resources for the production of goods and
services within a social system
Resources (sometimes called factors of production)
Natural resources (land, forests, minerals, water)
Human resources (labor)
Financial resources (capital)
Intangible (good reputation, quality products)

1-18
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Economic Systems
How 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

1-19
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Economic Systems
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?

1-20
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Comparison of
Communism, Socialism, and Capitalism

1-21
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Communism
A society in which the people, without
regard to class, own all the nations
resources.
China
North Korea
Cuba

1-22
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Socialism
System in which the government owns and
operates basic industries but individuals own
most businesses.
Sweden
Israel
India

1-23
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Capitalism
Free Enterprise
Individuals own and operate majority
of businesses providing goods and
services
United States Japan
Australia
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Pure Capitalism vs
Modified Capitalism
Pure Capitalism
Free Market
All economic decisions made without government
intervention
Modified Capitalism
Government intervenes and regulates business to
some extent
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No country practices pure capitalism, socialism,
or communism. Economic systems can be
mixtures and often contain various elements of
government intervention
1-26
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The Free-Enterprise System
Many large economies are free-enterprise
Even China applies free-enterprise principles
o Basic individual and business rights
Right to own property
Right to earn profits and use them as one
wishes (within constraints of law)
Right to make business decisions
Right to choose (careers, what goods/services
to purchase, etc.)

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

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Forces of Supply & Demand

Equilibrium Price =Price at which number of products supplied equal
amount of products consumers are willing to buy at a specific time
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Nature of Competition
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

1-30
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Economic Cycles &
Productivity
Economic Expansion
Economy is growing and consumers are spending money
Economic Contraction
Spending declines, layoffs, economy slows down
1-31
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Overall Unemployment Rate

1-32
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Economic Cycles
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
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The 2008-2010 Recession
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 exceeded10%
Personal savings rates increased
Government spent $750 billion on financial institutions, and $789 billion on an economic
stimulus package

1-34
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Measuring the U.S. Economy:
GDP

1-35
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Evaluating the
U.S. Economy

1-36
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A Brief History of the
U.S. Economy
The early economy
The Industrial Revolution
The manufacturing economy
The marketing economy
The service economy
The new digital economy
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Entrepreneurship
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

1-38
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The Role of Government
in the U.S. Economy
Modified Capitalism
o The government regulates industry to encourage
competition and protect stakeholders like
consumers, employees, or the environment
o Laws force businesses to adhere to government
standards
o Government agencies like the U.S. Federal
Reserve Board or the Department of Commerce
occasionally intervene to regulate the economy
and spur growth
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Ethics & Social Responsibility
in Business
Business ethics refers to standards and
principles used by society to define
appropriate behavior at work
Stakeholders increasingly demand that
businesspeople behave ethically and
socially responsibly
Business reputation depends on profit
and ethical conduct and social
responsibility

1-40
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Ethical Business Certifications

Only natural ingredients
Cradle to Cradle certified
Means products are designed with materials that
can be infinitely reused
Every product is inspected by the Environmental
Protection and Encouragement Agency
Reviews ingredients for safety
Offset CO
2
emissions created from production and
travel
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Can You Learn Business
in a Classroom?
Yes!!!
To be successful in business, you need:
Knowledge
Skills
Experiences and
Good judgment

1-42