The Changing Face of Business

Chapter 1

Businesses solve our transportation problems by marketing cars, tires, gasoline, and airline tickets

Bring food to our tables by growing, harvesting, processing, packaging, and shipping everything from spring water to cake mix and frozen shrimp.

Restaurants buy, prepare, and serve food, and some even deliver.

Construction companies build our schools, homes, and hospitals, while real estate firms bring property buyers and sellers together.

What Businesses Do?

Clothing manufacturers design, create, import, and deliver our jeans, sports shoes, work uniforms, and party wear.

Entertainment for our leisure hours comes from hundreds of firms that create, produce, and distribute films, television shows, videogames, books, and music CDs and downloads.

What Businesses Do?

All business firms must know what their customers want in order to be successful.

Businesses lead in advancing technology and other changes. They have the resources, the know-how, and the financial incentive to bring about real innovations, such as iPhone and iPad, new cancer treatments, etc.

What Businesses Do?

Business consists of all profit-seeking activities and enterprises that provide goods and services necessary to an economic system. Businesses produce goods or services to meet consumer needs and wants. Some businesses produce tangible goods (automobiles, meat products, digital music players), while others provide services (air transportation, insurance, hair styling, theme parks, concerts) Profits represent rewards for business people who take the risk involved to offer goods and services to customers.

What is Business?

Not-for-profit organizations are business-like establishments that have primary objectives other than profits.

Although they place public service above profit making, they still need money to achieve their goals

Not-For-Profit Organizations

Factors of Production

An economic system requires certain inputs for successful operation. Economists use the term factors of production

Natural Resources

Capital

Human Resources

Entrepreneurship

Factors of Production

Natural Resources include all production inputs that are useful in their natural states, including agricultural land, building sites, forests, and mineral deposits.

Natural resources are the basic inputs required in any economic system.

Factors of Production

Capital, includes technology, tools, information, and physical facilities.

Technology is a broad term that refers to such machinery and equipment as computers and software, telecommunications, and inventions designed to improve production.

Information, frequently improved by technological innovations, is another critical factor because both managers and operating employees require accurate, timely information for effective performance of their assigned tasks.

Factors of Production

Human resources represent another critical input in every economic system.

This category encompasses both the physical labor and the intellectual inputs contributed by workers.

Effective, well-trained human resources provide a significant competitive edge because competitors cannot easily match another company’s talented, motivated employees in the way they can buy the same computer system or purchase the same grade of natural resources.

Factors of Production

Entrepreneurship is the willingness to take risks to create and operate a business.

An entrepreneur is someone who sees a potentially profitable opportunity and then devises a plan to achieve success in the marketplace and earn those profits.

Factors of Production

Type of the payment received by the firms and individuals who supply them

All businesses operate within a larger economic system (private enterprise system) that determines how goods and services produced, distributed, and consumed in a society. An economic system that rewards firms for their ability to identify serve the needs and demands of customers. Minimizes government interference in economic activity.

The Private Enterprise System

Private enterprise system = Capitalism Adam Smith is the father of capitalism. He believed that an economy is best regulated by the “invisible hand” of competition.

Competition is the battle among businesses for consumer acceptance. Competition enables consumers to receive best possible products and prices.

The Private Enterprise System

To compete successfully, each firm must find a basis for competitive differentiation, the unique combination of organizational abilities, products, and approaches that sets a company apart from competitors in minds of customers. Google for example continues to challenge Microsoft’s dominance in the market for business word-processing and

spreadsheet software.

The Private Enterprise System

Basic Rights in a Private Enterprise System

Basic Rights in a Private Enterprise System

•The right to private property is the most basic freedom under the private enterprise system. Every participant has the right to own, use, buy, sell, and bequeath (or donate) most forms of property, including land, buildings, machinery, equipment, patents on inventions, individual possessions, and intangible properties. •The private enterprise system also guarantees business owners the right to all profits—after taxes—they earn through their activities. Although a business is not assured of earning a profit, its owner is legally and ethically entitled to any income it generates in excess of costs.

Basic Rights in a Private Enterprise System

•Freedom of choice means that a private enterprise system relies on the potential for citizens to choose their own employment, purchases, and investments. They can change jobs, negotiate wages, join labor unions, and choose among many different brands of goods and services. •The private enterprise system also permits fair competition by allowing the public to set rules for competitive activity. For this reason, the U.S. government has passed laws to prohibit “cutthroat” competition—excessively aggressive competitive practices designed to eliminate competition.

An Entrepreneur:

Is a risk-taker

Takes financial, personal,

social, and career risks

Sees a potentially profitable

opportunity

Devises a plan to achieve

success in the marketplace

and earn those profits

Fuels most economies

throughout the world.

Provides innovation

Entrepreneurship

Entrepreneurial thinking is important within large firms.

Six Eras in the History of U.S. Business

Relationship era

businesses are taking a different, longer-term approach to their interactions with customers.

relationship era is an age of connections—between businesses and customers, employers and employees, technology and manufacturing, and even separate companies.

The world economy is increasingly interconnected

As you begin your own career, you will soon see how important relationships are, including your online presence. (See Business Etiquette)

Managing Relationships through Connections

Relationship Management

activities to build and maintain mutually beneficial ties with customers and other parties.

involves gathering knowledge of customer needs and preferences and applying that understanding to get as close to the customer as possible.

Relationship management depends on technology.

In managing relationships with customers, technology most often takes the form of communication, via the Internet and cell phone.

Managing Relationships through Connections

Going Green

Another way of building relationships is to incorporate issues that your customers care about into your business.

The need to develop environmentally friendly products and processes is becoming a major new force in business today. Companies in every industry are researching ways to save energy,

cut emissions and pollution, reduce waste, and, not incidentally, save money and increase profits as well.

The Green Advantage

The Green Advantage

A partnership is an affiliation of two or

more companies that help each other

achieve common goals.

A strategic alliance is a partnership

formed to create a competitive advantage

for both parties.

Strategic Alliances and Partnerships

Dedicated workers who can foster strong

ties with customers

Capable of high-quality production

Able to compete in global markets

Technically savvy

Today’s Business Workforce

By 2030, the number of U.S. workers 65 or older will reach 72 million.

Technology has intensified the hiring challenge by requiring workers to have ever more advanced skills.

Changes in the Workforce: Aging Population

Economists predict the U.S. labor pool could soon fall short by as many as 10 million people.

Diversity, blending individuals of different genders, ethnic backgrounds, cultures, religions, ages, and physical and mental abilities, can enhance a firm’s chances of success.

Some of the firms that made the top ten in a recent list of “Top 50 Companies for Diversity” were also leaders and innovators in their industries, including Johnson & Johnson, AT&T, the accounting firm Ernst & Young, Marriott International, and The Coca-Cola Company and IBM.

Changes in the Workforce: Shrinking Labor Pool/Diversity

The two fastest-growing ethnic populations in the United States are Hispanics and people of Asian origin.

Employee teams with individuals of different genders, ethnic backgrounds, cultures, religions, ages, and physical and mental abilities are more effective.

Changes in the Workforce: Shrinking Labor Pool/Diversity

Outsourcing is using outside vendors to produce goods or fulfill services and functions that were previously handled in-house or in-country.

Offshoring is the relocation of business processes to lower-cost locations overseas.

Production China

Services India

Changes in the Workforce: Outsourcing

Younger workers are looking to something other than work-comes-first

Telecommuting

Part-time and temporary workers are growing

Collaboration is replacing working alone

Value risk-taking and innovation

Changes in the Workforce: Flexibility& Innovation through Collaboration

Critical-thinking

Creativity

Vision

Ability to lead change

The 21st-Century Manager

Critical thinking is the ability to analyze and assess information to pinpoint problems or opportunities.

Creativity is the capacity to develop novel solutions to perceived organizational problems.

Businesspeople need vision, the ability to perceive marketplace needs and what an organization must do to satisfy them.

Critical Thinking, Creativity, Vision

Guide employees and organizations through changes

Managers must be comfortable with tough decisions.

Factors that require organizational change can come from external and internal sources.

Ability to Lead Change

Solid profits

Stable growth

Safe and challenging work environment

High-quality goods and services

Business ethics and social responsibility

What Makes a Company Admired?