Business Foundations A Changing World.pdf

Chapter 1: The Dynamics of Business and Economics SUMMARY LEARNING OBJECTIVES KEY TERMS AND DEFINITIONS CONTENT OUTLINE BOXED TEXT DISCUSSION QUESTIONS WITH SUGGESTED ANSWERS Enter the World of Business: Inside the Zoom Boom Responding to Business Challenges: Taylor Swift Fights Scalpers Business Disruption: Competition Is Brewing in Kombucha Market Technology and the Economy: Up in the Air: Drones and Air Traffic Control So You Want a Job in the Business World END OF CHAPTER TEACHING RESOURCES Check Your Progress Get Involved Build Your Skills: The Forces of Supply and Demand Solve the Dilemma: Mrs. Acres Homemade Pies Build Your Business Plan: The Dynamics of Business and Economics See for Yourself Case: Tesla: More Than a Car Company Team Exercise CONNECT ACTIVITIES GrubHub Excels Amidst the Changing Business Environment Uber and Its Effect on the Sharing Economy iSeeIt! Video Case: Supply and Demand BONUS TEACHING RESOURCES Term Paper or Project Topic Guest Speaker Suggestions Teaching Suggestions Hi rt/ Fe rr ell : B u s i n e s s F o n d a t i o n s 1 3 e 01-3 SUMMARY We begin our study of business in this chapter by examining the fundamentals of business and economics. First, we introduce the nature of business, including its goals, activities, and participants. Next, we describe the basics of economics and apply them to the U.S. economy. Finally, we establish a framework for studying business in this text. LEARNING OBJECTIVES LO 1-1 Define basic concepts such as business, product, profit, and economics. LO 1-2 Identify the main participants and activities of business. LO 1-3 Explain why studying business is important. LO 1-4 Compare the four types of economic systems. LO 1-5 Describe the role of supply, demand, and competition in a free enterprise system. LO 1-6 Specify why and how the health of the economy is measured. LO 1-7 Outline the evolution of the American economy. LO 1-8 Explain the role of the entrepreneur in the economy. LO 1-9 Evaluate a small business owner’s situation and propose a course of action. Hi rt/ Fe rr ell : B u s i n e s s F o n d a t i o n s 1 3 e 01-4 KEY TERMS AND DEFINITIONS big data Large volumes of structured and unstructured data that are transmitted at very fast speeds. blockchain A decentralized record-keeping technology that stores linked. budget deficit The condition in which a nation spends more than it takes in from taxes. business Individuals or organizations who try to earn a profit by providing products that satisfy people’s needs. capitalism (free enterprise) An economic system in which individuals own and operate the majority of businesses that provide goods and services. communism First described by Karl Marx as a society in which the people, without regard to class, own all the nation’s resources. competition The rivalry among businesses for consumers’ dollars. demand The number of goods and services that consumers are willing to buy at different prices at a specific time. depression A condition of the economy in which unemployment is very high, consumer spending is low, and business output is sharply reduced. drones unmanned aerial devices, can be programed with AI to perform human tasks such as delivering products or collecting environmental data and imagery. economic contraction A slowdown of the economy characterized by a decline in spending and during which businesses cut back on production and lay off workers. economic expansion The situation that occurs when an economy is growing and people are spending more money; their purchases stimulate the production of goods and services, which in turn stimulates employment. economic system A description of how a particular society distributes its resources to produce goods and services. economics The study of how resources are distributed for the production of goods and services within a social system. Hi rt/ Fe rr ell : B u s i n e s s F o n d a t i o n s 1 3 e 01-5 entrepreneur An individual who risks their wealth, time, and effort to develop for profit an innovative product or way of doing something. equilibrium price The price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time. financial resources (capital) The funds used to acquire the natural and human resources needed to provide products; also called capital. free market system Pure capitalism, in which all economic decisions are made without government intervention. gross domestic product (GDP) The sum of all goods and services produced in a country during a year. human resources (labor) The physical and mental abilities that people use to produce goods and services; also called labor. inflation A condition characterized by a continuing rise in prices. mixed economies Economies made up of elements from more than one economic system. monopolistic competition The market structure that exists when there are fewer businesses than in a pure competition environment and the differences among the goods they sell are small. monopoly The market structure that exists when there is only one business providing a product in a given market. natural resources Land, forests, minerals, water, and other things that are not made by people. nonprofit organizations Organizations that may provide goods or services but do not have the fundamental purpose of earning profits. oligopoly The market structure that exists when there are very few businesses selling a product. open economy An economy in which economic activities occur between the country and the international community. product A good or service with tangible and intangible characteristics that provide satisfaction and benefits. Hi rt/ Fe rr ell : B u s i n e s s F o n d a t i o n s 1 3 e 01-6 profit The difference between what it costs to make and sell a product and what a customer pays for it. pure competition The market structure that exists when there are many small businesses selling one standardized product. recession A decline in production, employment, and income. socialism An economic system in which the government owns and operates basic industries, but individuals own most businesses. stakeholders Groups that have a stake in the success and outcomes of a business. standard of living Refers to the level of wealth and material comfort that people have available to them. supply The number of products—goods and services—that businesses are willing to sell at different prices at a specific time. technology includes the methods and processes creating applications to solve problems, perform tasks, and make decisions. unemployment The condition in which a percentage of the population wants to work but is unable to find jobs. Hi rt/ Fe rr ell : B u s i n e s s F o n d a t i o n s 1 3 e 01-7 CONTENT OUTLINE The following section provides the flow of information using the LEARNING OBJECTIVES as a guide, KEY TERMS learners will need to take away from the course, and a notation of when to use POWERPOINT SLIDES with LECTURE NOTES to drive home teaching points. There is also a reminder on when CONNECT activities can be used. This feature was created to facilitate in-class or online discussions more effectively. LO 1-1 Define basic concepts such as business, product, profit, and economics.  Introduction  The Nature of Business o The Goal of Business Key Terms:  Business  Product  Profit  Nonprofit organizations  Stakeholders PowerPoint Slides: PPT 1.4 Lecture Outline and Notes: I. The Nature of Business A. Business refers to the individuals and organizations seeking a profit by providing products that satisfy people’s needs. B. Products refer to goods or services with tangible and intangible attributes that provide satisfaction and benefits. A product can be a good, service, or idea. 1. Examples of tangible goods include an automobile, smartphone, jeans, and so on. 2. Examples of services include dry cleaning, a checkup with your doctor, a movie, a sports event, and so on. 3. A product can also be an idea. Accountants and attorneys, for example, generate ideas for solving problems. Hi rt/ Fe rr ell : B u s i n e s s F o n d a t i o n s 1 3 e 01-8 PPT 1.5 C. The Goal of Business: to earn a profit, the difference between what it costs to make and sell a product and what a customer pays for it. 1. Businesses have a right to keep their profits as they choose—within legal limits—because profit is the reward they take in providing products. 2. Earning profits contributes to society by providing employment, which in turn provides money that is reinvested in the economy. 3. Nonprofit organizations do not have the fundamental purpose of earning profits, although they may provide goods or services. 4. Both nonprofit organizations and businesses require management skills, marketing expertise, and financial resources; and they must abide by laws and regulations, act in an ethical and socially responsible manner; and adapt to economic, technological, and social changes. 5. Earning a profit requires: a. Management skills to plan, organize, and control the activities of the business and to find and develop employees so that it can make products consumers will buy. b. Marketing expertise to learn what products consumers need and want and to develop, manufacture, price, promote, and distribute those products. c. Financial resources and skills to fund, maintain, and expand its operations. d. The ability to face challenges such as abiding by laws and government regulations. e. Acting in an ethical and socially responsible manner. f. Adapting to economic, technological, political, and social changes. 6. To earn a profit, businesses need to produce quality products, operate efficiently, and be socially responsible and ethical in dealing with stakeholders—groups that have a stake in the success and outcomes of a business. O 1-2 LO 1-3 Identify the main participants and activities of business. o The People and Activities of Business Explain why studying business is important. o Why Study Business? Key Terms: Hi rt/ Fe rr ell : B u s i n e s s F o n d a t i o n s 1 3 e 01-9 PPT 1.6 PPT 1.7 A. The People and Activities of Business 1. The people involved in business activities are the owners, employees, and customers. (Note that owners, employees, and customers are the main stakeholders, whereas the external environment consists of competition, the economy, information technology, legal and political forces, and social responsibility.) a. Owners have to put up the resources to start a business. They can manage the business themselves or have employees as managers. b. Employees are responsible for the work that goes on within the business. c. The major role of a business is to satisfy the customers who buy its goods and services. 2. The activities of businesses include primarily management, marketing, and finance. a. Management is included in the same part of the circle (Figure 1.1) as employees because managers coordinate employees’ actions to achieve the firm’s goals, organize people to work efficiently, and motivate them to achieve business goals. 1) Production and manufacturing is another element of management. Managers plan, organize, staff, and control the tasks required to carry out the work of the company. 2) Management is also concerned with acquiring, developing, and using resources effectively and efficiently in a business. b. Marketing and consumers are in the same segment (Figure 1.1) because the focus of all marketing activities is satisfying consumers. i. Marketing involves all activities designed to provide goods and services that satisfy consumers’ needs and wants, including gathering information and conducting research to determine customer wants; planning and developing products; and determining price, distribution, and promotion. c. Finance: Owners and finance are in the same part of the circle (Figure 1.1) because although management and marketing deal with financial considerations, it is primarily the responsibility of the owners to provide financial resources for the operation of the business. i. Finance refers to all activities concerned with obtaining money and using it effectively.