part 1 Ferrell Hirt Ferrell BUSINESS A CHANGING
part 1 Ferrell Hirt Ferrell BUSINESS A CHANGING WORLD EIGHTH EDITION FHF Mc. Graw-Hill/Irwin Copyright © 2011 by The Mc. Graw-Hill Companies, Inc. All rights reserved.
The Nature of Business What is a business? Individuals or organizations trying to earn a profit by providing products that satisfy people's needs. FHF 1 -3
The Nature of Business What is a product? A good or service with tangible and intangible characteristics that provide satisfaction and benefits. FHF 1 -4
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. FHF 1 -5
Profit Is: [ The difference between what it costs to make and sell a product and what a customer pays for it ] FHF 1 -6
Non-Profit Organizations Not all organizations are for-profit businesses Nonprofit organizations v Provide goods and services but v Do not have the fundamental purpose of earning profits FHF 1 -7
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 ] FHF 1 -8
The People and Activities of Business FHF 1 -9
The Activities of Business Management – Focus on employees v Motivating employees toward business goals v Coordinating employee’s actions v Organizing people for efficiency FHF 1 -10
Management: Production and Manufacturing Another element of management ü Plan activities ü Organize staff ü Control tasks of the organization FHF 1 -11
Marketing Focus on satisfying customers o o o Determine what products customers want Plan and develop products Determine: § § Distribution Place Promotion Price FHF 1 -12
Finance is the primary responsibility of owners § Obtaining money § Using money effectively § Accountants, stockbrokers, bankers FHF 1 -13
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) FHF 1 -16
Economic Systems How a society distributes its resources to produce goods and services § v Central issue of economics How to fulfill an unlimited demand for goods and services with a limited supply of resources FHF 1 -17
Communism A society in which the people, without regard to class, own all the nation’s resources. v China v North Korea v Cuba FHF 1 -18
Socialism System in which the government owns and operates basic industries but individuals own most businesses. v Sweden v Israel v India FHF 1 -19
Capitalism Free Enterprise Ø Individuals own and operate majority of businesses providing goods and services Australia Japan United States FHF 1 -20
Pure Capitalism vs Modified Capitalism Pure Capitalism v Free Market v All economic decisions made without government intervention Modified Capitalism v Government intervenes and regulates business to some extent FHF 1 -21
Mixed Economies [ No country practices pure capitalism, socialism, or communism. Economic systems can be mixtures and often contain various elements of government intervention ] FHF 1 -22
The Free-Enterprise System 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. ) FHF 1 -23
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 FHF 1 -24
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 FHF 1 -29
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 FHF 1 -25
Economic Cycles & Productivity Economic Expansion Economy is growing and consumers are spending money Economic Contraction Spending declines, layoffs, economy slows down FHF 1 -26
Economic Cycles Inflation v Condition characterized by continuing rise in prices Recession v Decline in production, employment, and income Depression v Unemployment very high; consumer spending low; business output sharply reduced Unemployment v % of population that wants to work but unable to find jobs FHF 1 -27
The 2008 -2010 Recession The worst recession since the Great Depression § Collapse of many financial institutions ü ü § § § AIG Bear Stearns Washington Mutual Merrill Lynch Stock market dropped 50% Highest mortgage default rate in history Unemployment exceeded 10% Personal savings rates increased Government spent $750 billion on financial institutions, and $789 billion on an economic stimulus package FHF 1 -34
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