Download Business Principles & Management

Chapter 1 - Business and Its Environment
Business Management Class- Mr. Sherpinsky
Council Rock School District
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Business
Production
Marketing
Finance
Industrial businesses
Commercial businesses
Service businesses
Industry
The Nature of Business
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An organization that produces or distributes a
good or service for profit is a business.
All businesses engage in 3 Major Activities:
1. Production (Manufacturing)
2. Marketing (Sales)
3. Finance (Money)
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Production: involves a company making a
product or providing a service for the
customer.
What do they provide?
What types of companies?
Goods: Tangible, made and stored
Manufacturing companies
prior to use
Services: Intangible, labor
intensive, can’t be made prior to need
Service companies
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Marketing: deals with
how goods or services
that are exchanged
between producers and
consumers.
 That’s everything from
purchasing the right raw
materials to the actual
shipping to wholesaler or
retailer markets.
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Finance – deals with all money matters
related to running a business. That could
include things like…
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Investments
Purchase of raw materials
Purchase of equipment to produce
Cost analysis and comparisons
What are some other things that
involve money in a business?
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Two Major Kinds of Businesses
 INDUSTRIAL
▪ Industrial firms- produce goods that are used by other
businesses or organizations to make things.
 COMMERCIAL
▪ Commercial firms-firms engaged in marketing,
(wholesalers and retailers), in finance, (banks and
investments companies), and in providing services
(medical offices, fitness centers, and hotels).
Businesses that produce goods.
 (Tangible)
 (Examples): automobile, television m,
clothing and shoes
 Mills
Provide assistance to supply a
need to a customer
 Intangible
 Can NOT be produced prior to need
 (Examples): doctors, lawyers, travel
agents, plumbers, government agencies,
etc…
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Today service firms far exceed
the number of manufacturing
firms.
Can you name some local
manufacturing and service companies?
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Supply and Demand
 Supply-the number of similar
products that will be offered for
sale at a particular time and at a
particular price.
 Demand-refers to the number
of similar products that will be
bought at a given time at a
given price
 How does supply
and demand
effect pricing?
 Why is it so
important to
businesses?
 CHECKPOINT 1.1
 CRITICAL
THINKING 1.1
Service firm-provides intangible
products/ assistance to satisfy
specialized needs through skilled
workers
 Industrial firm- produce goods that
are used by other businesses or
organizations to make things.
 Commercial firm-firms engaged in
marketing, finance, and furnishing
services.
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 Industry-refers to all businesses
within a specific category (auto,
medical, music, publishing,
advertising)
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Industry is the term often used to refer to all
businesses within a category, i.e.,
 music industry (instruments, songs, singers)
 publishing industry (books, magazines, newspapers)
 Government industry (fire, police, state, federal,
etc.)
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Page 6 shows growth in employment in industries/ businesses.
Which has had the most growth?
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Go to the BLS.gov website
Research employment
growth in major industries
 Which service industries are
projected to have the greatest
growth from 2008-2018?
 Name top 4!
1.2
Goals:
1) Describe how innovations affect
businesses
2) Identify the impact global
competition has had on U.S.
businesses
3) Discuss ways in which businesses
can improve their business
practices.
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Innovation
Global competition
Effectiveness
Efficiency
Domestic goods
Foreign goods
Output
Productivity
Downsize
Empowerment
What is Innovation?
Steve Jobs: Innovation
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Innovation is something entirely
new.
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For example:
 Natural fibers like cotton and wool
 Chemical develops led to synthetic fibers like
rayon, nylon, and polyester
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Can also affect business operations
 Computers used in design and manufacturing
 Internet changed relationships, information
▪ Small versus Large has now been equalized
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Using the Internet
 Find an example of eight (8)
products or services that
used innovation to
revolutionize what they
offer…
Be ready to share
with the class!!!
Third World Nation-countries that
have few manufacturing firms and a
population that is generally poor and
uneducated to a large degree.
 Domestic goods-products made by
firms in the United States.
 Foreign goods-products made by
firms in other countries.
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What is meant by Global competition?
What is an example of a company falling
behind?
The United
ability of
States
profit-making
automobileorganizations
manufacturers
to
is an example
Competeof
with
an industry
other businesses
that fell in
behind.
How
other and
countries.
Why?
the driving force behind the major decisions made
by most large companies today. Ability of businesses
from one country to compete with businesses from
another country
•NICs are countries whose economies have not yet
reached first world status but have outpaced their
developing counterparts.
•NICs are nations undergoing rapid economic
growth (usually export-oriented).
•In many NICs, social upheaval can occur as
primarily rural, agricultural populations migrate to
the cities, where the growth of manufacturing
concerns can draw many thousands of laborers.
First World Countries
Second World Countries
Third World Countries
Where Do Your
Customers Come
From?
Web Quest
Research one of the major
retailers you know.
 (Wal-Mart, Target, or Sears)
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Answer these questions:
1. What percentage of goods do they
sell come from outside the United
States?
2. Name 8 countries they buy from?
3. Give examples of what types of
products they buy from each country
Effective
2. Efficient
1.
To Compete and Survive!
What does that mean and
how does it occur?
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Occurs when an organization
makes the right decisions in
deciding 3 things:
1) What products or services to
offer to customers.
2) How to produce the products
3) How to deliver them to the
consumers
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Occurs when an
organization produces
needed goods or services
 Expected Quality AND
 Quickly AND
 At a low cost, without
wasting time or
materials
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Which of the following actions represents
effectiveness and which represents
efficiency?
? Survey people to see what they like in a product
? New equipment was installed to produce more
items in less time
? A new product is produced by a robot based on
customers’ answers to 5 questions
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Which of the following actions represents
effectiveness and which represents efficiency.
 Survey people to see what they like in a product
(Effectiveness)
 New equipment was installed to produce more items in
less time (Efficiency)
 A new product is produced by a robot based on customers’
answers to 5 questions (Efficiency and Effectiveness).
Companies MUST BE efficient
 Extent of efficiency is measured by output or
amount produced within a given time.
 Productivity refers to producing largest
quantity in least amount of time by using
efficient methods an modern equipment.
 Workers are more productive when they are
▪ Well equipped
▪ Well trained
▪ Well managed
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Why is Quality is important to
customers
 Why is Quality important to retailers
 TQM is a commitment to excellence
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 Baldridge National Quality Award
(National honor given annually by
federal agency)
 Japan’s Quality Award Program is the
Deming Award
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Recipient of these prestigious
awards always show increase in
sales.
1.
2.
3.
Specialization
Technology and Innovation
Reorganization
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Employees are training for specific types of jobs
rather than general training
 Example: General mechanic or workers that specialize in
transmission repair, body repair, engine repair, etc.
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Specialization builds experts in their field
 Improves quality and increases amount produced.
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Specialization improves efficiency.
 Effectiveness improved by mass production, assembly line
production, up-to-date equipment…robots
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Effectiveness can be improved though
advanced technology…equipment, process,
& materials.
 United States improves efficiency by encouraging
invention and innovative ideas from their workers.
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Most difficult way to increase
efficiency
Old way to increase efficiency in the US:
 downsize (layoff workers) and
 cut back on goods and service offered.
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Rethink organization
a) Redesign the workflow
b) Recognize employees
c) EMPOWER the entire team showed
improvement in production, quality,
morale, and profits.
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Reorganizing made US competitive in
global market.
 CHECKPOINT 1.2
 CRITICAL
THINKING 1.2
Lisa Gansky - TED January 2011
Consumer Reports magazine rates consumer
products, including cars.
 For many years, the annual car ratings listed foreign
cars as superior to domestic ones.
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BUT DOES QUALITY REALLY MATTER?
Focus attention on
customers’ needs.
 Provide excellent
customer service.
 Offer high-quality
goods and services.
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Growth and Prosperity
The total market value of all goods and services
produced in a country in a year.
Gross Domestic Product
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Gross Domestic
Product (GDP)
Underground economy
Entrepreneur
Franchise
Franchisor
Franchisee
Intrapreneur
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Overall, the United States is a prosperous
nation
Around the world, people admire and envy
this country’s economic strength.
What about worldwide?
P. 15
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Gross Domestic
Product (GDP) –
total market value of all
goods produced and
services provided in a
country in a year.
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Individual wellbeing -2nd measure of
a nation’s wealth.
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Small businesses are part of the
“Entrepreneurship
movement”
 Someone who starts, manages, owns,
and assumes the risk of a business…
 Part-time, full-time, with little or no
money
 Located at home or at a business
location
Is the Majority
of business
in the United
States
Firms with 1 to 4 employees
Firms with 5 to 9 employees
Firms with 10 to 19 employees
Firms with 20 to 99 employees
Firms with 100 to 499 employees
Firms with 500 employees or more
Firms with 500 to 749 employees
Employers of
more than
half of all
workers
Firms with 750 to 999 employees
Firms with 1,000 to 1,499 employees
Firms with 1,500 to 1,999 employees
Firms with 2,000 to 2,499 employees
Firms with 2,500 to 4,999 employees
Firms with 5,000 employees or more
Firms with 5,000 to 9,999 employees
Firms with 10,000 employees or more
3,617,764
1,044,065
633,141
526,307
90,386
18,469
6,060
3,038
3,044
1,533
904
1,934
1,956
975
981
Operated by one or few individuals
 Few produce goods
 Employ fewer than 100 people
 Over 98% of all business
 Over half of US workers are employed
by businesses with fewer than 500
employees.
 Owners usually highly skilled in one or
more areas
 Many earn less than $250,000 a year in
revenue
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What is a franchise?
 Legal agreement in which an individual purchases
the right to sell a company’s product or service
under the company’s name or trademark
 Examples?
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Franchisor: the parent company (provider)
Franchisee: the distributor of product or
services
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Positive
Parent company
provides the product or
service
Provides special training
Greater chance of
survival
Benefit from corporate
name and advertising
Negative
 Start up fee
 Must adhere to their
rules and contract
 Chance of fraud
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Find Ten (10) examples
of franchises in
Newtown PA 18940
Report their HQ
Address
RISK
Greatly depends on
manager effectiveness
 Entrepreneur assumes
the risk of success or
failure
 3 out of 5 fails within 3
years
 Economic & financial
reason for failure
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OBLIGATIONS
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To customers
To workers
To management
To competitors
To investors
To the public
(Touching Lives)
Business Failure Reasons
4%
1%
1%
Economic Causes
Finance Causes
6%
Disaster and Fraud
Neglect Causes
24%
Strategy Causes
64%
Experience Causes
Economic: Industry Weakness, Low Profits, Low Sales
Finance; Heavy expenses, Burdensome debts
Disaster: Hurricanes, floods, theft
Neglect?: conflicts, family problems, and poor work habits
Strategy: Overexpansion, difficulty collecting from customers
Experience: inadequate planning and inexperience
Intrapreneurship versus Entrepreneurship
Company gives employee the freedom and
funds to develop new products, processes, or
services.
What do You Think?
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Employees benefits how?
Employer benefits how?
Consumers benefits how?
Examples where used?
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Companies have begun offering
employees the opportunity to buy into the
company. This is called a
Employee Stock Ownership Plan
_____________________________(ESPO)
 Employees buy shares of stock in the company
which benefits the company $$$ and increased
productivity.
 Employees benefits by becoming more motivated
which increases productivity.
 Work hard and better.
Why do so many people
start businesses, yet so
many of the businesses
ultimately fail?
Businesses are easy to
start but hard to operate
and manage successfully
What is the main difference between an
entrepreneur and an intrapreneur?
 CHECKPOINT 1.3
 CRITICAL
THINKING 1.3
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Underground Economy:
Economic items or dollars not
reported in GDP numbers.
 Illegal Activities
 Counterfeit Products
 Under the table employees
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Estimated at 5% of the GDP number
during a bad economy and as much
as 20% during a boom!
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Go to my faculty Webpage:
Answer the Net BookMark
question on page 20 in textbook:
Complete the Crossword Puzzle
Take the Practice Test
 Print out all three (3)
assignments: Analysis, Puzzle
and Test and turn them in for
credit.