The PROFILE at the beginning of this chapter focuses on JENNY MING FROM OLD NAVY, a part of GAP, INC. Ming’s passion for fashion has helped drive record growth at Old Navy

1. WHAT IS A BUSINESS?

Describe how businesses and nonprofit organizations add to a country’s standard of living and quality of life.

1. BASIC CONCEPTS
1. A BUSINESS is any activity that seeks profit by providing goods and services to others.
2. PROFIT is the amount a business earns above and beyond what it spends. CONCEPT CHECK
3. Businesses also provide people with the opportunity to become wealthy.
2. BUSINESSES CAN PROVIDE WEALTH AND A HIGH QUALITY OF LIFE FOR ALMOST EVERYONE.
1. ENTREPRENEURS are people who organize, operate, and assume the risk of starting a business.
2. Businesses are a part of an economic system that helps to create a higher standard of living and quality of life for everyone.
3. The QUALITY OF LIFE of a country refers to the general well-being of a society
3. NONPROFIT ORGANIZATIONS USE BUSINESS PRINCIPLES.
1. Nonprofit organizations such as government agencies, public schools, charities, and social causes help make a country more responsive to all the needs of citizens.
2. A NONPROFIT ORGANIZATION is an organization whose goals don’t include making a profit for its owners.
3. You need the SAME SKILLS to work in nonprofit organizations that you need in business, including information management, leadership, marketing, financial management.
4. Businesses, nonprofit organizations, and volunteer groups often strive to accomplish the same objectives.
2. ENTREPRENEURSHIP VERSUS WORKING FOR OTHERS.

Explain the importance of entrepreneurship to the wealth of an economy and show the relationship of profit to risk assumption

1. There are TWO WAYS TO SUCCEED IN BUSINESS:
1. One way is to rise up through the ranks of a large company.
2. The more risky path is to start your own business.
2. OPPORTUNITIES FOR ENTREPRENEURS.
1. Millions of people have taken the entrepreneurial risk and succeeded.
2. Entrepreneurs have come from all over the world to prosper in America.
1. The number of Hispanic-owned businesses in the United States grew by 76% in the 1990s.
2. Increases have also been made by Asians, Pacific Islanders, American Indians, and Alaskan Natives.
3. The number of women business owners has also dramatically increased.
3. MATCHING RISK WITH PROFIT
1. Not all businesses make a profit; profit is revenue minus expenses.
2. REVENUE is the money a business earns by selling goods and services.
3. A LOSS occurs when a business’s costs and expenses are more than its revenue, the money a business earns by selling its products.
4. RISK is the chance you take of losing time and money on a business that may not prove profitable. CONCEPT CHECK
5. Rewards and risk are related.
1. Those companies that take the most risk may make the most profit.
2. As a potential business owner, you should do research to find the right balance between risk and profit.
4. THE FACTORS THAT ARE NEEDED TO CREATE WEALTH
1. THE FACTORS OF PRODUCTION the resources businesses use to create wealth.
1. LAND (and other natural resources)
2. LABOR (workers)
3. CAPITAL (e.g., money, machines, tools, and buildings)
4. ENTREPRENEURSHIP
5. KNOWLEDGE.
2. Some experts believe that the most important factor of production is KNOWLEDGE.
3. What makes rich countries rich is a combination of entrepreneurship and the effective use of knowledge.
4. Entrepreneurship also helps make some states and cities rich while others remain relatively poor
3. THE BUSINESS ENVIRONMENT
1. The FIVE ENVIRONMENTAL FACTORS that are key to business growth and job creation are:
1. Economic environment, including taxes and regulation.
2. Technological environment.
3. Competitive environment.
4. Social environment.
5. Global business environment.
2. Business prospers in a healthy environment.
4. THE ECONOMIC ENVIRONMENT

5. THE TECHNOLOGICAL ENVIRONMENT. CONCEPT CHECK

Illustrate how the technological environment has affected businesses.

1. The Internet is a major force in business today.
2. HOW THE INTERNET IS CHANGING EVERYTHING.
1. More than just a massive network of computers, the Internet has created a revolution in communication through:
1. A POWERFUL COMMUNICATION MEDIUM.
2. INSTANT ACCESS.
3. BUSINESSES WITHOUT BORDERS.
3. THE E-COMMERCE EXPLOSION.
1. E-COMMERCE is the buying and selling of products and services by businesses and consumers over the Internet. Attractive factors include:
1. Lower transaction costs.
2. Larger purchases per transaction.
3. Integration of business processes.
4. Flexibility.
5. Larger catalogs.
6. Improved customer interactions.
2. BUSINESS-TO-CONSUMER (B2C) E-COMMERCE continues to grow, but profits are problematic.
3. BRICK-AND-MORTAR BUSINESSES (TRADITIONAL STORES) are growing by expanding on to the Internet.
4. B2B (BUSINESS-TO-BUSINESS) E-COMMERCE is five times as big as B2C e-commerce.
4. HOW E-COMMERCE IS CHANGING THE ROLES OF INTERMEDIARIES.
1. INTERMEDIARIES are companies that help move goods and services between producers and consumers.
2. Many companies now selling directly to consumers through the Internet, eliminating many intermediaries.
5. USING TECHNOLOGY TO BE RESPONSIVE TO CUSTOMERS.
1. A DATABASE, an electronic storage file where information is kept, can store vast amounts of information about consumers.
2. Databases let stores carry fewer items and less inventory.
6. Because INFORMATION MANAGEMENT IS SO IMPORTANT, many companies now have a chief information officer (CIO) or chief knowledge officer (CKO.)
6. THE COMPETITIVE ENVIRONMENT.
CONCEPT CHECK

Identify various ways that businesses can meet and beat competition

1. Making quality products is not enough to stay competitive in world markets. Now you have to offer QUALITY PRODUCTS and OUTSTANDING SERVICE at competitive prices.
2. COMPETING BY PLEASING THE CUSTOMER.
1. Business is becoming CUSTOMER-DRIVEN—this means that customers’ wants and needs come first.
2. Successful companies must listen to customers to determine their wants and needs and then adjust their products, policies, and practices to meet these demands.
3. COMPETING WITH SPEED.
1. The companies that provide speedy service are those that are winning.
2. To businesses TIME IS MONEY, and businesses expect fast service.
3. To keep up, business people need continuing education on the latest concepts and tools.
4. COMPETING BY MEETING COMMUNITY NEEDS.
1. STAKEHOLDERS are all the people who are affected by the policies and activities of an organization.
2. Stakeholders include customers, employees, stockholders, suppliers, environmentalists, and elected officials.
3. The challenge for companies in the 21st century will be to ensure that all stakeholders’ needs are considered and satisfied.
5. COMPETING BY RESTRUCTURING AND MEETING THE NEEDS OF EMPLOYEES.
1. To meet the needs of customers, firms must EMPOWER their front-line workers, giving them more freedom to respond quickly to customer requests.
2. In many companies this has meant EMPOWERING employees and using CROSS-FUNCTIONAL, SELF-MANAGED TEAMS. (Discussions of these concepts are woven throughout the entire text.)
3. Empowerment has resulted in the elimination of managers as lower-level workers learn to work in self-managed teams.
4. Empowered employees may demand increased compensation, even partial ownership of the firm.
6. COMPETING BY CONCERN FOR THE NATURAL ENVIRONMENT.
1. Managers must be careful that they cause minimal damage to the natural environment.
2. Environmental issues include the potential benefits and hazards of nuclear power, recycling, management of forests, ethical treatment of animals, and protection of the air we breathe and the water we drink.
3. Environmentalism must be a major focus of everyone, and is becoming increasingly so.
7. THE SOCIAL ENVIRONMENT

Demonstrate how the social environment has changed and what the reaction of the business community has been.

1. DEMOGRAPHY is the statistical study of the human population to learn its size, density, and characteristics.
2. DIVERSITY AND ITS ADVANTAGES FOR BUSINESS CONCEPT CHECK
1. The U.S. of the future will be very different from what it is today.
1. Our population will increase by approximately 50% in the next 50 years.
2. As the population grows, there will be a greater need for goods and services, creating more jobs.
3. The Hispanic and Asian populations will increase.
2. DIVERSITY is the process of optimizing the contributions of people from different cultures.
3. As American workers learn to work with people of all nations, they gain an ADVANTAGE WHEN IT COMES TO NEGOTIATING AND WORKING WITH PEOPLE IN GLOBAL MARKETS.
4. A diverse population is a strong population—there is strength in different views and perspectives.
3. THE INCREASE IN THE NUMBER OF OLDER AMERICANS.
1. By 2030, the 76 million baby boomers will be senior citizens.
2. Think of the career opportunities of providing goods and services for older adults.
3. What opportunities do a wealthy, older market offer retailers, recreation specialist, etc.?
4. TWO-INCOME FAMILIES
1. The high costs of housing have made it difficult for many households to live on just one income.
2. Many companies are implementing programs to assist two-income families.
1. Many employers provide child care benefits of some type, some through cafeteria benefits packages.
2. Other companies provide parental leave, flexible work schedules, and elder care programs.
3. Some companies are increasing the number of part-time workers by allowing workers to stay home and send in their work by telecommunications, a practice known as TELECOMMUTING.
5. SINGLE PARENTS have encouraged businesses to implement family-friendly programs such as FAMILY LEAVE and FLEXTIME.
8. THE GLOBAL ENVIRONMENT

Analyze what businesses must do to meet the global challenge.

1. The global environment of business affects all other environmental influences.
1. The number one global environmental change today is the growth of international competition and the increase in free trade among nations.
2. U.S. manufacturers have implemented the most advanced quality methods, after analyzing the best practices throughout the world.
3. U.S. workers in many industries are more productive than workers in Japan and other countries CONCEPT CHECK
4. PRODUCTIVITY is the total output of goods and services in a given period of time divided by work hours.
5. Businesses have gone beyond simply COMPETING with organizations in other countries to learning to COOPERATE with international firms.
2. HOW GLOBAL CHANGES AFFECT YOU.
1. Many think that the fair trade agreements will lead to many CAREER OPPORTUNITIES for American college graduates.
2. Students must PREPARE themselves to compete in changing global environments.
9. THE EVOLUTION OF BUSINESS

Review how trends from the past are being repeated in the present and what such trends will mean for the service sector.

1. Businesses in the U.S. have become so productive that fewer workers are needed in the industrial sector to produce GOODS, or tangible products.
2. PROGRESS IN THE AGRICULTURAL AND MANUFACTURING INDUSTRIES.
1. The use of TECHNOLOGY allowed the agricultural industry to become so PRODUCTIVE that the number of farmers dropped for about a third of the population to less than 2%.
2. AGRICULTURE is still a major industry in the U.S., but MILLIONS OF SMALL FARMS HAVE BEEN REPLACED BY FEWER AND LARGER FARMS.
3. Many farmers lost their jobs and went to work in factories.
4. TECHNOLOGY made manufacturing more productive and workers lost their jobs.
5. However, the unemployment rate is now at its lowest point in 30 years.
3. PROGRESS IN SERVICE INDUSTRIES
1. Many workers who lost their manufacturing jobs found jobs in service industries.
2. SERVICES are intangible products.
3. Since the mid-1980s, the SERVICE SECTOR HAS GENERATED ALMOST ALL OF OUR ECONOMY’S INCREASES IN EMPLOYMENT.
4. Service-sector growth has slowed, but is still the largest area of growth.
5. The service era is quickly losing out to a new GLOBAL INFORMATION REVOLUTION that is breaking down barriers between nations.
4. YOUR FUTURE IN THE GLOBAL ECONOMY.
1. This information-based global revolution will alter the way business is done in the future.
2. Most of the CONCEPTS AND PRINCIPLES that make business more effective and efficient are also applicable in government agencies and nonprofit organizations.