Better Business, 5th Edition By Michael R. Solomon
Email: Richard@qwconsultancy.com
CHAPTER 1: BUSINESS BASICS CHAPTER OPENER Many students come to an introduction to business class not quite sure about what’s in it for them. However, the course has something for everyone, from those who have been in the business world a while to those without any experience at all. As the book unfolds, students will develop an understanding of the foundations of business and will be able to apply what they already know about business to many parts of the course. This first chapter dives right into the world of business: • explaining the differences between goods and services • differentiating between for-profit businesses and not-for-profit organizations • identifying and describing the factors of production Next, the chapter covers the ways in which competition, the social environment, globalization, and technological growth both challenge and provide opportunities to business owners. Students will then be introduced to different types of businesses in terms of their scope. Finally, the chapter will make the vital connection between their current life skills and the business environment.
DETAILED LECTURE OUTLINE I. The Business Landscape A. Business Defined 1. What exactly is a business? a. Businesses are entities that offer products and services to their customers in order to earn a profit. b. A profit is earned when a company’s revenue (the money it brings in) exceeds its expenses (the money it pays out). c. When expenses exceed revenue, the company posts a loss. 2. What kinds of products do businesses offer? a. Products can be either a good or a service. b. Goods are physical products a business sells. c. A service is an intangible product that is bought or sold. d. Some companies (such as restaurants) offer products that are both goods and services. e. Countries change over time in whether goods or services dominate their economic system. 3. What do businesses do with their profits? a. As profits are generated, a company can reward its employees, increase its productivity, or expand its business.
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b. A successful business benefits both the owner and society because they offer desired goods and services, provide employment, and generate income and spending in the economy. 4. What about not-for-profits? a. Not-for-profit organizations do not pursue profits for its owners, but instead seek to service the community through social, educational, or political means. b. Profits are used to further the organization’s causes by expanding the services they provide. B. The Factors of Production 1. What do businesses use to create the products they sell? a. The factors of production are the resources used to create goods and services. These are as follows: i. Labor refers to any physical or intellectual work (ideas and knowledge) that people contribute to a business’s production. ii. Natural resources are raw materials provided by nature that are used to produce goods and services. iii. Capital, both real and financial: a.) Real capital refers to the physical facilities used to produce goods and services. b.) Financial capital refers to money used to facilitate a business enterprise. iv. Entrepreneurial talent: a.) An entrepreneur assumes the risk of creating, organizing, and operating a business and directs all of a business’s resources. v. Intellectual property consists of privately owned, intangible assets developed as a result of people’s intellect and creativity. a.) Examples include patents, copyrights, and trademarks. vi. Technology refers to goods and services such as computers and software that make businesses more efficient and productive. II. Common Business Challenges and Opportunities A. Competition 1. How does competition influence business? a. Competition arises when two or more businesses vie to attract customers and gain an advantage. b. Competition forces companies to improve their product offerings, lower their prices, promote their brands, and focus on customer satisfaction. i. It weeds out less efficient companies and less desirable products from the marketplace. c. Companies need to deliver customer satisfaction, understand the power of social networking, and empower their employees. i. Social networking sites are websites that make it easier for people to connect with one another online for the purposes of building and supporting social relationships. .
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a.) Companies are increasingly using social networking to connect to their customers, promote their products, offer discounts, and build relationships. ii. It is also essential to empower workers to feel free to deal with customer needs by giving them greater decision-making responsibilities. B. Social Environment 1. How does the social environment affect business? a. A social environment is an interconnected system of demographic factors such as race, ethnicity, gender, age, income distribution, sexual orientation, and other characteristics. b. Three specific issues surrounding the social environment present potential challenges and opportunities for today’s businesses. i. An aging population a.) Baby boomers, the generation born between 1946 and 1964, make up the majority of the aging population in the United States. b.) The aging U.S. population presents opportunities for businesses but it also presents challenges for the U.S. economy. c.) Potential problems include funding entitlement programs such as Social Security and Medicare. d.) Caring for the needs of an older population presents growth opportunities for businesses, especially retirement centers, healthcare, pharmaceutical companies, and the travel industry. ii. Increasing workforce diversity a.) The U.S. Census Bureau reports that the minority population in the United States is about 35 percent, making 1 in 3 residents a minority. b.) Companies must develop diversity initiatives such as nondiscrimination policies, a minority network, or diversity education to manage, retain, and promote a diverse workforce. c.) The term minority applies to more than just people of different ethnicities. i.) Minority groups might represent gender, culture, religion, sexual orientation, or disability and all groups must be treated fairly. iii. The green movement a.) Anxieties about global warming and climate change have motivated businesses to become involved in a green economy— one that factors ecological concerns into business decisions. i.) The demand for more green products presents new opportunities for entrepreneurs to meet those needs. ii.) “Green-collar” jobs can revitalize large swaths of the U.S. manufacturing economy. C. Globalization 1. How has globalization affected business?
a. Multinational enterprises—companies that have operations in more than one country—are among the leaders of a movement called globalization. b. Globalization is a movement toward a more interconnected and interdependent world economy. i. Economies around the world are merging as technology, goods and services, labor, and capital move back and forth more easily across international borders. ii. A growing number of companies are offshoring—relocating their production facilities overseas or subcontracting components to foreign companies to achieve lower manufacturing costs. iii. Globalization presents both benefits and risks to the U.S. economy. a.) Lowered production costs allow firms to lower the cost of products for consumers, yet people remain concerned about workers in the United States who lose their jobs to workers overseas. iv. Globalization poses other risks for U.S. companies, including: a.) Increased competition from international companies b.) Fluctuations in the value of the U.S. dollar c.) Security and patent protection concerns d.) Unstable political climates in foreign countries D. Technological Changes 1. Why does the pace of technological change present challenges to businesses today? a. Companies must stay on the cutting edge of technology to remain competitive, and that is an expensive and time-consuming operation. b. Advancements in technology are completely changing the foundation and focus of how many businesses are run. 2. What benefits does technology provide to business? a. Technology, when used and implemented effectively, can help streamline businesses and cut costs. b. Companies can also use new technology systems to increase productivity. c. Technology makes it possible for employees to telecommute, or work from home or another location away from the office. 3. What role does the Internet play in technological growth? a. E-commerce i. E-commerce consists of three different kinds of business trade: business-to-consumer (B2C), business-to-business (B2B), and consumer-to-consumer (C2C). a.) B2C interactions take place between a business and a consumer. b.) B2B interactions involve the sale of goods and services from one business to another. c.) C2C transactions have become possible through consumer-driven storefronts where individuals offer goods directly for sale to customers. ii. E-commerce has been growing rapidly since the new millennium, and e-commerce will continue to be a driving force in the economy. b. Online security .