Chapter 1 Taking Risks and Making Profits Within the Dynamic Business Environment 1 Entrepreneurship and Wealth Building a Success in business is based off of finding a need and filling it finding a market who needs this need as well profit services work i Goods Tangible products such as computers food clothing cars and appliances ii Services Intangible products i e products that cannot be held in your hand such as education health care insurance recreation travel tourism b Result of filling is a market is that you can make money for yourself i Business Any activity that seeks to provide goods and services to others while operating at a ii Entrepreneur A person who risks time and money to start and manage a business c Revenue The total amount of money a business takes in during a given period by selling goods and d Profit The amount of money a business earns above and beyond what it spends for salaries and other expenses needed to run the operation e Loss Occurs when a business s expenses are more than its revenues i If a business loses money over time it will likely have to close putting its employees out of 1 About 80 000 businesses in the U S close each year f Risk The chance an entrepreneur takes of losing time and money on a business that may not prove profitable i More risk more profit g Standard of Living The amount of goods and services people can buy with the money they have i The U S has one of the highest standards of living 1 Because the value of a dollar in U S is lower people can purchase more with the money they have b c of wealth created by businesses 2 Goods cost more in some countries than others because of higher taxes and stricter government regulations h Quality of Life General well being of a society in terms of its political freedom natural environment education health care safety amount of leisure and rewards that add to the satisfaction and joy that other goods and services provide i Maintaining a high quality of life requires the combined efforts of businesses nonprofit organizations and government agencies 1 More More available to improve quality of life 2 Higher standards of living can lower the quality of life i Stakeholders People who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address community etc i Customers employees stockholders suppliers dealers bankers people in the surrounding j Outsourcing Contracting with other companies often in other countries to do some of the functions of a firm like its production or accounting tasks k Insourcing Foreign companies are setting up design and production facilities in the U S i Example Honda and Toyota producing cars in the U S l Nonprofit Organization An organization whose goals do not include making a personal profit for its owners or organizers i Financial gain is used to meet social or educational goals rather than for personal profit ii Social Entrepreneurs People who use business principles to start and manage non profits and help address social issues 2 Entrepreneurship Versus Working for Others a Two ways to succeed in business i Rise through the ranks of large companies become an employee of a large corporation and 1 Someone else assumes entrepreneurial risk and provides you with benefits work your way up ii Become an entrepreneur b 5 Factors of Production i Land Natural Resources Labor Workers Capital Machines tools buildings or whatever else is used in the production of goods does not have to include money Entrepreneurship Knowledge 1 Rich countries become rich from the combination of entrepreneurship knowledge a Use knowledge to grow businesses create wealth c Business Environment Consists of the surrounding factors that either help or hinder the development of businesses i Elements The economic legal environment the technological environment the competitive environment the social environment and the global business environment 1 Creating the right business environment is the foundation for social benefits of all kinds d Policies That Favor Business i Gov t minimizes spending keeps taxes and regulations to a minimum ii Establish a currency that s tradable in world markets iii Allow private ownership of businesses iv Pass laws that enable businesspeople to write enforceable contracts v Minimize corruption harder to build w o permits e Technology Everything from phones and copiers to computers medical imaging devices personal digital assistants and the various software programs that make business processes more effective efficient and productive i Effectiveness Produces the desired result ii Efficiency Producing goods services while using the least amount of resources f Productivity The amount of output you generate given the amount of input such as the number of hours you work i The more you can produce in a given time period the more money you are worth to companies g E commerce The buying and selling of goods over the internet i B2C Business to Consumer 1 Businesses most responsive to consumer wants needs will SUCCEED ii B2B Business to Business businesses sell goods and services to one another h Database An electronic storage file for information i Retailers can use databases to store all items you purchased to then see which items you might ii Companies trade database information which is why other companies send you promotions like in the future cards magazines etc numbers for illegal purposes i Identity Theft Obtaining of individuals personal information such as Social Security and credit card j Empowerment Giving frontline workers the responsibility authority freedom training and equipment they need to respond quickly to customer requests k Demography Statistical study of the human population with regard to its size density and other characteristics such as age race gender and income l Climate Change The movement of the temperature of the planet up or down over time i This is costly to businesses they need to be more green 1 Greening The trend toward saving energy producing products that cause less harm to the environment 3 The Evolution of Business a Progress in Agricultural Manufacturing Industries i Millions of small farms that existed previously have been replaced by huge farms some merely large farms and some small but specialized ones b Progress in Service Industries i Fastest growing firms now are those that provide services such as law health entertainment ii Services make up about 70 of the economy finance etc
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