Chapter 1 Business in a Global Environment What is Business Business profit seeking activities and enterprises that provide goods and services necessary to an economic system Profits rewards for businesspeople who take risks involved to offer goods and services to customers Not for Profit Organizations Not for profit organizations businesslike establishments that have primary objectives other than returning profit to owners Private sector not for profits include museums libraries charitable religious orgs Public sector not for profits include gov t agencies political parties unions Factors of Production Factors of production 4 basic inputs of effective operation natural resources capital human resources entrepreneurship Natural resources production inputs that are useful in their natural states land building sites forests minerals Capital includes technology tools information facilities o Technology results in new products improves products helps a company operate more smoothly Human resources anyone who works o Companies rely on employees for ideas innovation physical effort Entrepreneurship willingness to take risks to create operate a business o An entrepreneur is someone who sees a profitable opportunity and then devises a plan to seek profits The Private Enterprise System Private enterprise system economic system that rewards firms for their ability to identify serve the needs demands of customers AKA capitalism Competition battle among business for consumer acceptance Competitive differentiation unique combination of organizational abilities products Basic Rights in the Private Enterprise System PES Right to private property right to own use buy sell leave property land buildings machinery equipment intangible property PES guarantees the right to all profits after taxes Freedom of choice means that a PES relies on the potential for citizens to choose their own employment purchases investments PES provides fair competition by allowing the public to set rules for competitive activity The Entrepreneurship Alternative Individuals who recognize marketplace opportunities are free to use their capital time talents to pursue those opportunities for profit Entrepreneurship creates jobs sells products and provides benefits of innovation Entrepreneurs often find new ways to use natural resources technology other factors of production Six Eras in the History of Business 1 The Colonial Period 2 The Industrial Revolution Pre 1776 economic focus of colonies centered in rural areas crops influenced every aspect of economy Colonists depended on England for manufactured items and investments for infant industries Industrial revolution began in England 1750 Business operations began to depend on mass production Mid 1800s railroad systems provided fast economical transportation gold rush Specialization of labor limiting each worker to a few specific tasks improved production efficiency In the US agriculture became mechanized factories sprang up in cities 3 The Age of Industrial Entrepreneurs 4 The Production Era Entrepreneurship soared in the early 1900 s Whitney McCormick Vanderbilt Morgan Carnegie 1920 s work became centralized as huge factories dominated US business assembly lines Owners turned responsibilities over to managers trained in operating established companies marketing was an afterthought little attention given to consumers 5 The Marketing Era Great Depression businesses began to pay more attention to markets for their goods services sales advertising became important Post WWII competition heated up as consumers began buying again Consumer Orientation business began to think of marketing as more than just selling developed process of determining what consumers wanted and designed products for those needs Branding process of creating an identity in consumer s minds became an important marketing tool Brand name term sign symbol that identifies products of one firm differentiates them from competitors offerings 6 The Relationship Era transaction management business promote products so that enough customers will buy them to cover costs earn acceptable profits Firms seek ways to actively nurture customer loyalty by managing interactions with customer Loyalty helps reduce advertising costs new customers tend to come from referrals Managing Relationships through Technology Businesses focus on relationship management collection of activities that build and maintain beneficial ties with customers gathering info on customer needs to get as close to the customer as possible Many activities are based on technology business application of knowledge based on scientific discoveries inventions innovations Strategic Alliances Partnerships Partnership affiliation of companies that help each other achieve goals Online businesses may team up with traditional retailers that contribute expertise on buying distribution Strategic alliance partnership formed to create a competitive advantage for businesses involved Today s Business Workforce Changes in the Workforce Aging of the Population Shrinking Labor Pool By 2030 72M workers will be 65 and retire bringing experience with them diversity of age makes it difficult for managers to accommodate different styles changing expectations technological expertise Technology brought a higher demand of workers with more advanced skills than there are available Increasingly Diverse Workforce Minorities now represent over 1 3 of workforce mangers have to learn to work with diversity Diversity blending of individuals of different genders ethnicities cultures religions ages abilities Outsourcing and the Changing Nature of Work Outsourcing using outside vendors to produce goods services that were previously handled in country allows firm to reduce costs concentrate on what it does best gain access to expertise it doesn t have Offshoring relocation of business processes to lower cost locations overseas Nearshoring outsourcing production services to locations near a firm s home base Flexibility and Mobility Innovation through Collaboration Many new workers are looking for part time work to develop new skills not to advance up the ladder Technology makes productive networking possible by allowing people to work where they choose Businesses using teamwork hope to build a creative environment where all members contribute knowledge skills to solve problems Employees are no longer likely to remain at a single company throughout their careers The 21st Century Manager
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