978-0078023163 Chapter 1 Part 1

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

1-1

chapter

Taking Risks and

Making Profits within

the Dynamic Business

Environment

what’s new in this edition 1.3

brief chapter outline and learning objectives 1.5

lecture outline and lecture notes 1. 7

PowerPoint slide notes 1.37

lecture enhancers 1.56

lecture enhancer 1-1: THE WORLD’S RICHEST PEOPLE 1.56

lecture enhancer 1-2: NON-TRADITIONAL STUDENTS BECOME THE NORM 1.57

lecture enhancer 1-3: QUIRKY: MAKING INVENTORS’ DREAMS A REALITY 1.57

lecture enhancer 1-4: SOCIAL ENTREPRENEURSHIP: IMPROVING WORLD HEALTH 1.58

WITHOUT PROFITS

lecture enhancer 1-5: MOBILE ENTREPRENEURS OPERATE ON THE GO 1.58

lecture enhancer 1-6: AMERICA’S LOST DECADE 1.59

lecture enhancer 1-7: CRASH TESTING CARS WITH COMPUTERS 1.60

lecture enhancer 1-8: SNAPCHAT: THE LATEST COMMUNICATION REVOLUTION 1.60

1



Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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lecture enhancer 1-9: PREVENTING IDENTITY THEFT 1.61

lecture enhancer 1-10: THE HIGH DEMAND FOR GREEN DEGREES 1.63

lecture enhancer 1-11: MILESTONES IN BUSINESS 1.64

critical thinking exercises 1.65

critical thinking exercise 1-1: HOW MUCH PROFIT? 1.65

critical thinking exercise 1-2: JOB AND CAREER VERSUS OWNING A 1.67

BUSINESS

critical thinking exercise 1-3: MAKING ETHICAL DECISIONS 1.68

bonus case 1.70

bonus case 1-1: NETWORKING OUTSIDE THE NET 1.70

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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what’s new in

this edition

additions to the 11th edition:

• Getting to Know Sammy Hagar

• Name That Company: Target

• Spotlight on Small Business: How a Food Truck Helped Rebuild a Storm-Struck Community

• Reaching Beyond Our Borders: Connecting Companies with Global Freelancers

• Adapting to Change: Gourmet Airport Eateries Take Flight

• Video Case: Thomas Lennon

revisions to the 11th edition:

• Statistical data and examples throughout the chapter were updated to reflect current information.

deletions from the 10th edition:

• Getting to Know Monif Clarke

• Name That Company: Mohammed Yunus and Grameen Bank

• Spotlight on Small Business

• Thinking Green

• Social Media in Business

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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brief chapter outline

and learning objectives

CHAPTER 1

Taking Risks and Making Profits within

the Dynamic Business Environment

 Getting to Know SAMMY HAGAR

 learning objective 1

Describe the relationship between profit and risk, and show how businesses and

nonprofit organizations can raise the standard of living for all.

I. ENTREPRENEURSHIP AND WEALTH BUILDING

A. Revenues, Profits, and Losses

B. Matching Risk with Profit

C. Standard of Living and Quality of Life

D. Responding to the Various Business Stakeholders

E. Using Business Principles in Nonprofit Organizations

 learning objective 2

Compare and contrast being an entrepreneur and working for others.

II. ENTREPRENEURSHIP VERSUS WORKING FOR OTHERS

A. Opportunities for Entrepreneurs

B. The Importance of Entrepreneurs to the Creation of Wealth

III. THE BUSINESS ENVIRONMENT

 learning objective 3

Analyze the effects of the economic environment and taxes on businesses.

A. The Economic and Legal Environment

 learning objective 4

Describe the effects of technology on businesses.

B. The Technological Environment

1. How Technology Benefits Workers and You

2. The Growth of E-Commerce

3. Using Technology to Be Responsive to Customers

 learning objective 5

Demonstrate how businesses can meet and beat competition.

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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C. The Competitive Environment

1. Competing by Exceeding Customer Expectations

2. Competing by Restructuring and Empowerment

 learning objective 6

Analyze the social changes affecting businesses.

D. The Social Environment

1. Managing Diversity

2. The Increase in the Number of Older Citizens

3. The Increase in the Number of Single-Parent Families

 learning objective 7

Identify what businesses must do to meet global challenges, including war and

terrorism.

E. The Global Environment

1. War and Terrorism

2. How Global Changes Affect You

3. The Ecological Environment

 learning objective 8

Review how past trends are being repeated in the present and what they mean for

tomorrow’s college graduates.

IV. THE EVOLUTION OF U.S. BUSINESS

A. Progress in the Agricultural and Manufacturing Industries

B. Progress in the Service Industries

C. Your Future in Business

V. SUMMARY

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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Getting to Know SAMMY HAGAR

While best known as the one-time frontman of Van Halen. Sammy Hagar used the money

he earned from music to build a business empire.

 learning objective 1

Describe the relationship between profit and risk, and show how businesses

and nonprofit organizations can raise the standard of living for all.

I. ENTREPRENEURSHIP AND WEALTH BUILD-

ING

A. BASIC CONCEPTS:

1. Success in business involves finding a need and

filling it.

2. A business provides needed goods, jobs, and

services to people in the area.

a. GOODS are tangible products such as com-

puters, food, clothing, cars, and appliances.

b. SERVICES are intangible products that can’t

be held in your hand, such as education,

health care, insurance, recreation, and travel

and tourism.

3. Successfully filling a need may make you rich.

4. A BUSINESS is any activity that seeks to provide

Just before Christmas 2013, hackers stole more than 110 million credit card numbers from this

retailer’s computer system requiring all customers to monitor activity on these accounts and/or

get new credit cards. The company’s profits fell nearly 50 percent for the quarter. Name that

company.

(Students should read the chapter before guessing the company’s name: Target)

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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PPT 1-1

Chapter Title

Taking Risks and

Making Profits

within the

Dynamic Business

Environment



McGraw-Hill/Irwin

CHAPTER 1

PPT 1-2

Learning Objectives

1. Describe the relationship between profit and

risk, and show how businesses and nonprofits

can raise the standard of living for all.

2. Compare and contrast being an entrepreneur

and working for others.

3. Analyze the effects of the economic

environment and taxes on businesses.

4. Describe the effects of technology on

businesses.

LEARNING OBJECTIVES

1-2

PPT 1-3

Learning Objectives

5. Demonstrate how businesses can meet and

beat competition.

6. Analyze the social changes affecting

businesses.

7. Identify what businesses must do to meet global

challenges, including war and terrorism.

8. Review how past trends are being repeated in

the present and what those trends mean for

tomorrow’s college graduates.

LEARNING OBJECTIVES

1-3

PPT 1-4

Sammy Hagar

• Has juggled a long music

career with lucrative

businesses.

• Started investing while in his

first band.

• Opened the Cabo Wabo

Cantina in 1990 and has since

increased the brand.

• Donates large amounts to help

feed the hungry.

SAMMY HAGAR

Entrepreneur

1-4

PPT 1-5

Name That Company

Just before Christmas 2013, hackers stole more than

110 million credit card numbers from this retailer’s

computer system requiring all customers to monitor

activity on these accounts and or get new credit

cards. The company’s profits fell nearly 50% for the

quarter.

Name that company!

NAME that COMPANY

1-5

(See complete PowerPoint slide notes beginning on page 1.37.)

PPT 1-6

Goods and Services

• Goods — Tangible products such as computers,

food, clothing, cars and appliances.

• Services — Intangible products (that can

’

t be held in

your hand) like education, healthcare, insurance,

recreation and travel.

• Successfully filling a market need means you

could make money for yourself and provide jobs

for others.



GOODS and SERVICES

1-6

LO 1-1

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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goods and services to others while operating at a

profit.

5. An ENTREPRENEUR is a person who risks time

and money to start and manage a business.

B. REVENUES, PROFITS, AND LOSSES

1. REVENUE is the total amount of money a busi-

ness takes in during a given period by selling

goods and services.

2. PROFIT is the amount a business earns above

and beyond what it spends for salaries and other

expenses.

3. REVENUE – EXPENSES = PROFIT.

4. A LOSS occurs when a business’s expenses are

more than its revenues.

5. Approximately 80,000 businesses in the U.S. fail

each year (although this number may be over-

stated).

C. MATCHING RISK WITH PROFIT

1. RISK is the chance an entrepreneur takes of los-

ing time and money on a business that may not

prove profitable.

2. The text uses the example of selling hot dogs dur-

ing the summer—paying for supplies, rent, sala-

ries, and only then making a profit.

3. Not all enterprises make the same amount of

profit.

4. The more RISKS you take, the HIGHER THE

REWARDS may be.

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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PPT 1-7

Business and Entrepreneurship

• Business — Any activity that seeks to provide

goods and services to others while operating at a

profit.

• Entrepreneur — A person who risks time and

money to start and manage a business.

• Success in business is often based on the

strategy of finding a need and filling it.

BUSINESS and

ENTREPRENEURSHIP

1-7

LO 1-1

PPT 1-8

Revenue, Profit, and Loss

REVENUE, PROFIT AND LOSS

1-8

LO 1-1



• Revenue — The total amount of

money a business takes in during

a given period by selling goods

and services.

• Profit — The amount of money a

business earns above and

beyond what it spends for salaries

and other expenses.

• Loss — Occurs when a

business

’

s expenses are more

than its revenues.

lecture enhancer 1-1

THE WORLD’S RICHEST PEOPLE

These are the world’s 20 richest people—their wealth, age, resi-

dence, and country of citizenship. (See the complete lecture en-

hancer on page 1.56 of this manual.)

critical thinking

exercise 1-1

HOW MUCH PROFIT?

The text defines profit as the amount a business earns above and

beyond what it spends for salaries and other expenses. Students

often have a very inaccurate idea of how much profit businesses

actually make. This exercise leads students to find this actual

profit percentage. (See the complete exercise on page 1.65 of

this manual.)

PPT 1-9

Risk

RISK

1-9

LO 1-1



• Risk — The chance an

entrepreneur takes of losing

time and money on a

business that may not prove

profitable.

• Not all businesses make

the same amount of profit.

• Businesses take risks, but

with great risks could

come great profit.

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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D. STANDARD OF LIVING AND QUALITY OF LIFE

1. Entrepreneurs PROVIDE EMPLOYMENT for

other people.

2. They also PAY TAXES that are used for schools,

hospitals, and other facilities.

3. Businesses are part of an economic system that

helps CREATE A HIGHER STANDARD OF LIV-

ING and quality of life for everyone.

4. STANDARD OF LIVING is the amount of goods

and services people can buy with the money they

have.

5. Potential businesspeople must find a location

with the right level of taxes and regulations.

6. QUALITY OF LIFE is the general well-being of a

society in terms of political freedom, natural envi-

ronment, education, health care, safety, amount

of leisure, and rewards that add to the satisfac-

tion and joy that other goods and services pro-

vide.

7. The combined efforts of businesses, nonprofit

organizations, and government agencies are re-

quired to maintain a high quality of life.

E. RESPONDING TO THE VARIOUS BUSINESS

STAKEHOLDERS

1. STAKEHOLDERS are all the people who stand

to gain or lose by the policies and activities of a

business and whose concerns the business

needs to address.

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

PPT 1-10

How Is Tax Money Used?

HOW is TAX MONEY USED?

1-10

LO 1-1

Taxes are used to provide:

• Hospitals

• Schools

• Libraries

• Playgrounds

• Roads

• Fire Protection

• Police Protection

• Environmental Programs

• Support for People in Need

PPT 1-11

Standard of Living

STANDARD of LIVING

1-11

Photo Credit: Walmart Stores

LO 1-1



• Standard of Living — The

amount of goods and services

people can buy with the money

they have.

• The U.S. has one of the highest

standards of living in the world.

• Workers in other countries may

make more money, but prices for

products are higher.

PPT 1-12

Quality of Life

QUALITY of LIFE

1-12

LO 1-1



• Quality of Life — The general well-being of a society

in terms of its political freedom, natural environment,

education, healthcare, safety, amount of leisure and

rewards that add to personal satisfaction.



lecture enhancer 1-2

NON-TRADITIONAL STUDENTS

BECOME THE NORM

During the recent recession, more students are turning toward

community colleges and they’re not always who you’d expect.

(See the complete lecture enhancer on page 1.57 of this manu-

al.)

PPT 1-13

Stakeholders

– Customers

– Employees

– Stockholders

– Suppliers

– Dealers

– Community Members

– Media

– Elected Officials

– Bankers

– Environmentalists

STAKEHOLDERS

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LO 1-1



• Stakeholders — All the people who stand to gain or

lose by the policies and activities of a business and

whose concerns the businesses need to address.



• Who are Stakeholders?

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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2. Stakeholders include customers, employees,

stockholders, suppliers, bankers, people in the lo-

cal community, environmentalists, and elected

leaders.

3. The challenge for companies in the 21st century

will be to recognize and respond to the needs of

their stakeholders.

4. To stay competitive, businesses may OUT-

SOURCE jobs to other countries.

a. OUTSOURCING means contracting with other

companies (often in other countries) to do

some or all of the functions of the firm, like its

production or accounting tasks.

b. Many companies have set up design and pro-

duction facilities here in the United States, a

practice known as INSOURCING.

c. The decision whether to outsource or to in-

source is based on what is best for all the

stakeholders.

F. USING BUSINESS PRINCIPLES IN NONPROFIT

ORGANIZATIONS

1. NONPROFIT ORGANIZATIONS—such as gov-

ernment agencies, public schools, charities, and

social causes—make a major contribution to the

welfare of society.

2. A NONPROFIT ORGANIZATION is an organiza-

tion whose goals do not include making a person-

al profit for its owners or organizers.

3. SOCIAL ENTREPRENEURS are people who use

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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PPT 1-14

Stakeholders

TEXT FIGURE 1.1

A Business and Its Stakeholders

STAKEHOLDERS

1-14

LO 1-1

PPT 1-15

Outsourcing and Insourcing

OUTSOURCING

and INSOURCING

1-15

LO 1-1

• Outsourcing — Contracting with other companies

(often in other countries) to do some of the firm

’

s

functions, like production or accounting.



• Insourcing — Foreign companies opening offices

and factories in the United States.

lecture enhancer 1-3

QUIRKY: MAKING INVENTORS’

DREAMS REALITY

As donations drop, nonprofits, especially churches, are feeling the

pinch and many clergy are out searching for jobs. (See the com-

plete lecture enhancer on page 1.57 of this manual.)

PPT 1-16

Nonprofit Organizations

NONPROFIT ORGANIZATIONS

1-16

LO 1-1



• Nonprofit Organization — An organization whose

goals do not include making a personal profit for its

owners or organizers.

PPT 1-17

Well-Known Nonprofits in the Unit-

ed States

WELL-KNOWN NONPROFITS

in the UNITED STATES

1-17

LO 1-1

United Way American Heart Association

Salvation Army American Cancer Society

American Red Cross

PPT 1-18

Keeping Strong Employees at

Nonprofits

KEEPING STRONG EMPLOYEES

at NONPROFITS

1-18

Source: Fast Company, accessed October 2014.

LO 1-1

1. Set ambitious, but realistic

goals.

2. Allow all employees to

work with the groups they

are serving.

3. Give employees a break.

Nonprofit work is draining. 

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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business principles to start and manage organiza-

tions that are not for profit and who help countries

with their social issues.

4. You need the SAME SKILLS to work in nonprofit

organizations that you need in business, including

information management, leadership, marketing,

and financial management.

5. Businesses, nonprofit organizations, and volun-

teer groups often strive to accomplish the same

objectives.

 learning objective 2

Compare and contrast being an entrepreneur and working for others.

II. ENTREPRENEURSHIP VERSUS WORKING FOR

OTHERS

A. THERE ARE TWO WAYS TO SUCCEED IN BUSI-

NESS:

1. One way is to RISE UP THROUGH THE RANKS

of a large company.

2. The riskier path is to START YOUR OWN BUSI-

NESS.

B. OPPORTUNITIES FOR ENTREPRENEURS

1. Millions of people have taken the entrepreneurial

risk and succeeded.

2. The number of Hispanic-owned businesses in the

United States has grown dramatically.

3. Increases have also been made by Asians, Pacific

Islanders, American Indians, and Alaska Natives.

4. Women now own over one-third of all businesses.