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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
1-2
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
1-3
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
1-4
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-5
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
1-6
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
1-7
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
1-8
PPT 1-1
Chapter Title
Taking Risks and
Making Profits
within the
Dynamic Business
Environment
Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.
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
1-9
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
1-10
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
1-11
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
1-13
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
1-13
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
1-14
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
1-15
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.
