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Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-16
lecture enhancer 1-4
SOCIAL ENTREPRENEURSHIP: IM-
PROVING WORLD HEALTH WITH-
OUT PROFITS
Victoria Hale has created a nonprofit organization, One-
WorldHealth, to finance necessary prescription drugs that
have no profit potential. (See the complete lecture enhancer on
page 1.58 of this manual.)
test
prep
PPT 1-19
Test Prep
TEST PREP
1-19
• What is the difference between revenue and
profit?
• What is the difference between standard of living
and quality of life?
• What is risk? How is it related to profit?
• What do the terms stakeholders, outsourcing and
insourcing mean?
PPT 1-20
The Ups and Downs of
Entrepreneurship
THE UPS and DOWNS
of ENTREPRENEURSHIP
1-20
LO 1-2
The UPS The DOWNS
The freedom to succeed. The freedom to fail.
Make your own decisions. No paid vacations.
High possibility of wealth. No health insurance.
Hire your own staff. No daycare.
SPOTLIGHT ON
small business
PPT 1-21
How a Food Truck Helped Rebuild
a Storm-Struck Community
1-21
HOW a FOOD TRUCK HELPED REBUILD
a STORM-STRUCK COMMUNITY
• After witnessing the destruction left behind after
Hurricane Sandy, Mike Diamond started Rockaway
Plate to serve free lunches.
• Now the truck is a profitable business that helps
local teens gain work experience.
PPT 1-22
Who Takes the Entrepreneurial
Challenge?
WHO TAKES the
ENTREPRENEURIAL CHALLENGE?
1-22
LO 1-2
• Millions of people have
started businesses and
succeeded.
• The number of Hispanic-
owned businesses in the
U.S. has grown
dramatically.
• Women now own over
one-third of all businesses.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-17
5. Businesses owned by minority women are grow-
ing twice as fast as minority men and over four
times faster than nonminority entrepreneurs.
C. THE IMPORTANCE OF ENTREPRENEURS TO THE
CREATION OF WEALTH
1. The FACTORS OF PRODUCTION are the re-
sources used to create wealth:
a. LAND (or natural resources)
b. LABOR (workers)
c. CAPITAL
i. This includes machines, tools, buildings,
or whatever is used in the production of
goods, but not money.
ii. Money is used to buy factors of produc-
tion.
d. ENTREPRENEURSHIP
e. KNOWLEDGE
2. Some experts, including the late Peter Drucker,
believe that the most important factor of produc-
tion is KNOWLEDGE.
3. Some countries are rich in land or labor, but these
aren’t critical to wealth creation.
4. What makes rich countries rich is not land, labor,
or capital; it is a combination of ENTREPRE-
NEURSHIP and the effective use of
KNOWLEDGE.
5. Entrepreneurship also helps make some states
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-18
critical thinking
exercise 1-2
JOB AND CAREER VERSUS OWN-
ING A BUSINESS
This exercise guides the student through the decision-making
process of evaluating various career options. (See the com-
plete exercise on page 1.67 of this manual.)
PPT 1-23
Women in the Workforce
WOMEN in the WORKFORCE
1-23
Source: Bloomberg Businessweek, accessed October 2014.
LO 1-2
PPT 1-24
Five Factors of Production
TEXT FIGURE 1.2
The Five Factors of Production
FIVE FACTORS of PRODUCTION
1-24
LO 1-2
• Entrepreneurs use what they’ve learned to grow
their businesses and increase wealth.
lecture enhancer 1-5
MOBILE ENTREPRENEURS OPER-
ATE ON THE GO
Entrepreneurship isn’t just for the office or storefront any-
more. Jetsetters can get in on the fun too. (See the complete
lecture enhancer on page 1.58 of this manual.)
test
prep
PPT 1-25
TEST PREP
1-25
• What are some of the advantages of working for
others?
• What benefits do you lose as an entrepreneur,
and what do you gain?
• What are the five factors of production? Which
ones seem to be the most important for creating
wealth?
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-19
and cities rich while others remain relatively poor.
III. THE BUSINESS ENVIRONMENT
A. The BUSINESS ENVIRONMENT consists of the sur-
rounding factors that either help or hinder the devel-
opment of business; they are:
1. The economic and legal environment
2. The technological environment
3. The competitive environment
4. The social environment
5. The global business environment
Businesses that create jobs and wealth grow and
prosper in a healthy environment.
learning objective 3
Analyze the effects of the economic environment and taxes on businesses.
B. THE ECONOMIC AND LEGAL ENVIRONMENT
1. People are willing to risk starting businesses if
they feel that the risk is acceptable.
2. GOVERNMENTS CAN LESSEN THE RISK of
starting a business and increasing entrepreneur-
ship and wealth by:
a. Minimizing spending and keeping TAXES
AND REGULATIONS to a minimum.
b. Allowing PRIVATE OWNERSHIP of business.
c. Passing LAWS that enable businesspeople to
write enforceable contracts.
d. Establishing a CURRENCY that is tradable in
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-20
PPT 1-26
What Is the Business
Environment?
TEXT FIGURE 1.3
Today’s Dynamic Business
Environment
WHAT is the
BUSINESS ENVIRONMENT?
1-26
LO 1-3
lecture enhancer 1-6
AMERICA’S LOST DECADE
The business environment of the “Oughts” has been seen as an
enormous step backward for the United States. (See the com-
plete lecture enhancer on page 1.59 of this manual.)
PPT 1-27
Government’s Role in Business
GOVERNMENT’S ROLE
in BUSINESS
1-27
LO 1-3
Government can promote business by…
1. Minimizing spending and keeping taxes and
regulations to a minimum.
2. Allowing private ownership of businesses.
3. Minimizing interference with the free exchange of
goods and services.
4. Passing laws that enable businesspeople to write
enforceable contracts.
5. Establishing a currency that’s tradable in world
markets.
6. Minimizing corruption.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-21
world markets.
e. MINIMIZING CORRUPTION in business and
government.
3. CORRUPT AND ILLEGAL ACTIVITIES nega-
tively affect the business community and the
economy.
4. The capitalist system relies heavily on honesty,
integrity, and high ethical standards.
a. The recent faltering economy was partially
caused by mortgage bankers pushing bor-
rowers into subprime mortgages.
b. The ripple effects reduced the value of hous-
ing and led to a freeze in credit markets.
learning objective 4
Describe the effects of technology on businesses.
C. THE TECHNOLOGICAL ENVIRONMENT
1. Few technical changes have had a more lasting
impact on businesses than INFORMATION
TECHNOLOGY.
2. Innovations such as the iPhone, BlackBerry, Fa-
cebook, and Twitter have changed how people
communicate.
3. HOW TECHNOLOGY BENEFITS WORKERS
AND YOU
a. TECHNOLOGY means everything from
phones and copiers to computers, medical
imaging devices, personal digital assistants,
and various software programs that make
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-22
PPT 1-28
Corruption Worldwide
Source: Transparency International, October 2014.
CORRUPTION WORLDWIDE
1-28
LO 1-3
Least Corrupt
1. Denmark
2. New Zealand
3. Finland
4. Sweden
5. Norway
Most Corrupt
1. Somalia
2. North Korea
3. Afghanistan
4. Sudan
5. South Sudan
MAKING
ethical
decisions
PPT 1-29
Ethics Begins
with You
ETHICS BEGINS with YOU
1-29
The number of employees calling in sick has
reached a five-year high. 3/5 of all callers were not
even sick. Others conduct personal business at
work, play video games and check their Facebook
pages while at work.
What is the problem with this situation?
What are the alternatives?
What are the consequences of each alternative?
What path would you choose?
Is it ethical?
critical thinking
exercise 1-3
MAKING ETHICAL DECISIONS
This exercise raises the question: What does the student do when
he or she comes to a Making Ethical Decisions box in the text?
(See the complete exercise on page 1.68 of this manual.)
PPT 1-30
Benefits of Technology
BENEFITS of TECHNOLOGY
1-30
LO 1-4
• Technology -- Everything from phones to copiers
and the various software programs that make
businesses more effective, efficient and productive.
• Effectiveness -- Producing the desired result.
• Efficiency -- Producing goods and services using the
least amount of resources.
• Productivity -- The amount of output you generate
given the amount of input (example: hours you work).
lecture enhancer 1-7
CRASH TESTING CARS WITH COM-
PUTERS
Technology is has long been a part of the manufacturing sector.
Here is how Ford and other automakers are changing the crash
test process. (See the complete lecture enhancer on page 1.60 of
this manual.)
lecture enhancer 1-8
SNAPCHAT: THE LATEST COMMU-
NICATION REVOLUTION
Technology has its hand in all we do from how we work to how
we communicate. Will Snapchat change our communication
style? (See the complete lecture enhancer on page 1.60 of this
manual.)
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-23
business processes more efficient and produc-
tive.
i. EFFECTIVENESS means producing the
desired result.
ii. EFFICIENCY means producing goods and
services using the least amount of re-
sources.
b. PRODUCTIVITY is the amount of output you
generate given the amount of input (such as
hours worked).
c. Tools and technology increase productivity.
d. Farmers use high technology to increase pro-
duction and profit.
4. THE GROWTH OF E-COMMERCE
a. E-COMMERCE is buying and selling of goods
over the Internet.
b. There are two types of e-commerce transac-
tions:
i. BUSINESS-TO-CONSUMER (B2C)
ii. BUSINESS-TO-BUSINESS (B2B)
c. B2B E-COMMERCE consists of selling goods
and services from one business to another.
d. Traditional businesses need to learn how to
deal with competition from B2B and B2C firms.
5. USING TECHNOLOGY TO BE RESPONSIVE TO
CUSTOMERS
a. The businesses that are most responsive to
customer wants and needs will succeed.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-24
bonus case 1-1
NETWORKING OUTSIDE THE NET
Though a lot of business networking is now done through social
media, it’s no replacement for real human interaction. (See the
complete case, discussion questions, and suggested answers be-
ginning on page 1.70 of this manual.)
REACHING
BEYOND OUR
borders
PPT 1-31
Connecting
Companies with
Global Free-
lancers
1-31
CONNECTING COMPANIES with
GLOBAL FREELANCERS
• Since the Great Recession, freelancers are more
important than ever before.
• Freelance employees don’t even have to live in
the same country as their employers.
• Elance is taking advantage of this development
with its over 8 million registrants.
PPT 1-32
E-Commerce
E-COMMERCE
1-32
LO 1-4
• E-Commerce -- The buying
and selling of goods online.
- B2C: Business to Consumer
- B2B: Business to Business
PPT 1-33
Cyber Attacks on Businesses
Source: Inc., January 2014.
CYBER ATTACKS on BUSINESSES
1-33
LO 1-4
• 80% of cyber attacks involve weak passwords.
• Since 2012, there has been an 8% increase in
malware attacks with an average loss of $92,000!
• Since 2012, there has been a 125% increase in
social media phishing attacks, stealing over $1 billion
from businesses.
• 29% of security breaches are hackers pretending to
be you and resetting your passwords.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
b. Businesses can use technology (such as UPC
bar codes on products) to become more re-
sponsive.
c. A DATABASE is an electronic storage file for
information; one use of databases is to store
vast amounts of information about consumers.
d. Databases also allow stores to carry fewer
items and less inventory.
e. However, gathering personal information about
people has led to IDENTIFY THEFT, obtaining
individuals’ personal information, such as So-
cial Security and credit card numbers, for ille-
gal purposes.
f. The Federal Trade Commission says that mil-
lions of Americans are victims of identify theft
each year.
learning objective 5
Demonstrate how businesses can meet and beat competition.
D. THE COMPETITIVE ENVIRONMENT
1. Making quality products is not enough to stay
competitive in world markets—now you have to of-
fer quality products and outstanding service at
competitive prices.
2. COMPETING BY EXCEEDING CUSTOMER EX-
PECTATIONS
a. Customers today want good quality at low pric-
es plus great service.
b. Business is becoming CUSTOMER-DRIVEN—
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-26
PPT 1-34
Databases and Identity Theft
DATABASES
and IDENTITY THEFT
1-34
Photo Credit: Jack Spade
LO 1-4
• Database -- An electronic
storage file for information.
• Identity Theft -- The obtaining
of individuals
’
personal
information, such as Social
Security and credit card
numbers, for illegal purposes.
PPT 1-35
Protect Yourself from Identity Theft
Source: Federal Trade Commission, www.ftc.gov accessed October 2014.
PROTECT YOURSELF
from IDENTITY THEFT
1-35
LO 1-4
Follow these steps to help protect yourself:
• Protect your Social Security Number.
• Shred financial documents and items with personal
information.
• Don’t give out personal information unless you know
whom you are dealing with.
• Use strong passwords.
• Never click links in suspicious emails.
• Monitor your credit report.
lecture enhancer 1-9
PREVENTING IDENTITY THEFT
How to reduce identity theft and what to do when it happens.
(See the complete lecture enhancer on page 1.61 of this manual.)
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-27
customers’ wants and needs come first.
c. Successful companies must LISTEN TO CUS-
TOMERS to determine their wants and needs
and then adjust their products, policies, and
practices to meet these demands.
3. COMPETING BY RESTRUCTURING AND EM-
POWERMENT
a. To meet the needs of customers, firms must
enable their frontline workers to RESPOND
QUICKLY TO CUSTOMER REQUESTS.
b. EMPOWERMENT is giving frontline workers
the responsibility, authority, freedom, training,
and equipment they need to respond quickly to
customer requests.
c. It sometimes takes years to restructure an or-
ganization to empower numbers.
learning objective 6
Analyze the social changes affecting businesses.
E. THE SOCIAL ENVIRONMENT
1. DEMOGRAPHY is the statistical study of the hu-
man population in regard to its size, density, and
other characteristics, such as age, race, gender,
and income.
2. MANAGING DIVERSITY
a. Today diversity includes many more population
groups, including seniors, people with disabili-
ties, singles, the devout, and so on.
b. The number of legal and illegal IMMIGRANTS
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-28
PPT 1-36
Using Empowerment to Compete in
Today’s Market
USING EMPOWERMENT
to COMPETE in TODAY’S MARKET
1-36
LO 1-5
• Customers want quality products at a good price
with excellent customer service.
• Because business is more customer-driven, some
managers give frontline employees more decision-
making power.
• Empowerment -- Giving frontline workers the
responsibility, authority, and freedom to respond
quickly to customer requests.
PPT 1-37
Demography
DEMOGRAPHY
1-37
LO 1-6
• Demography -- The
statistical study of the
population in terms of
size, density and
characteristics like,
age, race, gender and
income.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-29
has had a dramatic impact on cities and
businesses.
3. THE INCREASE IN THE NUMBER OF OLDER
CITIZENS
a. U.S. citizens aged 65–74 are the richest de-
mographic group in U.S. society.
b. By 2020, 22.8% of the population will be over
60 years old.
c. Think of the career opportunities of providing
goods and services for older adults.
d. Paying Social Security to seniors will drain
huge amounts of money from the economy.
e. Soon there will be LESS MONEY COMING
INTO the Social Security system than will BE
GOING OUT.
4. THE INCREASE IN THE NUMBER OF SINGLE-
PARENT FAMILIES
a. SINGLE PARENTS have encouraged busi-
nesses to implement family-friendly programs
such as FAMILY LEAVE and FLEXTIME.
learning objective 7
Identify what businesses must do to meet global challenges, including
war and terrorism.
F. THE GLOBAL ENVIRONMENT
1. Two important environmental changes in recent
years have been the GROWTH OF GLOBAL
COMPETITION and the INCREASE OF FREE
TRADE among nations.
a. Improvements in transportation and commu-
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-30
PPT 1-38
Demography of the U.S. by Age
Source: U.S. Census Bureau, www.census.gov, accessed October 2014.
DEMOGRAPHY of the U.S. by
AGE
1-38
LO 1-6
PPT 1-39
Projected Demography of the U.S.
by Race
CURRENT DEMOGRAPHY
of the U.S. by RACE
1-39
Source: U.S. Census Bureau, www.census.gov, accessed October 2014.
LO 1-6
PPT 1-40
Projected Demography of the U.S.
by Race in 2050
PROJECTED DEMOGRAPHY
of the U.S. by RACE in 2050
1-40
Source: U.S. Census Bureau, www.census.gov, accessed October 2014.
LO 1-6
PPT 1-41
U.S. Population Changes
U.S. POPULATION CHANGES
1-41
LO 1-6
• Diversity has grown from just
recruiting minority and female
workers.
• Population shifts are creating
opportunities for some and
limiting others.
• Growth of single-parent
households have encouraged
businesses to implement
programs such as family leave
and flextime.
PPT 1-42
Who Will Support Social Security?
Source:U.S.CensusBureau,www.census.gov,accessedO ctober2014.
WHO WILL SUPPORT
SOCIAL SECURITY?
Number of Workers per Retiree
1-42
LO 1-6
PPT 1-43
What is Diversity?
WHAT is DIVERSITY?
1-43
LO 1-6
• The U.S. Equal Employment Opportunity Commission
prohibits laws discriminating against:
- Age
- Disability
- Genetic information
- National origin
- Pregnancy
- Race
- Religion
- Sex
PPT 1-44
Important Changes to the Global
Environment
IMPORTANT CHANGES to the
GLOBAL ENVIRONMENT
1-44
LO 1-7
1. Growth of global
competition.
2. Increase of free trade
among nations.
3. Development of
efficient distribution
systems.
4. Advances in
communication
systems.
