978-0078023163 Chapter 1 Part 2

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.CensusBureau,www.census.gov,accessedO ctober2014.

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.