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Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-31
nication have led to more trade.
b. World trade (GLOBALIZATION) has signifi-
cantly improved living standards around the
world.
c. World trade has both benefits and costs, as
will be discussed in Chapter 3.
2. WAR AND TERRORISM
a. Recent wars have drawn billions of dollars
from the American economy.
b. The threat of terrorism makes people more
fearful and cautious and adds to a business’s
organizational costs.
c. Businesspeople benefit from a peaceful and
prosperous world.
G. HOW GLOBAL CHANGES AFFECT YOU
1. Expanding global commerce will create many ca-
reer opportunities for American college gradu-
ates.
2. Students must prepare themselves to compete in
changing global environments.
H. THE ECOLOGICAL ENVIRONMENT
1. CLIMATE CHANGE is the movement of the tem-
perature of the planet up or down over time.
2. GREENING is saving energy and producing
products that cause less harm to the environ-
ment.
3. These concepts will be highlighted throughout this
text.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-32
PPT 1-45
Increasing Costs of the Global
Environment
INCREASING COSTS of the
GLOBAL ENVIRONMENT
1-45
LO 1-7
• Wars cost billions of dollars.
• Tax money is diverted.
• Cost of security goes up.
• Cost of insurance goes up.
ADAPTING TO
change
PPT 1-46
Gourmet Airport Eateries Take
Flight
GOURMET AIRPORT EATERIES
TAKE FLIGHT
1-46
• Airport restaurants have
more regulations than
traditional spots.
• People are likely to spend
more when travelling.
• This has led to more
gourmet restaurants
popping up in airports.
PPT 1-47
Global Greening
GLOBAL GREENING
1-47
LO 1-7
• Climate Change -- Movement of the temperature of
the planet up or down over time.
• Greening -- Trend toward saving energy and
producing products that cause less harm to the
environment.
• Many companies like GE, Coca-Cola,
British Airways and Shell are adopting green
practices.
lecture enhancer 1-10
THE HIGH DEMAND FOR GREEN
DEGREES
As the job crunch was experienced by recent grads, students
still in school started enrolling in sustainability programs.
(See the complete lecture enhancer on page 1.63 of this man-
ual.)
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-33
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. American businesses have become so productive
that fewer workers are needed in the industrial sector
to produce goods.
B. PROGRESS IN THE AGRICULTURAL AND MAN-
UFACTURING INDUSTRIES
1. The use of TECHNOLOGY made the agricultural
industry so PRODUCTIVE that the number of
farmers dropped from about a third of the popula-
tion to about 1%.
2. AGRICULTURE is still a major industry in the
U.S., but fewer and larger farms have replaced
millions of small farms.
3. Many farmers lost their jobs and went to work in
factories.
4. Now TECHNOLOGY is making manufacturing
more productive and workers again losing their
jobs.
C. PROGRESS IN THE SERVICE INDUSTRIES
1. The fastest growing firms provide services in ar-
eas like law, health, telecommunications, enter-
tainment, and finance.
2. SERVICES make up over 70% of the value of
the U.S. economy and have generated almost all
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-34
test
prep
PPT 1-48
Test Prep
TEST PREP
1-48
• What are four ways the government can foster
entrepreneurship?
• What is the difference between effectiveness,
efficiency and productivity?
• What is empowerment?
• What are some of the major issues affecting the
economy today?
lecture enhancer 1-11
MILESTONES IN BUSINESS
Some important dates in the history of business. (See the com-
plete lecture enhancer on page 1.64 of this manual.)
PPT 1-49
The Evolution of Business
The EVOLUTION of BUSINESS
1-49
LO 1-8
Agriculture Era
Manufacturing Era
Service Era
Information-Based Era
PPT 1-50
The Agricultural Era
The AGRICULTURAL ERA
1-50
LO 1-8
• In the 1800s, the agricultural
industry led economic
development.
• Technology, like the
harvester and cotton gin,
changed the farming
industry making it more
efficient.
• This led to fewer farmers
with larger farms.
PPT 1-51
The Manufacturing Era
The MANUFACTURING ERA
1-51
• As technology
improved
productivity, fewer
workers were
needed in factories.
LO 1-8
• Industrialization in the 19th and 20th
centuries moved jobs from farms to
factories.
PPT 1-52
The Service Era
The SERVICE ERA
1-52
LO 1-8
• Make up over 70% of the
U.S. economy.
• Since the mid-1980s, the
service industry generated
almost all the increases in
employment.
• More high-paying jobs in
service industries.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
the increases in employment.
3. Service-sector growth has slowed, but is still the
largest area of growth.
4. There are more high-paying jobs in the service
sector than in the goods-producing sector.
D. YOUR FUTURE IN BUSINESS
1. The service sector now seems to be losing out to
a new era.
2. This information-based global revolution will alter
the way business is done in the future.
3. Most of the CONCEPTS AND PRINCIPLES that
make business more effective and efficient are
also applicable in government agencies and non-
profit organizations.
V. SUMMARY
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
PPT 1-53
The Information Technology Era
The INFORMATION
TECHNOLOGY ERA
1-53
LO 1-8
• IT affects:
- Agriculture
- Industry
- Service
TEXT FIGURE 1.4
What Is the Service Sector?
This text figure gives a representative list of services as classi-
fied by the government.
test
prep
PPT 1-54
Test Prep
TEST PREP
1-54
• What major factor caused people to move from
farming to manufacturing and from
manufacturing to the service sector?
• What does the future look like for tomorrow’s
college graduates?
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
1-37
PowerPoint slide notes
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
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
1-38
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
Answer: Target
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
It is important to make sure that students understand the
difference between goods and services. Emphasize that
goods are tangible (can be held or touched) like Nike ath-
letic shoes, while services are intangible (cannot be held in
your hand) like a haircut.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
1-39
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
In the United States the entrepreneur is held in high regard.
Most students have heard of Sam Walton and Michael Dell,
but it often adds to the classroom experience if they under-
stand how these entrepreneurs started their businesses. Sam
Walton started Walmart with just one store in Arkansas in
the 1960s. Michael Dell got his start building computers in
his University of Texas dorm room, ultimately leading to
the creation of Dell, Inc.
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.
About 80,000 businesses in the United States close each
year.
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.
Irish entrepreneur Denis O’Brien makes billions by selling
cell phones in the poorest and most violent countries in the
world. Big risk, big profit.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
1-40
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
Entrepreneurs provide jobs for others and the taxes they
pay benefit the community.
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.
Workers in Japan may make more than Americans, but a
bottle of beer may cost $7 in Japan.
PPT 1-12
Quality of Live
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.
The more money businesses create, the more is available
to improve the quality of life for all citizens.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
1-41
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?
PPT 1-14
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.
1. Outsourcing is the contracting with other companies
to do some of the firm’s functions. As the slide states
these companies are often in other countries. For ex-
ample, Dell Computers and many other companies
outsource support services to call centers in India and
other Asian nations. This can be an emotional issue
and one that students often do not understand. When
discussing this topic with students, it is important for
students to understand that outsourcing has occurred
for years and does not always involve a company
from the United States locating jobs in another coun-
try.
2. Once students understand outsourcing, the concept of
insourcing can be discussed. For example, Hyundai
operates plants in the United States. Its design and
engineering headquarters are in Detroit, and they pro-
duce cars in Montgomery, Alabama. All of which
employ American workers. Insourcing benefits the
American worker such as when Toyota and Honda
decided to build automobile manufacturing plants in
Kentucky and Ohio rather than in Japan.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
1-42
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.
Nonprofits use the same principles and skills you will
learn in this class.
PPT 1-17
Well-Known Nonprofits in the United
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
1. This slide provides a listing of well-known non-
profit organizations in the United States.
2. Some of the better known nonprofit organizations
include: Salvation Army, United Way and the
American Red Cross.
3. Ask students to identify smaller, local nonprofit
organizations and discuss how they contribute to
the community’s quality of life.
PPT 1-18
Keeping Strong Employees at Nonprof-
its
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.
1. Since few nonprofits can compete for qualified
employees by offering higher salaries, they must
find other ways to recruit, hire, and retain workers.
2. Many nonprofit workers choose to accept lower
wages in exchange for the feeling that they are
helping a good cause.
3. Since nonprofit work is often exhausting, manag-
ers need to find ways to help employees relax and
celebrate their good works.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
1-43
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?
1. Revenue is the total amount of money a business
takes in during a given period of time. Profit is the
amount of money a business earns above and beyond
what it spends for salaries and other expenses during
a given period.
2. Standard of living is the amount of goods and ser-
vices a person can buy with the money he or she has.
Quality of life refers to the general well-being of so-
ciety in terms of its political freedom, natural envi-
ronment, education, health care, safety, amount of lei-
sure, and rewards that add to the satisfaction and joy
that other goods and services provide.
3. Risk is the chance an entrepreneur takes in losing
time and money on a business that may not prove
profitable. Usually, entrepreneurs willing to take the
most risk make the highest profit.
4. 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. Out-
sourcing is contracting with other companies (often in
other countries) to do some or all the functions of a
firm, like its production or accounting tasks. Insourc-
ing is when foreign companies set up design and pro-
duction facilities in the United States.
PPT 1-20
The Ups and Downs of Entrepreneur-
ship
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.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
1-44
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 Chal-
lenge?
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.
PPT 1-23
Women in the Workforce
WOMEN in the WORKFORCE
1-23
Source: Bloomberg Businessweek, accessed October 2014.
LO 1-2
1. In the past 40 years, the number of working women
has increased significantly.
2. A considerable number even out earn their hus-
bands; something that seemed unheard of in the
past.
3. In 1970, there were 0 female CEOs in Fortune 500
companies. In 2014, there were 24 (a record high!).
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
1-45
PPT 1-24
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.
PPT 1-25
Test Prep
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?
1. When working for others, someone else assumes
the entrepreneurial risk and provides you with ben-
efits (life health insurance, vacation time, etc.).
2. As an entrepreneur you have the freedom to make
your own decisions and the potential for creating
wealth, while sacrificing the benefits that working
for others often provides.
3. The factors of production are land, labor, capital,
entrepreneurship, and knowledge. Of these, entre-
preneurship and knowledge seem to be the most
important for creating wealth.
PPT 1-26
What is the Business Environment?
WHAT is the
BUSINESS ENVIRONMENT?
1-26
LO 1-3
