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©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
Characteristics of Business6.1 The Nature of Business6.2 Changes Affecting Business6.3 The Contributions of Business
CHAPTER
6
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
2
6.1 The Nature of Business
GOALS● Explain the nature of business activities.● Describe the general types of businesses.
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
3
Management of Business Activities
● Business – an organization that produces or distributes a good or service for profit● Profit is the difference between earned income and costs
● Production – involves making a product or providing a service● Manufacturing firms create products that customers
purchase to satisfy needs● Service firms use the skills of employees to offer activities
and assistance to satisfy customer needs● Service firms exceed the number of manufacturing firms
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
4
Management of Business Activities
● Marketing – activities between business and customers involved in buying and selling goods and services
● Finance – all the money involved in running a business
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Management of Business Activities
● Supply and Demand● Supply - the number of similar products that will
be offered for sale at a particular time & at a particular price
● Demand - the number of similar products that will be bought at a given time at a given price
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Types of Businesses
● Goods-producing businesses – produce goods used by other businesses, organizations, or consumers● Companies that mine coal & extract oil from the
earth provide resources that are used by other companies & consumers
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Types of Businesses
● Service businesses – type of business that use mostly labor to satisfy customers● Examples include firms engaged in marketing (wholesale
and retailers), in finance (banks & investment companies), and in providing services (medical offices, fitness centers, & hotels)
● Industry – businesses in a category doing similar work● Examples: automotive, school, health, government,
movie/film
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
©2013 Cengage Learning. All Rights Reserved.
8
CHAPTER 6
Expected Employment in Major Industries by 2018
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
9
6.2 Changes Affecting Business
GOALS● Describe how innovations affect businesses.● Identify the impact global competition has had
on U.S. businesses.● Discuss ways in which businesses can improve
their business practices.
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Innovation’s Impact on Management
● Innovation - something entirely new● Effects of innovation is the kind of products &
services offered for sale by other businesses
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Impact of Global Competition on Business Management
● Global competition - the ability of businesses from one country to compete with similar businesses in other countries
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
12
Focusing Management on the Right Things
● Effectiveness – making the right decisions about what products or services to offer customers and the best way to produce & deliver them
● Efficiency – producing products & services quickly, at low cost, without wasting time & materials
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
13
Focusing Management on the Right Things
● Achieving effectiveness● Knowing what customers want● Domestic goods – products made by firms in the
United States● Foreign goods – products made by firms in other
countries● Total quality management (TQM) – a commitment
to excellence accomplished by teamwork & improvement of work procedures
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
14
Focusing Management on the Right Things
● Achieving efficiency● Output – the quantity produced within a given
time● Productivity – producing the largest quantity in
the least amount of time by using efficient methods and modern equipment
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Focusing Management on the Right Things
● Achieving efficiency● Specialization
● When workers specialize, they become experts at their assigned tasks, this improves efficiency
● Technology and innovation● With new discoveries and inventions, better-quality
goods & services are built at a faster pace & lower cost
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
16
Focusing Management on the Right Things
● Achieving efficiency● Reorganization of work
● Challenging way to increase efficiency ● Empowerment – letting workers participate in
determining how to perform their work tasks & offer ideas on how to improve the work process
● Firms find the the quality of work often improves● Re-engineering – redesign the work flow throughout
the organization
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
17
6.3 The Contributions of Business
GOALS● Identify two ways a nation measures its
economic growth and prosperity.● Describe the benefits of business ownership
to the nation and individuals.
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Business Growth and Prosperity
● Gross domestic product (GDP) – the total market value of all goods and services produced in a year● GDP is the chief measure of a nation’s economic
wealth● Compared year to year and also with GDP of other
countries● In 2010, GDP in US reached $14.7 trillion, China is close
to America in terms of GDP
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Business Growth and Prosperity
● Underground economy – income that escapes being recorded in the GDP
● Working full or part-time for cash ● Size concerns government due to its illegal nature
& activities are not taxed
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Business Growth and Prosperity
● Individual well-being is the second measure of nation’s wealth● US Department of Commerce gathers information
that reveals the financial well-being of US citizens● 66% families live in homes they own● 80% of adults carry cell-phones in the US and families
are giving to children under the age of 10● Human Development Index (HDI) measures life
expectancy, education, and gross national product● In 2010, US ranks 4th after Norway, Australia, & New Zealand
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
21
Business Growth and Prosperity
● Even though America is doing well economic and social problems exist● Job shortages, layoffs, lack of skills causes income
to drop● Low income causes it difficult to buy homes, send
children to college, save for retirement● Over 14% of American families had income below the
poverty level of $22,000 for a family of four
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
22
Business Ownership
● Entrepreneur – someone who starts, manages, & owns a business
● Popularity of small business● Almost anyone who wishes to do so may start a
business● Small business describes companies that are
operated by one or a few individuals● In the US about half of all employed people work for
small businesses
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Business Ownership
● Growth of franchise business● Franchise – a legal agreement in which and
individual or small group of investors purchases the rights to sell a company’s product or service under the company’s name and trademark
● Franchisor – the parent company of a franchise agreement that provides the product or service
● Franchisee – the distributor of a franchised product or service
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Business Ownership
● Growth of franchise business● In a franchise agreement, the franchisee pays an
initial fee—often $100,000 or more—to the franchisor & a percentage –usually 3 to 8 % of sales
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Business Ownership● Growth of franchise business
● In return, the franchisee gets assistance in selecting a location for the store or building, operating procedures & policies, & exclusive rights to sell the franchised product or service
● Services are valuable to inexperienced business owners● 5-10% of franchised business fail, the failure rate is far
lower than the failure rate of nonfranchised new businesses
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Business Ownership
● Risks of ownership● Success depends on managerial effectiveness● Risk is the possibility of failure● The Service Core of Retired Executives (SCORE)
reports up to 70% of new firms with employees survive at least two years, & half survive for five years
©2013 Cengage Learning. All Rights Reserved.
Business Management, 13e
CHAPTER 6
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Business Ownership
● Obligations of ownership● Responsible to the entire community● Economic and social responsibility
● Customers, employees, investors, competitors and the public
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