Chapter 1 - Business and Its Environment Business Management Class- Mr. Sherpinsky Council Rock...

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Chapter 1 - Business and Its EnvironmentBusiness Management Class- Mr. SherpinskyCouncil Rock School District

Business Production Marketing Finance Industrial businesses Commercial

businesses Service businesses Industry

The Nature of Business

An organization that produces or distributes a good or service for profit is a business.

All businesses engage in 3 Major Activities:

1. Production (Manufacturing)2. Marketing (Sales)3. Finance (Money)

Production: involves a company making a product or providing a service for the customer.

What do they provide? What types of companies?

Manufacturing companies

Service companies

Goods: Tangible, made and stored prior to use

Services: Intangible, labor intensive, can’t be made prior to need

Marketing: deals with how goods or services that are exchanged between producers and consumers. That’s everything from

purchasing the right raw materials to the actual shipping to wholesaler or retailer markets.

Finance – deals with all money matters related to running a business. That could include things like…

– Investments– Purchase of raw materials– Purchase of equipment to

produce– Cost analysis and

comparisonsWhat are some other things that involve money in a business?

Two Major Kinds of BusinessesTwo Major Kinds of Businesses INDUSTRIAL▪ Industrial firms- produce goods that are

used by other businesses or organizations to make things.

COMMERCIAL▪ Commercial firms-firms engaged in

marketing, (wholesalers and retailers), in finance, (banks and investments companies), and in providing services (medical offices, fitness centers, and hotels).

Businesses that produce goods.

(Tangible) (Examples): automobile,

television m, clothing and shoes Mills

Provide assistance to Provide assistance to supply a need to a supply a need to a customercustomer

Intangible Can NOT be produced prior to

need (Examples): doctors, lawyers, travel

agents, plumbers, government agencies, etc…

Today service firms far exceed the number of manufacturing firms.

Can you name some local manufacturing and service

companies?

Supply and DemandSupply and Demand Supply-the number of

similar products that will be offered for sale at a particular time and at a particular price.

Demand-refers to the number of similar products that will be bought at a given time at a given price

How does supply and demand effect pricing?

Why is it so important to businesses?

CHECKPOINT CHECKPOINT 1.11.1

CRITICAL CRITICAL THINKING 1.1THINKING 1.1

Service firm-provides intangible products/ assistance to satisfy specialized needs through skilled workers

Industrial firm- produce goods that are used by other businesses or organizations to make things.

Commercial firm-firms engaged in marketing, finance, and furnishing services.

Industry-refers to all businesses within a specific category (auto, medical, music, publishing, advertising)

Industry is the term often used to refer to all businesses within a category, i.e., music industry (instruments, songs, singers) publishing industry (books, magazines,

newspapers) Government industry (fire, police, state, federal,

etc.) Page 6 shows growth in employment in industries/

businesses.

Which has had the most growth?

Go to the BLS.gov website

Research employment growth in major industries Which service industries

are projected to have the greatest growth from 2008-2018?

Name top 4!

1.2

Goals:Goals:1)Describe how innovations affect businesses2)Identify the impact global competition has had on U.S. businesses3)Discuss ways in which businesses can improve their business practices.

Innovation Global competition Effectiveness Efficiency Domestic goods Foreign goods Output Productivity Downsize Empowerment

What is Innovation? Steve Jobs: Innovation

Innovation is something entirely new.

For example: Natural fibers like cotton and wool Chemical develops led to synthetic fibers

like rayon, nylon, and polyester

Can also affect business operations Computers used in design and

manufacturing Internet changed relationships,

information▪ Small versus Large has now been equalized

Using the Internet Find an example of

eight (8) products or services that used innovation to revolutionize what they offer…

Be ready to share Be ready to share with the class!!!with the class!!!

Third World Nation-countries that have few manufacturing firms and a population that is generally poor and uneducated to a large degree.

Domestic goods-products made by firms in the United States.

Foreign goods-products made by firms in other countries.

What is meant by Global competition?

What is an example of a company falling behind?

The ability of profit-making organizations toCompete with other businesses in

other countries.

The United States automobile manufacturersis an example of an industry that fell behind.

How and Why?

the driving force behind the major decisions madeby most large companies today. Ability of businessesfrom one country to compete with businesses fromanother country

•NICs are countries whose economies have not yet reached first world status but have outpaced their developing counterparts.

•NICs are nations undergoing rapid economic growth (usually export-oriented).

•In many NICs, social upheaval can occur as primarily rural, agricultural populations migrate to the cities, where the growth of manufacturing concerns can draw many thousands of laborers.

First World CountriesSecond World CountriesThird World Countries

Where Do Your Customers Come

From?

Web Quest- Research one of the major retailers you know.

(Wal-Mart, Target, or (Wal-Mart, Target, or Sears)Sears)

Answer these questions:1.What percentage of goods do

they sell come from outside the United States?

2.Name 8 countries they buy from?

3.Give examples of what types of products they buy from each country

1. Effective2. Efficient

To Compete and Survive!To Compete and Survive!

What does that mean andWhat does that mean andhow does it occur?how does it occur?

Occurs when an organization makes the right decisions

in deciding 33 things: 1) What products or services

to offer to customers.2) How to produce the

products3) How to deliver them to the

consumers

Occurs when an organization produces needed goods or services Expected Quality Expected Quality ANDAND

Quickly ANDQuickly AND At a low cost, At a low cost, without wasting time without wasting time or materialsor materials

Which of the following actions represents effectiveness and which represents efficiency?? Survey people to see what they like in a

product ? New equipment was installed to produce

more items in less time ? A new product is produced by a robot

based on customers’ answers to 5 questions

Which of the following actions represents effectiveness and which represents efficiency. Survey people to see what they like in a

product (Effectiveness) New equipment was installed to produce more

items in less time (Efficiency) A new product is produced by a robot based on

customers’ answers to 5 questions (Efficiency and Effectiveness).

Companies MUST BE efficientExtent of efficiency is measured by output or amount produced within a given time.Productivity refers to producing largest quantity in least amount of time by using efficient methods an modern equipment.

Workers are more productive when they Workers are more productive when they areare▪ Well equipped▪ Well trained▪ Well managed

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Why is Quality is important to customers

Why is Quality important to retailers

TQM is a commitment to excellence Baldridge National Quality

Award (National honor given annually by federal agency)

Japan’s Quality Award Program is the Deming Award

Recipient of these prestigious awards always show increase in sales.

1. Specialization 2. Technology and

Innovation3. Reorganization

Employees are training for specific types of jobs rather than general training Example: General mechanic or workers that

specialize in transmission repair, body repair, engine repair, etc.

Specialization builds experts in their field Improves quality and increases amount produced.

Specialization improves efficiency. Effectiveness improved by mass production,

assembly line production, up-to-date equipment…robots

Effectiveness can be improved though advanced technology…equipment, process, & materials. United States improves efficiency by

encouraging invention and innovative ideas from their workers.

Most difficult way to increase efficiency

Old way to increase efficiency in the US: downsize (layoff workers) and cut back on goods and service offered.

Rethink organizationa)Redesign the workflowb)Recognize employees c)EMPOWER the entire team showed

improvement in production, quality, morale, and profits.

Reorganizing made US competitive in global market.

CHECKPOINT CHECKPOINT 1.21.2

CRITICAL CRITICAL THINKING 1.2THINKING 1.2

Lisa Gansky - TED January 2011

Consumer Reports magazine rates consumer products, including cars.

For many years, the annual car ratings listed foreign cars as superior to domestic ones.

BUT DOES QUALITY REALLY BUT DOES QUALITY REALLY MATTER?MATTER?

Focus attention on customers’ needs.

Provide excellent customer service.

Offer high-quality goods and services.

Growth and Prosperity

The total market value of all goods and services produced in a country in a year.

Gross Domestic Product

Gross Domestic Product (GDP)

Underground economy

Entrepreneur Franchise Franchisor Franchisee Intrapreneur

Overall, the United States is a prosperous nation

Around the world, people admire and envy this country’s economic strength.

P. 15

What about worldwide?

Gross Domestic Product (GDP) – total market value of all goods produced and services provided in a country in a year.

Individual well-being -2nd measure of a nation’s wealth.

Small businesses are part of the “Entrepreneurship movement” Someone who starts, manages,

owns, and assumes the risk of a business…

Part-time, full-time, with little or no money

Located at home or at a business location

Is the Majority of business in the United States

Employers of more than half of all workers

Firms with 1 to 4 employees 3,617,764Firms with 5 to 9 employees 1,044,065Firms with 10 to 19 employees 633,141Firms with 20 to 99 employees 526,307Firms with 100 to 499 employees 90,386Firms with 500 employees or more 18,469Firms with 500 to 749 employees 6,060Firms with 750 to 999 employees 3,038Firms with 1,000 to 1,499 employees 3,044Firms with 1,500 to 1,999 employees 1,533Firms with 2,000 to 2,499 employees 904Firms with 2,500 to 4,999 employees 1,934Firms with 5,000 employees or more 1,956Firms with 5,000 to 9,999 employees 975Firms with 10,000 employees or more 981

Operated by one or few individuals

Few produce goods Employ fewer than 100 people Over 98% of all business Over half of US workers are

employed by businesses with fewer than 500 employees.

Owners usually highly skilled in one or more areas

Many earn less than $250,000 a year in revenue

What is a franchise? Legal agreement in which an individual

purchases the right to sell a company’s product or service under the company’s name or trademark

Examples? Franchisor: the parent company

(provider)Franchisee: the distributor of

product or services

Positive Parent company

provides the product or service

Provides special training

Greater chance of survival

Benefit from corporate name and advertising

Negative Start up fee Must adhere to their

rules and contract Chance of fraud

Find Ten (10) examples of franchises in Newtown PA 18940

Report their HQ Address

Greatly depends on manager effectiveness

Entrepreneur assumes the risk of success or failure

3 out of 5 fails within 3 years

Economic & financial reason for failure

To customers To workers To management To competitors To investors To the public

(Touching Lives)

RISK OBLIGATIONS

64%

24%

6%

4% 1% 1%

Business Failure ReasonsEconomic Causes

Finance Causes

Disaster and Fraud

Neglect Causes

Strategy Causes

Experience Causes

Economic: Economic: Industry Weakness, Low Profits, Low SalesFinance; Finance; Heavy expenses, Burdensome debtsDisaster: Disaster: Hurricanes, floods, theftNeglect?: Neglect?: conflicts, family problems, and poor work habitsStrategyStrategy: Overexpansion, difficulty collecting from customersExperience: Experience: inadequate planning and inexperience

Intrapreneurship versus Entrepreneurship

Company gives employee the freedom and funds to develop new products, processes, or services.

What do You Think? Employees benefits how? Employer benefits how? Consumers benefits how? Examples where used?

Companies have begun offering employees the opportunity to buy into the company. This is called a _____________________________(ESPO)

Employee Stock Ownership Plan

Employees buy shares of stock in the company which benefits the company $$$ and increased productivity.

Employees benefits by becoming more motivated which increases productivity.

Work hard and better.

Why do so many people start businesses, yet so many of the businesses

ultimately fail?

Businesses are easy to start but hard to operate and manage successfully

What is the main difference What is the main difference between an entrepreneur and an between an entrepreneur and an

intrapreneur?intrapreneur?

CHECKPOINT CHECKPOINT 1.31.3

CRITICAL CRITICAL THINKING 1.3THINKING 1.3

Underground EconomyUnderground Economy: Economic items or dollars not reported in GDP numbers. Illegal Activities Counterfeit Products Under the table employees

Estimated at 5% of the GDP Estimated at 5% of the GDP number during a bad economy number during a bad economy and as much as 20% during a and as much as 20% during a boom!boom!

Go to my faculty Webpage:Answer the Net BookMark

question on page 20 in textbook:

Complete the Crossword Puzzle

Take the Practice Test Print out Print out allall three (3) three (3)

assignments: Analysis, assignments: Analysis, Puzzle and Test and turn Puzzle and Test and turn them in for credit.them in for credit.

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