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Objectives
1. What a business is2. The basic functions of business3. How to distinguish businesses from each
other based on general characteristics4. The importance of e-commerce5. The concept of derived demand6. The major types of businesses that
comprise the industrial market
5.1 Defining Business
What is Business? Business is all the activities involved in
producing and marketing goods and services Called companies or businesses
Every company seeks to satisfy economic needs by planning, organizing, and controlling resources in order to produce and market goods or services
The Functions of Business
Two Primary Functions: The production and the marketing of goods
and services Both functions depend heavily on the activity
called management
Management – Is used to plan, organize and control available resources to reach company goals
Production
Production is the process of: Creating, growing, manufacturing, or
improving on goods and services
Songwriter – creates a song Farmer – grows wheat Ford Motor Company – manufactures
cars
Marketing
When goods or services are created, they must be sold in the marketplace
Marketplace exists whenever a product is sold to a customer- when an exchange takes place between two or more people
The exchange process is the focus of the broad range of activities called marketing!
Management
All resources used; labor, capital, natural resources – must be brought together (organized) through management to achieve company goals
Management has several meanings: Money or anything that can be sold for cash
quickly Also means to get credit or borrow money As a supporting function of management,
finance means money management
Types of Businesses
Businesses come in a variety of shapes and sizes and are classified differently
Size – large or small Profit Orientation – Profit or Non-Profit Market (served) consumer or industrial Type of Product – Goods, services, or
something else
Large VS Small
Small Business – one that is operated by only one or a few people and have less than 100 employees Mom & Pops Neighborhood Stores Florists/Gift Shops Delicatessens
They make up about 95% of all U.S. businesses are classified as small businesses
They employ over half of the private sector workforce (nongovernment)
Large VS Small
A Large business is usually considered one that has more than 1000 employees
Companies are usually national or global They have many different departments
Domestic VS. Global
Domestic Markets have buyers in a single country
The Global Market is the exchange of goods and services among nations
The internet, along with faster transportation has made it much easier to do business globally
The trend is moving from domestic markets to global markets Established companies that have domestic success for
many years are now facing international competition ~they must “get with the program” to stay competitive
Profit VS NonProfit
Profit is the motivating factor in starting a business in a market economy, however, its not the only motivator
Service Organizations – NonProfit – are not operated to make a profit; they want to make a difference in peoples lives’ Examples:
YMCA/ YWCA Boys/Girls Clubs of America Ronald McDonald House
Profit VS NonProfit
NonProfits still must hire employees and pay the costs and expenses of running the business
All remaining income (after paying expenses) goes to the charitable cause. No profit is made
Public VS. Private
Public Sector – Not intended to make a profit Most local, state, and federal government
agencies fall into this category Public Schools Public LibrariesPublic sector organizations buy one-third of all
goods and services sold in the U.S. each yearGovernment Agencies are usually required to buy
the least expensive product that meets minimum specifications
Businesses not associated with the government are part of the Private Sector
Goods or Services
Goods – tangible things you can touch Services – intangible; dry-cleaning, haircuts,
mall security, etc. In the 1990s , a whole new service opened up;
The Internet!! Internet Service Providers Web page designers Telecommunication Providers
American Businesses will continue to grow in the early 21st Century; however, growth will be in service industries rather than manufacturing
The internet will continue to grow and shape business
Consumer VS. Industrial
Industrial or Business to Business Market- is based on; derived from the demand for consumer goods and services
The demand for industrial goods derived Marketers of industrial goods need to be
aware of how their markets will change as a result of changes in the consumer market When consumers buy more cars. The derived
demand for auto components (tires, batteries, etc) increases
Industrial Market consists of:
Extractors – Businesses that take something from the earth or sea; agriculture, forestry, fishing and mining
Construction Companies – Build structures; houses, buildings or manufacturing plants Manufacturing plants – producing goods to sell
to other manufacturers or wholesalers and retailers. Called business to business marketing
Industrial Market consists of:
Wholesalers – Buy their goods from manufacturers and resell them to industrial users, other wholesalers and retailers. Also called distributors
Retailers – Buy their goods from wholesalers or directly from manufacturers and resell them to the consumer market. Caters to the consumer
E-CommerceE-Tailing
Has become a whole new category of business
The buying and selling of goods and services through the use of electronic networks, usually the internet
Can also be classified as any activity that uses electronic communication in the exchange of goods and services
Began before the internet in 1996 (but 20 times faster); scanners for grocery items, debit cards etc.
In Review ~ (Objectives)Answer the following in your notebooks……..
1. What is a business?2. What are the basic functions of business?3. How do you distinguish businesses from
each other?4. What is the importance of e-commerce?5. What is the concept of derived demand?6. What are the major types of businesses
that comprise the industrial market?
Section 5.2 Ethics and Social Responsibility
Objectives:1. The areas in which businesses are
thought to have social responsibilities2. The ways business activities impact our
environment3. Ethics defined & how marketers make
ethical choices4. Consumerism5. Current workplace trends and employee
concerns
Ethics and Social Responsibility
Other than following the law and paying taxes, should businesses have any other social responsibility?Most consumers feel business should act in a sociably responsible manner and consider the social and environmental consequences of their actions
Social Responsibility – businesses are part of a larger society and should be held accountable to that society for their actions
Social Responsibility
Ben and Jerry’s – donates 7.5 % of its pretax earnings to the disadvantaged and needy
They also contribute to groups that strive for social change and environmental issues
McDonalds Funds Ronald McDonald houses around the
country Medical Research, diabetes, MS, Salvation
Army, etc
Environmental Issues
Laws govern many environmental issues that affect us: Prohibit improper disposable of medical,
chemical, and other hazardous wastes
Air and Water Pollution – EPA to help protect the environment from pollution.Clean Air Act – Vehicles must pass emission testing and use unleaded gas to protect people and animals from the harmful effects of lead
Environmental Issues
Conservation and Recycling – The price and availability of oil is greatly affected by political and economic disruptions; this makes it unpredictableExploring other fuels has become necessary, car manufacturers are producing smaller cars that are more fuel efficientSome fuels create less pollution
More companies and households are recycling… plastic bottles……….
Environmental Issues
Green Marketing – Companies make an effort to produce and promote environmentally safe products. They are marketed as: Ozone-Safe Recyclable Environmentally Friendly BiodegradableThis helps to create customer loyalty, there are
a lot of people/consumers willing to pay more money for products that are environmentally friendly
Business Ethics
Ethics – Guidelines for good behavior; the way you act when no one is looking
Knowing the difference between right and wrong and doing the right thing
Ethical behavior is fair and takes everyone's well-being into account
Unethical Behavior
Bait and Switch Advertising – Advertising a particular product that a store doesn’t have in stock and switching them to a (higher) price product
Selling unsafe products is prohibited.
But……….. The sale of alcohol and cigarettes are often
glamorized.
Is this ethical?
Three Basic Questions Marketers must ask themselves on ethics… According
to The American Marketing Association
1. Is the practice right, fair and honest?2. What would happen if the product were
marketed differently?3. What practice will result in the greatest
good for the greatest amount of people?
Product Recalls – Some businesses will voluntarily take products off the shelf and recall then before the Consumer Product Safety Commission forces them to do so. Tylenol………..
Consumerism
The societal effort to protect consumer rights by putting legal, moral, and economic pressure on business
Began in the early 1900’sfocused on product purity, postal rates and banking
1930’s – 1950’s – Concentrated on product safety, labeling, misrepresentation, deceptive advertising, consumer refunds and bank failures
Consumerism
1960’s – 1980’s – Greatest growth in consumerism and involved all areas of marketing.
President John F. Kennedy created the Consumer Bill of Rights
The Bill stated that consumers have four basic rights:
Consumer Bill of Rights
1. To be informed and protected against fraud, deceit, and misleading statements, and to be educated in the wise use of financial resources
2. To be protected from unsafe products3. To have a choice of goods and services4. To have a voice in product and marketing
decisions made by government and business
Consumerism
1960’s to 1970’s – Ralph Nader – Unsafe at any Speed – Focused on the Automobile Industry & what it could do to make cars safer
The Federal Trade Commission – expanded its role to include consumer complaints
Containers have become recyclable in response to consumers concerns over the environment
Workplace Trends and Concerns
Employee Issues have become the center of concern since the 1990s
FlextimeTelecommutingFamily LeaveHelp for the Physically ChallengedHealth Care ReformOn-Site Child Care
Workplace Trends and Concerns
Flextime – Allows workers to choose their work hours. Early Start, Early finish/ 4 day workweeks
Telecommuting – Working from home, usually by computer
Family Leave – Legally required by federal law for large employers. Workers are entitled for up to 12 weeks of nonpaid family leave every two years
Workplace Trends and Concerns
Help for the Physically Challenged – Mandated by The Americans with Disabilities Act of 1990 –
Employers must provide physically challenged people with the same job opportunities and work site access that others have
Health Care Reform – Most people have insurance through their jobs; How to cover these people has become a National Health Care debate.
Workplace Trends and Concerns
On-Site Child Care – This has grown in popularity with the
increase in two-income families. When this benefit is provided in any form, it tends to reduce employee turnover
Other Concerns:Sexual Harassment – Unwelcome
Sexual attention or the creation of an intimidating, hostile or offensive working environment
Computer Privacy and Security