I. WHAT IS A BUSINESS?

LEARNING GOAL 1. Describe how businesses and nonprofit organizations add to the standard of living and quality of life.

A. A BUSINESS is any activity that seeks profit by providing goods and services to others.

B. BUSINESSES CAN PROVIDE WEALTH AND A HIGH QUALITY OF LIFE FOR ALMOST EVERYONE.

1. Entrepreneurs may not only become wealthy themselves, but also provide employment for other people.

2. Businesses are a part of an economic system that helps to create a higher standard of living and quality of life for everyone.

3. The STANDARD OF LIVING of a country refers to the amount of goods and services people can buy with the money they have.

4. The QUALITY OF LIFE of a country refers to the general well-being of a society.

C. NONPROFIT ORGANIZATIONS USE BUSINESS PRINCIPLES.

1. Nonprofit organizations such as government agencies, public schools, charities, and social causes help make a country more responsive to all the needs of citizens.

2. A NONPROFIT ORGANIZATION is an organization whose goals don't include making a profit for its owners.

3. You need the SAME SKILLS to work in non-profit organizations that you need in business. Skills needed include information management, leadership, marketing, and financial management.

4. Businesses, nonprofit organizations, and volunteer groups often help to accomplish the same objectives.

II. THE IMPORTANCE OF ENTREPRENEURSHIP TO WEALTH.

LEARNING GOAL 2. Explain the importance of entrepreneurship to the wealth of an economy and show the relationship of profit to risk assumption.

A. OPPORTUNITIES FOR ENTREPRENEURS.

1. An ENTREPRENEUR is a person who risks time and money to start and manage a business.

2. Entrepreneurs have come from all over the world to prosper in America.

a. The number of Latino-owned businesses in the United States grew by 76% in the 1990s.

b. Increases have also been made by Asians, Pacific Islanders, American Indians, and Alaskan Natives.

3. Corporate DOWNSIZING, eliminating some workers or managers to make a business more efficient, is a factor contributing to the increasing number of entrepreneurs.

4. Such reductions are creating new opportunities for entrepreneurs.

5. The 21st century will provide more opportunities, and challenges, for those who understand how the business system works.

B. MATCHING RISK WITH PROFIT.

1. PROFIT is money a business earns above and beyond what is spends for salaries, expenses, and other costs.

2. A LOSS occurs when a business's costs and expenses are more than its revenue, the money a business earns by selling its products.

3. RISK is the chance you take of losing time and money on a business that may not prove profitable.

4. Not all companies make the same profit.

a. Those companies that take the most risk may make the most profit.

b. As a potential business owner, you should do research to find the right balance between risk and profit.

C. THE ROLE OF THE FACTORS OF PRODUCTION IN CREATING WEALTH.

1. THE FACTORS OF PRODUCTION the resources businesses use to create wealth.

a. LAND (and other natural resources)

b. LABOR (workers)

c. CAPITAL (e.g., money, machines, tools, and buildings)

d. ENTREPRENEURSHIP.

e. KNOWLEDGE.

2. Some experts believe that the most important factor of production is KNOWLEDGE.

3. Entrepreneurship and knowledge are key components in enriching today's countries.

4. Entrepreneurship also helps make some states and cities rich while others remain relatively poor.

III. THE BUSINESS ENVIRONMENT.

LEARNING GOAL 3. Examine how the economic environment and taxes affect businesses.

A. The FIVE KEY ENVIRONMENTAL FACTORS critical to the success of business are:

1. Economic environment, including taxes and regulation.

2. Technological environment.

3. Competitive environment.

4. Social environment.

5. Global business environment.

B. Business prospers in a healthy environment.

C. THE ECONOMIC ENVIRONMENT.

1. People are willing to take the risk of starting businesses if they feel that the risk isn't too great.

2. GOVERNMENTS CAN LESSEN THE RISK of starting a businesses thereby increasing entrepreneurship and wealth by:

a. Allowing private ownership of business.

b. Passing laws that enable businesspeople to write contracts that are enforceable in court.

c. Establish a tradable currency.

d. Eliminate corruption in business and government.

e. Keep taxes and regulations to a minimum.

IV. THE TECHNOLOGICAL ENVIRONMENT.

LEARNING GOAL 4. Illustrate how the technological environment has affected businesses.

A. The INTERNET is the network of computer and telecommunication equipment that links people throughout the world into one unified communications system.

B. THE IMPORTANCE OF INFORMATION TECHNOLOGY.

1. Many companies now have a chief information officer responsible for getting workers the information they need.

2. That information includes information about customers, competitors, and the changing business environment.

3. The problem today is that few businesses are managing information well.

C. RESPONDING TO CUSTOMERS.

1. Technology has also made it possible for businesses to become more responsive to customers.

2. A DATABANK, an electronic storage file where information is kept, can be used to store vast amounts of information about customers.

3. ELECTRONIC DATA INTERCHANGE involves data from bar codes being sent directly to manufacturers, which then replace the items quickly.

4. Growing use of this technology is making it possible for businesses to save time and money, resulting in less expensive products.

V. THE COMPETITIVE ENVIRONMENT.

LEARNING GOAL 5. Identify various ways that businesses can meet and beat competition.

A. Making quality products is not enough to stay competitive in world markets. Now you have to offer quality products and outstanding service at competitive prices.

B. COMPETING BY DELIGHTING THE CUSTOMER.

1. Successful companies must listen to customers to determine their wants and needs and then adjust their products, policies, and practices to meet these demands.

2. Business is becoming customer-driven-this means that customers' wants and needs come first.

C. COMPETING BY MEETING THE NEEDS OF THE COMMUNITY.

1. STAKEHOLDERS are all the people who are affected by the policies and activities of an organization.

2. Stakeholders include customers, employees, stockholders, suppliers, environmentalists, and elected officials.

3. The challenge for companies in the 21st century will be to ensure that all stakeholders' needs are considered and satisfied.

D. COMPETING BY RESTRUCTURING AND MEETING THE NEEDS OF EMPLOYEES.

1. To meet the needs of customers, firms must give their front-line workers more freedom to respond quickly to customer requests.

2. In many companies this has meant EMPOWERING employees and using CROSS-FUNCTIONAL, SELF-MANAGED TEAMS.

3. It sometimes takes years to restructure and organization so that managers are willing to give up some of their authority.

E. COMPETING BY CONCERN FOR THE NATURAL ENVIRONMENT.

1. Environmental issues include the potential benefits and hazards of nuclear power, recycling, management of forests, ethical treatment of animals, and protection of the air we breathe and the water we drink.

2. Environmentalism must be a major focus of everyone, and is becoming increasingly so.

VI. THE SOCIAL ENVIRONMENT.

LEARNING GOAL 6. Demonstrate how the social environment has changed and what the reaction of business has been.

A. DEMOGRAPHY is the statistical study of the human population to learn its size, density, and characteristics.

B. MULTICULTURALISM AND ITS ADVANTAGES FOR BUSINESS.

1. The U.S. of the future will be very different from what it is today.

a. Our population will increase by approximately 50%. As the population grows, there will be a greater need for goods and services, creating more jobs.

b. The Hispanic, Latino, and Asian populations will increase.

2. MULTICULTURALISM is the process of optimizing the contributions of people from different cultures.

3. As American workers learn to work with people of all nations, they gain an ADVANTAGE WHEN IT COMES TO NEGOTIATING AND WORKING WITH PEOPLE IN GLOBAL MARKETS.

4. A diverse population is a strong population-there is strength in different views and perspectives.

C. THE INCREASE IN THE NUMBER OF OLDER AMERICANS.

1. By 2030, the 76 million baby boomers will be senior citizens.

2. Think of the career opportunities of providing goods and services for older adults. What opportunities do a wealthy, older market offer retailers, recreation specialist, etc.?

D. TWO-INCOME FAMILIES

1. The high costs of housing have made it difficult for many households to live on just one income.

2. Many companies are implementing programs to assist two-income families.

a. Many employers provide child care benefits of some type, some through cafeteria benefits packages.

b. Other companies provide parental leave, flexible work schedules, and elder care programs.

3. Some companies are increasing the number of part-time workers by allowing workers to stay home and send in their work by telecommunications, a practice known as TELECOMMUTING.

VII. THE GLOBAL ENVIRONMENT.

LEARNING GOAL 7. Analyze what businesses must do to meet the global challenge.

A. The global environment of business affects all other environmental influences.

1. The number one global environmental change today is the growth of international competition and the increase in free trade among nations.

2. U.S. manufacturers have implemented the most advanced quality methods, after analyzing the best practices throughout the world.

3. U.S. workers in many industries are more productive than workers in Japan and other countries.

4. PRODUCTIVITY is the volume of goods an services that one worker can produce.

5. Businesses have gone beyond simply COMPETING with organizations in other countries to learning to COOPERATE with inter national firms.

B. GLOBAL OPPORTUNITIES AND FREE TRADE AGREEMENTS.

1. NAFTA, signed in 1994, opened trade between the United States, Canada, and Mexico. (NAFTA is discussed in more detail in Chapter 3.)

2. The intended goal was for consumers and businesses in all three countries to benefit from unrestricted trade.

3. In general, NAFTA has not been the success imagined by some, nor the disaster proposed by others.

4. Trying to protect manufacturers from inter national competition often leads to stagnation and the inability to compete globally.

5. European leaders recognize the benefits of free trade and have negotiated free trade agreements creating the EUROPEAN UNION (EU).

C. HOW GLOBAL CHANGES AFFECT YOU.

1. Many think that the fair trade agreements will lead to many CAREER OPPORTUNITIES for American college graduates.

2. Students must PREPARE themselves to compete in changing global environments.

VIII. THE QUALITY IMPERATIVE.

LEARNING GOAL 8. Compare the new quality standards and identify what businesses are doing to meet those standards.

A. QUALITY in is defined as providing customers with high quality goods and services that go beyond the expected.

B. THE QUALITY STANDARD: THE BALDRIGE AWARD.

1. One standard for quality was set with the introduction in 1987 of the Malcolm Baldrige National Quality Awards.

2. The award measures quality in three ways:

a. By customer satisfaction

b. By product and service quality

c. By quality of internal operations.

C. QUALITY, ISO 9000, AND ISO 14000 STANDARDS.

1. The new global measures for quality are called ISO 9000 standards.

2. ISO 9000 refers to quality management and assurance standards published by the International Organization for Standardization.

a. ISO standards provide a 'common denominator' of business quality accepted around the world.

b. The European Union is demanding that companies doing business with the EU be certified by ISO standards.

3. ISO 14000 is a collection of the best practices for managing and organization's environmental impacts.

IX. THE EVOLUTION OF AMERICAN BUSINESS.

LEARNING GOAL 9. Review how trends from the past are being repeated in the present and what that will mean for the service sector.

A. Businesses in the U.S. have become so productive that fewer workers are needed to product GOODS, or tangible products.

B. PROGRESS IN THE AGRICULTURAL AND MANUFACTURING INDUSTRIES.

1. The use of TECHNOLOGY allowed the agricultural industry to become so PRODUCTIVE that the number of farmers dropped for about a third of the population to less than 2 percent.

2. AGRICULTURE is still a major industry in the U.S., but MILLIONS OF SMALL FARMS HAVE BEEN REPLACED BY FEWER AND LARGER FARMS.

3. FARMERS LOST THEIR JOBS and went to work in factories.

4. TECHNOLOGY made manufacturing more productive and workers lost their jobs.

C. PROGRESS IN SERVICE INDUSTRIES

1. Many workers who lost their manufacturing jobs found jobs in service industries.

2. SERVICES are intangible products.

3. Since the mid-1980s, the SERVICE SECTOR HAS GENERATED ALMOST ALL OF OUR ECONOMY'S INCREASES IN EMPLOYMENT.

4. Projections are that the service section WILL GROW SLOWLY in the coming decades.

5. The service era is quickly losing out to a new GLOBAL INFORMATION REVOLUTION that is breaking down barriers between nations.

D. YOUR FUTURE IN THE GLOBAL ECONOMY.

1. This information-based global revolution will alter the way business is done in the future.

2. Most of the CONCEPTS AND PRINCIPLES that make business more effective and efficient are applicable in government agencies and nonprofit organizations.