Chapter 1: The Changing Face of Business

What is Business?

A broad, all-inclusive term applied to various enterprises.
All profit-seeking activities and enterprises.
Provider of goods and services necessary to an economic system.
Drives the economic pulse of a nation.
Provides the means through which a citizens' standard of living improves.
An exchange between a buyer and a seller.

What are Profits?

Rewards earned by businesspeople who blend people, technology, and information to create and market wants-satisfying goods and services.
$\text{Profits} = \text{Revenues} - \text{Expenses}$
Profits provide incentives to start and expand companies.

Not-for-Profit Organizations

Not-for-profit organizations with objectives other than returning profits to their owners.
Public service goals above profits; operate in both public and private sectors.
Public: government agencies, political parties, and labor unions; Private: museums, libraries, trade associations, and religious organizations.
The concepts and challenges of for-profit firms apply to not-for-profits.

Factors of Production

Land: natural resources; payments: $\text{Rent}$ .
Labor: physical and intellectual inputs; payments: $\text{Wages}$ .
Capital: technology tools, information, and physical facilities; payments: $\text{Interest}$ .
Entrepreneurship: willingness to take risks to create and operate a business; payments: $\text{Profit}$ .

The Private Enterprise System

A U.S. economic system that rewards firms for their ability to identify and serve the needs and demands of customers.
Capitalism is another name for the private enterprise system.
Adam Smith is the father of capitalism, who believed in the "invisible hand" to regulate competition.
To compete, each firm must provide a competitive differentiation to set itself apart.

Basic Rights in the Private Enterprise System

Right to Private Property – own, use, buy, sell and bequeath most forms of property; including land, buildings, machinery, and equipment.
Right to profits after taxes, earned through business activities.
Competition – allows for the public to set rules for competitive activity.
Freedom of Choice – citizens choose their own employment, purchases, and investments.

The Entrepreneurship Alternative (1 of 5)

The entrepreneurial spirit fuels growth in the U.S. economy.
The entrepreneurial spirit is the source of new jobs.
Entrepreneurs are risk takers who recognize marketplace opportunities and use their capital, time, and talents to pursue profits.
The willingness of individuals to start new ventures drives economic growth and keeps pressure on existing companies to satisfy customers.

The Seven Eras in Business History

Colonial (Pre-1776): Primarily Agricultural.
Industrial Revolution ( $1760 \text{ to } 1850$ ): Mass production by semiskilled workers, aided by machines.
Production (Through the $1920s$ ): Emphasis on producing more goods faster; production innovations such as assembly lines.
Marketing (Since $1950s$ ): Consumer orientation; seeking to understand and satisfy needs and preferences of customer groups.
Relationship (Began in $1990s$ ): Benefits derived from deep, ongoing links with individual customers, employees, suppliers, and other businesses.
Social (Since $2000s$ ): New ways to businesses and consumers to communicate and share information through the internet and social media.

Strategic Alliances

To take full advantage of available opportunities, businesses form partnerships with other organizations.
One form of partnership is a strategic alliance; creates a competitive advantage for the businesses involved.
Example: Alexa voice-enabled assistant will be heard in Ford, Toyota, Hyundai, and Volkswagen automobiles.

The Green Advantage

A way to build relationships is to incorporate issues of value into your business that are of concern to customers.
Companies can create environmentally friendly products and processes.
Companies are well aware of saving energy, cutting emissions, reducing pollution and waste.

Current Business Workforce Trends

Keeping pace with accelerated change in today’s business world is crucial.
To keep pace with change, a skilled and knowledgeable workforce is an essential resource.
High-quality production workforces are needed to compete in global markets.
Knowledge is needed to stay on top of new technologies, advances, and innovation.
Integration of machines and artificial intelligence (AI) continues to expand.

Changes in the Workforce

Aging of the Population and Shrinking Labor Pool.
Increasingly Diverse Workforce.
Changing Nature of Work.
The need for flexibility and mobility.
Innovation through collaboration.
Artificial intelligence to innovate and become more efficient.

Aging of the Population and Shrinking Labor Pool

There are more than $8.5 \times 10^{6}$ U.S. workers 65 or older in today’s workforce, a $60\%$ increase compared to a decade ago.
The labor pool could fall short as some Baby Boomers retire.
Management challenges with a multi-generational workforce with up to five different generations.
Work-life styles, work expectations, and disparate levels of technological expertise.
Advanced technological skills will be required.

Increasingly Diverse Workforce

Workers in developing regions have moved to more prosperous countries like the United States to gain access to opportunities.
Diversity and inclusion must be included in workplace policies to retain employees.
Workplace success is enhanced through different genders, ethnic backgrounds, cultures, religions, ages, and physical and mental abilities.
Rapid technological change has intensified the hiring challenge by requiring workers with technical skills and advanced degrees.

Outsourcing and the Changing Nature of Work

A shift away from manufacturing, and more to services.
Outsourcing involves the use of outside vendors—contracting work out to another party—for the production of goods or fulfillment of services and functions previously performed in house.
Offshoring – relocating business processes, both production and services, to lower cost locations overseas.
Nearshoring – outsourcing production or services near a company’s headquarters.

Employment by Major Service Industry Sector

Services-providing sectors show growth; key areas include professional and business services; health care and social assistance; educational services; leisure and hospitality; etc.

Flexibility and Mobility

Exploration and implementation of various work arrangements.
Millennials are more open to freelancing or working on contract over traditional full-time employment.
Millennials care less about money and the work-comes-first lifestyle; value training, flexibility, diversity and inclusion, and getting along with co-workers.
Millennials prefer to use technology to collaborate online and share knowledge with a sense of mission.

Innovation through Collaboration

Businesses use teamwork in a creative environment where members solve problems or seize opportunities.
Crowdsourcing: enlisting the collective talent of a number of people to get work done.
Allows companies to find workers for a specific task or project in a more efficient and cost-effective way—using online marketplaces to hire global talent beyond their own workforce.

Today’s Manager

Importance of Vision: Perceiving marketplace needs and what an organization must do to satisfy needs.
Importance of Critical Thinking: Analyze and assess information, knowledge, and arguments for problem solving.
Importance of Creativity: Developing novel solutions or better ways to do business.
Ability to Lead Change: Changes resulting from technology, marketplace demands and global competition.

Importance of Vision

Marc Benioff, CEO of Salesforce.com, is considered a visionary leader because of his approach to technology and cloud computing.

What Makes a Company Admired?

Fortune’s World’s Most Admired Companies criteria: Innovation; People management; Use of corporate assets; Social Responsibility; Quality of management; Quality of products and services.