Business Chapter+01 PP flash

Chapter 1: Taking Risks and Making Profits within the Dynamic Business Environment

Introduction

• Companies engage in risky activities to achieve profits.

• Profits are essential for business growth and economic development.

Chapter Contents

• Business and Wealth Building

• The Importance of Entrepreneurs to Creation of Wealth

• The Business Environment

• The Evolution of U.S. Business

Learning Objectives

• LO 1-1: Describe the relationship between profit and risk and how they can raise living standards.

• LO 1-2: Explain the role of entrepreneurship and productive factors in wealth creation.

• LO 1-3: Analyze economic conditions and taxation impact on businesses.

• LO 1-4: Discuss technological influences on businesses.

• LO 1-5: Explore competitive strategies for businesses.

• LO 1-6: Identify social changes affecting businesses.

• LO 1-7: Review strategies for businesses to handle global challenges like war and terrorism.

• LO 1-8: Assess how historical trends impact future job markets for graduates.

Business and Wealth Building

Definition of Business

• A business is an activity aimed at providing goods and services to generate profit.

Types of Products

• Goods: Tangible items (e.g., computers, food, clothing).

• Services: Intangible offerings (e.g., education, healthcare).

Role of Entrepreneurs

• Entrepreneur: Someone who invests time and money into starting and managing a business.

Revenues, Profits, and Losses

Financial Definitions

• Revenue: Total earnings from sales during a specific timeframe.

• Profit: Surplus remaining after expenses (salaries, costs) are deducted from revenue.

• Loss: Occurs when expenses exceed revenues.

Matching Risk with Profit

• Risk: The potential to lose time and investment; inherent in entrepreneurship.

• Profitability varies across industries; larger risks may yield greater rewards.

Standard of Living and Quality of Life

Definitions

• Standard of Living: Represents the goods and services accessible to individuals based on income.

• Quality of Life: Assesses overall well-being, including factors like education, environment, and healthcare.

Economic Context

• The U.S. enjoys a high standard of living, contrasting with differing costs abroad.

Responding to Various Business Stakeholders

Stakeholders

• All parties affected by a business's actions (employees, customers, owners).

Outsourcing and Insourcing

• Outsourcing: Hiring external organizations for functions (often overseas).

• Insourcing: Foreign companies establishing operations within the U.S.

Using Business Principles in Nonprofit Organizations

• Nonprofit Organization: Focuses on social, educational goals rather than profit generation.

• Financial surplus is used to advance their mission.

The Importance of Entrepreneurs to the Creation of Wealth

Pros and Cons of Entrepreneurship

• Positives: Independence, control, opportunity for wealth.

• Negatives: Risk of failure, lack of employee benefits.

Factors of Production

• Five key resources critical to wealth creation:

  1. Land

  2. Labor

  3. Capital

  4. Entrepreneurship

  5. Knowledge

The Business Environment

Overview

• Influencing factors for business development:

  1. Economic and legal environment

  2. Technological environment

  3. Competitive environment

  4. Social environment

  5. Global business environment

Economic and Legal Environment

• Government Role: To stimulate entrepreneurship by:

  1. Enabling private business ownership.

  2. Facilitating free markets.

  3. Supporting contract enforceability.

  4. Maintaining a stable currency.

  5. Curbing corruption.

Technological Environment

Impact of Technology

• Technology enhances productivity and drives innovation.

• E-commerce: Growth of online commercial activities (B2B and B2C).

Challenges of Technology

• Data security risks like identity theft.

Competitive Environment

Key Strategies

• Focus on quality and service to meet customer expectations.

• Empowerment: Decentralizing decision-making to frontline employees for better responsiveness.

Social Environment

Demographic Trends

• Demography: Study of population characteristics affecting business.

• Increased diversity within the workforce.

• Notable trends include a rising number of older adults and single-parent families.

Global Environment

Globalization

• International expansion thanks to advanced distribution and communication.

Impact of War and Terrorism

• Economic strain from military expenditures affects business operations.

Conclusion

• Continuous adaptation to change is essential for success in the dynamic business landscape.

• Understanding principles of entrepreneurship, wealth creation, and the business environment sets the foundation for future leadership roles.