Business in society

Business today can be suymmed in two words: Rapi

Businesses found that they need to be more responsive if they want to remain profitable and competitive. Including big businesses and small ones.

What is the business environment?
It resembles the natural environment we live in, its all around us but not always noticeable. It includes tech, competitors, advertising, regulations, consumer demands, and money. When these elements of the business environment change like the weather and seasons would, companies need to predict, react and adapt accordingly. Those who fail find themselves struggling.

Although the environment in which businesses operate is always changing, the accelerated pace of change presents special challenges and opportunities for businesses today.

For example:

A students needs to buy course material for school. A couple of decades ago they would have needed to go to the bookstore and purchase it with cash or a check. They may have even gotten a few sweaters with the logo of the school, or some new pens, etc. the bookstore was probably open normal hours form nine to five, monday to friday. What happens then? The coursework for my particular class is not physical. The payment was done electronically instead of cash. The library may not have been open so I could have gone to another online seller like amazon and gotten my own physical copy or rented online. Never setting foot inside a store.

From this example you can see the way companies do business today is different compared to several years ago. It can be from the result of developments in technology, while others are the result of shifting consumer demands and trends. Regardless of the particular cause, though all businesses have to cope with the changing nature and pressures of the business environment, A large part

of this course will focus on the ways in which they do just that.

Business
A business is any person or organization that provides goods or services to consumers for the purpose of making a profit. Goods are tangible items, such as cars, television, or soda.
Service
A service is an action or work performed for payment. Services include things like haircuts, hotel stays or roller coaster rides.

Profit, Loss and Value

Businesses can generate profits form the sale of goods and or services. Profits are the financial reward that comes from taking the risk of running or owning a business, Businesses that suffer extraordinary losses during a short period of time, or slowly see their profits decline, may end up closing or filing for bankruptcy.

Profit and losses
Profit is the amount of revenue or income that a business owner retains after paying all the expenses associated with the operation of the business. If the expenses of the business exceed the revenue or income generated from operation then the business will suffer a loss.

Clearly the goal of most businesses is to generate a profit by increading revenue while minimizing expenses. One of the best ways they do this is by providing their customers with value

Value
When businesses talk about value, they are referring to the relationship between the price a customer pays for the good or service and the perceived benefits the customer receives in exchange for their time and money.

Value has become such a key component of todays business model that if you go to almost any fast food restaurant you’ll find a “value meal” or “value menu” advertised. Such businesses are sending the message to their customers that they’ll receive the highest value in terms of quantity obtained in exchange for money spent. Its a business model based on the belief that if you give your customers value then profit will follow. While all businesses seek to increase their revenue, what a business actually does with those funds can vary and depends on whether its a for profit or nonprofit organization.

For profit vs Nonprofit

Some organizations provide their goods and services in order to generate revenues (income) that can be used to further their purpose or mission.

Non profit
A nonprofit business is one that provides goods or services to consumers, but its primary goal is not to return profit to the owners of the business. Instead it uses those profits to provide a public service, advance a cause or assist others. Most nonprofits also rely on donations from individuals and businesses, grants, and government funding to help fund their work, since the revenue they raise rarely covers all of their operating costs.

Examples of nonprofit businesses

American Red Cross
Local Animal Shelter
Trevor Project

Much of what differentiates a for profit business from a nonprofit business goes on behind the scenes and isn’t very visible to the customer. For example, a nonprofit organization is subject to government regulation and oversight in ways that differ significantly from a for profit business. Nonprofits do not pay taxes on their revenue but how their funds are disbursed and how their operations are managed is tightly regulated.

Comparison of the attributes of for profit and not for profit businesses and highlight differences and similarities.

For Profit

Owned by individuals, partners or shareholders
Profit is used to pay owners, partners or shareholders
Profits are subject to taxation by local, state, and federal authorities

Both

Incurs expenses for operations
Provides goods and services to customers
Pays salaries to employee and managers
Generates revenues from sales

Profit

Generates revenues from contributions
Operated by board of directors, trustees or managers
Profit is used to further the mission of the organization
Profits are NOT subject to taxation by local, state and federal authorities

Factors of Production

Natural Resources

Has two fundamental characteristics. 1) they are found in nature and 2) they can be used for the production of goods and services. In order to provide benefit, people first have to discover them and then figure out how to use them in the production of a good or service. Examples consist of land, tree, wind, water and minerals

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A key feature of natural resources is that people can’t make them. They also tend to be limited.

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New natural resources can be discovered or new ways of extracting them, such as fracking for gas an oil. These natural resources can be renewable, such as forests, or non renewable such as oil, or natural gas. Its also possible to invent new uses for natural resources such as using wind to generate electricity. Resources that are cultivated or made with human effort can not be considered natural resources, which is why agricultural crops are not natural resources.

All businesses both profit and non need resources in order to operate and produce something to sell.
Inputs and outputs
Resources are the inputs used to produce outputs. Inputs for a restaurant include the labor of the employees, the cooking equipment in the kitchen, and the ingredients for the food on the menu. A restaurants outputs include food and serving customers.
A resource needs to be productive. A resource is productive because it can be used to create something else. Resources are also called factors of production.
Factors of production
There are four categories of resources
1. Natural resources (land)
2. Labor (human capital)
3. Capital (machinery, factories, equipment)
4. Entrepreneurship (somebody who recognizes a profit opportunity)

Labor

Refers to human resources also called human capital both physical or intellectual

The word labor often calls to mind physical labor working in a factory or field, constructing a building, waiting on tables, but it can refer to any human input (paid or unpaid) involved in the production of a good or service. This broader definition of labor is particularily important in todays technology driven business environment which relies heavily on the intellectual contributions of the labor force. Intellectual contributions include experience in and out of school training, skills, and natural abilities. In order to remain competitive, businesses place a premium on employees who bring these “hard skills” to the table. Many of the advances in our world today are the result of the application of intellectual human resources.

Finally labor brings creativity and innovation to businesses. Businesses use human creativity to address changes in consumer preferences and to invent goods and services that consumers haven’t even imagines yet. Without creativity, innovation would stall and economies would stagnate.

Capital

Is a resource that has been produced but is also used to produce other goods and services. This factor of production includes machinery, tools, equipment, buildings and technology.

Businesses must constantly upgrade their capital to maintain a competitive edge and operate efficiently.

Businesses have faced unprecedented technological change and have had to meet the demands of consumers whose lives increasingly take place in a virtual world.

Almost every business has an internet presence, and many customers are more accustomed to interacting with an online version of the business than a brick and mortar store.

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Its important to point out that money is not a resource and not factor of production. Remember that resources need to be productive. Resources have to be used to make something else and money by itself can not do that.

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You cannot use money to make a cake. You could use money to buy the ingredients, mixing tools, and an oven that you could use to bake the cake. The money that you spent making a cake far easier than growing wheat for the flour, making told by hand, learning how to construct an ove, and so on. But by itself, money can not produce anything. Its used to acquire the productive resources that can produce goods and services. You may have heard people talk about “financial capital” or “investment capital” which means money, however, in the specific context of describing factors of production, money is not a form of capital.

Entrepreneurship

It is a special form of labor provided by an entrepreneur. An entrepreneur is someone who is willing to risk their time and money to start or runa business usually with the hope of earning a profit in return. Entrepreneurs have the ability to organize the other factors of production and transform them into a business. Without entrepreneurship, many of the goods and services we consume today would not exist.

Example

Baking a cake. What factors of production go into the baking of a cake

Natural Resources: Wind, Harnessed to produce electricity that powers the electric mixer and oven.

Labor: The bakers labor combined with the creativity and skills needed to actually bake and decorate it.

Capital: Ovens, cake pans, flour, sugar, butter, and other ingredients used to make the cake

Entrepreneurship: An individual who starts the bakery or runs a home based business baking and selling cakes to customers

All four factor of production are required to create the outputs that would get you into the cake business.

Who is involved in a business?

Functional areas in business

The decisions about how best to use the factors of production to provide the goods or services of the business require a team of people working in a variety of jobs which can be categorized into different functional areas. As businesses grow larger, and their product and services become more complex, the number of functional areas within a business grows. Different functions within a business are performed and controlled by different parts of the business. Each functional area makes specific and valuable contributions to the organizations as a whole.

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Main functional areas of a business

Management: supervising other people
Operations: converting resources into products and services
Marketing/ Sales: Designing products and services to meet customer needs and convincing customers to buy them
Finance: obtaining and managing a business money
Research and development: innovating to create new products and services </aside>
An important reason for separating business operations into functional areas is to allow each to operate within it area of expertise, building efficiency and effectiveness across the business as a whole.

Functional areas in a business vary according to the nature of the market and the size of the business. For example, manufacturing companies like Nike and Apple have significant Research and Development departments in order to stay ahead of their competition. On the other hand, retail companies such as grocery stores may have no internet R&D department, but will be heavily invested in operations areas surrounding supply chain management. Also small businesses may not have enough workers to have separate departments for these functions, but the task that have to be accomplished in running the business will touch all of these functional areas.

Management

Operations (production, supply chain) - Finance(accounting, procurement, human resources) - Marketing/Sales - Research and Development (development, information technologies)

The primary role of managers in business is to supervise other peoples performance. Most management activities fall into the following categories:

Planning: managers plan by setting long term goals for the business, as well as short term strategies needed to execute those goals.

Organizing: Managers are responsible for organizing the operations of a business in the most efficient way - enabling the business to use its resources effectively

Controlling: a large percentage of a managers time is spent controlling the activities within the business to ensure that its on track to achieve its goals. When people or processes stray from the path, managers are often the first ones to notice and take corrective action.

Leading: managers serve as leaders for the organization in practical as well as symbolic ways. The manager leads teams through the developments of a new product. They may be seen as the leader of the organization when interacting with the community or suppliers.

Operations

Operations is where inputs are converted to outputs. Operations is the heart of a business, providing goods and services in a quantity and of a quality that meets the needs of the customers. Operations controls the supply chain, including procurement and logistics.

Marketing/ Sales

Marketing consists of all that a company does to identify customers needs and design products and services that meet those needs. They promote the services, determining how the service will be delivered and developing a pricing strategy to capture market share while remaining competitive.

Responsible for overseeing the company’s internet presence. (Website, blogs, social media campaigns, etc). Today social media marketing is one of the fastest growing sectors within the marketing function.

The goal of sales is to convince customers to agree to buy the business products and services. These transactions generate the revenue the company needs in order to operate profitably. Again, depending on the nature of the market and the company size, sales functional areas can vary in structure and approach: inside/outside representation, vertical/ horizontal focus, direct, etc. sales works to follow up on the leads created by marketing and activities generated by the sales force itself.

Finance

The finance function involves planning for, obtaining and managing a company’s funds. Finance managers plan for both short term and long term financial capital needs and analyze the impact that borrowing will have on the financial well being of the business. A company’s finance department answers questions about how funds should be raised (loans vs stocks) the long term cost of borrowing funds, and the implications of financing decisions for the long term health of the business.

Accounting is a crucial part of the finance functional area. They provide managers with info needed to make decisions about the allocation of company resources. This area is responsible for accurately representing the financial transactions of a business to internal and external parties, government agencies and owner/investors. Financial accountants are primarily responsible for the preparation of financial statements to help entities both inside and outside the organization assess the financial strength of the company. Managerial accountants provide info regarding costs, budgets, asset allocation and performance appraisal for internal use by management for the purpose of decision making.

Research and Development

The R&D function focuses on innovation which allows the business to introduce new products and services to their customers. A small business may not necessarily have a separate team of people who work only on R&D. The time and money devoted to R&D is usually not expected to generate a profit immediately. However, business have to devote some attention to R&D to stay ahead of their competition in the long term .

Key People Within Functional Areas

Management

Operations (COO) ~ Finance (CFO) ~ Marketing/Sales (CRO) ~ Research & Development (CTO)

The management functional area in most large corporations is led by the Chief Executive Office (CEO). Depending on company size, there may be a President in position as well.

The operations functional area is managed by the Chief Operations Officer (COO) In this example, operations consists of production, led by a vice president (VP), a supply chain department and a procurement area with director level people in charge

The finance functional area is led by the Chief Functional Officer (CFO) who is one of the most important “c-level” executives. In additon to running finance and accounting the CFO reports company results to the financia community. Finance also contains human resources in many companies and the legal department. It is common. For the CFO to have VPs of HR, Accounting and legal as direct reports. HR contains functions like employee training, compensation and benefits, and recruiting. Accounting has multiple functions, such as Account payable, receivable, record keeping and cash flow. The legal department is responsible for contracts, copyrights and various negotiations on behalf of the company

The marketing/sales functional area is managed by the Chief Revenue (CRO) which is a relatively new addition to c level executives. The CRO may have a sales VP and marketing vp as direct repots, but in some cases, the CRO may act as VP of sales or marketing. This functional area may also contain customer service with a director level manager in charge. Marketing has specialized functions, such as communication, social media, data science analysis, and product marketing. Customer service is usually responsible for customer relationship management (CRM) and problem resolution and support.

The research and development functional area is the lifeblood of manufacturing businesses. R&D is staffed with scientists, thought leaders subject matter experts, and industry analysts striving to provide the organization with knowledge and ideas to keep up with the competition. R&D is led by the Chief Technology Officer (CTO) who manages a development VP or similar title, depending on what technology products are being produced: semiconductors, athletic footwear, software systems, or dental appliances. In many organization, the information technology area (IT) responsible for providing internal technology tools to the company’s employees is housed in the R&D organization.

What a common name for the role filled by the top leader within each functional area? Chief

Interested Parties

An individual or group that has a legitimate interest in a company, organization or business. You may see these people and groups referred to as stakeholders in business writing and other media. The Stanford Research Institute defines stakeholders as “those groups without whose support the organization would cease to exist. Interested parties can affect or be affected by the actions of a business and they can exist both within and outside of a business.

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Interested Parties or stakeholders

Internal interest parties are groups or people who work directly within the business
External interested parties are groups outside a business or people who don’t work inside the business but are affected in some way by the decisions and actions of the business. </aside>

Internal Interested Parties

Employees
Manager
Owners

External Interested Parties

Customers - Want the business to produce quality products at reasonable prices.
Shareholders - Have an interest in business operations since they are counting on the business to remain profitable and provide a return on their investment in the business
Government - Need businesses to thrive in order to pay taxes that support government services, such as education, police and fire protection
Suppliers - Need the business to continue to buy their products in order to maintain their own profitability and long term financial health
Creditors - That supply financial capital, raw materials and services to the business want to be paid on time and in full
Society - As a whole is concerned about the impact that business operations have on the safety of the goods and services produced by the business
Distributors - Need the business to continue operating so that the products to distribute and operate profitably.

External Forces

Businesses do not operate in a vacuum, immune to the forces that shape our everyday life. Just like people, businesses interact with their surroundings and just like people, business react differently to their environment. How they respond to these external forces can make the difference between success and failure, especially in todays

Fast paced business, climate. Businesses Opry, with all of these forces in their environment, simultaneously and factors in one category can affect or complicate factors in another we can organize the external forces that affect businesses into the following six categories.

Political forces
Economic forces
Social forces
Technological forces
Legal forces
Environmental forces

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A quick way to remember these categories is with the abbreviation PESTLE

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Political Forces

Government policies have a huge impact on businesses. Tax policies at all levels of government can influence we are businesses, decide to locate the operations, and how they make investments. The low corporate tax rate is one reason that companies such as Apple, Microsoft and Google established offices in Ireland, and are some of the largest employers there. Actions by the government can favor certain industries by providing financial incentives to encourage production. For example, in the US the CHIPS and signs act of 2020 to set aside 52.7 billion in subsidies to support businesses involved in the manufacture of semiconductor chips receiving a government subsidy essentially lowers the cost of production for the business.

Businesses that store supplies from other countries or export. The goods abroad are affected whenever governments have disputes over trade. War, or conflict in another country can also affect the government policies. The Russian invasion of Ukraine in 2022 resulted in the United States and many European countries and posing a variety of sanctions that limit trade freeze assets element. How thanks me transfer money among other things as you can see political forces are constantly changing, and can be unpredictable.

Economic Forces

The economic forces relate to the overall economy, and includes things such as interest rates, employment rates and inflation. After the great recession in 2008 the stock market recovered home price of climbs to an all-time high and unemployment reached a record low, but all that changed with the shock of the COVID-19 pandemic. They’re always challenges to be faced by economic forces. We just have not grown in step with overall economic growth do US workforce has shrunk and wealth. Any quality has continued to increase. These economic conditions have all had a direct impact on businesses, regardless of size.

Social Forces

Social forces - our attitudes, values, ethics, and lifestyles - influence what, how, where, and when people purchase products or services. They are difficult to predict, define, and measure because they can be very subjective. They also change as people move through different life stages changing roles have brought more women into the workforce development of the two income household increased family incomes heading to demand for time-saving goods and services, change family shopping patterns, and infected individuals ability to achieve a work life balance. In addition, I renewed emphasis on ethical behavior with an organization at all levels of the company has managers and employees are like searching for the right to approach when it comes to gender inequality, sexual harassment, and other social behaviors, that impact the potential for a business to continued success. The social environment also fuels horses such as corporate social responsibility (CSR) which means that more and more consumers are demanding that businesses be good corporate citizens by supporting charitable causes and contributing to local, adhering to ethical standards in the treatment of workers and others, and adopting environmentally responsible practices.

Social forces also include the demographics. Demography is the study of peoples vital statistics, such as their age, gender, race, and ethnicity and location. Demographics help companies defined the market for their products, and also determine the size and composition of the workforce businesses. Today must deal with a unique shopping preferences of different generations which each require marketing approaches and goods and services targeted to their needs and preferences. For example, 75 million members of the millennial generation were born between 1981 and 1997. 2017 they surpassed baby boomers as America’s largest generation. The marketing impact of millennials continues to immense. These are technologically savvy and prosperous people with hundreds of billions of dollars to spend. Other age groups, such as generation X (people born between 1965, and 1980) and the baby boomers (people born between 1946 in 1964) have their own spending patterns. Many people nearing retirement have saves money, and spend it on their health, their comfort and recreation. As the population, ages, businesses offer more products to appeal to middle, aged and senior markets.

In addition, minorities represent more than 38% of the total population with immigration, bringing millions of new residence to the country over the past several decades. By 2044 the US Census Bureau projects that the United States will be a plurality nation meaning that no one racial or ethnic group, will make up a majority of the population projects. Companies recognize the value of hiring a diverse workforce that reflects our society companies also develop product marketing campaigns that target, different racial and ethnic groups.

Combined the social forces with the world, wind of changing fads trends and current events, and you have some idea of why the social environment can present the greatest challenge to business

Which of the following actions by businesses are reaction to social forces?

A. A company that bruise beer raise their prices as a result of the cost of equipment and grain going up?

B. A home organizing service gave employees raises so that increase transportation costs were not caused them to quit?

C. A local gym offers new, low impact exercise classes to appeal to the large number of retirees that have moved into the area?

D. A mortgage company laid off workers because rising interest rates result in fewer home sales?

Technological Forces

Almost daily, businesses are driven to rethink the business technology. They used to reach customers., produce their products and provide the services. When referring to business technology, it means computers., telecommunications, and the Internet. Many traditional brick, and mortar. Businesses have been forced into online sales because of the expansion of Internet access becoming virtually every corner of the world. Consumers today can conveniently purchase products without leaving their homes, their desks or their phones. The disadvantage of that to businesses is that they’re able to compare to other competitors their prices, benefits, features and services, such as ridesharing like Uber and Lyft they have become successful in technology environment, because of the use of smart phones, becoming white spread in today’s business, as they have to be more vigilant about spotting, emerging trends, and not only technology, but in the way consumers use that technology.

Businesses have a lot of things to consider, like how they will invest in new technologies, in order to remain competitive the new developments in auto motion, artificial intelligence that can affect operations and what they produce. They also have to look into technologies like cyber security, in order to protect themselves, and continuously assess their technology infrastructure.

Environmental Forces

Physical changes in environment can have a significant effect and businesses. The fact of climate change can become more apparent businesses have to contend with extreme weather in natural disasters. They also have to be aware about how they use limited natural resources, such as freshwater. Some of these forces may present opportunities for businesses to create products and services that complement environmental forces. for example, rising temperatures caused by climate change, present an opportunity, if businesses can develop new cooling systems to reduce harmful emissions at the same time environmental forces may influence business strategies, such as deciding where to locate new facilities.

Legal Forces

Businesses do have two go through laws and regulations for the company. I have to consider privacy laws that can really have a ginormous impact in companies and their businesses, such as tide company, and their advertisement they had to make sure to give a warning to parents, so not that children near the pods because it is dangerous. To obtain an advantage. Businesses can send representatives known as lobbyists to ask legislators to pass laws that are favorable to them.

Which of the following actions by businesses are a reaction to technological forces?

A clothing manufacturers changes the way they dye fabric to use less water and produce less waste.

A publishing company gets rid of their offices when they find that video conferencing and working remotely is just as efficient but saves money

A toy company puts a warning label on toys that have small parts so that consumers can be aware not to give them to babies or very small children who may swallow the parts

A house cleaning company switches to all natural cleaning products that have minimal plastic packaging

Self Check

External forces that affect businesses include:

A) advances in technology

B) motivated employees

C) the company mission

D) capable leaders

Rock oil corporation has been polluting the air even though they are following all relevant laws. Local activists start to hold protest rallies at the front gate of the company, demanding that Rock Oil stop polluting and clean up its processes. When the company addresses these issues, the management at Rock Oil will be reacting to:

A) Legal forces

B) social forces

C) economic forces

D) Technological Forces

Career Connection: Hard vs Soft Skills: Learn It

Hard Skills

In your schooling, you may have learned how to use electronic databases when working on research papers. That is a specific skill that you could use if you are a journalist gathering information for an article or if you would work for a marketing company and you need to do research about potential customers if you have ever worked in customer service at a coffee shop, you will have learned the skill of operating a cash, register or point-of-sale system that you would also be able to use another business that uses a similar sister these are examples of hard skills.

Soft Skills

Soft skills include things like interpersonal skills, ability to work on the team and being able to solve problems. If you have ever worked at a busy restaurant, you probably have developed stuff skills that allow you to work well in a group, such as learning how to communicate with different people, recognizing went to compromise, and helping out when you spot a problem. These soft skills would be just as valuable if you worked at a bank branch where you work with customers and are part of a team that includes tellers, financial advisors and managers.

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Hards skills are job related skills that you acquire through education or experience. Soft skills are personal attributes or character traits that can help you at any job.

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