The Concept of Business and Profit, The External Environment of Business, .pptx

The Concept of Business and Profit, The External Environment of Business, Dimensions of the External Environment, Economic Systems, Factors of Production , Degrees of Competition, Perfect Competition, Ethics in the Workplace, Assessing Ethical Behavior, Core Principles and Organizational Values, Social Responsibility, The Stakeholder Model of Responsibility

1. Business Essentials Twelfth Edition Business Environment Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved.

2. Introduction China has moved away from a socialist towards a free market economy termed “socialist market economy.” Alibaba accounts for 80% of China’s online shopping. China population 1.4 billion US population <3 million Alibaba owner Jack Ma

3. The Concept of Business and Profit Business organization that provides goods or services to earn profits Profits difference between a business’s revenues and its expenses

4. The External Environment of Business External Environment everything outside an organization’s boundaries that might affect it

5. Dimensions of the External Environment

6. The External Environments of Business (1 of 2) Domestic Business Environment - the environment in which a firm conducts operations and derives revenues Global Business Environment - international forces that affect a business and includes international trade agreements, international economic conditions, and political unrest Technological Environment - ways by which firms create value for their constituent

7. The External Environments of Business (2 of 2) Political-Legal Environment - the relationship between business and government Sociocultural Environment - includes the customs, mores, values, and demographic characteristics of the society and determines the business standards that a society is likely to value and accept The Economic Environment - includes relevant conditions that exist in the economic system in which a company operates

8. Economic Systems Economic system a nation’s system for allocating its resources among its citizens, both individuals and organizations

9. Factors of Production (1 of 2) Labor includes the physical and intellectual contributions people make while engaged in economic production and is also called human resources. Capital is the term used to describe the financial resources needed to operate a business. An Entrepreneur is a person who accepts the risks and opportunities entailed in creating and operating a new business venture.

10. Factors of Production (2 of 2) Physical resources - tangible things that organizations use to conduct their business and include natural resources and raw materials Information resources - data and other information used by businesses and include market forecasts, the specialized knowledge of people, and economic data

11. Degrees of Competition (1 of 5) Table 1.1 Degrees of Competition Characteristic Perfect Competition Monopolistic Competition Oligopoly Monopoly Example Local farmer Stationery store Steel industry Public utility Number of competitors Many Many, but fewer than in perfect competition Few None Ease of entry into industry Relatively easy Fairly easy Difficult Regulated by government Similarity of goods or services offered by competing firms Identical Similar Can be similar or different No directly competing goods or services Level of control over price by individual firms None Some Some Considerable

12. Degrees of Competition (2 of 5) For perfect competition to exist, two conditions must prevail: all firms in an industry must be small, and the number of firms in the industry must be large

13. Perfect Competition The products of each firm are so similar that buyers view them as identical to those of other firms. Both buyers and sellers know the prices that others are paying and receiving in the marketplace. Because each firm is small, it is easy for firms to enter or leave the market. Going prices are set exclusively by supply and demand and accepted by both sellers and buyers.

14. Degrees of Competition (3 of 5) Monopolistic Competition market or industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors

15. Degrees of Competition (4 of 5) Oligopoly market or industry characterized by a handful of (generally large) sellers with the power to influence the prices of their products

16. Degrees of Competition (5 of 5) Monopoly market or industry in which there is only one producer that can therefore set the prices of its products Natural Monopoly industry in which one company can most efficiently supply all needed goods or services

17. Ethics in the Workplace (1 of 2) Ethics beliefs about what is right and wrong or good and bad in actions that affect others Business ethics refers to ethical or unethical behaviors by employees in the context of their jobs

18. Ethics in the Workplace (2 of 2) Ethical behavior behavior that conforms to individual beliefs and social norms about what’s right and good Unethical behavior behavior that conforms to individual beliefs and social norms about what is defined as wrong and bad

19. Business and Managerial Ethics Managerial Ethics standards of behavior that guide individual managers in their work Behavior toward Employees Behavior toward the Organization Behavior toward Other Economic Agents

20. Assessing Ethical Behavior Gather the relevant factual information. Analyze the facts to determine the most appropriate moral values. Make an ethical judgment based on how right or wrong the proposed activity or policy is.

21. Core Principles and Organizational Values

22. Social Responsibility (1 of 2) Social responsibility refers to the overall way in which a business attempts to balance its commitments to relevant groups and individuals in its social environment

23. Social Responsibility (2 of 2) Organizational Stakeholders those groups, individuals, and organizations that are directly affected by the practices of an organization and who therefore have a stake in its performance

24. Major Corporate Stakeholders

25. The Stakeholder Model of Responsibility (1 of 2) Most companies that strive to be responsible to their stakeholders concentrate first and foremost on five main groups: Customers Employees Investors Suppliers Local communities where they do business

26. The Stakeholder Model of Responsibility (2 of 2) Customers Treat customers fairly and honestly Employees Treat employees fairly and respect their dignity and basic human needs Investors Follow proper accounting procedures; provide information to shareholders about financial performance

27. Responsibility toward Customers Consumer rights Consumerism – social activism dedicated to protecting the rights of consumers in their dealings with businesses Unfair pricing Collusion – two or more firms collaborate on such wrongful acts as price fixing Price gouging

28. Responsibility toward Employees (1 of 2) Provide opportunities to balance work and life pressures and preferences Help employees maintain job skills Treat terminated or laid-off employees with respect and compassion

29. Responsibility toward Employees (2 of 2) A company that provides its employees with equal opportunities without regard to race, sex, or other irrelevant factors is meeting both its legal and its social responsibilities

30. The Stakeholder Model of Responsibility Suppliers Create mutually beneficial partnership arrangements with suppliers Local and International Communities Involvement in programs and charities

31. Contemporary Social Consciousness The Concept of Accountability The expectation of an expanded role for business in protecting and enhancing the general welfare of society

32. Responsibility toward the Environment Air pollution Water pollution Land pollution Toxic waste disposal Recycling

33. Entrepreneurship Entrepreneur businessperson who accepts both the risks and the opportunities involved in creating and operating a new business venture Entrepreneurship the process of seeking business opportunities under conditions of risk

34. Entrepreneurial Characteristics Resourcefulness Concern for good, personal customer relations Strong desire to be their own bosses Deal with uncertainty and risk

35. Sole Proprietorship Advantages Freedom Simple to form Low start-up costs Tax benefits Disadvantages Unlimited liability Limited resources Limited fundraising capability Lack of continuity

36. Partnerships Advantages More talent and money More fundraising capability Relatively easy to form Limited liability for limited partners Tax benefits Disadvantages Unlimited liability for general partners Disagreements among partners Lack of continuity

37. Comparative Summary: Three Forms of Business Table 3.1 Comparative Summary: Three Forms of Business Ownership Business Form Liability Continuity Management Sources of Investment Proprietorship Personal, unlimited Ends with death or decision of owner Personal, unrestricted Personal General Partnership Personal, unlimited Ends with death or decision of any partner Unrestricted or depends on partnership agreement Personal by partner(s) Corporation Capital invested As stated in charter, perpetual or for specified period of years Under control of board of directors, which is selected by stockholders Purchase of stock

38. Alternatives to General Partnerships Limited Partnership Allows for limited partners who invest money but are liable for debts only to the extent of their investments General (or active) partners run the business Master Limited Partnership Master partner has majority ownership and runs the business; minority partners have no management voice

39. Cooperatives Combine the freedom of sole proprietorships with the financial power of corporations Groups of sole proprietorships or partnerships agree to work together for their common benefit

40. Types of Corporations (1 of 4) Table 3.2 Types of Corporations Type Distinguishing Features Examples Closely Held Stock held by only a few people Subject to corporate taxation Blue Cross/Blue Shield MasterCard Primestar Publicly Held Stock widely held among many investors Subject to corporate taxation Apple Starbucks Texas Instruments Subchapter S Organized much like a closely held corporation Subject to additional regulation Subject to partnership taxation Minglewood Associates Entech Pest Systems Frontier Bank Limited Liability Organized much like a publicly held corporation Subject to additional regulation Subject to partnership taxation Pacific Northwest Associates Global Ground Support Ritz Carlton Professional Subject to partnership taxation Limited business liability Unlimited professional liability Norman Hui, DDS & Associates B & H Engineering Anderson, McCoy & Oria Multinational Spans national boundaries Subject to regulation in multiple countries Toyota Nestlé General Electric

41. Types of Corporations (2 of 4) Closely Held (or Private) Corporation a corporation whose stock is held by only a few people and is not available for sale to the general public Publicly Held (or Public) Corporation A corporation whose stock is widely held and available for sale to the general public S Corporation a hybrid of a closely held corporation and a partnership, organized and operated like a corporation but treated as a partnership for tax purposes

42. Types of Corporations (3 of 4) Limited Liability Corporation (LLC) hybrid of a publicly held corporation and a partnership in which owners are taxed as partners but enjoy the benefits of limited liability Professional Corporation form of ownership allowing professionals to take advantage of corporate benefits while granting them limited business liability and unlimited professional liability

43. Types of Corporations (4 of 4) Multinational (or Transnational) Corporation form of corporation spanning national boundaries

44. Managing a Corporation Corporate Governance roles of shareholders, directors, and other managers in corporate decision making and accountability

45. Corporate Governance Stockholder (or Shareholder) owner of shares of stock in a corporation Board of Directors governing body of a corporation that reports to its shareholders and delegates power to run its day-to-day operations while remaining responsible for sustaining its assets Officers top management team of a corporation

46. Special Issues in Corporate Ownership Joint Ventures and Strategic Alliances Employee Stock Ownership Plans Institutional Ownership Mergers, Acquisitions, Divestitures, and Spin-Offs