Business Administration Unit 1 Business and Its Environment Chapter 1 – Characteristics of...
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Transcript of Business Administration Unit 1 Business and Its Environment Chapter 1 – Characteristics of...
Controversial IssueIn order to protect U.S. businesses from foreign competitors, should the federal government provide financial aid that would enable troubled businesses to survive?
Own you own– 3-5 reasons for yes– 3-5 reasons for no
Book – Read Page 3 – Income vs. Outgo: A Delicate Balance
Business/Profit
Business– Organization that produces or distributes a
good or service for profit
Profit– Difference between earned income and costs
Production
Making a product– Manufacturing firms produce goods
• U.S. Steel / Johnson & Johnson
Providing a service– Assistance to satisfy specialized needs through
skilled workers• Doctor / Accountant / Taxi Driver
Service firms far outnumber mfg. firms
Supply / Demand
Supply– # of similar products offered for sale at
particular time for particular price
Demand– # of similar products bought at given time at
given price
? ? ? ? ? ? ? ?
Manufacturing or Service?
1. Watch repair shop
2. Jewelry made by group of Native Americans
3. Someone who mows lawns
4. Shop making minute timers
Industrial
Produce goods used by other businesses to make things– Mine ore for metal– Construct buildings for businesses– Chemical company
Third world nations have few mfg. firms – generally poor
Commercial
Marketing– Wholesalers & Retailers
Finance– Banks & Investment Companies
Services– Intangible – labor intensive
• Mowing lawns, accountants, plane ride
Industry
Refers to all businesses within a category– Publishing Industry
• Produce & sell books• Magazines• Newspapers• Printed documents prepared by authors
Global Competition
Ability to compete with businesses in other countries– Other countries have industrialized– Americans purchasing foreign goods
• Efficient, greater variety, lower prices– American businesses had to change
Global competition is the force behind major decisions of large companies today
Effectiveness
Decisions about products/services to offer, produce & deliver– What customers want
Domestic good– Made in U.S.
Foreign good– Made in another country
TQM
Total Quality Management–Commitment to excellence–Teamwork & continual improvement–Training from experts–Customers get well-made products–Learned lessons on quality from
Japanese
Efficiency
Producing goods/services quickly @ low cost while maintaining quality– Output
• Quantity produced within given time
– Productivity• Producing largest quantity in least time
using efficient methods & modern equipment
Malcolm Baldridge
National quality award– Managed by federal government– Hundreds apply for this award
• Winners have an upturn in demand for products
– Deming Award• Japanese award, named for an American
? ? ? ? ? ? ?
Fastest student to finish exam, but receives lowest grade:
1. Effective & efficient
2. Effective but inefficient
3. Ineffective but efficient
4. Ineffective & inefficient
Specialization
Specialize in an area–Expert in assigned tasks
Mass Production–Up-to-date equip. & assembly lines
• Computers & Robots–Large quantities of identical goods–Costs decrease to consumers
Technology & Innovation
Technology includes– Equipment, manufacturing processes &
materials• Better quality goods/services• Built faster at lower cost• Materials that weigh less & last longer
– Kevlar
– Technology = staying ahead of competitors
Technology & Innovation
Innovation–Development of new ideas, products
& processes–Transform creativity into
• High-quality products/services• Cost-saving benefits
Reorganization
Late 70’s to early 90’s–Companies had slow growth–Competition from other nations
Downsize–Cutting back goods/services &
employees–Needed better way to compete
Reorganization
Empowerment– Workers decide how to perform their jobs,
ideas on improving processes– Drastically changed role of workers
• Past – narrow tasks, little decision making• Improved quality of work & efficiency• Fewer managers due to skilled workers
Reorganization
Re-engineering– Assembly lines
• Steps eliminated, abbreviated, or given to employees
– Customer complaints decreased– Well-trained workers– Most major firms adopted these practices
GDP
Gross Domestic Product– Total market value of all goods/services
produced in a country in a year– 1st measure of economic wealth
• Compare year-year & to other countries
– Purchased $ amount reported to gvt.• $8.8 trillion in recent years
GDP
Underground Economy– Income that escapes being recorded
in GDP–Transactions not recorded or illegal
• Lawn mower, babysitter, drug dealer
–Not reported: 5% (brisk economy) to 20% (lagging economy)
Fact
Joint agreements between domestic & foreign firms– Ford & Mazda make parts/cars for other
Difficult to classify a product domestic– Honda Civic made in U.S., parts made in
Japan & Canada
Entrepreneurship
Entrepreneur– Person who starts, manages & owns a
business– Few gvt. Controls prevent starting a
business– New businesses may have:
• Physical facility (store), individual working in home office, internet business
Small Business
Business operated by one or a few– Few employees
• Gas station, bakery, restaurant– Computers – easy to work from home
• Consultants – e-mail• Craftspeople – sell on internet
– Many earn less than $250,000 in yearly revenue
Franchise Business
Legal agreement where distributor buys rights to sell franchising company’s product/service under company’s name & trademark– McDonald’s, Pizza Hut, Sir Speedy
Franchisor – parent companyFranchisee – distributor of franchised product/service
Franchise Business
Franchise agreement usually includes initial fee to franchisor and % of weekly sales (3-8%)
Franchisee gets in return–Help selecting location, exclusive
rights to sell in specific geographic area, training & advice
Franchise Business
5-10% fail – far less than non-franchised businessesCheck-out franchisorEmployee over 8 million peopleAccount for ½ retail store salesApproximately 12% of all businesses are franchises
In-Class Work
On the internet, look up a franchise business you might be interested in buyingDetermine costs and location availabilityPrint out a copyShare with class
Risks of Ownership
Managerial effectiveness– Earn adequate income– Pay all expenses & earn a profit
Entrepreneur assumes risk of success or failure– Risk
• Competition, changes in price & style, economic conditions
Risks of Ownership
Businesses fail for many reasons–1 out or 4-5 fail within 3 years–½ close within 6-7 years
• Some voluntarily close–Sell to another
–Economic & financial factors cause failure
Controversial Issue
Because the failure rate among new businesses is high, should potential entrepreneurs be required to pass a test on how to run a businesses?
On your own…– 3-5 reasons for yes– 3-5 reasons for no
Intrapreneurship
Employee given funds & freedom to create a special unit/department in company to develop new product/process/service–Main company finances venture
• Intrapreneurs have freedom to run “business” with little or no interference
Intrapreneurship
Employees benefit– Don’t risk salary or savings– Innovative abilities & skills are
encouraged
Employers benefit– Keep creative employees, could be
competition otherwise– New, better products introduced
ESOP
Employee Stock Ownership Plan–Employees directly own the company
by buying shares in it–Companies obtain funds
• Employees highly motivated
–ESOP’s show increased productivity
Group Work
Text Book–Page 26-28 – Solve Business Problems
• 3-4 students in a group• Case 1-1 – 5 questions• Case 1-2 – 4 questions• Check if done• Review in class
Individual Work
Work Book–Page 1 & 2 – Study Guide
• Turn in for grade
–Pages 4-5-6-7 – Problems• Check if done• Review in class