BUSINESS AND SOCIAL RESPONSIBILITY

Section 5.1

Objectives

1. What a business is2. The basic functions of business3. How to distinguish businesses from each

other based on general characteristics4. The importance of e-commerce5. The concept of derived demand6. The major types of businesses that

comprise the industrial market

5.1 Defining Business

What is Business? Business is all the activities involved in

producing and marketing goods and services Called companies or businesses

Every company seeks to satisfy economic needs by planning, organizing, and controlling resources in order to produce and market goods or services

The Functions of Business

Two Primary Functions: The production and the marketing of goods

and services Both functions depend heavily on the activity

called management

Management – Is used to plan, organize and control available resources to reach company goals

Production

Production is the process of: Creating, growing, manufacturing, or

improving on goods and services

Songwriter – creates a song Farmer – grows wheat Ford Motor Company – manufactures

cars

Marketing

When goods or services are created, they must be sold in the marketplace

Marketplace exists whenever a product is sold to a customer- when an exchange takes place between two or more people

The exchange process is the focus of the broad range of activities called marketing!

Management

All resources used; labor, capital, natural resources – must be brought together (organized) through management to achieve company goals

Management has several meanings: Money or anything that can be sold for cash

quickly Also means to get credit or borrow money As a supporting function of management,

finance means money management

Types of Businesses

Businesses come in a variety of shapes and sizes and are classified differently

Size – large or small Profit Orientation – Profit or Non-Profit Market (served) consumer or industrial Type of Product – Goods, services, or

something else

Large VS Small

Small Business – one that is operated by only one or a few people and have less than 100 employees Mom & Pops Neighborhood Stores Florists/Gift Shops Delicatessens

They make up about 95% of all U.S. businesses are classified as small businesses

They employ over half of the private sector workforce (nongovernment)

Large VS Small

A Large business is usually considered one that has more than 1000 employees

Companies are usually national or global They have many different departments

Domestic VS. Global

Domestic Markets have buyers in a single country

The Global Market is the exchange of goods and services among nations

The internet, along with faster transportation has made it much easier to do business globally

The trend is moving from domestic markets to global markets Established companies that have domestic success for

many years are now facing international competition ~they must “get with the program” to stay competitive

Profit VS NonProfit

Profit is the motivating factor in starting a business in a market economy, however, its not the only motivator

Service Organizations – NonProfit – are not operated to make a profit; they want to make a difference in peoples lives’ Examples:

YMCA/ YWCA Boys/Girls Clubs of America Ronald McDonald House

Profit VS NonProfit

NonProfits still must hire employees and pay the costs and expenses of running the business

All remaining income (after paying expenses) goes to the charitable cause. No profit is made

Public VS. Private

Public Sector – Not intended to make a profit Most local, state, and federal government

agencies fall into this category Public Schools Public LibrariesPublic sector organizations buy one-third of all

goods and services sold in the U.S. each yearGovernment Agencies are usually required to buy

the least expensive product that meets minimum specifications

Businesses not associated with the government are part of the Private Sector

Goods or Services

Goods – tangible things you can touch Services – intangible; dry-cleaning, haircuts,

mall security, etc. In the 1990s , a whole new service opened up;

The Internet!! Internet Service Providers Web page designers Telecommunication Providers

American Businesses will continue to grow in the early 21st Century; however, growth will be in service industries rather than manufacturing

The internet will continue to grow and shape business

Consumer VS. Industrial

Industrial or Business to Business Market- is based on; derived from the demand for consumer goods and services

The demand for industrial goods derived Marketers of industrial goods need to be

aware of how their markets will change as a result of changes in the consumer market When consumers buy more cars. The derived

demand for auto components (tires, batteries, etc) increases

Industrial Market consists of:

Extractors – Businesses that take something from the earth or sea; agriculture, forestry, fishing and mining

Construction Companies – Build structures; houses, buildings or manufacturing plants Manufacturing plants – producing goods to sell

to other manufacturers or wholesalers and retailers. Called business to business marketing

Industrial Market consists of:

Wholesalers – Buy their goods from manufacturers and resell them to industrial users, other wholesalers and retailers. Also called distributors

Retailers – Buy their goods from wholesalers or directly from manufacturers and resell them to the consumer market. Caters to the consumer

E-CommerceE-Tailing

Has become a whole new category of business

The buying and selling of goods and services through the use of electronic networks, usually the internet

Can also be classified as any activity that uses electronic communication in the exchange of goods and services

Began before the internet in 1996 (but 20 times faster); scanners for grocery items, debit cards etc.

In Review ~ (Objectives)Answer the following in your notebooks……..

1. What is a business?2. What are the basic functions of business?3. How do you distinguish businesses from

each other?4. What is the importance of e-commerce?5. What is the concept of derived demand?6. What are the major types of businesses

that comprise the industrial market?

Section 5.2 Ethics and Social Responsibility

Objectives:1. The areas in which businesses are

thought to have social responsibilities2. The ways business activities impact our

environment3. Ethics defined & how marketers make

ethical choices4. Consumerism5. Current workplace trends and employee

concerns

Ethics and Social Responsibility

Other than following the law and paying taxes, should businesses have any other social responsibility?Most consumers feel business should act in a sociably responsible manner and consider the social and environmental consequences of their actions

Social Responsibility – businesses are part of a larger society and should be held accountable to that society for their actions

Social Responsibility

Ben and Jerry’s – donates 7.5 % of its pretax earnings to the disadvantaged and needy

They also contribute to groups that strive for social change and environmental issues

McDonalds Funds Ronald McDonald houses around the

country Medical Research, diabetes, MS, Salvation

Army, etc

Environmental Issues

Laws govern many environmental issues that affect us: Prohibit improper disposable of medical,

chemical, and other hazardous wastes

Air and Water Pollution – EPA to help protect the environment from pollution.Clean Air Act – Vehicles must pass emission testing and use unleaded gas to protect people and animals from the harmful effects of lead

Environmental Issues

Conservation and Recycling – The price and availability of oil is greatly affected by political and economic disruptions; this makes it unpredictableExploring other fuels has become necessary, car manufacturers are producing smaller cars that are more fuel efficientSome fuels create less pollution

More companies and households are recycling… plastic bottles……….

Environmental Issues

Green Marketing – Companies make an effort to produce and promote environmentally safe products. They are marketed as: Ozone-Safe Recyclable Environmentally Friendly BiodegradableThis helps to create customer loyalty, there are

a lot of people/consumers willing to pay more money for products that are environmentally friendly

Business Ethics

Ethics – Guidelines for good behavior; the way you act when no one is looking

Knowing the difference between right and wrong and doing the right thing

Ethical behavior is fair and takes everyone's well-being into account

Unethical Behavior

Bait and Switch Advertising – Advertising a particular product that a store doesn’t have in stock and switching them to a (higher) price product

Selling unsafe products is prohibited.

But……….. The sale of alcohol and cigarettes are often

glamorized.

Is this ethical?

Three Basic Questions Marketers must ask themselves on ethics… According

to The American Marketing Association

1. Is the practice right, fair and honest?2. What would happen if the product were

marketed differently?3. What practice will result in the greatest

good for the greatest amount of people?

Product Recalls – Some businesses will voluntarily take products off the shelf and recall then before the Consumer Product Safety Commission forces them to do so. Tylenol………..

Consumerism

The societal effort to protect consumer rights by putting legal, moral, and economic pressure on business

Began in the early 1900’sfocused on product purity, postal rates and banking

1930’s – 1950’s – Concentrated on product safety, labeling, misrepresentation, deceptive advertising, consumer refunds and bank failures

Consumerism

1960’s – 1980’s – Greatest growth in consumerism and involved all areas of marketing.

President John F. Kennedy created the Consumer Bill of Rights

The Bill stated that consumers have four basic rights:

Consumer Bill of Rights

1. To be informed and protected against fraud, deceit, and misleading statements, and to be educated in the wise use of financial resources

2. To be protected from unsafe products3. To have a choice of goods and services4. To have a voice in product and marketing

decisions made by government and business

Consumerism

1960’s to 1970’s – Ralph Nader – Unsafe at any Speed – Focused on the Automobile Industry & what it could do to make cars safer

The Federal Trade Commission – expanded its role to include consumer complaints

Containers have become recyclable in response to consumers concerns over the environment

Workplace Trends and Concerns

Employee Issues have become the center of concern since the 1990s

FlextimeTelecommutingFamily LeaveHelp for the Physically ChallengedHealth Care ReformOn-Site Child Care

Workplace Trends and Concerns

Flextime – Allows workers to choose their work hours. Early Start, Early finish/ 4 day workweeks

Telecommuting – Working from home, usually by computer

Family Leave – Legally required by federal law for large employers. Workers are entitled for up to 12 weeks of nonpaid family leave every two years

Workplace Trends and Concerns

Help for the Physically Challenged – Mandated by The Americans with Disabilities Act of 1990 –

Employers must provide physically challenged people with the same job opportunities and work site access that others have

Health Care Reform – Most people have insurance through their jobs; How to cover these people has become a National Health Care debate.

Workplace Trends and Concerns

On-Site Child Care – This has grown in popularity with the

increase in two-income families. When this benefit is provided in any form, it tends to reduce employee turnover

Other Concerns:Sexual Harassment – Unwelcome

Sexual attention or the creation of an intimidating, hostile or offensive working environment

Computer Privacy and Security

Workplace Trends and Concerns

Computer Privacy and Security Many employers track employee

computer use to ensure that computers are being used appropriately and for work related use only

Employee monitoring is more widespread than ever …………….