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CHAPTER 1

Managing Within The DynamicBusiness Environment: Taking

Risks and Making Profits.

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Topics

Business? Standard of Living & Quality of Life

Stakeholders and Stockholders

5 Factors of Productions Govt. Role in Business Environment

Business Environment

How Biz Meet and beat competition

Global Environment: War and Terrorisms

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Business and Entrepreneurship:

Revenues, Profits and Losses. Businesses provide people with goods and services,

employs people and provides people with theopportunity to become wealthy, which eventually helpsimprove a countrys economy.

A business is any activity that seeks to provide goodsand services to others while operating at a profit.

Profit is the amount of money a business earns aboveand beyond what it spends for salaries and otherexpenses.

We need an entrepreneur to start a business, who iswilling to risk money and time to start and manage thebusiness.

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Business and Entrepreneurship:

Revenues, Profits and Losses A revenue is the total amount of money a business

takes in during a given period by selling goods andservices.

A loss occurs when a businesss expenses are more thanits revenues. Most business failures are due to poor management or

problems associated with cash flow. Not allentrepreneurs are skilled at being managers.

In order to start a business, an entrepreneur must takerisk. Risk is the chance an entrepreneur takes of losingtime and money on a business that may not proveprofitable.

Whereas one James Bond movie lost money, anothermovie brought about a huge profit of $205 million.

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Businesses add to standard of

living and quality of life A nations businesses are part of an economic system

that contributes to the standard of living and quality oflife for everyone in the country.

Businesses provide employment for other people whichreduces poverty. Taxes that are paid by the employedare used by the government to build hospitals, schools,libraries and other facilitates.

The term standard of living refers to the amounts ofgoods and services people can buy with the money theyhave.

United States has one of the highest standard of living inthe world, even though a few workers in some othercountries such as Germany and Japan make moremoney per hour.

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Businesses add to standard of

living and quality of life Prices for goods and services in Germany and Japan are

higher than that of the United States, so what a personcan buy in those countries is less than what a person inthe United States can buy with the same amount ofmoney.

The reasons why goods might cost more in one countrythan in other are higher taxes and stricter governmentregulations.

Quality of life refers to the general well-being of asociety in terms of political freedom, a clean naturalenvironment, education, health care, safety, free time,and everything else that leads to satisfaction and joy.

Maintaining a high quality of life requires the combinedefforts of businesses, non-profit organizations and the

government.

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Business Stakeholders

Stakeholders are all the people who stand togain or lose by the policies and activities of abusiness.

They include customers, employees,stockholders, suppliers, dealers, bankers, andpeople in the surrounding community,environmentalists and elected government

leaders. The challenge of the 21st century is for

organizations to stay profitable as well asbalance the need for all stakeholders.

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Non profit Organizations

Non-profit organizations make a majorcontribution to the welfare of the society.

A non-profit organization is an organizationwhose goals do not include making a personalprofit for its owners or organizers.

They include public schools, charities, mosquesand other groups devoted to social causes.

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Importance of Entrepreneurs in the

Creation of Wealth Factors of production are the resources that are

used to create wealth and includes thefollowing: Land and other natural resources. Labor skilled, unskilled workers. Capital Machines, tools, buildings and other means

of manufacturing. Entrepreneurship Knowledge.

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Importance of Entrepreneurs in the

Creation of Wealth Factors of production are the resources that are

used to create wealth and includes the

following: Land and other natural resources.

Labor skilled, unskilled workers.

Capital Machines, tools, buildings and othermeans of manufacturing.

Entrepreneurship

Knowledge.

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Factors of production

Availability of one or two of the factors of production in hugeamounts does not guarantee a wealthy economy; instead fora nation to become wealthy, one need to have a properbalance of all of the factors of production.

For Example: Russia and China have vast areas of land with

many natural resources but they are not rich countries;whereas Japan and Singapore are relatively rich countrieswhich do not have plenty of natural resources.

Bangladesh is a country with a huge labor force, but thatitself does not make it a wealthy nation.

For a nation to become wealthy, we need entrepreneurs whois willing to take the risk of money and time to start newbusinesses, buy land and capital, and hire a labor force whoutilizes their knowledge to run the business.

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The Business Environment

The business environment consists of thesurrounding factors that either help or hinder

the development of business. The five elementsin the business environment are:

Economic and legal environment

Technological Environment

Competitive Environment Social Environment

Global Business Environment

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The Business Environment

The Economic and Legal Environment Entrepreneursgo into business for a high return on investment for theirmoney and time. If a government takes away much of

what a business earns through its taxes, thenentrepreneurs many no longer be interested to take suchrisks. Similarly, with too much of government regulation,entrepreneurs will be discouraged to start a business.

Thus lower taxes and a less restrictive regulatory system

attracts entrepreneurs and helps business prosper.

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The Business Environment

Governments in many countries own enterprisesthemselves, and thus there is little incentive for

people to work hard to create their own profit. In some countries, the corruption level is so high

that it is difficult to get permission to build afactory or open a store without a government

permit which is obtained largely through briberyof public officials.

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The Business Environment

The Technological Environment The technology refersto any device from phones to computers and othersoftware programs that makes business processes moreefficient and productive. Tools and technology greatlyimprove productivity.

Productivity refers to the amount of output that isgenerated from a given amount of input (e.g. hoursworked).

Efficiency refers to producing items using the leastamount of resources.

E.g. how an electronic database helps a companybecome more responsive to customer needs and wants.

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The Business Environment The Competitive Environment Competition among

businesses has never been greater than it is today. Todays successful companies not only strive for high-quality

products but also offers them at a competitive price. Customersneeds and wants come first in todays business world.

Speedis another important component of customersatisfaction.

To stay competitive, businesses need to be responsive to customersand be able to handle customer complaints quickly andsatisfactorily. One way to accomplish this is through employeeempowerment.

Employee empowerment is the process through which frontline

workers are given the responsibility, authority, freedom, trainingand equipment they need to respond quickly to customer requestswithout having to consult higher manager ( Save response time)

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The Business Environment

The Social Environment One important aspect of thesocial environment is the demography.

Demography is the statistical study of the human

population with regard to its size, density and othercharacteristics such as age, gender, race, religion,income and so on.

Population shifts leads to new opportunities for somefirms and to declining opportunities for others.

For instance, as a country moves from lower incomelifestyle to higher income lifestyle, the need for luxuriousproducts increases.

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The Business Environment

A country with a high density ofpopulation in their youth will have a

higher demand for latest tech devices thana country with a high density ofpopulation in the late 60s.

A country with a high density of population intheir old age will have a higher demand fornursing homes, adult day care, home healthcare, medicine and so on.

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The Business Environment

The Global Environment Two important globalenvironmental changes are: The growth of international competition

The increase of free trade among nations

Manufacturers in countries as China, India, SouthKorea can produce high quality goods at a lower pricethan that of United States or Japan because their

workers are paid less money. This calls for companiesin the developed countries to set up firms in thedeveloping countries to match the low cost with theircompetitor firms.

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The Business EnvironmentThe Global Environment:War and Terrorism The threats of terrorism adds greatly

to organizational costs including the costs of securitypersonnel, security equipments and insurance. E.g.airliners have had to install stronger cockpit doors after9/11, buy more security equipment and hire newsecurity personnel.

War and terrorism also makes investor fearful anddiscourages foreign investment in countries vulnerable to

such threats.

Thats it for Today