Bus

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Bus 101 Chapter 01

• Introduction To Business

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Goals

• What is the relationship between profit and risk.
• How do businesses entrepreneurs add to the
  wealth of an economy and increase the standard of
  living and quality of life?
• Compare entrepreneurs to working for others
• How do taxes and economic environment affect
  businesses?
• How has technology affected businesses?
• How can businesses meet and beat their
  competitors?
• What has been the reaction to the changing social
  environment?
• What must businesses do to meet the global
  challenge?
• What business trends from the past can help us
  plan for the future?

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Business Terms

• Entity
• An entity could be a business, a nonprofit
  company, a college, or other
• Business
• Any activity that seeks to provide goods and
  services to others for a profit
• Nonprofit organization
• An organization whose goals do not include making
  a personal profit for its owners or organizers
• Examples
• Churches and Temples
• Washington Boomerang Club

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Business Terms

• Goods
• Tangible items like shoes, cars, food, etc.
• Services
• Intangible things like preparing a tax return,
  tutoring, fixing a car, etc.

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Business Terms

• Entrepreneurs
• Entrepreneurs are people who take risks in order
  to implement new ideas that will solve existing
  problems in the hopes of gaining profit (or for
  benefits for nonprofit)
• Entrepreneurs see the problem and then have good
  ideas that can solve the problem

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Business Terms

• Economic
• The production, distribution, and consumption of
  goods and services
• Economy
• The system or range of economic activity in a
  country, region, or community

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Business Terms

• Revenue
• Cash in or the promise to pay cash later
  (accounts receivable) that a business receives
  for the sale of goods or services.
• Expense
• The cost spent by a business (cash out or the
  promise to pay cash out later (accounts payable))
  to run the business.
• Profit or Loss Revenues - Expense

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Profit

• Profit or Net Income Revenue Expenses
• (Revenues are greater than Expense)
• Loss or Net Loss Revenue Expenses
• (Expense are greater than Revenues)

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Risk

• The chance that you may lose time or money while
  running a business. The higher the risk the
  greater the profit or loss may be.
• Do Entrepreneurs take risk?
• How about the Banks, Investment Firms, Insurance
  Companies and Hedge Funds in the 2007-2010
  Financial Crisis?

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Businesses Provide Benefits For Society

• Provide Jobs for Employees
• Provide Products and Services for people to buy
• Pay Taxes (hopefully) so that governments can
• Hire fire and police people
• Provide Schools and Parks
• Assist people in need
• For more about companies not paying taxes type
  US corporations pay little tax into Google.

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Businesses and Employees pay taxes so the
government can

• Build schools and roads and parks
• Hire fire men/women and police
• Keep the environment healthy
• Help people in need
• Laws to Promote Private Property
• Courts to Enforce Contracts
• If this does happen, then the profit from
  business helps to increase the
• Standard of Living
• Quality of Life

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Standard of living

• The amount of goods and services you can buy with
  the money you have
• If you have more money than someone else, but can
  buy less, the standard of living would be lower
  for you than for the person who could buy more.
• 7.00 Beer in Japan / 3 beer in the USA
• Problems with measuring the Standard of living
• http//en.wikipedia.org/wiki/Standard_of_living

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Quality of life

• The general well-being of a society in terms of
• Political freedom
• A clean natural environment
• Education
• Health care
• Safety
• Free time
• Everything else that leads to satisfaction and
  joy (that does not harm others)
• Quality of life comes from a combined efforts
  amongst businesses, nonprofits and government
  agencies

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2007-2010 Financial Crisis

• What has happened to the Standard of Living
  Quality of Life during this period?

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Stakeholders Everyone who stands to gain or lose
from a businesses conduct
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Outsourcing Insourcing

• Outsourcing
• Contacting with other companies to do tasks for
  the business such as production or accounting
• Insourcing
• Firms from other countries setting up design or
  production facilities in the US

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Outsourcing

• Contracting with other companies to do various
  business functions such as accounting or
  production.
• Outsourcing can
• Help business focus on what it does best
• Reduce costs and increase profit
• Cause communities to lose jobs

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Entrepreneurs

• Entrepreneurs are people who take risks in order
  to implement new ideas that will solve existing
  problems in the hopes of gaining profit.
• Entrepreneurs see the problem and then have good
  ideas that can solve the problem.

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Entrepreneurs

• Entrepreneurs must work hard to implement the new
  idea and create a business or other entity
• Entrepreneurs take great risks when they start a
  new business or other entity
• It is usually very hard to translate the new idea
  into a successful business or other entity
• Entrepreneurs are the engine behind any
  successful economy because they
• Solve problems
• Start Businesses
• Help to generate profit and wages
• Help to increase standard of Living And Quality
  Of Life

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Compare entrepreneurs to working for others

• Working for others
• No entrepreneurial risk
• Benefits (pay, insurance)
• Entrepreneurs
• Good idea to solve problem ? Great risks Great
  Benefits or Loose it all

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Factors of Production Resources used to Create
Wealth

• Land
• Any natural resource
• Labor (workers)
• Capital
• Buildings, computers, machines
• NOT CASH (cash buys the factors of production)
• Entrepreneurship
• Land, Labor, Capital, Knowledge are of little
  good with out an entrepreneur to
• See problem
• Have idea
• Take risk of starting business
• Knowledge (Effective use of knowledge)

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Why Are Some Countries/ States/ Cities Wealthier
Than Others?

• Countries that encourage entrepreneurship tend to
  be wealthier
• Ways to encourage entrepreneurship
• Legal systems that protect private property, help
  to enforce contacts, discourage bribery
• Financial markets that can get help startup
  entrepreneurial companies loans or stock.
• Others

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Business Environment

• Surrounding factors that help or hinder the
  development of businesses
• The economic and legal environment
• The technological environment
• The competitive environment
• The social environment
• Global Business Environment

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Business Environment

• The economic and legal environment (ways
  government can foster entrepreneurship)
• Freedom of ownership
• Contract laws
• Elimination of corruption
• Tradable currency (If you did not have one you
  could not buy from other counties)
• Minimum taxes and regulations required to provide
  a high quality of life

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Business Environment

• The technological environment
• Information Technologies (computers, cell phones,
  internet)
• Spreadsheets
• The default computer program for the business
  world
• Databases
• Store raw data and create useful information
• Bar codes
• Automate transactions, accounting and data
  collection
• The Internet
• Information and commerce

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Technology

• Things that make running a business more
  effective, efficient and productive such as
• Machines
• Phones
• Medical Devices
• Spreadsheets and Databases
• Internet
• History the wheel and the telescope are
  technological elements

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Effective Efficient

• Effective
• Producing the desired result
• Efficient
• Obtain goal with the fewest resources (time,
  work, materials)

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Productivity

• The amount of output you generate given the
  amount of input
• Productivity goes up when you produce the same
  amount of output with fewer inputs.
• Example In 1980, summarizing customers sales
  purchases for the year (accounting task) may have
  taken 5 hours whereas in 2010, with the use of a
  spreadsheet this job could take as little as five
  minutes.

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Average per capita GDP (Gross Domestic Product)

• (Total Value of all final goods
  services)/(Number of people in Country)
• For more info http//en.wikipedia.org/wiki/Gross_
  domestic_product

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E-commerce

• The buying and selling of goods and services over
  the internet
• B2C Business to Customer (Amazon.com)
• B2B Business to Business (Coloradoboomerangs.com)

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Database

• Stores raw data
• Creates useful information for decision making
• Example Search data base for customers who have
  low sales or who have not made purchases in a
  while so that you can contact them and try to
  make a sale

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Spreadsheet

• Calculations and data analysis can be made in
  programs like Excel
• Excel is the most used program in the business
  world and for most jobs it is required that you
  know how to use it.

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Identity Theft

• Obtaining private information such as Social
  Security Credit Card numbers to use for illegal
  purposes

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Business Environment

• The competitive environment
• Customer Service
• Stakeholder recognition
• Employee Service
• Concern for the environment

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Competition

• To compete in the World Economy you must
• Delight the customer
• Have a customer and stakeholder orientation
• Create profits with a social orientation
• Demonstrate proactive ethics
• Create quality products/service and provide
  service after the sale
• Have a customer focus

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Empowerment

• Giving frontline workers the responsibility,
  authority, and freedom to respond quickly to
  customer needs.
• This requires that employees be trained properly
  so that they can respond to customer needs
  without consulting a manager

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Business Environment

• The social environment
• Diversity
• Demographic change
• Family changes
• Global Business Environment
• Global Competition Free Trade
• Transportation and Communications have
  contributed to an increase
• Decreases Cost
• But has it decreased quality?

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21st Century Diversity Issues

• Race

• Gender

• Ethnicity

• Disability

Source U.S. Equal Employment Opportunity
Commission
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Buying Power of Diverse Groups

• Women 3,700 Billion
• African Americans 761 Billion
• Hispanic Americans 686 Billion
• Gay Men Lesbians 610 Billion
• Asian Americans 397 Billion
• Native Americans 51 Billion

Sources National Organization on Disability
Employability U.S. Pan Asian American Chamber of
Commerce DiversityInc.com U.S. Census Bureau
The Augusta Chronicle, October 22, 2005 Selig
Center for Economic Growth, 2005.
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Demography

• The statistical study of the human population
  with regard to its size, density, and other
  characteristics such as race, gender, and income.
• Businesses must understand demography in order to
  provide or not provide the products and services
  that people may want.
• Example A company may need to close a store if
  the population in that area declines, or a
  company may need to add products if the
  demography changes

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Change

• Because the rate of change has increased,
  businesses and workers must change also.
  Continuing education and training is required to
  keep up with the times

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Global Environment

• International Competition and Free Trade
• Improvements in Transportation and Communication
• War Terrorism
• Global Changes

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Making customers happy and managing cash flow are
amongst the most important daily tasks of any
competitive business
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1) What is the relationship between profit and
risk.

• The more risk the greater the profit and losses
• Entrepreneurs take a big risk when they try to
  start a business. If they are successful they can
  have great profits. If the business fails, they
  may lose all their money and time invested

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2) How do businesses entrepreneurs add to the
wealth of an economy and increase the standard of
living and quality of life?

• When an entrepreneur creates a business or
  nonprofit, they provide a solution to a problem.
  By solving a problem, the entrepreneur and
  business can increase both the standard of living
  and quality of life.
• The standard of living can be increased by
  providing profit to the owner and wages to the
  employees.
• The quality of life can be increased by providing
  the solution in itself and also by providing tax
  revenues for the government that can be used for
  education, parks and similar endeavors.

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3) Compare entrepreneurs to working for others

• Working for others
• No entrepreneurial risk
• Benefits (pay, insurance)
• Entrepreneurs
• Good idea to solve problem ? Great risks Great
  Benefits or Loose it all

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4) How do taxes and economic environment affect
businesses?

• Taxes can have two major effects 1) they provide
  revenues so that the government can protect
  private property and enforce contacts 2) they
  can deter business from making investments if the
  taxes are too high.
• The economic environment can have positive or
  negative impacts on businesses. On the positive
  side, low interest rates can help business borrow
  to make capital investments. On the negative
  side, low interest rates and easy credit without
  sufficient regulation can lead to a housing
  market and debt market bubble that could pop and
  lead to recession, which in turn could hurt
  business activity.

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5) How has technology affected businesses?

• From more efficient farming equipment to
  spreadsheets to help with accounting and
  marketing, technology helps to increase
  productivity.
• The continual change in technology has also meant
  that businesses and governments must continually
  retrain employees.

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6) How can businesses meet and beat their
competitors?

• Delight the customer
• Have a customer and stakeholder orientation
• Create profits with a social orientation
• Demonstrate proactive ethics
• Create quality products/service and provide
  service after the sale
• Have a customer focus

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7) What has been the reaction to the changing
social environment?

• The reaction of business has been slow, but
  inevitable. As the demographics change,
  businesses must change, or they will not survive.
• Businesses have change location, changed products
  and service and have changed internal policies to
  meet these changes.

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8) What must businesses do to meet the global
challenge?

• Compete with businesses around the world while
  keeping customers happy (quality of product and
  customer service) and employees satisfied
  (outsourcing)

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9) What business trends from the past can help us
plan for the future?

• Farming ? Manufacturing ? Service ? Information
• In a changing world, be flexible and be willing
  to learn new things

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Entrepreneurs

• Entrepreneurs
• See Problems
• Have an Idea that can help to solve the problem
• Take the risk of starting a business
• Risk future uncertainty
• Risk could be great gains or losses
• Get funding to start business (in this case debt
  is usually good)
• New business new jobs new goods services
  for people
• New Business pay taxes to help government with
  costs associated with
• Legal System, Police, firemen, Social Security
• Everyone is better off
• Entrepreneurs Engine of any economy
• Schumpeter Continuous Gail of Creative
  Destruction

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History

• Tax History
• http//www.infoplease.com/ipa/A0005921.html
• Over the last century starting overall government
  spending in the United States has increased
  substantially from about seven percent of GDP in
  1902 to about 35 percent of GDP in 2010
• Federal Government spends money on all sorts of
  things
• Federal Revere started in 1913
• Social Security Act was enacted in 1935
• Medicare and Medicaid in 1960s

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GDP

• GDP Gross Domestic Product
• Uses numbers from within borders
• GNP Gross National Productor
• GNI Gross National Income
• In addition to numbers from within borders, this
  includes income from overseas
• GCP per capital
• (Totals goods)/Population (Kids included)
• GDP/(Labor Force) is a more common measure for
  productivity