CB12e Basic PPT - Part 1 - Business in a Global Environment

8/6/2019 CB12e Basic PPT - Part 1 - Business in a Global Environment

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Chapter 1The Framework of Contemporary Business

Distinguish between business and

not-for-profit organizations.

Identify and describe the factors

of production.Describe the private enterprise

system.

Identify the six eras of business

and explain the relationship era.

Explain how today¶s business

workforce is changing.

Describe how the nature of work

is changing.Identify skills and attributes of

21st-century managers.

Outline the characteristics

that make a company

admired.

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WHAT IS BUSINESS?

Business All profit-seeking activities and enterprises that provide goods and

services necessary to an economic system.

Profit Rewards for businesspeople who take risks involved to offer goods and

services to customers.

Not-for-Profit Organizations

� Businesslike establishments that have primary objectives other than returning

profits to owners.

� Examples: Ohio State¶s athletics departments, U.S. Postal Service, American

Heart Association

� Face many of the same challenges as for-profit organizations.



Factors of ProductionFour basic inputs an economic system requires:

Natural Resources All production inputs that are

useful in their natural state.

Capital Technology, tools, information, and physical facilities.

Human Resources Anyone who works, including

the CEO and a self-employed mechanic.

Entrepreneurship Willingness to take risks to

create and operate a business.



THE PRIVATE ENTERPRISE SYSTEM Private Enterprise System An economic system that rewards firms for their

ability to see and meet the needs and demands of consumers. Also called

capitalism.

Competition Battle among businesses for customer acceptance; Adam Smith¶s³invisible hand´ that requires firms to engage in competitive differentiation

to set themselves apart from competitors.

� To succeed, firms must adjust to market changes and competitors¶ actions

� Example: Kellogg¶s adaptations to consumers¶ preference for healthier cereal

help it succeed in its battle against General Mills for the breakfast cerealmarket.



Basic Rights in the Private Enterprise System

Right to own, use, buy, sell, and

bequeath most

forms of property.

Owner legally and

ethically entitled to

income in excess

of costs, after taxes

paid.

Citizen choice in

employment, purchases,

and investments.

Fairness ensured byrules and laws set in

public sphere.



T he Entrepreneurship AlternativeEntrepreneur A risk taker in the private enterprise system. Also called

capitalism.

Entrepreneurship fuels the growth of the U.S. economy:

�One in every seven firms in the United States began operations in the lastyear.

� Of the 20 million U.S. businesses currently in operation, 15 million are self-

employed people without any employees.

� Nearly 12 million U.S. employees currently work for a business with fewer

than ten employees.

� Small companies tend to be more flexible and innovative in their use of the

factors of production.

� Large firms adopt entrepreneurial approaches to enhance flexibility,

improve innovation, and open new market opportunities



SIX ERAS IN THE HISTORY OF U.S.BUSINESS

T he Colonial Period (pre-1776)

� Emphasized rural and agricultural production.

� Colonists depended on England for finished products and financial backing.

T he Industrial Revolution (1760-1850)

� Move from one-by-one production of goods by skilled laborers to factory

systems and mass production.

� Factories profited from savings realized through large-scale production.



T he Age of Industrial Entrepreneurs (late 1800s)� Inventors created an endless array of commercially useful products and new

production methods.

� Eli Whitney introduced concept of interchangeable parts.

�

Robert McCormick introduced horse-drawn reaper than reduced the labor involved in harvesting wheat.

� Vanderbilt (railroads), Morgan (banking), and Carnegie (steel) started new

businesses and reaped great benefits.

T he Production Era (through the 1920s)

� Emphasis on efficient production of goods through huge, labor-saving factories.

� Focus on internal processes rather than external influences,

e.g., Henry Ford¶s assembly lines.



T he Marketing Era (since 1950s)� Drop in income during Great Depression focused businesses on marketing goods

and services through sales and advertising.

� Development of consumer orientation, a marketing approach that focuses on

determining what consumers want and need and developing products to satisfythose needs

� Businesses increasingly distinguished their products from competitors¶ through

branding, e.g., the McDonald¶s ³golden arches.´



T he Relationship Era (began in 1990s)� Businesses take a long-term approach to interactions with customers to build

loyalty and improve customer retention.



Managing Relationships through T echnologyRelationship Management Collection of activities that build and maintain

ongoing, mutually beneficial ties with customers and other parties.

� Involves gathering knowledge of customer needs and preferences and applying

this understanding.

� Many of these activities are based on technology, the business application of

knowledge based on scientific discoveries, inventions, and innovations.

� Communication with customers often aided by technology, particularly the

Internet, e.g., Stonyfield Farm¶s use of blogs to reinforce customer

relationships.

� Bovine Bugle



Strategic Alliances and Partnerships� Businesses affiliate with each other through partnerships to take advantage of

new opportunities.

� Firms form a strategic alliance to create a competitive advantage.

�

Example: A partnership between an online company such as eB

ay and traditionalretailers such as Bloomingdale¶s, Home Depot, and Motorola.

� Traditional retailers contribute expertise in buying and distribution.

� Online company sells outdated or excess merchandise.

� Everyone wins: Customers get good prices, retailers get better return on their

dollar, and eBay gets a cut of sales.

� Example: Pepsi and Apple partnering in short-term promotion of Pepsi¶s soft

drinks and Apple¶s iTunes Music Store.



TODAY¶S BUSINESS WORKFORCE A skilled and knowledgeable workforce

� Fosters strong ties with customers and partners

� Improves efficiency and quality

� Promotes innovation

All of these provide a foundation for competitive differentiation.



Changes in the Workforce Aging of the Population The number of Americans 65 and older will double

by 2030; trend is similar globally.

� More workers at the younger and older ends of the age spectrum.

�

Companies developing incentives to keep older employees longer.Shrinking Labor Pool The U.S. may face a shortage of 10 million workers by

2010.

� Technology requires workers with advanced skills.

� Immigrants represent one of every seven workers, one of every two new

workers.



Changes in the WorkforceIncreasingly Diverse Workforce Immigration and growing Hispanic and

Asian populations are major factors contributing to a more diverse workforce.

� Diversity ² blending individuals of different genders, ethnic backgrounds,

cultures, religions, ages, and physical and mental abilities ² can enhance a

firm¶s chances of success.

� Offer firms varied perspectives and experiences that foster innovation and

creativity.



Changes in the WorkforceOutsourcing and the Changing Nature of Work U.S. output is shifting

from manufacturing to services such as financial management and

communications.

� Different work lifestyles, e.g., telecommuting, scheduling flexibility.

� Outsourcing Using outside vendors to do work formerly done inside the

company.

� Increased use of offshoring, relocation of business processes to lower-cost

locations overseas, and nearshoring, outsourcing near the firm¶s home base.



Changes in the WorkforceNew Employer-Employee Partnership Lifetime employment with one

company is largely a thing of the past. Today¶s model is partnership.

� Companies recognize value of a partnership with employees and many

routinely share financial data with them.

� Companies offer stock, profit-sharing, and employee training geared toward

career advancement.



THE 21ST-CENTURY MANAGER

Importance of Vision

Vision is the ability to perceive marketplace needs and what an organization must

do to satisfy them.

Importance of Critical T hinking and Creativity

Critical thinking is the ability to analyze and assess information to pinpoint

problems or opportunities.

Creativity is the capacity to develop novel solutions to perceived organizational problems.

Ability to Steer Change

Changes are driven by technology, marketplace demands, and

global competition.



WHAT MAKES A COMPANY ADMIRED? Business ethics ² standards of conduct and moral values involving decisions made

in the work environment.

Social responsibility ² management philosophy that includes contributing

resources to promote the well-being of the general public.

More information about this list



Chapter 2Business Ethics and Social Responsibility

Explain the concepts of business

ethics and social responsibility.

Describe the factors that influence

business ethics.

List the stages in the development

of ethical standards.

Identify common ethical dilemmas

in the workplace.

Discuss how organizations shapeethical behavior.

Describe how businesses¶ social

responsibility is measured.

Summarize the responsibilities of

business to the general public,customers, and employees.

Explain why investors

are concerned with

business ethics and

social responsibility.

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Concern for Ethical and Societal Issues

Sarbanes-Oxley Act 2002 law that added oversight for the nation¶s major

companies and a special oversight board to regulate public accounting firms

that audit the financial records of these corporations.

Business Ethics The standards of conduct and moral values governing actions

and decisions in the work environment.

� Social responsibility.

� Balance between what¶s right and what¶s profitable.

� Often no clear-cut choices.

� Often shaped by the organization¶s ethical climate.



THE NEW ETHICAL ENVIRONMENT � High profile investigations and arrests in headlines.

� Vast majority of businesses ethical.

� New corporate officers charged with deterring wrongdoing and ensuring ethical

standards.



Individuals Make a Difference� Personal ethics matter.

� Survey of British workers found 30 percent spent 30 minutes daily doing

personal business online.

� Technology expanded abuses.

� Data theft.



Development of Individual Ethics



On-the-Job Ethical Dilemmas

Situation in which a business

decision may be influenced

for personal gain.

Telling the truth and

adhering to deeply feltethical principles in

business decisions.

Businesspeople expect

employees to be loyal

and truthful, but ethical

conflicts may arise.

Employee¶s disclosure

of illegal, immoral, or

unethical practices in

the organization.



HOW ORGANIZATIONS SHAPE ETHICAL CONDUCT



Ethical Awareness� Code of Conduct Formal statement that defines how the organization expects

and requires employees to resolve ethical questions.

Ethical Reasoning

� Codes of conduct cannot detail a solution for every ethical situation, so

corporations provide training in ethical reasoning.

Ethical Action

� Helping employees recognize and reason through ethical problems and turningthem into ethical actions.

Ethical Leadership

� Executives must demonstrate ethical behavior in their actions.



ACTING RESPONSIBLY TO SATISFY SOCIETY

Social Responsibility Management¶s acceptance of the obligation to consider

profit, consumer satisfaction, and societal well-being of equal value in

evaluating the firm¶s performance.

� For example, contributions to the overall economy, job opportunities, and

charitable contributions and service.

� Measured through social audits.



Areas of responsibility



Responsibilities to the General PublicPublic Health Issues What to do about inherently dangerous

products such as alcohol, tobacco, vaccines, and steroids.

Protecting the Environment Using resources efficiently,

minimizing pollution.

� Recycling Reprocessing used materials

for reuse.

Developing the Quality of the Workforce Enhancing

quality of the overall workforce through education and

diversity initiatives.

Corporate Philanthropy Cash contributions, donations of equipment and products, and supporting the volunteer efforts

of company employees.



Responsibilities to CustomersThe Right to Be Safe Safe operation of products, avoiding

product liability.

The Right to Be Informed Avoiding false or misleading

advertising and providing effective customer service.

The Right to Choose Ability of consumers

to choose the products and services they

want.

The Right to Be Heard Ability of consumers to

express legitimate complaints to the appropriate parties.



Responsibilities to EmployeesWorkplace Safety Monitored by Occupational Safety and

Health Administration.

Quality-of-Life Issues Balancing work and family

through flexible work schedules, subsidized child

care, and regulation such as the Family andMedical Leave Act of 1993.

Ensuring Equal Opportunity on the Job

Providing equal opportunities to all employees without

discrimination; many aspects regulated by law.

Age Discrimination Age Discrimination in EmploymentAct of 1968 protects workers age 40 or older.

Sexual Harassment and Sexism Avoiding unwelcome

actions of a sexual nature; equal pay for equal work without

regard to gender.







Responsibilities to Investors and theFinancial Community

� Obligation to make profits for shareholders.

� Expectation of ethical and moral behavior.

� Investors protected by regulation by theSecurities and Exchange Commission

and state regulations.



Chapter 3Economic Challenges Facing Global and

Domestic Business

Distinguish between micro-

economics and macroeconomics.

Explain the factors that drive

supply and demand.

Describe the four types of market

structures in a private enterprise

system.

Compare the three major types of

economic systems.

Identify and describe the four stages of the business cycle.

Explain the factors that affect the

stability of a nation¶s economy.

Discuss how monetary and fiscal

policy are used to manage an

economy¶s performance.

Describe the major global

economic challenges of

the 21st century.

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Economics Analysis of the choices people and governments make in allocating

scarce resources.

Microeconomics The study of small economic units, such as individual

consumers, families, and businesses.

Macroeconomics The study of a country¶s overall economic issues, such as how

an economy uses its resources and the effects of government policies on

individuals¶ standard of living.

Microeconomics: The Forces of

Demand and Supply

Demand Willingness and ability of consumers to purchase goods and services at

different prices.

Supply Amount of goods and services for sale at different prices.



Factors Driving Demand� Demand curve shows the amount of a product buyers will purchase at different

prices. Quantity increases as price decreases.

� Economists distinguish between changes in the quantity demanded at various

prices and a true shift in the demand curve.



Factors Driving Supply� A supply curve shows the relationship between different prices and the

quantities that sellers will offer for sale, regardless of demand.

� Movement along the

supply curve is the

opposite of movement along

the demand curve.

� The factors of

production play a

central role in

determining theoverall supply of

goods and

services.



How Demand and Supply Interact � Changes in the real world often affect both supply and demand, and often

multiple factors cause contradictory pressures.

� Supply and demand curves meet at the equilibrium price.

� B

uyers andsellers tend to

make choices

that restore the

equilibrium

price.



MACROECONOMICS: ISSUES FOR THE ENTIRE SOCIETY

� Political, social, and legal environments differ in every country.

� Three types of economies

� Private enterprise systems

� Planned economies

� Mixed market systems





EVALUATING ECONOMIC PERFORMANCE

� Economic system should provide stable business environment and sustained

growth.

Flattening the Business Cycle

� Business decisions and consumer behavior differ at various stages of the

business cycle:

� Prosperity ² High consumer confidence, businesses expanding

� Recession ² Cyclical economic contraction lasting for six months or longer

� Depression ² Extended recession

� Recovery ²Declining unemployment, increasing business activity



Productivity and the Nation·s Gross DomesticProduct

Productivity Relationships between the goods and services produced and the

inputs needed to produce them.

Gross Domestic Product (GDP) Sum of all goods and services produced within

a nation¶s boundaries; a measure of national productivity.

� GDP is tracked in the United States by the Bureau of Economic Analysis, a

division of the U.S. Department of Commerce.



Price-Level ChangesInflation Rising prices caused by a combination of excessive consumer demand

and increases in the costs of raw materials, component parts, human resources,

and other factors of production.

� Devalues money: Hurts people with fixed or slowly rising incomes, income from

fixed interest rate; benefits people with rising incomes, debts with fixedinterest rate

� Steady prices benefit the overall economy

� Businesses can make long-range plans and investments

� Consumers can purchase more products, particularly major purchases.

� Deflation Falling prices, which can weaken the overall economy.

Measuring Price Level Changes The U.S. government tracks price

changes through the Consumer Price Index, which measures the

monthly average change in prices of goods and services.



Employment Levels� The unemployment rate is the percentage of total workforce actively seeking

work but currently unemployed.



MANAGING THE ECONOMY¶S PERFORMANCE

� Government uses monetary and fiscal policy to fight unemployment, increase

spending, and reduce the duration and severity of economic recession.

Monetary Policy

Monetary Policy Government actions to increase or decrease the money supply

and change banking policy and interest rates to influence consumer spending.

Fiscal Policy

Fiscal Policy Government actions to influence economic activity through

decisions about taxes and spending.



The Federal Budget

Budget Annual plan for how the government will raise and spend money in

the coming year.

� Primary sources of government funds: Taxes, borrowing, and fees.

� Government spending in excess of tax revenue produces a budget deficit.

� Government covers the deficit by borrowing money by sellingTreasury bills, notes, and bonds to investors.

� These obligations are added to the national debt, $43 trillion at the

writing of this text.

� Government revenue in excess of spending results in a budget surplus.

� Equal spending and revenue results in a balanced budget.

� How fast to pay off the national debt is the subject of national debate.



GLOBAL ECONOMIC CHALLENGES OF THE 21ST CENTURY



GLOBAL ECONOMIC CHALLENGES OF THE 21ST CENTURY



Chapter 4Competing in Global Markets

Explain international business and

why nations trade.

Discuss types of advantage in

international trade.

Describe measurements of

international trade and exchange

rates.

Identify the major barriers that

confront global businesses.

Explain how international tradeorganizations and economic

communities reduce barriers to

international trade.

Compare the different levels of

involvement used by businesses

when entering global markets.

Distinguish between a

global business strategy

and a multidomestic

business strategy.

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Exports Domestically produced goods and services sold in markets in other

countries.

Imports Foreign-made products and services purchased by domestic consumers.

WHY NATIONS TRADE

� Boosts economic growth by providing access tonew markets and needed resources.

� More efficient production systems.

� Less reliance on economies of home nations.



International Sources of Factors of Production

� Decisions to operate abroad depend on availability, price, and quality of

� Labor

� Natural resources

� Capital

� Entrepreneurship� Allows a company to spread risk throughout nations in different stages of the

business cycle or development.



Size of the International Marketplace� World population = 7 billion

� One in five people live in relatively well-developed

countries.

� Share of world¶s population in less-developed

countries will grow in coming years.

� Population size is no guarantee of prosperity.

� Though developing nations generally have lower per capita income,

many have strong GDP growth rates and their huge populations can

be lucrative markets.



Absolute and Comparative Advantage� Absolute advantage Country can maintain a monopoly or produce at a lower cost

than any competitor.

� Example: China¶s domination of silk production for centuries.

� Rare these days, mostly tied to climate advantages for growing certain crops.

� Comparative advantage Country can supply a product more efficiently and at

lower cost than it can supply other goods, compared with other countries.

� Example: India¶s combination of a highly educated workforce and low wage

scale.



MEASURING TRADE BETWEEN NATIONS

Balance of trade Difference between a nation¶s imports and exports.

Balance of payments Overall flow of money into or out of a country.

Major U.S. Exports and Imports

� U.S. leads world, exports and imports annually total $3 trillion.

� U.S. imports more goods than exports; exports more services than imports.



Exchange RatesExchange rate Value of one nation¶s currency relative to the currencies of other

nations.

� Values fluctuate, or ³float,´ depending on supply and demand for each currency in

the international market.

� National governments deliberately influence exchange rates

� Business transactions usually conducted in currency of the region where they

happen.

� Rates can quickly create or wipe out competitive advantage.

� H ard currencies Currencies that owners can easily convert into other currencies.

� Foreign currency market is world¶s biggest, with daily volume of $1.5 trillion, 50

times the size of all equity markets put together.



BARRIERS TO INTERNATIONALTRADE

Social and Cultural Differences

Language Potential problems include mistranslation, inappropriate messaging,

lack of understanding of local customs and differences in taste.

Values and Religious Attitudes Differing values about business efficiency,

employment levels, importance of regional differences, and religious practices,

holidays, and values about issues such as interest-bearing loans.



Economic DifferencesInfrastructure Basic systems of communication, transportation, energy facilities,

and financial systems.

Currency Conversion and Shifts Fluctuating values can make pricing in

local currencies difficult and affect decisions about market desirability and

investment opportunities.

Political and Legal Differences

Political Climate Stability is a key consideration.

Legal Environment Three dimensions: U.S. law, international regulations, laws

of the countries where they plan to trade. Corruption can be an important issue.

International Regulations F riendship, commerce, and navigation

treaties between U.S. and other nations.



T ypes of

T rade Restrictions

Tariffs Taxes, surcharges, or duties on foreign products.

� Revenue tariffs generate income for the government.

� Protective tariffs raise prices of imported goods to level the playing field for

domestic competitors.

Nontariff Barriers Also called administrative trade barriers

� Quotas limit the amount of a product that can be imported over a specified

time period.

� An embargo imposes a total ban on importing a specified product or all

trading with a particular country.

� Exchange controls through central banks or government agencies

regulate the buying and selling of currency to shape foreign

exchange in accordance with national policy.



REDUCING BARRIERS TO INTERNATIONAL TRADE

Organizations Promoting International T rade

�General Agreement on Tariffs and Trade (GATT) sponsored negotiations toreduce worldwide barriers to trade.

� Founded 1947

� Uruguay Round of negotiations cut average tariffs by one-third, or $700

billion.

� Led to the establishment of the World Trade Organization.



World Trade Organization Monitors GATT agreements.

� 149 member countries

� Began monitoring GATT agreements in 1995

World Bank Lends money to less-developed and developing countries.

� Funds projects that build or expand infrastructure.

� Provides assistance and advice.

International Monetary Fund Promotes trade through financial cooperation.

� Makes short-term loans to member nations to meet expenses.

� Operates as lender of last resort for troubled nations.



International Economic Communities� Reduce trade barriers and promote regional economic cooperation.

� F ree-trade area Members trade freely among selves without tariffs or trade

restrictions.

� Customs union Establishes a uniform tariff structure for members¶ trade with

nonmembers.

� Common market Members bring all trade rules into agreement.

NAFT A (1994)

� World¶s largest free-trade zone: United States, Canada, Mexico.� Combined population: 435 million

� Total GDP: nearly $14 trillion

� U.S. and Canada are each other¶s biggest trading partners.



CAFT

A (2005)� Free-trade zone among United States, Costa Rica, the Dominican Republic, El

Salvador, Guatemala, Honduras, and Nicaragua.

� Total GDP: nearly $14 trillion

� $33 billion traded annually between U.S. and these countries.

European Union

� Best-known example of a common market.

� Combined population: 450 million people in 25 countries

� Total GDP: $12 trillion

� Goals include promoting economic and social progress, introducing

European citizenship as complement to national citizenship, and

giving EU a significant role in international affairs.



GOING GLOBAL� Three key decisions for companies considering going global:

� What foreign market(s) will the company enter?

� What expenditures are required to enter a new market?

� What is the best way to organize overseas operations?

Levels of Involvement

Importers and Exporters Most basic level of international involvement, with

the least risk and control.

Countertrade Payments made in the form of local products, not currency.



Contractual Agreements Often come after a company has some experience in

international sales. Include franchising, foreign licensing, and subcontracting.

Franchising Contractual agreement in which a wholesaler or a retailer gains the

right to sell the franchisors¶ products under that companies brand name in

exchange for agreeing to related operating requirements.

Offshoring Relocation of business processes to lower-cost location overseas.

International Direct Investment Includes establishment of manufacturing

facilities, opening of an overseas division, and acquisition of an existing firm

in the host country.

� Joint ventures Allow companies to share risks, costs, profits, and

management responsibility with one or more host country nationals.



F

rom Multinational Corporation to GlobalB

usinessMultinational corporation (MNC) An organization with significant foreign

operations and marketing activities outside its home country.



DEVELOPING A STRATEGY FOR INTERNATIONAL BUSINESS

Global Business Strategies

� F

irm sells same product in essentially the same manner throughout the world.� Works well for products with nearly universal appeal and luxury items.

Multidomestic Business Strategies

� Firm develops products and marketing strategies that appeal to customs, tastes,

and buying habits of particular national markets.

� Example: Spinach, egg, and tomato soup on the menu in K FC¶s

menu in China.

Documents

CB12e Basic PPT - Part 1 - Business in a Global Environment