Transcript Slide 1

Chapter 1
Learn here about …
business enterprises, not-for-profit organizations,
factors of production;
competition, entrepreneurship and private
enterprise;
the contemporary relationships era;
technology in business operations and competition;
quality, customer satisfaction and value creation;
productivity and competitiveness in the global
markets;
trends that challenge managerial effectiveness;
skills that managers need to lead businesses today;
ethics, social responsibility and business decision
making.
Business enterprises, not-for-profit
organizations, factors of production
By business we imply all the
profit-seeking activities and
enterprises that provide the
goods and services required
to run an economic system.
Here, “profit” is the reward or return
that a business enterprise receives as
compensation for the risks undertaken in providing
the goods and/or services to customers.
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Ireland Worldwide ...
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Michael Dell's
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The “not-for-profit” organizations are all
those businesslike establishments whose
primary objective is to provide service to
their consumers and excludes returning
profits to the owners.
These organizations usually serve social,
political, governmental, educational or the like
functions.
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Consumer
Business
We can also classify different
businesses as …
Business
Consumer
Business-toBusiness (B2B)
Business-toConsumer (B2C)
Consumer-toBusiness (C2B)
Consumer-toConsumer (C2C)
Factors of production …
are the materials and inputs needed for
successful operation of the business; and
comprise …
Natural resources
(basic materials like agricultural
land, forests, minerals, building
sites and facilities etc.)
Capital
(money, technology, tools,
information, physical facilities)
Human resources
(workers’ physical labor as also
talents and/or intellectual inputs)
Entrepreneurship
(willingness to take the needed risks
to create and operate business)
Factor
Payments
Rent
Interest
Wages
Profits
The Private Enterprise System
Businesses in the U.S., and now increasingly worldwide,
function within the private enterprise system — the economic
system that rewards enterprises for their ability to perceive and
serve the needs and demands of the consumers. This is also
called capitalism or, more specifically, consumer capitalism.
Philosophical basis of capitalism was laid out
by the British philosopher and economist
Adam Smith (1723-1790) who first argued, in
his celebrated treatise An Inquiry into the
Nature and Causes of the Wealth of Nations
(1776) that, in exercising the right to pursue
his (or her) own good, the
individual is led by an invisible hand, to achieve
Macrothe best good for all. Any
economics
governmental interference with free com08:26 From:
petition will most certainly be injurious, he
Soraal
therefore argued.
Capitalism comes in many shades, however.
For instance, in the book “Good Capitalism,
Bad Capitalism” (by William Baumol, Robert
Litan and Carl Schramn: Yale University Press,
2007), the authors discuss four forms of
capitalism:
entrepreneurial,
big-firm (corporate),
state-directed, and
Click image, above, to go to
the Council on Foreign Relations site
Oligarchic.
to see Carl Schramm and Robert Litan
discuss their book Good Capitalism, Bad
Capitalism and the Economics of
Growth and Prosperity.
You can access this book
at the class website of at the following URL:
http://www.yalepresswiki.org/gcbc/GCBC_Entire.pdf
A private enterprise system rewards the firm/business for
its ability to identify and serve the needs and demands of its
customers, and therefore operates in the framework of four
basic rights:
Right to private property: Every
participant has the right to own,
use, buy, sell, and/or bequeath
most forms of property.
Private
Right to profit: Every firm/
Property
business has the right to
all profits, after taxes,
it earns through its
operations/activities.
Right of free choice:
Every participant in the
system has the freedom of
choice (with regard to jobs,
Profits
purchases, and investments)
Right to compete: Every participant has the right to compete
freely and fairly in the marketplace.
Competition
Rights
Freedom
of Choice
Judging from the American experience,
Entrepreneurial Capitalism …
promotes continued economic growth, e.g.,
one in seven current organizations began operating within the current year;
more than one in every five new jobs has been created by new small businesses;
nearly 12 million U.S. employees currently work for businesses with fewer than
ten employees;
encourages finding novel means to use natural
resources, technology, and the other factors of
production;
helps existing large companies by enhanced
flexibility, improved innovation and new market
opportunities;
enhances efficiency and competitiveness by
creating new industries, developing successful
business methods and improved U.S. standing in
the global market.
1970
Total Employed:
71 million
a
Service Providing Jobs
1. Trade, Transportation and Utilities
2. Information
3. Financial Activities
4. Professional and
Business Services
a
b
8
7
c
Goods
producing
Service
Providing
6
5
4
32
b
8
1
2
c
7
All additional
jobs in the U.S.
since 1970 have
been created in
the economy’s
service providing
segment.
6
1
Service
Providing
5
4
3
2
5. Education and
Health Services
6. Leisure and
Hospitality
7. Other Services
8. Government
Goods Producing Jobs
a. Natural
Resources and
Mining
b. Construction
c. Manufacturing
2007
Total Employed:
137.6 million
Data source: Bureau of Labor Statistics
ftp://ftp.bls.gov/pub/suppl/empsit.ceseeb1.txt
250
200
150
Population,
in millions
300
>65 years
45-64 years
16-44 years
100
50
<15 years
0
1940
70%
65%
1960
1980
2000
14%
16-64 years
(left scale)
12%
60%
10%
65-plus years
(right scale)
55%
50%
1940
8%
The
aging of
the U.S.
population.
6%
1960
1980
2000
Data source:
2008 Economic Report of the President
http://www.gpoaccess.gov/eop/2008/B34.xls
Small Business owners are not
an uneducated
4% Not
lot!!!
reported
19%
Graduate
School
24%
Bachelor’s
Degree
24% High
School or
less
28% Some
College
Source: U.S. Census Bureau “Survey of Small Business Owners (SBO):
Owner’s Education Levels at Start-Up, Purchase, or Acquisition of the
Business” (http://www.census.gov/csd/sbo/edu.html)
1800
1900
2000
History of American Business — Six Eras
The relationship era
(since 1990s) seeks long-term
consumer and worker-loyalty.
David Silverman "Advice for Starting a
Business“. "What is the number one piece of
advice for anyone starting their own business?"
Interview with David Silverman.
The marketing era (since 1950s) began with the Great Depression, when
excess production and poor demand shifted the focus from mere production
and distribution to marketing, selling and advertising. It accelerated in the postWW II boom, though. Increased competition made branding important.
The production era (through the 1920s) met the growing demand for
manufactured goods with an increase in huge labor-intensive assembly-line
factories, specialization of labor, and the rise of the manager, to focus on
producing more goods at a faster pace. Marketing was minimal.
Industrial entrepreneurs (late 1800s) created countless commercially
useful products, so advancing the U.S. business system that raised the overall
standard of living by creating the demand for more goods, e.g., Cornelius
Vanderbilt (railroads), J.P. Morgan (banking), Andrew Carnegie (steel).
Industrial revolution (1760-1850) began in England and France but
peaked in the U.S. It shifted the focus on individual craftsmanship to massproduction, so bringing in the economies of scale. This was a period of rapid
growth and urbanization: agriculture became mechanized, factories sprang
up in the cities, a new railroad system increased the pace of industry.
Colonial (before 1776): Local economy depended on farm and plantation
outputs, and on England for the manufactured items and finances.
6 The Relationship Era (began in 1990s)
Businesses take a long-term approach to
interactions with customers to build loyalty and
improve customer retention.
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Managing Relationships through Technology
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Relationship 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.
Dave Olsen, Starbucks - Haas Event
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the best companies to work for in America as
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successes and the importance of "Leading from the Heart."