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CHAPTER 1

Managing Within The Dynamic Business Environment: Taking Risks and Making Profits.

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

Business and Entrepreneurship: Revenues, Profits and Losses.

Businesses provide people with goods and services, employs people and provides people with the opportunity to become wealthy, which eventually helps improve a countrys economy. A business is any activity that seeks to provide goods and services to others while operating at a profit. Profit is the amount of money a business earns above and beyond what it spends for salaries and other expenses. We need an entrepreneur to start a business, who is willing to risk money and time to start and manage the business.

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 and services. A loss occurs when a businesss expenses are more than its revenues. Most business failures are due to poor management or problems associated with cash flow. Not all entrepreneurs are skilled at being managers. In order to start a business, an entrepreneur must take risk. Risk is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable. Whereas one James Bond movie lost money, another movie brought about a huge profit of $205 million.

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 of life for everyone in the country. Businesses provide employment for other people which reduces poverty. Taxes that are paid by the employed are used by the government to build hospitals, schools, libraries and other facilitates. The term standard of living refers to the amounts of goods and services people can buy with the money they have. United States has one of the highest standard of living in the world, even though a few workers in some other countries such as Germany and Japan make more money per hour.

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 person can buy in those countries is less than what a person in the United States can buy with the same amount of money. The reasons why goods might cost more in one country than in other are higher taxes and stricter government regulations. Quality of life refers to the general well-being of a society in terms of political freedom, a clean natural environment, education, health care, safety, free time, and everything else that leads to satisfaction and joy. Maintaining a high quality of life requires the combined efforts of businesses, non-profit organizations and the government.

Business Stakeholders

Stakeholders are all the people who stand to gain or lose by the policies and activities of a business. They include customers, employees, stockholders, suppliers, dealers, bankers, and people in the surrounding community, environmentalists and elected government leaders. The challenge of the 21st century is for organizations to stay profitable as well as balance the need for all stakeholders.

Non profit Organizations

Non-profit organizations make a major contribution to the welfare of the society. A non-profit organization is an organization whose goals do not include making a personal profit for its owners or organizers. They include public schools, charities, mosques and other groups devoted to social causes.

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 other means of manufacturing. Entrepreneurship Knowledge.

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 other means of manufacturing. Entrepreneurship Knowledge.

Factors of production

Availability of one or two of the factors of production in huge amounts does not guarantee a wealthy economy; instead for a nation to become wealthy, one need to have a proper balance 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 countries which do not have plenty of natural resources. Bangladesh is a country with a huge labor force, but that itself does not make it a wealthy nation. For a nation to become wealthy, we need entrepreneurs who is willing to take the risk of money and time to start new businesses, buy land and capital, and hire a labor force who utilizes their knowledge to run the business.

The Business Environment

The business environment consists of the surrounding factors that either help or hinder the development of business. The five elements in the business environment are:

Economic and legal environment Technological Environment Competitive Environment Social Environment Global Business Environment

The Business Environment

The Economic and Legal Environment Entrepreneurs go into business for a high return on investment for their money and time. If a government takes away much of what a business earns through its taxes, then entrepreneurs many no longer be interested to take such risks. 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.

The Business Environment

Governments in many countries own enterprises themselves, 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 a factory or open a store without a government permit which is obtained largely through bribery of public officials.

The Business Environment

The Technological Environment The technology refers to any device from phones to computers and other software programs that makes business processes more efficient and productive. Tools and technology greatly improve productivity. Productivity refers to the amount of output that is generated from a given amount of input (e.g. hours worked). Efficiency refers to producing items using the least amount of resources. E.g. how an electronic database helps a company become more responsive to customer needs and wants.

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. Customers needs and wants come first in todays business world.

Speed is another important component of customer


satisfaction.
To stay competitive, businesses need to be responsive to customers and be able to handle customer complaints quickly and satisfactorily. One way to accomplish this is through employee empowerment. Employee empowerment is the process through which frontline workers are given the responsibility, authority, freedom, training and equipment they need to respond quickly to customer requests without having to consult higher manager ( Save response time)

The Business Environment

The Social Environment One important aspect of the social environment is the demography. Demography is the statistical study of the human population with regard to its size, density and other characteristics such as age, gender, race, religion, income and so on. Population shifts leads to new opportunities for some firms and to declining opportunities for others. For instance, as a country moves from lower income lifestyle to higher income lifestyle, the need for luxurious products increases.

The Business Environment

A country with a high density of population in their youth will have a higher demand for latest tech devices than a country with a high density of population in the late 60s.
A country with a high density of population in their old age will have a higher demand for nursing homes, adult day care, home health care, medicine and so on.

The Business Environment

The Global Environment Two important global environmental changes are:


The growth of international competition The increase of free trade among nations Manufacturers in countries as China, India, South Korea can produce high quality goods at a lower price than that of United States or Japan because their workers are paid less money. This calls for companies in the developed countries to set up firms in the developing countries to match the low cost with their competitor firms.

The Business Environment


The Global Environment: War and Terrorism The threats of terrorism adds greatly to organizational costs including the costs of security personnel, security equipments and insurance. E.g. airliners have had to install stronger cockpit doors after 9/11, buy more security equipment and hire new security personnel. War and terrorism also makes investor fearful and discourages foreign investment in countries vulnerable to such threats. Thats it for Today