Learning objective 3
Describe the five elements of the business environment.(Text pages13-29)
A.The business environment is the surrounding factors that either help or hinder the development of business; they are:
1.the economic and legal environment
2.the technological environment
3.the competitive environment
4.the social environment
5.the global business environment
Businesspeople must be aware of all the environments in which they operate.
B.The Economic and Legal Environment
1.If people feel that the risk is acceptable, they are willing to take the risk of starting businesses
a.Part of entrepreneurs’ risk involves the setup of the economic system and how government works with or against businesses.
b.Governments can lessen the risk of starting a businesses and increasing entrepreneurship and wealth.
2.Entrepreneurs seek an acceptable return on investment (roi), the money gained from taking a business venture risk.
a.RETURN ON INVESTMENT (ROI), is the money gained from taking a business venture risk; in addition to money, investment of time is also an important consideration.
b.If the investment of time and money becomes too high, the ROI may no longer be worth the risk.
c.States and cities with high taxes drive entrepreneurs out, while low-tax governments attract them.
d.Some tax laws also help small businesses.
3.What can government do?
a.Governments can lessen the risks by passing laws that let businesspeople write contracts that are enforceable in court.
b.The uniform commercial code (ucc) is a comprehensive set of commercial laws, adopted by every state in the United States, which covers sales laws and other commercial laws.
c.Government can also establish a currency that’s tradable in world markets.
d.A tradable currency is money that is allowed to be exchanged for another country’s money.
e.Governments can help minimize corruption in businesses and in their own ranks.
4.Corrupt and illegal activities—such as Enron, WorldCom, and Tyco—negatively affect the business community and the economy.
a.Other forms of corruption can affect small businesses, such as employees stealing money or giving free merchandise to friends.
b.According to Bloomberg Personal Finance, “one of the greatest threats to the U.S. economy … is the wholesale undermining of investor confidence in the stock market as a result of corporate deceptions.”
c.Such scandals emphasize the need for laws restraining people from committing unethical acts.
5.A board of directors is a group that oversees the activities of a corporation.
a.A board of directors generally represents a mix—a small number of company executives and a greater number of outsiders.
b.The Hewlett-Packard scandal involved the chairman of the board of directors, who allegedly used unconventional methods to spy on board members.
6.The capitalist system relies heavily on honesty, integrity, and high ethical standards.
7.In a capitalist system companies and businesses are owned by citizens instead of government.
C.The Technological Environment
1.Few technical changes have had a more lasting impact on businesses than information technology.
2.The Internetis a major force in business today.
3.Increased productivity
a.Technology means everything that makes business processes more efficient and productive.
b.Effectiveness is producing the desired results.
c.Efficiency is the ability to produce using the least amount of resources.
d.A resourceis something used in the production of goods.
e.PRODUCTIVITY is the amount of output you generate given the amount of input (e.g. hours worked.)
f.Tools and technology have greatly improved productivity.
g.Example: CAD, CAM and AI are used to automate manufacturing plants.
h.Farmers use high technology to increase production and profit.
i.Access to technology is one reason U.S. workers are more productive than those in other countries.
4.Making buying and selling easier
a.E-COMMERCE is business conducted electronically over the Internet.
b.There are two types of e-commerce transactions: Business-to-Consumer (B2C)and Business-to-Business (B2b).
c.Business-to-Consumer (B2c)is business that produces products to sell directly to the consumer.
d.B2B (BUSINESS-TO-BUSINESS) E-COMMERCEis business that produces products to sell to another business.
e.B2B is at least five times as big as B2C.
f.E-commerce experienced phenomenal initial growth, creating companies such as Amazon.com, as well as many failed enterprises.
g.Many traditional companies, such as J.C. Penney, are also expanding online.
5.Responsiveness to customers
a.The businesses that are most responsive to customer wants and needs will succeed.
b.Businesses can use technology, such as UPC codes on products, to become more responsive.
c.Universal product codes (upc) are the series of lines and numbers that you see on most consumer packaged goods; they identifiy the type of product.
d.A DATABASEisan electronic storage file where information is kept; one use of databases is to store vast amounts of information about consumers.
e.These databases let businesses tailor products and marketing to customers.
f.Databases also allow stores carry fewer items and less inventory.
D.The Competitive Environment
1.Making quality products is not enough to stay competitive in world markets.
2.Now you have to offer high-quality products and outstanding service at competitive prices, or value, the relative worth, merit, or importance.
3.Consumer-driven organizations
a.Customer-driven organizations, both large and small, provide outstanding customer service.
b.Businesses can successfully compete against competitors if they offer better and friendlier service.
c.Successful companies must listen to customers to determine their wants and needs and then adjust their products, policies, and practices to meet these demands.
d.Customers now also demand speed—faster deliveries, quicker responses.
4.Employee empowerment
a.To meet the needs of customers, firms must enable their front-line workers to respond quickly to customer requests.
b.EMPOWERMENT is giving frontline workers the responsibility, authority, and freedom to respond quickly to customer requests.
c.To implement empowerment, businesses must train front-line people to make decisions, without consulting managers.
d.Many firms have createdcross-functional teams, a group of people with different expertise working together to achieve a common goal.
e.With empowerment, workers need more education and training.
f.It sometimes takes years to restructure an organization to empower workers.
E.The Social Environment
1.Businesses need to be aware of the major changes occurring in the U.S. population.
2.Diversity
a.diversity involves broad differences between people (ethnically, gender, color, sexual orientation, body size, age.)
b.Both Hispanic and Asian populations are growing rapidly.
c.Advantages of diversity:
i.A business can better serve customers with a diverse workforce.
ii.A diverse workforce brings about new, fresh ideas and perspectives.
d.Generational issues
i.The Boomers, or Baby Boomers (born between 1946 and 1964) have been called workaholics.
ii.Generation X (born between 1965 and 1980) want work-life balance.
iii.Generation Y, or the Millennial Generation, (born between 1981 and 1994) are the children of Baby Boomers.
e.Management of diverse groups is complicated and becomes more difficult with overseas assignments.
3.Aging consumers
a.Baby Boomers are aging, and their retirement could create employment imbalances.
b.U.S. citizens aged 45 to 64 are the richest group in U.S. society.
c.Businesses that cater to the aging Baby Boomers will have the opportunity for exceptional growth.
4.Dual incomes
a.A dual-income family is one in which both adult members of the household work.
b.High housing costs have made it difficult for many households to live on just one income.
c.Many companies are implementing programsto assist two-income families.
i.Many employers provide child care benefits of some type, some through cafeteria benefits packages.
ii.Cafeteria-style benefits packages enable families to choose from a menu of benefits.
d.Many companies are hiring more part-time workers to accommodate parents who work.
e.Some companies allow workers to telecommute, working from home and keeping in touch with the company through telecommunications.
5.Single parents
a.The number of single-parent households has grown rapidly.
b.Many single parents struggle with the work/life balance.
c.Single parents have encouraged businesses to implement family-friendly programs such as family leave and flextime.
6.Marriage
a.People are getting married much later, if at all, and having children later.
b.Many married couples have chosen not to have a child, which creates more wealth and the need for different products.
F.The Global Environment
1.Two important environmental changes in recent years have been the growth of international competition and the increase of free trade among nations.
2.Free trade is the reduction of barriers to trade, such as elimination of tariffs (or taxes) on goods brought into another country.
3.U.S. companies now must also compete against manufacturers in low-wage companies overseas.
4.Better technology, tools, and education enable each worker to be more productive.
5.All size businesses compete in the global marketplace, including medium-sized and small companies.
6.Few recent events have had a bigger effect on U.S. businesses than the terrorist attacks on the WorldTradeCenter on September 11, 2001.
a.In the wake of these attacks, the travel industry suffered because some people were afraid to fly.
b.The slump also affected hotels, amusement parks, restaurants, and more.
7.The threat of terrorism makes people more fearful and cautious and adds to a business’ organizational costs.
8.Events such as the war in Iraq and the threat of nuclear power in North Korea, have an impact on businesses everywhere—both positive and negative.
Self check Questions(Text page 29)
- In what ways can the government make things easier for businesspeople? Do you think the government should do more? Why or why not?
- Name two changes that have been brought about by technology. What kinds of long-term effects do you think these changes will have?
- Why is social diversity an important concern for business?
- What is free trade, and how does the issue of free trade impact businesses competing overseas?
The Five Parts of the Business Environment
(Refers to text pages 13-14)
TEXT Figure 1.3
Today’s Dynamic Business Environment (Text page 14)
lecture link 1-3
The Language of Business
More businesses are looking for bilingual employees. (See complete lecture link on page 1.27 of this manual.)
PowerPoint 1-7
The Economic and Legal Environment
(Refers to text pages 13-15)
TEXT Figure 1.4
The Economic and Legal Environment (Text page 15)
PowerPoint 1-8
The Economic and Legal Environment
(Refers to text pages 15-17)
TEXT REFERENCE
Ethical Challenge:
Biz Majors Get an F for Honesty
(Box in text on page 17)
A survey of college students found that undergraduate business students do more cheating that just about anyone else—54% admitted to cheating on written assignments. What ethical practices do these students take with them into careers?
PowerPoint 1-9
The Technological Environment (Refers to text pages 17-19)
TEXT Figure 1.5
The Technological Environment (Text page 18)
PowerPoint 1-10
The Technological Environment(Refers to text pages 19-20)
PowerPoint 1-11
The Competitive Environment (Refers to text pages 20-23)
TEXT Figure 1.6
The Competitive Environment (Text page 21)
TEXT REFERENCE
Study Skills Are a Learned Behavior
(Box in text on page 22)
Studying is a learned behavior that can improve with practice. An additional exercise and discussion is available in this chapter on page 1.25 of this manual.
TEXT Figure 1.7
How Competition Has Changed Business (Text page 21)
PowerPoint 1-12
The Social Environment
(Refers to text pages 23-25)
TEXT Figure 1.8
The Social Environment (Text page 24)
TEXT Figure 1.9
Sample Census Table (Text page 24)
bonus internet
exercise1-1
Trends in Population
This Internet exercise leads students online to the Census Bureau’s web page to gather data regarding trends in population and the social environment. (See complete exercise on page 1.29 of this manual.)
Bonus Case 1-1
Dual Career Planning
Dual careers require careful planning and discussion. See complete case, discussion questions, and suggested answers on page 1.37 of this manual.
Bonus Case 1-2
Dealing with Changing Family Structures
This case focuses on the economic and social changes that have affected the nature of families. (See complete case, discussion questions, and suggested answers on page 1.39 of this manual.)
PowerPoint 1-13
The Social Environment
(Refers to text pages 26-27)
lecture link 1-4
America Loves its Pets
Businesses need to monitor the social environment to detect trends that can present opportunities. This lecture link presents one—America’s growing love affair with its pets. (See complete lecture link on page 1.28 of this manual.)
PowerPoint 1-14
The Global Environment
(Refers to text pages 27-29)
TEXT Figure 1.10
The Global Environment (Text page 29)