Chapter 1

The Changing Face of Business

What is a business?

Business:
o All profit seeking activities and enterprises that provide goods and services
necessary to n economic system
Profits
o Rewards for businesspeople who take the risks involved to offer goods and
services to customers
Non Profit Organizations
o Organizations whose primary aims are public service, not returning a profit to its
owners

Factors of Production

Factors of Production
o 4 basic inputs for effective operation:
1. Natural Resources
a. All production inputs that are useful in their natural states,
including agricultural land, building sites, forests and mineral
deposits
b. Factor of payment: Rent
2. Capital
a. Production inputs consisting of technology, tools, information
and physical facilities
b. Factor of payment: Interest
3. Human Resources
a. Production inputs consisting of anyone who works, including
both the physical labor and the intellectual inputs contributed
b. Factor of payment: Wages
4. Entrepreneurship
a. The willingness to take risks to create and operate a business
b. Factor of payment: Profit

Private Enterprise System

Private Enterprise system

o An economic system that rewards firms for their ability to identify and serve the
needs and demands of customers (also know as Capitalism)
Competition
o The battle among businesses for consumer acceptance
Competitive differentiation
o The unique combination of organizational abilities, products, and approaches that
sets on company apart from its competitors in the minds of customers
Private Property
o The most basic freedom under the private enterprise system; the right to own,
use, buy, sell and hand down land, buildings, machinery, equipment, patents,
individual possessions and various intangible kinds of property

6 Eras in the History of Business

Era
Colonial Period
Industrial Revolution
Industrial entrepreneurs

Production

Marketing

Relationship

Main Characteristics
Primarily agriculture
Mass production by
semiskilled workers aided by
machines
Advances in technology and
increased demand for
manufactured goods, leading
to enormous entrepreneurial
opportunities
Emphasis on producing more
goods faster, leading to
production innovations (e.g.
assembly lines)
Consumer orientation, seeking
to understand and satisfy
needs and wants of customer
groups
Benefits derived from deep,
ongoing links with individual
customers, employees,
suppliers and other businesses

Time Period
Prior to 1776
1760-1850
Late 1800s

Through the 1920s

Since 1950s

Began in 1990s

Marketing Era

Consumer orientation
o A business philosophy that focuses first on consumers unmet wants and needs,
and then designs products to meet those needs
Branding
o The process of creating in consumers minds an identity for a good, service or
company; a major marketing tool in contemporary business
Brand
o A name, term, sign, symbol or design that identifies the products of one firm and
shows how they differ from competitors offerings

The Relationship Era

Transaction management
o Building and promoting products in hope that enough customers will buy them to
cover costs and earn profits
Relationship era
o The business era where firms seek to actively promote customer loyalty by
carefully managing every transaction
Advantages:
Long term reduction in advertising and sales costs

Customer spending increases over time, increasing revenue

Relationship management
o The collection of activities that build and maintain ongoing, mutually beneficial
ties with customers and other stakeholders
Technology
o The business application of knowledge based on scientific discoveries, inventions
and innovations
Strategic Alliances
o A partnership formed to create a competitive advantage for the businesses
involved; in international business, the business strategy of one company
partnering with another company in the country where it wants to do business
Green Advantage
o Gaining advantage by building the relationship with your customers by getting
involved in issues that your customers care about (e.g. environmental concerns)
Changes in Workforce

Aging of the Population and a Shrinking Labor Pool

o As people retire from the workforce, they take their experience and expertise
with them
Increasingly Diverse Workforce
o Diversity
Blending of individuals of different genders, ethnic backgrounds,
cultures, religions, ages and physical and mental abilities
Outsourcing and the Changing Nature of Work
o Outsourcing
Using outside vendors to produce goods or fulfill services and functions,
which were previously in-house or in-country
o Offshoring
The relocation of business processes to lower cost locations overseas
o Near shoring
The outsourcing of production or services to locations near a firms home
base
Flexibility and Mobility
Innovation through Collaboration

21st Century Manager

Importance of Vision
o Vision
The ability to perceive marketplace needs and what an organization must
do to satisfy them
Importance of Critical Thinking and Creativity
o Critical thinking
Ability to analyze and assess information to pinpoint problems or
opportunities
o Creativity

The capacity to develop novel solutions to perceived organizational

problems
Ability to Lead Change
o Must guide their employees and organization through the changes brought about
by technology, marketplace demands and global competition

What makes a company admired?

Solid profits
Stable growth
Safe and challenging work environment
High quality goods and services
Business ethics and social responsibility
o Business ethics
Refers to the standards of conduct and moral values involved in
decisions made in the work environment
o Social responsibility
Management philosophy that includes:
Contributing resources to the community
Preserving the natural environment
Developing or participating in NPO designed to promote the
wellbeing of the general public