So…What is Business?

1. So…What is Business?

2. The Scope of US Business • Business-an activity that satisfies economic needs by planning, organizing, and controlling resources to produce and market goods or services • Free market economy-goal is usually to earn a profit • US has some of the most successful businesses in the world

3. The Scope of US Business • 1,000’s of new businesses started each year • Some want to work for themselves • US economy encourages new businesses • Most businesses start small • Some stay small, while others grow • 95% of all US businesses are classified as small business • Small businesses employ over ½ of the private-sector work force

4. Nonprofit Organizations • Nonprofit organizations • Service organizations • Profit is not the goal • Ex: YMCA/YWCA, Leukemia Society, American Cancer Society • Hire employees/pay costs of business • Must earn income • Any income remaining after expenses goes to charitable cause • Public schools fall into this category • Public sector vs. Private sector

5. Classifying Businesses • Classified by type of product/service • Bread • Flour • Bakery • Dry cleaner • Building maintenance • Cleaning • Newspapers/Magazines • Education/training

6. The Functions of a Business • Production-ideas, goods, services • Creating, growing, manufacturing, or improving on something produced by someone else. • Ex: song writer, farmer, Ford, lumber company, home builder • Marketing-ideas, goods, services • Marketplace- where products are sold • Wherever two or more people agree to buy/sell a product • Exchange process-when customers exchange their $ (or promise to pay) • Marketing is determining and satisfying the needs and wants of consumers through the exchange process

7. The Functions of Business • Management • Brings together land, labor, and capital • Management is the process of achieving company goals by effective use of resources • Management functions: • Planning • Organizing • Controlling

8. The Functions of Business • Management (cont.) • Managing resources for the purpose of making a profit • Requires: • Good financial planning • Good record keeping • Knowledge of laws/proper accounting procedures • Finance- money management • Analyze past trends • Forecasts for the future

9. Group Question #1 • How might this organizational chart be different if this were a small business? President Treasurer Production Manager Sales Manager Manufacturing Supervisor Accountant Assistant Sales Manager Bookkeeper Prod. Dept. Support Prod. Dept. Support Sales Rep. Sales Rep. Sales Rep. Office Manager Office Support Office Support Office Support

10. The Business Utilities • So…there are two basic business functions-production & marketing • Each creates different utilities • Utility-economic term that means “value added”

11. Let’s Open a Lemonade Stand! • Form Utility • Raw materials-lemons • Add water & sugar = lemonade • When you create this product, you are adding value to the raw materials=form utility • Place Utility • You set up a stand in the quad • Convenient place…thirsty people • This adds value to your product=place utility • Time Utility • Summertime in Sacramento • “This heat makes me thirsty” • Making product available when people need it adds value to your product=time utility

12. Lemonade Stand (cont.) • Information Utility • You put up a sign on the corner to tell people about your lemonade • Informing people about something they might like to have adds value to your product= information utility • Possession Utility • Not all students have change when they pass by your lemonade stand. • You allow them to pay you (just once) on Friday for all the lemonade they consumed • This adds value to your product= possession utility

13. Production Utility • Form Utility is created by the production of your product • Raw materials  product • Gap T-Shirt • Big Mac • Lemonade • Now, product is worth more (added value) than the individual raw materials that went into its production.

14. Marketing Utilities • Marketing Utilities - utilities that add value that also help you get your product into the hands of the consumer. • Place-(The Where) getting product to consumer • Transportation • Refrigeration (perishable items) • Storage-by producer, by wholesaler • Storage and display by retailer • Time (The When) having products when consumer wants them • Plans to get product at the right time of year • Retailers must stay open to make goods available

15. Possession (The What) the actual exchange • Happens every time the product changes hands • Buying on credit, accepting checks, layaway, installments • Information (The How) • Communication with customer • Features and benefits, price, packaging, advertising, ingredients, safety precautions, the care, use, and maintenance of the product

16. Benefits of Marketing • 1. Lowering prices • Increases demand  more profitable to manufacture/sell in larger quantities • Larger quantities  reduced per unit cost • Fixed costs-rent on building, etc • Variable costs-raw materials • Producing larger quantities = spending less per unit on fixed costs • Lower price to consumers • Marketing activities can also lower prices by increasing competition

17. Group Question #1 • When televisions first came out, they were expensive. Competition and market activities helped produce better, lower-priced televisions. • Name other products that vastly improved in design and price after the original models were introduced in the market.

18. Benefits of Marketing • 2. Developing new and improved products • Marketing activities  “new & improved” • Disposable diapers-redesign, redesign, redesign • Businesses have to spend money to learn about customer’s needs and wants • Businesses also have to make enough profit to allow for some failures and still stay in business • Ford Edsel

19. Marketing and Social Responsibility • Laws • Encourage fair business practices • Protect consumers, worker, investors, environment • Other social responsibilities • Environmental Stewardship • Civic Engagement • Social Change - Less fortunate, disabled • Global Impact/Responsibility • Medical research

20. Ethical and Legal Concerns • Ethics-guidelines for good behavior • Doing what is “right” • Considers well-being of everyone in society • Some ethical situations addressed by laws • Bait and switch advertising • Price fixing • Selling unsafe products • Some ethical situations involve debate • Freedom of speech vs. freedom to compete

21. Ethical and Legal Concerns • 3 basic ethical questions: • Is the practice right? Fair? Honest? • What would happen if the product was marketed differently? • What practice will result in the greatest good for the greatest number of people? • Weighing legal issues and social responsibility • Recalls • Socially responsible businesses recall products BEFORE gov’t tells them to. • Sometimes, they may recall a product even if they are not responsible for its faulty design or problems it can potentially cause. • Ex: Tylenol

22. Environmental Stewardship Consumption of Natural Resources • Oil resources-oil crisis of 1970s • Conservation depends on business, government, and consumers • Recycling programs • US-”throw away” society • 5% of world population • Produce 50% of world’s trash

23. Environmental Issues • Most are governed by laws • Ex: Improper disposal of medical, chemical, and other hazardous wastes • EPA-Environmental Protection Agency • Protects environment from pollution • Efforts to reduce smog emissions • Modification of automobile engines • Unleaded gasoline • Fluorocarbons-aerosol cans (hairspray) • Agricultural Pesticides • Industrial Waste

24. Consumerism • Involves relationship of marketing with consumers • Consumerism-societal effort to protect consumer rights by putting legal, moral, and economic pressure on business. • 1900’s-focused on product purity, product shortages, antitrust, postal rates, and banking • 1930’s-1950’s-product safety, labeling, misrepresentation, deceptive ads, consumer refunds, and bank failures • 1960’s-1980-consumerism grew to involve all areas of marketing.

25. Consumerism (cont.) • Consumer Bill of Rights • President Kennedy • Consumers have four basic rights • To be informed & protected against fraud, deceit, and misleading statements, and to be educated in the wise use of financial resources • To be protected from unsafe products • To have a choice of goods and services • To have a voice in product and marketing decisions made by government and business

26. Consumerism (cont.) • 1960’s-1970’s- • Books written about consumerism • Consumer dissatisfaction-demanded action • Federal Trade Commission expanded it’s role to include consumer issues • 1980’s-less active • Business had responded (24-hour service) • 1990’s-companies more responsive • Consider and address customer concerns in marketing plans