BUS - 100 Getting Started & Chapter One THINGS TO DO RIGHT AWAY FOR AN A!

1. 1.  Send me an email identifying who you are. The best way to communicate with me if you have questions or problems. rtgordon@ilstu.edu Use good emailing techniques. You are in BUSINESS!2. Get Signed up for WhatsNew in Business. Sign up at http://whatsnew4bus.wikispaces.com/ for when you want to present. 3.  Sign up for the Virtual Stock Exchange and enroll in class game at www.marketwatch.com . Use your ULID as your ID 4.  Turn in Quiz 2 on 2nd Class Day – 10pts….  5.  Start on TEP part a. 6. Figure out Textbook. BUS - 100 Getting Started & Chapter OneTHINGS TO DO RIGHT AWAY FOR AN A!

2. The Virtual Stock Exchange……What place are you in? www.marketwatch.com/game

3. --A stock is a fractional piece of ownership of a corporation. --Publicly traded stocks are sold in shares each of which has a share price which can change. --Stocks are purchased, sold, exchanged and regulated at a Stock Market Exchange. --Each stock has a three or four digit ticker symbol. ie Nike is NKE> --The Biggest Stock Exchanges are the NYSE and the NASDAQ. --In order to trade their stocks, a company listing their shares must meet many requirements. --Two Kinds of Stock….Common and Preferred stock (dividend stock) --Companies go public in order to sell their shares so that their business can expand and grow. It brings in needed capital. --There are many kinds of stocks including: Blue Chips Dividend Growth Growth and Dividend Large Cap Medium Cap Small Cap Penny Stocks International Stocks --You can also divided stocks into industry sectors like Fast Foods ….McDonalds(MCD) and Starbucks (SBUX)

4. --Why Buy stock? Share in profits….dividend Capital Appreciation ( the share price goes up) --Stocks are very volatile and there is risk but over the long haul it is one of the best investments. --Stock prices change based on Company News Current Events Analyst ratings --The Stock Market has a whole can be measured by various indices like the Dow Jones Industrial Average. The most widely used & made up of the top 30 companies in the US. NASDAQ S&P 500 Russell 2000 --The Dow Jones average has been kept since 1897. The DOW started out at 25 and has gone as high as 14000. Currently the DOW is at 10000. --To Invest in stock an investor should do their own Research. One good website is www.aaii.com You can use that website by logging in as room225 and a password of room225. Use the stock screens to help you pick stocks. --You will create your own “portfolio” of stocks. You need to define your risk tolerance. Your risk should be based on how much money you have, how much you can afford to lose, your time horizon, you life situation, and how much you worry.  --Good Luck with your investing!

5. Why do they call it Wall Street? • http://maps.google.com/maps?hl=en&tab=wl

6. The Dow Jones Averages T.V. & radio news programs report the Dow Jones Industrial Average many times during the workweek. What is the Dow Jones Average? Charles H. Dow In 1882, Charles H. Dow, Edward Jones & Charles M. Bergstresser start a company that distributes copies of stock market reports to business customers in New York City. The first reports are handwritten & distributed by messenger boys. In 1889, the reports, plus additional editorials, become known as the Wall Street Journal.

7. 1896 – Charles Dow creates the Dow Jones Industrial Average by choosing 12 major American companies & averaging the prices of their stocks. The 12 original companies are: American CottonOil, American Sugar, American Tobacco, Chicago Gas, Distilling & Cattle Feeding, General Electric, Laclede Gas, National Lead, North American, Tennessee Coal & Iron, U.S. Leather, U.S. Rubber

8. Days with Greatest Percentage Lost

9. Stock Market Crash In late October 1929 – just a few days before Halloween – investors in New York City began to panic. Stocks that they had bought at high prices began to drop. More & more investors sold their stocks at whatever price they could get. Over two days, the value of companies being traded on the stock exchange fell almost 13 % on Monday & another 12 % the next day. That day became known as "Black Tuesday." Fortunes were wiped out. The stock market had crashed. All across the country & all around the world, people paid attention to the news closely. Some investors killed themselves. Millions of people from all over the world who owned stocks waited helplessly as stock values crashed.

10. http://www.youtube.com/watch?v=5PUwr8DsYeg The 1987 Crash…… http://www.youtube.com/watch?v=YCUsb3y0Sr4&NR=1&feature=fvwp

11. What To Do With Income? • Pay taxes • Spend it (consume today) • Save it (delay consumption to future) • Invest it • Using money you have saved to purchase a product that will create benefits in the future • Saving and investing involves trade-offs

12. Saving and Investment • Saving • Not consuming all current income • Examples: Savings Account, Certificate of Deposit • Business Investment • Production and purchase of capital goods • Examples: machines, buildings and equipment that can be used to produce more goods and services in the future • Personal investment • Purchasing financial securities • Examples: stocks, bonds, real estate, mutual funds • Pay a higher rate of return in the long run than the interest paid on savings accounts.

13. Return, Risk and Liquidity • Rate of Return -Type of profit or loss you are getting on your investment (Interest on savings) • Liquidity – ease of turning assets into money • Return and Risk (direct relationship) • Greater risk, higher returns (NASDAQ stocks) • Less risk, lower returns (CD) • Return and Liquidity (inverse relationship) • Greater liquidity, lower return (CD) • Less liquidity, greater return (Bonds)

14. How Liquid Are You? • Very liquid • Somewhat liquid • Illiquid

15. Share in money-market mutual fund Credit card with $5,000 line of credit Eurodollar savings account in a Swiss Bank Your House Oil painting by Monet • $20 Traveler’s Check • 30 Day Treasury Bill • Share of Microsoft Stock • $5,000 Savings Account • Apartment Complex • $1 (Dollar) Bill • Gold bullion • IBM 20-year Bond Categorize as “very liquid,” “somewhat liquid” or “illiquid”

16. Major Exchanges • NYSE - New York Stock Exchange – “The Big Board” • Founded in 1792, the oldest and most prestigious stock exchange in the U.S. – 3,000 mostly large-cap companies • NASDAQ - National Association of Securities Dealers Automated Quotation System - computerized national trading system that lists more than 5300 small-cap & technology companies • AMEX - The American Stock Exchange founded in 1842 as the New York Curb Exchange – 700 companies

17. Blue Chips • Largest most consistently profitable companies that usually pay dividends • Coca-Cola • General Electric • McDonald’s • Exxon-Mobile • Wal-Mart • Gillette

18. Types of Stocks • Common Stock • The most basic form of ownership that a corporation issues. • It designates that you own a fraction of the company. • The value of a common stock is directly influenced by the successes and failures of the issuing company. • It may or may not pay a dividend, which is the portion of the company's profits paid out to its shareholders.

19. Preferred Stock • They receive their dividends before common stock owners • If the company goes out of business, preferred stockholders are paid back the money they invested before the common stockholders • For these reasons, preferred stock is generally less risky than common stock • The main drawback of preferred stock is that it cannot benefit as much from company profits because it only pays a fixed dividend

20. Capital Gains and Dividends – How do you make money$$$$? • Capital Gains • A profit made when selling stock at a higher price than they paid for it. Most people buy stock to make money from capital gains. • For example, if you buy 100 shares of Company XYZ at $100.00 a share (a total $10,000 investment) and sold it for $125.00 a share ($12,500), you’ve realized a capital gain of $25.00 a share, or $2,500.00.

21. Dividends • Dividends are the distribution of profits from a company to the stockholders • Investors buy stock for the dividend payments. • For example, if Company XYZ declares an annual dividend of $10.00 a share and you own 100 shares, you’ll earn $1000.00 a year, or, $250.00 paid each quarter.

22. Who Decides Dividends? • A companies board of directors decides how large a dividend the company will pay, or whether it will pay one at all. • Quarterly dividend payments are the most common; annual and semiannual payments are less common. • Usually only large, established companies pay dividends. • This is because smaller companies need to reinvest their profits to continue growing.

23. IPO – Initial Public Offerings • Taking a company through a public offering on the U.S. securities markets is a major undertaking • It is a source of pride, an opportunity for business growth, and a serious legal responsibility. • Great way to get growth money for expansion. • Downside – give up control • Only time company gets money

24. Why Invest in Stock? • Earn regular income – dividend payments • Buy low, sell high…hopefully ☺ • Sell at higher price than you bought? • Capital gain • Sell at lower price than you bought? • Capital loss • When do you reap the benefits?

25. Market Cycles • Ups and Downs • Throughout its history, the stock market has tended to move in cycles of activity. • The stock market is greatly affected by economics, social, and political factors. • While it's impossible to predict the market's future activity, one thing is certain: The stock market will continue to experience ups and downs.

26. Bull and Bear Markets • Bull: attacks by thrusting horns up (positive) • Optimistic outlook, investor confidence • Prices rising or expected to rise • Can apply to anything that is traded • Bear: attacks by swiping paw down (negative) • Prices falling or expected to fall • Enter a downturn of 15-20% in multiple indexes • Psychological effects & speculation

27. Indexes • Each exchange calculates an index, or benchmark, based on the activity of its member companies' stock prices. • "The market's up" or “the market's down," refers to the Dow Jones Industrial Average. It is considered a reliable indicator of the strength - or weakness - of stocks in general. Composite of 30 companies.

28. Market Indices & Averages • A short list of the major U.S. indices: • Dow Jones Industrial Average (DJIA) • Dow Transports (DJTA) • Dow Utilities (DJUA) • DJ Wilshire 5000 • NASDAQ Composite / NASDAQ 100 • S&P 500 Index (S&P 500) / S&P 100 • Russell 2000 • NYSE and AMEX Composites

29. Business Now: Moving at Breakneck Speed In the last decade: • The players have changed • What consumers want has changed • How we buy has changed • Companies are being launched and growing faster than ever • Mature firms are being merged, acquired and dissolved

30. Business Basics A business is any activity that provides goods and services in an effort to earn profit. • Non-profit organizations focus on causes not profit

31. Business Basics Profit is the financial reward that comes from starting and running a business. • the money that a business earns in sales (or revenue), minus expenses

32. The History of Business: Putting It All in Context Long-term Relationships Satisfied Customers Use of Technology Consumer Power Growth in Consumerism Product Differentiation Customer Focus Assembly Line Refining Production Productivity Gains Decrease Costs Hard Sell No Customer Focus Industrial Titans Wealth Creation Increase in Living Standard Manipulation/Competition Exploitation Mass Production Factories Work Specialization Efficiency

33. Nonprofits and the Economy: The Business of Doing Good “ • Nonprofits focus on health, human services, education, art, religion and culture • Nonprofits contribute to the economy • Nonprofits are organizations that also require management • Many nonprofits work with businesses to improve the quality of life in society • Companies support their missions and improve society Nonprofits are not in the business of financial gain. We’re in the business of doing good. - Chuck Bean “

34. Factors of Production: The Basic Building Blocks Natural Resources • Businesses rely on some combination of these factors • Entrepreneurship is a key factor • Most growing economies support and promote entrepreneurship Human Resources Capital Entrepreneurship

35. Entrepreneurial Spirit: The Richest Americans 2008 Source: “The 400 Richest Americans”, September17, 2008, Forbes Website, http://www.forbes.com/lists/2008/54/400list08_The-400-Richest-Americans_Rank.html, accessed January 18, 2009.

36. The Business Environment: The Context for Success

37. Economic Environment In September 2008 the U.S. economy plunged into the worst fiscal crisis since the great depression. • The value of the stock market tumbled • More than a million Americans lost their jobs • Housing prices plummeted and foreclosures reached record levels • Economic turmoil in the U.S. spread around the world

38. Economic Environment • The Federal Reserve and U.S. Government have taken action in stimulus package • Job creation • Energy focus • Infrastructure building • Key elements of the U.S. economy will promote growth • Entrepreneurs • Enforceable contracts • Low corruption

39. Flex Your Creativity As the second decade of the 21st century begins, the nation is at a crossroads Myths about creativity: • Lone geniuses drive creativity • The best ideas come in bursts of brilliant insight • Nothing matters more than the idea itself • Time pressure fuels creativity • Slacking never pays

40. Competitive Environment • Today’s competition is intense • Companies must make loyal customers—vocal promoters of their products/services • Companies must provide unsurpassed value • Value is the size gap between benefit and price • The cheapest product does not mean value • The key to value is quality

41. Competitive Principles • Avoid your competitors’ strengths and exploit their weaknesses. Don’t try and beat them at their game. • Always be a little paranoid. Never underestimate your competition. • Competitors will usually get better when pushed. • Competitors are sometimes irrational when pushed.

42. Competitive Environment • Leading Edge versus Bleeding Edge: Speed to Market • How fast firms get products to market can be a competitive advantage • Bleeding edge firms launch products that fail because they are ahead of the market • Leading edge firms offer products just as the market is ready • Apple computers was not first to the MP3 market but they now own 75% market share • Employees are another key competitive advantage

43. Innovation: For Better or for Worse Disposable Diapers Cat Litter Bikinis Muzak Laptop Viagra Camcorder Great Inventions that have impacted human life….for better or for worse. Kool-Aid Astroturf

44. Social Environment: U.S. Population Estimates • Diversity • Aging Population • Rising Worker Expectations • Ethics & Social Responsibility Source: U.S. Census Bureau, 2005-2007 American Community Survey, U.S. Census website, http://factfinder.census.gov/servlet/ADPTable?_bm=y&-geo_id=01000US&-qr_name=ACS_2007_3YR_G00_DP3YR5&-ds_name=ACS_2007_3YR_G00_&-_lang=en&-_sse=on, accessed January 19, 2009; In a Generation, Minorities May Be the U.S. Majority, by Sam Roberts, August 13, 2008, New York Times website, http://www.nytimes.com/2008/08/14/washington/14census.html?ref=todayspaper, accessed January 19, 2009.

45. Social Environment • The U.S. has become more ethnically diverse in recent years. • Hispanic and Asian populations are projected to double by 2050. • Growing ethnic populations offer profit potential for firms. • Growing diversity impacts the workplace.

46. Social Environment Teens today are much less likely than their parents to categorize people by race, religion, and sexual orientation. They’re more likely to notice similarities and differences in core values.

47. Technological Environment • Business technology includes any tools that businesses can use to become efficient and effective • Source of competitive advantage • Industries have experienced dramatic change • New industries have emerged

48. Technological Environment Technology continues to evolve at breakneck speed, the change in everyday life and business operations is almost unimaginable. Companies that welcome change and manage it well will clearly be the winners http://www.usps.com/communications/news/press/2005/pr05_062.pdf.

49. Through innovation, Netflix leveraged all the changes and opportunities of the business environment.

50. Gather around the Water Cooler: Let’s Talk • How has Netflix leveraged technology and the adoption of technology in the home? • How has the entrepreneurial spirit of this firm changed competition in an industry dominated by one big player and small local companies? • Why does Netflix flourish in down economic cycles as well as times of growth?