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Farzana Chowdhury
BUS 201
Chapter

Taking Risks and

Making Profits
within the
Dynamic
Business
Environment

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 Business & Entrepreneurship
• Businesses provide people with goods and services, employs people
and provides people with the opportunity to become wealthy, which
eventually helps improve a country’s economy.

• Business – Any activity that seeks to provide goods and services to

others while operating at a profit

• Profit – The amount of money a business earns above and beyond

what is spent 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.
• Entrepreneur – A person who risks time and money to start and
manage a business.

• Businesses doesn’t only make money for entrepreneurs. Businesses

provide us with necessities such as food, clothing, housing, medical
care and transportation, as well as other goods and services that
makes our lives easier and better. 2
 Business & Entrepreneurship
• Match Risk With Profit
– Revenue: the total amount of money a business takes in during a
given period by selling goods and services.
– Loss: when a business’s expenses are more than it’s revenues.
• If a business loses money overtime, it will likely have to close, putting
employees out of work.
• Starting a business involves risk
– Risk: the chance an entrepreneur takes of losing time and money
on a business that may not provide profitable
– Companies that take the most risk make the most profit
• Most business failures are due to poor management or problems
associated with cash flow. Not all entrepreneurs are skilled at being
managers.
• A potential business owner needs to do research (e.g. talk to other
business people, read business publications) to find the right balance
between risk and profit. Different individuals have different tolerances
for risk. To decide which is the best choice for you, you have to
calculate the risks and the potential reward for each decision.

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 Businesses add to standard of living
and quality of life
• A nation’s businesses are part of an economic system that contributes
to the standard of living and quality of life for everyone in the country.
• Standard of Living/Quality of Life
– 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.
• Standard of living: 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.
– 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.
– Often the reasons goods cost more in one country versus another
includes higher taxes and stricter government regulations. Finding the
right level of taxes and regulation is an important step toward making a
country prosperous. 4
 Businesses add to standard of living
and quality of life
• At this point it is enough to understand that the US has such a high
standard of living largely because of the wealth created by its businesses.

• Quality of Life: 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 government agencies.
– The more money businesses create, the more is potentially available
to improve the quality of life for everyone.

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 Businesses Stakeholders
• Responding to the Various Business Stakeholders
– Stakeholders: All the people who stand to gain or lose by the
policies and activities of a business.
– E.g. customers, employees, stock-holders, suppliers, dealers,
bankers, environmentalists, government, media.
– The challenge of the 21st century is to balance as much a
possible the needs of all stakeholders.
– Managers must give consumers what and need – and make
profit for shareholders – managers must be careful to balance
the needs of those needs against the needs of the community
(recycling, management of forests, ethical treatment of animals
etc.)

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 Non Profit Organizations
• Using Business Principles in Nonprofit Organizations
– Despite their efforts to satisfy all their stakeholders, businesses cannot
do everything for the community – non-profit organizations such as
public schools, charities, groups devoted to social causes make major
contribution to the welfare of the society.
– Non Profit Organization: An organization whose goals do not include
making a personal profit for its owners or organizers.
– Non-profit organizations often do strive for financial gains, but such
gains are used to meet the stated social goals or educational goals of
the organization rather than profit.
– If you want to work in a non-profit organization, you will need to learn
business skills such as information management, leadership,
marketing, financial management etc. Therefore the knowledge and
skills you acquire in this and other business courses will be useful for
careers in any organization, including a non-profit one.

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Objectives of Business

Survival

Profit Social
Growth Responsibility

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 Entrepreneurship Vs. Working for
Others
• There are two ways to succeed in business
– One way, is to rise up through the ranks of large companies
• The advantage of working for others is that somebody else assumes the
entrepreneurial risks and provides you with the benefits such as paid
vacation time, health insurance etc.
• Businesses need good managers to succeed and all workers contribute to
producing and marketing goods and services that increase the quality of life
and standard of living of others.
– The other, more risky path to become successful is to start your own
business
• It takes a brave person to start a small business
• As an Entrepreneur you do not receive any benefits, rather you have to
provide them for your yourself.
– To become a successful entrepreneur you need to start by getting a
good education, then get a job to learn about a certain business,
eventually if you want to become huge success, you might want to start
your own business.

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Creating Wealth: Factors of Production
• Economists have been studying the issues of wealth creation for many
years. They began the process by studying potential sources of wealth
to determine what are most important. Overtime, they came up with five
factors that seemed to contribute to wealth. They called them the factors
of production. They are:
1. Land (or natural resources): Land and other natural resources are used to
make homes, cars and other products.
2. Labor (workers): People have always been an important resource in
producing goods and services, but many people are now being replaced by
technology.
• Bangladesh is a country with a huge labor force, but that itself does not make it a
wealthy nation.
3. Capital: This includes machines, tools, buildings and other means of
manufacturing. It does not include money; money is used to buy factors of
production – it is not a factor itself.
4. Entrepreneurship: All resources in the world have little value unless
entrepreneurs are willing to take the risk of starting businesses to use those
resources.
5. Knowledge: Information technology has revolutionized business, making it
possible to quickly determine wants and needs and to respond with desires
goods and services.
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 Creating Wealth: Factors of Production
• Traditionally, business and economics textbooks emphasized only four factors of
production: Land, Labor, Capital and Entrepreneur. But management expert and
business consultant Peter Drucker says that the most important factor of production in
our economy is and always will be knowledge.
– When high-tech businesses began to fail in the early 2000s, a lot of knowledge
workers had to find new jobs, their education and experience made the transition
easier.
• 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.
– If we were to analyze rich countries vs. poor countries to see what causes the
difference in the levels of wealth, we have to look at the factors of production.
• Some relatively poor countries like Russia and China have plenty of land and natural
resources. Where as Japan and Hong Kong are relatively rich countries but poor in land and
other resources. Therefore, land isn’t the critical element for wealth creation
• Most poor countries have many laborers – laborers need to find work to make a contribution
– they need entrepreneurs to provide them with jobs
• Capital – machinery and tools are now becoming available in the world market – capital is
not productive without entrepreneurs to put it to use
• So we can understand, what makes rich countries rich is a combination of entrepreneurship
and effective use of knowledge. The lack of entrepreneurship and absence of knowledge
among workers, along with lack of freedom, contribute to keeping poor countries poor.
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Business Environment

Global Economic &

Business Legal

Social Technology

Competitive

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 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:
1. The economic and legal environment
2. The technological environment
3. The competitive environment
4. the social environment
5. the global business environment
• Businesses grow and prosper in a healthy environment.
• The wrong environmental conditions lead to business failure,
loss of jobs and low standard of living and quality of life.
• Creating the right business environment is the foundation for
social progress of all kinds, including good schools, clean air and
water, good health care, and low rates of crime.

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 Economic & Legal 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 stat
a business.
• Thus lower taxes and a less restrictive regulatory system attracts
entrepreneurs and helps business prosper.
• Governments in many countries own enterprises themselves, and
thus there is little incentive for people to work hard to create their
own profit.
• In other 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.

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 Economic &
Legal Environment
$ Minimum taxes and regulations
$ Freedom of ownership
$ Contract laws
$ Tradable currency
$ Elimination/minimization of
corruption

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 Technological Environment
• Various tools and machines developed throughout history have
changed the business environment tremendously, but few
technological changes have made a more comprehensive and
lasting impact on businesses than the emergence of IT
(computers, cell phones etc.)
• How Technology benefits all
– Technology: Everything from phones and copiers to computers,
medical imaging devices, personal digital assistants and various
software programs that make business process more efficient and
productive.
– Efficiency means producing items using the least amount of resources.
– Productivity is the amount of output you generate given the amount of
input. (e.g. hours worked)
– Tools and technology greatly improve productivity. Top managers
should make sure that the company has the latest technology and that
its employees are trained to use it in order to stay competitive not only
in domestic market but in global market as well.

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 Technological Environment
• E-Commerce
– The buying and selling of goods over the internet.
– There are two major types of e-commerce transactions: business to
consumer (B2C) and business to business (B2B)
– While the potential of the B2C e-commerce market is measured in
millions, B2B e-commerce market is said to be measured in trillions of
dollars.
– Traditional businesses will have to learn how to deal with the new
competition from B2B and B2C firms.
– Just like any other traditional business, success will come to those e-
commerce businesses that offer quality products at good prices with
great service.
– Many large companies have combined their traditional operations
with new internet sites that make them more competitive.

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 Technological Environment
• Responsiveness to Customer
– Businesses largely succeed or fail largely because of the way they
treat their customers.
– businesses that are most responsive to customers wants and needs
will succeed, and those that do not respond to customers will not be
as successful.
– Traditional retailers can respond to the internet revolution by using
technology to become much more responsive to customers. (e.g.
businesses mark their goods with Universal Product Codes /
barcodes that can be used to tell retails what the customer has
bought and put that information into a database).
– This database can then be used to find out what the local population
is buying / wants. Which also enables stores to carry less inventory,
saving them money.

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 Competitive Environment
• Competition among businesses has never been greater than it is
today. Some companies have found a competitive edge by
focusing on quality. However, high quality product is not enough to
allow a company to stay competitive in world markets. Companies
now have to offer both quality and outstanding service at
competitive prices.

• How Competition has changed Business

Traditional Businesses World-Class Businesses

Customer satisfaction Delight the customer
Customer orientation Customer and stakeholder orientation
Profit orientation Profit and social orientation
Reactive ethics Proactive ethics
Product orientation Quality and service orientation
Managerial focus Customer focus

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 Competitive Environment
• Customer Expectations
– Business is becoming more customer driven, not management driven as in the
past. This means customers wants and needs must come first.
– Successful organizations must now listen more closely to customers to
determine their wants and needs, then adjust the firm’s products, policies and
practices to meet those demands.

• Restructure/Empower
– To meet the needs of customers, firms must give their frontline workers the
responsibility, authority, freedom, training and equipment they need to respond
quickly to customer requests and to make other decisions essential to producing
quality goods and service – this is called empowerment.
– To implement a policy of empowerment, managers must train frontline people to
make decisions without the need to consult managers.

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 Social Environment
• One important aspect of the social environment is the demography.
• We will look at the demographic trends that most affect businesses
and career choices.
• Demography: the statistical study of the human population with
regards to its size, density, and other characteristics such as age,
race, gender and income.
– 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.
– 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 60’s.
– 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.

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 Social Environment
• Diversity/Multicultural
– An increasing percentage of the US population in the future will be
minorities
– Companies have responded to the diverse customer base by hiring a
more diverse workforce to serve them.
– The management of diverse groups can be difficult. It gets even more
difficult as managers go overseas and must respond to all the cultural,
political and social issues that are peculiar to each country.

• Aging/Graying of America
– There is an increasing number of senior citizens – in the US there will be
74mn people over the age of 60 by 2020.
– Businesses must look into this issue and include such demographics for
successful businesses of the future.

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 Social Environment
• Two-Income Families
– High costs of housing and maintaining a lifestyle, high levels of taxes
have led to a dramatic growth in two income families. Furthermore,
many women want a career outside the home.
– As a result of this trend companies have responded to the demands
of two-income families by offering maternity benefits, parental leave,
flexible work schedules etc.

• Single-Parent Families
– Single parents have encouraged businesses to implement programs
such as family leave (workers can take time off to attend a sick child)
and flexi-time (workers come in an leave at selected times).

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 Global Environment
• The global environment of business is very important
as it surrounds all other environmental influences.
– Two important environmental changes in the recent years are:
• the growth of international competition and
• the increase of free trade among nations.
• Quality & Productivity
– Today, manufacturers in countries such as China, India,
Mexico can produce high-quality goods at low prices because
their workers are paid less money that US workers and they
have learned the concepts of quality control from Japanese,
German and US producers.
– Better technology, machinery, tools, education and training
enable each worker to be more productive.

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 Global Environment
• War & Terrorism
– The incident of 9/11 had a very big effect on the US
businesses – one of the obvious effects was on the travel
industry. Others industries affected are – hotels, amusement
parks, restaurants etc.
– The threat of terrorism adds greatly to organizational costs,
including the cost of security personnel, security equipment,
and insurance.
– The war in Iraq that begin in March 2003 has also impacted
businesses everywhere. Some businesses like the defense
industry stand to gain profits, whereas others suffer losses.
– War and terrorism also makes investor fearful and
discourages foreign investment in countries vulnerable to
such threats.

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 Global Environment
• Global Changes
– In the long run there is every hope for a resurgence of global
trade. As businesses expand to several global markets, new
jobs will be created in both manufacturing and service
industries.
– Global trade also means global competition. Businesses
must prepare themselves to compete with the rapidly
changing worldwide environment.

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 21st Century
Diversity Issues
• Race • Age
• Gender • Language
• Ethnicity • Religion
• Disability • Sexual
Source: U.S. Equal Employment Opportunity Commission

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 Evolution of
American Business
• Agricultural/Manufacturing

• Service Industries

• Future???

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 4
Farzana Chowdhury
BUS 201
Chapter

Demanding
Ethical and
Socially
Responsible
Behavior

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 Ethics vs. Law

• Ethics: Standards of moral behavior, that

is accepted by the society as right versus
wrong.
• Law: Rules that a particular country or
community recognizes as regulating the
actions by its members and may enforce
penalties if broken.

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 Cont.…

A behavior may be legal but

unethical

A behavior may be illegal but

Ethical and ethical.
Legal
Behaviors A behavior may be both legal and
ethical.

A behavior may be both illegal and

unethical.

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 Corporate Social Responsibility
• CSR is the Business’s concern for the
welfare of the society.
• Examples:
 Grameenphone is committed to work closely with Bangladesh Government
and concerned development agencies to achieve that target, with the aim to
raise awareness and advocate for necessary policy reforms on HIV/AIDS
through different communication channels.

 To develop environment of Bangladesh Dutch-Bangla Bank t has taken tree

plantation programs across the country. It also provides a lot of scholarship to
underprivileged students for their education. It has given support many
students for higher education. It also arranges Olympiad of Mathematics to
develop students' mathematical knowledge.

 Unilever limited implements many programs on public health. They already

have taken initiative for free dental check up. They create consciousness
among the rural people about Health by their many activities.
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 4 Dimensions of CSR
• Corporate Philanthropy: The dimensions of social responsibility
that includes charitable donations. Ex. Microsoft employees have
donated over $1 billion to charitable organizations since 1983.
• Corporate Social Initiatives: Enhanced forms of corporate
philanthropy directly related to the company’s competencies. Ex.
BC Hydro has influenced many of its consumers to reduce their
energy consumption through its Power Smart loyalty program.
• Corporate Responsibility: The dimension of social responsibility
that includes everything from hiring minority workers to making
safe (FDA tested) products. Ex. Body Shop Beauty Products.
• Corporate Policy: The dimensions of social responsibility that
refers to the position a firm takes on social and political issues.
Ex. Bayer says, ‘We are committed to integrity in business
dealings – no corruption’.