Chapter 1

The Changing Face of Contemporary

Business als
Le
1

o
G
g
n
arni

Distinguish between business and

not-for-profit organizations.

5 Explain how todays business

workforce is changing.

2 Identify and describe the factors

6 Describe how the nature of work

3 Describe the private enterprise

7 Identify skills and attributes of

4 Identify the six eras of business

8 Outline the characteristics

of production.
system.

and explain the relationship era.

is changing.

21st-century managers.
that make a company
admired.

WHAT IS BUSINESS?
Business Allprofitseekingactivitiesandenterprisesthatprovidegoodsand
servicesnecessarytoaneconomicsystem.
Profit Rewardsforbusinesspeoplewhotakerisksinvolvedtooffergoodsand
servicestocustomers.

Not-for-Profit Organizations
Businesslikeestablishmentsthathaveprimaryobjectivesotherthanreturning
profitstoowners.
MurrayStatesathleticdepartments,U.S.PostalService,American
CancerSociety
Facemanyofthesamechallengesasforprofitorganizations.
See Fortune 500 for a list of major U.S. companies.

Factors of Production
Fourbasicinputsaneconomicsystemrequires:
Natural Resources Allproductioninputsthatare
usefulintheirnaturalstate.
Capital Technology,tools,information,and
physicalfacilities.
Human Resources Anyonewhoworks,including
theCEOandaselfemployedmechanic.
Entrepreneurship Willingnesstotakerisksto
createandoperateabusiness.
Example:UnderArmour

THE PRIVATE ENTERPRISE SYSTEM

Private Enterprise System Aneconomicsystemthatrewardsfirmsfortheir
abilitytoseeandmeettheneedsanddemandsofconsumers.Alsocalled
capitalism.
Competition Battleamongbusinessesforcustomeracceptance;
AdamSmithsinvisiblehandthatrequiresfirmstoengageincompetitive
differentiationtosetthemselvesapartfromcompetitors.Smithisthefather
ofcapitalism.
Competition is the battle among businesses for consumer
acceptance.
Tosucceed,firmsmustadjusttomarketchangesandcompetitorsactions
Example:McDonaldsstrivestomeetconsumerspreferenceforhealthieritems
inthebattleagainstWendys,Sonic,etc.

Basic Rights in the Private Enterprise

System

Righttoown,use,
buy,sell,and
bequeathmost
formsofproperty.

Fairnessensuredby
rulesandlawssetin
publicsphere.

Ownerlegallyand
ethicallyentitledto
incomeinexcess
ofcosts,aftertaxes
paid.

Citizenchoicein
employment,purchases,
andinvestments.

The Entrepreneurship Alternative

Entrepreneur Arisktakerintheprivateenterprisesystem.Alsocalled
capitalism.
EntrepreneurshipfuelsthegrowthoftheU.S.economy:
1inevery7firmsintheUnitedStatesbeganoperationsinthelastyear.
Ofthe20millionU.S.businessescurrentlyinoperation,15millionareself
employedpeoplewithoutanyemployees.
Nearly12millionU.S.employeescurrentlyworkforabusinesswithfewer
thantenemployees.
Smallcompaniestendtobemoreflexibleandinnovativeintheiruseofthe
factorsofproduction.
Largefirmsadoptentrepreneurialapproachestoenhanceflexibility,
improveinnovation,andopennewmarketopportunities

SIX ERAS IN THE HISTORY OF U.S.

BUSINESS
The Colonial Period (pre-1776)
Emphasizedruralandagriculturalproduction.
ColonistsdependedonEnglandforfinishedproductsandfinancialbacking.

The Industrial Revolution (1760-1850)

Movefromonebyoneproductionofgoodsbyskilledlaborerstofactory
systemsandmassproduction.
Factoriesprofitedfromsavingsrealizedthroughlargescaleproduction.

The Age of Industrial Entrepreneurs (late

1800s)
Inventorscreatedanendlessarrayofcommerciallyusefulproductsandnew
productionmethods.
EliWhitneyintroducedconceptofinterchangeableparts.
RobertMcCormickintroducedhorsedrawnreaperthanreducedthelabor
involvedinharvestingwheat.
Vanderbilt(railroads),Morgan(banking),andCarnegie(steel)startednew
businessesandreapedgreatbenefits.

The Production Era (through the 1920s)

Emphasisonefficientproductionofgoodsthroughhuge,laborsavingfactories.
Focusoninternalprocessesratherthanexternalinfluences,
e.g.,HenryFordsassemblylines.Assemblylines

The Marketing Era (1950s-1990s)

DropinincomeduringGreatDepressionfocusedbusinessesonmarketinggoods
andservicesthroughsalesandadvertising.
Developmentofconsumerorientation,amarketingapproachthatfocuseson
determiningwhatconsumerswantandneedanddevelopingproductstosatisfy
thoseneeds
Businessesincreasinglydistinguishedtheirproductsfromcompetitorsthrough
branding:

The Relationship Era (began in 1990s)

Businessestakealongtermapproachtointeractionswithcustomerstobuild
loyaltyandimprovecustomerretention.
Examples:CitibankandBurgerKing

Managing Relationships through

Technology
Relationship Management Collectionofactivitiesthatbuildandmaintain
ongoing,mutuallybeneficialtieswithcustomersandotherparties.
Involvesgatheringknowledgeofcustomerneedsandpreferencesandapplying
thisunderstanding.
Manyoftheseactivitiesarebasedontechnology,thebusinessapplicationof
knowledgebasedonscientificdiscoveries,inventions,andinnovations.
Communicationwithcustomersoftenaidedbytechnology,particularlythe
Internet,e.g.,StonyfieldFarmsuseofblogstoreinforcecustomer
relationships.
BovineBugle

Strategic Alliances and Partnerships

Businessesaffiliatewitheachotherthroughpartnershipstotakeadvantageof
newopportunities.
Firmsformastrategicalliancetocreateacompetitiveadvantage.
Example:ApartnershipbetweenanonlinecompanysuchaseBayand
traditionalretailerssuchasBloomingdales,HomeDepot,andMotorola.
Example:PepsiandApplepartneringinshorttermpromotionofPepsissoft
drinksandApplesiTunesMusicStore.

TODAYS BUSINESS WORKFORCE

Askilledandknowledgeableworkforce
Fostersstrongtieswithcustomersandpartners
Improvesefficiencyandquality
Promotesinnovation
Alloftheseprovideafoundationforcompetitivedifferentiation.

Changes in the Workforce

Aging of the PopulationThenumberofAmericans65andolderwilldouble
by2030;trendissimilarglobally.
Manybabyboomersarehittingthepeakoftheircareers,whileGenerationsX
andYarelaunchingtheircareers.
Technologyhasintensifiedthehiringchallengebyrequiringworkerstohaveever
moreadvancedskills.
Shrinking Labor PoolTheU.S.maysoonfaceashortageof10million
workers.
Technologyrequiresworkerswithadvancedskills.
ThetwofastestgrowingethnicpopulationsintheUnitedStatesare
HispanicsandpeopleofAsianorigin.
Immigrantsrepresentoneofeverysevenworkers,oneofeverytwonew
workers.

Changes in the Workforce

Outsourcing and the Changing Nature of WorkU.S.outputisshifting
frommanufacturingtoservicessuchasfinancialmanagementand
communications.

Outsourcing is using outside vendors to produce goods or fulfill

services and functions that were previously handled in-house
or in-country.

Offshoring is the relocation of business processes to lower-cost

locations overseas.

Changes in the Workforce

New Employer-Employee PartnershipLifetimeemploymentwithone
companyislargelyathingofthepast.Todaysmodelispartnership.
Companiesrecognizevalueofapartnershipwithemployeesandmany
routinelysharefinancialdatawiththem.
Companiesofferstock,profitsharing,andemployeetraininggearedtoward
careeradvancement.

THE 21ST-CENTURY MANAGER

Importance of Vision
Visionistheabilitytoperceivemarketplaceneedsandwhatanorganizationmust
dotosatisfythem.

Importance of Critical Thinking and

Creativity
Criticalthinkingistheabilitytoanalyzeandassessinformationtopinpoint
problemsoropportunities.
Creativityisthecapacitytodevelopnovelsolutionstoperceivedorganizational
problems.

Ability to Steer Change

Changesaredrivenbytechnology,marketplacedemands,and
globalcompetition.

WHAT MAKES A COMPANY ADMIRED?

Businessethicsstandardsofconductandmoralvaluesinvolvingdecisionsmade
intheworkenvironment.
Socialresponsibilitymanagementphilosophythatincludescontributing
resourcestopromotethewellbeingofthegeneralpublic.

Buffet

TodaysList

Quiz Time! (just for fun)

The Changing Workforce
1. By 2050, what percent of the U.S. population will be
made up of Asians, Hispanics, African-Americans, and
other nonwhite groups?
a. 47 percent
b. 57 percent

c. 67 percent
d. 77 percent

The Changing Workforce

1. By 2050, what percent of the U.S. population will be
made up of Asians, Hispanics, African-Americans, and
other nonwhite groups?
a. 47 percent
b. 57 percent

c. 67 percent
d. 77 percent

The Changing Workforce

2. The most dramatic workforce change since the 1960s is
the growing number of _______ in the workforce.
a. Hispanics

c. African Americans

b. seniors (65+)

d. women

The Changing Workforce

2. The most dramatic workforce change since the 1960s is
the growing number of _______ in the workforce.
a. Hispanics

c. African Americans

b. seniors (65+)

d. women

The Changing Workforce

3. Of the 43 million Americans who have disabilities, 20
million are of working age (16 to 64). How many of this
group are employed?

a. 8 million
b. 15 million

c. 12 million
d. 19 million

The Changing Workforce

3. Of the 43 million Americans who have disabilities, 20
million are of working age (16 to 64). How many of this
group are employed?

a. 8 million
b. 15 million

c. 12 million
d. 19 million

The Changing Workforce

4. By the year 2015, what percent of the workforce will be
55 years of age or older?
a. 15 percent

c. 40 percent

b. 25 percent

d. 50 percent

The Changing Workforce

4. By the year 2015, what percent of the workforce will be
55 years of age or older?
a. 15 percent

c. 40 percent

b. 25 percent

d. 50 percent

The Changing Workforce

5. What percent of the total U.S. population speaks a
language other than English at home?
a. 4 percent

c. 24 percent

b. 14 percent

d. 34 percent

The Changing Workforce

5. What percent of the total U.S. population speaks a
language other than English at home?
a. 4 percent

c. 24 percent

b. 14 percent

d. 34 percent

The Changing Workforce

6. What are the two most racially and ethnically diverse
states in the U.S.?
a. Florida, New York

c. New York, California

b. Florida, California

d. New Mexico, California

The Changing Workforce

6. What are the two most racially and ethnically diverse
states in the U.S.?
a. Florida, New York

c. New York, California

b. Florida, California

d. New Mexico, California

The Changing Workforce

7. What are the two least ethnically and racially diverse
states?
a. North, South Dakota

c. Maine, Vermont

b. Wyoming, Nevada

d. Arkansas, Illinois

The Changing Workforce

7. What are the two least ethnically and racially diverse
states?
a. North, South Dakota

c. Maine, Vermont

b. Wyoming, Nevada

d. Arkansas, Illinois