Introduction to Management Chapter 1

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Business Essentials, 8th Edition

Ebert/Griffin

Global Edition

Introduction to Management


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Planning, organizing, directing,and controlling businessoperations.

Includes various theories andpractical applications used tomaintain business sustainability

through the management ofcapital, financial, and humanresources

Business Management


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1. Business

2. Profits3. Consumer Choice and

Demand

4. Opportunity and Enterprise

The Concept of Business


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The Benefits of Business

Provide goods and services Employ workers which results in

increased quality of life and standard ofliving

Innovation and opportunities

Enhanced personal incomes of ownersand stockholders

Support for charities and communityleadership


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External Environment

Everything outside an organizationsboundaries that might affect it

1. Domestic Business,

2. Global Business,

3. Technological,

4. Political-legal,

5. Sociocultural, And

6. Economic Environments

The External Environments ofBusiness


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1. Domestic Business Environment

The environment in which a firm conducts

its operations and derives its revenues by: Seeking to be close to customers

Building relationships with suppliers

Distinguishing itself from competitors

The External Environments ofBusiness (cont.)


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2. Global Business Environment

The international forces that affect abusiness:

International trade agreements

International economic conditions

Political unrest

International market opportunities

Suppliers

Cultures

Competitors

Currency values



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3. Technological Environment

All the ways by which firms createvalue for their constituents:

Human knowledge

Work methods

Physical equipment

Electronics and telecommunications

Various business activity processing systems



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Political-Legal Environment The relationship between business and the

government; laws regulate what anorganization can and cannot do in manyareas including:

Products Advertising practices

Safety and health considerations



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Sociocultural Environment

The customs, mores, values, anddemographic characteristics of the

society

The standards of business conduct asociety is likely to accept



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Economic Environment

The relevant conditions that exist in theeconomic system in which a companyoperates.



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Economic System A nations system for allocating its resources amongits citizens, both individuals and organizations

Factors of Production Labor

Capital

Entrepreneurs

Physical resources

Information resources

Economic Systems


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Planned Economy

Market Economy

Two Types of EconomicSystems


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Planned Economy

- Communism individualscontribute according to their abilitiesand receive benefits according to theirneeds.

Types of Economic Systems


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Market Economics

Capitalism

Market Mixed Market Economy

Privatization

Socialism

Types of Economic Systems(cont.)


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1. Demand2. Supply

The Laws of Demand and Supply in aMarket Economy

Demand: Buyers will purchase (demand) moreof a product as its price drops and less of a

product as its price increases.

Supply: Producers will offer (supply) more of aproduct for sale as its price rises and less of aproduct as its price drops.

The Economics of Market Systems


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Demand and Supply Schedule

The relationships among different levels of

demand and supply at different price levels Demand curve: How much product will be

demanded (bought) at different prices.

Supply curve: How much product will be

supplied (offered for sale) at different prices.

Market price (equilibrium price): The price atwhich the quantity of goods demanded and thequantity of goods supplied are equal.

Demand and Supply in aMarket Economy


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Demand and Supply (cont.)


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Surplus A situation in which the quantity

supplied exceeds the quantity demanded

Shortage

A situation in which the quantity

demanded will be greater than thequantity supplied



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Private Enterprise System Allows individuals to pursue their own

interests with minimal governmentrestriction.

Elements of a Private EnterpriseSystem Private property rights

Freedom of choice Profits

Competition

Private Enterprise in a MarketEconomy


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These are the four degrees of perfectcompetition.

1. Perfect Competition.2. Monopolistic Competition.3.

Oligopoly.4. Monopoly.

Degrees of Competition


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1. Perfect Competition

No single firm is powerful enough toinfluence the price of its product.

All firms in an industry are small.

The number of firms in the industry is large.

For example gas stations sell almost identicalproducts at almost identical prices, but are not perfectcompetition. (The cost of setting up a gas station isnot low; gas stations compete on the basis of location,not just price, etc.)

Degrees of Competition


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2. Monopolistic Competition

Numerous sellers try to differentiate theirproducts from those of competitors in an

attempt to influence price. There are many sellers, though fewer

than in pure competition.

Sellers can enter or leave the marketeasily.

The large number of buyers relative tosellers applies potential limits to prices.

Degrees of Competition(cont.)


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3. Oligopoly An industry with only a few large sellers.

Entry by new competitors is hard becauselarge capital investment is needed.

The actions of one firm can significantlyaffect the sales of every other firm in theindustry.

The prices of comparable products are

usually similar. As the trend toward globalization continues,

most experts believe that oligopolies willbecome increasingly prevalent.



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Monopoly

An industry or market that has only oneproducer (or else is so dominated by one

producer that other firms cannot competewith it).

Natural monopolies: Industries in whichone firm can most efficiently supply allneeded goods or services.



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Economic Indicators

Statistics that show whether an economicsystem is strengthening, weakening, orremaining stable

Economic Indicators


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1. Economic growth indicators2. Economic stability indicators.

3. Business Cycle

4. Aggregate Output

5. Standard of Living

6. Gross Domestic Product (GDP)

7. Gross National Product (GNP)

8. Real Growth Rate9. Real GDP

10. Nominal GDP

11. GDP per Capita

12. Purchasing Power Parity

There are 22 of EconomicIndicators:


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13. Productivity14. Balance of Trade

15. National Debt

16. Stability

17. Inflation

18. Consumer Price Index (CPI)

19. Unemployment

20. Cyclical Unemployment21. Recession

22. Depression

Economic Indicators (cont.)


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Fiscal Policy The ways in which a government collects (taxes) and

spends revenues.

Monetary Policy The manner in which a government controls its money

supply.

Stabilization Policy Coordinating fiscal and monetary policies to smooth

fluctuations in output and unemployment and to stabilizeprices.

Managing the U.S. Economy


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Introduction to Management Chapter 1

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