Chapter 1

Taking Risks and Making

Profits within the
Dynamic Business
Environment

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 KEY TERMS
Business
Services
Entrepreneur
Revenue
Profit
Loss
Standard of Living
Stakeholders
Outsourcing
Nonprofit Organization
Factors of Production Clouds
(cloud storage)
Database
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 Business and Wealth
Building
(defined) Business — Any activity that seeks to
provide goods and services to others while
operating at a profit.

Goods — Tangible products such as:

(defined)
computers, food, clothing, cars, and appliances.

Services — Intangible products (that

(defined)
can’t be held in your hand) such as: a parking
space, education, health care, insurance,
watching a movie, recreation, tax preparation,
haircuts and travel.
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 Business and Wealth
Building
Successfully filling a market need means you
could make money for yourself—even lots of
money in some cases, examples (Jeff Bezos,
Mark Zuckerberg, Sam Walton)
Entrepreneur — A person who risks time
(defined)
and money to start and manage a business.
(never forget an entrepreneur not only risks his
or her money to launch the business…BUT…
they risk time (example—George invests
$100,000 and starts a restaurant featuring
Exotic Greek food but after 3-4 years of
nurturing it, it is losing money daily, and he
decides that he ultimately must file for
bankruptcy. He will not get back his $100,000
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 Business and Wealth
Building
Revenues, Profits, and Losses
• Revenue — The total amount of money a
(defined)
business takes in during a given period by selling
goods and services.

• Profit — The amount of money a business

(defined)
earns above and beyond what it spends for salaries
and other expenses. (This is a primary goal of every
business)

• Loss — When a business’s expenses are more

(defined)
than its revenues it has incurred a loss. (While this
often happens in the short term, it cannot go on
indefinitely, or the firm may go out of business)
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 Business and Wealth
Building
Matching Risk with Profit
• Risk — The chance an entrepreneur takes of
(defined)
losing time and money on a business that may not
prove profitable.

• Not all enterprises make the same amount, or

percentages, of profit. (example a bakery versus a
high-end jewelry store)

• Businesses take risks, but also, with big risks could

also come big profits.

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 Business and Wealth
Building
Standard of Living and Quality of Life
• Standard of Living — The amount of goods
(defined)
and services people can buy with the money they
have.

• The United States has one of the highest standards

of living in the world, but not the highest. Countries
like Norway, Switzerland and Denmark rank higher
than the USA.

• Workers in other countries may make more money,

but the prices for the products sold in their
countries might often be higher.

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 Business and Wealth
Building
Standard of Living and Quality of Life continued
• Quality of Life — The general well-being of a
(defined)
society in terms of its political freedom, natural
environment, education, health care, safety, amount
of leisure time and facilities, and rewards that add
to the satisfaction and joy that other goods and
services provide.
• High quality of life requires combined efforts of for-
profit businesses, nonprofits, the general public, and
of government agencies.

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 Business and Wealth
Building
Responding to the Various Business
Stakeholders
• Stakeholders — All the people who stand to
(defined)
gain or lose by the policies and activities of a
business and whose concerns the business needs
to address.
• In Baruch College some stakeholders are: current
students, graduates, part-time and full-time faculty,
staff, booksellers, banks and others
• A primary challenge of all businesses and
enterprises is to recognize and respond to the
needs of as many of your stakeholders as possible.

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 Business and Its
Stakeholders

Jump to long
description in appendix
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©McGraw-Hill Education. Source: John Mackey and Raj Sisodia, Conscious Capitalism
 Business and Wealth
Building
Responding to the Various Business
Stakeholders continued
• Outsourcing — Contracting with other
(defined)
companies (often in other countries) to do some of
the functions of a firm, like production or
accounting.
• An example of this is the jeans that you are
wearing. Yes indeed, you probably purchased them
at the Gap in Brooklyn, or Queens or elsewhere, but
it is likely that the denim came from a factory in
South America and the zippers from Japan and they
were cut and sewn in a factory in Cambodia or
Vietnam.
• Many foreign companies are opening offices and
factories in the United States, which is called
insourcing. (Hyundai, Mercedes, BMW, Toyota andLO 1-1
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Honda, among many others)
 Business and Wealth
Building
Using Business Principles in Nonprofit
Organizations
• Nonprofit Organization — An organization
(defined)
whose goals do not include making a personal profit
for its owners or for its organizers.
• Nonprofit organizations use financial gains to meet
social or educational goals.

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 Well-Known Nonprofits in the United
States

United Way

American Heart Association

Salvation Army

American Cancer Society

American Red Cross

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 The Importance of
Entrepreneurs to the Creation of
Wealth
The Positives to Being an Entrepreneur
• The freedom to succeed
• Make your own decisions (what to sell, when, where,
etc)
• Possible wealth (Elon Musk, Jeff Bezos, Sam Walton,
Bill Gates)

The Negatives to Being an Entrepreneur

• The freedom to fail (sadly a very high percentage of
new business startups do fail within the first five years
in business)
• No paid vacations (you can take a vacation but your
business will cease while you are on vacation)
• No health insurance (of course you can have coverage
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but again, you must pay for it yourself)
 Importance of
Entrepreneurs
To create wealth for its
citizens, a country
requires more than
natural resources. It
needs the efforts of
entrepreneurs and the
skill and knowledge to
produce goods and
services.

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 The Importance of
Entrepreneurs to the Creation of
Wealth
The Five Factors of Production (know these ↓↓)
Factors of production — These are the actual
resources that
are needed to and used to create wealth.
The five factors are:
1. Land (or natural resources)
2. Labor (workers)
3. Capital
4. Entrepreneurship
5. Knowledge
Famous management theorist Peter Drucker always said
“the “most important” factor of production, by far, is
knowledge.”
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 The Five (5) Factors of
Production

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©McGraw-Hill Education. Source: Drucker Institute, druckerinstitute.com, April 2017.
 The Business
Environment
(defined) Business environment — The
surrounding factors that either help or hinder
the development of businesses.
1. Economic and legal environment
2. Technological environment
3. Competitive environment
4. Social environment
5. Global business environment

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 The Business
Environment
The Economic and Legal Environment
• Government can promote entrepreneurship by:
1. Allowing private ownership of businesses
2. Minimizing interference with the free exchange of
goods and services
3. Passing laws that enable businesspeople to write
enforceable contracts
4. Establishing a currency that’s tradable in world
markets
5. Minimizing corruption

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 The Business
Environment
The Technological Environment
Technology — Everything from phones to
(defined)
computers and the various software programs that
make business processes more effective, efficient,
and productive.
• How Technology Benefits Workers and You
• Effectiveness — Producing the desired result.
• Efficiency — Producing goods and services using the
least amount of resources.
• Productivity — The amount of output you generate
given the amount of input (e.g., hours worked).

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 The Business
Environment
The Technological Environment (cont’d)
The Growth of E-Commerce
(defined) E-Commerce — The buying and selling of goods
and services over the Internet.
• Business-to-consumer (B2C)
• Business-to-business (B2B)
• Consumer-to-consumer (C2C)

The Growth of Robotics and Artificial

Intelligence too

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 The Business
Environment
The Technological Environment (cont’d)
• Using Technology to Be Responsive to Customers
• (defined) Clouds or Cloud Storage is a model of computer
data storage in which the digital data is stored in
logical pools. The physical storage spans multiple
servers, and the physical environment is typically
owned and managed by a hosting company
• (defined)Database — An electronic storage file for
information.
• Identity Theft — The illicit harvesting of
(defined)
individuals’ personal information, such as: Social
Security numbers, dates of birth, mother’s maiden
names, and credit card numbers, for illegal purposes.

©McGraw-Hill Education.
 The Business
Environment
The Social Environment
• Demography — The statistical study of the
(defined)
human population with regard to its size, density,
and other characteristics such as age, race, gender,
occupation, religion, and income.
• It is “extremely important” for many sectors in
business, especially marketers--to carefully study
demographics.
• Population sectors is a key statistical metric that
was updated as a result of the recent CENSUS

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 Technology and
Agriculture
Technology, robotics
and artificial
intelligence have all
increased productivity
and made all business
sectors, even farmers,
more efficient,
allowing for lower
costs, improved
efficiency throughout
business, and even
larger farms. This
trend has helped
lessen price increases
of some foods for
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consumers, but has
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 The Evolution of U.S.
Business
Progress in Service Industries
• Services make up over 80 percent of the value of
the U.S. economy.
• Since the mid-1980s, the service industry generated
almost all the increases in employment. (this is
starting to change of late.)
• There are more high-paying jobs in service
industries.

Your Future in Business

• We’re in the midst of an information-based global
and technical revolution.
• Since ROBOTICS is so ubiquitous today, I always
warn my students that in order to secure your
employment possibilities you need to be SMARTER
and MORE RESOURCEFUL than the Robot…or…you LO 1-8
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