INTRODUCTION TO BUSINESS
INTRODUCTION TO BUSINESS BCOR 1010
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This 12 page Class Notes was uploaded by Jaron Rowe Jr. on Friday October 30, 2015. The Class Notes belongs to BCOR 1010 at University of Colorado at Boulder taught by Beth Cross in Fall. Since its upload, it has received 37 views. For similar materials see /class/232070/bcor-1010-university-of-colorado-at-boulder in Business at University of Colorado at Boulder.
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Date Created: 10/30/15
BCOR 1010 PART ONE THE CONTEXT OF MODERN BUSINESS A The Economic Environment 1 Factors of Production 1 Land Natural resources 2 Labors Workers 3 Capital Buildings Equipment 4 Entrepreneurship 5 Knowledge Information 2 World s Economic Systems 1 Communism all factors owned by the people a From each according to his abilities to each according to his needs Karl Marx b GovemmenU Central Flaming c No competition 1 Cuba North Korea 2 Socialism some factors owned by all the people a More equal allocation of resources b GovemmenU central planning for basic goods services 3 Most basic industries owned by the government 1 Sweden India Israel i Socialism Retail Example 1 Sales rep who overachieves their quota 120 contributes 20 of their commission 2 Sales reps who underachieve their quota 80 gain 20 of their commission from others 3 Capitalism favors are privately held and used to make a pro t a Competition b Freedom 3 Free to succeed or fail i About 8000 businesses fail each year 1 13 fail within 2 years 2 56 fail within 4 years 1 Father of capitalism is Adam Smith i 17231790 ii Scottish Political Economist and moral philosopher who was a rebel iii Wrote The Wealth of Nations 1776 9212011 BCOR 1010 i Attacked the merchantilism type of society because he believed that their goals were not in line with the time of society 2 Proposed a new system of society which revolves around self interest iv Father of free trade as well v it is not from the benevolence of the butcher the brewer or the baker that we expect our dinner but it is from their regard for their own self interest 1 The drive of the individual selfinterest in an environment of similarly motivated individuals will result in competition and the competition will result in providing goods that the society wants and in the quantities and at the prices that society wants Greed is the utmost expression of selfinterest 1 Not just greed of money but greed for everything is good for the USA as well as for individuals 2 From Wall Street e Free market Capitalism i Selfinterest Behavior 1 Producers 2 Consumers 3 Labor Force 4 Investors ii Why don t producers charge high prices and pay employees low wages 1 Workers can go work somewhere else go on strike consumers wont buy the products etc 2 They are constrained by competition a Competition will help regulate in ated prices because people can choose what they want to buy f Adam s The Invisible Hand 39 Selfinterest and competition will produce the optimal quantity and variety of goods ii The invisible hand guides the market iii Society s Welfare is Maximized iv Resources move to their most efficient uses v Limited Government Laissez Faire vi Yields the greatest amount for society as a side effect 1 economic freedom is robustly correlated with important societal values like poverty reduction human development political freedom and environmental protection 4 Basic difference the extent to which factors of production are owned andor distributed controlled by private interests or publicly by the government a Efficiency vs equality V H 9212011 BCOR 1010 3 A Market Economy a Supply and Demand 1 If there is no Visible hand how do prices get set 2 As the price goes down the demand goes up 3 At a high price there is very little demand but when you lower the price the demand goes up a As you raise your price for your product you are willing to supply more 4 Equilibrium price the point where the demand meets the supply 5 Works well in Capitalistic societies b Levels of Competition 1 Pure or perfect Competition a Indistinguishable products b Infinite sellers i Commodities pens ii Gas stations 2 Monopolistic Competition a Similar products i Minor differences real or perceived b Many sellers c Examples i Athletic shoes handbags apparel candies 3 Contemporary Oligopolies a Over 100B bottledcanned Soft Drink Market b 3 firms control 88 c Sodas water energy drinks sports drinks fruit juices teas etc d High entry barriers distribution i Coke and pepsi airplanes intel and AMD GPS data supermarket chains cigarettes etc e Collusion meeting together and deciding to all raise your prices 4 Contemporary Monopolies a MP3 players b 1 firm controls 73 c Natural monopolies government allows these when it is good for society to do so i Electricity gas water etc 4 Measuring a Market Economy Most important economic indicators a In ation i Widespread increase in prices ii Measured by the Consumer Price Index CPI 9212011 BCOR 1010 1 Basket of about 400 goodsservices 2 Tracked monthly iii De ation iv Way that we measure our economy to see how it is working V Prices change over time with gradual in ation b GDP Gross Domestic Product 1 Measures the sum of all goods and services produced in a country in a year a Includes production of anything in America c Productivity i Measures output per person per hour 1 EX Calls per rep per hour ii What affects productivity 1 Education 2 Technology 3 More efficient methods 4 Motivation or loss of d Unemployment i Measures the percentage of the population age 16 and over who are actively looking for work but cannot find it 1 Frictional left one job and looking for another good unemployment 2 Cyclical not as good not enough jobs in that industry seasonal unemployment 3 Structural worst of the 3 mismatch between the skills of the workers and the available jobs ii Current US unemployment rate 96 1 Number is not precise but the rate is pretty standard 2 Lower than most Socialist countries in the world PART ONE THE CONTEXT OF MODERN BUSINESS com A The Economic Environment 1 Factors of Production 2 World s Economic Systems 3 A Market Economy 4 Measuring a Market Economy B The Role of Government 1 Channeling Markets Along Competitive Line 9212011 BCOR 1010 i Sometimes in a free market it is not purely competitive 1 When you are completely in control your quality of the product and amount of supply goes down ii Antitrust Regulations 1 Collusion a Example Major League Baseball i Contract lengths ii Salaries 2 Monopoly a Whole Foods Wild Oats i We brought this challenge because the evidence before us showed that the merger would most likely result in higher prices and reduced choices for consumers who shop at premium natural and organic markets iii Regulation of natural monopolies 1 When a single firm can best serve society a Subway transportation b Water c Telephone service d Electricity 2 Govemment regulations 2 Market Failures Externalities amp Public Goods 1 Situations when the market may fail to allocate the real costs and benefits of a product 11 Extemalities are overproduced a Costs borne by unrelated third parties i Pollution ii Traffic congestion iii Resource depletion Overproduced in the free market Stents i Boston Scientific Stents ii Coronary Heart Disease 1 1 killer 2 more exercise 3 fewer cheeseburgers social costs private costs extemalities what would happen if companies priced their goods based on social costs i Automobiles road wear fuel efficiency ii Cleaning products environmental ii Bullets social harm iv Sexual advertising teen pregnancy 06 09 9212011 BCOR 1010 III Public good are underproduced 3 Equality vs Ef ciency I Arthur Okun a Efficiency vs equality fairness b Egalitarian ideals in politicssociety c Inequality in economic system II The basic TradeOff a Insulin III What constitutes Fairness a Income distribution b Income redistribution i TaX burden by AGI 1 Top 1 3689 2 Top 5 5713 3 Top 10 6819 4 Top 25 8486 5 Top 50 9670 6 Bottom 50 330 IV Universal entitlements a Free b Universal c Nontransferable V Rights Votes Equal justice before the law Free speech religion etc Procreation Emigration Immunity from enslavement To have public services i All of these are the minimum decent standard of living depicted by Okun mwomocm PART ONE THE CONTEXT OF MODERN BUSINESS com A The Economic Environment B The Role of Government 9212011 BCOR 1010 1 C Corporate Social Responsibility CSR 1 Taking Account of Stakeholders Interests De ning CSR I Corporate Social Responsibility a Taking into account the interests of stakeholders iCorporate citizenship b Who is a stakeholder iAnyone affected by the company s actions or policies 11 Stakeholders a Consumers b Employees c Surrounding Communities d Stockholders e Suppliers 111 Balancing the shareholder s expectations of maximum return against other priorities is one of the fundamental problems confronting corporate management The shareholder must receive a good return but the legitimate concerns of other constituents customers employees communities suppliers and society at large also must have appropriate attentionquot Exit And Voice Mechanisms For Stakeholders 1V all economic systems are characterized by institutions of a free market process of entryexit b institutions upholding a claim right for a democratic voice ie quothaving a sayquot V The basic concept is as follows members of an organization whether a business a nation or any other form of human grouping have essentially two possible responses when they perceive that the organization is demonstrating a decrease in quality or benefit to the member a they can exit withdraw from the relationship b or they can voice attempt to repair or improve the relationship through communication of the complaint grievance or proposal for change Enlightened SelfInterest Good for Business 1 taking into account the interests of stakeholders because it benefits the business a motive is the key difference 9212011 BCOR 1010 Business Ethics and the Individual 1 Understanding Ethics I Beliefs about what is right and wrong or good or bad in actions that affect others a not the same as CSR or enlightened selfinterest 2 Relevance I Andrew Fastow Enron CFO a I was extremely greedy I lost my moral compass andI did many things that I regret b But he said in the culture of corruption at Enron he thought he was being a hero by in ating Enron s earnings c collapse wiped out thousands of jobs 6 billion is market value 11 10 year sentence a wife 5 months 2 Ramalinga Raju I Satyam Founder and CEO II admitted to 1 billion dollar fraud III arrested 1092009 IV He and his brother managing director resigned 3 50000 Business majors at 69 schools I serious cheating on exams II cheating on written assignments a Plagiarism a friend s homework 3 Law vs Ethics as Guides to Behavior 1 ethics and the law are not good substitutes 4 An Example of a Clash between Business Conduct and Individual Values New Va pharmacy won39t sell any contraceptives Store follows Roman Catholic teachings some fear impact on rural women The Associated Press updated 407 pm MT Tues Oct 21 2008 CHANTILLY Va A new drug store at a Virginia strip mall is putting its faith in an unconventional business plan No candy No sodas And no birth control Divine Mercy Care Pharmacy is among at least seven pharmacies across the nation that are refusing as a matter of faith to sell contraceptives of any kind even if a person has a prescription States across the country have been wrestling with the issue of pharmacists who refuse on religious grounds to dispense birth control or morningafter pills and some have enacted laws requiring drug stores to fill the prescriptions In Virginia though pharmacists can turn away any prescription for any reason quotI am grateful to be able to practicequot pharmacy manager Robeft Semler said quotwhere my conscience will never be violated and my faith does not have to be checked at the door each morningquot Semler ran a similar pharmacy before opening the new 9212011 BCOR 1010 store which is not far from Dulles International Airport The store only sells items that are healthrelated including vitamins skin care products and overthecounter medications On Tuesday the pharmacy celebrated a blessing from Arlington Bishop Paul S Loverde While Divine Mercy Care is not affiliated with the Roman Catholic Church it is guided by church teachings on sexuality which forbid any form of artificial contraception including morningafter pills condoms and birth control pills a common prescription used by millions of women in the US quotThis pharmacy is a vibrant example of our Holy Father39s charge to all of us to wear our faith in the public squarequot said Loverde who sprinkled holy water on the shelves stocked with painkillers and acne treatments quotIt will allow families to shop in an environment where their faith is not compromisedquot Drawing scorn The drug store is the seventh in the country to be certified as not prescribing birth control by Pharmacists for Life International The antiabortion group estimates that perhaps hundreds of other pharmacies have similar policies though they have not been certified Earlier this year in Wisconsin a state appeals court upheld sanctions against a pharmacist who refused to dispense birth control pills to a woman and wouldn39t transfer her prescription elsewhere Elsewhere at least seven states require pharmacies or pharmacists to fill contraceptive prescriptions according to the National Women39s Law Center Four states explicitly give pharmacists the right to turn away any prescriptions the group said The Virginia store39s policy has drawn scorn from some abortion rights groups who have already called for a boycott and collected more than 1000 signatures protesting the pharmacy quotlfthis emboldens other pharmacies in other parts of the state it could really affect lowincome and rural women in terms of accessquot said Tarina Keene executive director of the Virginia chapter ofthe National Abortion Rights Action League Robert Laird executive director of Divine Mercy Care believes many of the estimated 50000 Catholics within a few miles of the store will support its mission and make up for the roughly 10 percent of business that contraceptives represent in a typical pharmacy Whether Catholics will be drawn to the pharmacy is uncertain According to a Gallup poll published last year for an extensive study of US Catholicism called American Catholics Today 75 percent of US Catholics said you can still be a good Catholic even if you don39t obey church teachings on birth control Catherine Muskett said she plans to shop at the drug store even though she lives more than 20 miles away quotObviously it39s good to support prolife causes Every little bit countsquot said Muskett one of about 75 people who crowded into the tiny shop for Tuesday39s ceremony 2008 The Associated Press All rights reserved This material may not be published broadcast rewritten or redistributed URL httpwwwmsnbcmsncomid27311596 WORKSHEET 1 Is it right for a pharmacist to be antiabortion Why or why not It is okay as long as the pharmacist allows the prescriptions to be transferred to another pharmacist that will fill the prescription 2 Is it right for a pharmacist to deny plan B to customers who seek the drug Why or why not It is okay again but the pharmacist must allow the costumer to go to another pharmacy and receive the drug 9212011 BCOR 1010 3 Why might your answer to 2 be affected by the fact that this is happening in remote locations It could be harder for the consumers to come across other places that will sell plan B 4 Can pharmacists reconcile their values with their job If yes how They can not sell birth control or plan B in their pharmacy but they can transfer people s prescriptions to another pharmacy that will fill the drug or they can chose to personally not use contraceptives but can distribute them to costumers PART ONE THE CONTEXT OF MODERN BUSINESS A The Economic Environment B The Role of Government C Corporate Social Responsibility D Globalization of Markets a Another contextual environment within which business must operate i Economic environment ii Role of government iii Corporate social responsibility iv Globalization b Positive opportunities and negative consequences c World merchandise exports reached 16 trillion in 2010 2 Growth of global trade a Why do nations trade i To obtain raw materials that are otherwise unavailable b Absolute advantage i A rare monopoly that exists when a country is the 1 Only source of an item 2 Only producer of an item 3 Most efficient producers of an item c Comparative advantage i A country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items 1 Example US agricultural commodities such as corn and wheat ii Change as countries change 3 Bene ts of engaging in global trade a Trade benefits i Comparative advantage 921201 1 BCOR 1010 ii Quality is better of certain goods iii Directs competition well iV Theoretically creates jobs V More costumers 39 Lowers prices 4 Negative effects of global trade a Trade problems i Domestic producers may be run out of business ii Lots of local culture and languages etc iii Inequality 1 Of wealth 2 Of jobs jobs that are going out of the country are the lower educated jobs and jobs coming in are usually only available to the higher educated 5 Challenges faced by firms seeking to go global a Ben Bernanke 507 b U S government steps in to train people and to help ease the impact i Trade assessment adjustment program 1 Insurance and training for workers adjusting to a new job c Economic barriers i The level of a country s economic development 1 Industrialized nations US Japan Great Britain Canada 2 Less developed countries Africa Asia South America ii Currency exchange rates 6 Structural options for globalization a ImportExport S b LicensingFranchising c Contract Manufacturing d Joint VenturesStrategic Alliances 9212011 BCOR 1010 6 Foreign Direct Investment FDI 9212011
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