hi and welcome to a series of lectures made available for introduction to business my name is Matt Alanis I'm a business instructor at the willow international center and these lectures are actually recorded for a course that I teach out at that particular college here obviously we make those available to the public as well and these are recorded specifically for that course this isn't something that I just record as I provide lecture to my aunt to my face-to-face courses as well so it's specifically for online and obviously tailored for that particular reason here as far as this material here the course that I teach out at willow is a three day a week course so we do cover multiple chatter in one chapter usually in three to four class sessions so it is a little bit difficult to condense that amount of material into a short online lecture so to speak so I do record multiple sessions of each particular chapter I kind of break them up so to speak and I think that's a little less daunting to listen to one 30-minute session as opposed to an hour and thirty hour and forty-five minutes because we do have a lot of material to cover so if it if you get to a point to where maybe we're going a little too fast or maybe it's a little too much material feel free and pause obviously come back to it that's one of the benefits of obviously taking online courses is you can kind of go at your own pace so to speak so alright so let's go ahead and get started here and this chapter introduces you to the concept of business specifically businesses in the US we talk about some of the some of the fundamentals we discuss the environment we discuss the economy basically everything that potentially can have an impact on businesses here in the US although we'll discuss some of the environments that are outside of the US and some other countries and different economic systems here but to kind of lame the lay the framework so to speak we want to first get some definitions out of the way so that we have a solid grasp of what we're going to cover so we can move forward and the first is this concept of an actual business here a business is an organization that provides goods and/or services that it sells to earn it's how profits are a key differentiator between obviously a business and maybe a nonprofit organization a non-profit is a difference between a revenue and an expense okay a revenue is something that the company would receive for selling goods and services so the easy way to determine your revenue is to multiply the number of goods you sold or services offered by the number that are the by the price of those particular goods and services per unit and that will give you an idea of what your revenues are okay revenue is essentially like the income for for a local for a person like you and I for an individual the money that we received from our job obviously would basically be our revenue now expenses are outgoing expenses are things that you pay for businesses expenses include everything from labor obviously paying your people to work could be overhead leases keeping the lights on rent those types of things could be marketing materials could be costs to acquire good so if you can relate or resell them obviously if you're a retailer like Target or Walmart you had to pay someone to acquire those goods so you can put them on your shelf for resale so that all takes money and so the difference between your revenues and your expenses is essentially your profit it's what you have left over to do different things with if you're a public institution you can pay dividends to actually your shareholders you can reinvest that back in your company you can do all sorts of different types of things but that's the basic fundamentals of businesses and profits now profits are interesting because they provide people with incentives to operate businesses and if there wasn't this incentive of profits most people would not be interested in starting their own business okay there are many people that are passionate about what they do but the idea of doing something and not getting paid it is a little a little disconcerting so to speak so profits do provide that incentive to encourage people to start small businesses as you probably know a majority of the hiring that's done here in the US is as a result of organizations that have less than 500 employees so hiring for small businesses definitely does matter so without profits as an incentive that could come in to come into play and could be negatively impacted by it the next thing is that profits do provide a reward for their owners if you're starting a business or if you've operated one for any period of time you know that early upfront is the most difficult and trying time you typically aren't earning profits for quite some time and so profits provide you ultimately with that reward for the time for the energy blood sweat and tears that you invest in this idea that you have in an attempt to obviously make it big and hopefully come to fruition so profits serve a number of different benefits of course now what's interesting about the US environment in particular is that obviously if you're a business owner you have a choice in terms of what you offer at what price you offer it at and where and when that you offer a product or service but what business owners also have to be cognizant of or aware of more likely is the consumer choice and demand so to speak and what I mean by this is we all have choices as consumers when you go to the store you have a choice in terms of what you buy you have a choice between competing brands you have a choice to buy a particular product altogether and so businesses need to be aware of what consumers want they need to be in tuned with what their customers interests are so they can design products and services that are ultimately going to be something that people want obviously if you manufacture something that no one has an interest in you could spend all the money in the world trying to design the best product but if there isn't a demand for it as we've seen from a lot of different consumer products that have been been failures no one is going to buy them and it's going to negatively impact your business as well now the next thing is opportunity and enterprise obviously with this idea of profits it provides people with an opportunity and an encouragement to operate new businesses and different things so with competition the way it is it encourages businesses to be innovative it encourages them to design products and services that are going to better equip us or better serve us in an attempt to acquire market share or to acquire more sales competition is good we like competition because it forces companies to be innovative it force them to design the best products and services the cheapest way so that people will buy them so we definitely do like that like I said before we as consumers will benefit from that very significantly now there are also many different benefits of business as well obviously one of the for one of the most that I just mentioned is it provides goods and services obviously we need to purchase things such as food clothing that you know obviously those are considered to be almost necessities but we also purchase different things you know durable goods we purchase vehicles homes electronics all those different types of things as well and businesses provide those to us and as I said before the this idea of competition does encourage businesses to offer the best products and services they can as a way of differentiating themselves from competition so that is very crucial the next component of a benefit for business is a do employ workers obviously many of us work for businesses so as a result that provides us with the ability to earn an income which is great because obviously if we were going to be able to buy things and provide for our families and put food on the table we have to earn some type of income and businesses allow us the opportunity to be employed of course which is great businesses also provide innovation and opportunities obviously this is a kind of in line with competition of course most people forget but an example that I usually give us with regards to Apple computers Apple computers usually hasn't been the first to develop a particular technology but they always did it typically the best and so one of the examples that I usually give is with regards to the Macintosh computer that came out in the early 1980s Apple the technology they use in the computer mainly the mouse that we all know and love and the graphical user interface which is commonly referred to as a GUI which is the desktop that has the icons before that time in order to get anyone on a computer you had to type in the actual file path so you were typing in exactly the address on your computer that you needed to go to access the file now all we do is we click on icons and then Peter directs us there itself so it's very easy to use but that wasn't common at this point in time and Apple Steve Jobs who was the chairman at the time and a lot of the different his colleagues and people that he work with went to a kind of private screenings if you will have a Xerox's Palo Alto Research Center and this was in the early 1980s and they were demoing different technologies that they were working on and Xerox as you know is commonly known for printers copiers and those types of things but they developed this technology of an archaic form of a mouse and obviously didn't roll very well it didn't have the obviously they don't have the infrared that they do now more commonly but they use the little little circular ball and that wasn't even commonplace at that time they had a couple of wheels and so it wasn't it was kind of clunky didn't work very well but Steve Jobs is sitting in the room and he realizes just what they found something that can revolutionize the personal computer industry something that hadn't been done before because number at this time it was all about typing in file paths and going everything a long way and so at this time he realized what they were they had a goldmine here and this was just a great opportunity and so that some people say that's one of the biggest failures of Xerox because they failed to recognize that that was truly an opportunity and as we know obviously it's commonplace now for all computers that we use but I would even argue that even if Xerox wanted to pursue it they didn't have the technical manpower they didn't have the resources they didn't have the expertise to make it happen that wasn't their skill set obviously they were just investing in this as a way of improving technology and Apple obviously was able to use that commercialize it and then give it to the point to where it's almost ingrained in society but you know once again if Apple wasn't concerned necessarily with being innovative and wanting to outdo IBM and Microsoft which were the big the big evils at the time they would not have seen that as an opportunity they wouldn't have attempted to commercialize that so innovation and opportunity is an important benefit of businesses the next thing is enhanced personal income for owners and stockholders a lot of large companies are public meaning that they actually trade stock on an open exchange so if a company is successful in their profitable that will benefit not only the owners but also stockholders potentially as well so when Apple has a positive earnings quarter or comes out with a new product it beat sales in the iPhone 4s or whatever it is you can cut most commonly or more frequently you will see an adjustment in the stock price in accordance with that and that benefits stockholders that benefits people that own that stock is part of a 401k it benefits people that have mutual funds that are somewhat invested in the stock of a particular company so that's another primary benefit of businesses as well and lastly support for charities and community leadership regardless of your question as to the intent of this businesses do provide a lot of money to local charities obviously community leaders as well and even if you question whether or not their motivation is kintyre ly pure you can't argue that you know businesses have a lot of money at their disposal and so that does provide benefit for a lot of charities because that's money that they would not normally have and now have at their disposal alright I want to spend a little bit of time here discussing the external environments of business and now an external environment is essentially anything that's outside of a business's boundaries that can have an effect on that remember that these are things that businesses can't control you can't change what's going on in your external environment but you can adapt to it you can attempt to maybe foresee it coming and and develop a plan in place to go against that so to speak and prepare for it or some type of contingency planning and so it's important for businesses that they prepare for these types of things because bad things do happen they happen all the time and it's important to be prepared as you all know now there are six areas in the external environment that we're going to review here the first of which is the domestic business environment we also have the global business environment we have the technological the political and legal the socio-cultural and lastly economic environments and we'll go over these one by one here all right the first of which is the domestic business environment now this includes anything that happens in the domestic environment in which the company primarily conducts its business so obviously I've mentioned Apple computers as an example before just to stay with the consistent theme well we'll continue to use them for the purposes of our examples here but Apple obviously is located in Cupertino California which is on the Bay Area and so that their domestic environment would be the u.s. obviously they conduct a large part of their business in the US they're headquartered here that would be their domestic business environment obviously Apple does business around the globe as well but this would be their domestic environment because they primarily drive a lot of their revenue from the US now there's a couple of things that you have to consider with regards to the domestic environment the first of which is your customers you obviously want to be close to your customers you want to know what are the things that they're looking for what do they want Steve Jobs always had an interesting take on customers because he never he always thought that market research and focus groups and asking customers what they wanted was a bad thing which is contrary to what a lot of market researchers will tell you they're all about finding out what your customers want and those types of things but his take was rather interesting and the reason that he thought that it wasn't positive is he said that customers don't know what they want until they see it they only know what they've seen and obviously Apple at the time and continues to develop new technology that obviously nobody thought of or something that we didn't think of at that point in time you know we get used to doing business and operating a certain way and so he felt like it was his job to introduce new technology that maybe people didn't want initially but obviously grew to know and love next obviously is building relationships with suppliers potentially if a supplier goes out of business it can have a very negative impact on your own business particularly if a that is the only supplier that you have for something so it is always important to have good relationships with suppliers to have long lasting relationships with suppliers you don't want to necessarily get into a bidding war in trying to get the lowest possible price for your components because you can risk damaging the relationship and it's extremely problematic to have to switch between suppliers over and over and over Apple computers uses many different suppliers for the chips that they use in their tablet computers and piece in their actual laptop computers and different things from the LCD screens they use on the iPad all different sorts of things so they try to maintain good relationships with those suppliers and not necessarily nickel and dime them because they know it's a longer lasting relationship so to speak and lastly competition competition is very important obviously you don't know specifically what's going on with competition but you can at least try and keep your ear to the ground so to speak and find out what's going on for Apple specifically you know obviously we've seen a lot of entrants into the kind of smartphone market if you will the iPhone just get past its I think four year anniversary of introduction and since that point in time after maybe a year year and a half after the iPhone was introduced you're starting to see products that are very very similar to it obviously if someone is successful at doing something you tend to get competition at it it's just kind of the nature of how things go same thing with the tablet market you know the iPad came out was obviously successful at what it did and then you're starting to see new entrants into the market Amazon just introduced the Kindle Fire which they're selling below cost and just came out in November and the reason they're selling that below cost is the idea is that you would spend money on obviously putting books on it and putting music in downloading videos and all those different types of things and they would make their money up kind of on the back end so to speak it's a way to get you hooked initially so that you have to buy obviously things to put on the device right because it's not just fun looking at the I mean it is kind of a neat form factor to it pretty sleek but you do want to actually do things with it of course that kind of goes without saying all right the global business environment obviously because we live in such an interconnected society it matters what happens across the globe I'm not only do we have to be concerned about what happens in our local communities and in our nation's but we also have to be concerned about what happens internationally because those forces can have a drastic impact on the things of business so we need to be aware of them it's very very important things like international trade agreements can have a significant impact on whether or not you can actually import or export your particular products most companies are more not companies but countries sometimes establish quotas and those quotas are designed to protect certain industries so for example the US auto industry or the US has had quotas in place for Japan made automobiles because they did wanted to protect the US auto manufacturing industry because there was this flood of Japanese cars into the market back in the 80s and they were priced very very low because their costs were low and the US auto industry had no way of competing so as a way to protect the US auto industry from failing the US government imposed quotas only allowing a certain number of vehicles from you know Toyota Honda Nissan into the country in this way of protecting the US auto industry now what most foreign companies have done is a way of getting around that as you know is that they establish plants in the US because there's no once you've if you've made it in the US with US workers obviously on US soil US labor equipment materials those types of things then you know obviously you're not importing it anywhere or exporting anywhere for that matter so there is no nothing in place about building it in the US which a lot of companies like Japan Honda and Nissan they primarily build a lot of their automobiles in the u.s. to get around those quotas quotas and those types of things international economic conditions is also very important depending on what's happening internationally in terms of the economy that will affect the demand for different products and services so if the standard of living drops internationally in a certain country that can have an impact on ultimately the demand for your products or your services political unrest is obviously something that affects us significantly we've seen within the last year political unrest in places like Libya in Egypt in all these other countries out kind of in the Middle East and that political unrest has had an effect on things back here home particularly because those types of countries are oil-producing countries and whenever there's political unrest and oil-producing country everybody starts to get concerned because they believe that oil is going to start to go up in terms of the how much it cost per barrel which is going to affect what you and I pay at the pump so to speak so there is great concern for what happens in some of the areas of the world politically you look at what's happening economically in Europe right now there's a lot of turmoil going on is Italy going to default you know they're paying upwards of possibly 7% on an actual bond at times which is an exorbitant amount for a bond so there's no way they can continue to sustain essence they're paying interest on it so those are things that are concerning and if you look at the stock market and the Dow Jones Industrial Average you'll see that depending on what happens in Europe it greatly affects the Dow if we have negative news coming out of Europe the Dow will likely be negative for the day so we live in a very interconnected society we have to be aware of what's happening international market opportunities also and you're seeing a lot of companies mainly Google for example is realizing just how big of a market China is for internet search they have 500 million people or potential Internet users in China and Google is realizing that that's an extremely high number obviously and is a great opportunity so that is an opportunity for them to for advertising and mobile advertising and utilizing internet search and so they're pursuing that so companies also have to be aware of market opportunities and trends as well next suppliers as suppliers internationally is very interesting because as we've seen in 2000 2011 the earthquake in Japan and subsequent tsunami ravaged that part of the you know ravaged the area of Japan and in all the areas along the coast so to speak and so a lot of suppliers were located there and so you had you know companies like Honda for example a lot of Honda dealerships couldn't offer and sell vehicles because they couldn't get arts for them you had a lot of body shops that were trying to order parts for repairs that couldn't find them anywhere because they were made in Japan and shipped over and it caused a bottleneck so to speak in terms of productivity in terms of operations and so what happens internationally with regards to suppliers obviously has an impact what happens back home as well cultures is extremely important too you have to be aware of what happens or what's the culture of a particular area obviously things don't operate just as they do here in the US people in Japan conduct business very differently than they do in the US and so when you're engaging in in conversation with different areas of the world you have to be aware of culture you have to be aware of what you're you know slogan is for example translated in a certain culture because sometimes there's intricacies involved with translating and what you think it says will not be what it means most commonly I always laugh about Chevy for example they produce the Chevy Nova in Mexico back some time ago and Nova translated directly in Spanish is no-go I mean so Chevy was kind of concerned what happened why didn't nobody buy anything like well you know the product is called no-go so people were kind of hesitant to go ahead and buy that just for fear of concern of it ultimately not working so that's one thing to be considerate of - next is competition obviously internationally you have to be aware of competition because we live in a global society things that happen overseas things that competitors do in certain markets have a direct impact on what happens back home as well so one once again something to definitely consider and lastly currency values changes and fluctuations and currency can have an impact on what you're paying if the currency in a certain country goes up significantly it now is more expensive for you to do business in that particular country so that is something that has to be managed as well all right as if that wasn't enough to worry about there also is the political and legal environment politically what we have to worry about is what happens how do we as a business what is our relationship with local governments you know we have to be cognizant of laws and different regulations that can potentially impact us of course there's a lot of different things that have happened most of you are probably familiar with what happened with Google Google tried to offer its internet search services to chut in China and what happened is that China as you know very much controls the information that their consumers and their people actually get they don't want anything to be anti-government sentiment they want to control the information and Google obviously is main mission is providing information to people in its most basic form unhindered we want to get the information out to people as quickly as we can and in the most purest way so Google had a very big problem censoring its its search results is what basically what China wanted and in 2010 they essentially pulled away from China saying they weren't going to offer internet search results because they felt like it was going against their own philosophy and having the sensor that information now recently Google has come out and said that they're going to be going back into China and when I say going back I mean with obviously more emphasis they do have about 500 employees in China 300 of which are engineers but they're going to be kind of pursuing it more aggressively in terms of offering internet search capabilities and those types of things as well so those are things that are going to happen obviously you have to be aware of what happens within a particular in particular country these are just a couple things that need to be considered of course oops I went a little too far products obviously advertising practices can vary you know in the US we are relatively strict in terms of our advertising you know during children's television hours you can't be advertising certain types of things alcohol cigarettes those things in Europe and in different area of the world that's considered to be okay so an advertiser in the US would have to be aware if they're going to advertise in Europe that those things do matter and you have to change those types of things if you're going to be allowed to operate internationally next the technological environment now technology is extremely important obviously a firm can use technology to create value for their consumers or they can not use technology to create value for your consumers and we've all seen a number of different things in the past with regards to companies and how ineffectively they've actually used technology before I always give a couple of examples with regards to companies that really have failed to adapt to changes in technology and the companies that I usually provide our borders for example and blockbuster um borders as you all know was very heavily invested in selling you know physical books and at that point in time the the mentality was that nobody wanted to buy a digital book why would you want to do that or don't you want to hold it physically smell the book fill it in your hands turn the pages one by one it's all about the experience there's no reason that anyone would want a digital book it just feels very impersonal because really that's the way we've always done it on a sidenote if anyone tells you that's the way we've always done it that is not a very good reason that typically means they don't know why they're doing that they just do that because you know that's really what they're used to so just kind of a side note there but as you all know we've kind of been able to see what's happened after the fact so to speak is that there has been this rush towards the new digital technology particularly digital book downloads and Amazon was one of the first to adopt that technology and really pioneer it and make it commercialize it and market it towards the masses and although borders made an attempt to get into that particular market it was far too late damage had already been done Amazon had too much market share at that point to really compete with effectively even Barnes and Noble is having some difficulties because they're finding that although the Nook has been successful and they've sold fairly well that it takes a lot of resources to build that type of business and they don't have the resources necessarily to offer that so to speak so that's one thing that they have to consider blockbuster obviously we all know blockbuster familiar with them one through Chapter eleven was recently recently purchased by DISH Network and they offered you know movies in-store you know four or five bucks or so for renting late fees those types of things Netflix comes along and there's a completely different model you can order movies have a queue online DVDs get sent to you then they came out with the streaming online business we didn't even have to order movies to get them you can actually just stream them directly through an Xbox or different set-top set-top box device and so those types of things were failed to adapt to know obviously blockbuster got into the mail-order business but it was too late and I didn't have the resources set up and so companies need to be cognizant of what's happening with technology because even if you think that it won't impact you it probably will so not necessarily something that you can predict per se but you can see trends see things starting to form a eBay is an example of a company that no one saw coming because why would you want to buy something without even seeing it at that point in time people like shopping in stores you would go hold the product test it out make sure it work you know there's this type of you know connection between the person and the product which I know sounds ridiculous but at that point in time you know that was the way business was done that was the way that people bought things so why would you buy things online eBay as we know now has been very successful and is really pioneered buying things online we've seen Craigslist we've seen every company has an internet site online purchasing is very successful of course and so those are things that you know obviously have common as a result of Technology so once again it's important for firms to be able to create value for constituents and they have to be aware of the different types of technology available to them if they are going to be able to do that next the socio-cultural environment the socio-cultural environment encompasses values customs and demographic characteristics of society these are things that actually happen and you need to understand them because they provide you with opportunities and we've all seen different things that have happened within late most recently according to the 2010 census the Hispanic population is now the majority in the Central Valley and that provides a lot of opportunity for businesses now and you're seeing a lot more marketing and advertising towards the Hispanic that Hispanic demographic because of the fact that it is the most populated demographic and obviously it's an untapped resource it's an untapped market so to speak so you're seeing a lot of competition for advertising space on on Spanish programming you're seeing a lot more advertising in Spanish and those different types of things as a result of that new opportunity next the economic environment obviously what happens in an economy does have a direct impact on the actual business most notably things like the unemployment rate and consumer confidence and different things like that in a strong economy you typically have people that have jobs unemployment is fairly low and in 2007 or so unemployment was roughly five and a half percent which is relatively good especially in today's terms we're at eight and a half as of last month or as of December of 2011 so that's extremely important in a strong economy people have jobs it's difficult to attract top talent because they already have jobs you have to offer more money more benefits in a weaker economy which like the one that we're in now where you have millions of people without work there are fewer people or there are more people looking for jobs so companies can be more selective they can pay less offer fewer benefits because they know that you may not have as many options or many opportunities to accept jobs that people will typically now take that first offer as opposed to kind of waiting a little bit sitting on it testing them off testing the water so to speak and seeing what other opportunities they have at their disposal consumer confidence is extremely important because if consumers are not confident that their conditions are going to improve within the next few months or next year then they're more likely to save money and remember if that if you don't know if you're going to be able to pay rent or pay to keep the lights on the last thing you're going to be doing is going out and buying flat-screen TVs or purchasing cars at least I hope that you wouldn't be so we don't like that necessarily as an economy because when people save that's less money getting pumped into the economy less sales tax revenue being forwarded over to governments less need for businesses to have jobs right so obviously everything kind of goes round and round based on how much people actually spend and so we do like those things so obviously businesses are very in tune with what's happening in the economy they know if consumer confidence is low the demand for their products particularly those products that are considered to be maybe luxuries and non necessities jewelry vacations those types of things may be in short supply which would in turn make them and put them in a position to where they may have to go ahead and and lay off work or so to speak so obviously things that that need to be considered and all those different types of things so for this lecture I'm going to go ahead and stop there we what got roughly about 3035 minutes or so and then we're going to pick up next going over some of the different economic systems thank you very much