Chapter 1

The Nature of Business

What’s so good about business?

Doing business is exciting

• Satisfaction of creating new products/services

• Excitement of the dynamic (changing) environment

• Use of new technology

Business can offer financial rewards

Business can offer psychological rewards

• Personal accomplishments

• Leading a successful organizational team

• Business can be fun

Businesses need good leadership

• Leaders must:– Be visionaries– Be promoters of

change– Build people up– Inspire people to give

their best– Set the moral tone for

the business

• Leaders must:– Be visionaries– Be promoters of

change– Build people up– Inspire people to give

their best– Set the moral tone for

the business

• Leaders need:– Communication skills– Motivation skills– Conviction – Flexibility– Integrity

• Leaders need:– Communication skills– Motivation skills– Conviction – Flexibility– Integrity

Focus on 3 Companies

• Dell – manufacturing company

• Best Buy – retail company

• Southwest Airlines – service company

Company Profile:– Started by Michael Dell at age 19 on a $1000 loan.– 2001 fiscal year ended with $38.1 billion in

revenues, a 26% increase FY 2000, and net profits of $2.3 billion.

– Manufacturing plants are in Austin, TX & Nashville, TN and in Brazil, Ireland, China & Malaysia.

– Dell uses a “direct-to-customer” business model.– Dell uses no retailers or other resellers, who add

time and cost to the product.– Dell maintains little stock or inventory– Dell is recognized for award-winning customer

service.

Company Profile:– Started by Michael Dell at age 19 on a $1000 loan.– 2001 fiscal year ended with $38.1 billion in

revenues, a 26% increase FY 2000, and net profits of $2.3 billion.

– Manufacturing plants are in Austin, TX & Nashville, TN and in Brazil, Ireland, China & Malaysia.

– Dell uses a “direct-to-customer” business model.– Dell uses no retailers or other resellers, who add

time and cost to the product.– Dell maintains little stock or inventory– Dell is recognized for award-winning customer

service.

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill

Company Profile:– Started by Richard Schulze in 1983.– Best Buy is the nation’s largest retailer of

consumer electronics and appliances.– In 2002, it had 1,900 stores generating $20

billion in revenue and $500+ million in profits.– Best Buy sells to customers in the U.S.,

Canada, Puerto Rico, and the U.S. Virgin Islands.

Company Profile:– Started by Richard Schulze in 1983.– Best Buy is the nation’s largest retailer of

consumer electronics and appliances.– In 2002, it had 1,900 stores generating $20

billion in revenue and $500+ million in profits.– Best Buy sells to customers in the U.S.,

Canada, Puerto Rico, and the U.S. Virgin Islands.

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill

Company Profile:– Started by Herb Kelleher and Rollin King as an

intrastate airline in Texas.– Southwest Airlines has 29 years of consecutive

profits.– It is #2 in Fortune magazine’s list of Most

Admired Companies.– It is the only airline that did not lay off

employees as a result of the September 11,2001 tragedy and the faltering economy.

– It is nationally recognized for its on-time performance.

Company Profile:– Started by Herb Kelleher and Rollin King as an

intrastate airline in Texas.– Southwest Airlines has 29 years of consecutive

profits.– It is #2 in Fortune magazine’s list of Most

Admired Companies.– It is the only airline that did not lay off

employees as a result of the September 11,2001 tragedy and the faltering economy.

– It is nationally recognized for its on-time performance.

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill

Technology is Changing Business

• E-commerce revolution is in the early phases

• In 2003, 75 million American consumers spent $100 billion purchasing products and services on the Internet

• In 2007, consumer spending is expected to be around $250 billion and businesses will complete another $5.4 trillion in online transactions (eMarketer, 2003)

How is e-commerce different from traditional commerce?

• Ubiquitous (available everywhere, all the time) • Expands global reach (across cultural/national boundaries)• Operates according to universal standards (lowers market

entry for merchants and search costs for consumers)• Interactive (between technology and user)• Increases information density (amount and quality of

information available to all market participants)• Permits personalization/customization

13

Major Types of E-commerce

14

The Growth of the Internet, Measured by Number of Internet Hosts with Domain Names

15

NRF/Forrester Online Retail Index, December 2002

Table 1.6, Page 37

16

Fastest Growing Non-Travel E-commerce Categories 2002

17

Top 25 Shopping Web Sites for Week Ending November 10, 2002

The OPEN SYSTEMS APPROACH to Studying Business

Business, like any other system – education or government – both impacts and is impacted by all other systems. Business leaders must consider these impacts in the decision making process.

Business, like any other system – education or government – both impacts and is impacted by all other systems. Business leaders must consider these impacts in the decision making process.

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill