1. CHAPTER ONE
BUSINESS IN CHANGING WORLD
Prepared by: Thomas Joluis

2. COURSE OUTLINE
1. The Dynamic of Business and Economics
2. Business Ethics and Social Responsibility
3. Business in a Borderless World

3. 1. The Dynamic of Business and
Economics
A solid understanding of business is necessary
for anyone who wants to start their own
company or work in business field.

4. The Nature of Business
• To create profits by:
– Selling products – Cars, food, clothing
– Providing services –
Healthcare, insurance
• Products have both tangible and
intangible characteristics.

5. The Goal of Business
• The primary goal of all business is to earn a
profit.
• Earning profits contributes to society by
providing employment, which in turn provides
money that reinvested in the economy.
• But, not all organizations are business.
(Red Cross, Special Olympics are nonprofit
organizations)

6. Business vs. Nonprofit
Organization
Business
An individual or
organization that
tries to earn a profit
by providing products
that satisfy people’s
needs, ex. Coca-Cola.
Nonprofit
Organization
Provides
products, especially
services, for some
purpose other than
profits, ex. Red
Cross

7. To earn a profit, a person or organization
needs:
management skills
marketing expertise
Stakeholder:
customers, employees, investors, government
regulators, the community and society.
Because these groups have a stake in the
success and outcomes of a business.

8. The economic foundations of business
Economics is the study of how resources are distributed for
the production of goods and services within a social system.
3 types of resources:
Natural
land, forests, etc. (not made by people)
Human
physical/mental abilities used by people to produce
goods and services
Financial
funds necessary to acquire needed natural and human
resources

9. What Is An Economic System?
• The way a society distributes its
resources to produce goods and
services.
• Addresses the issue of how to fulfill
unlimited demand with limited supply
of resources.

10. Types of Economic Systems
• Communism
• Socialism
• Capitalism

11. Comparison of Communism,
Socialism, and Capitalism
Communism Socialism Capitalism
Business
Ownership
Most businesses
are owned and
operated by the
government.
The government owns
and operates major
industries; individuals
own small businesses.
Individuals own
and operate all
businesses.
Competition None. The
government owns
and operates
everything.
Restricted in major
industries; encouraged
in small business.
Encouraged by
market forces and
government
regulations.
Profits Excess income
goes to the
government.
Profits earned by small
businesses may be
reinvested in the
business; profits from
government-owned
industries go to the
government.
Individuals are free
to keep profits and
use them as they
wish.

12. Communism Socialism Capitalism
Product
availability
and price
Consumers have
a limited choice
of goods and
services; prices
are usually high.
Consumers
have some
choice of
goods and
services; prices
are determined
by supply and
demand.
Consumers have
a wide choice of
goods and
services; prices
are determined
by supply and
demand.
Employme
nt options
Little choice in
choosing a
career; most
people work for
government-
owned industries
or farms.
Some choice of
careers; many
people work in
government
jobs.
Unlimited choice
of careers.

13. Economic Systems and
Where They Occur
Communism: Socialism: Capitalism:
China Sweden United States
North Korea India Canada
Cuba France Australia
Vietnam Israel Japan

14. Mixed Economies
Most countries of the
world have elements of
more than one economic
system.

15. The Free-Enterprise System
• Individuals can own property and pass it on
to their heirs.
• People and businesses can earn profits and
use them as they wish.
• Individuals and businesses can determine
how their businesses operate.
• Individuals can choose their career, where
to live, and what to buy.

16. Supply and Demand
• Supply:
– The number of
products business is
willing to sell at
different prices at a
specific time.
– An upward sloping
curve on a graph.
• Demand:
– The number of goods
and services that
customers are willing
to buy at different
prices at a specific
time.
– A downward sloping
curve on a graph.

17. Supply, 50
Demand, 10
0
10
20
30
40
50
60
10 20 30 40 50
Price(RM)
Quantity (unit)
Equilibrium price of Plastic Chair

18. 2. Business Ethics and Social Responsibility
Comparison of Business Ethics and Social
Responsibility
Business Ethics: The principles and
standards that define
acceptable conduct in
business.
Social A business’s obligation to
Responsibility: maximize its positive impact
and minimize its negative
impact on society.

19. Ethical Issue
An identifiable problem, situation, or
opportunity that requires a person to choose
from among several actions that may be
evaluated as right or wrong, ethical or unethical.
©
FAST FACT:
The most common types of observed misconduct
are lying, withholding information, and abusive /
intimidating behavior.

20. Business law
• refers to the laws and regulations that govern the
conduct of business.
• Many problems and conflicts in business can be
avoided by owners, manager and employees
know more about business law and the legal
system.
• Business ethics, social responsibility, and law
together act as a compliance system, requiring
the businesses an employee’s act responsibly to
society.

21. The role of ethics in business
Ethical conduct builds trust among individuals
and in business relationships, which validate
and promotes confidence in business
relationships.

22. Ethical Issue Categories
abusive and intimidating behavior
conflict of interest
 fairness and honesty
 communications
 misuse of company resources
 business associations.

23. Abusive and intimidating behavior
• Physical threats
• False accusations
• Profanity
• Insults /Yelling /Harshness
• Unreasonableness to ignoring someone

24. Conflict of interest
Occurs when a person must
choose whether to advance
their own personal interest
or those of others.
• Bribes – payments, gifts, or
special favours intended to
influence the outcome of a
decision

25. Fairness and honesty
Are at the heart of business ethics and relate
to the general values of decision makers.
• Disobey the law
• Discriminating
• Harm the customer, employees, clients or
competitors
• Disclosure information
• Cheating

26. Communications
False and misleading advertising and deceptive
personal-selling tactics anger customers and
may cause a business to fail.

27. Misuse of company resources
‘steal’ office hour – late arrival, early
leaving, long lunch break, inappropriate sick
days, excessing socializing, engaging personal
activities (online shopping while on the job)

28. Business associations
• Disclosure information of the company
• Plagiarism – the act of taking someone else’s
work and presenting is as your own without
mentioning the sources

29. Three Factors that Influence Business
Ethics
Individual
Standards
and
Values
Opportunity:
Codes and
Compliance
Requirements
Managers’
and
Coworkers’
Influence
Ethical/Unethical
Choices
in Business

30. Codes of Ethics
• Formalized rules and standards that
describe what a company expects of
its employees.
FAST FACTS:
Written ethics standards are more
often found in larger companies than
smaller ones.

31. In order to develop code of
ethics, there are key thing that must
be consider.
• Create a team to assist with the process of
developing the code (include management and
non-management employees from across
departments and functions).
• Solicit input from employees from different
departments, functions, and region to compile a
list of common questions and answers to include
in the code document.

32. • Make certain that the headings of the code
sections can be easily understood by all
employees.
• Avoid referencing specific U. S laws and
regulations or those of specific
countries, particularly for codes that will be
distributes to employees in multiple regions.

33. • Hold employee group meetings on a complete
draft version (including graphics and pictures) of
the text using language that everyone can
understand.
• Inform employees that they will receive a copy of
the code during an introduction session.
• Let all employees know that they will receive
future ethics training which will, in part, cover the
important information contain in the code
document.

34. Whistleblowing
The act of an employee exposing the
employer’s wrongdoing to outsiders, such as
the media or government regulatory
agencies.

35. The Nature of Social
Responsibility
Four Dimensions:
1. Economic – earn profits
2. Legal – comply with the law
3. Ethical – not just “for profit” only
4. Voluntary & Philanthropic – promote
human welfare and goodwill

36. The Pyramid of Social Responsibility
Ethical Responsibilities
being ethical; doing what is right, just,
and fair; avoiding harm
Voluntary
Responsibilities
being a
“good corporate citizen”;
contributing to the
community and quality of life
Legal Responsibilities
obeying the law (society’s codification of right
and wrong)
Economic Responsibilities
being profitable

37. Corporate citizenship
is the extent to which business meet the
legal, ethical, economic and voluntary
responsibilities placed on them by their
various stakeholders.
It involves the activities and organizational
process adopted by business to meet their
social responsibilities.

38. Social responsibility issues
Relations Issues
Relations with owners
and stockholders
Fair information
Protecting the owner right’s and investment
Employee relations
Discriminations / equal opportunity
Safety and welfare
Consumer relations
Consumerism
Customer right
Sustainability issues
Pollution
Alternative energy
Community relations Charity

39. Discussion
Discuss in your group. . .
Detect some of the ethical issues that may
arise in business. ( 5 marks)
Specify how business can promote ethical
behaviour by employees. ( 5 marks)

40. Detect some of the ethical issues that
may arise in business. ( 5 marks)
An ethical issue is an identifiable
problem, situation or opportunity requiring a
person or organization to choose among several
actions that must be evaluated as right or wrong.
Ethical issues can be categorized in the context of
their relation with:
1. conflict of interest
2. fairness and honesty
3. Communications
4. business associations.

41. Specify how business can promote ethical
behaviour by employees. ( 5 marks)
Business can promote ethical behaviour by
employees by limiting their opportunity to
engage in misconduct.
1. Formal codes of ethics,
2. Ethical policies
3. Ethics training programs
Reduce the incidence of unethical behaviour
by informing employees what is expected of
them and providing punishment for those
who fail to comply.

42. 3. Business in a Borderless World
International business refers to
the buying, selling, and trading of
goods and services across
national boundaries.

43. Why nation trade
Nation and business engage in international
trade to obtain raw materials and goods that
are otherwise unavailable to them or are
available elsewhere at a lower price than that
at which they themselves can produce.
A nation, or individuals and organizations
from a nation, sell surplus materials and goods
to acquire funds to buy the goods, services
and idea its people need.

44. Absolute Advantage
Absolute advantage exists when a country is
the only source of an item, the only producer
of an item, or the most efficient producer of
an item.
Example: DeBeers Consolidated Mines, Ltd.
(virtually controls the world’s diamond trade).

45. Comparative Advantage
Comparative advantage occurs when a country
specializes in products that it can supply more
efficiently or at a lower cost than it can
produce other items.
Example: U.S. agricultural commodities, such
as corn and wheat.

46. Importing & Exporting
Selling to
foreign markets
Buying from
foreign markets

47. Balance of trade
• Balance of trade is the difference in value
between its exports and imports.
• If the country have import more products than
exports, it has negative balance of trade or
also known as trade deficit. However, if the
country exports more products than import, it
has trade surplus.

48. Balance of payments
The difference between the flow of
money into and out of country.
( balance of trade, foreign investments, foreign
aid, loans, military expenditures, and money spent by
tourists)
• A country with a trade surplus generally has a favorable
balance of payments because it is receiving more money
from trade with foreign countries than it is paying out.
• When a country has trade deficit, more money flows out of
country than into it. If more money flows out of the country
than into it from tourism and others sources, the country
may experience declining production and higher
unemployment, because there is less money available for
spending.

49. International Barriers
• Economic
• Legal/political
• Social/cultural
• Technological

50. Economic Barriers
• The level of a country’s
economic development
– Industrialized nations –
U.S., Japan, Great
Britain
– Less-developed
countries – Costa Rica
• The level of existing
infrastructure
• Currency exchange
rates

51. Political & Legal Barriers
• Laws and regulations
• Tariffs and trade restrictions
– Import tariffs, exchange
controls, quotas, embargos, anti-dumping
regulations
• Political barriers
– Political instability, cartels

52. Social & Cultural Barriers
• The overall culture of a
country
• The culture of the
marketplace
• The culture of “how
business is practiced”
Think globally, but act locally

53. Technological Barriers
Varying levels of technological
development and infrastructure

54. Group Discussions
Briefly explain four (4)
international barriers in trading &
provide examples.