Chapter 1

TAKING RISKS
AND
MAKING PROFITS
WITHIN THE DYNAMIC
BUSINESS ENVIRONMENT

Introduction to Business Administration – Instructor: Phuoc Van Hanh

LEARNING OBJECTIVES
LO 1-1 Describe the relationship between profit and risk, and show
how businesses and nonprofit organizations can raise the standard
of living for all.
LO 1-2 Explain how entrepreneurship and the other factors of
production contribute to the creation of wealth.
LO 1-5 Demonstrate how businesses can meet and beat
competition.
LO 1-6 Analyze the social changes affecting businesses.
LO 1-7 Identify what businesses must do to meet global challenges,
including war and terrorism.
GETTING TO KNOW
Tristan Walker,
Founder of Walker & Company
LEARNING OBJECTIVES
LO 1-1 Describe the relationship between profit and risk, and show
how businesses and nonprofit organizations can raise the standard
of living for all.
LO 1-2 Explain how entrepreneurship and the other factors of
production contribute to the creation of wealth.
LO 1-5 Demonstrate how businesses can meet and beat
competition.
LO 1-6 Analyze the social changes affecting businesses.
LO 1-7 Identify what businesses must do to meet global challenges,
including war and terrorism.
 Business and Wealth Building

A business is any activity that seeks to provide goods and

services to others while operating at a profit.
Goods are tangible products such as computers, food, clothing,
cars, and appliances …
Services are intangible products (i.e. products that can’t be held in your
hand) such as education, healthcare, insurance, recreation and
travel and tourism …

An entrepreneur is a person who risks time and money to start

and manage a business.
 Business and Wealth Building

Revenue is the total amount of money a business takes in

during a given period by selling goods and services.
Profit is the amount of money a business earns above and
beyond what it spends for salaries and other expenses needed
to run the operation.
A loss occurs when a business’ expenses are more than its
revenues.

=> How about when the amount of money earned = spent?

 Business and Wealth Building

Risk is:
(1) the chance an entrepreneur takes of losing time and money
on a business that may not prove profitable.
(2) the chance of loss, the degree of probability of loss, and the
amount of possible loss.

=> Where do you often hear about “risk”?

In 1979, Geral Fauss took 5,000 oversized foam fingers to the Sugar Bowl
in New Orleans not knowing if he would sell a single one. The former high
school shop teacher created the now-famous fingers a few years earlier
and they became a big hit with his students. Fortunately, the Sugar Bowl
crowd liked them, too. He sold every last finger and launched a company
that is still going strong.

What risks and rewards did Fauss face when starting his business?
 Business and Wealth Building

Standard of living refers to the amount of goods and services

people can buy with the money they have.

Quality of life refers to the general well-being of a society in

terms of its political freedom, natural environment, education,
healthcare, safety, amount of leisure and rewards that add to the
satisfaction and joy that other goods and services provide.
Stakeholders are all the
people who stand to gain or
lose by the policies and
activities of a business and
whose concerns the
businesses need to address.

Fig 1.1 A business and its stakeholders

 Business and Wealth Building

Outsourcing means contracting with other companies (often in

other countries) to do some or all the functions of a firm, like its
production or accounting tasks.

Insourcing means foreign companies setting up facilities in our

country.
A nonprofit organization is an organization
whose goals do not include making a
personal profit for its owners or organizers.

Nonprofit organizations often do strive for

financial gains, but they use them to meet
their social or educational goals rather than
for personal profits.

Example: The Red Cross

LEARNING OBJECTIVES
LO 1-1 Describe the relationship between profit and risk, and show
how businesses and nonprofit organizations can raise the standard
of living for all.
LO 1-2 Explain how entrepreneurship and the other factors of
production contribute to the creation of wealth.
LO 1-5 Demonstrate how businesses can meet and beat
competition.
LO 1-6 Analyze the social changes affecting businesses.
LO 1-7 Identify what businesses must do to meet global challenges,
including war and terrorism.
The Importance of Entrepreneurs to the Creation of Wealth

There are two ways to succeed in business:

1. Work for others, such as large companies.

2. Become an entrepreneur: Own your own business and reap

the profits from it.
5 factors of the production that seemed to contribute to wealth

Fig 1.2 The five factors of production

 5 factors of the production that seemed to contribute to wealth
1. Land (or natural resources). Land and other natural resources are used to make
homes, cars, and other products.
2. Labor (workers). People have always been an important resource in producing
goods and services, but many people are now being replaced by technology.
3. Capital. This includes machines, tools, buildings, or whatever else is used in the
production of goods. It might not include money; money is used to buy factors of
production but is not always considered a factor by itself.
4. Entrepreneurship. All the resources in the world have little value unless
entrepreneurs are willing to take the risk of starting businesses to use those resources.
5. Knowledge. Information technology has revolutionized business, making it possible
to quickly determine wants and needs and to respond with desired goods and services.
The business environment
consists of the surrounding
factors that either help or
hinder the development of
businesses.

Fig 1.3 Today’s dynamic business environment

LEARNING OBJECTIVES
LO 1-1 Describe the relationship between profit and risk, and show
how businesses and nonprofit organizations can raise the standard
of living for all.
LO 1-2 Explain how entrepreneurship and the other factors of
production contribute to the creation of wealth.
LO 1-5 Demonstrate how businesses can meet and beat
competition.
LO 1-6 Analyze the social changes affecting businesses.
LO 1-7 Identify what businesses must do to meet global challenges,
including war and terrorism.
Companies now have to offer both high-quality products and
good value - that is, outstanding service at competitive prices.

 Competing by Exceeding Customer Expectations.

 Competing by Restructuring and Empowerment.

Empowerment: Giving frontline workers the responsibility,

authority, freedom, training, and equipment they need to respond
quickly to customer requests.
LEARNING OBJECTIVES
LO 1-1 Describe the relationship between profit and risk, and show
how businesses and nonprofit organizations can raise the standard
of living for all.
LO 1-2 Explain how entrepreneurship and the other factors of
production contribute to the creation of wealth.
LO 1-5 Demonstrate how businesses can meet and beat
competition.
LO 1-6 Analyze the social changes affecting businesses.
LO 1-7 Identify what businesses must do to meet global challenges,
including war and terrorism.
Demography is the statistical study of the human population
with regard to its size, density, and other characteristics such as
age, race, gender, and income.

Diversity efforts now include genders, older adults, people with

disabilities, people with different sexual orientations, religious,
extroverts, introverts, married people, and singles, …
LEARNING OBJECTIVES
LO 1-1 Describe the relationship between profit and risk, and show
how businesses and nonprofit organizations can raise the standard
of living for all.
LO 1-2 Explain how entrepreneurship and the other factors of
production contribute to the creation of wealth.
LO 1-5 Demonstrate how businesses can meet and beat
competition.
LO 1-6 Analyze the social changes affecting businesses.
LO 1-7 Identify what businesses must do to meet global challenges,
including war and terrorism.
Two important changes are the growth of global competition and
the increase of free trade among nations.

World trade, or globalization, has grown thanks to the development

of efficient distribution systems and communication advances such
as the Internet.
The Ecological Environment

Climate change is the movement of the temperature of the

planet up or down over time.

Saving energy and producing products that cause less harm

to the environment, such as solar energy, is called greening.
In-class discussion 1 (10 points)

Q: Find one business who really concern about the

ecological environment. Discuss their specific
actions that supports the environment.

Q: Find out the tasks performed, skills needed, pay

(in VND), and opportunity outlook of a wedding
planner in Vietnam market.