Industrial businesses produce goods used by other businesses or organizations to make things.

Commercial businesses engage in marketing, in finance, and in providing services. Every business engages in at least three major activities: production, marketing, and finance. The increased global competition of recent years has required firms to become more efficient and effective at providing goods and services of high quality at low prices to customers around the world. Innovations such as computer technology and the Internet have changed the way businesses run. A countrys economic growth is seen in a continuously expanding GDP and the variety of goods and services that people are able to afford. The ease of starting a small business has allowed many people to become either entrepreneurs or intrapreneurs. Although many small firms fail, many others are highly successful as independent enterprises, franchisees, or large international firms. The U.S. population has been growing largely because of immigration and because Americans are living longer. It is also becoming more diverse. The trend has been for people and businesses to locate in the southern part of the country. Changes in American society and its values affect how businesses function. Changes can be seen in the growing number of women in the workforce, the changing nature of the family, and rising job insecurity, stress, and violence. Poverty and discrimination persist. Businesses are becoming more environmentally conscious. Businesses are responding to employee needs by redesigning jobs, improving workplace health and safety, and providing flexible scheduling and family-friendly benefits. Ethical conduct in business requires doing more than the law prescribes. Businesses establish codes of ethics to identify right and wrong behavior for employees. The goal of business extends beyond merely making profits to being socially responsible to various stakeholders. To produce goods and services, businesses use land (natural resources), labor, capital goods, and entrepreneurship. Because a nation does not have enough resources to satisfy everyones wants, it must decide what goods or services will be produced, how they will be produced, and who will get them. There are three basic economic systems. A market economy in a capitalistic society makes decisions through the forces of supply and demand. In a command economy, generally in a communist society, government makes these decisions. A mixed system has characteristics of both market and command economies. Capitalism is founded on basic principles: the right of individuals and businesses to own private property and produce goods and services; compete with other producers, set prices, and earn a profit; and buy whatever goods or services they like. In all political-economic systems, governments reserve the right to control unfair competition and to correct undesirable inflation and recession problems that occur in business cycles.

 Firms go into international business because of the potential for larger profits and limited opportunities in the home market. Removal of barriers to trade and investment, creation of trading blocs and technological advances in communication and transportation has created a positive environment for conducting international business. International business occurs in various forms, such as exporting and importing, licensing, joint ventures, wholly owned subsidiaries, strategic alliances, and multinational firms. International business faces unique challenges, such as the need to work within the rules set by more than one government, currency exchange rates, and cultural differences. Two theories explain international trade and investments. The theory of comparative advantage explains why a particular country specializes in producing a particular product or service. The product life cycle theory explains how a products life stage encourages international business. Data on trade and investment are used to set business and economic policies. The balance of trade between countries is evidence of a nations financial strength or weakness. Most small businesses begin with one or a few owners. Characteristics that help assure these entrepreneurs success include the strong need to be boss, to make their own decisions, and to take reasonable risks. To aid their success, they must prepare a business plan. A sole proprietorship, or proprietorship, is a business owned and operated by one person. Many small retail and service businesses are single owner firms because they are the easiest to start. Other advantages include the power to make all decisions, receive all profits, pay less in taxes than corporations, and know employees and customers personally. Proprietorships have a few disadvantages, such as lacking skills or knowledge needed to perform all key business tasks, lacking funds for expansion, surviving major financial losses, and closing should illness or death occur. A partnership is a business owned by two or more people. Key advantages over sole proprietorships are that multiple owners can contribute more skills and capital to start or expand, can obtain more credit from banks and other sources, are in a better position to compete, and need not close because of an owners retirement. Partnerships have several disadvantages. Each partner has unlimited financial liability for all business debts and is responsible for contracts made by other partners. Other problems can arise when a partnership breaks up, decides how to divide profits, or lacks the capital needed to expand. Some partnerships have limited partners who do not participate in running a business and have limited liability. However, one or more members of a partnership must be an ordinary (general) partner with unlimited liability. A corporation is a form of ownership preferred by large and growing firms. Corporations are more difficult to form than sole proprietorships or partnerships. A

business must specify its purpose, identify its owners (stockholders), elect a board of directors, select officers, establish operating policies, and prepare a charter for approval by the state. The chief advantages of corporations are that liability is limited, more capital can be raised for growth, stock can be bought and sold more easily than ownership shares in partnerships, and the life of the corporation does not end when owners sell their shares. The chief disadvantages of corporations include higher tax rates, double taxation, and more extensive record keeping and government-required paperwork. Joint ventures are alliances formed among companies to produce a product or service that neither alone could provide efficiently. A virtual corporation is a type of joint venture in which a network of companies form temporary alliances among themselves as needed to take advantage of current market conditions. Cooperatives, such as credit unions, are businesses owned and operated by their user-members for the purpose of supplying themselves with goods and services. Limited liability companies (LLC) and Subchapter S corporations avoid double taxation and the unlimited-liability disadvantage of partnerships. Nonprofit corporations do not pay taxes and do not exist to make a profit. Quasi-public corporations are important to society but are government-run because they lack the profit potential to attract private investors. Federal, state, and local governments regulate business activities to protect citizens and businesses. The Federal Trade Commission administers federal laws that regulate commerce. Landmark laws such as the Sherman and Clayton Acts helped set the stage for defining fair competition. Other federal agencies regulate basic industries such as aviation, communications, and food and drugs. A downside of free enterprise is that some firms go bankrupt, but bankruptcy laws allow businesses to recover or to exit business operations fairly. The federal government protects individuals and firms from the theft or misuse of their inventions, publications, and other intellectual property by granting the owners patents, trademarks, or copyrights. Local and state governments also regulate business through licenses, zoning laws, and franchising regulations. Governments obtain revenues through taxes to pay for public services, such as police, schools, and other human services. The most common sources of revenue are income, sales, and property taxes. A progressive tax such as an income tax is based on ones ability to pay, and is higher for those who earn more than for those who earn less. A proportional tax such as a countys real estate tax stays the same regardless of a propertys current value. A regressive tax, such as a sales tax, requires people who earn less to pay a greater portion of their income than do people who earn more. Arguments can be made for each of the three types of taxes. Computers come in all sizes, shapes, and configurations, and all need an operating system and application software to perform tasks. The Internet is a worldwide network of linked computers that permits users to share data and information over phone lines or cable. The development of the World Wide

Web made the Internet accessible to the general public through Web browsers and hyperlink navigation. The chief information officer is accountable for managing all of an organizations electronic information and supporting systems that help employees make timely and informed decisions. Many businesses use information systems. A management information system (MIS) integrates data from many departments, helping managers make decisions. A decision support system (DSS) helps managers consider alternatives when making specific decisions. An executive information system (ESS) combines and summarizes ongoing transactions to help top-level managers make decisions affecting the future direction of the company. Computers have modified existing jobs and created new ones. Employees have been affected in various ways, including new job and skill requirements, layoff fears, and health factors.

More than a billion people worldwide have access to the Internet, and 400 million Internet domains were registered by 2006. By 2004, online retail sales totaled over $130 billion and business-to-business online sales topped $1.95 trillion. Buying and selling merchandise is not the primary use of the Internet for either consumers or businesses. Consumers use the Internet to communicate and gather information. Businesses use the Internet to communicate, gather information about prospective customers and other businesses, and improve business operations. A small business must complete three major tasks to establish an e-commerce Web site: business planning, technology development, and site promotion. Online customers are loyal to businesses that have easy-to-use Web sites, provide shopping security, and offer efficient delivery and customer service. However, if customers have problems with an online business, they are likely to switch to a competitor or to a bricks-and mortar business. Developing an e-commerce business requires business planning, technology development, and site promotion. Communication is a two-way process that involves creating, sending, receiving, and interpreting messages. The three main channels of communication are oral, written, and nonverbal. Two barriers to effective communication are distractions and distortions. Corporate culture involves the shared values, beliefs, and behavior of an organization. Cultures may be (1) entirely open, with extensive interactive communication among all organization members, (2) entirely closed with dominantly downward communication, or (3) a combination of open and closed communication systems. Communications in organizations follow both formal and informal networks. Formal communication networks are official company channels, such as between managers and their employees. Informal networks are communications among informal groups. Managers must deal with problems that challenge their communication skills, such as conflicts and communication across cultures. They must also learn to run meetings effectively with techniques such as the nominal group technique and brainstorming.

 Good managers are generally good communicators. They listen effectively, facilitate upward communications, and choose the appropriate communication channels for their messages.