Table of Content

Why We Study Business
How We are doing in Business
People from the core of Business
The foundation of Business
Economic Systems
A Historical review of American Business
Business Challenges 1990s


This is a first year undergraduate module, as part of year degree in business computing. It leads into a second year course on organizational behavior.

Let’s star by observing that,” the foundation of doesn’t mean an introduction to “. It means going back to first principles, aiming to understand something more deeply. Many University courses require the student to discover the foundations of a subject familiar from school or for real-life.

Weather you have taken previous courses in business studies in the media; you will already have some knowledge and awareness of business. Studying the foundation of business at university level should take your knowledge and awareness forward.

Why we study business

The study of business will help you shape answer, sharpen your skills, and understand the business and economic links between Bangladesh and other nations, in Europe, North America, the third world (e.g.Japan, South Korea).

While studying business, you will learn about history, the free enterprise system, how changes in the environment affect business, and what skills are needed to have a good chance to be successful. You will also learn about business careers and what will be needed to succeed in a business career. There is no magic formula. However, the road to business success will be easier for those whounderstand how business works and do the business works properly.

Why We Study Business
Increasing dependence on others
International opportunities
Standard of Living
Coping with Change
Preventing Misconceptions


Increasing Dependence on Others

Over the years, people have become more and more dependent on others. By learning business knowledge we understand mutual dependence, using the business system effectively, and being a part of business.

Business is the exchange of goods, services, or money for mutual benefit or profit.

Today, the business conducted inand among Bangladesh, the United States, Canada, Great Britain,Germany, Japan, and other countries is more complicated than bartering shoes for corn. Years ago, our ancestors discovered that producing everything one needs occasionally requires doing some undesirable work. They also discovered that individuals have various traits, needs, and skills. If a person specialized in a particular job, such as making shoes or growing corn, the surpluses produced could be traded for other desirable goods.This early exchange of goods without using money was called barter.

Few people today produce everything they need or use; a complex division of labor has encouraged us to not be self-sufficient. Huge level of people in different nations is depending with others in business perspectives.

For example, you buy food at the local supermarket. You drive a car manufactured in Dearborn, Michigan. You use fuel pumped from oil wells in west Texas. You go to schools built by carpenters, bricklayers, ironworkers, and cement workers. You wear designed in Milan, Italy. You pitch baseballs manufactured in Haiti.


International opportunity

For individuals educated in business, exciting opportunities will exist around the world as we move toward the 21st century. The new era of business performance in an international marketplace will require business leaders who know how to start, operate, and sustain businesses. Business negotiations, joint ventures between companies in different countries, travel across borders, investment across geographical boundaries, and working for foreign-owned enterprises are becoming commonplace. To functions in such a world, each of us must understand the principles of business.

By using international business opportunity, all people take all kinds of facilities like different products and services of different countries. By transportation and information facilities we take all countries products and services easily.


Standard of Living

Another reason to study business is to protect our way of life. Many countries like United States, Europe, and third world countries take great pride in being free and independent. Because of the independence, hard work, and values embodies in business institutions, these countries enjoy a comfortable standard of living.


  • 96 percent of all American homes have at least one telephone
  • 96 percent of all American homes have at least one television.
  • 50 percent of all Americans own at least one automobile.
  • The United States provides half of the world’s wheat.
  • Agricultural output has increases 75 percent since 1940.

From this result, we understand that business incrase ourability to get better opportunity among all sector of life. Standard of livingdescribes the amount of goods and services that an average family or individual views as necessary. The standard of living of each generation of Americans has been better than the previous generation. We believe that a minimal amount of government interference and a free market business system have been the major reasons for perpetuating our way of living.


Coping with Change

Business is dynamic –always changing. Coping with both predictable and unpredictable events can be easier, more efficient, and less traumatic if we understand business. Price increase or decrease, products are added, needs changes, services are created to meet needs, laws are passed, and unexpected events occur –

For example, the October 19, 1987 (major), and October 13, 1989(minor), stock market crashes; finding traces of benzene in bottles of Perrier water; and the war in the Persian Gulf. These all have been a part of the dynamic business system.

Using business concept, when any unexpected occur is taken place, business can overcome this. From this view, we can tall business is smart and everywhere.


Preventing Misconceptions

Understanding business also prevents our accepting misconceptions, misinformation, and inaccurate data as truths. Many people still believe that Japan has the number one economy, that the average U. S. business earns 15 percent profit. That starting salaries for recent college graduates are usually $50,000 annually, and that most people work for large businesses. Each of these assumptions is inaccurate. The United States is number one in terms of the market value of all final goods and services produced over a one-year period, which is called the gross national product (GDP). Also look at agricultural production and automobile registrations.


A Child learns his language from his Mother and Environment. Like a child to learn language, every man has learned business knowledge from the environment. The GNP tells us how we are doing in business. It is calculated by adding expenditures on all goods and services for a one-year period.

For example, if we spend about $11,000 on each of 8 million American cars, that $88 billion would go into GNP.

Today in the United States, more than 14.5 million organizations, called business enterprises, contribute to the GNP by exchanging goods, services, or money to earn a profit. These business enterprises (such as visible changes hair salons, Olive Garden restaurants, and Fiesta supermarkets) intend to earn a fair or reasonable profit by selling goods and services through business transactions. When an organization such as Apple Computer exchange a personal computer for money that is a business transaction. Apple hopes to earn a profit from its involvement in the transaction.

In the sense that business involves the exchange of goods, services, or money for mutual benefit, we are involved in business.

For example, Coca cola, who bought an energetic drink though a business transaction with Pepsi, hope to benefit by becoming more organized and productive.

For most of us, our food, clothing, automobile, telephone, airplane trip to Hawaii, golf clubs, and Spanish audio tapes were purchased, used, and enjoyed because we did business with an enterprise. We are all affected in some way by the activities of business enterprise.

Across the world authoritarian governments and centralized or planned economics are on the run as free enterprise business gains strength. As world business prospers, many countries government must manage more and more money, and more money can mean more debt

People from the Core of Business

The human element is the core of business. Business needs people as owners, managers, employees, and customers. People need business for the production of goods and services and the creation of jobs. Weather business is transected in Mexico, Canada, or Nigeria does not matter. Businesses may be operated differently and the objectives of businesses may differ, but the universal element in all business activities is people. Without the help of people, business is impossible. Business is impossible without people. So we can say that people is the core of business.

People include business as an owner, managers, employees, and consumers. Now these elements are shown by explanation


People, who own a business, as well as those who invest money in one, do so because they expect to earn a profit. Owners are generally man, organization, and group etc. most of the giant corporation, such as General Motors, Eastman Kodak, Dow Chemical, Du Pont, and Exxon, are owned by large number of people. Those companies have large number of shareholders and employees. When making decisions, the professional manager in business organizations need to consider the owners and what they expect from the business.


The person responsible for operating the business may be the owner (an owner-manager, also called an entrepreneur) or a professional manager employed by the owner. Both types of managers seek to achieve profit, growth, survival and social responsibility.

The owner manager sets his or her own objectives, whereas a professional manager attempts to achieve objectives sets by others. The professional manager is accountable to the owners of the business, who judge the manager’s by who well their objectives accomplished over a period of time.

Many of these business owners are entrepreneurs, people who take the risks necessary to organize and manage a business and receive the financial profits and nonmonetary rewards. The entrepreneur of the 1990s is expected to be innovative, practical, and strong willed. This view was actually years ago by noted Austrian economist Joseph Schumpeter. He stated:

“The function of entrepreneurs is to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, opening a new source of supply of materials or a new outlet of products, by recognizing a new industry.”

The owner-managers who fit Schumpeter’s description are too numerous to list. The list would include names like Ted Turner (CNN), Ken Olsen (Digital Equipment Corporation), Fred Smith  (Federal Express), Bob Reis (Final Technology Inc.), Frank Perdue (Perdue Chickens), John McCormack (Visible Changes), Bill McGovern (MCI Communications), Liz Clainborne  (Liz Claiborne), Barbara  Lamont (WCCL –TV), and Akihito Morita (Sonny) .Each of these entrepreneurs  practices what Schumpeter  described. They personify the term entrepreneur.


Employees supply the skills and abilities needed to provide a product or service and to earn a profit. Most employees expect to receive an equitable wage or salary and to be given gradual increase in the amount they are paid for the use of their skills and abilities. To compete with other business, a business enterprise needs a omitted and effective team of employees.


A consumer is a person or business who purchases a good and service for personal and organizational use. Consumers in economic systems such as those of Japan, Germany, Canada, and the United States want more and better products and services. They want better automobiles, better homes, more luxurious, and better leisure equipment. They want to pay a fair price for the goods and services they purchase. They also want the goods and services they purchase to be reliable.

A business enterprise attempts to satisfy consumer needs and desire while earning a profit. To do so business must determine what those consumer needs and desires are. Because consumers continually want more and better things, new business are formed, and other business make adjustments to accommodate the demand. When a need or desire for products or services exists, a business can earn a profit by supplying it promptly and efficiently. The uncertainty and risk involve in assessing consumer needs and wants provide a challenge to the business decision maker attempting to earn a profit


Business must achieve their objectives to remain in operation. List of business objectives generally include such factors as profit, survival, growth, and social responsibility.


Business Objectives
Social Responsibility
Business Profit



Survival is an obvious objective. Other objectives can be accomplished only if the business enterprise survives.


Growth is an objective because business does not stand still. Market share increase, personal and individual development, and increased productivity are important growth objectives.The growth of Compaq Computer and Wal-Mart to multibillion dollar enterprises is often used as an example of business success accomplished through growth.


In recent years, meeting social responsibilities has been recognized as an important objective. Business, like each person in society must accept their responsibilities in areas such as pollution control, eliminating discriminatory practices, and energy conservation.


Although survival, growth, and social responsibilities are important objectives, the profit objective plays the major role in business. Profit, however, means different things to different people because of their values, attitudes and perceptions.




Typically, a business person calculates profit by subtracting all the cost, including taxes, from the revenue received for selling a product or service in the market. The difference is referred to as business profit. For example, the franchise owner of a Wendy’s fast –food restaurant subtracts all expenses (for supplies, staff wages, property, advertising, and so on) from all income to determine the business profit.

Successful business organizations earn a profit because their goods and services effectively meet customer needs and demands. Basically, profits reward a business enterprise for effectively conducting a number of activities.

RISK-TAKING     the business may earn a profit when it takes risks by entering a new market or by competing head-on with another business. For example, Toyota invested millions of dollars in promoting and selling small cars in the United States. Today, this Japanese corporation is the largest small-car seller in the U.S. market.

Business organizations that evaluate consumer needs and demands and then move efficiently into a market can earn substantial profits. Xerox in the photo reproduction industry,  Compaq Computers in personal computers, and Domino’s in the pizza business are examples of companies whose accurate assessments.

Another way, Business objectives can be defined as……


Understanding economics is essential to Understanding business? No single definition of economics satisfies everyone, But let’s look at one concise description: Economics is the study of how a society chooses to use scarce resources to produce goods and services and to distribute them to people for consumption, This definition raises certain issues that are key to understanding economics; (1) Resources. (2) Goods and services. And (3) allocation of both resources and products. Let’s discuss each of them


A nation’s resources consist of three board areas; natural, capital, and labor. Natural resources

Are provided by nature in limited amounts; Natural resources must be processed to become a product or to be used to produce other goods or services, For example trees must be processed into lumber before they can be used to build homes, shopping malls, and schools.

Capital resources are goods produced for the purpose of making other types of goods services, Some capital resources, called current assets have a short life and are used up in the production process, These resources fuel, raw materials, paper, Labor resources represent the human talent of a nation, To have value in the labor force, individuals must be trained to perform either skilled or semiskilled work, For example, the job of physicist requires extensive training

Goods and services

A nation’s resources are used to produce goods and services that will meet people’s needs and wants, Needs are goods and services people must have simply to exit, wants, on the other hand, are they would like to have but do not absolutely need for survival, Such item as food, clothing, shelter, medical care are needs; video recorders, fashionable clothes and luxury vacations are wants,


Resources allocation all resources face old economic problem of limited resources and unlimited wants. We know, for example that the supply of oil and natural gas in the United States is limited natural resources. Even the amount of capital resources, such as corporate stocks and bonds that can be raised during a specific period, is time

Because we live in a world in which the quantity of all resources is limited, we must make choices about how these scares resources are to be used, we have to answer three fundamental economic questions:


  • what goods and services will be produced, and in what quantities?
  • how will goods and services be produced, and by whom?
  • who will use the goods and services?


Once these questions are answered, we have a basis for choosing how our resources will used, how they will be allocated to best satisfy consumers wants and needs, in a free enterprise economy. Allocation of resources also involves other issues. Should the need for business property and success be a consideration? What priority should be given to government’s need for resources? In our economy, allocating resources-especially scare resources-involves all these questions, allocation can be complicated, indeed

Production distribution   the issue of allocation is not limited to scare resources, It also involves the distribution of good and services to the consumers, In this context, allocation involves an exchange, in an ideal pattern distribution in a free economy. The business earns a profit and the customer is satisfied with the goods or services;



An economic system is an accepted way of organizing production, establishing the rights and freedom of ownership using productive resources, and governing business transaction in a society, there are three basic types of system


  • the government can produce almost all the goods and services (a planned economy)
  • private enterprise can produce almost everything (pure capitalism)
  • there can be some government production and some private production (a mixed economy)


No economy is entirely privately owned. But few are almost entirely government owned. The United States is a mixed economy with about 90 percent of production provided by the private sector.

Private versus state ownership percentages for 18 countries are illustrated, compare India, Austria, Canada, and the United States on degrees of ownership. And you will find some noticeable differences.


Planned Economy

Modern socialism has much of its roots in the ideas of Karl Marx (1818-1883) published in 1867 in das capital. Marx believed that workers were being exploited by the owners and forced to work for wages that barely allowed them to survive. Capitalist, who owned the means of production, were viewed as a separate, distinct class. According to Marx, capitalists made profits by paying workers less than the value of their production.



The Union of Soviet Socialist Republics was born with the Bolshevik revolution of 1971. Marx’s ideas helped shape the economic system adopted by the new nation. The communist leadership set up a centrally planned system that, until 1985 operated without the profit motive. It was a classic example of planned economy.

Prior to major changes in 1989 and 1990, Countries such as East Germany, Romania, Bulgaria, andSoviet Union had planned economics, the government owned productive resources. Financial enterprise, Retail stores, and banks, in a planned economy, the government is the owner because it speaks for the people, personal property, such as autos, clothing, and furniture, is owned by private citizens, however, almost all housing and the means of production are owned by government.

In the soviet planned economy. Politically appointed committees planned production, set prices, and managed the economy. Each factory received detailed instructions on how many goods to produce.

Perestroikain 1985 Mikhail Gorbachev, general secretary of the communist party began a new program called perestroika. Perestroika means economic restructuring. Gorbachev is promoting reduced government control, less direction and fewer rules. On January 1.1988 about 60 percent of soviet enterprises were put on a self-financing basis. The manager of the businesses were asked to decide how much and what to produce. Workers’ wages were tied to profits. Under perestroika those firms not making a profit risk being shut down. This is new pressure on enterprise in the Soviet Union,

Perestroika has required the use of better management skills, teamwork, goal setting, and other practices typically unused in the Soviet Union, with perestroika, the prices of many products have increased and have resulted in a high inflation in the Soviet Union,

The move to decontrol prices has increased Soviet citizens for fear future price increase. Their fear resulted in a stampede to buy everything in sight while government still controlled prices. Today there are shortage of many goods, such as meat, soap, and work clothing. The Soviet government believes that the postponement of prices decontrol will reduce the fears of citizens about inflation and stop the panic buying,

Soviet citizens lack the opportunity to consume many of the goods and service that Americans. Canadians and Japanese in all walks of life take for granted. However, Soviet citizens enjoy some advantage not obtainable in the United States. Medical care is available for everyone at no cost, and rents in government housing are subsidized: public transportation is relatively inexpensive, and most higher education is tuition free.

Perestroika also has given Soviets the opportunity to engage in joint ventures with partners in different countries. A Joint Venture is the formal co-operation of two or more businesses to share business decision making, investment risks, and profits. The business action tells how McDonald’s learned to do business in the Soviet Union through a Joint venture.


The Soviet Union’s economic system does not permit the freedoms found in the United States, Canada, Japan, and in the Western European nations. Even the current version of Perestroika, general planners set production goals on the basis of political goals rather than consumer needs and wants. The entire world is watching as the world’s most powerful planned economy makes changes to improve its economic performance. Most people around the world want Gorbachev’s Perestroika to succeed.



Most modern industrialized nations have mixed economies. In a mixed economy, both the government and private business enterprises produce and distribute goods and services. The government usually plays a role in supplying defense, roads, education, pensions and some medical care. In the mixed economy, markets are generally free and competitive.

Capitalism and the mixed economy   The American brand of economic system called Capitalism has created a mixed economy. Capitalism is characterized by private ownership of capital and by competition among businesses seeking a profit. Consumers play much more of a role under capitalism than they do in planned economy.

The have a freedom of choice in purchasing goods and services, in selecting an occupation or a school, and in deciding how to us money that is earned. They are free to consume what they want and need. Their choices greatly influence decisions about production and use of resources.


A mixed capitalist economy also allows the freedom to start a business. Freedom of enterprise means that businesses and individuals with the capital may enter essentially and legal business venture they wish. This important feature of capitalism permits individuals to seek out profit making business opportunities. Under capitalism, any business or individual can earn a profit by producing useful good and service. However, businesses and individuals do not have an automatic right to profit. Profit is a reward to business for using scarce economic resource efficiently. Consumer must consider a good or service reasonable in Price, quality and value differ a profit can be made.


Competition is yet another important part of capitalism. In general, competition refers to the rivalry among business for consumer dollars. Because of competition for consumers dollars business have to be aware of what consumers want to buy. If they ignore consumer wishes they are likely to lose sales, which directly affect the level of profit. A business consistently loses money and makes no profit will fail. Consequently competition among business generally provides with lower prices, more services and improved products. The 1980s fare wars in the airline industry illustrate how fierce combination among businesses can grow.

The American economic system is mixed capitalism .It becomes mixed when government established operating guideline and laws for business to follow. For example, one important federal law requires a variety of safety rules to be followed construction jobs. An economic system also becomes mixed when government competes directly with business. This often happens in such areas as medical research, electric power, generation, and communication. The US postal service is an example of a government business that competes with private businesses. Such as federal express and United Parcel Service.


The U.S. Economic System the United States has developed the world’s largest economic system. This model, a simplification of our mixed economic system, includes only the broadest parts of the economy; it does not include the government.


Resource markets are places where economic resources – natural, labor, technological and capital – are bought and sold. The New York Stock Exchange, where money is invested in companies, is a capital resource market. The employment ad in local newspaper is a resource market where labor is bought and sold. Product markets are the thousands of markets in America where business outputs – goods and services- are sold to consumers. Consumers pay for goods and services with money. This type of consumer expenditure is called retail sales. The money businesses receive from retail sales is business revenue.


In return for money, people provide labor through work; invest in business (capital), and sell natural resources to businesses. The money received in payment for these economics resources is used to purchase goods and services. Of course business view money paid to suppliers of goods and services as an expense.


What economic system is best?

The most appropriate form of economic system for a nation depends on several things, including cultural factors and the availability of economic resources. For example, capitalism is unlikely to be appropriate for a nation that creates hurdles for individuals who want to organize their own business. The right of business owners to use economic resources for whatever purpose they want is his backbone of capitalism. Capitalism normally works best with people who are willing and able to make their own economic decisions. In fact, capitalism encourages people to take the initiative to become better educated and to make their own decisions.





As we mentioned previously economic involves learning about a society use of limited productive resorts to satisfy the unlimited desires of its citizens. American economic success arises from the freedom to owner property freedom of choice freedom to earn reasonable profit sufficient natural resources. Hardworking and educated people and outstanding business builder ship. Thought out Americans history, business leader’s help displayed their talents in organizing business.


  • Managing human resources
  • Financing business
  • Marketing goods & services
  • Using information resources


However American has no guarantee of being world leaders in business transactions know how & success. Today there business leader ship is being challenged by creative, hardworking, astute competitors thought out the world, especially in Japan, Germany, Italy, and South Korea & Hong Kong.

Historically the influents of money societies & cultures have formed the business values that helped make the United States the worldwide economic power. Let’s review the stages through which American business has reached its present position in the world.



Mercantilism is a system of state power with public authority controlling & directing the nation’s economic life.

To understand the forces behind the founding the American colonies. We must understand the economic thought out of that time this economic phlolosophy lead the governments of European nations especially England, France, Spain & Portugal to do everything possible to increase the power wealth of the country. According to the basic tenets of mercantilism a nation should:


  • Be as self-sufficient possible
  • Sell more goods to foreigners than are purchased from foreigners in order to increase the mother countries wealth
  • Accumulate gold & silver bullion because this serves as a measure of the countries wealth & power.
  • Established colonies which serve as sources of raw materials of precious metals as a market for goods.




Adam Smith a professor at the university Endivurgh in Scotland in the late 1700s.was a prominent critic of mercantilism. Smith wanted to make individuals & there needs the focal point of the economy. He felt that individual pursuit of their owns vest interests would lead a nation to attain its goals. His book the wealth of nations (published in1776) presented many of his views. Smith believed:


  • People do their best when they reap the rewards of hard work &intelligence &suffer the penalties of laziness.(He favored the use of profits as a   means of encouraging individual incentive & intuitive)


  • People should be free to conduct business or seek work that provides them with the greatest reward for their efforts.


  • What serves the individual also services society the pursuit of individual self-interest leads to the best allocation of the nation’s resources& thus to the maximum satisfaction of people’s needs.



Smith assumed the enemy of human freedom at that time to be the state the internationalist mercantilist government: that imposed tariffs. Grated to nobodies leaved access &above all sought to improve what was best left its self.



A policy that encourages govt. to leave business & the economy alone.

French word laissez-fair means to lead people do as they choice. Only one rare occasion, in order to prevent monopolies, should a laissez-fair govt. interfere with the operation of the economy. Instead the economy is guide by the invisible hand of compaction. This was the key to Smith’s philosophy.



Profit motive is expected or actual returns that motivate business leaders to do what must be done.


The invisible hand works efficiently in the United States. It has even found its way to eastern European economics. For example- as we prepare this book about one third of the Soviet Union’s food is produced on the one percent of land owned by private owners. The other 99%is in the from collective farms. With centrally controllers farmers the self-interests, motivated Soviet farmers work the land owned by the Soviet government.

Through many of Adam smith’s suggestions have been practiced in the United States, the concept of laissez-faire has generally been rejected. Ignoring Smith’s advice that the economy operates best when left alone, govt. officials have actively sought to improve its operation. Today govt. involvement covers numerous areas, include.










Industrial revelation: Industrial revelation is the development of modern technology &production processes which began in England about 1769.


All thought what we call the industrial revelation began in England about 1769 it made its appearance in American in 1790.the industrial Revolution characterized by extensive mechanization of production systems, cause the population to concentrate in citizen &challenged the nature of work for many people.


In 1790 a young apprentice mechanic ,Samuel Salter , was able to construct in the machinery necessary for the textile mills his mil in Rhode island was America’s first true factory. After lei Whitney invented the cotton gin in1793.the techniques of production were improved that sheer size of most enterprises dramatically increased.


Whitney made another significant contribution to the industrialization of America interchangeable parts. In 1798 hewn contract to build 10000 muskets for the American govt. he immediately set out to build a plant and design the new musket. Industrial life in the United States changed drastically after the civil war ended in 1865.Improvements in rail &steamship transportation closed the gap between producer & consumer. Products could be sold to a large market scattered over wide geographic areas rather than only in small. Local markets .also the factory system expanded & began to influence all aspects of life.


To services the expanding markets .a new type of business was necessary the general store or the small mill could not service a geographically dispersed market .only a larger .more efficient business operation could deal with the demands of larger markets .producers needed

Better distribution systems .transportation ware houses .production capabilities and

Managerial skills.




The Pre-depression


The period from the end of the 19th century to great depression in 1929 was one of growth in the oil, steel, and financial industries .other industries such as tobacco, meat, and copper, also grew. for example in the early 19th century meat processing had been quite primitive, done either at home or by local butchers ,but around the turn of the century , a major industry based on hogs & cattle develop through the business spirit. Ricks taking & knowledge of leaders like Philip are more, Gustavo’s swift, & mike Cudahy. The property of the 1920s resulted from a number of factories one important cause was the profits made in stock market speculation .people were putting money into the stock market.





Consolidated cigar $115 $2.5


Erie railroad 93.5 2


General foods 82 20
General motors 91 8


New York central 256 9
Radio corporation of America 115 2.5


U.S. steel 261 21



24, 1929, the bottom fell out. He extant of financial collapse is indicated is table 1.3 note for instance how Radio Corporation of America lost 98% of its stock market value in the three years.




Depression:A depression is a period of drastic decline in the national economy characterized

By decreasing business transactions .Falling prices.And high unemployment.


The depression of 1929-40 will be ingrained in the minds of anamerics for generation to come.(Even today ,many presidential decisions are affected by memories of and by reading and learning about the great depressions.) the tragic poverty and unemployment of that time have had no equal .between October 1929 and the early 1940s,unemployment hit 25% of the work force .or about 13 million people (this compares to about 34 million ,using 1990 figures).


Although the 1929 stock market crash was a major factor leading to the great depression, other factors contributed, some of the culprits included:


  • The actions of the federal reserve system
  • Installment buying
  • Over production of consumer goods and a decline in investment


The crash of the stock market came early in the depression and its effects were less significant than the waves of bank failures that followed. The first wave came in October 1930, the second march 1931 and the third in the last quarter of 1932. In each case, banks failed because servers panicked. Bank did not keep on the hand 100% of the cash deposited. They could not pay back all their depositors at once and thus went bankrupt .millions of Americans lost their life savings in the bank failures.


World war ӀӀ and the postwar period

The nation’s economic troubles finally began to ease at the start of World War II. Unfortunately economic problem were replaced by wartime fears.

War production meant Uncle Sam War the principle customer of goods. Industries modified their facilities to produce tanks, weapons, tool, military, clothing, airplanes, ships, and other wartime equipment. The government’s total wartime expenditure (1941 – 45) was about $347 billion. As a result, such consumer goods as shoes, tires, clothing, gasoline, and meat became scarce and war rationed.

The end of World War II brought renewed fears of depression. But these fears war unfounded. The economy continued to expend because of:

  • A pent-up demand for consumer goods, resulting from wartime limits on consumption.
  • Built-up purchasing power resulting from individual savings during the war. Much of the wartime saving was forced on people by the government. At one point, the government deducted 10% of a person’s wage and put it into series E government bonds.
  • Plant and equipment expansion created by the war,.
  • An efficient and ready-to-work labor force.
  • The population explosion during the 10 years following the war.
  • The emergence of new or modernized industries and process: natural gas, plastics, electronics, data processing, aluminum, and aeronautics.


Inflation: The rise in the average level of price for all goods and services in a particular time period.

The organization of petroleum exporting countries (OPEC). Our economic growth had stalled. Americans were faced with stagflation.

Stagflation: A stalled economy faced ton with rising prices for good and services.

Supply-Sid Economics:Reducing Government role in business by decreasing taxes and government regulation.




Business Challenges for The 1990s

The business and economic world of the 1990s faces many challenges. A few of the most significant challenges that will influence our study of business are discussed in this section.




An aging Population:

The aging of America also benefits those growing up and beginning their business eareers in the 1990s. With fewer young workers available to provide goods and services, wages and are expected to rise. The downside is the cost of caring for aging America.

The changing family:America has about 90 millionhouseholds. There is no really no average.Rising divorce rates, working mothers, fewer children and a changing world have altered the way many families live.

Parents are waiting longer to have children. In 1970 only 90 percent of all women have their children often the age of 25. In 1990 over 38 percent of the omen having children was over 25. The parents who wait longer have more money to spend on children.


Overall, employment will be about 135 million in 2000 according to labor development projection. The service economy will create more jobs (20 million) than only other part of the economy. Services are intangible products for example insurance, airline treble, tax preparation advice. That are not physically possessed and that involve a performance or an effort. Example of service industries includes banking, transportation, retail trade and entertainment.








Minorities in America

America has always been a century of minorities, a nation of immigrants and refugees as the percentage of minorities and immigrant’sincreases; they will play a more significant role in the American economy and workplace.


The global boom

In the past centuries, heads of state were all-important because the relationship countries were primarily political. Today a country’s business leaders are often as prominent as its political figure.

Nation is now linked by telecommunications and trade. Fiber optic calls are faster and much clearer than calls using copper wire. Americans made over 5 billion minutes of overseas calls in 1990.

The Environment

The economically booming world of the 1990s will not be without environmental challenges. Business leaders must help solve the ozone layer depletion, acid rain, the greenhouse effect, and distraction of rain forests. As the public becomes more concerned about the environment. Business leader take note. If a company’s environmental reputation affects people’s buying decision.


At last we can say that business involve the exchange of goods, services or money for mutual benefits. We need to study business because we have become so inter dependent on others, both individually and as a nation.

Increasing globalization of business will bring many opportunities. We strive to maintain and improve our standard of living. We will be able to separate fact fiction in business issues.