Page 69 - Introduction to Business

CHAPTER 1 What Is Business? 43

national scale is a country’s gross national product new business models that are radically changing the
(GNP). The GNP is the value of all final goods and serv- basic operating structure in firms that have served the
ices produced by a country’s factors of production marketplace well for decades. Several key trends are
(regardless of where these factors are located) and sold emerging: companies are being transformed on a mas-
on the market at current prices over a given time sive scale; customers are becoming smarter and more
period, usually a year. It is also a measure of a country’s demanding; business is becoming more nimble; knowl-
living standard, including its health status and educa- edge is becoming a key asset; and transparency and
tional attainment. By breaking GNP down into its com- openness are becoming crucial for business success. In
ponents, one could analyze how, for example, con- the emerging business models, success will be achieved
sumption is affected by a recession and the importance by those businesses that involve their suppliers, their
of the role consumers play in an economy. The higher infrastructure providers, and—perhaps most
the level and faster the growth rate of an economy, the importantly—their customers in a network where they
richer and better off the consumers of that country are. can build value together.
At the PPP rate, one international dollar will have the The Internet and related technologies are not only
same purchasing power in any country as one U.S. dol- here to stay; they will also play an extremely important
lar has in the United States. Hence, when foreign coun- role as an engine of economic growth and development
try GNI (equal to GNP) is converted to the PPP basis, it in countries. The key issue is how fast Internet and
allows for the comparison of GNIs among countries. related technologies diffuse across national boundaries
The PPP approach is a true measure of the economic from developed to developing countries. With informa-
well-being of the citizens of a country. The greater the tion technology advancing in leaps and bounds, and
GNI per capita (PPP basis) of a country, the greater is the price of semiconductor chips and software falling
the purchasing power of the citizens of that country. all the time, developing countries that have just started
The GNI (PPP basis) of the country as a whole is also investing in IT are obtaining a lot more for each dollar
important, since it gives businesses a feel for the coun- invested in this technology than did countries that
try’s potential market size. invested earlier. The impact of these technologies on
education, family planning, and health care, as well as
LEARNING OBJECTIVE 10 business, in developing countries is remarkable. The
Evaluate the impact of the digital era on global busi- Internet will help bridge the gap between the devel-
nesses, governments, and societies. oped and developing countries, but the latter will need
to keep their markets open and allow new technologies
Innovations in information technology (IT—computers,
to come in while at the same time implementing reforms
software, telecommunications, and the Internet) are
radically changing the way people live, communicate, that raise the level of education in their countries.
and work. This period of transformation— adjusting The success of Internet and related technologies
our lifestyle to make the Internet and related technolo- depends on how effectively and widely these
gies a part of our everyday lives—is called the digital technologies can be put to use by businesses to boost
era. Information technologies, of which the Internet is efficiency and growth. Countries with open economic
by far the most publicly visible form, are turning the and political systems will see big gains overall. The
world upside down as access to the technologies IT industry’s rapid growth in any country will have to
spreads rapidly around the globe. These technologies go hand in hand with minimal government controls
are having an enormous impact on business, spawning and regulations.

Chapter Questions
3. What is globalization, and what are the origins and
1. What is profit? How might you try to improve prof- effects of globalization on U.S. business?
its if your company is not doing as well as you 4. What is capitalism? How are resources allocated in
think it should? a free market system? Is this an efficient system for
2. Historically, business evolved in the United business?
States through four distinct periods. List the 5. Why is a “purely competitive” market structure
periods and mention one or two key factors best for consumers and society alike? Is it good for
that influenced business development during business as well?
each. Pick one of the periods and explain in 6. What is a monopoly, and why are consumers and
detail what type of business development took governments opposed to having monopolies in
place then. their economies?

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