A Changing Workforce

The workforce is changing in several significant ways: it is aging, the labor pool is shrinking, it's becoming increasingly diverse and it's using collaboration to innovate. The nature of work has shifted toward services and toward a focus on information. More firms now rely on outsourcing, offshoring, and nearshoring to produce goods or fulfill services and functions that were previously handled in-house or in-country. In addition, today’s workplaces are becoming increasingly flexible, allowing employees to work from different locations and through different relationships.

*outsourcing: using outside vendors for business activities
*offshoring: relocation of businesses overseas in order to lower costs.
*nearshoring: outsourcing production or services to locations near a firm’s home base.

Eras of Business History

The Colonial Period (Before 1776)
Rural and agricultural production. Towns were small,served as marketplaces for farmers. Economic focus centered on rural areas.

The Industrial Revolution (~1760 to 1850)
Business operations shifted from independent skilled workers who specialized on building products one by one to a factory system that mass produced items by bringing together large numbers of semi-skilled workers. Factories profited from savings created by large scale production and increasing assistance from machines. Specialization of labor, limiting each worker to a few specific tasks in the production process, also improved production efficiency.

The Age of Industrial Entrepreneurs (late 1800s)
The entrepreneurial spirit of the "golden age in business" did much to advance the American business system and raise overall standard of living of its citizens. This market transformation, in turn, created new demand for manufactured goods.

The Production Era (through 1920s)
More goods were made due to the increasing demand for manufactured goods. Assembly lines were created and efficiency in production was emphasized.

The Marketing Era (starting 1950s)
Consumer orientation was discovered and businesses began to advertise to appeal to certain groups or people; analyze consumer desires before beginning actual production.

The Relationship Era (since 1990s)
A significant change has been taking place in the ways companies interact with customers, taking a longer term approach to their interactions with customers. Firms seek ways to actively nurture customer loyalty by carefully managing every interaction.

*Taken from Boone & Kurtz, Contemporary Business, 14th Edition

Video: Accounting Costs vs. Economic Costs

Video: Opportunity Cost

Opportunity cost

An opportunity cost (OC) is the value of the next best alternative foregone. Unlike accountants who merely count costs related to a purchase or a job or a decision, economists add the value of the opportunity cost to this accounting value. If I buy a $25 shirt, then my OC is the DVD I couldn't buy. If I teach economics for one hour, then my OC is the time I couldn't spend working out. Any good or service that has an OC is called an economic good (i.e. most everything we can see and buy around us). If there is no OC, then we have a free good, like seawater or (arguably) fresh air.

The concept of opportunity cost is vital for our arsenal of evaluative tools. Whenever we spend money, firms spend money, governments spend money, etc., an argument can be made through OC analysis that the money could have been better spent (or not spent/collected in the first place). Different people have different views, making this concept central to our study of economics, scarcity and rationing.

Types of Economic Systems : Command - Mixed - Free/Market

There are three main types of economic systems. In a command (or planned) economy, the basic economic questions of what to produce, how to produce and for whom to produce are answered by the central planning agency of the government. This represents total government intervention as the government decides what's made how and for whom. The factors of production are owned by everybody and, in theory, the government combines these productive inputs in a manner that's best for all. Of course, this is very difficult to orchestrate, especially considering the size and intricacies of economies. The collapse of the Soviet Union and continued move away from command economies illustrates it's inability to function in reality.

In a pure free or market economy, the forces of supply and demand via the interactions between consumers and producers answers these three questions. Resources are allocated to those that can afford them and factors of production are privately-owned. Because of the profit incentive, there tends to be little waste and, thus, this system is far more efficient than the command economy. There is no government intervention in the pure free market. Because of this, there are too few merit and public goods, too many demerit goods, and not "enough" government protections (arguably).

All economies in reality are mixed. In other words, there are free market elements with some level of government intervention. It is the latter that determines whether or not an economy is closer to command or closer to free. A country like North Korea would be mixed, close to command; Sweden close to the middle thanks to an extensive welfare state; and Singapore would be close to free market because of little government intervention compared to much of the rest of the world.

VIDEO -> http://blog.thinkwell.com/2009/08/overview-of-economic-systems.html
GREAT READ -> http://www.bized.co.uk/learn/economics/notes/systems.htm

Pros of free markets : efficient use of resources (through price mechanism), profit incentives created many high-quality g/s
Pros of command economies : little unemployment, presence of public and merit goods (and fewer demerit goods), resources may be used up at a slower pace, not as many clear winners and losers
Pros of mixed : can mix pros from both!
Cons of each : see pros of other

Video - Resources