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A PRACTICAL INTRODUCTION
Susan BanCity College of San Francisco
PEARSON
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CONTENTS
Preface xxixFrom the Authors xxxvii
1.3 Risk, EnProduction: The
op, Si "Ihe Factors ofFire ©f "Business 9
PART HTODAY'S BUSINESS ENVIRONMENTHow Exceptional Businesspeople Prepare forToday's Challenges 2
Starting OutBusiness: The Driving Force of Change 2
FORECAST: What's Ahead in This Chapter 2WINNERS & LOSERS: In Pursuit of Success—The Right
Way & the Wrong Way 3
1.1 Business $k Profits:The Basis of Wealth 4
THE ESSENTIAL QUESTION 4Two Types of Organizations: For-Profit & Nonprofit 4
For-Profit Organizations: For Making Money 4Nonprofit Organizations: For Offering Products or
Services 4What You Learn about Business Is Applicable in Any
Organization 4The Fundamentals of What Businesses Do: Selling Goods or
Services to Generate Revenue & Profits 5How the Sales of Goods or Services Produce Revenue
& Possible Profits 5• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
How One Man Makes Inspirational Writing & Speakinga Revenue-Producing Business. 5
The New American Economy: From Goodsto Services 6
D BRIEFING / BUSINESS SKILLS & CAREERDEVELOPMENT: What's the Pay for Entry-Level Jobsfor College Graduates in Business? 6
1.2 Business as Benefactor:7
THE ESSENTIAL QUESTION 7Business Can Improve People's Quality of Life 7
Raising the Standard of Living 7Contributing to Long & Healthy Lives & to Human
Knowledge 8Business Supports Employee, Government, & Community
Interests 8
THE ESSENTIAL QUESTION 9The Wealthy People Next Door 9Do Only Entrepreneurs Take Risks? 10Factors of Production: The Building Blocks of Wealth 10
The Traditional Four Factors of Production 10A Fifth Factor of Production—Knowledge 11D BRIEFING / EARNING GREEN BY GOING GREEN:
Factors of Production in an Entrepreneurial FurnitureBusiness. 11
1.4 The BusinessForces That Encourage
12
THE ESSENTIAL QUESTION 12Economic Forces: The Tension between Freedom
& Restraint 12Technological Forces: The Effect on Productivity
& Security 12Competitive Forces: The Influence on Customer, Employee,
& Investor Satisfaction 13Global Forces: The Effect on Trade & Stability 13Social Forces: The Changes in Population 13
1.5 Seven Key Business Rulles: The GreatAdventure of Being in Businessin the 21st Century 14
THE ESSENTIAL QUESTION 14Stakeholders: Rule 1—You Must Meet the Needs '
of Stakeholders, Those with an Interest in YourOrganization 15• BRIEFING / CUSTOMER FOCUS: Taking Care of
Buyers: Amazon Pays Close Attention to "TheCustomer Experience." 15
• BRIEFING / A WORLD OF CONSTANT CHANGE:A Media Prank Hurts Domino's Pizza. 17
Uncertainty: Rule 2—You Must Deal with Constant Change,Including Technological Change 18
Competition: Rule 3—You Must Master the CompetitiveEnvironment to Stay Ahead of Rivals 18m BRIEFING / A WORLD OF CONSTANT CHANGE:
U.S. Manufacturing Isn't Dead; It's Becoming MoreUpscale. 19
Common Economy: Rule 4—You Must Deal with anInterdependent Global Economic System 19D BRIEFING / BUSINESS SKILLS & CAREER
DEVELOPMENT: New College Grads Find JobsOverseas. 20
IX
Ethics: Rule 5—You Must Be Ethical & SociallyResponsible 20Q BRIEFING / LEGAL & ETHICAL PRACTICES: Wells
Fargo Is Ordered to Refund "Unfair & Deceptive"Overdraft Fees. 20
Social Differences: Rule 6—You Must Learn to Deal withDifferent Kinds of People 21• BRIEFING / A WORLD OF CONSTANT CHANGE:
U.S. Social Differences in the 21st Century. 21Self-Development: Rule 7—You Must Acquire the Personal
Skills Needed for Business Success 22
PRACTICAL ACTION Your Business Career Starts . . .Now: Using College to Give Yourself a Boost towardCareer Success 24
LEAIRWIWG & SKILLS PORTFOLIO 25Summary 25Key Terms 26Pop Quiz Prep 27Critical Thinking Questions 27
CASES 28VIDEO CASE: Making a Difference in Society: Saving
Lives of Senior Dogs 28BUSINESS DECISION CASE: Apple & Google:
Relationship Status Change 29
BRIEFINGS 30
Ethics & Social ResponsibilityBusiness as a Positive Force 32
FORECAST: What's Ahead in This Chapter 32WINNERS & LOSERS: Ethical Behavior—Courage versus
Cheating 33
2.1 The Ethical & Social Responsibilitiesof Busimiesspeople: The Way You LiveMatters 34
THE ESSENTIAL QUESTION 34Carroll's Social Responsibility Pyramid: Profit, Law, Ethics,
& Citizenship 34Values, Ethics & Laws, & Corporate Social
Responsibility 35Values: Underlying Beliefs That Help Determine
Behavior 35Ethics & Laws: Standards of Right & Wrong 35Corporate Social Responsibility: Benefiting Society as Well
as the Organization 36Defining Ethical Dilemmas 36
B BRIEFING / LEGAL & ETHICAL PRACTICES: EthicalDilemma for the Thomas Kinkade Company: Was It"Just Business" to Exploit Gallery Owners' Faith? 36
Behaving Badly, Behaving Well 37Behaving Badly: The "Holier-than-Thou" Effect Excuses
Our Own Behavior but Not Others' 37Behaving Well: Treat Others as You Would Yourself 37
PRACTICAL ACTION How Well Do You Deal with the"Cheating Culture"? 38
2.2 Doing the [Right Thing:How Organisations Can Promote
••*• Ethical Behavior"" 39
THE ESSENTIAL QUESTION 39 \1 Top Managers Strongly Support an Ethical Climate:
"We're Not Just Giving Lip Service" 39'm BRIEFING / SOCIALLY RESPONSIBLE BUSINESS:
An Ethical Top Manager at CitiMortgage Keeps Peoplein Their Homes. 39
2 The Firm Tries to Hire the Right Employees: "We WantHonest, Responsible People Working Here" 40• BRIEFING / BUSINESS CULTURE & ETIQUETTE:
Who Will You Ask to Write You a Reference?(And Don't Forget to Thank Them.) 40
3 There Are Ethics Codes & Training Programs: "We Needto Tell Employees What We Expect of Them" 40Two Kinds of Ethics Codes: Compliance-Based
& Integrity-Based 41Ethics Training & Ethics Officers 41
Sign of Major Ethical Problems: When InsidersBlow the Whistle 42
White-Collar Fraud & the Sarbanes-Oxley Reform Act 42
2.3 CorporateConcern for the Welfare of Society 44
THE ESSENTIAL QUESTION 44Is Corporate Social Responsibility a Good Idea?
Two Views 44The Case for CSR: "Companies Aren't Separate
from Society" 44The Case against CSR: "Companies Should Just Make
Profits" 45• BRIEFING / EARNING GREEN BY GOING GREEN:
Subaru Proves Going Green Can Lower, Not Increase,Costs. 45
Blended Value: Measuring Results in Both Economic& Social Areas 46• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
The White Dog Cafe Expresses Blended Value in the"Triple Bottom Line." 46
Social Auditing: Evaluating Corporate SocialResponsibility 46
2.4The lenefits to Stakeholders 49
THE ESSENTIAL QUESTION 49The Negative Effects of Being Bad 49
High Costs of Employee Fraud 49Diminished Stock Price 49Diminished Sales Growth 49Damaging Lawsuits 50
The Positive Effects of Being Good 50Benefiting Customers 50Benefiting Owners 50
CONTENTS
• BRIEFING / LEGAL & ETHICAL PRACTICES:A Food Giant Benefits Its Owners by FeedingHungry Children. 50
Benefiting Employees 50Benefiting Suppliers 51Benefiting the Local & National Community 51Benefiting the International Community 51• BRIEFING / GLOBAL BUSINESS: Unilever Benefits
the International Community by Addressing ImportantWorld Problems. 51
Interdependency in Solving Common Problems:The Threat of Global Climate Change 52Can Climate Change Be Reversed? 53D BRIEFING / EARNING GREEN BY GOING GREEN:
What Can Business Do to Fight ClimateChange? 53
What You Can Do: The "Civic Generation" Can Be a Forcefor Change 54Working with Companies as an Intern to Advise on Saving
Energy 54Volunteering Your Services for Free 54
LEAIRWINQ & SKILLSummary 55Key Terms 56Pop Quiz Prep 26Critical Thinking Questions
55
56
CASES 57
VIDEO CASE: Patagonia: Social Responsibility& Managing Ethics 57
BUSINESS DECISION CASE: Oprah Winfrey NotForgotten:^The Importance of Giving Back 57
IFMGS ' 58
EconomicsHow Business Builds & Distributes Wealth 60
FORECAST: What's Ahead in This Chapter 60WINNERS & LOSERS: Can You Predict Whether a Movie
Will Be a Hit? 61
623.1 Freedom to Succeed—oHow Economics Affects Business
THE ESSENTIAL QUESTION 62Economics: Dealing with Scarcity & the Forces of Supply
& Demand 62Dealing with Scarcity 62• BRIEFING / A WORLD OF CONSTANT CHANGE:
The Scarcity of Super Bowl Losers' Caps. 62The Forces of Supply & Demand 63
Two Major Fields of Economics: Macroeconomics& Microeconomics 63Macroeconomics: The Study of Large Economic Units 63Microeconomics: The Study of Small Economic Units 64
The Importance of Knowledge in the New Economy 64
3.2 Three Types @fEFre&Markef,
B BRIEFING / A WORLD OF CONSTANT CHANGE:Using Knowledge to Build a Technology for PredictingHit Movies. 64
lixed 65
THE ESSENTIAL QUESTION 65 X1 Command Economies: Communism ^Socialism 65
Communism: All Property Is Owned by theGovernment 65 *
• BRIEFING / GLOBAL BUSINESS: The (Mostly)Communist Countries Today. 66
Socialism: State-Owned Industries & RedistributedWealth 66
2 Free-Market Economies: Capitalism 69What Creates Wealth? Adam Smith's Theory 69The Benefits of Capitalism 69The Drawbacks of Capitalism 70
3 Mixed Economies: Publicly & Privately Owned 71
3.3 IHow Free-Mairket Capitalism Works 72
THE ESSENTIAL QUESTION 72The Four Basic Rights under Capitalism 72Four Types of Free Markets: The Varieties of
Competition 73• BRIEFING / LEGAL & ETHICAL PRACTICES: The
Oligopoly of Health Insurers in Some Markets. 74The Way Free Markets Work: Demand, Supply, & Market
Price 75Demand, Supply, & Meeting of Minds 75Graphing Demand & Supply: Reaching the Market
Price 76How Real Is the Demand & Supply Model? A Word about
Consumer Sovereignty 77D BRIEFING / PERSONAL FINANCE: The Irrational
Desire of Preferring to Pay by Credit Card Instead ofCash. 77
How Can Capitalism Survive? 78Regulation or No Regulation? 78What Would Adam Smith Do? 78
3.4 e©ple Weed
e in the U.S.
Economic System 79
THE ESSENTIAL QUESTION 79The Business Cycle: The Booms & Busts of Economic
Activity 79Booms & Busts: The Four Phases of the Business
Cycle 80Recession & Depression: Decline & Worse Decline 80
Three Major Indicators of Economic Conditions: GDP,Price Indexes, & Unemployment Rate 81Gross Domestic Product: Goods & Services Produced in a
Year 81Price-Change Indexes: Measuring Inflation & Deflation 81The Unemployment Rate: Joblessness among Active Job
Seekers 82
CONTENTS XI
Productivity: Key to Business Survival & Better LivingStandards 82What Productivity Is: More Products Created with the
Resources Needed to Produce Them 83D BRIEFING / EARNING GREEN BY GOING GREEN:
Boosting Productivity in Junk Hauling—Applying HighTech to a Low-Tech Business. 83
Can Productivity Improvements Be Done for ServiceIndustries as They Were for Manufacturing? 83
PRACTICAL ACTION Going beyond Unemploymentto New Career Possibilities 84
Fiscal & Monetary Policies: Government's "Visible Hand"in the Business Cycle 85
Fiscal Policy: Adjusting Government's Taxation& Borrowing Approaches to Achieve EconomicStability 85
Monetary Policy: Adjusting the Money Supply & InterestRates to Achieve Economic Growth 86
3.5 The—Almost—Second GreatDepression: The Road t© a Global EconomicCrisis 87
THE ESSENTIAL QUESTION 87A Tale of Two Bubbles: Dot.com & Subprime 87
The Dot.com Bubble: Overvalued TechnologyStocks 87
The Subprime Bubble: Overvalued Mortgage Loans 88From Boom to Bust 88
The Government Intervenes: But Where Were theRegulators Originally? 89Fighting Back 89What Really Happened? 90
4.1 Globalization: The100
LEAiWING & SKILLS PORTFOLIO 90Summary 90Key Terms 92Pop Quiz Prep 26Critical Thinking Questions 92
CASES 94VIDEO CASE: An Economics Lesson: Gourmet Food
Trucks Thrive 94BUSINESS DECISION CASE: The Ivory Coast:
Despite Uncertainty, the Sweetest Placeon Earth 95
iS 96
THE ESSENTIAL QUESTION 100D BRIEFING / BUSINESS SKILLS & CAREER
DEVELOPMENT: When's the Best Time to Take a JobAbroad? 100
The Development of the Global Workplace &E-Commerce 101 V
One Big Market: Free Trade & the Global Economy 102Imports & Exports: The Ebb & Flow of the Global
Economy 102m BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
A Los Angeles Salon Owner Imports Real-HairExtensions from India. 102
• BRIEFING / GLOBAL BUSINESS: Exporting U.S.Chicken Feet—A Great Chinese Delicacy. 103
Positive & Negative Effects of the Global Economy 103The Rise of Two Kinds of International Businesses:
The Big & the Quick 104Huge Multinationals: Large Companies Merge into Larger
Ones 104Small, Quick-Moving Firms: Startups Operate
Worldwide 104• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
Communications Technology Enables a 20-PersonIrrigation-Equipment Firm to Operate in ThreeCountries. 105
4.2International Trade 106
THE ESSENTIAL QUESTION 106Why Countries Trade with Each Other 106
Three Reasons Countries Trade 106Absolute & Comparative Advantage: Countries Playing to
Their Strengths 107Balance of Trade, Balance of Payments,
& Counter-trading 107Balance of Trade: Comparing Exports & Imports 108Balance of Payments: Comparing Money In & Money
Out 108Countertrading: Bartering Goods for Goods 108
How Companies Enter Foreign Markets 109
PRACTICAL ACTION U.S. Jobs in an Era of GlobalOutsourcing: Which Go, Which Stay 111 —
• BRIEFING / LEGAL & ETHICAL PRACTICES: GeneralMotors Links with Shanghai Company in Joint Ventureto Sell Buicks in China. 112
GlobalizationRising to the Challenge of WorldCompetition 98
FORECAST: What's Ahead in This Chapter 98WINNERS & LOSERS: Understanding Cultural
Differences 99
4.3Trade 114
THE ESSENTIAL QUESTION 114Cultural Conditions: Avoiding Misunderstandings 114
B BRIEFING / BUSINESS CULTURE & ETIQUETTE:U.S.-Arab Cultural Differences—Touch & InterpersonalSpace. 115
Economic Conditions: Infrastructure & Currency Shifts 116
XII CONTENTS
Infrastructure & Resources: What Affects a Nation's Levelof Development 116
• BRIEFING / A WORLD OF CONSTANT CHANGE:Cellphones Improve the Infrastructure in Africa, 116
Currency Exchange Rates 118• BRIEFING / PERSONAL FINANCE: An American in .̂
London Dealing with Currency Exchange—How Much IsThat Big Mac, Really? 118
Political & Legal Conditions: Adjusting to Other Countries'Governments & Laws 119
1224.4Barriers fit Facilitators
THE ESSENTIAL QUESTION 122Three Kinds of Trade Protectionism 122Organizations Facilitating International Trade 123Common Markets: NAFTA, EU, Mercosur, & APEC 124The World No Longer Revolves around the United
States 125
126LEARNIWQ & SKILLS PORTFOLIOSummary 126Key Terms 127Pop Quiz Prep 127Critical Thinking Questions 127
CASES 128VIDEO CASE: The Mini: A Mega-Mini Comeback in
the United States 128BUSINESS DECISION CASE: Outsourcing Health Care
& Medical Tourism: Is a Trip to an Exotic CountryIncluded in Your Health Benefits? 129
S 130
ITSTARTING & GROWINGA SUCCESSFUL BUSINESS 132
Forms of OwnershipBusiness Enterprises Great & Small 132
FORECAST: What's Ahead in This Chapter 132WINNERS & LOSERS: Mergers & Acquisitions 133
5.1 Basic Forms ©f BiSole Proprietorships,C©rp©rati©mis, & Co©|
uisiness OMPartnerslh
peratives
worshipslips.
134
THE ESSENTIAL QUESTION 134Sole Proprietorships: One-Owner Businesses 135
• BRIEFING / BUSINESS SKILLS & CAREERDEVELOPMENT: A Minority-Owned Public RelationsFirm. 135
Five Benefits of Being a Sole Proprietorship 135Five Drawbacks of Being a Sole Proprietorship 135H BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
A Small-Business Owner Finally Takes aVacation. 136
Partnerships: Twosor- More Owners 137Types of Partnerships: General,.Limited, Master Limited,
& Limited Liability 137 ^Four Benefits of Being a PartnershipY.137Three Drawbacks of Being a Partnership 138
PRACTICAL ACTION Partnering in Business with aSpouse or Boyfriend/Girlfriend: Defining Roles &Setting Limits 139Corporations: From Mom 'n ' Pops to World Goliaths 139
Types of Corporations: C, S, LLC, & B 139Five Benefits of Being in a Corporation 141Four Drawbacks of Being in a Corporation 141• BRIEFING / LEGAL & ETHICAL PRACTICES:
Incorporating a Small Business in Nevada. 142Cooperatives: Limiting Power of Each Shareholder 142
• BRIEFING / LEGAL & ETHICAL PRACTICES: A RuralTown Abandoned by National Chains Formsa Cooperative Department Store. 142
5.2 Franchises; A Special Formof Ownership 144
THE ESSENTIAL QUESTION 144Franchises: Help in Starting a Business 144
• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:Jersey Mike's Sub Sandwich Shop Develops a SmallBusiness into a Franchisor. 145
Types of Franchises 145Business-Format Franchise: Using a Franchisor's Name
& Format 145Product-Distribution Franchise: Selling a Franchisor's
Trademarked Product 145Manufacturing Franchise: Making a Product Using a v
Franchisor's Formula 146Five Benefits of Owning a Franchise 146Five Drawbacks of Owning a Franchise 146Trends in Franchising 148
Home-Based Businesses 148Minorities & Franchising 148Going International 148
5.3 Mergers IPaths t@ Bysiness Expansion 149
THE ESSENTIAL QUESTION 149How to Grow: Internal & External Expansion, Mergers,
& Acquisitions 149Why Mergers & Acquisitions Occur 150
Shortcut to Growth: Acquiring Rather Than Developing aCapability 150
Management Talent: Acquiring Managerial Expertise 150Saving Money: Consolidating Operations to Reduce
Costs 150Tax Benefits: Acquiring an Unprofitable Firm to Reduce
Taxes 150
CONTENTS XIII
The Three Types of Mergers: Horizontal, Vertical,& Conglomerate 151Horizontal Mergers: Same Industry, Same Activity 151Vertical Mergers: Same Industry, Different
Activities 151Conglomerate Mergers: Different Industries, Different
Activities 151Unfriendly Mergers: Hostile Takeovers 151
• BRIEFING / EARNING GREEN BY GOING GREEN:Maxxam Acquires Pacific Lumber in a HostileTakeover. 152
Tender Offers & Proxy Fights: Ways to Launch a HostileTakeover 152
"White Knights" & "Poison Pills": Ways to Resist a HostileTakeover 153
Borrow-&-Buy Strategies: Leveraged Buyouts & EmployeeBuyouts 153Leveraged Buyout (LBO): Borrowing against the Assets of
the Firm Being Acquired 153Employee Buyout: Borrowing against Employees' Assets to
Create an Employee-Owned Firm 154
LEARNING & SCCILLSSummary 154Key Terms 156Pop Quiz Prep 156Critical Thinking Questions
154
156
CASES 157VIDEO CASE: Owning a Slice of the Action:
A Domino's Pizza Franchise 157BUSINESS DECISION CASE: Model of Success:
Green Bay Packers, Super Bowl XLV Champions—A Nonprofit Professional Sports Team Ownedby Its Fans 158
159
Q) ________________________________The Entrepreneurial SpiritPursuing the Dream of Success in SmallBusiness 160
FORECAST: What's Ahead in This Chapter 160WINNERS & LOSERS: Entrepreneurs 161
6.1 Small Business &The Art of the Quick 162
THE ESSENTIAL QUESTION 162Being a Small-Business Owner versus Being an
Entrepreneur 162Small-Business Owners: "I Just Want to Make a
Living" 163• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
The Shock Brothers' Small Business—Gold ProspectingAdventures. 163
Entrepreneurs: "I Want to Build a High-GrowthBusiness" 163
• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:Chef-Owner Mourad Lahlou's Entrepreneurial SmallBusiness—Aziza, New Moroccan Cuisine. 164
Three Types of Entrepreneurs 164• BRIEFING / A WORLD OF CONSTANT CHANGE:
Intrapreneur Seamus Blackley Dreams Up Microsoft'sXbox. 165
• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:A Recession-Decimated Hot-Tub Maker CreatesEntrepreneurial Teams to Find New Products toMake. 166
How Do People Become Entrepreneurs?Opportunity versus Necessity 166Opportunity Entrepreneurs: "I Burn to Pursue
Success" 166Necessity Entrepreneurs: "I Need to Replace Lost
Income" 166Do You Have What It Takes to Be an Entrepreneur?
Four Characteristics 167
6.2 The World of Small Business 168
THE ESSENTIAL QUESTION 168The Contributions of Small Business 168Some Types of Small Businesses: Home-Based
& Web-Based 169Home-Based Businesses: Running Your Own Show from
Home 169Web-Based Businesses: Using a Website to Build a
Business 170Owning Your Own Business: Buy or Start? 171
PRACTICAL ACTION Starting a Business on theCheap: The Right Mindset 172
Buying a Small Business 172Looking Over & Negotiating for an Existing
Business 173• BRIEFING / INFO TECH & SOCIAL MEDIA: An
Entrepreneur Buys a Blog Devoted to Funny CatPictures & Builds a Web Empire. 173
Selling Your Business 173
6.3 From Idea t© Business174
THE ESSENTIAL QUESTION 174It Begins with an Idea 174
D BRIEFING / EARNING GREEN BY GOING GREEN:Restoring Buildings Using Green Materials. 175
D BRIEFING / CUSTOMER FOCUS: Plenty of Fish, anOnline Dating Site, Begins as a One-Person Web-BasedBusiness. 175
Learning about Business, Getting Experience 175Step 1: Read about Business—& Your Prospective
Business 176Step 2: Talk to Knowledgeable People—Mentors & Trade
Associations 176Step 3: Get Experience 176
Writing a Business Plan 177Why Write a Business Plan? 177How Do You Conceptualize a Business Plan? 177
XIV CONTENTS
Is It Really Necessary to Create a Formal Business Plan?The Reasons Why Not 178
PRACTICAL ACTION Creating a Successful BusinessPlan: Make It Sing 179
6.4 Getting Financing 180
THE ESSENTIAL QUESTION 180Financing a New Enterprise: Eight Sources
of Funds 180Other Support: Incubators & Enterprise Zones 182
Incubators 182Enterprise Zones 182
6.5 Achieving Success in aBusiness 183
THE ESSENTIAL QUESTION 183Why Small Businesses Fail 183How to Keep a Small Business Healthy 184
LEAiNIWG & SKILLS PORTFOLIO 185Summary 185Key Terms 186Pop Quiz Prep 186Critical Thinking Questions 186
CASES 187
VIDEO CASE: Extreme Entrepreneurship: No ToyingAround at Wild Planet 187
BUSINESS DECISION CASE: Big Love, in India:An Online Group Dating Website Finds Its Placein India's Changing Social Culture 187
BRIEFINGS 188
MANAGEMENTAchieving Superior Results in theWorkplace 190
Management & LeadershipRealizing Exceptional Results 190
FORECAST: What's Ahead in This Chapter 190WINNERS & LOSERS: Leadership Qualities 191
7.1 Management: What It Is, How You DoIt—The Four Essential Functions 192
THE ESSENTIAL QUESTION 192The Need for Management: To Achieve Effectiveness
& Efficiency 192The Four Things Managers Must Do 192Pyramid Power: The Three Levels of Management 194
What Managers Do: Practical Decision Making 195m BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
Jeff Bezos's Major Decision: What Kind of CompanyShould Amazon Be? 196
PRACTICAL ACTION How Can You as a ManagerMake Great Decisions? 197
198
THE ESSENTIAL QUESTION 198Why Plan? Four Benefits 198The Basis for Planning: Vision & Mission Statements 199
The Vision: "This Is What We Want to Become" 199The Mission Statement: "These Are Our Fundamental
Purposes" 199Three Types of Planning for Three Levels of Management:
Strategic, Tactical, & Operational 200Strategic Planning by Top Managers: 1 to 5 Years 200Tactical Planning by Middle Managers: 6 to
24 Months 200Operational Planning by Supervisory Managers: 1 to
52 Weeks 201Goals & Objectives 202Assessing Your Competitive Position for Strategic Planning:
SWOT Analysis 202• BRIEFING / GLOBAL BUSINESS: Toyota Takes a Look
at Itself—A Hypothetical SWOT Analysis. 203Other Plans: Contingency 203
B BRIEFING / A WORLD OF CONSTANT CHANGE:AlixPartners Creates Doomsday Contingency Plans for(Currently) Profitable Companies. 203
7.3 Arrange Tasks, Peopleisi t Other Resources to Get Things Done 204
THE ESSENTIAL QUESTION 204The Organization Chart 204
Vertical Hierarchy of Authority: Who Reports toWhom 205 •
Horizontal Specialization: Who Specializes in WhatWork 205
The Skills That Star Managers Need 205How the Mix of Skills Changes as One Rises to the
Top 206
7.4 Leading: You Motivate People toto Achieve Important Goals 207
THE ESSENTIAL QUESTION 207Leader versus Manager: Dealing with Change versus
Dealing with Complexity 207How Leaders Cope with Change 207How Managers Cope with Complexity 208You Need Not Be a Manager to Be a Leader 208
Leadership Styles: From Boss-Centered to Employee-Centered Leadership 208Autocratic Leadership: "Do This Because I Said So!" 208Participative (Democratic) Leadership: "Let Me Get Your
Thoughts on What to Do" 208
CONTENTS XV
Free-Rein Leadership Style: "Here's the Goal, Do What YouWant to Achieve It" 209
What Style Works Best? 209Transactional versus Transformational Leaders 210
Transactional Leadership: Promoting a Well-RunOrganization 210
Transformational Leadership: Promoting Vision, Creativity,& Exceptional Performance 211
Four Key Things That Transformational Leaders Do 211D BRIEFING / EARNING GREEN BY GOING GREEN:
Nike's Mark Porter Communicates a Strong Sense ofPurpose. 212
7.5 Controllings You IMonitor Performance,Compare It with Goals, & Take CorrectiveAction 213
THE ESSENTIAL QUESTION 213Why Control Is Needed: Six Reasons 213
O BRIEFING / EARNING GREEN BY GOING GREEN:Becoming Aware of Opportunities—Ted Turner'sMontana Grills Offer Green Grub. 214
Taking Control: Four Steps in the Control Process 215
LEARNIWG Si SKILLS PORTFOLIO 217Summary 217Key Terms 218Pop Quiz Prep 218Critical Thinking Questions 219
CASES 220VIDEO CASE: Triple Rock Brewing Company
Management Insist on a Relaxed WorkSetting 220
BUSINESS DECISION CASE: Is Middle Managementas We Know It Becoming Extinct? Or Does It Needa Revival? 221
BRIEFINGS 222
The Effective OrganizationBeing Change Oriented in a HyperchangingWorld 224
FORECAST: What's Ahead in This Chapter 224WINNERS & LOSERS: Company Cultures 225
8.1 Adapting Organisations to Tomorrow'sMarketplace 226
THE ESSENTIAL QUESTION 226How Do You Recognize the Need for Change? Collins's Five
Stages of Organizational Decline 226Areas in Which Change Is Often Needed 228
• BRIEFING / INFO TECH & SOCIAL MEDIA: Twitter,Facebook, and Other Social Media Change theApproach to Customer Service. 228
D BRIEFING / EARNING GREEN BY GOING GREEN:Best Buy's New Strategy—"Bring Us Your Junk." 228
How Are Changes Implemented? 229Recognize Problems & Opportunities & Devise
Solutions 229Gain Allies by Corrimunicating Your Vision 229Overcome Employee Resistance, & Empower & Reward
Them to Achieve Progress 229 ^
8.2 The Informal! Side of an Organization:230
THE ESSENTIAL QUESTION 230Organizational Culture: A Firm's "Social Glue" 230
Heroes: Exceptional People Embodying the Firm'sValues 230
D BRIEFING / BUSINESS SKILLS & CAREERDEVELOPMENT: Anne Mulcahy Becomes a Hero toXerox. 230
Stories: Oral Histories about the Firm'sAchievements 231
• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:The Baker's Story—Giving a Six-Time Felon One LastChance at Redemption. 231
Symbols: Objects & Events Conveying a Firm's ImportantValues 231
Rites & Rituals: Celebrating Important Occasions 232How Culture Influences an Organization's Members 232
PRACTICAL ACTION Surviving & Thriving in aNew Job: The First Two Months of Fitting into anOrganization's Culture 233
8.3 The Formal Side of an Organization:Structure 234
THE ESSENTIAL QUESTION 2341 Authority, Accountability, & Responsibility 234
Authority: Making Decisions & Giving Orders toSubordinates 234
Accountability: Reporting & Justifying Results toSuperiors 234
Responsibility: Obligation to PerformAssigned Tasks 234
2 Division of Labor: Work Specialization 2353 Hierarchy of Authority: The Chain of Command 2354 Span of Control: Narrow versus Wide 235
Narrow Span of Control: Manager Has Few PeopleReporting 235
Wide Span of Control: Manager Has Many PeopleReporting 235
5 Delegation: Line versus Staff Positions 236Line Positions: Jobs That Have Decision-Making
Authority 236
PRACTICAL ACTION Becoming an EffectiveDelegator: Dos & Don'ts 237
Staff Positions: Jobs That Are Advisory 2376 Centralization versus Decentralization
of Authority 237Centralized Authority: Big Decisions Made by Higher
Managers 237
XVI CONTENTS
Decentralized Authority: Big Decisions Made by LowerManagers 238
• BRIEFING / A WORLD OF CONSTANT CHANGE:Cisco's Failed Experiment of 48 Decentralized"Management Councils." 238
8.4 itructures:239
THE ESSENTIAL QUESTION 2391 Functional Structure: Grouping by Occupational
Specialties 2392 Divisional Structure: Grouping by Purpose 240
Customer Divisions: Grouping by Common Customers orCustomer Groups 240
Geographic Divisions: Grouping by Regional Sites orAreas 240
Process Divisions: Grouping by Work Specialization 240Product Divisions: Grouping by Similar Products or
Services 241Industry Divisions: The Conglomerate Structure 241
3 Hybrid Structure: Both Functional & Divisional 2424 Matrix Structure: Vertical & Horizontal Command
Structures in a Grid 242
8.5 Networks & Teamwork: Two Ways
Conditions 244
THE ESSENTIAL QUESTION 244Organizations Using Networks: Core Companies Linked to
Outside Firms 244Organizations Using Teamwork: Benefiting from Common
Commitment 245Different Kinds of Teams: Action, Production, Project,
& Advice 245Action Teams: For Tasks Requiring High Coordination
among Trained Specialists 246Production Teams: For Performing Day-to-Day
Operations 246Project Teams: For Doing Creative Problem
Solving 246Advice Teams: For Providing More Information 246
Cross-Functional Self-Managed Teams 247
248Summary 248Key Terms 249Pop Quiz Prep 249Critical Thinking Questions 249
CASES 250VIDEO CASE: Herman Miller: From Office
Environment to Healing Environment 250BUSINESS DECISION CASE: New Corporate
Culture: Office Romance on the Rise & Out of theCloset 251
BRSEFIWGS 252
Operations ManagementGenerating Quality Products & Services 254
FORECAST: What's Ahead in This Chapter 254WINNERS & LOSERS: Ensuring Quality 255
X
9.1 Operations Management How GoodsSr Services Are Produced 256 C
THE ESSENTIAL QUESTION 256Operations, Production, & Operations Management: What
They Are, How They Work 256Production or Operations: Transforming Resources into
Finished Products 256Production Management versus Operations
Management 257Manufacturing versus Services: The Differences in
Operations Management 257Manufacturing Businesses: Producing Goods 257D BRIEFING / EARNING GREEN BY GOING GREEN:
Metal Management Shreds Scrap Metal to Make NewSteel. 257
Service Businesses: Performing Services 258H BRIEFING / A WORLD OF CONSTANT CHANGE: Tele
Atlas Helps Drivers by Updating Digital Mapmakers onRoad Changes. 258
PRACTICAL ACTION Transforming Your Own Work:Becoming More Efficient 258
9.2 Processes:259
THE ESSENTIAL QUESTION 259Form Utility: How Operations Processes Add Value 259
Breaking Down Materials: Analytic Transformation 259Combining Materials: Synthetic Transformation 260
Continuous versus Intermittent ConversionProcesses 260Continuous Processes: Ongoing 260Intermittent Processes: As Needed 260
A Short History of Production 260Improving Production: Use of CAD/CAM/CIM, Flexible
Manufacturing, Lean Manufacturing, & MassCustomization 262H BRIEFING / A WORLD OF CONSTANT CHANGE:
Starbucks Takes on "Lean" Techniques. 264D BRIEFING / CUSTOMER FOCUS: TasteBook Uses
Mass Customization to Manufacture PersonalizedCookbooks. 265
9.35Vilana|266
THE ESSENTIAL QUESTION 266Facility Location: Selecting a Place for Your Company's
Operations 266
CONTENTS XVII
Facility Layout: Arranging Your ProductionResources 268
Purchasing & Inventory: Getting & Storing the BestResources 269Dealing with Suppliers: Two Strategies 269Inventory & Inventory Control: Keeping the Goods in
Stock 269Supply-Chain Management & Just-in-Time Systems:
Storing the Supplies That Suppliers Supply 270Supply-Chain Management: Integrating Production from
Suppliers to Customer 270Just-In-Time: Let Supplies Be Delivered Just as They're
Needed 271MRP & ERP: Using Computers to Deliver the
Right Resources to the Right Place at the RightTime 271Materials Requirement Planning: Using a Bill of Materials
to Deliver the Right Materials on Time to the RightPlace 271
Enterprise Resource Planning: Integrating All BusinessProcesses across the Entire Company 272
Scheduling Tools: Gantt & PERT Charts 272Gantt Charts: Visual Time Schedules for Work
Tasks 272PERT Charts: Identifying Best Sequence of Production
Activities 273
9.4 Quality Assurance: Producing BetterProducts & Services 274
THE ESSENTIAL QUESTION 274Total Quality Management: Seeking Continual
Improvement \ 274TQM: What It Is 275The Four Components of TQM 275
Three Quality-Control Techniques: ISO 9000, StatisticalProcess Control, & Six Sigma 275ISO 9000 Series: Meeting Standards of Independent
Experts 275Statistical Process Control: Testing with Periodic Random
Samples 276Six Sigma: Data-Driven Ways to Eliminate Defects 276
PRACTICAL ACTION Training for Green Jobs:Focusing on People, Planet, & Profits 277
$k SKILLy 278
Key Terms 279Pop Quiz Prep 279Critical Thinking Questions
PORTFOLIO 278
280
CASES 280VIDEO CASE STUDY: Blackbird Guitars—"Big Sound,
Small Body" 280BUSINESS DECISION CASE: My Coworker Is a
Robot 281
282
Motivating EmployeesAchieving Exceptional Performance in theWorkplace 2 8 4 ^
FORECAST: What's Ahead in This .Chapter 284WINNERS & LOSERS: Motivated Employees 285
\
10.1 Motivating for Performance, 286
THE ESSENTIAL QUESTION 286Motivation: What Lights Your Fire? 286
Motivation: What It Is, How It Works 286D BRIEFING / BUSINESS SKILLS & CAREER
DEVELOPMENT: A Motivational Mind Game forSuccess. 286
Two Types of Rewards: Extrinsic & Intrinsic 287Extrinsic Rewards: Satisfaction in Receiving Pay or
Recognition from Others 287D BRIEFING / EARNING GREEN BY GOING GREEN:
The Extrinsic Rewards of Investing in Green Energy:Making Money. 287
Intrinsic Rewards: Satisfaction in Accomplishing the TaskItself 288
D BRIEFING / EARNING GREEN BY GOING GREEN: TheIntrinsic Rewards of Investing in Green Energy: GainingFeelings of Accomplishment. 288
Why Is Motivation Important? 288
10.2 Motivation Theory 289
THE ESSENTIAL QUESTION 2891 Taylor's Scientific Management: Improving Productivity
by Studying Work Methods 289Frederick Taylor & the Principles of Scientific
Management 289Frank & Lillian Gilbreth & Industrial Engineering 290The Practical Significance of Taylor & the Gilbreths
Today 2902 Mayo & the Supposed "Hawthorne Effect":
Giving Employees Added Attention to ImproveProductivity 290The Practical Significance of the Hawthorne Studies 290
3 Maslow's Hierarchy of Needs: Meeting UnsatisfiedEmployee Wants 291The Maslow Hierarchy 291M BRIEFING / SOCIALLY RESPONSIBLE BUSINESS:
Fulfilling Higher-Level Needs—One Man Triesto Strike a Balance between Safety & Higher-LevelNeeds. 291
The Practical Significance of Maslow's Ideas 2924 Herzberg's Two Kinds of Motivating Factors: Dealing
with Employee Satisfaction & Dissatisfaction 292Motivating Factors: "What Will Make Employees
Satisfied?" 292Hygiene Factors: "Why Are Employees Dissatisfied?" 293The Practical Significance of Herzberg's Research 293
5 Job Enrichment: Fitting Jobs to People 293Fitting People to Jobs: The Technique of Job
Simplification 293
XVIII CONTENTS
Fitting Jobs to People: The Techniques of JobEnlargement & Job Enrichment 294
The Practical Significance of Ideas about JobEnrichment 295
6 McGregor's Theory X & Theory Y: Treating EmployeesDifferently 296Theory X: The Pessimistic View about Employees 296Theory Y: The Optimistic View about Employees 296The Practical Significance of Theory X/Theory Y 297
7 Ouchi's Theory Z: Combining Japanese & AmericanManagement Approaches 297The Basis for Theory Z: Blending Japanese & American
Management Approaches 297The Practical Significance of Theory Z 297
8 Reinforcement Theory: Behavior Modification 298How Reinforcement Theory Works 298• BRIEFING / SOCIALLY RESPONSIBLE BUSINESS:
Using Reinforcement to Improve Accountability& Integrity. 298
The Practical Significance of Reinforcement Theory 2989 Vroom's Expectancy Theory: Meeting Employee
Expectations 299Three Calculations of Expectancy Theory 299The Practical Significance of Expectancy Theory 300
10 Adams's Equity Theory: Treating EmployeesFairly 300The Elements of Equity Theory: Comparing Your
Contributions & Returns with Those of Others 301The Practical Significance of Equity Theory 301
11 Goal-Setting Theory & Managementby Objectives 302Three Desirable Qualities Goals Should Have 302Management by Objectives: The Four-Step Process for
Motivating Employees 303The Practical Significance of Goal-Setting Theory 303
10.3 How Forward-Looking CompaniesMotivate Their Employees: Perks, Benefits,
304
THE ESSENTIAL QUESTION 304What Students Say They Want in a Job 304Treating Employees Well 304
• BRIEFING / CUSTOMER FOCUS: Clients Like Ad Firm'sHappy Employees. 305
Learning Opportunities 305Work-Life Benefits 305Being Nice 306
The Benefits of Listening 306Praise: One of the Most Important Motivators 306
PRACTICAL ACTION Enhancing Your CommunicationSkills: Playing Your Winning Game 307
IEAIRNIWG & SKILLS PORTFOLIO 308Summary 308Key Terms 310Pop Quiz Prep 310Critical Thinking Questions 310
CASES 310
VIDEO CASE STUDY: Zappos—Motivating Employeesthrough Company Culture 310
BUSINESS DECISION CASE: Pets in theWorkplace: Increased Employee Engagement orBarking? 311
BRJEFIWGS 31*2
Human Resource ManagementGetting the Right People for BusinessSuccess 314
FORECAST: What's Ahead in This Chapter 314WINNERS & LOSERS: Valuing Human Resources 315
11.1 Finding Great People:BuiSding Human Capital 316
THE ESSENTIAL QUESTION 316D BRIEFING / BUSINESS SKILLS & CAREER
DEVELOPMENT: Preparing Now for Your First Post-College Job. 316
Human Resource Management: Managing an Organization'sMost Important Resource 317
Determining the Human Resources Needed 317Job Analysis, Job Description, & Job Specification 317Si BRIEFING / A WORLD OF CONSTANT CHANGE: Job
Analysis & Description for UPS Drivers. 318Predicting Future Employee Needs 318
11.2 Laws Affecting IHuman Resource319
THE ESSENTIAL QUESTION 3191 Labor & Unions: General Employee Rights 3192 Compensation & Benefits: Pay, Pensions,
& Perks 3193 Workplace Health & Safety: Standards for Employee
Weil-Being 3214 Equal Employment Opportunity: Banning Bigotry 321
Discrimination 321Affirmative Action 321Sexual Harassment 321• BRIEFING / LEGAL & ETHICAL PRACTICES: Sexual
Harassment Case Costs FedEx Big-Time 322
11.3Training, & Development 323
THE ESSENTIAL QUESTION 323The Recruiting Process: How Companies Look for Qualified
Applicants 324Getting Noticed by Prospective Employers: Online
Networking, Personal Networking, Internships,& Transition Jobs 325
• BRIEFING / BUSINESS CULTURE & ETIQUETTE:Taking Control of Your Digital Reputation. 325
CONTENTS XIX
• BRIEFING / BUSINESS SKILLS & CAREERDEVELOPMENT: How to Go about Networking. 326
D BRIEFING / BUSINESS SKILLS & CAREERDEVELOPMENT: Creating Your Own Internship—How aFuture Celebrity Chef Got Started. 327
The Selection Process: How Companies Choose the BestPerson for the Job 327• BRIEFING / LEGAL & ETHICAL PRACTICES: Would You
Tell These Kinds of Lies on Your Resume? 328Orientation, Training, & Development 330
PRACTICAL ACTION Preparing for a Job Interview:"Sweat the Small Stuff" 331
Orientation: The First 30 to 90 Days on the Job 332Training & Development: Helping Employees Fill Gaps in
Knowledge 332Mentoring: Guiding Newcomers 333
11.4 Performance Appraisals 334
THE ESSENTIAL QUESTION 334Types of Performance Appraisals: Formal versus Informal,
Objective versus Subjective 334D BRIEFING / BUSINESS SKILLS & CAREER
DEVELOPMENT: How to Prepare for a PerformanceReview. 335
Formal versus Informal Performance Appraisals 335Objective versus Subjective Performance Appraisals 335
Other Evaluators besides Managers Who Can Report onEmployee Performance 336Reports by Coworkers, Subordinates, & Customers 336Reports by Employees about Themselves 336D BRIEFING / BUSINESS SKILLS & CAREER
DEVELOPMENT: Honest Self-Assessments AreImportant. 336
Reports by Everybody: The 360-Degree Assessment 337• BRIEFING / BUSINESS SKILLS & CAREER
DEVELOPMENT: Using Social Networking-StyleSystems to Help with 360-Degree Assessment. 337
Grading Employees on the Curve: "Rank & Yank" 337Giving & Receiving Effective Performance Feedback 338
How Managers Should Handle Appraisal Feedback:"What's the Best Way to Counsel an Employee?" 338
PRACTICAL ACTION How Employees Should HandleAppraisal Feedback: "How Do I Deal with Criticismfrom My Boss?" 339
11.5& Disciplining 340
THE ESSENTIAL QUESTION 340Compensation: Base Pay, Benefits, & Incentives 340
Base Pay: Wages or Salaries 340Benefits: Nonwage or Nonsalary Compensation 340Incentives: Inducements to Employee Productivity 341Other Inducements: Altering Work Hours 342
Moving & Replacing Employees within the Organization:Promotions, Transfers, Disciplining, & Dismissals 343
Key Terms 347Pop Quiz Prep 347Critical Thinking Questions 348
CASES 348VIDEO CASE STUDY: Joie de Vivre Hospital i ty-
Creating an Emotional Connection 348BUSINESS DECISION CASE: Stink over Ink?
Victims of Tattoo Layoffs 349 V
B^8EFIW6S 350
MARKETINGBuilding Satisfying Relationshipswith Customers 352
MarketingCreating Successful Customer Relationships withDesirable Products 352
FORECAST: What's Ahead in This Chapter 352WINNERS & LOSERS: Who Knows Marketing? 353
12.1 g: What it Is,354
346Summary 346
THE ESSENTIAL QUESTION 354Marketing: The Most Current Definition 354How Marketing Evolved: Four Periods 355
• BRIEFING / CUSTOMER FOCUS: Marketing Technologyto Boomers. 356
O BRIEFING / CUSTOMER FOCUS: Using Social Media toTarget College Students' Wants & Needs. 357
Delivering Value: When Customers Perceive a BetterRelationship with Your Product versus Others'Products 357
Products, Product Lines, & Product Mixes:What Organizations Have to Offer 358Product: A Good or Service That Can Satisfy Buyers'
Needs 358Product Line: A Group of Products Designed fora Similar
Market 358Product Mix: The Combination of All Product Lines 358
12.2 C©insymer Buying Behavior 359
THE ESSENTIAL QUESTION 359The Consumer Buying Process: Five Steps in Making
Decisions 359Factors Influencing Buying Behavior 360
Culture & Subculture: The Influence of Values& Attitudes 360
Social Class: The Influence of Our SocioeconomicGroup 360
Reference Groups: The Influence of Groups We IdentifyWith 360
XX CONTENTS
Personal Image: The Look We Wish to Project 361Situational Matters: The Effects of Timing, Moods, Impulse,
Expectations, & So On 361• BRIEFING / SOCIALLY RESPONSIBLE BUSINESS:
Is It Ethical to Exploit Consumers' MisguidedBeliefs? 361
12.3 Marketing Strategy & Typesof Markers 362
THE ESSENTIAL QUESTION 362Developing a Marketing Strategy 362For-Profit Marketing to Consumers: Goods & Services for
Personal Use 363Geographic Segmentation: Dividing the Market by
Location 363Demographic Segmentation: Dividing the Market by Age,
Gender, Income, & So On 363• BRIEFING / A WORLD OF CONSTANT CHANGE:
Harley-Davidson Markets to Female Bikers. 363Psychographic Segmentation: Dividing the Market by
Psychological Characteristics, Values,& Lifestyles 363
D BRIEFING / EARNING GREEN BY GOING GREEN:Where Are the Supporters of the Environment? 363
Benefit Segmentation: Dividing the Market by BenefitsThat People Seek in a Product 364
User-Rate Segmentation: Dividing the Market byFrequency of Customer Usage 364
Taking Segmentation Even Further: Niche Marketing& One-to-One Marketing 364
• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:Practicing Niche Marketing: Using Blogs/to SellPaintings of Bluegrass Musicians. 364
For-Profit Marketing to Businesses: Goods & Services forBusiness Use 365Geographic Segmentation: Dividing the Market by
Location 365Customer-Based Segmentation: Dividing the Market by
Customer Characteristics 365Q BRIEFING / BUSINESS SKILLS & CAREER
DEVELOPMENT: General Mills Sales Reps Call onDifferent Types of Industries. 365
Product-Use-Based Segmentation: Dividing the Market byCustomer Use of the Product 366
Not-for-Profit Marketing 366
12.5Environment 372
12.4 The 1The 4-P Marketing Mix 367
THE ESSENTIAL QUESTION 367Why Develop New Products: Four Reasons 367The Marketing Process, with the Marketing Mix:
The 4-P Strategy—Product, Pricing, Place,& Promotion 369Conducting Research & Determining the Target Market:
"Is There an Opportunity & a Group of Buyers for OurPossible Product?" 369
• BRIEFING / EARNING GREEN BY GOING GREEN:Is There a Market for an Off-Campus Electric-CarCharging Station? 369
THE ESSENTIAL QUESTION 372Marketing Research:vGetting Accurate Information to Make
Marketing Decisions 372The Marketing Environment: Outside Factors That Influence
Marketing Programs 374 ^Global Forces 375 V ^Economic Forces 375 ,'Sociocultural Forces 375Technological Forces 375Competitive Forces 376Political Forces 376Legal & Regulatory Forces 376
The World of Marketing: Onward to the 4 Ps 376
PRACTICAL ACTION How You Can Affecta Company's Marketing: Providing WebFeedback 377
Summary 378Key Terms 379Pop Quiz Prep 379Critical Thinking Questions 379
CASES 380VIDEO CASE STUDY: Sales at Jones Soda: Sometimes
Fizzy, Sometimes Flat 380BUSINESS DECISION CASE: Can Coarse Language,
Sexuality, & Nudity Be Effective MarketingTechniques to Sell Denim? 381
S 382
Product & Pricing StrategiesOffering Great Products That Meet Consumers'Wants & Needs 384
FORECAST: What's Ahead in This Chapter 384WINNERS & LOSERS: Developing a New Personal
Finance Tool 385
13.1 The Start of Product Strategy:Determining the Total Product Offer 386
THE ESSENTIAL QUESTION 386The Total Product Offer: Determining How Potential Buyers
Evaluate a Product 386• BRIEFING / EARNING GREEN BY GOING GREEN:
The Total Product Offer of the Toyota Prius. 387Consumer versus Business Markets: The Personal versus
the Industrial 387Consumer Markets: Goods & Services for Personal
Use 387Business Markets: Goods & Services for Firms Providing
Goods & Services 389
CONTENTS XXI
13.2 Innovation, the Product Life Cycle, 13.4 Pricing Strategies:? 403
Process 390
THE ESSENTIAL\QUESTION 390How New Is New? Continuous, Dynamically Continuous,
& Discontinuous Innovation 390Continuous Innovation: Modest Improvements 390Dynamically Continuous Innovation: Marked
Changes 391• BRIEFING / LEGAL & ETHICAL PRACTICES:
Are "Toning Shoes"—a Dynamically ContinuousInnovation—Too Risky? 391
Discontinuous Innovation: Brand New 391Level of Innovation: Key to Type of Marketing
Strategy 391The Product Life Cycle: Four Stages 392
• BRIEFING / A WORLD OF CONSTANT CHANGE:Is the United States Ready for a "Credit CardPhone"? 392
, • BRIEFING / A WORLD OF CONSTANT CHANGE:Growth of the Kindle E-Book. 393
Six Stages in Developing a New Product 394
PRACTICAL ACTION Unblocking the Mind Blocks:"Destroy Judgment, Create Curiosity" 396
13.3
& Packaging 397
THE ESSENTIAL QUESTION 397Brands, Brand Names, Brand Marks, & Trademarks:
Creating a Unique Identity for a Product 397Brand Names: Brands Expressed as Words, Letters, or
Numbers 398Brand Marks: Brands That Cannot Be Expressed
Verbally 398Trademarks: Brands Given Exclusive Legal
Protection 398Different Types of Brands: Manufacturer's & Private-Label,
Family & Individual 398Manufacturer's Brands: For Products Distributed
Nationally 398Private-Label Brands: For Products Distributed by One
Store or Chain 398Family Brands: Giving All Company Products the Same
Brand 399Individual Brands: Giving Different Company Products a
Different Brand 399Co-Branding: Brands of Two Nohcompeting Products Are
Combined 399What Is Branding Supposed to Do? Four Goals 399Judging the Value of a Brand: Brand Equity & Brand
Loyalty 400Brand Awareness: People Recognize the Product 400Brand Preference: People Use the Product
Habitually 400Brand Insistence: People Will Accept No Substitutes 401
Packaging: Protecting & Promoting a Product 401
THE ESSENTIAL QUESTION 403What Pricing Is Supposed to Do: Five Possible Goals 403
• BRIEFING / SOCIALLY RESPONSIBLE BUSINESS:Does Ikea's Inexpensive Furniture Put the Planet atRisk? 404 " \
• BRIEFING / PERSONAL FINANCE: Pricing to CreatePrestige—Does High-Priced Wine Really TasteBetter? 405
Determining the Revenue Needed to Cover Costs: Break-Even Analysis 405Fixed Costs: Expenses That Don't Change 405Variable Costs: Expenses That Change According to
Number of Products Produced 405Computing Break-Even Point: Using Fixed Costs & Variable
Costs 405• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
A Pizza Restaurant Uses Fixed & Variable Costs toCalculate the Break-Even Point. 406
Principal Pricing Strategies: Three Approaches 406Alternative Pricing Strategies: Six Other Approaches 407
• BRIEFING / PERSONAL FINANCE: PsychologicalPricing Uses Fact That Precise Numbers Seem CheaperThan Round Numbers. 408
Credit Terms: Another Inducement 409
LEADING a SKILLS PORTFOLIO 409Summary 409Key Terms 411Pop Quiz Prep 411Critical Thinking Questions 411
CASES 412VIDEO CASE STUDY: Smashburger: "Does America
Need Another Hamburger Joint?" 412BUSINESS DECISION CASE: Choice: "More Is Better"
or "Less Is More"? 413
S 414
Distribution & Promotion StrategiesManaging for Efficient Supply Channels& Persuasive Communication 416
FORECAST: What's Ahead in This Chapter 416WINNERS & LOSERS: Video Rentals 417
14.1 The D5: MIX:
418
THE ESSENTIAL QUESTION 418The 4-P Marketing Mix Continued: Place (Distribution)
Strategy & Promotion Strategy 418Distribution Channels, Intermediaries, the Distribution Mix,
& the Distribution Strategy 418
XXII CONTENTS
• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:Distribution Strategy for an Entrepreneur's "RecipeDeck." 419
Types of Distribution Channels: Consumer & Business 420Distribution Channels for Consumer Goods &
Services 420Distribution Channels for Business Goods & Services 421
How Do Intermediaries Add Value to a Product? 421Distribution Strategies: Three Kinds of Market Coverage—
Intensive, Selective, or Exclusive 422Intensive Distribution: "Let's Distribute as Widely as
Possible" 423Selective Distribution: "Let's Distribute Where the Product
Will Get Special Attention" 423• BRIEFING / A WORLD OF CONSTANT CHANGE:
How Selective Distribution of Luxury Goods HasChanged. 423
Exclusive Distribution: "Let's Distribute in a LimitedWay" 423
14.2 Intermediaries: Wholesalers,Agents & Brokers, §t Retailers 424
THE ESSENTIAL QUESTION 424Wholesalers: Selling to Institutions or Retailers 424
• BRIEFING / SOCIALLY RESPONSIBLE BUSINESS:Applying High Tech So Buyers Can Use Their MobileDevices to Trace a Food's Source. 424
Agents & Brokers: People Who Bring Buyers & SellersTogether 426How Do Agents Differ from Brokers? 426What Makes Agents & Brokers Different from Wholesalers
& Retailers? 426Store Retailers: Selling to Ultimate Consumers 426
Store Retailers: Product-Line Retailers & BargainRetailers 427
Shopping Centers: From Strip Malls to Super-RegionalCenters 428
Nonstore Retailers: From Vending Machines to OnlineShopping 428Vending Machines: Push-Button Selling of Convenience
Goods 428Direct Selling: Door-to-Door Sales, House-Party Sales,
& Multilevel Marketing 428O BRIEFING / LEGAL & ETHICAL PRACTICES: Weighing
the Risks of Multilevel Marketing. 429Direct Marketing: Direct Mail, Catalog Marketing,
& Telemarketing 429Video Marketing: TV Shopping Channels & Programs 429Online Retailing: Electronic Catalogs, Virtual Storefronts,
& Cybermalls 430D BRIEFING / EARNING GREEN BY GOING GREEN:
How Do You Know Eco-Friendly Claims Are True? 430
14.3$k Logistics 431
THE ESSENTIAL QUESTION 431Supply Chains & Logistics: Moving Products to the Final
Buyers 431• BRIEFING / GLOBAL BUSINESS: The Supply-Chain
Journey of an Ethan Allen Couch. 431
Supply-Chain Management: The Strategy of MovingMaterials & Products 432
Logistics: The Tactics of Moving Materials & Products 432Transportation Trade-Offs: What's the Best Choice-
Cheap, Fast, or Reliable? 432Rail Transport: Trains Are Best for Large, Bulky Items 432Road Transport: Trucks Can Go Almost Anywhere 432Pipeline Transport: Pipelines Are Efficient for Liquids
&Gas 433 V ^Water Transport: Ships & Barges Are Cheapest but
Slowest 433 4Air Transport: Planes Are Fastest but Most Expensive 434Combined Transport Modes: Intermodal Shipping &
Containerization 434Warehousing: Storing & Distributing Goods 434
Storage Warehouses: For Long-Term Storage 434Distribution Centers: For Short-Term Storage 434
14.4 The Promotion$k Strategies 435
THE ESSENTIAL QUESTION 435Promotion, the Promotion Mix, & Integrated Marketing
Communication 435The Promotion Mix: The Combination of Tools Used to
Promote a Product 435Integrated Marketing Communication: A Comprehensive,
Unified Promotional Strategy 436The Goals of Promotion: Informing, Persuading,
& Reminding 436• BRIEFING / BUSINESS SKILLS & CAREER
DEVELOPMENT: Business Cards Can Be MadeInformative to Prospective Consumers. 436
D BRIEFING / PERSONAL FINANCE: The "Buy ThisNow!" Psychology of Infomercials. 437
Promotional Strategies: Push versus Pull 437The Push Strategy: Aimed at Wholesalers & Retailers 437The Pull Strategy: Aimed at Consumers 437
14.5 Advertising & Public [Relations 438
THE ESSENTIAL QUESTION 438Types of Advertising: Brand, Institutional, & Public
Service 438Advertising Strategies: From Informational to Fear
Appeals 439Advertising Media: From Newspapers to the Internet 441
Creating a Media Plan: Developing Media Strategy 442Media Buying: What Are the Considerations? 442The Great Upheaval: Ads Move to "New Media" 442
Publicity & Public Relations 442
PRACTICAL ACJION New Media Marketing AidsThat Can Benefit Small Businesses 443
14.6 Personal Selling & SalesPromotion 444
THE ESSENTIAL QUESTION 444Personal Selling: Establishing a Relationship between Seller
& Buyer 444When Is Personal Selling Appropriate? 445
CONTENTS XXIII
The Sales Tasks: Creative Selling, Order Processing, & SalesSupport 445
The Seven Steps in the Personal Selling Process 445
PRACTICAL ACTION Creating a Successful FirstImpression: How You Look, How You Act, What YouSay 447Sales Promotion: Short-Term Marketing to Stimulate Dealer
Effectiveness & Consumer Buying 448Trade Promotion: Business-to-Business Promotion 449Consumer-Oriented Sales Promotion: Business-to-
Consumer Promotion 449Guerrilla Marketing & Word-of-Mouth Marketing 449
Guerrilla Marketing: Innovative, Unusual, & Low-CostMethods 450
Word-of-Mouth Marketing: People Telling Others aboutProducts 450
Applying Different Marketing Strategies to DifferentStages of the Product Life Cycle 450
LEARWIN© & SKILLS PORTFOLIO 452Summary 452Key Terms 453Pop Quiz Prep 454Critical Thinking Questions 454
CASES 456VIDEO CASE: Michael Levy of Pet Food Express
"Delivers" Food, Supplies, & CommunitySupport 456
BUSINESS DECISION CASE: Should Walmart ForceIts Suppliers to Comply with Its Green Goals? 457
S '458
FINANCIAL RESOURCESAchieving Profitability 460
Accounting & Financial StatementsPower in the Numbers 460
FORECAST: What's Ahead in This Chapter 460WINNERS & LOSERS: Risks & Common Sense 461
15.1 Accounting: Users & Practitioners 462
THE ESSENTIAL QUESTION 462The Users of Accounting Information: Inside & Outside the
Company 462Inside Users: Managers & Employees 462• BRIEFING / LEGAL & ETHICAL PRACTICES: Using
Open-Book Management to Share AccountingInformation with Employees. 463
Outside Users: Stockholders, Lenders, Suppliers, & theGovernment 463
The Practitioners of Accounting: Managerial &Financial 463
Private versus Public Practitioners: Serving OneOrganization versus Serving Many 464• BRIEFING / LEGAL & ETHICAL PRACTICES: Arthur
Andersen Fails to Be Independent—and Fails as aCompany. 465
Not-for-Profit Accountants: Working for Governments &N on profits 466Government Accountants: Determining Where Tax Money
Goes 466 %:^s
D BRIEFING / BUSINESS SKILLS & CAREERDEVELOPMENT: Working for the GovernmentAccountability Office. 466
Not-for-Profit Accountants: Aiding Contributors byProviding Financial Transparency 466
Forensic Accountants: Financial Sleuths 467The Effect of Information Technology on Accounting 467
15.2 The Accounting Process: Sax Steps forAnalysing an Organisation's Finances 468
THE ESSENTIAL QUESTION 468Generally Accepted Accounting Principles: Relevance,
Reliability, Consistency, & Comparability 468The Six Steps of the Accounting Process 469
PRACTICAL ACTION How to Read an AnnualReport 471
15.3 Financial Statements $k Financialis: The Vocabulary of Accounting 472
THE ESSENTIAL QUESTION 472• BRIEFING / SOCIALLY RESPONSIBLE BUSINESS:
A Financially Conscious Business with an UnusualPurpose. 472
The Balance Sheet: What We're Worth, How We GotThere 472
The Income Statement: What Our Revenue & Expenses .Were & the Resulting Profit or Loss 475
The Statement of Cash Flows: How Money Came&Went 478
15.4 Using Financial479
.is to
THE ESSENTIAL QUESTION 479Liquidity Ratios: How Well Can We Pay Our Liabilities as
They Come Due? 479Activity Ratios: How Well Do We Manage Our Assets to
Generate Revenue? 480Debt to Owners' Equity Ratios: How Much Do We Rely on
Borrowing to Finance Our Operations? 481Profitability Ratios: How Good Are Our Profits in Relation
to Our Sales, Assets, or Owners' Equity? 481
LiSummary 482Key Terms 484Pop Quiz Prep 484Critical Thinking Questions
482
484
XXIV CONTENTS
CASES 485VIDEO CASE: POPS Diner: Accounting for Food,
Fuel, & Fizz 485BUSINESS DECISION CASE: Hollywood Accounting:
Creative, but Not So Glamorous for Writers &Actors 486
BRIEFINGS 487
Financial ManagementA Basic Guide to Finances, Money,& Banking 488
FORECAST: What's Ahead in This Chapter 488WINNERS & LOSERS: Specialized Bank Loans 489
16.1 Financial Management490
Financial
THE ESSENTIAL QUESTION 490• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
The Biggest Mistakes Startups Make. 490Financial Management: What It Is, Why It's
Important 490The Job of Financial Manager & the Risk-Return
Trade-Off 490• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
The Risk-Return Trade-Off of Small-Business OwnersWho Can't Pay Their Taxes. 491
The Importance of Financial Management:' Solvency &Efficiency 491
Financial Planning: Forecasting, Budgeting, & FinancialControls 491
16.2 Finding Funds to Keep the FirmOperating 494
THE ESSENTIAL QUESTION 494Why Firms Borrow Money: Four Reasons 494
• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:Capital Expenditures for a Drum Maker. 495
16.3 (Setting Short-Term & Long-TermFinancing 496
THE ESSENTIAL QUESTION 496Sources of Short-Term Financing: Trade Credit, Short-Term
Loans, Factoring, & Commercial Paper 496• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:
Friends Help Eileen Fisher Get Her Clothing LineGoing. 497
• BRIEFING / SMALL BUSINESS & ENTREPRENEURS:Using Credit Cards to Start a Business. 498
Sources of Long-Term Financing: Long-Term Loans, DebtFinancing, & Equity Financing 499
Financial Leverage & Cost of Capital: Using BorrowedFunds to Increase the Rate of Return 501
PRACTICAL ACTION Money Money, Who's GotMoney? 502
16.4 Money: What It Is,How It's ControJIed 503
THE ESSENTIAL QUESTION 503What Money Is: Five Characteristics & Three
Functions 503 \"The Five Characteristics of Money 504 ;The Three Functions of Money 504
The Money Supply: What It Is 505The Federal Reserve System: The U.S. Government's Bank
for Bankers 505M1, the Narrowest Measure: Quick-Access Money—
Currency, Checks, & So On 505M2, a Broader Measure: M1 plus Slower-Access Money—
Savings, Mutual Funds, & So On 505How Money Is Created: The Role of the Fed & Commercial
Banks 506The Fed's Board of Governors & 12 Reserve Banks 506The Fed's Member Banks 507Getting Money to the Banks 507
How the Fed Controls the Money Supply: Three Tools 507Tool 1: Reserve Requirement—Specifying Percentage
of Cash Banks Must Hold in Deposits (UsedInfrequently) 508
• BRIEFING / LEGAL & ETHICAL PRACTICES: HowBanks Have Evaded the Reserve Requirement,Using Computer Programs to Transfer Depositors'Money. 508
Tool 2: Open-Market Operations—Buying & Selling U.S.Government Bonds to Increase/Decrease Bank Reserves(Used Frequently) 509
Tool 3: Discount Rate—Specifying the Interest Rate on FedLoans to Member Banks (Used Only with Tool 2) 509
How the Fed Clears Checks between Different Banks 509The Era of E-Cash: Money Goes Digital 510
Electronic Money 510Debit Cards, Smart Cards, & Cellphones 510
16.5 Banks & Other Financial511
THE ESSENTIAL QUESTION 511Commercial Banks: Full-Service Banks 511
Types of Deposit Accounts: Checking, Savings, NOW,Money Market Accounts, & Certificates of Deposit 512
How Commercial Banks Make Money: Loan Interest, Feesfor Services, & Fees from Other Financial Products 513
Savings Institutions: Savings & Loans & Mutual SavingsBanks 513
Credit Unions: Depositor-Owned FinancialCooperatives 513
Nonbanks: Other Financial Institutions 514Investment Banks: Institutions for Raising Capital &
Handling Mergers & Acquisitions 515How Your Money Is Protected 515
• BRIEFING / PERSONAL FINANCE: Staying Alertto Be Sure You Don't Lose Money with Your FDICInsurance. 516
CONTENTS XXV
16.6 The Changing Banking Environment:Regulation, Deregulation,& Financial Panics 517
THE ESSENTIAL QUESTION 517The Early Trend toward Regulation 517The Trend toward Deregulation & Risky Investments 517The Beginning of the 2008 Crash 518Links to the Global Financial System 519The Question of Confidence 519
520LSummary 520Key Terms 522Pop Quiz Prep 522Critical Thinking Questions 522
CASES 524VIDEO CASE: Money: More Than Just What Banks
Lend 524BUSINESS DECISION CASE: Pawnshop: Lender of
Last Resort? Not Necessarily So 525
526
17Securities MarketsInvesting for the Future 528
FORECAST: What's Ahead in This Chapter 528WINNERS & LOSERS: Looking for Great Stocks 529
17.1 The Two Kinds of Securities Markets:Primary versus Secondary 530
THE ESSENTIAL QUESTION 530D BRIEFING / PERSONAL FINANCE: Do Males &
Females Have Different Investment Styles? 530The Primary Securities Market: Where New Issues Are First
Sold to Investors 531• BRIEFING / A WORLD OF CONSTANT CHANGE:
Should Tech Start-Ups Raise Money through an IPO orPrivate Investors? 531
The Secondary Securities Market: Where Existing IssuesAre Bought & Sold by Investors 532
PRACTICAL ACTION Determining Your InvestmentPosture 533
17.2 Securities: Money Market Instruments,Bonds, §t Stocks 534
THE ESSENTIAL QUESTION 534Money Market Instruments: Short-Term lOUs
from Governments, Corporations, & FinancialInstitutions 534
Bonds: Long-Term lOUs from Governments, Corporations,& Financial Institutions 535
Ratings for Bonds: From Investment-Grade Quality toJunk 536
• BRIEFING / LEGAL & ETHICAL PRACTICES: WereBond-Rating Agencies Honest When Rating Mortgage-Backed Securities? 537
The Varied Ways Bonds May Pay Off: Callable, Serial,Sinking-Fund, & Convertible Bonds 537
Stocks: Units of Ownership in Corporations 538How Much Is a Share of Stock Worth? Par Value, Market
Value, Book Value, Dividends, & Stocl< Splits 539Common Stock versus Preferred Stock 540
Stock Markets: Domestic & Foreign Marketplaces forSecurities 541Types of Stock Markets: Trading Floor versus Electronic
Network 541U.S. Stock Markets: Four Arenas for Trading 541• BRIEFING / GLOBAL BUSINESS: A German Company
Buys the New York Stock Exchange. 541Foreign Stock Markets 543
Regulating Securities: The Securities & ExchangeCommission 543Provide Investors with Full Disclosure of Financial
Facts 543Register with the SEC & Provide Prospectuses &
Reports 543Avoid Taking Advantage of Inside Information 543
securities 544
THE ESSENTIAL QUESTION 544Selecting a Broker, & Buying & Selling Securities 544
Choosing a Broker: Full-Service or Discount? 544Buying & Selling Securities: Putting in the Order 545
Market Order: "Buy or Sell at the Best Price NowPossible" 545
Limit Order: "Buy Below or Sell Above Only a CertainPrice" 545
Discretionary Order: "Use Your Professional Judgmentabout When to Buy or Sell" 545
Keeping Up with the Market 545The Leading Stock Market Indicators: Dow Jones, S&P 500,
NASDAQ, & Wilshire 5000 546Tracking Specific Securities: How to Get Price
Quotes 546
17.4
& Commodities 547
THE ESSENTIAL QUESTION 547Mutual Funds: Diversified Investments by Pools of
Investors 547Exchange-Traded Funds: Collections of Stocks Traded on
Exchanges throughout the Day 548You Can Trade an ETF More Conveniently 549Fees Are Lower Than They Are for Mutual Funds 549
Commodities Trading: Risky Trading in Raw Materials 549Futures Contracts: Agreements to Buy Commodities at a
Set Price in the Future 549Commodity Exchanges: Arenas for Buying & Selling Raw
Materials 549
XXVI CONTENTS
17.5 Investment Strategies 550 FLEXCHAPTERSAvailableatwww.mybizlab.com- and Pearson Custom Library
THE ESSENTIAL QUESTION 550 Flex Chapter A Business LawFive Investment Strategies 550 F | e x chapter B Labor Management IssuesYour Own Portfolio 551 F , e x C h a p t e r C ^ M a n a g e m e n t & Insurance
* Flex Chapter D Information TechnologyLEARNING & SKILLS PORTFOLIO 552 Flex Chapter E Personal Finance ~ %
Summary 552 \Key Terms 553 Glossary G-1 \Pop Quiz Prep 553 *Critical Thinking Questions 554 References R-1
CASES 554 Index 1-1VIDEO CASE: Capital Advisors: A Dynamic Approach
to Risk Management 554BUSINESS DECISION CASE: Day Trading:
Risky Business 555
BRIEFINGS 556
CONTENTS XXVII
