v
B rief Conte n ts
C ar eer P ro l o g ue Part I
Bu sin ess E nv i r o nm e nt Chapter 1 Chapter 2 Chapter 3 Chapter 4
Part II
Motives and Functions of a Business 2 Business Ethics and Social Responsibility 36 Assessing Economic Conditions 72 Assessing Global Conditions 106
157
Selecting a Form of Business Ownership 158 Entrepreneurship and Business Planning 190
Management Chapter 7 Chapter 8 Chapter 9
Part IV
1
Starting a New Business Chapter 5 Chapter 6
Part III
xx xi i i
239
Managing Effectively 241 Organizational Structure 276 Improving Productivity and Quality 314
Managing Employees
361
Chapter 10 Motivating Employees 362 Chapter 11 Hiring, Training, and Evaluating Employees 396
Part V
Marketing
447
Chapter 12 Creating and Pricing Products 448 Chapter 13 Distributing Products 492 Chapter 14 Promoting Products 526
Part VI
Financial Management
565
Chapter 15 Accounting and Financial Analysis 566 Chapter 16 Financing 598 Chapter 17 Expanding the Business 640
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Contents
Preface xxv Career Prologue xxxiii
Part I Business Environment 1 Chapter 1 Motives and Functions of a Business 2 The Goal of a Business 3 Where the Profits Come From 4 Profit as a Motive to Understand Business 4 How the Profit Motive Is Influenced by the Government 5 Nonprofit Businesses 5 Decision Making: Decisions to Create a Business 6 Resources Used to Produce Products or Services 6 Natural Resources 6 Human Resources 7 Capital 7 Entrepreneurship 9 Decision Making: How to Use the Factors of Production 10 Key Stakeholders in a Business 11 Owners 11 Small Business Survey: Background of Owners 12 Creditors 14 Employees 15 Suppliers 16 Customers 16 Summary of Key Stakeholders 17 Decision Making: How Business Decisions Affect Stakeholders 18 The Business Environment 18 Social Environment 18 Industry Environment 19 Economic Environment 19 Global Environment 19 Small Business Survey: How Business Owners Use Their Time 20 Decision Making: Responding to the Business Environment 20 Key Types of Business Decisions 20 How Business Decisions Affect Performance 21 How Some Business Functions Enhance Decision Making 22 Applying the Key Types of Decisions to a Single Business 22
CONTENTS
Results of Bad Business Decisions 23 Decision Making: Integrating Business Functions 23
Preview of This Text
24
College Health Club: Business Decisions at College Health Club
Summary 28 Key Terms 28 Review & Critical Thinking Questions Discussion Questions 29
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It’s Your Decision: Business Decisions at CHC
29
Investing in a Business 30 The Stock Market Game 30 Case: How Yahoo! Created a Business 31 Video Case: Burton Snowboards 31 Internet Applications 32 Dell’s Secret to Success 32 In-Text Study Guide 33
Chapter 2 Business Ethics and Social Responsibility 36 Responsibility to Customers 38 Responsible Production Practices 38 Responsible Sales Practices 38 How Firms Ensure Responsibility toward Customers 39 Role of Consumerism 40 Role of the Government 40 Small Business Survey: Illegal or Unethical Activities of Firms 41 Decision Making: Ensuring Responsibility toward Customers 42 Responsibility to Employees 43 Employee Safety 43 Proper Treatment by Other Employees 43 Equal Opportunity 45 How Firms Ensure Responsibility toward Employees 45 Conflict with Employee Layoffs 46 Global Business: Global Ethics 47 Satisfying Employees 47 Decision Making: Ensuring Responsibility toward Employees 48 Responsibility to Stockholders 49 How Firms Ensure Responsibility 49 How Stockholders Ensure Responsibility 51 Conflict with Excessive Executive Compensation 51 Decision Making: Responsibility toward Investors 52 Responsibility to Creditors 52 How Firms Violate Their Responsibility 53 Decision Making: Tradeoffs from Satisfying All Stakeholders 53 Responsibility to the Environment 54 Air Pollution 54 Land Pollution 54 Conflict with Environmental Responsibility 55 Decision Making: Ensuring Responsibility toward the Environment 56 Responsibility to the Community 56 Conflict with Maximizing Social Responsibility 56 Decision Making: Ensuring Responsibility toward the Community 58
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CONTENTS
Summary of Business Responsibilities 58 Self-Scoring Exercise: Assessing the Ethical Standards of the Firm Where You Work 59 Business Responsibilities in an International Environment 59 The Cost of Fulfilling Social Responsibilities 60 Self-Scoring Exercise: Assessing Whether Specific Situations Are Ethical 61 Cost of Complaints 61 Cross Functional Teamwork: Ethical Responsibilities across Business Functions 62 College Health Club: Social Responsibility Decisions at CHC
Summary 64 Key Terms 64 Review & Critical Thinking Questions Discussion Questions 66
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It’s Your Decision: Ethics at CHC
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Investing in a Business 67 Case: Social Responsibility at Ben & Jerry’s Ice Cream 67 Video Case: Case Social Responsibility at Timberland 67 Internet Applications 68 Dell’s Secret to Success 68 In-Text Study Guide 69
Chapter 3 Assessing Economic Conditions 72 Impact of Economic Growth on Business Performance 74 Strong Economic Growth 74 Weak Economic Growth 74 Indicators of Economic Growth 76 Decision Making: Responding to Economic Growth 77 Impact of Inflation 78 Types of Inflation 78 Decision Making: Responding to a Change in Inflation 80 Impact of Interest Rates 80 Impact on a Firm’s Expenses 80 Impact on a Firm’s Revenue 82 Global Business: Capitalizing on Global Economic Conditions 83 Decision Making: Responding to a Change in Interest Rates 83 How Market Prices Are Determined 83 Demand Schedule for a Product 84 Supply Schedule for a Product 84 Interaction of Demand and Supply 85 Effect of a Change in the Demand Schedule 85 Effect of a Change in the Supply Schedule 86 Effect of Demand and Supply on the General Price Level 88 Decision Making: Using Supply and Demand to Monitor Market Prices 88 Factors That Influence Market Prices 88 Consumer Income 88 Consumer Preferences 89 Production Expenses 89 Decision Making: Assessing the Potential Change in Market Prices 90 Government Influence on Economic Conditions 90 Monetary Policy 90 Fiscal Policy 92 Summary of Government Influence on Economic Factors 94 Dilemma of the Federal Government 94
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CONTENTS
Cross Functional Teamwork: Economic Effects across Business Functions 95 Decision Making: Responding to Changes in Monetary Policy 96 College Health Club: Impact of Economic Conditions on CHC
Summary 97 Key Terms 98 Review & Critical Thinking Questions Discussion Questions 99
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It’s Your Decision: Economic Exposure at CHC
99
Investing in a Business 100 Case: Impact of Economic Conditions 100 Video Case: Exposure of Ben and Jerry’s to Economic Conditions 101 Internet Applications 101 Dell’s Secret to Success 101 In-Text Study Guide 102
Chapter 4 Assessing Global Conditions 106 How International Business Can Enhance Performance 108 Attract Foreign Demand 108 Small Business Survey: International Business 110 Capitalize on Technology 110 Small Business Survey 111 Use Inexpensive Resources 111 Diversify Internationally 113 Combination of Motives 113 Decision Making: Using International Business to Reduce Expenses 115 How to Conduct International Business 115 Importing 115 Exporting 116 Direct Foreign Investment (DFI) 118 Outsourcing 119 Strategic Alliances 120 Decision Making: Choosing a Strategy to Expand Overseas 121 Barriers to International Business 121 Reduction in Barriers 121 Remaining Barriers 122 Disagreements about International Trade Policy 123 Decision Making: Responding to Potential Trade Barriers 124 How Foreign Characteristics Influence International Business 124 Culture 125 Economic System 125 Global Business: Nonverbal Communications in Different Cultures 126 Economic Conditions 128 Exchange Rates 130 Political Risk and Regulations 130 Small Business Survey: Do Small Firms Conduct International Business? 131 Cross Functional Teamwork: Managing International Business across Business Functions 132 Decision Making: Assessing Foreign Characteristics 134 How Exchange Rate Movements Can Affect Performance 134 Impact of a Weak Dollar on U.S. Importers 135 Impact of a Strong Dollar on U.S. Importers 135 Actual Effects of Exchange Rate Movements on U.S. Importers 135
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Impact of a Weak Dollar on U.S. Exporters 136 Impact of a Strong Dollar on U.S. Exporters 137 Hedging against Exchange Rate Movements 137 Small Business Survey: Concern about Exchange Rate Movements 138 How Exchange Rates Affect Foreign Competition 139 Decision Making: The Decision to Hedge Exchange Rate Risk 140 College Health Club: CHC’s Exposure to Global Conditions
Summary 141 Key Terms 142 Review & Critical Thinking Questions Discussion Questions 142
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It’s Your Decision: Global Exposure at CHC
143
Investing in a Business 143 Case: Global Expansion by Linton Records 143 Video Case: Global Business at Lonely Planet 144 Internet Applications 144 Dell’s Secret to Success 145 In-Text Study Guide 146
Summary of Part One 149 Developing a Business Plan for Campus.com 150 Integrative Video Case: Finding Sources of Financing 151 Integrative Video Case: Establishing a Business and Its Corporate Responsibility The Stock Market Game 152 Running Your Own Business 153 Your Career in Business: Pursuing a Major and a Career in Economics 154
Part II Starting a New Business 157 Chapter 5 Selecting a Form of Business Ownership 158 Sole Proprietorship 159 Characteristics of Successful Sole Proprietors 160 Advantages of a Sole Proprietorship 160 Disadvantages of a Sole Proprietorship 160 Decision Making: Deciding on the Sole Proprietor Form of Business 161 Partnership 162 Advantages of a Partnership 162 Disadvantages of a Partnership 163 S-Corporations 163 Limited Liability Company (LLC) 163 Decision Making: Deciding on the Partnership Form of Business 164 Corporation 164 How Stockholders Earn a Return 165 Private versus Public Corporations 165 Advantages of a Corporation 166 Disadvantages of a Corporation 167 Comparing Forms of Business Ownership 170 How Business Ownership Can Change 170 Decision Making: Deciding on the Corporation Form of Business 171
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CONTENTS
How Ownership Can Affect Return and Risk 172 Impact of Ownership on the Return on Investment 172 Impact of Ownership on Risk 173 Cross Functional Teamwork: Sources of Risk across Business Functions 175 Decision Making: Deciding Whether to Add Partners to Reduce Risk 175 Obtaining Ownership of an Existing Business 175 Assuming Ownership of a Family Business 175 Purchasing an Existing Business 175 Franchising 176 Self-Scoring Exercise: Do You Have the Skills Necessary to Succeed in Business? 177 Decision Making: Deciding Whether to Establish Franchises 179 College Health Club: Business Ownership at CHC
179
Global Business: Ownership of Foreign Businesses 180 Summary 181 Key Terms 182 Review & Critical Thinking Questions 183 Discussion Questions 183 It’s Your Decision: Ownership at CHC
183
Investing in a Business 184 Case: Deciding the Type of Business Ownership 184 Video Case: Organization of Annie’s Homegrown Business 185 Internet Applications 185 Dell’s Secret to Success 185 In-Text Study Guide 186
Chapter 6 Entrepreneurship and Business Planning 190 Creating a New Business 192 Online Resources for Creating a Business 193 Pros and Cons of Being an Entrepreneur 193 Entrepreneurial Profile 194 Decision Making: Deciding Whether to Create a New Business 195 Assessing Market Conditions 195 Demand 196 Competition 197 Small Business Survey: Competition 198 Global Business: Assessing a Market from a Global Perspective 199 Labor Conditions 200 Regulatory Conditions 200 Small Business Survey: Impact of Regulations on Small Businesses 201 Summary of Market Conditions 201 Decision Making: How to Capitalize on Market Conditions 202 Developing a Competitive Advantage 202 Key Advantages 202 Small Business Survey: Quality as a Competitive Advantage 204 Using the Internet to Create a Competitive Advantage 204 Expenses of a Web-Based Business 206 Using SWOT Analysis to Develop a Competitive Advantage 206 Small Business Survey: Technology as a Competitive Advantage 207 Decision Making: Developing a Competitive Advantage 207 Developing the Business Plan 207 Assessment of the Business Environment 208 Management Plan 209
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Marketing Plan 211 Financial Plan 212 Online Resources for Developing a Business Plan 214 Summary of a Business Plan 214
Cross Functional Teamwork: Industry Effects across Business Functions 217 Assessing a Business Plan 217 Small Business Survey: What Are the Major Concerns of Small Businesses? 218 Decision Making: Deciding on a Business Plan 218
Risk Management by Entrepreneurs 219 Reliance on One Customer 220 Reliance on One Supplier 220 Reliance on a Key Employee 220 Small Business Survey: What Is the Cost of Employee Injuries? 222 Exposure to E-risk 222 Decision Making: How to Manage Risk 223 College Health Club: Developing a Business Plan
Summary 226 Key Terms 227 Review & Critical Thinking Questions Discussion Questions 228
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It’s Your Decision: Industry Exposure and Business Planning at CHC
Investing in a Business 229 Case: Planning a Business 230 Video Case: Caribou Coffee 230 Internet Applications 231 Dell’s Secret to Success 231 In-Text Study Guide 232
Summary of Part Two 235 Business Organization for Campus.com 236 Integrative Video Case: Growing a Small Business 236 The Stock Market Game 237 Running Your Own Business 237 Your Career in Business: Pursuing a Major and a Career in Entrepreneurship
Part III Management 239 Chapter 7 Managing Effectively 240 Levels of Management 242 Decision Making: Interaction among Management Layers 243 Functions of Managers 244 Planning 244 Cross Functional Teamwork: Interaction of Functions to Achieve the Strategic Plan 246 Organizing 248 Leading 250 Global Business: Conflicts with the Goal of a Multinational Corporation 252 Controlling 253 Global Business: Leadership Styles for Global Business 254 Integration of Management Functions 257 Use of Technology and Software to Improve Management Functions 257
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Software to Improve Management Functions 258 Decision Making: Using Managerial Functions to Make Decisions 259
Managerial Skills 259 Conceptual Skills 259 Interpersonal Skills 260 Technical Skills 260 Decision-Making Skills 261 Summary of Management Skills 262 Decision Making: Determining the Required Management Skills 262 How Managers Manage Time 263 Set Proper Priorities 263 Schedule Long Time Intervals for Large Tasks 263 Minimize Interruptions 263 Small Business Survey: How Managers Run Meetings Efficiently 264 Set Short-Term Goals 265 Delegate Some Tasks to Employees 265 Decision Making: How to Manage Time to Complete a Project 265 College Health Club: Planning at CHC
Summary 267 Key Terms 268 Review & Critical Thinking Questions Discussion Questions 269
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It’s Your Decision: Managing at CHC
269
Investing in a Business 269 Case: Applying Management Skills 270 Video Case: Managing at Caribou Coffee 270 Internet Applications 271 Dell’s Secret to Success 271 In-Text Study Guide 272
Chapter 8 Organizational Structure 276 Purpose and Types of Organizational Structure 277 How Organizational Structure Varies among Firms 278 Impact of Information Technology on Organizational Structure 281 Decision Making: Selecting an Organizational Structure 281 Accountability in an Organizational Structure 282 Role of the Board of Directors 282 Small Business Survey: Who Are the Board Members of Small Firms? 283 Oversight of the Internal Auditor 287 Internal Control Process 287 Decision Making: Oversight of an Organizational Structure 288 Distributing Authority among the Job Positions 288 Centralization 288 Decentralization 289 Self-Scoring Exercise: How Decentralized Is Your Company? 290 Global Business: How Organizational Structure Affects the Control of Foreign Operations 291 Decision Making: Whether to Decentralize? 293 Structures That Allow More Employee Input 293 Matrix Organization 293 Intrapreneurship 295 Informal Organizational Structure 296 Decision Making: Creating an Effective Informal Structure 297
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CONTENTS
Methods of Departmentalizing Tasks 298 Departmentalize by Function 298 Departmentalize by Product 298 Cross Functional Teamwork: Relationship between Organizational Structure and Production 299 Departmentalize by Location 300 Global Business: Organizational Structure of a Multinational Corporation 301 Departmentalize by Customer 301 Cross Functional Teamwork: Interaction among Departments 302 Decision Making: How to Departmentalize 303 College Health Club: Departmentalizing Tasks at CHC
Summary 304 Key Terms 305 Review & Critical Thinking Questions Discussion Questions 306
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It’s Your Decision: Organizational Structure at CHC
306
Investing in a Business 307 Case: Creating an Organizational Structure 307 Video Case: Student Advantage 308 Internet Applications 308 Dell’s Secret to Success 309 In-Text Study Guide 310
Chapter 9 Improving Productivity and Quality 314 Resources Used for the Production Process 315 Human Resources 316 Materials 316 Other Resources 317 Combining the Resources for Production 317 Decision Making: Determining the Resources Needed 318 Selecting a Site 318 Factors Affecting the Site Decision 318 Evaluating Possible Sites 319 Small Business Survey: Location as a Competitive Advantage 320 Global Business: Selecting a Foreign Production Site 321 Decision Making: Choosing the Optimal Site 321 Selecting the Design and Layout 322 Factors Affecting Design and Layout 322 Decision Making: Determining the Optimal Design and Layout 325 Production Control 325 Purchasing Materials 325 Small Business Survey: Why Do Firms Outsource Rather Than Produce Some Products Themselves? 326 Inventory Control 328 Routing 330 Scheduling 330 Quality Control 333 Cross Functional Teamwork: Interaction of Functions Involved in Total Quality Management 334 Global Business: Global Quality Standards 335 Small Business Survey: Exposure to Liability Lawsuits 337 Decision Making: Deciding on Quality Control 338 Methods to Improve Production Efficiency 338 Technology 339
CONTENTS
Economies of Scale 340 Restructuring 343 Integration of the Production Tasks 343 Decision Making: Tradeoffs from Production Decisions 345 College Health Club: Average Cost at CHC
Summary 346 Key Terms 347 Review & Critical Thinking Questions Discussion Questions 348
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It’s Your Decision: Production Decisions at CHC
348
Investing in a Business 349 Case: Selecting the Best Plant Site 349 Video Case: Quality Control at Canondale 350 Internet Applications 350 Dell’s Secret to Success 350 In-Text Study Guide 351
Summary of Part Three 355 Developing a Management and Production Plan for Campus.com 356 Integrative Video Case: Quality Control (Ping Golf) 356 The Stock Market Game 357 Running Your Own Business 357 Your Career in Business: Pursuing a Major and a Career in Management
Part IV Managing Employees 361 Chapter 10 Motivating Employees 362 The Value of Motivation 364 Decision Making: Responding to a Lack of Motivation 365 Theories on Motivation 365 Hawthorne Studies 365 Maslow’s Hierarchy of Needs 366 Herzberg’s Job Satisfaction Study 367 McGregor’s Theory X and Theory Y 368 Theory Z 369 Expectancy Theory 369 Self-Scoring Exercise: The Frazzle Factor 370 Equity Theory 370 Reinforcement Theory 371 Motivational Guidelines Offered by Theories 372 Decision Making: Determining How to Motivate Employees 373 Motivating Disgruntled Employees 374 Decision Making: Motivating Disgruntled Employees 374 How Firms Can Enhance Job Satisfaction and Motivation 374 Adequate Compensation Program 375 Cross Functional Teamwork: Spreading Motivation across Business Functions 378 Job Security 378 Flexible Work Schedule 378 Employee Involvement Programs 379 Self-Scoring Exercise: Are You an Empowered Employee? 380
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CONTENTS
Small Business Survey: Do Employees Want More Influence in Business Decisions? 381 Comparison of Methods Used to Enhance Job Satisfaction 384 Firms That Achieve the Highest Job Satisfaction Level 384
Global Business: Motivating Employees across Countries 385 Decision Making: Increasing Job Satisfaction 385 College Health Club: Motivating Employees at CHC
Summary 387 Key Terms 388 Review & Critical Thinking Questions Discussion Questions 388
388
It’s Your Decision: Motivating Employees at CHC
Investing in a Business
386
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389
Case: Using Motivation to Enhance Performance 390 Video Case: Motivating Employees at Valassis Communications, Inc.
390
Internet Applications 391 Dell’s Secret to Success 391 In-Text Study Guide 392
Chapter 11 Hiring, Training, and Evaluating Employees 396 Human Resource Planning 398 Forecasting Staffing Needs 398 Job Analysis 398 Recruiting 398 Small Business Survey: Recruiting 403 Decision Making: How to Recruit 405 Providing Equal Opportunity 405 Federal Laws Related to Discrimination 405 Diversity Incentives 406 Decision Making: Ensuring Equal Opportunity in New Job Positions 408 Compensation Packages That Firms Offer 408 Salary 408 Stock Options 409 Commissions 411 Bonuses 411 Profit Sharing 411 Employee Benefits 411 Small Business Survey: Do Firms Reward Employees for Customer Satisfaction? 412 Small Business Survey: Which Employee Benefits Are Most Important to Employees? 412 Global Business: Compensating Employees across Countries 413 Perquisites 413 Comparison across Jobs 413 Decision Making: Selecting the Proper Compensation Package 414 Developing Skills of Employees 415 Technical Skills 415 Small Business Survey: How Do CEOs Allocate Their Time When Managing Employees? 416 Decision-Making Skills 416 Customer Service Skills 416 Safety Skills 417 Human Relations Skills 417 Decision Making: Training Employees 418 Evaluation of Employee Performance 418 Segmenting the Evaluation into Different Criteria 418
CONTENTS
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Using a Performance Evaluation Form 419 Assigning Weights to the Criteria 419
Cross Functional Teamwork: How Job Responsibilities across Business Functions Can Complicate Performance Evaluations 422 Steps for Proper Performance Evaluation 422 Action Due to Performance Evaluations 423 Dealing with Lawsuits by Fired Employees 423 Employee Evaluation of Supervisors 424 Decision Making: Evaluating Employees 425 College Health Club: Developing Employee Skills and Evaluating Performance at CHC 425
Summary 426 Key Terms 427 Review & Critical Thinking Questions Discussion Questions 428
427
It’s Your Decision: Hiring and Evaluating Employees at CHC
428
Investing in a Business 429 Case: Filling Job Positions 429 Video Case: Recruiting and Training at Valassis Communications 430 Internet Applications 430 Dell’s Secret to Success 430 In-Text Study Guide 431 Appendix: Labor Unions
435
Background on Unions 435 History of Union Activities 435 Trends in Union Popularity 436 Negotiations between Unions and Management 436 Salaries 436 Job Security 437 Management Rights 437 Grievance Procedures 437 Conflicts between Unions and Management 438 Labor Strikes 438 Management’s Response to Strikes 439 Management’s Criticism of Unions 439 How Firms Reduce Employees’ Desire for a Union 440
Summary of Part Four 441 Developing the Human Resource Plan for Campus.com 442 Integrative Video Case: Effective Management (Café Pilon) 442 The Stock Market Game 443 Running Your Own Business 443 Your Career in Business: Pursuing a Major and a Career in Human Resources
Part V Marketing 447 Chapter 12 Creating and Pricing Products 448 Background on Products Product Line 450 Product Mix 450
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Small Business Survey: Product Choices as a Competitive Advantage 451 Improving the Convenience of the Product 453 Product Life Cycle 454 Decision Making: Deciding the Product Line and Mix 455
Identifying a Target Market 456 Factors That Affect the Size of a Target Market 456 Small Business Survey: Identifying the Target Market 456 Global Business: Targeting Foreign Countries 459 The Use of E-Marketing to Expand the Target Market 459 Decision Making: Deciding on the Target Market 460 Creating New Products 460 Use of Marketing Research to Create New Products 461 Small Business Survey: New Products as a Competitive Advantage 462 Small Business Survey: What Are the Keys to Creating Successful Products? 463 Use of Research and Development to Create Products 463 Steps Necessary to Create a New Product 464 Cross Functional Teamwork: Interaction among Product Decisions and Other Business Decisions 467 Decision Making: Creating a New Product 468 Product Differentiation 468 Unique Product Design 469 Unique Packaging 469 Unique Branding 470 Summary of Methods Used to Differentiate Products 472 Decision Making: Differentiating the Product 472 Pricing Strategies 472 Pricing According to the Cost of Production 473 Pricing According to the Supply of Inventory 473 Pricing According to Competitors’ Prices 473 Small Business Survey: Pricing as a Competitive Advantage 475 Example of Setting a Product’s Price 475 Break-Even Point 477 Cross Functional Teamwork: Relationship between Pricing and Production Strategies 478 Pricing Technology-Based Products 478 Decision Making: Pricing a Product 479 Additional Pricing Decisions 479 Discounting 479 Sales Prices 480 Credit Terms 480 Decision Making: Offering Sales Prices 481 College Health Club: CHC’s Product Differentiation, Discounting, and Credit Decisions 481
Summary 482 Key Terms 483 Review & Critical Thinking Questions Discussion Questions 484
484
It’s Your Decision: Pricing Decisions at CHC
Investing in a Business 486 Case: Marketing T-Shirts 486 Video Case: Marketing at Burton Snowboards 487 Internet Applications 487
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CONTENTS
Dell’s Secret to Success 487 In-Text Study Guide 488
Chapter 13 Distributing Products 492 Channels of Distribution 493 Direct Channel 493 One-Level Channel 495 Two-Level Channel 495 Summary of Distribution Systems 496 Factors That Determine the Optimal Channel of Distribution 497 Decision Making: Selecting the Channels of Distribution 498 Selecting the Degree of Market Coverage 499 Intensive Distribution 499 Selective Distribution 499 Exclusive Distribution 499 Selecting the Optimal Type of Market Coverage 500 Decision Making: Selecting the Optimal Market Coverage 501 Selecting the Transportation Used to Distribute Products 501 Truck 501 Rail 501 Air 501 Water 502 Pipeline 502 Additional Transportation Decisions 502 Decision Making: Selecting a Mode of Transportation 503 How to Accelerate the Distribution Process 503 Streamline the Channels of Distribution 504 Use of the Internet for Distribution 504 Integrate the Production and Distribution Processes 505 Cross Functional Teamwork: Interaction between Distribution Decisions and Other Business Decisions 507 Decision Making: Accelerating the Distribution 507 Background on Retailers 508 Number of Outlets 508 Quality of Service 508 Variety of Products Offered 509 Store versus Nonstore 509 Decision Making: Choosing Retailers 511 Background on Wholesalers 511 How Wholesalers Serve Manufacturers 511 How Wholesalers Serve Retailers 512 Decision Making: Whether to Use an Intermediary 513 Vertical Channel Integration 513 Vertical Channel Integration by Manufacturers 513 Cross Functional Teamwork: Relationship between Pricing and Distribution Strategies 514 Vertical Channel Integration by Retailers 514 Global Business: Global Distribution 515 Decision Making: Deciding Whether to Serve as a Retailer 515 College Health Club: CHC’s Distribution
Summary 517 Key Terms 519 Review & Critical Thinking Questions
519
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Discussion Questions
519
It’s Your Decision: Distribution Decisions at CHC
520
Investing in a Business 520 Case: Distribution Decisions by Novak, Inc. 521 Video Case: Distribution Strategies at Burton Snowboards 521 Internet Applications 522 Dell’s Secret to Success 522 In-Text Study Guide 523
Chapter 14 Promoting Products 526 Background on Promotion 527 Promotion Mix 528 Decision Making: Planning a Promotion Mix 528 Advertising 529 Reasons for Advertising 529 Forms of Advertising 530 Summary of Forms of Advertising 533 Decision Making: Selecting a Form of Advertising 534 Personal Selling 535 Identify the Target Market 535 Small Business Survey: What Skills Are Needed to Be Successful in Sales? 536 Contact Potential Customers 536 Make the Sales Presentation 537 Answer Questions 537 Close the Sale 537 Follow Up 537 Managing Salespeople 538 Decision Making: Personal Selling 538 Sales Promotion 538 Rebates 539 Coupons 539 Sampling 540 Displays 540 Premiums 541 Summary of Sales Promotion Strategies 541 Decision Making: Deciding on a Sales Promotion 541 Public Relations 542 Special Events 542 Global Business: Promoting Products across Countries 543 News Releases 543 Press Conferences 543 Decision Making: Taking Advantage of Public Relations 544 Determining the Optimal Promotion Mix 544 Target Market 544 Small Business Survey: Unique Marketing as a Competitive Advantage 546 Promotion Budget 546 Evaluating and Revising a Firm’s Promotions 547 Cross Functional Teamwork: Interaction between Promotion Decisions and Other Business Decisions 548 Decision Making: Revising the Promotion Mix over Time 549 College Health Club: Promotion at CHC
Summary 550 Key Terms 551
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CONTENTS
Review & Critical Thinking Questions Discussion Questions 552
551
It’s Your Decision: Promotion Decisions at CHC
Investing in a Business
552
553
Case: Promoting Products on the Internet 553 Video Case: Distribution Promotion Decisions at Oxygen
554
Internet Applications 554 Dell’s Secret to Success 554 In-Text Study Guide 555
Summary of Part Five 559 Developing the Marketing Plan for Campus.com 560 Integrative Video Case: Pricing Strategy at World Gym 560 The Stock Market Game 561 Running Your Own Business 561 Your Career in Business: Pursuing a Major and a Career in Marketing
562
Part VI Financial Management 565 Chapter 15 Accounting and Financial Analysis 566 How Firms Use Accounting 568 Reporting 568 Small Business Survey: Responsibility for Financial Reporting 569 Decision Support 570 Control 571 Decision Making: Using Financial Reports to Detect Deficiencies 571 Responsible Financial Reporting 571 The Role of Auditors in Ensuring Proper Reporting 572 The Role of the Board of Directors in Ensuring Proper Reporting 573 The Role of the Sarbanes-Oxley Act 573 Decision Making: Ensuring Accurate Financial Reporting 575 Interpreting Financial Statements 575 Income Statement 576 Balance Sheet 576 Decision Making: Interpreting Financial Information to Make Business Decisions 579 Ratio Analysis 580 Measures of Liquidity 580 Measures of Efficiency 581 Measures of Financial Leverage 582 Measures of Profitability 583 Comparison of Ratios with Those of Other Firms 584 Global Business: Effect of Exchange Rate Movements on Earnings 586 Limitations of Ratio Analysis 587 Sources of Information for Ratio Analysis 588 Decision Making: Using Ratio Analysis for Business Decisions 588 College Health Club: Financial Condition of CHC
Summary 589 Key Terms 590 Review & Critical Thinking Questions
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Discussion Questions
591
It’s Your Decision: Financial Management at CHC
591
Investing in a Business 592 Case: Using an Accounting System 592 Video Case: Reporting Information at Archway 592 Internet Applications 593 Dell’s Secret to Success 593 In-Text Study Guide 594
Chapter 16 Financing 598 Methods of Debt Financing 599 Borrowing from Financial Institutions 600 Issuing Bonds 604 Issuing Commercial Paper 605 Impact of the Debt Financing Level on Interest Expenses 606 Common Creditors That Provide Debt Financing 606 Decision Making: Whether to Borrow Funds 607 Methods of Equity Financing 607 Retaining Earnings 607 Issuing Stock 608 Small Business Survey: Financing 612 Comparison of Equity Financing with Debt Financing 612 Decision Making: Deciding Whether to Obtain Equity Funding 613 How Firms Issue Securities 613 Origination 613 Underwriting 613 Distribution 614 Decision Making: Deciding Whether to Issue Stock 614 Other Methods of Obtaining Funds 615 Financing from Suppliers 615 Leasing 616 Small Business Survey: Leasing 616 Decision Making: Deciding Whether to Lease as a Financing Method 617 Deciding the Capital Structure 617 Cross Functional Teamwork: Relationship between Pricing and Financing Strategies 618 Revising the Capital Structure 618 How the Capital Structure Affects the Return on Equity 619 Small Business Survey: Financing Choices of Small Firms 620 Global Business: Global Financing 621 Cross Functional Teamwork: Interaction between Financing Decisions and Other Business Decisions 621 Decision Making: Deciding on the Capital Structure 622 Remedies for Debt Problems 622 Extension 622 Composition 623 Private Liquidation 623 Formal Remedies 623 College Health Club: Financing at CHC
Summary 625 Key Terms 626 Review & Critical Thinking Questions Discussion Questions 627
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It’s Your Decision: Financing Decisions at CHC
Investing in a Business
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CONTENTS
Case: The IPO Decision 629 Video Case: Venture Capital Financing
629
Internet Applications 630 Dell’s Secret to Success 630 In-Text Study Guide 631 Appendix: How Interest Rates Are Determined
634
How Interest Rates Change 634 Demand for Loanable Funds 634 Supply of Loanable Funds 634 Combining Demand and Supply 634 Effect of a Change in the Demand Schedule 635 Effect of a Change in the Supply Schedule 636 Factors That Can Affect Interest Rates 637 Monetary Policy 637 Economic Growth 637 Expected Inflation 638 Savings Behavior 638 Summary of Factors That Affect Interest Rates 639
Chapter 17 Expanding the Business 640 Investment Decisions 642 How Interest Rates Affect Investment Decisions 642 Capital Budget 643 Classification of Capital Expenditures 643 Small Business Survey: Allocation of Business Investment 644 Decision Making: Business Investment Decisions 645 Capital Budgeting Tasks 645 Cross Functional Teamwork: Cross Functional Relationships Involved in Business Investment Decisions 646 Proposing New Projects 646 Estimating Cash Flows of Projects 646 Determining Whether Projects Are Feasible 646 Implementing Feasible Projects 647 Small Business Survey: Time Allowed for Investments to Pay Off 647 Global Business: Global Investing 648 Monitoring Projects That Were Implemented 648 Summary of Capital Budgeting Tasks 648 Decision Making: Capital Budgeting Tasks 649 Mergers and Other Forms of Restructuring 650 Types of Mergers 650 Corporate Motives for Mergers 650 Merger Analysis 652 Merger Procedures 654 Defense against Takeover Attempts 655 Leveraged Buyouts 656 Divestitures 656 Decision Making: Deciding Whether to Acquire a Business 657 Short-Term Investment Decisions 657 Liquidity Management 657 Accounts Receivable Management 658 Small Business Survey: Investment Decisions by Small Businesses 659 Small Business Survey: Extending Credit 659 Inventory Management 660
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Decision Making: Deciding How Much Liquidity Is Needed 661 College Health Club: Accounts Receivable Management at CHC
Summary 662 Key Terms 663 Review & Critical Thinking Questions Discussion Questions 664
661
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It’s Your Decision: Investment Decisions at CHC
664
Investing in a Business 665 Case: Deciding Whether to Acquire a Business 665 Video Case: Investing and Financing at Timbuk2 666 Internet Applications 666 Dell’s Secret to Success 666 In-Text Study Guide 667 Appendix A: Capital Budgeting Analysis
671
Background on Present Value 671 Estimating the Net Present Value 673 Appendix B: Consolidating All Major Strategies in the Business Plan 676
Summary of Part Six 681 Developing the Financial Plan for Campus.com 682 Integrative Video Case: Financing at Cerner Corporation 682 The Stock Market Game 683 Running Your Own Business 683 Your Career in Business: Pursuing a Major and a Career in Accounting and Finance
Appendix A Information Technology 686 Appendix B How to Invest in Stocks 702 Appendix C Answers to In-Text Study Guide 716 Glossary 720 Company Index 730 Subject Index 733
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