business
essentials
TENTH EDITION Global Edition
Ronald J. Ebert
Ricky W. Griffin
PEARSON Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Säo Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
Contents
Letter from the Authors About the Authors
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Special Thanks to Our Super Reviewers Preface
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Part 1: The Contemporary Business World
1 The U.S. Business Environment 28 Chapter Opening Gase: What Goes Up.. .Can Go Even Higher! 31 The Concept of Business and the Concept of Profit 32 The External Environments of Business 33 Domestic Business Environment 33 Global Business Environment 34 Technological Environment 34 Political-Legal Environment 35 Sociocultural Environment 35 Economic Environment 36 managing in turbulent times: What Goes Around... 36 Economic Systems 37 Factors of Production 37 Types of Economic Systems 38 finding a better way: Blending Capitalism and Social Responsibility at Mercy Corps 41 The Economics of Market Systems 41 Demand and Supply in a Market Economy 41 Private Enterprise and Competition in a Market Economy 44 entrepreneurship and new ventures: Business ... and Pleasure 46 Economic Indicators 46 Economic Growth, Aggregate Output, and Standard of Living 47 Economic Stability 51 Managing the U.S. Economy 52 summary of leaming objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • end notes 8
2 Understanding Business Ethics and Social Responsibility 60 Chapter Opening Case: Is Fair Trade Really Fair? 63 Ethics in the Workplace 64 Individual Ethics 65 Ambiguity, the Law, and the Real World 65 Individual Values and Codes 65 Business and Managerial Ethics 65 managing in turbulent times: Just When They Need It Most 66 Assessing Ethical Behavior 67 Company Practices and Business Ethics 68 Social Responsibility 71 The Stakeholder Model of Responsibility 71 entrepreneurship and new ventures: The Electronic Equivalent of Paper Shredding 72 Contemporary Social Consciousness 73 Areas of Social Responsibility 74 Responsibility toward the Environment 74 finding a better way: Zero Waste 75 Responsibility toward Customers 76 Responsibility toward Employees 78 Responsibility toward Investors 79 Implementing Social Responsibility Programs 80 Approaches to Social Responsibility 80 Social Responsibility and the Small Business 81 The Government and Social Responsibility 82 How Governments Influenae Organizations 83 How Organizations Influenae Government 84 Managing Social Responsibility 84 Formal Organizational Dimensions 85 Informal Organizational Dimensions 85 Evaluating Social Responsibility 86 summary of leaming objectives • key terms • questions & exercises • building a business: continuing team exercises • building your business skills • exercising your ethics • team exercises • cases • end notes
CONTENTS
3 Entrepreneurship, New Ventures, and Business Ownership 96 Chapter Opening Gase: Launching a Business in the Gym 99 What is a "Small" Business 100 The Importance of Small Business in the U.S. Economy 101 Populär Areas of Small Business Enterprise 102 finding a better way: The Rise of Services 104 managing in turbulent times: The Wide World of Risk 105 Entrepreneurship 105 Entrepreneurship Goals 105 Entrepreneurial Characteristics 106 Starting and Operating a New Business 106 Understanding Distinctive Competencies 107 Crafting a Business Plan 108 Starting the Small Business 108 Financing the Small Business 110 Trends, Successes, and Failures in New Ventures 111 Trends in Small Business Start-Ups 111 Reasons for Failure 113 Reasons for Success 113 entrepreneurship and new ventures: Harvard Dropout Turned Billionaire 114 Noncorporate Business Ownership 114 Sole Proprietorships 114 Partnerships 115 Cooperatives 117 Corporations 117 The Corporate Entity 117 Types of Corporations 118 Managing a Corporation 120 Special Issues in Corporate Ownership 120 summary of learning objectives • key terms • questions & exercises • building a business: continuing team exercises • building your business skills • exercising your ethics • team exercise • cases • end notes 4
Understanding the Global Context of Business 130
Chapter Opening Gase: The Embargo Grinds On 133 The Contemporary Global Economy 134 The Major World Marketplaces 136 finding a better way: Too Much of a Good Thing? China's Success Creates More Jobs in Mexico 137 Trade Agreements and Alliances 138
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International Trade 140 Balance of Trade 140 Balance of Payments 142 Exchange Rates 143 Forms of Competitive Advantage 144 entrepreneurship and new ventures: Polling in the Worldwide Dough 144 International Business Management 145 Going International 145 Levels of International Involvement 147 International Organization Structures 148 managing in turbulent times: The Ups and Downs of Globalization 148 Understanding the Cultural Environment 149 Values, Symbols, Beliefs, and Language 150 Employee Behavior across Cultures 150 Barriers to International Trade 152 Economic Differences 152 Legal and Political Differences 153 summary of learning objectives • Key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • crafting a business plan • end notes
Part 2: The Business of Managing
5 Managing the Business 164 Chapter Opening Case: Google Keeps Growing 167 The Management Process 168 Basic Management Functions 168 The Science and the Art of Management 171 Becoming a Manager 171 Types of Managers 173 Levels of Management 173 Areas of Management 174 Management Roles and Skills 175 Managerial Roles 175 Basic Management Skills 177 Management Skills for the Twenty-First Century 178 Strategie Management: Setting Goals and Formulating Strategy 179 Setting Business Goals 180 entrepreneurship and new ventures: ButterflEYE 180 Types of Strategy 182
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CONTENTS
finding a better way: A New Model for Going Green 183 Formulating Strategy 183 A Hierarchy of Plans 185 managing in turbulent times: Challenging Times for Gulf Airlines 186 Contingency Flanning and Crisis Management 186 Contingency Flanning 187 Crisis Management 187 Management and the Corporate Culture 188 Building and Communicating Culture 188 Changing Culture 189 summary of learning objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • end notes 6 Organizing the Business 198 Chapter Opening Case: Organizing for Success at South African Airways 201 What Is Organizational Structure? 202 Organization Charts 203 Determinants of Organizational Structure 203 The Building Blocks of Organizational Structure 204 Specialization 204 Specialization and Growth 205 finding a better way: Blending the Old with the New 206 Departmentalization 206 Establishing the Decision-Making Hierarchy 208 Distributing Authority: Centralization and Decentralization 208 managing in turbulent times: The Complexities of Offshoring 209 The Delegation Process 211 Three Forms of Authority 212 Basic Forms of Organizational Structure 213 Functional Structure 213 Divisional Structure 213 Matrix Structure 214 entrepreneurship and new ventures: Making the Grade 215 International Structure 215 Organizational Design for the Twenty-first Century 216 Informal Organization 218 Informal Groups 218 Organizational Grapevine 219 Intrapreneuring 219 summary of learning objectives • key terms • questions & exercises • building a business: continuing team
exercise • building your business skills • follow-up questions • exercising your ethics • team exercise • cases • end notes
7 Operations Management and Quality for Producing Goods and Services 228 Chapter Opening Case: Ryanair Customer Satisfaction—but Who to Believe? 231 What Ooes Operations Mean Today? 232 Growth in the Services and Goods Sectors 233 Creating Value through Operations 234 Differences between Service and Goods Manufacturing Operations 235 Operations Processes 236 Business Strategy as the Driver of Operations 238 The Many Faces of Production Operations 238 Operations Flanning 240 Capacity Flanning 240 entrepreneurship and new ventures: A Better Path to Flanning Meals (and Better Eating, Too) 241 Location Flanning 241 finding a better way: "Going Green" Yields a Better Way to Spin Clean 242 Layout Flanning 242 Quality Flanning 244 Methods Flanning 245 Operations Scheduling 246 The Master Operations Schedule 246 Detailed Schedules 247 Staff Schedules and Computer-Based Scheduling 247 Project Scheduling 248 Operations Control 249 Materials Management 249 Quality Control 251 Quality Improvement and Total Quality Management 251 The Quality-Productivity Connection 252 Managing for Quality 252 managing in turbulent times: Quick Footed Egyptian Businesses 253 Tools for Total Quality Management 254 Adding Value through Supply Chains 256 The Supply Chain Strategy 256 Outsourcing and Global Supply Chains 257 summary of learning objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • crafting a business plan • end notes
CONTENTS Part 3: People in Organizations 8 Employee Behavior and Motivation
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Chapter Opening Case: Chicken or Egg?
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Forms of Employee Behavior 272 Performance Behaviors 273 Organizational Citizenship 273 Counterproductive Behaviors 274 managing in turbulent times: The Law of Well-Being 274 Individual Differences among Employees 275 Personality at Work 275 Attitudes at Work 278 Malching People and Jobs 280 Psychological Contracts 280 The Person-Job Fit 282 Basic Motivation Concepts and Theories 282 Classical Theory 282 Early Behavioral Theory 282 entrepreneurship and new ventures: Motivation at Bigfoot 286 Contemporary Motivation Theory 287 Strategies and Techniques for Enhancing Motivation 289 Reinforcement/Behavior Modification 289 Using Goals to Motivate Behavior 289 finding a better way: Carrot or Stick? 290 Participative Management and Empowerment 291 Team Structures 291 Job Enrichment and Job Redesign 291 Modified Work Schedules and Alternative Workplaces 292 summary of leaming objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • end notes
9 Leadership and Decision Making
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Chapter Opening Case: Middle Eastern Business Leadership 305
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The Situational Approach to Leadership 310 Leadership through the Eyes of the Followers 311 Transformational Leadership 311 Charismatic Leadership 312 managing in turbulent times: Leading during Tough Times 313 Special Issues in Leadership 313 Leadership Substitutes 313 Leadership Neutralizers 314 The Changing Nature of Leadership 314 Leaders as Coaches 315 Gender and Leadership 315 Cross-Cultural Leadership 315 finding a better way: Creating Board Diversity 316 Emerging Issues in Leadership 317 Strategie Leadership 317 Ethical Leadership 317 Virtual Leadership 317 Leadership, Management, and Decision Making 318 The Nature of Decision Making 318 entrepreneurship and new ventures: A Bad Decision at Wesabe 320 Rational Decision Making 320 Behavioral Aspects of Decision Making 323 summary of leaming objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • end notes 10 Human Resource Management and Labor Relations 334 Chapter Opening Case: A Unique Partnership Drives Wegmans 337 The Foundations of Human Resource Management 338 The Strategie Importance of HRM 338 HR Flanning 339 The Legal Context of HRM 341 Equal Employment Opportunity 341 Compensation and Benefits 342 Labor Relations 343 Health and Safety 343 Other Legal Issues 343
The Nature of Leadership 306 Leadership and Management 306 Leadership and Power 307
Staffing the Organization 344 Recruiting HR 344 Selecting HR 345 finding a better way: Dock Strike in Hong Kong
Early Approaches to Leadership 308 Trait Approaches to Leadership 308 Behavioral Approaches to Leadership 309
Compensation and Benefits Wages and Salaries 348 Incentive Programs 348
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CONTENTS
Benefits Programs 349 entrepreneurship and new ventures: Whoie Benefits? 350 Developing the Workforce 351 Training and Development 351 Performance Appraisal 352 New Challenges in the Changing Workplace 354 Managing Workforce Diversity 354 Managing Knowledge Workers 354 Contingent and Temporary Workers 355 managing in turbulent times: Temp or Perm? 356 Dealing with Organized Labor 357 Unionism Today 357 Collective Bargaining 358 summary of learning objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • crafting a business plan • end notes
Part 4: Principles of Marketing: Building Relationships with Customers for Competitive
Marketing Research 388 The Research Process 389 Research Methods 390 Understanding Consumer Behavior 391 Influences on Consumer Behavior 391 The Consumer Buying Process 392 finding a better way: The Truth about Your Online Customer Service 393 Organizational Marketing and Buying Behavior 394 Business Marketing 394 B2B Buying Behavior 394 Social Media and Marketing 395 The International Marketing Mix 396 Small Business and the Marketing Mix 397 entrepreneurship and new ventures: Social Networking for Jobs in Good Times and in Bad 398 Small-Business Products 398 Small-Business Pricing 399 Small-Business Distribution 399 Small-Business Promotion 399 summary of learning objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • end notes
Advantage 12 Developing and Pricing 11 Marketing Processes and Consumer Behavior
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Chapter Opening Case: Starbucks Brews a New Marketing Mix 375 What Is Marketing? 376 Delivering Value 376 Goods, Services, and Ideas 378 Relationship Marketing and Customer Relationship Management 378 The Marketing Environment 379 managing in turbulent times: Feeling the Pressure for "Green" 381 Developing the Marketing Plan 382 Marketing Strategy: Flanning the Marketing Mix 383 Marketing Strategy: Target Marketing and Market Segmentation 386 Identifying Market Segments 387 Geographie Segmentation 387 Demographic Segmentation 387 Geo-Demographic Segmentation 387 Psychographic Segmentation 388 Behavioral Segmentation 388
Products
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Chapter Opening Case: iTunes Is It 413 What Is A Product? 414 The Value Package 414 Classifying Goods and Services 415 The Product Mix 416 Developing New Products 417 The New Product Development Process 417 entrepreneurship and new ventures: This Business Is /Appsolutely Booming 418 Product Mortality Rates 419 The Seven-Step Development Process 420 Variations in the Process for Services 420 Product Life Cycle 421 Stages in the PLC 421 Extending Product Life: An Alternative to New Products 423 Identifying Products 423 Determining Prices 425 Pricing to Meet Business Objectives 426 finding a better way: Fixed Prices in UAE 426 Price-Setting Tools 427
CONTENTS Pricing Strategies and Tactics 429 Pricing Strategies 429 managing in turbulent times: How Recessionary Times Became a Stimulus for Innovative Pricing and Promotion 431 Pricing Tactics 431 International Pricing 432 summary of leaming objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • end notes
13 Distributing and Promoting Products 442 Chapter Opening Case: With Its Worldly View, Netflix Wants an Entire Globe of Streamers 445 The Distribution Mix 446 Intermediaries and Distribution Channels 446 Distribution Strategies 448 Channel Conflict and Channel Leadership 449 Wholesaling 449 Merchant Wholesalers 449 Agents and Brokers 450 The Advent of the E-Intermediary 450 Retailing 451 Types of Brick-and-Mortar Retail Outlets 451 finding a better way: Bye-Bye Cash Registers, Hello Tablets! 452 Nonstore Retailing 452 Online Retailing 453 Physical Distribution 454 Warehousing Operations 455 Transportation Operations 455 entrepreneurship and new ventures: Running in Two Speeds at Once: Paperless and Paper 456 Distribution through Supply Chains as a Marketing Strategy 457 The Importance of Promotion 457 Promotional Objectives 457 Promotional Strategies 458 The Promotional Mix 458 Advertising Promotions 459 Personal Selling 460 Personal Selling Situations 460 Personal Selling Tasks 461 managing in turbulent times: Direct Mail Marketing: Back from a "Slow Death"? 462 The Personal Selling Process 463 Sales Promotions 464
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Direct (or Interactive) Marketing 464 Publicity and Public Relations 465 summary of leaming objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • crafting a business plan • end notes
Part 5: Managing Information for Better Business Decisions
14 Information Technology (IT) for Business 476 Chapter Opening Case: Online Pirates Feast on Economic Downturn 479 Information Technology Impacts: A Driver of Changes for Business 480 Creating Portable Offices: Providing Remote Access to Instant Information 480 Enabling Better Service by Coordinating Remote Deliveries 481 Creating Leaner, More Efficient Organizations 481 Enabling Increased Collaboration 482 Enabling Global Exchange 482 Improving Management Processes 482 Providing Flexibility for Customization 483 Providing New Business Opportunities 483 Improving the World and Our Lives 484 IT Building Blocks: Business Resources 485 The Internet and Other Communication Resources 486 Networks: System Architecture 487 Hardware and Software 490 Information Systems: Harnessing the Competitive Power of IT 491 managing in turbulent times: When Cash Gets Scarce, Businesses Switch to Internet Bartering 491 Leveraging Information Resources: Data Warehousing and Data Mining 492 entrepreneurship and new ventures: Speaking Loud and Clear: A New Voice Technology 493 Types of Information Systems 494 IT Risks and Threats 496 Hackers 496 Identity Theft 497 Intellectual Property Theft 497 Computer Viruses, Worms, and Trojan Horses 497 Spyware 497 Spam 498
CONTENTS IT Protection Measures 498 Preventing Unauthorized Access: Firewalls 498 Preventing Identity Theft 498 Preventing Infectious Intrusions: Anti-Virus Software 499 Protect!ng Electronic Communications: Encryption Software 499 Avoiding Spam and Spyware 499 finding a better way: The Pentagon's New Career Track: Cyberwarfare 500 Ethical Concems in IT 500 summary of learning objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • end notes
finding a better way: Ageing Asia 531 Bringing Ethics into the Accounting Equation 531 Why Accounting Ethics? 532 Intemationalizing Accounting 533 International Accounting Standards Board 533 finding a better way: Accounting Practices for the Small Business 534 Why One Set of Global Practices? 535 summary of learning objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • crafting a business plan • end notes
Part 6: The Financial System 15 The Role of Accountants and Accounting Information
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and Issues in Financial Management
Chapter Opening Case: Frenkel's Forensics 513 What Is Accounting, and Who Uses Accounting Information? 514 Who Are Accountants and What Do They Do? 515 Financial versus Managerial Accounting 515 Certified Public Accountants 515 Private Accountants and Management Accountants 518 Forensic Accountants 518 Federal Restrictions on CPA Services and Financial Reporting: Sarbox 519 The Accounting Equation 520 Assets and Liabilities 521 Owners' Equity 521 Financial Statements 521 Balance Sheets 522 Income Statements 523 Statements of Cash Flows 525 The Budget: An Internal Financial Statement 526 Reporting Standards and Practices 526 Revenue Recognition and Activity Timing 527 Füll Disclosure 527 Analyzing Financial Statements 527 managing in turbulent times: The "Fairness" Dilemma: What's an Asset's Real Value? 528 Solvency Ratios: Borrower's Ability to Repay Debt 529 Profitability Ratios: Earnings Power for Owners 529 entrepreneurship and new ventures: How Will Twitter Turn Tweets into Treasure? 530 Activity Ratios: How Efficiently Is the Firm Using Its Resources? 530
16 Understanding Money and the Role of Banking
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Chapter Opening Case: A Tale of Two Worlds in Banking 551 What Is Money? 552 The Characteristics of Money 552 The Functions of Money 553 M-1: The Spendable Money Supply 553 M-2: M-1 Plus the Convertible Money Supply 554 Credit Cards and Debit Cards: Plastic Money? 556 The U.S. Financial System 556 Financial Institutions 556 The Growth of Financial Services 558 managing in turbulent times: Getting Serious with Credit Standards 559 Financial Institutions Create Money and Are Regulated 560 Regulation of the Banking System 561 The Federal Reserve System 562 The Structure of the Fed 562 The Functions of the Fed 563 The Tools of the Fed 563 The Changing Money and Banking System 564 finding a better way: In Search of a Much-Needed Economic "Fix," the Fed Finds a Better Way 565 Government Intervention for Stabilizing the U.S. Financial System 565 Anticrime and Antiterrorism Regulations 566 The Impact of Electronic Technologies 567
CONTENTS entrepreneurship and new ventures: Cultivating a Social Side for Community Banking 568 International Banking and Finance 569 Currency Values and Exchange Rates 570 The International Payments Process 571 International Bank Structure 571 summary of leaming objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • end notes
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Choosing Equity versus Debt Capital 609 Regulating Securities Markets 611 The Securities and Exchange Commission 611 Regulations against Insider Trading 612 summary of leaming objectives • key terms • questions & exercises • building a business: continuing team exercise • building your business skills • exercising your ethics • team exercise • cases • crafting a business plan • end notes Appendices
1 7 Managing Business Finances 584 Chapter Opening Case: Investing in Green 587 Maximizing Capital Growth 588 The Time Value of Money and Compound Growth 588 Common Stock Investments 589 Investing to Fulfill Financial Objectives 591 Reasons for Investing 591 Most Mutual Funds Don't Match the Market 591 Exchange-Traded Funds 592 The Business of Trading Securities 592 Primary and Secondary Securities Markets 593 Stock Exchanges 593 Nonexchange Trading: Electronic Communication Networks 595 Individual Investor Trading 595 Tracking the Market Using Stock Indexes 596 entrepreneurship and new ventures: An Entrepreneurship of Evil 598 The Risk-Return Relationship 599 Investment Dividends (or Interest), Appreciation, and Total Return 599 Fantasy Stock Markets 600 Managing Risk with Diversification and Asset Allocation 601 Finding a Better Way: Mass Communications with IT Puts Stock Trading within Easy Reach 602 Financing the Business Firm 603 Secured Loans for Equipment 603 Working Capital and Unsecured Loans from Banks 603 Angel Investors and Venture Capital 604 Sale of Corporate Bonds 605 Managing in Turbulent Times: Weakening South African Housing Market? 606 Becoming a Public Corporation 607 Going Public Means Selling off Part of the Company 608 Stock Valuation 608 Market Capitalization 609
Appendix I: Risk Management
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Coping with Risk 623 Insurance as Risk Management 624 Appendix II: The Legal Context of Business
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The U.S. Legal and Judicial Systems 627 Types of Law 627 The U.S. Judicial System 628 Business Law 629 Contract Law 629 Tort Law 629 Property Law 630 Agency Law 631 Commercial Law 631 Bankruptcy Law 631 The International Framework of Business Law 632 Appendix III: Managing Your Personal Finances
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Building Your Financial Plan 633 Assessing Your Current Financial Condition 634 Develop Your Financial Goals 635 Making Better Use of the Time Value of Money 636 Flanning for the Golden Years 636 Time Value as a Financial-Planning Tool 637 Conserving Money by Controlling It 637 Credit Cards: Keys to Satisfaction or Financial Handcuffs? 638 Save Your Money: Lower Interest Rates and Faster Payments 638 Financial Commitments of Home Ownership 639 How Much House Can You Afford? 639 Cashing out from Tax Avoidance (Legally) 640 The IRA Tax Break 641
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CONTENTS
Protecting Your Net Worth 642 Why Buy Life Insurance? 643 What Does Life Insurance Do? 643 How Much Should I Buy? 643 Why ConsiderTerm Insurance? 643 How Much Does It Cost? 643 Appendix IV: Unions and Labor Management
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Why Do Workers Unionize? 645 The Evolution of Unionism in the United States 645 Early Unions 646 The Emergence of the Major Unions 646 Unionism Today 648 Trends in Union Membership 648 Trends in Union-Management Relations 649
Trends in Bargaining Perspectives 650 The Future of Unions 650 Contemporary Union Structure 651 Locals 651 Laws Governing Labor-Management Relations 652 The Major Labor Laws 652 How Unions Are Organized and Certified
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Collective Bargaining 655 Reaching Agreement on Contract Terms 656 Contract Issues 656 When Bargaining Fails 657 Administering a Labor Agreement 659 end notes
Glossary 661 Index 681
