NINTH EDITION BUSINESS

What Is a "Small" Business? 82 The Importance of Small Business in the U.S. Economy 82 Popular Areas of Small-Business Enterprise 84 Managing in Turbu...

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NINTH EDITION

BUSINESS ESSENTIALS GLOBAL EDITION

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 Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

11

Part 1: The Contemporary Business World

Business and Managerial Ethics 55 Assessing Ethical Behavior 57 Company Practices and Business Ethics 58

1

Social Responsibility 24

60

The Stakeholder Model of Responsibility 61 Entrepreneurship and New Ventures: The Electronic Equivalent of Paper Shredding 62

Chapter Opening Case: What Goes Up... Can Go Even Higher! 24

Contemporary Social Consciousness 63

The Concept of Business and the Concept of Profit 26 The External Environments of Business 27

Areas of Social Responsibility

64

Responsibility toward the Environment 64

Domestic Business Environment 28

Responsibility toward Customers 65

Global Business Environment 28

Responsibility toward Employees 68

Technological Environment 28

Responsibility toward Investors 68

Political-Legal Environment 28

Implementing Social Responsibility Programs 69

Sociocultural Environment 29

Approaches to Social Responsibility 70

Economic Environment 29

Managing Social Responsibility Programs 72

Economic Systems 29 Factors of Production 29 Managing in Turbulent Times: What Goes Around... 31 Types of Economic Systems 31 The Economics of Market Systems 33 Demand and Supply in a Market Economy 33 Private Enterprise and Competition in a Market Economy 36 Entrepreneurship and New Ventures: Business... and Pleasure 38

Social Responsibility and the Small Business 72 End-of-Chapter Review: Sinopec's Sustainability 74 Online content www.pearsonglobaleditions.com/mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Video Exercise • End Notes

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Economic Indicators 38 Economic Growth, Aggregate Output, and Standard of Living 39 Economic Stability 43

ras

80

Chapter Opening Case: Harvard Dropout Turned Billionaire 80

Managing the U.S. Economy 45 End-of-Chapter Review: Hitting the Peak? 46 Online content www.pearsonglobaleditions.com/mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Video Exercise • End Notes

What Is a "Small" Business? 82 The Importance of Small Business in the U.S. Economy 82 Popular Areas of Small-Business Enterprise 84 Managing in Turbulent Times: The Wide World of Risk 85

Entrepreneurship 86 Entrepreneurial Characteristics 86 Starting and Operating a New Business Chapter Opening Case: China in the Spotlight Ethics in the Workplace

52

54

Starting the Small Business 88

Managing in Turbulent Times: Just When They Need It Most 55

Trends, Successes, and Failures in New Ventures 90

Individual Ethics 54

8

Crafting a Business Plan 87 Financing the Small Business 89

87

CONTENTS Trends in Small-Business Start-Ups Reasons for Failure

90

Part 2: The Business of Managing

92

Reasons for Success 92 Entrepreneurship and New Ventures: Being Savvy and Lucky Make a Great Combination 93

Noncorporate Business Ownership 94 Sole Proprietorships Partnerships Cooperatives

s Mainiagemeot 134 Chapter Opening Case: Google Keeps Growing T h e M a n a g e m e n t Process

94

Planning

95

Leading

Corporations 96 96

Types of Corporations

138

Types of M a n a g e r s 139 Levels of Management 139

98

Managing a Corporation

137

138

Controlling

The Corporate Entity

136

136

Organizing

96

134

99

Areas of Management

Special Issues in Corporate Ownership 100 End-of-Chapter Review: Conjuring Up Profits? 102 Online content www.pearsonglobaleditions.com/ mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Video Exercise • End Notes

140

Basic Management Skills 142 Technical Skills

142

Human Relations Skills Conceptual Skills

142

142

Decision-Making Skills

142

Time Management Skills

143

Management Skills for the Twenty-First Century

143

Strategic Management: Setting Goals and Formulating Strategy 144 Setting Business Goals

108 Chapter Opening Case: Cocoa—a Fair-Trade? The Contemporary Global Economy

Entrepreneurship and New Ventures: Samuel

108

Adams Makes Headway

111

The Major World Marketplaces 112 Trade Agreements and Alliances 113 International T r a d e 115 Exchange Rates 118 Forms of Competitive Advantage 119 Entrepreneurship and New Ventures: Rolling in the Worldwide Dough 120

Types of Strategy

121

Formulating Strategy

International Organization Structures

for Gulf Airlines

151

Contingency Planning and Crisis Management 151 Contingency Planning Crisis Management

122

152

152

Communicating the Culture and Managing Change

123

125

125 126

End-of-Chapter Review: The Profitability of Ethical Sourcing 128 Online content www.pearsonglobaleditions.com/ mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Crafting a Business Plan • Video Exercise • End Notes

153

End-of-Chapter Review: Want to Know-the Future? Just Google It... 154 Online content www.pearsonglobaleditions.com/ mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Video Exercise • End Notes

Barriers to International Trade 125

Legal and Political Differences

150

A Hierarchy of Plans

Managing in Turbulent Times: The Ups and Downs of Globalization 124

Economic Differences

148

Management and the Corporate Culture 152

Levels of International Involvement

Social and Cultural Differences

145

147

Managing in Turbulent Times: Challenging Times

International Business Management 121 Going International

144

6

160

Chapter Opening Case: A New Chinese-American Recipe For Success 160

What Is Organizational Structure? 162 Organization Charts

162

Determinants of Organizational Structure

163

10

CONTENTS

The Building Blocks of Organizational Structure 164

The Master Production Schedule Detailed Schedules

Specialization 164 Departmentalization 165 Managing in Turbulent Times: Restructuring BlueScope Steel 167

Staff Schedules and Computer-Based Scheduling Project Scheduling

Materials Management

Distributing Authority: Centralization and Decentralization 168

Matrix Structure

Tools for Total Quality Management

172

The Supply Chain Strategy

208

End-of-Chapter Review: Price vs. Quality

International Structure

175

Organizational Design for the Twenty-First Century

176

Informal Organization 177 178

Organizational Grapevine Intrapreneuring

208

Outsourcing and Global Supply Chains

174

Informal Groups

205

Adding Value Through Supply Chains 207

173

Entrepreneurship and New Ventures: Making the Grade

203

Managing in Turbulent Times: Leaner Operations Are Restoring the U.S. Auto Industry 204

172

Divisional Structure

202

Managing for Quality

170

Basic Forms of Organizational Structure 172 Functional Structure

Quality Control

202

Quality Improvement and Total Quality Management 203

170

Three Forms of Authority

199

200

Operations Control 201

Establishing the Decision-Making Hierarchy 167

The Delegation Process

199

199

178

178

End-of-Chapter Review: Tweaking the Recipe 180 Online content www.pearsonglobaleditions.com/ mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Video Exercise • End Notes

210

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Part 3: People in Organizations

216 Chapter Opening Case: Pay in Asia Eclipses the West 216

Forms of Employee Behavior 218 Performance Behaviors

Chapter Opening Case: Ryanair Customer Satisfaction—but Who to Believe? 186

What Does Operations Mean Today? 188 Creating Value through Operations 188

Operations Processes

Personality at Work

191

Business Strategy as the Driver of Operations 192 192

Operations Planning 194 Entrepreneurship and New Ventures: A Better Path to Planning Meals (and Better Eating, Too) 195 Capacity Planning 195 Location Planning

196

Layout Planning

196

Quality Planning

197

Methods Planning

198

Operations Scheduling 199

219

Managing in Turbulent Times: Tragedy 220

.

Individual Differences Among Employees 220

190

The Many Faces of Production Operations

219

Counterproductive Behaviors in the Workplace

Differences between Service and Goods Manufacturing Operations

218

Organizational Citizenship

Attitudes at Work

221 222

Matching People and Jobs 223 Psychological Contracts The Person-Job Fit

223

224

Basic Motivation Concepts and Theories 225 Classical Theory 225 Early Behavioral Theory 225 Contemporary Motivation Theory

228

Strategies and Techniques for Enhancing Motivation 229 Reinforcement/Behavior Modification

230

CONTENTS

Entrepreneurship and New Ventures: Extreme Employee Empowerment 231 Using Goals to Motivate Behavior 231 Participative Management and Empowerment 232 Team Structures 232

11

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Job Enrichment and Job Redesign 233 Modified Work Schedules 233 End-of-Chapter Review: Motivation in China 236 Online content www.pearsonglobaleditions.com/ mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Video Exercise • End Notes

264 Chapter Opening Case: Twenty-five Years of Procter & Gamble, Egypt 264

The Foundations of Human Resource Management 267 The Strategic Importance of HRM 267 HR Planning 267

Staffing the Organization 268 Recruiting Human Resources 269 Selecting Human Resources 269 Chapter Opening Case: Middle Eastern Business Leadership 242

The Nature of Leadership 244 Early Approaches to Leadership 245

Developing the Workforce 271 Training 271

Trait Approaches to Leadership 245

Performance Appraisal 271

Behavioral Approaches to Leadership 246 The Situational Approach to Leadership

Compensation and Benefits 246

Leadership Through the Eyes of Followers

247

271

Wages and Salaries 272 Incentive Programs 272 Benefits Programs 273

Transformational Leadership 247

The Legal Context of HRM

Charismatic Leadership 248 Special Issues in Leadership

Entrepreneurship and New Ventures: Moving People to Move Movies 270

249

274

Equal Employment Opportunity 274

Leadership Substitutes 249

Contemporary Legal Issues in HRM 275

Leadership Neutralizers 249

Managing in Turbulent Times: In Good Times and Bad 276

Managing in Turbulent Times: No More Secrets? 250

The Changing Nature of Leadership 251

New Challenges in the Changing Workplace 277 Managing Workforce Diversity 277

Leaders as Coaches 251

Managing Knowledge Workers 278

Gender and Leadership 251

Contingent and Temporary Workers 279 Dealing w i t h Organized Labor

Cross-Cultural Leadership 251 Emerging Issues in Leadership

252

Strategic Leadership 252

279

Unionism Today 279 Collective Bargaining

280

Ethical Leadership 252

Reaching Agreement on Contract Terms 281

Virtual Leadership 252

Contract Issues 281

Entrepreneurship and New Ventures: An Apple a Day 253

When Bargaining Fails 282

Leadership, Management, and Decision Making 253 Rational Decision Making 254 Behavioral Aspects of Decision Making 256 End-of-Chapter Review: What Makes A Good Leader? 258

End-of-Chapter Review: Reaping the Rewards of the "Build Within" Policy 284 Online content www.pearsonglobaleditions.com/ mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Crafting a Business Plan • Video Exercise • End Notes

12

CONTENTS

Part 4: Principles of Marketing

n

C o a s u i m e i r B©[email protected]

290

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Chapter Opening Case: Starbucks Brews a New Marketing Mix 290 What Is Marketing? 292 S 320

Delivering Value 292 Goods, Services, and Ideas 293 Relationship Marketing and Customer Relationship Management 293 The Marketing Environment 294 Managing in Turbulent Times: Feeling the Pressure for "Green" 296

Strategy: The Marketing Mix 297 Product 297 Pricing 298 Place (Distribution) 298 Promotion 298 Blending It All Together: Integrated Strategy 298

Target Marketing and Market Segmentation 299 Identifying Market Segments 299

Understanding Consumer Behavior 301 Influences on Consumer Behavior 301 The Consumer Buying Process 301

Organizational Marketing and Buying Behavior 303 Business Marketing 303 B2B Buying Behavior 303

What Is a Product? 304 The Value Package 304 Classifying Goods and Services 305 The Product Mix 306

Developing New Products 306 The New Product Development Process 306 Product Mortality Rates 307 Product Life Cycle 307 Identifying Products 309

The International Marketing Mix 311 International Products 311 International Pricing 311 International Distribution 312 International Promotion 312

Small Business and the Marketing Mix 312 Entrepreneurship and New Ventures: Social Networking for Job Opportunities in Tough Times 313 End-of-Chapter Review: Can Starbucks Have the Best of Both Markets—Luxury AND Affordability? 314

Chapter Opening Case: iTunes Is It 320 Determining Prices 322 Pricing to Meet Business Objectives 322 Price-Setting Tools 323

Pricing Strategies and Tactics 325 Pricing Strategies 325 Pricing Tactics 326

The Distribution Mix 327 Intermediaries and Distribution Channels 327

Wholesaling 329 Retailing 329 Types of Brick-and-Mortar Retail Outlets 329 Entrepreneurship and New Ventures: A 'Helping Hand' for Professional Inspiration: wowOwow! 330 Nonstore Retailing 331

The Role of E-Intermediaries 331 Online Shopping Agents 331 Electronic Retailing 331

Physical Distribution 333 Warehousing Operations 333 Transportation Operations 334 Distribution Through Supply Chains as a Marketing Strategy 334 Managing in Turbulent Times: Getting a Stimulus Boost with Pricing and Promotion 335

The Importance of Promotion 336 Promotional Objectives

336



The Promotional Mix 337 Advertising Promotions 338 Personal Selling 339 Sales Promotions 340 Direct (or Interactive) Marketing 340 Publicity and Public Relations 341 End-of-Chapter Review: At Apple, iTunes Means Mu$ic 342 Online content www.pearsonglobaleditions.com/ mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills . • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Video Exercise • End Notes

13

CONTENTS

Part 5: Managing Information

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13 350 Chapter Opening Case: Online Pirates Feast on Economic Downturn 350

IT Impacts 352

g

Creating Portable Offices: Providing Remote Access to Instant Information 352

Chapter Opening Case: Frenkel's Forensics 378

What Is Accounting, and Who Uses Accounting Information? 380 Who Are Accountants and What Do They Do? 380

Enabling Better Service by Coordinating Remote Deliveries

352

Creating Leaner, More Efficient Organizations Enabling Increased Collaboration Enabling Global Exchange

352

353

Financial versus Managerial Accounting Certified Public Accountants 381 Private Accountants and Management

353

Improving Management Processes

354

Providing Flexibility for Customization

354

Providing New Business Opportunities

354

Improving the World and Our Lives

Accountants

356

359

360

362

364

364

Reporting Standards and Practices 391 Analyzing Financial Statements 392 Managing in Turbulent Times: The "Fairness" Dilemma: What's an Asset's Real Value?

393 -

Profitability Ratios: Earnings Power for Owners Twitter Turn Tweets into Treasure?

367

Intellectual Property Theft

391

394

394

Entrepreneurship and New Ventures: How Will

Hackers 366

395

Activity Ratios: How Efficiently Is the Firm Using Its Resources? 396

367

Computer Viruses, Worms, and Trojan Horses

Bringing Ethics into the Accounting— Equation 396

367

Spyware 368

Why Accounting Ethics? 396

Spam 368

Internationalizing Accounting 398

IT Protection Measures 368 Preventing Unauthorized Access: Firewalls Preventing Identity Theft

368

International Accounting Standards Board

369

Why One Set of Global Practices?

Preventing Infectious Intrusions: Anti-Virus Software

369

Protecting Electronic Communications: Encryption Software

390

The Budget: An Internal Financial Statement

Solvency Ratios: Borrower's Ability to Repay Debt

IT Risks and Threats 366 Identity Theft

388

Statements of Cash Flows

and Data Mining 363 Entrepreneurship and New Ventures: Speaking Loud and Clear: A New Voice Technology

386

Income Statements

Leveraging Information Resources: Data Warehousing

Types of Information Systems

The Accounting Equation 385 Financial Statements 386 Balance Sheets

Information Systems: Harnessing the Competitive Power of IT 361 Managing in Turbulent Times: When Cash Gets Scarce, Businesses Switch to Internet Bartering

383

Federal Restrictions on CPA Services and Financial Reporting: Sarbox 384

The Internet and Other Communication Resources Hardware and Software

380

383

Forensic Accountants

355

IT Building Blocks: Business Resources 356 Networks: System Architecture

378

369

Avoiding Spam and Spyware

370

Ethical Concerns in IT 370 End-of-Chapter Review: Online Piracy Means Tougher Economic Times 372

398

398

End-of-Chapter Review: Investigating Fraud 400 Online content www.pearsonglobaleditions.com/ mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Video Exercise • End Notes

14

CONTENTS

Investing to Fulfill Financial Objectives

Part 6: Financial Issues

Reasons for Investing

Exchange-Traded Funds

Chapter Opening Case: A Tale of Two Worlds in Banking 408 410

Networks 411 412

444

Tracking the Market Using Stock Indexes

The U.S. Financial System 412

Entrepreneurship of Evil

412

Investment Dividends (or Interest), Appreciation, and Total Return 449

Financial Institutions Create Money and Are Regulated 417 Regulation of the Banking System

Managing Risk with Diversification and Asset Allocation

418

The Functions of the Fed

420

Secured Loans for Equipment

451

Working Capital and Unsecured Loans from Banks Angel Investors and Venture Capital

420

Sale of Corporate Bonds

The Changing Money and Banking System 421

422

423 424

Market Capitalization

455

Choosing Equity Versus Debt Capital

Regulations Against Insider Trading

426

427

End-of-Chapter Review: Shakeups Bring a Wakeup Call to Banking 428 Online content www.pearsonglobaleditions.com/ mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Video Exercise • End Notes

Maximizing Capital Growth 438

Insurance as Risk Management

Common Stock Investments

439

457

Appendices

Coping with Risk

438

457

End-of-Chapter Review: U.S. Cap and Trade Experiment Is Put on Hold 458 Online content www.pearsonglobaleditions.com/ mybizlab: Summary of Learning Objectives • Key Terms • Questions & Exercises • Building Your Business Skills • Exercising Your Ethics: Individual Exercise • Exercising Your Ethics: Team Exercise • Video Exercise • End Notes

Chapter Opening Case: Investing in Green 436

The Rule of 72

456

Appendix I: Risk Maea

436

The Time Value of Money and Compound Growth

454

454

The Securities and Exchange Commission

Currency Values and Exchange Rates 425

16

Going Public Means Selling Off Part of the Company

Regulating Securities Markets 456

International Banking and Finance 425 The International Payments Process

453

Becoming a Public Corporation 454 Stock Valuation

Entrepreneurship and New Ventures: Cultivating a Social Side for Community Banking

452

African Housing Market?

Anti-Crime and Anti-Terrorism Regulations The Impact of Electronic Technologies

451

451

Managing in Turbulent Times: Weakening South

Government Intervention for Stabilizing the U.S. Financial System 422

International Bank Structure

450

Financing the Business Firm 450

The Federal Reserve System 418 418

447

The Risk-Return Relationship 448

415

416

The Structure of the Fed

445

Entrepreneurship and New Ventures: An

Managing in Turbulent Times: Getting Serious

The Tools of the Fed

444

Individual Investor Trading

M-2: M-1 Plus the Convertible Money Supply

The Growth of Financial Services

442

442

Non-Exchange Trading: Electronic Communication

410

with Credit Standards

441

Primary and Secondary Securities Markets Stock Exchanges

M-1: The Spendable Money Supply

Financial Institutions

441

The Business of Trading Securities 442

What Is Money? 410 The Functions of Money

440

Most Mutual Funds Don't Match the Market

408

The Characteristics of Money

440

438

466

466 466

Appendix 11: The Legal Content S

468

CONTENTS

The U.S. Legal and Judicial Systems 468 Types of Law 468 The U.S. Judicial System

Planning for the Golden Years

468

476

Conserving Money by Controlling It 476

Contract Law 469

Credit Cards: Keys to Satisfaction or Financial

469

Handcuffs?

Property Law 470

477

Save Your Money: Lower Interest Rates and Faster

Agency Law 470 Commercial Law

475

Time Value as a Financial-Planning Tool

Business Law 469 fort Law

Making Better Use of the Time Value of Money 475

Payments

471

477

Declining Asset Value: A Borrower's Regret

Bankruptcy Law 471

The International Framework of Business Law 472

How Much House Can You Afford?

S 473

Building Your Financial Plan 473 Develop Your Financial Goals

474

477

Cashing Out from Tax Avoidance (Legally) 480 The IRA Tax Break 480 Protecting Your Net Worth 481

Appendix ill:

Assessing Your Current Financial Condition

477

Financial Commitments of Home Ownership 477

473

Glindex 483

15