LEARNING OBJECTIVES
Moses Gerard Shyne CHAPTER 3

1. Explain why nations and companies participate in international trade.
Because no national economy produces all the goods and services that its people need.
2. Describe the concepts of absolute and comparative advantage.
A nation has an absolute advantage if (1) it’s the only source of a particular product or (2) it can make more of a product using the same amount of or fewer resources than other countries.
Because of climate and soil conditions, for example, comparative advantage , which exists when a country can produce a product at a lower opportunity cost compared to another nation
3. Explain how trade between nations is measured.
We determine a country’s of trade by subtracting the value of its imports from the value of its exports. If a country sells more products than it buys,it has a favorable balance, called a trade surplus . If it buys more than it sells, it has an unfavorable balance, or a trade deficit 1. Define importing and exporting.
Importing involves purchasing products from other countries and reselling them in one’s own.
Exporting entails selling products to foreign customers.
2. Explain how companies enter the international market through licensing agreements or franchises. Foreign direct investment (FDI) refers to the formal establishment of business operations on foreign soil.
3. Describe how companies reduce costs through contract manufacturing and outsourcing.

Through international contract manufacturing , or outsourcing , a company has its products manufactured or services provided in other countries.
4. Explain the purpose of international strategic alliances and joint ventures.
A strategic alliance is an agreement between two companies to pool talent and resources to achieve business goals that benefit both partners.
5. Understand how U.S. companies expand their businesses through foreign direct investments and international subsidiaries.
Foreign direct investment (FDI) refers to the formal establishment of business operations on foreign soil.
6. Understand the arguments for and against multinational corporations.
Offshoring occurs when a company sets up facilities in a foreign country that replaces U.S. manufacturing facilities to produce goods that will be sent back to the United States for sale.
Shifting production to low ­wage countries is often criticized as it results in the loss of jobs for
U.S. workers. 1. Appreciate how cultural, economic, legal, and political differences between countries create challenges to successful business dealings.
Success in international business means understanding an assortment of cultural, economic, and legal differences between countries. 1. Describe the ways in which governments and international bodies promote and regulate global trade.
They protect domestic industries by reducing foreign competition, the use of controls to restrict free trade is often called protectionism

1. Discuss the various initiatives designed to reduce international trade barriers and promote free trade.
The General Agreement on Tariffs and Trade (GATT) encourages free trade by regulating and reducing tariffs and by providing a forum for resolving disputes. 1. Understand how to prepare for a career in international business.
Major in international business. Develop your knowledge of international politics, economics, and culture.Study a foreign language.Take advantage of study ­abroad opportunities. Interact with fellow students from other cultures. CHAPTER 4
1. Identify the questions to ask in choosing the appropriate form of ownership for a business.

What are you willing to do to set up and operate your busi ness ? How much control do you want?Do you want to share profits with others? Do you want to avoid special taxes on your business? Do you have all the skills needed to run the business ? Should it be posisble for the business to continue without you ? What are your financing needs?How much liability exposure are you willing to accept ?
1. Describe the sole proprietorship form of organization, and specify its advantages and disadvantages. Advantages of a sole proprietorship include the following:
Easy and inexpensive to form; few government regulations Complete control over your business
Get all the profits earned by the business Don’t have to pay any special income taxes
Disadvantages of a sole proprietorship include the following:

Have to supply all the different talents needed to make the business a success If you die, the business dissolves Have to rely on your own resources for financing If the company incurs a debt or suffers a catastrophe, you are personally liable (you have unlimited liability)
1. Identify the different types of partnerships, and explain the importance of a partnership agreement. A general partnership is a business owned jointly by two or more people.A limited partnership has a single general partner who runs the business and is responsible for its liabilities, plus any number of limited partners who have limited involvement in the business and whose losses are limited to the amount of their investment. 2. Describe the advantages and disadvantages of the partnership form of organization
.A partnership has several advantages over a sole proprietorship: It’s relatively inexpensive to set up and subject to few government regulations. Partners pay personal income taxes on their share of profits; the partnership doesn’t pay any special taxes. It brings a diverse group of people together to share managerial responsibilities.disadvantages over a sole proprietorship:
Shared decision making can result in disagreements. Profits must be shared. 1. Explain how corporations are formed and how they operate.
Corporations are owned by shareholders who invest money in them by buying shares of stock .
They elect a board of directors that’s legally responsible for governing the corporation. 2. Discuss the advantages and disadvantages of the corporate form of ownership.
An important advantage of incorporation is limited liability : Owners are not responsible for the obligations of the corporation and can lose no more than the amount that they have personally

invested in the company. Incorporation also makes it easier to access financing. Because the corporation is a separate legal entity, it exists beyond the lives of its owners. Corporations are gener ally able to attract skilled and talented employees. A corporation has several disadvantages over a sole proprietorship and partnership: The goals of corporate managers, who don’t necessarily own stock, and shareholders, who don’t necessarily work for the company, can differ. It’s costly to set up and subject to burdensome regulations and government oversight. It’s subject to ―double taxation.‖ Corporations are taxed on their earnings. When these earnings are distributed as dividends, the shareholders pay taxes on these dividends. 1. Examine special types of business ownership, including S ­ corporations, limited ­ liability companies, cooperatives, and not ­for ­ profit corporations.
The S ­ corporation gives small business owners limited liability protection, but taxes company profits only once, when they are paid out as dividends. It can’t have more than one hundred stockholders. A limited ­ liability company (LLC) is similar to an S ­ orporation: its members are not personally liable for company debts and its earnings are taxed only once, when they’re paid out as dividends. But it has fewer rules and restrictions than does an S ­ corporation. For example, an LLC can have any number of members. A cooperative is a business owned and controlled by those who use its services. Individuals and firms who belong to the cooperative join together to market products, purchase supplies, and provide services for its members. A not
­ for ­ profit corporation is an organization formed to serve some public purpose rather than for financial gain. It enjoys favorable tax treatment. 1. Define mergers and acquisitions, and explain why companies are motivated to merge or acquire other companies

A merger occurs when two companies combine to form a new company. An acquisition is the purchase of one company by another with no new company being formed. Companies merge or acquire other companies to gain complementary products, attain new markets or distribution channels, and realize more efficient economies of scale. A hostile takeover is an act of assuming control that is resisted by the targeted company’s management and its board of directors. Chapter 5
1. Define entrepreneur.
An entrepreneur is someone who identifies a business opportunity and assumes the risk of creating and running a business to take advantage of it. 2. Describe the three characteristics of entrepreneurial activity.
Innovating . An entrepreneur offers a new product, applies a new technique or technology, opens a new market, or develops a new form of org anization for the purpose of producing or enhancing a product.
Running a business . Entrepreneurship means setting up a business to make a profit from an innovative product or process. Risk taking . Risk means that an outcome is unknown. Entrepreneurs, there fore, are always working under a certain degree of uncertainty, and they can‘t know the outcomes of many of the decisions that they have to make.
3. Identify five potential advantages to starting your own business.
Be your own boss.
Accommodate a desired lifestyle.

Achieve financial independence.
Enjoy creative freedom.
Use your skills and knowledge. 1. Define a small business.
A small business is one that is independently owned and operated, exerts little influence in its industry, an (with a few exceptions) has fewer than five hundred employees. 2. Explain the importance of small businesses to the U.S. economy.
There are more than twenty ­ seven million small businesses in this country, and they generate about 50 percent of our gross domestic product (GDP). 1. Describe the goods ­ producing and service ­ producing sectors of an economy.
The goods ­ producing sector includes all businesses that produce tangible goods 2. Identify the industries in which small businesses are concentrated.
Many small businesses in the service ­ producing sector are retailers — they buy goods from other firms and resell them to consumers, in stores, by phone, through direct mailings, or over the Internet. Other small business owners in this sector are wholesalers — they sell products to businesses that buy them for resale or for company use. A high proportion of small businesses in this sector provide professional, business, or personal service s.

1. Summarize the advantages and disadvantages of business ownership.

There are several advantages that, generally speaking, come with success in business ownership: 1. Independence . As a business owner, you‘re your own boss.
2. Lifestyle . Because you‘re in charge, you decide when and where you want to work.
3. Financial rewards . In spite of high financial risk, running your own business gives you a chance to make more money than if you were employed by someone else.
4. Learning opportunities . As a business owner, you‘ll be involved in all aspects of your business. 5. Creative freedom and personal satisfaction . As a business owner, you‘ll be able to work in a field that you really enjoy, and you‘ll gain personal satisfaction from watching your business succeed. There are also a number of potential disadvantages to consider in deciding whether to start a small business:
1. Financial risk . The financial resources needed to start and grow a business can be extensive, and if things don‘t go well, you may face substantial financial loss. In addition, you‘ll have no guara nteed income.
2. Stress . You‘ll have a bewildering array of things to worry about — competition, employees, bills, equipment breakdowns, customer problems. 1. Explain what it takes to start a business.
What, exactly, is my business idea ? Is it feasible?
What type of business is right for me? What industry do I want to get into?
Do I want to run a business that‘s similar to many existing businesses, or do I want to innovate? Do I want to start a new business, take over an existing one, or buy a franchise?
Do I want to start the business by myself, or do I want company? 2. Evaluate the advantages and disadvantages of several small business ownership options — starting a business from scratch, buying an existing business, and obtaining a franchise.
Starting from scratch . This is the most common and riskiest option. Advantage You start with a clean slat e and build the business the way you want. Disadvantage : It‘s up to you to develop your customer base and build your reputation. Buying an existing business . This option is not as risky as starting a business from scratch, but it has some drawbacks. Advantages : You‘ll already have a proven product, current customers, active suppliers, a known location, and trained employees. Disadvantages : It‘s hard to determine how much to pay for a business; perhaps the current owners have disappointed customers; maybe the location isn‘t as good as it used to be. Buying a franchise Under a franchise setup, a franchiser (the company that sells the franchise) grants the franchisee (the buyer) the right to use a brand name and to sell its goods or services.
Advantages : You‘ve bought a prepackaged, ready ­ to ­ go business that‘s proven successful elsewhere; you also get ongoing support from the franchiser.
Disadvantages : The cost can be high; you have to play by the franchiser‘s rules; and franchisers don‘t always keep the ir promises.

1. Discuss the importance of planning for your business, and identify the key sections of a business plan.A business plan generally includes the following sections:
1. Executive summary. One ­ to three ­ page overview.

2. Description of proposed business. Brief description of the company that answers such questions as what your proposed company will do, what goods or services it will provide, and who its main customers will be.
3. Industry analysis. Short introduction to the industry in which you propose to operate.
4. Mission statement and core values and what is (and isn‘t) appropriate in conducting company activities. 5. Management plan. Information about management team qualifications and responsibilities, and design ation of your proposed legal form of organization.
6. Goods, services, and the production process. Description of the goods and services that you‘ll provide in the marketplace; explanation of how you plan to obtain or make your products or of the process by which you‘ll deliver your services.
7. Marketing. Description of your plans in four marketing ­ related areas: target market, pricing, distribution, and promotion.
8. Global issues. Description of your involvement, if any, in international markets.
9. Financial plan. Report on the cash you‘ll need for start ­ up and initial operations, proposed funding sources, and means of repaying your debt.
10. Appendices. Supplemental information that may be of interest to the reader. 1. Discuss ways to succeed in managing a business, and explain why some businesses fail.
Business owners face numerous challenges, and the ability to meet them is a major factor in success (or failure). As a business owner, you should do the following:
1. Know your business . Successful businesspeople are knowledgeable about the industry in which they operate, and they know who their competitors are.

2. Know the basics of business management To manage a business, you need to understand the functional areas of business — accounting, finance, management, marketing, and production. 2. Identify sources of small business assistance from the Small Business Administration.
The SBDC (Small Business Development Centers) matches businesspeople needing advice with teams of retired executives wh o work as volunteers through the SCORE program. Chapter 6
1. Identify the four interrelated functions of management: planning, organizing, directing, and controlling. Managers plan, organize, direct, and control resources to achieve specific goals. In planning , they set goals and determine the best way to achieve them. Organizing means allocating resources (people, equipment, and money) to carry out the company’s plans. Directing is the process of providing focus for employees and motivating them to achieve organizational goals.
Controlling involves comparing actual to expected performance and taking corrective action when necessary.
1. Understand the process by which a company develops and implements a strategic plan.
It begins with strategic planning — the process of establishing an overall course of action. Step one is identifying the purpose of the organization. Then, management is ready to take the remaining steps in the strategic planning process:
1. Prepare a mission statement that describes the purpose of the organization and tells customers, employees, and others what it’s committed to doing.

2. Select the core values that will guide the behavior of members of the organization by letting them know what is and isn’t appropriate and important in conducting company activities. 3. Use SWOT analysis to assess the company’s strengths and weaknesses and its fit with the external environment.
4. Set goals and objectives or performance targets, to direct all the activities needed to achieve the organization’s mission.
5. Develop tactical plans and operational plans to implement objectives
1. Discuss various options for organizing a business, and create an organization chart.
Management must develop an organizational structure, or arrangement of people within the organization, that will best achieve company goals. The process begins with specialization — dividing necessary tasks into jobs; the principle of grouping jobs into units is called departmentalization . Units are then grouped into an appropriate organizational structure.
Functional organization groups people with comparable skills and tasks; divisional organization creates a structure composed of self ­ contained units basedonproduct ,customer , process , or geographical division . Forms of organizational division are often combined. An organization’s structure is represented in an organization chart — a diagram showing the interrelationships of its positions. This chart highlights the chain of command , or auth ority relationships among people working at different levels.
1.Explain how managers direct others and motivate them to achieve company goals.
Practicing a transformational style , managers mentor and develop subordinates and motivate them to achieve organizational rather than merely personal goals. Transformational leadership is effective in organizations that value team building and information sharing.
1. Describe the process by which a manager monitors operations and assesses performance.

The process of comparing actual to planned performance and taking corrective action is called controlling . The control function can be viewed as a five ­ step process: (1) establish standards,
(2) measure performance, (3) compare actual performance with standards and identify any deviations, (4) determine the reason for deviations, and (5) take corrective action if needed.
1. Describe the skills needed to be a successful manager.
The skills needed by managers vary according to level. Top managers need strong conceptual skills , while those at midlevel need good interpersonal skills and those at lower levels need technical skills . All managers need strong communication , decision ­ making , and time ­ management skills Chapter 7
1. Define human resource management and explain how managers develop and implement a human resource plan.
The process of human resource management consists of all the actions that an organization takes to attract, develop, and retain quality employees. To ensure that the organization is properly staffed, managers engage in strategic human resource planning — the process of developing a plan for satisfying the organization’s human resource needs.
1. Explain how companies train and develop employees, and discuss the importance of a diverse workforce
The process of introducing new employees to their jobs and to the company is called orientation.An effective approach is to take things slowly, providing new employees with information on a need ­ to ­ know basis while making them feel as comfort able as possible.
New employees will need initial training to start their jobs, and they’ll need additional training as

they grow in or change their jobs. Off ­ thejob training allows them to focus on learning without the distractions that would occur in the office, but on ­ the ­ job training is more common
1. Define motivation and describe several theories of motivation.
The general desire or willingness of someone to do something.There are four influential theories of motivation: hierarchy ­ of ­ needs theory, two ­ factor theory, expectancy theory, and equity theory. Hierarchy ­of ­ needs theory proposes that we’re motivated by five unmet needs — physiological, safety, social, esteem, and self ­ actualization — and must satisfy lower ­ level needs before we seek to satisfy higher ­ level needs.
1. Identify factors that make an organization a good place to work, including competitive compensation and benefits packages.
Employees report that they’re motivated to perform well when they’re challenged, respected, treated fairly, and appreciated. Other factors may contribute to employee satisfaction. Some companies use job redesign to make jobs more interesting and challenging. Job rotation allows employees to rotate from one job to another on a systematic basis. Job enlargement enhances a job by adding tasks at similar skill levels. Job enrichment adds tasks that increase both responsibility and opportunity for growth. Many organizations recognize the need to help employees strike a balance between their work and home lives and offer a variety of work arrangements to accommodate different employee needs. Flextime allows employee s to designate starting and quitting times, compress workweeks, or perform part ­ time work. With job sharing , two people share one full ­ time position. Telecommuting means working from home. Many employers also offer dependent care, paid leave for new parent s, employee ­ assistance programs, and on ­ site fitness centers. Competitive compensation also helps.
Workers who are paid by the hour earn wages , while those who are paid to fulfill the responsibilities of the job earn salaries

1. Explain how managers evaluate employee performance and retain qualified employees.
In addition to offering competitive compensation, companies may take a variety of steps to retain qualified employees:
1. Providing appropriate training and development
2. Helping employees achieve a satisfying work/nonwork balance in their lives
3. Creating a positive work environment
4. Recognizing employee efforts
5. Involving employees in decision making
1. Explain why workers unionize and how unions are structured, and describe the collective ­ bargaining process.
Some workers belong to labor unions — organized groups of workers that bargain with employers to improve members’ pay, job security, and working conditions. Unions have a pyramidal structure. At the bottom are locals, who serve workers in a particular geogra phical area. 1. Locals are usually organized into national unions that assist with local contract negotiations and negotiate industry ­ wide contracts.
2. Nationals may be linked by a labor federation , such as the AFL ­ CIO, which provides assistance to member unions and serves as the principal political organ for organized labor.
When there’s a discrepancy between what workers want in terms of salary increases, benefits, working conditions, and job security and what management is willing to give, the two sides engage in a process called collective bargaining .
1. If everything goes smoothly, a contract is soon put into place.

2. If negotiations break down, the sides may resort to mediation (in which an impartial third party makes recommendations for reaching an agreement) or arbitration (in which the third party imposes a binding agreement). When unionized workers feel that they’ve been treated unfairly, they can file grievances — complaints over contract ­ related matters that are resolved by union representatives and employee supervisors. If labor differences can’t be resolved through collective bargaining or formal grievance procedures, each side may resort to a variety of tactics. The union can do the following:
1. Call a strike (in which workers leave their jobs until the issue is settled)
2. Organize picketing (in which workers congregate outside the workplace to publicize their position) 3. Arrange for boycotting (in which workers and other consumers are urged to refrain from buying an employer’s products) Chapter 8
1. Define a team and describe its key characteristics.
A team (or a work team) is a group of people with complementary skills who work together to achieve a specific goal.
1. Teams are accountable for achieving specific common goals. Members are collectively responsible for achieving team goals, and if they succeed, they‘re rewarded collectively.
2. Teams function interdependently. Members cannot achieve goals independently and must rely on each other for information, input, and expertise.
3. Teams are stable. Teams remain intact long enough to finish their assigned tasks, and each member remains on board long enough to get to know every other member.

4. Teams have authority. Teams possess the decision­making power to pursue their goals and to manage the activities through which they complete their assignments.
5. Teams operate in a social context. Teams are assembled to do specific work for larger organizations and have the advantage of access to resources available from other areas of their organizations. 2. Explain why organizations use teams, and describe different types of teams.
Companies build and support teams because of their effect on overall workplace performance, both organizational and individual. Work teams may be of several types:
1. In the traditional manager­led team, the leader defines the team‘s goals and activities and is responsible for its achieving its assigned goals.
2. The leader of a self­managing team may determine overall goals, but employees control the activities needed to meet them.
3. A cross­functional team is designed to take advantage of the special expertise of members drawn from different functional areas of the company.
4. On virtual teams, geographically dispersed members interact electronically in the process of pursuing a common goal.
1. Explain why teams may be effective or ineffective.
Generally speaking, teams are effective when the following are true:
1. Members are interdependent.
2. Members work better together than individually.
3. Teams work well enough to satisfy members.
4. Leadership rotates.
5. Members help one another.

6. Members become boosters.
7. Members trust one another.
2. Identify factors that contribute to team cohesiveness.
Group cohesiveness refers to the attractiveness of a team to its members. If a group is high in cohesiveness, membership is quite satisfying to its members; if it‘s low in cohesiveness, members are unhappy with it and may even try to leave it.
Common obstacles to team success include the following:
1. Unwillingness to cooperate
2. Lack of managerial support
3. Failure of managers to delegate authority
4. Failure of teams to cooperate
1. Understand the importance of learning to participate in team­based activities.
As the business world depends more and more on teamwork, it‘s increasingly important for incoming members of the workforce to develop skills and experience in team­based activities.
2. Identify the skills needed by team members and the roles that members of a team might play.
Every team requires some mixture of three skill sets:
1. Technical skills: skills needed to perform specific tasks
2. Decision­making and problem­solving skills: skills needed to identify problems, evaluate alternative solutions, and decide on the best options
3. Interpersonal skills: skills in listening, providing feedback, and resolving conflict
Team members deal with two basic challenges:
(1) accomplishing the team‘s assigned task and (2) maintaining or improving group cohesiveness. 3. Learn how to survive team projects in college (and actually enjoy yourself).

 The following are eight ways to add value to and survive team projects in college:
1. Draw up a team charter.
2. Contribute your ideas.
3. Never miss a meeting.
4. Be considerate of each other.
5. Create a process for resolving conflict.
6. Use the strengths of each team member.
7. Don‘t do all the work yourself.
8. Set deadlines.
4. Explain the skills and behaviors that foster effective team leadership.
The following are seven types of skills and behaviors that help team leaders influence their members and gain their trust:
1. Demonstrating integrity
2. Being clear and consistent
3. Generating positive energy
4. Acknowledging common points of view
5. Managing agreement and disagreement
6. Encouraging and coaching
7. Sharing information
1. Discuss the role of communication in the design of the RAZR cell phone.
Effective communication is needed in several facets of the new­product design and development process:
1. Designers must effectively communicate both ideas and practical specifications.

2. The process usually succeeds only when the assigned team integrates input from every relevant area of the organization.
2. Define communication and discuss the ways in which organizations benefit from effective communication. Communication is the process of transferring information from a sender to a receiver.
Businesses benefit in several ways when they‘re able to foster effective communication among employees: 1. Decisions are more assured and cogent, and problem solving is faster.
2. Warning signs of potential problems appear earlier.
3. Workflow moves more smoothly and productivity increases.
4. Business relationships are stronger.
5. Marketing messages are more persuasive.
6. The company‟ s professional image is enhanced.
7. Employee satisfaction goes up and turnover goes down.
8. The firm and its investors enjoy better financial results.
1. Discuss the nature of communications in an organizational setting, including communication flows, channels, and networks.
In a typical organizational setting, communication flows may take three directions:
1. Downward communication flows from higher organizational levels (supervisors) to lower organizational levels (subordinates).
2. Upward communication flows from lower to higher organizational levels.
3. Lateral (or horizontal) communication flows across the organization, among personnel on the same level.

2. Explain barriers to communication, and discuss the most common types of barriers to group communication. Organizational communication flows through two different channels. Internal communication is shared by people at all levels within a company. External communication occurs between parties inside a company and parties outside the company, such as suppliers, customers, and investors. Organizational communication also flows through two different networks. Its formal communication network consists of all communications that flow along an organization‘s official lines of authority. The informal communication network, sometimes called the grapevine, goes to work whenever two or more employees get together and start talking about the company and their jobs.
Barriers to communication include anything that prevents people from communicating as effectively as possible. Among groups, two types of barriers are common. Cultural barriers, sometimes called cultural filters, are the barriers that result from differences among people of different cultures. Functional barriers arise when communication must flow among individuals or groups who work in different functional areas of an organization.
1. Explain the do‘s and don‘ts of business e­mails.
1. Write a meaningful subject line.
2. Keep the message focused and readable.
3. Avoid attachments.
4. Identify yourself clearly in the first few lines.
5. Be kind. Don‟ t flame. Always think before hitting the “send” button.
6. Proofread.
7. Don‟ t assume privacy.

8. Distinguish between formal and informal situations.
9. Respond promptly.
10. Show respect and restraint.
2. Describe the process followed to create and deliver successful presentations.
In preparing and delivering your presentation, you can follow a four­step process: plan, prepare, practice and present.
You should plan your presentation based on your purpose and the knowledge level and interest of your audience.
In preparing your presentation, it helps to divide it into three sections: opening, body and close.
1. Your opening, which uses about 5–10 percent of your time, should grab your audience‟ s attention.
2. The body covers your main points and uses about 80 to 85 percent of your time.
3. Your close, which uses about 5 to 10 percent of your time, should leave the audience with a positive impression of you and your presentation.
3. Learn how to write clear, concise memos. Memos are effective at conveying fairly detailed information. Here are some tips:
1. Keep paragraphs short and to the point.
2. Accent or highlight major points.
3. Use short headings.
4. Your title should reflect the contents of your memo.
5. Be persuasive and convincing in your narrative. Chapter 9
1. Define the terms marketing, marketing concept, and marketing strategy.

Marketing is a set of processes for creating, communicating, and delivering value to customers and for improving customer relationships. It includes everything that organizations do to satisfy customers‘ needs.
The philosophy of satisfying customers‘ needs while meeting organizational profit goals is called the marketing concept and guides all of an organization‘s marketing activities.
To apply this approach, marketers need a marketing strategy—a plan for doing two things: selecting a target market and then implementing strategies for creating, pricing, promoting, and distributing products that satisfy customers‘ needs.
2. Outline the tasks involved in selecting a target market.
A target market is a specific group of consumers who are particularly interested in a product, would have access to it, and are able to buy it.
To identify this group, marketers first identify the overall market for the product (from the consumer market, the industrial market, or both).
Then, they divide the market into market segments—groups of customers with common characteristics that influence their buying decisions.
1. Identify the four Ps of the marketing mix.
Developing and implementing a marketing program involves a combination of tools called the marketing mix (often referred to as the ―four Ps‖ of marketing): product, price, place, and promotion. 2. Explain how to conduct marketing research.
Before settling on a marketing strategy, marketers often do marketing research to collect and analyze relevant data.
First, they look at secondary data that have already been collected, and then they collect new data, called primary data.

Methods for collecting primary data include surveys, personal interviews, and focus groups.
3. Discuss various branding strategies and explain the benefits of packaging and labeling.
To protect a brand name, the company takes out a trademark by registering it with the U.S.
Patent and Trademark Office. There are three major branding strategies:
1. With private branding, the maker sells a product to a retailer who resells it under its own name. 2. Under generic branding, a no­brand product contains no identification except for a description of the contents.
3. Using manufacture branding, a company sells products under its own brand names.
When consumers have a favorable experience with a product, it builds brand equity. If consumers are loyal to it over time, it enjoys brand loyalty.
Packaging—the container holding the product—can influence consumers‘ decisions to buy products or not buy them. It offers them a glimpse of the product and should be designed to attract their attention.
Labeling—the information on the packaging—identifies the product. It provides information on the contents, the manufacturer, the place where it was made, and any risks associated with its use. 1. Identify pricing strategies that are appropriate for new and existing products. Several strategies work for existing as well as new products.
With cost­based pricing, a company determines the cost of making a product and then sets a price by adding a profit to the cost.
With demand­based pricing, marketers set the price that they think consumers will pay. Using target costing, they figure out how much consumers are willing to pay and then subtract a reasonable profit from this price to determine the amount that can be spent to make the product.

Companies use prestige pricing to capitalize on the common association of high price and quality, setting an artificially high price to substantiate the impression of high quality.
Finally, with odd­even pricing, companies set prices at such figures as $9.99 (an odd amount), counting on the common impression that it sounds cheaper than $10 (an even amount).
1. Explore various product­distribution strategies.
Distribution entails all activities involved in getting the right quantity of a product to customers at the right time and at a reasonable cost.
Companies can sell directly (from stores or over the Internet) or indirectly, through intermediaries—retailers or wholesalers who help move products from producers to end users.
Retailers buy goods from producers and sell them to consumers, whether in stores, by phone, through direct mailings, or over the Internet.
Wholesalers (or distributors) buy goods from suppliers and sell them to businesses that will resell or use them.
Physical distribution—the process of getting products from producers to customers—entails several interrelated activities: warehousing in either a storage warehouse or a distribution center, materials handling (physically moving products or components), and transportation
(shipping goods from manufacturing facilities to resellers or customers).
2. Explain how companies create value through effective supply chain management.
A firm can produce better­quality products at lower cost and distribute them more effectively by successfully managing its supply chain—the entire range of activities involved in producing and distributing products, from purchasing raw materials, transforming raw materials into finished goods, storing finished goods, and distributing them to customers.
Effective supply chain management (SCM) requires cooperation, not only among individuals within the organization but also among the company and its suppliers and dealers. In addition, a

successful company provides customers with added value by focusing on and improving its value chain—the entire range of its value­creating activities.
1. Describe the elements of the promotion mix.
The promotion mix—the ways in which marketers communicate with customers— includes all the tools for telling people about a product and persuading potential customers to buy it.
Advertising is paid, nonpersonal communication designed to create awareness of a product or company. Personal selling is one­on­one communication with existing and potential customers.
Sales promotions provide potential customers with direct incentives to buy.
Publicity involves getting the name of the company or its products mentioned in print or broadcast media.
1. Explain how companies manage customer relationships.
Because customers are vital to a business, successful companies practice customer­relationship management—retaining good customers by keeping information on current customers, to foster and maintain strong ongoing relationships.
Companies that ask customers if they can contact them are engaged in permission marketing
2. Describe social media marketing and identify its advantages and disadvantages.
Mass marketing is the practice of sending out messages to a vast audience of anonymous people. TV advertising is a form of interruption marketing that interrupts people to get their attention
(with the hope they will listen to the ad).
1. Explain how a product moves through its life cycle and how this brings about shifts in marketing­mix strategies.

The stages of development and decline that products go through over their lives is called the product life cycle.
The stages a product goes through are introduction, growth, maturity, and decline.
1. Once it‘s developed, a new product is introduced to the market.
2. With any success at all, it begins to grow, attracting more buyers.
3. At some point the market stabilizes, and the product becomes mature.
4. Eventually, its appeal diminishes, and it‘s overtaken by competing brands or substitute products. Sales decline and it‘s ultimately taken off the market.
1. Describe the external marketing environment in which businesses operate.
A number of forces over which it has little or no control affect a company‘s marketing activities.
Taken together, they make up its external marketing environment, which includes regulatory and political activity, economic conditions, competitive forces, changes in technology, and social and cultural influences.
2. Discuss the factors that influence consumer behavior.
Successful marketing often hinges on understanding consumer behavior—the decision process that individuals go through when purchasing or using products.
Several psychological and social variables influence buyers‘ decisions. They go through a series of steps in reaching the decision to buy a product: need recognition, information search, evaluation, purchase, and post purchase evaluation.
1. Describe opportunities in the field of marketing.
The field of marketing is extensive, and so are the opportunities for someone graduating with a marketing degree.
A few of the options available include advertising, brand and product management, marketing research, supply chain and logistics management, retailing, and sales.

Chapter 11
1. Define operations management, and discuss the role of the operations manager in a manufacturing company.
The job of operations management is to oversee the process of transforming resources into goods and services.
The role of operations managers in the manufacturing sector includes production planning, production control, and quality control.
2. Describe the decisions made in planning the production process in a manufacturing company. During production planning, managers determine how goods will be produced (production process), where production will take place (site selection), and how manufacturing facilities will be laid out (layout planning).
In selecting the appropriate production process, managers compare three basic methods: make­to­order strategy (goods are made to customer specifications), mass production or make­to­stock strategy (high volumes of goods are made and held in inventory for later sale), and mass customization(high volumes of customized goods are made).
In choosing the site for a company‘s manufacturing operations, managers look for locations that minimize shipping costs, have an ample supply of skilled workers, provide a favorable community for workers and their families, offer resources at low cost, and have a favorable business climate.
Managers estimate the quantity of products to be produced by forecasting demand for their product and then calculating the capacity requirements of the production facility—the maximum number of goods that it can produce over a given period under normal working conditions.
1. Describe four major types of facility layouts: process, product, cellular, and fixed position.

Managers have several production layout choices, including process, product, cellular, and fixed­position. The process layout groups together workers or departments that perform similar tasks. At each position, workers use specialized equipment to perform a particular step in the production process. In a product layout, high­volume goods are produced in assembly­line fashion— that is, a series of workstations at which already­made parts are assembled.
In a cellular layout, small teams of workers handle all aspects of building a component, a
―family of components,‖ or even a finished product.
A fixed­position layout is used to make large items (such as ships or buildings) that stay in one place while workers and equipment go to the product.
1. Identify the activities undertaken by the operations manager in overseeing the production process in a manufacturing company.
Once the production process is under way, the attention of the operations manager shifts to the daily activities of materials management, which encompasses materials purchasing, inventory control, and work scheduling.
Because material costs often make up about 50 percent of total manufacturing costs, vendor selection and material acquisition gets a good deal of the operations manager‘s time and attention. In recent years, the purchasing function has been simplified through technology advances, including e­purchasing and electronic data interchange (EDI), which process transactions and transmit purchasing documents.
Commonly used inventory control methods include just­in­time (JIT) production, by which materials arrive just in time to enter the manufacturing process, and material requirements

planning (MRP), which uses computer programming to determine material needs. To schedule jobs, managers create a master production schedule (MPS).
1. Explain how to create and use both PERT and Gantt charts.
Gantt and PERT charts are two of the most common graphical tools used by operations managers to diagram the activities involved in producing goods.
A Gantt chart is an easy­to­use graphical tool that helps operations managers determine the status of projects.
PERT charts are used to diagram the activities required to produce a good, specify the time required to perform each activity in the process, and organize activities in the most efficient sequence. A PERT chart identifies a critical path—the sequence of activities that will entail the greatest amount of time.
1. Explain how manufacturing companies use technology to produce and deliver goods in an efficient, cost­effective manner.
In addition to creating high­quality products, companies must produce and deliver goods and services in an efficient, cost­effective manner.
Sophisticated software systems, including computer­aided design (CAD),computer­aided manufacturing (CAM), computer­integrated manufacturing (CIM), and flexible manufacturing systems (FMS), are becoming increasingly important in this area.
Computer­aided design software (CAD) is used to create models representing the design of a product. Many companies link CAD systems to the manufacturing process through computer­ integrated manufacturing (CIM) systems that not only determine the steps needed to produce components but also instruct machines to do the necessary work.

A CAD/CAM system can be expanded by means of computer­integrated manufacturing (CIM), which integrates various operations (from design through production) with functional activities ranging from order taking to shipping.
A CIM system is a common element in a flexible manufacturing system (FMS), in which computer­controlled equipment can easily be adapted to produce a variety of goods.
1. List the characteristics that distinguish service operations from manufacturing operations.
Though the primary function of both manufacturers and service providers is to satisfy customer needs, there are several important differences between the two types of operations. While manufacturers produce tangible, generally standardized products, service firms provide intangible products that are often customized to satisfy specific needs.
Unlike manufactured goods, many services are bought and consumed at the same time.
Operational efficiency is just as important in service industries as it is in manufacturing.
Operations managers in the service sector make many decisions that are similar to those made by manufacturers: they decide which services to offer, how to provide these services, where to locate their businesses, what their facilities will look like, and what the demand will be for their services. 2. Describe the decisions made in planning the product delivery process in a service company.
Service providers that produce goods can, like manufacturers, adopt either a make­to­order approach (in which products are made to customer satisfaction) or make­to­stock approach (in which products are made for inventory) to manufacturing them.
Estimating capacity needs for a service business is more difficult than for a manufacturer.
Service providers can‘t store their services for later use: services must be delivered on an as­needed basis.
3. Identify the activities undertaken to manage operations in a service organization.

Overseeing a service organization puts special demands on managers, especially services requiring a high degree of contact with customers.
Given the importance of personalized service, scheduling workers is more complex in the service industry than in manufacturing. In manufacturing, operations managers focus on scheduling the activities needed to produce goods; in service organizations, they focus on scheduling workers to ensure that enough people are available to handle fluctuating customer demand. 1. Explain how manufacturing and service companies alike use total quality management and outsourcing to provide value to customers.
Today, companies that compete in both the manufacturing and service sectors must deliver quality goods and services that satisfy customers‘ needs. Many companies achieve this goal by adhering to principles of total quality management (TQM).
Companies using a TQM approach focus on customer satisfaction, engage all members of the organization in quality efforts, and strive for continuous improvement in the design, production, and delivery of goods and services. They also benchmark other companies to find ways to improve their own performance.
To identify areas for improvement, companies can use a technique called statistical process control (SPC), which monitors quality by testing to see whether a sample of output is being made to predetermined specifications.
Another cost­saving approach is outsourcing—having outside vendors manufacture components or even entire products or provide services, such as information­ technology support or service center operations.

Outsourcing is an appealing option for companies without the expertise in producing everything needed to make a product or those that want to take advantage of low labor costs in developing countries. Chapter 12
1. Define accounting and explain the differences between managerial accounting and financial accounting. Accounting is a system for measuring and summarizing business activities, interpreting financial information, and communicating the results to management and other stakeholders to help them make better business decisions.
Accounting can be divided into two major fields:
Management accounting provides information and analysis to decision makers inside the organization (such as owners and managers) to help them operate the business.
Financial accounting provides information not only to internal managers, but also to people outside the organization (such as investors, creditors, government agencies, suppliers, employees, and labor unions) to assist them in assessing a firm’s financial performance.
2. Identify some of the users of accounting information and explain how they use it.
U.S. and non­U.S. companies follow different sets of standards in preparing financial accounting reports: U.S. companies adhere to a uniform set of rules called generally accepted accounting principles
(GAAP), which are issued by an independent agency called the Financial Accounting Standards
Board (FASB).
Many companies outside the United States follow a set of accounting principles called
International Financial Reporting Standards (IFRS), which are issued by the International
Accounting Standards Board (IASB).

Experts expect that a single set of worldwide accounting standards will eventually emerge and be followed by both U.S. and non­U.S. companies.
1. Understand the function of the income statement.
The income statement shows a firm’s revenues and expenses and whether it made a profit.
2. Understand the function of the balance sheet.
The balance sheet shows a firm’s assets, liabilities and owner’s equity (the amount that its owners have invested in it).
The balance sheet is based on the accounting equation: assets = liabilities + owner’s equit
3. Understand the function of the statement of owner’s equity
The statement of owner’s equity reports the changes in owner’s equity that have occurred over a specified period of time.
1. Understand the difference between cash­basis and accrual accounting.
Companies using cash­basis accounting recognize revenue as earned only when cash is received and recognize expenses as incurred only when cash is paid out.
Companies using accrual accounting recognize revenues when they’re earned (regardless of when the cash is received) and expenses when they’re incurred (regardless of when the cash is paid out).
2. Understand the purpose of a statement of cash flows and describe its format.
The statement of cash flows shows how much cash the business has coming in and going out.The statement of cash flows furnishes information about three categories of activities that cause cash either to come in or to go out: operating activities, investing activities, and financing activities. 1. Evaluate a company’s performance using financial statements and ratio analysis.

 Two common techniques for evaluating a company’s financial performance are vertical percentage analysis and ratio analysis.
Vertical percentage analysis reveals the relationship of each item on the income statement to a specified base—generally sales—by expressing each item as a percentage of that base.
The percentages help you to analyze changes in the income statement items over time.
Ratios show the relationship of one number to another number—for example, gross profit to sales or net profit to total assets.
Ratio analysis is used to assess a company’s performance and financial condition over time and to compare one company to similar companies or to an overall industry.
Ratios can be divided into four categories: profit margin ratios, management efficiency ratios, management effectiveness ratios, and debt­to­equity ratios.
Profit margin ratios show how much of each sales dollar is left after certain costs are covered.
Two common profitability ratios are the gross profit margin(which shows how much of each sales dollar remains after paying for the goods sold) and net profit margin (which shows how much of each sales dollar remains after all costs are covered).
Management efficiency ratios tell you how efficiently your assets are being managed.
One of the ratios in this category—inventory turnover—measures a firm’s efficiency in selling its inventory by looking at the relationship between sales and inventory.
Management effectiveness ratios tell you how effective management is at running the business and measure overall company performance by comparing net profit to some measure of the amount of capital used in the business.
The return on assets ratio, for instance, compares net profit to total assets to determine whether the company generated a reasonable profit on the assets invested in it.
Financial condition ratios are used to assess a firm’s financial strength.

The current ratio (which compares current assets to current liabilities) provides a measure of a company’s ability to meet current liabilities.
The debt­to­equity ratio examines the riskiness of a company’s capital structure by looking at the amount of debt that it has relative to total equity.
Finally, the interest coverage ratio (which measures the number of times a firm’s operating income can cover its interest expense) assesses a company’s ability to make interest payments on outstanding debt.
1. Understand why it’s not a good idea to falsify financial statements.
Current statutes and standards governing U.S. business and accounting practice reflect public reaction to a wave of corporate misconduct in the 2000s.
Ethical and trustworthy behavior is critical in accounting because users trust accountants to provide financial reports that are relevant, timely, and, most important, accurate.
2. Appreciate the background behind stricter legal and professional standards in U.S. business and accounting practice.
The federal Sarbanes­Oxley Act (SOX) of 2002 was designed to encourage ethical corporate behavior and to discourage fraud and other forms of corporate malfeasance. The Code of
Professional Ethics of the American Institute of Certified Public Accountants (AICPA) sets down two hallmarks of ethical behavior: integrity and objectivity and independence
3. Understand ethics and their importance in the accounting profession.
If you choose a career in accounting, you have two career options: work as a public accountant or work as a private accountant.
Public accounting firms provide clients with external audits in which they examine a company’s financial statements and submit an opinion on whether they’ve been prepared in accordance with GAAP. They also provide other accounting and tax services.

4. Identify career opportunities in accounting.
Most members of public accounting firms are certified public accountants (CPAs) who have met required educational and work requirements.
Private accountants, often called management or corporate accountants, work for specific companies, nonprofit organizations, or government agencies.
Chapter 13
1. Identify the functions of money and describe the three government measures of the money supply. Money serves three basic functions:
1. Medium of exchange: because you can use it to buy the goods and services you want, everyone’s willing to trade things for money.
2. Measure of value: it simplifies the exchange process because it’s a means of indicating how much something costs.
3. Store of value: people are willing to hold onto it because they’re confident that it will keep its value over time.
1. Distinguish among different types of financial institutions.
Financial institutions serve as financial intermediaries between savers and borrowers and direct the flow of funds between the two groups.
Those that accept deposits from customers—depository institutions—include commercial banks, savings banks, and credit unions; those that don’t—no depository institutions—include finance companies, insurance companies, and brokerage firms.
2. Discuss the services that financial institutions provide and explain their role in expanding the money supply.

Financial institutions offer a wide range of services, including checking and savings accounts,
ATM services, and credit and debit cards. They also sell securities and provide financial advice.
A bank holds onto only a fraction of the money that it takes in—an amount called its reserves—and lends the rest out to individuals, businesses, and governments. In turn, borrowers put some of these funds back into the banking system, where they become available to other borrowers. The money multiplier effect ensures that the cycle expands the money supply. 1. Identify the goals of the Federal Reserve System and explain how it uses monetary policy to control the money supply and influence interest rates.
To achieve these goals, the Fed has three tools:
1. it can raise or lower reserve requirements—the percentage of its funds that banks must set aside and can’t lend out;
2. it can raise or lower the discount rate—the rate of interest that the Fed charges member banks to borrow ―reserve‖ funds;
3. it can conduct open market operations—buying or selling government securities on the open market. 1. Explain the ways in which a new business gets start­up cash.
Financial institutions offer business loans with different maturities. A short­term loan matures in less than a year, an intermediate loan in one to five years, and a long­term loan after five years or more.
Banks also issue lines of credit that allow companies to borrow up to a specified amount as the need arises.
2. Identify approaches used by existing companies to finance operations and growth.

Banks generally require security in the form of collateral, such as company or personal assets. If the borrower fails to pay the loan when it’s due, the bank can take possession of these assets.
Existing companies that want to expand often seek funding from private investors. Angels are wealthy individuals who are willing to invest in ventures that they believe will succeed. Venture capitalists, though willing to invest larger sums of money, often want to cash out more quickly than angels. They generally invest in existing businesses with strong growth potential.
Successful companies looking for additional capital might decide to go public, offering an initial sale of stock called an initial public offering (IPO).
1. Show how the securities market operates and how it’s regulated.
Securities markets provide two functions:
1. They help companies raise funds by making the initial sale of stock to the public.
2. They provide a place where investors can trade previously issued stock.
Stock sold through an IPO is issued through a primary market with the help of an investment banking firm.
Previously issued securities are traded in a secondary market, where the proceeds from sales go to investors rather than to the issuing companies
2. Understand how market performance is measured. The best­known exchanges are the New York Stock Exchange, the American Stock Exchange, and the NASDAQ.
They’re all regulated by the Securities and Exchange Commission (SEC), a government agency that is charged with enforcing securities laws designed to protect the investing public. Stock market trends are measured by market indexes, such as the Dow Jones Industrial Average
(DJIA), the NASDAQ Composite Index, and Standard & Poor’s Composite Index (S&P 500).

When the stock market is enjoying a period of large increases in prices, it’s said to be in a bull market. When prices are declining, it’s often called a bear market.
1. Define equity and debt financing, and discuss the advantages and disadvantages of each financing approach.
Companies can raise funds through equity financing—selling stock—or through debt financing—issuing bonds. Each option has its advantages and disadvantages.
Stock may be common stock or preferred stock. Preferred stock is safer than common stock but it doesn’t have the upside potential—namely, the possibility that shareholders will benefit greatly if a company performs very well. Unlike common stockholders, however, whose dividends vary according to a company’s profitability, holders of preferred stock receive annual fixed dividends.
1. Discuss career opportunities in finance.
Most positions in finance fall into one of these three areas: commercial banking, corporate finance, and the investment industry.
Finance professionals employed in commercial banking help clients obtain personal or business loans. They also invest the bank’s excess funds.
Those employed in corporate finance obtain and manage their employing company’s cash, debt, and investments. They provide financial analysis and advice to management.
Financial professionals in the investment industry provide financial advice to their clients and help them buy and sell stocks.
To pursue a career in finance, you’ll need a strong finance education, as well as familiarity with both accounting and finance.
Chapter 15
1. Distinguish between data and information.

Data are unprocessed facts. Information is data that have been processed or turned into some useful form.
2. Define information system (IS) and identify the tasks of the information systems manager.
To gather and process data into information and distribute it to people who need it, an organization develops an information system (IS)—the combination of technologies, procedures, and people who collect and distribute the information needed to make decisions and to coordinate and control company­wide activities.
In most large organizations, the information system is operated by a senior management team that includes a chief information officer (CIO) who oversees information and telecommunications systems. 1. Explain how IS managers capture, store, and analyze data.
Organizations capture and store data in databases—electronic collections of related data that can be accessed by various people in the organization.
To facilitate data analysis, IS managers may move data from various databases into a data warehouse—a centralized database in which data are consolidated and organized for efficient analysis. To come up with answers to a huge range of questions, managers perform a technique called data mining—the process of searching and analyzing large amounts of data to reveal patterns and trends that can be used to predict future behavior.
1. Discuss ways in which an IS can be designed to meet the needs of individuals at various organizational levels.
Information needs vary according to managerial level (top, middle, or first­line).
An IS, or information system, can be divided into two categories:
1. Those that meet the needs of low­level managers.

2. Those that meet the needs of middle­ and upper­level manager.
1. Describe the main systems for sharing information through networked computers.
There are two systems that can satisfy both needs.
1. A local area network (LAN) links computers in close proximity, connecting them by cables or by wireless technology.
2. A wide area network (WAN) covers a relatively large geographical area and connects computers by telephone lines, wireless technology, or satellite.
2. Define cloud computing and identify its advantages and disadvantages.
The term ―cloud computing‖ means performing computer tasks using services provided over the Internet.
The software as a service (SaaS) category of cloud computing gives companies access to a large assortment of software packages without having to invest in hardware or install and maintain software on its own computers.
A technology firm offering infrastructure as a service provides users with hardware, including servers, central processing units, network equipment, and disk space.
Those offering the platform as a service category of cloud computing provide services that enable users to develop customized web applications.
1. Explain how four networking technologies—the Internet, the World Wide Web, intranets, and extranets—make data communication possible.
Data communication networks transmit digital data from one computer to another computer using a variety of wired and wireless communication channels.
One such network, the Internet, is an immense global network of smaller interconnected networks linking millions of computers.

By connecting paying subscribers into the Internet infrastructure, a company called an Internet service provider provides services, such as e­mail, online conferencing, and instant messaging.
A large portion of the Internet, the World Wide Web (―the Web‖), is a subsystem of computers that can be accessed by means of a special protocol known as hypertext transfer protocol
(HTTP).
Computers on the Web are connected with hypertext links that permit users to navigate among
Internet resources. A Web browser is software that locates and displays Web pages.
1. Identify and discuss challenges faced by companies engaged in e­commerce.
Though a source of vast opportunities, e­commerce—conducting business over the
Internet—also presents some unprecedented challenges, particularly in the area of security.
1. Malicious programs, such as viruses and worms, can wreak havoc with computer systems.
2. Unauthorized parties may gain access to restricted company Web sites in order to steal funds or goods.
3. Firewalls—software and hardware systems that prevent unauthorized users from accessing computer networks—help to reduce the risks of doing business online.
1. Identify career opportunities in information management.
The number and variety of opportunities in the information systems (IS) field have grown substantially as companies have expanded their use of information technology. The senior management team in large organizations includes a chief information officer who oversees information and a chief technology officer who oversees IT planning and implementation. Most entry­level IS jobs require a business degree with a major in information systems. Many supplement their IS majors with computer science or some other business area, such as accounting, finance, marketing, or operations management. Those entering organizations with
IS degrees may choose to follow either a management or a technology path.