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PART I Organization of a Business 1

PART I Organization of a Business 1

Chapter 1 Planning a Business 2

CHAPTER 1 Planning a Business 2

Creditors 4

Owners 4

Key Participants in a Business 4

Employees 5

Customers 6

Summary of Key Participants 7

Interaction among Business Functions 8

Key Functions of Business 8

How Some Business Functions Enhance Decision Making 9

Creating a Business Idea 10

Examples of Successful Business Ideas 10

SMALL BUSINESS SURVEY: Charactarittics of Business Entrsperenears 12

Steps for Creating a Business Iden 12

Developing the Business Plan 13

Management Plan 13

Marketing Plan 14

Financial Plan 15

Summary of a Business Plan 16

SPOTLIGHT ON TECHNOLOGY: Business Planning Suftrars 16

Assessing a Business Plan 17

BUSINESS DILEMMA: Dentaping a New Wa?lth Ch? Business 18

Kcy Terms 21

Review Questions 21

Investing in the Stock of a Business 22

Discussion Questins 22

Running Your Own Business 22

Case 1: Starting a New Business 23

Case 2: Organizing a Business 23

Video Case: Creating a Successful Business 24

The Coca-Cola Company Annual Report Project 24

In-Text Study, Guide 25

APPENDIX 1 Business Addresses 28

CHAPTER 2 Selecting a Form of Business Ownership 36

Chapter 2 Selecting a Form of Business Ownership 36

Possible Forms of Business Ownership 38

Scle Proprietorship 38

Partnership 39

Corporation 41

Comparing Forms of Business Ownership 46

SMALL BUSINESS SURVEY: Key Concerns about Business Owership 47

Methods of Owning Existing Businesses 47

Purchasing an Existing Business 47

Franchising 47

Assuming Ownership of a Family Business 47

SPOTLIGHT ON TECHNOLOGY: Organizing Your Bosiness by Dsing the Intarnet 50

Receiving Assistance as a New Business 51

How Owners Measure Business Performance 51

Return on Investment 51

Risk 51

SELF-SCORING EXERCISE: Do You N?ve the M?c?ssary Skills to Swccead in Business? 54

CROSS-FUNCTIONAL TEAMWORK: Sources of Risk Aeross Businass Functions 55

GLOBAL BUSINESS: O?narship of Forsign Businessat 56

BUSINESS DILEMMA: Owdership Decision at College Nsalth Clwb 56

Summary 57

Discussion Questions 58

Key Terms 58

Review Questions 58

Running Your Own Business 59

Investing in the Stock of a Business 59

Case 1: Decidmg the Type of Business Ownership 59

Case 2: The Franchising Decision 60

Video Case: A Business Ownership Dilemma 60

The Coca-Cola Company Annual Report Project 61

In-Text Study Guide 61

Surfing the Net: What Is the World Wide Web? 63

CHAPTER 3 Business Ethics and Social Responsibility 66

Chapter 3 Business Ethics and Soeial Responsibility 66

Responsibility to Customers 68

Responsible Production Practices 68

How Firms Ensure Responsibility toward Customers 68

Responsible Sales Practices 68

How Consumerism Ensures Responsibility toward Custoniers 69

How the Government Ensures Responsibility toward Customers 69

Responsibility to Emplovees 71

Employee Safety 71

Proper Treatment by Other Employees 71

Equal Oppornmty 73

Conflict with Employee Layoffs 74

GLOBAL BUSINESS: Global Ethics 74

How Firms Ensure Responsibility 75

How Stockholders Ensure Responsibility 75

Responsibility to Stockholders 75

Conther with Excessive Exeeutive Campensation 76

Responsibility to Creditors 77

Responsibility to the Environment 78

Air Pollution 78

Land Pollution 79

Contlict with Fnvironmerital Responsilhility 80

Responsibility to the Community 81

Couflict with Vaxinnizing Social Responsibility 81

SPOTLIGHT ON TECHNOLOGY: When Does Tough Competitlon Become Unethieal? 82

Summary of Business Responsibilities 83

SELF-SCORING EXERCISE: Assessing The Ethical Standards of the Firm Where You Work 83

SELF-SCORING EXERCISE: Assessing Whether Specific Situations Are Ethieal 84

CROSS-FUNCTIONAL TEAMWORK: Ethical Responsibilities Across Businass Functions 85

The Cost of Ensuring Social Responsibilities 85

Cost of Lawsuits 86

BUSINESS DILEMMA: Social Responsibility at College Health Club 87

Summary 89

Review Questions 89

Key Terms 89

Discussion Questions 90

Running Your Own Business 90

Investing in the Stock of a Business 90

Case 1: E-mail and Ethics 90

Case 2: Social Responsibilities to Employees 91

Video Case: Payback for Social Responsibility 91

The Coca-Cola Company Annual Report Project 92

In-Text Study Guide 92

Surfing the Net: Finding Information About Firms on the Internet 94

Summary of Part I 99

PART II Business Environment 101

PART II Business Environment 101

Chapter 4 Economic Environment 102

CHAPTER 4 Economic Environment 102

Macroeconomic Factors that Affect Business Performance 104

Economic Growth 104

Inflation 107

Interest Rates 108

Summary of Macroeconomic Factors that Affect a Firm s Performance 109

GLOBAL BUSINESS: Capitalizing on Global Economic Conditions 110

How Market Prices Are Determined 111

Demand Schedule for the Product 111

Supply Schedule for a Product 112

Interaction of Demand and Supply 112

Effect of a Change in the Demand Schedule 113

Effect of a Change in the Supply Schedule 114

Effect of Demand and Supply on the General Price Level 116

Factors that Influence Market Prices 116

Consumer Income 116

Consumer Preferences 116

Production Expenses 117

Government Influence on Economic Conditions 117

Monetary Policy 117

Fiscal Policy 118

SPOTLIGHT ON TECHNOLOGY: Manitoring the Economic Emvirsnmest 119

Summary of Government Influence on Economic Factors 119

Dilemma of the Federal Government 120

CROSS-FUNCTIONAL TEAMWORK: Econ??mic Effects Aerass Busimess Fumctions 121

BUSINESS DILEMMA: Ec?nomic Effects on College Nealth Club 122

Summary 123

Key Terms 124

Review Questions 124

Discussion Questions 124

Running Your Own Business 124

Investing in the Stock of a Business 125

Case 1: How Economic Conditions Influence Business Decisions 125

Case 2: Supply and Demand for GM Automobiles 125

Video Case: Exposure to Weak Economic Conditions 126

The Coca-Cola Company Annual Report Project 126

In-Text Study Guide 126

Surfing the Net: Access to Economic Information on the World Wide Web 129

Combining Demand and Supply 130

Effect of a Change in the Supply Schedule 130

Effect of a Change in the Demand Schedule 130

APPENDIX 4 How Interest Rates Are Determined 130

How Interest Rates Change 130

Demand for Loanable Funds 130

Supply for Loanable Funds 130

Factors that Can Affect Interest Rates 133

Monetary Policy 133

Economic Grawth 133

Expected Inflation 134

Summary of Factors that Affect Intcrest Rates 135

Savings Behavior 135

CHAPTER 5 Industry Environment 136

Chapter 5 Industry Environment 136

Industry Characteristics that Influence Business Performance 138

Industry Demand 138

Industry Competition 139

Labor Environment 140

Regulatory Environment 140

SMALL BUSINESS SURVEY: Are Flms Affectod by Ind?slry Ragulations? 141

Summary of Industry Characteristics 141

Industry Sources 142

Exposure to Industry Conditions 143

Firm s Market Share 143

Firm s Focus on Its Main Industry 144

Competing Within an Industry 146

Identify the Competitors 147

SPOTLIGHT ON TECHNOLOGY: How Information Techmology Can Cr?ate A Compotitive Mhcantage 149

Develop a Competitive Advantage 149

CROSS-FUNCTIONAL TEAMWORK: Indnstry Effacts Aeress Buslness Funetions 150

GLOBAL BUSINESS: Assessing the Indestry Envirsa??at from a Glohal Parspctim 151

BUSINESS DILEMMA: Iadustry Effacts on College Mealth Club 151

Summary 153

Key Terms 154

Review Questions 154

Discussion Questions 154

Running Your Own Business 154

Investing in the Stock of a Business 154

Case 1: Exposure of Software Firms to Industry Conditions 155

Case 2: Impact of Industry Conditions on Pharmaceutical Firms 155

The Coca-Cola Company Annual Report Project 156

Video Case: Exposure to Weak Industry Conditions 156

In-Text Study Guide 157

Surfing the Net: Access to Industry Information on the World Wide Web 159

CHAPTER 6 Global Environment 160

Chapter 6 Global Environment 160

Why Firms Engage in International Business 162

Attract Foreign Demand 162

Capitalize on Technology 164

Use Inexpensive Resources 164

Diversify Internationally 164

Combination of Motives 164

Foreign Expansion in the U.S. 167

Foreign Competition 167

How Firms Engage in International Business 168

Importing 168

Exporting 169

Direct Foreign Investment (DFI) 169

Strategic Alliances 170

GLOBAL BUSINESS: Nerverbal Comm??ication in Diffarent Cult?res 171

Culture 172

Economic System 172

How Foreign Characterisics Influence International Business 172

Economic Conditions 175

SMALL BUSINESS SURVEY: De Small Firms Conduet International Busiuess? 177

Exchange Rates 177

CROSS-FUNCTIONAL TEAMWORK: Managing Inturnational Busimess Aeress Business Functions 178

How Exchange Rate Movements Can Affect Performance 179

Impact of a Weak Dollar on U.S. Importers 179

SPOTLIGHT ON TECHNOLOGY: Mering Taeh??l?gy Aeress Bardars 180

Impact of a Strong Dollar on U.S. Importers 180

Actual Effects of Exchange Rate Movements on U.S. Importers 181

Impact of a Weak Dollar on U.S. Exporters 181

Impact of a Strong Dollar on U.S. Exporters 183

Hedging Against Exchange Rate Movements 183

How Exchange Rates Affect Foreign Competition 184

BUSINESS DILEMMA: Exchange Rate Effects at Callgea Mealth Clab 185

Summary 187

Key Terms 187

Review Questions 187

Discussion Questions 188

Running Your Own Business 188

Investing in the Stock of a Business 188

Case 1: Global Expansion by ABC Records 188

Case 2: Exposure to Foreign Competition 189

Video Case: Exposure to Global Conditions 189

In-Text Study Guide 190

The Coca-Cola Company Annual Report Project 190

Surfing the Net: International Business on the World Wide Web 193

APPENDIX 6 The Forign Exchange Market 194

Exchange Rate Quotations 194

Factors that Affect Exchange Rate Movements 194

Differential Inflation Rates 194

Differential Interest Rates 196

Covernment Intervention 196

Summary of Part II 197

PART III Management 199

PART III Management 199

CHAPTER 7 Fundamentals of Effective Management 200

Chapter 7 Fundamentals of Effective Management 200

Levels of Management 202

Functions of Managers 203

Planning 203

Lcading 208

CROSS-FUNCTIONAL TEAMWORK: Interaction of functions to Achi?v? the Stratagie Plan 208

Organizing 208

Controlling 211

Integration of Management Functions 212

GLOBAL BUSINESS: Leadaership Styles for Global Business 214

Managerial Skills 215

Conceptual Skills 215

Interpersonal Skills 215

Technical Skills 216

Decision-Making Skills 216

How Managers Manage Time 217

Summary of Management Skills 217

SPOTLIGHT ON TECHNOLOGY: Software to Improve Management 218

Set Proper Priorities 218

Schedule Long Time intervals for Large Tasks 219

Minimize Interruptions 219

Set Short-Term Goals 219

SMALL BUSINESS SURVEY: Now Managers Run Msslings Effieiently 220

Delegate Some Tasks to Employees 220

BUSINESS DILEMMA: Planning at Coll?ge Health Club 221

Summary 222

Key Terms 222

Review Questions 223

Discussion Questions 223

Running Your Own Busmess 223

Investing in the Stock of a Business 223

Case 1: Applying Management Skills 224

Case 2: Developing a Plan for the Official All-Star Cafe 224

The Coca-Cola Company Annual Report Project 225

Video Case: How Effective Management Can Be the Key to Success 225

In-Text Study Guide 226

Surfing the Net: Management Training on the World Wide Web 228

CHAPTER 8 Organizational Structure 230

Chapter 8 Organizational Structure 230

How a Firm s Organizational Structure Achieves its Strategic Plan 232

Chain of Command 232

Authority of the Board of Directors 233

SMALL BUSINESS SURVEY: Who Are the Board Members of Small Firms? 234

Monitoring by Institutional Investors 235

Span of Control 235

Organizational Height 235

Centralization 235

Decentralization 236

SELF-SCORING EXERCISE: How Decentralized Is Your Company? 237

Line Versus Staff Positions 239

Creating a Stri?cture that Allows More Employee Input 241

SPOTLIGHT ON TECHNOLOGY: Now Information Systoems Enhance Organizational Stroctures 243

Informal Organizational Structure 243

Methods of Departmentalizing Tasks 244

Departmentalize by Product 245

Departmentalize by Function 245

Departmentalize by Location 246

Departmentalize by Customer 246

Departmentalize by Various Characteristics 246

CROSS-FUNCTIONAL TEAMWORK: Interaetion Among Departments 247

GLOBAL BUSINESS: Drganizational Structure of a Mnltinational Carperation 247

BUSINESS DILEMMA: Drganizational Structure of College Nealth Club 248

Summary 249

Key Terms 250

Review Questions 250

Discussion Questions 250

Running Your Own Business 250

Case 1: Creating An Organizational Structure 251

Investing in the Stock of a Business 251

Case 2: Restructuring at Apple Computer 251

The Coca-Cola Company Annual Report Project 252

In-Text Study Guide 252

Video Case: Reorganizing to Achieve Business Success 252

Surfing the Net: Managing by Telecommuting 255

Chapter 9 Production Management 256

CHAPTER 9 Production Management 256

Resources Used for the Production Process 258

Human Resources 258

Other Resources 259

Combining the Resources for Production 259

Materials 259

Factors Affecting the Site Decision 260

Selecting a Site 260

Evaluating Possible Sites 262

GLOBAL BUSINESS: Seleeting a Fereign Pr?duction Site 263

Selecting the Design and Layout 264

Factors Affecting Design and Layout 264

Reducing the Layout Space 265

Production Control 266

Purchasing Materials 267

Inventory Control 268

SMALL BUSINESS SURVEY: Why De Frms Outsa?rea Rather Thea Pr??ea Than Produca Seme Pr??ets Thems?hes? 268

Routing 270

Scheduling 271

SPOTLIGHT ON TECHNOLOGY: Agila Mannfact?ring 273

Quality Control 274

BUSINESS DILEMMA: Production at Cotlage Mealth Club 274

Review Questions 276

Key Terms 276

Summary 276

Running Your Own Business 277

Investing in the Stock of a Business 277

Case 1: Selecting the Best Plant Site 277

Discussion Questions 277

Case 2: Improving the Production Process 278

Video Case: How Production Can Be a Key to Success 278

The Coca-Cola Company Annual Report Project 279

In-Text Study Guide 279

Surfing the Net: Manufacturing Information on the World Wide Web 282

CHAPTER 10 Improving Production Quality and Efficiency 284

Chapter 10 lmproving Production Quality and Efficiency 284

Improving Production Quality with TQM 286

Specify the Desired Quality Level 288

Control the Quality Level 289

Achieve the Desired Quality Level 289

SELF-SCORING EXERCISE: Are You Mighly Satlsfied As a Castemer? 291

GLOBAL BUSINESS: Global Quality Standards 292

Methods to lmprove Production Efficiency 293

Technology 294

Economies of Scale 295

Restructuring 298

SPOTLIGHT ON TECHNOLOGY: Using Intermation Tnchmslegy to ?mprom Prodmet ?ualty 299

CROSS-FUNCTIONAL TEAMWORK: Interaetion of Fmmetions Levelrad in Tetal ??alty Menagement 301

SMALL BUSINESS DILEMMA: T?tal Quality Management at Collega Neslth Club 302

Summary 304

Key Terms 304

Review Questions 304

Discussion Questions 304

Running Your Own Business 305

Investing in the Stock of a Business 305

Case 1: Using TQM to Assess Employee Quality 305

Case 2: Applying TQM to Education 305

Video Case: How the Focus on Quality Can Lead to Success 306

The Coca-Cola Company Annual Report Project 307

In-Text Study Cuide 307

Surfing the Net: Quality Information on the World Wide Web 308

Summary of Part III 310

PART IV Managing Employees 311

PART IV Managing Employees 311

CHAPTER 11 Motivating Employees 312

Chapter 11 Motivating Employees 312

Hawthorne Studies 314

Maslow s Hierarchy of Needs 314

Theories on Motivation 314

Herzberg s Job Satisfaction Study 316

McGregor s Theory X and Theory Y 317

Theory Z 318

Expectancy Theory 318

Equity Theory 319

Reinforcement Theory 320

Motivational Guidelines Offered by Theories 321

How Firms Can Enhance Job Satisfaction and Motivation 322

Adequate Compensation Program 322

Job Security 324

CROSS-FUNCTIONAL TEAMWORK: Sproading Motivation Aerass Besiness Fanctions 325

Elexible Work Schedule 325

SPOTLIGHT ON TECHNOLOGY: Using Competars to Motivate Emplayess 326

Employee Involvement Programs 326

SELF-SCORING EXERCISE: Are You an Empowared Emplayse? 327

SMALL BUSINESS SURVEY: Do Emplayess Want Mera Inflnenea in Busimess ?? 328

Comparison of Methods Used to Enhance Job Satisfaction 330

GLOBAL BUSINESS: Metivaling Empleyess Aerass Co?ntries 331

BUSINESS DILEMMA: Mativation at College Nealth Club 331

Summary 332

Key Terms 333

Review Questions 333

Discussion Questions 334

Running Your Own Business 334

Investing in the Stock of a Business 334

Case 1: Using Motivation to Enhance Performance 334

Case 2: Notivating Young Employees 335

Video Case: Motivating Emplovees as a Means of Survival 335

The Coca-Cola Company Annual Report Project 336

In-Text Study Guide 336

Surfing the Net: Employee Ownership Information on the World Wide Web 339

CHAPTER 12 Hiring, Training, and Evaluating Employees 340

Chapter 12 Hiring、 Training、 and Evaluating Employees 340

Human Resource Planning 342

Forecasting Employee Needs 342

Job Analysis 342

Recruiting 343

Compensation Packages That Firms Offer 347

SMALL BUSINESS SURVEY: Do Firms Reward Employees far Customer Satisfaction? 348

Salary 348

Commissions 348

Bonuses 348

Profit Sharing 349

Emplovee Benefits 349

Perquisites 349

Comparison Across Jobs 349

GLOBAL BUSINESS: Compensating Employees Aerass Countries 350

Developing Skills of Employees 350

Technical Skills 350

SMALL BUSINESS SURVEY: How Do CEOs Allocate Their Time Whan Managing Empleyess? 351

Decision-Making Skills 351

Customer Service Skills 351

Safety Skills 352

Human Relations Skills 352

Evaluation of Employee Performance 352

Segmenting the Evahnation into Different Criteria 352

SPOTLIGHT ON TECHNOLOGY: Using Computers to Manage and Train Empleyees 353

Using a Performance Evaluation Form 354

Assigning Weights to the Criteria 354

Steps for Proper Performance Evaluation 356

Dealing With Lawsuits by Fired Employees 357

Action Due to Performance Evaluations 357

BUSINESS DILEMMA: Performance Evalmation at Cellage Nealth Club 359

Employee Evaluation of Supervisors 359

CROSS-FUNCTIONAL TEAMWORK: How Job Responsibilities Acress Businesa Functions Can Complieats Parformance Evaluations 359

Summary 360

Discussion Questions 361

Review Questions 361

Key Terms 361

Case 1: Filling Job Positions 362

Investing in the Stock of a Business 362

Running Your Own Business 362

Case 2: Training on the Job 362

Video Case: Managing Employees in a Volatile Business 363

In-Text Study Guide 364

The Coca-Cola Company Annual Report Project 364

APPENDIX 12 Labor Unions 367

Background on Unions 367

History of Union Activities 367

Surfing the Net: Information on Human Resource Management 368

Trends in Union Popularity 368

Negotiations between Unions and Management 368

Salaries 368

SELF-SCORING EXERCISE: The Frazzle Facter 369

Job Security 369

Management Rights 370

Grievance Procedures 370

Conflicts between Unions and Management 370

Management s Criticism of Unions 372

How Firms Reduce the Employee s Desire for a Union 372

Summary of Part IV 374

PART V Marketing 375

PART V Marketing 375

Chapter 13 Product and Pricing Strategies 376

CHAPTER 13 Product and Pricing Strategies 376

Background on Products 378

Product Line 379

Product Mix 380

Identifying a Target Market 380

Factors That Affect the Size of a Target Market 381

GLOBAL BUSINESS: Targating Farelgn Ca?tries 383

Creating New Products 383

Use of Marketing Research to Greate New Products 384

Use of Research and Development to Create Products 384

SMALL BUSINESS SURVEY: What Are the Kays to Crazting Successful Preducta? 385

Steps Necessary to Create a New Product 386

CROSS-FUNCTIONAL TEAMWORK: Interaction Among Prodaet Dacisines and ? 388

Product Differentiation 389

Unique Design 389

Unique Packaging 390

Unique Branding 390

Summary of Methods to Differentiate Products 392

Produet Life Cycle 392

Introduction 392

Growth 392

Maturity 392

Decline 393

Pricing Strategies 393

Pricing According to the Cost of Production 394

Pricing According to the Supply of Inventory 394

Pricing According to Competitors Prices 394

SPOTLIGHT ON TECHNOLOGY: Prieing Laformation-Based Preducts 395

Example of Setting A Product s Price 396

Break-Even Point 397

Additional Pricing Decisions 398

Discounting 398

Sales Prices 399

Gredit Terms 399

BUSINESS DILEMMA: Product Differantiation at Collage Nealth Club 400

Summary 402

Key Terms 402

Review Questions 403

Disussion Questions 403

Running Your Own Business 403

Investing in the Stock of a Business 404

Case 1: Marketing T-Shirts 404

Case 2: Marketing for“Big Bertha” Golf Clubs 404

Video Case: Developing a New Product 405

The Coca-Cola Company Annual Report Project 405

In-Text Study Guide 406

Surfing the Net: Price Information on the World Wide Web 408

Chapter 14 Distribution Strategies 410

CHAPTER 14 Distribution Strategies 410

Channels of Distribution 412

Direct Channel 412

One-Level Channel 413

Two-Level Channel 414

Summary of Distribution Systems 414

Factors That Determine the Optimal Channel of Distribution 415

Seiecting the Degree of Market Coverage 415

Selective Distribution 416

Exclusive Distribution 416

Intensive Distribution 416

SMALL BUSINESS SURVEY: Are Catalegs Using International Distribntion? 417

Selecting the Optimal Type of Market Coverage 417

Selecting the Transportation Used to Distribute Products 418

Truck 418

Rail 418

Air 418

Water 419

Pipeline 419

Additional Transportation Decisions 419

How to Accelerate the Distribution Process 420

Streamline the Channels of Distribution 420

Integrate the Production and Distribution Processes 421

Background on Retailers 422

Number of Outlets 422

CROSS-FUNCTIONAL TEAMWORK: Interaction betwoon Distribution Decisions and Other Business Decisions 423

Quality of Service 423

Variety of Products Offered 423

Store versus Nonstore 424

Background on Wholesalers 425

How Wholesalers Serve Manufacturers 425

How Wholesalers Serve Retailers 425

Vertical Channel Integration 426

Vertical Channel Integration by Manufacturers 426

Vertical Channel Integration by Retailers 427

GLOBAL BUSINESS: Global Distribotion 428

SPOTLIGHT ON TECHNOLOGY: Using Techm?logy to lmpreve Distribation 428

BUSINESS DILEMMA: Ratailing Decision at College Health Club 429

Summary 430

Key Terms 431

Review Questions 431

Discussion Questions 431

Running Your Own Business 432

Investing in the Stock of a Business 432

Case 1: Distribution of Comic Books 432

Case 2: Distribution Decisions by Transtar 433

Video Case: Using Distribution to Achieve Success 433

The Coca-Cola Company Annual Report Project 434

In-Text Study Guide 434

Surfing the Net: Distribution Information on the World Wide Web 436

Ghapter 15 Promotion Strategies 438

CHAPTER 15 Promotion Strategies 438

Background on Promotion 440

Promotion Mix 440

Advertising 441

Reasons for Advertising 443

Forms of Advertising 443

SPOTLIGHT ON TECHNOLOGY: Electromic Shopping Offered by Firms 444

Summary of Forms of Advertising 447

Personal Selling 447

Identify the Target Market 448

Contact Potential Customers 448

Make Sales Presentation 448

Answer Questions 449

Close the Sale 449

Follow Up 449

SMALL BUSINESS SURVEY: What Skills Are N?oded to Ba Successful in Salas? 450

Sales Promotion 450

Rebates 451

Coupons 451

Sampling 451

Displays 452

Premiums 452

Summary of Sales Promotion Strategies 452

GLOBAL BUSINESS: Promoting Products Across Comntries 452

Public Relations 453

Special Events 454

News Releases 454

Press Conferences 454

Determining the Optimal Promotion Mix 455

Target Market 455

Promotion Budget 456

Managing Salespeople 458

Evaluating the Effects of Promotion 458

CROSS-FUNCTIONAL TEAMWORK: Interaction betw??n Pronotion Decisiems and Other Business Decisions 459

BUSINESS DILEMMA: Promotlon Strategy at Collage Nealth Club 459

Summary 460

Key Terms 461

Review Questions 461

Discussion Questions 461

Running Your Own Business 462

Investing in the Stock of a Business 462

Case 1: Miller Beer s New Promotion Strategy 462

Case 2: Using Michael Jordan to Promote Nike Shoes 462

Video Case: How Promotion Saved a Business 463

The Coca-Cola Company Annual Report Project 463

In-Text Study Guide 464

Surfing the Net: Promotions on the World Wide Web 466

Summary of Part V 467

PART VI Financial Management 469

PART VI Financial Management 469

Chapter 16 Accounting and Financial Management 470

CHAPTER 16 Accounting and Financial Analysis 470

How Firms Use Accounting 472

Reporting 472

Decision Support 473

Control 473

Interpreting Financial Statements 473

Income Statement 474

Balance Sheet 475

Ratio Analysis 476

Measures of Liquidity 477

Measures of Efficiency 478

Measures of Financial Leverage 479

Measures of Profitability 480

SPOTLIGHT ON TECHNOLOGY: Databsse Acceunting Systems 481

Comparison of Ratios with Those of Other Firms 482

Limitations of Ratio Analysis 485

Sources of Information for Ratio Analysis 485

GLOBAL BUSINESS: Effect of Exehange hate Mersments of Earmings 485

BUSINESS DILEMMA: Financial Analysis of College Health Club 486

Summary 487

Review Questions 488

Discussion Questions 488

Key Terms 488

Running Your Own Business 489

Investing in the Stock of a Business 489

Case 1: Using an Accounting System 489

Case 2: Achieving Internal Control 489

Video Case: Responding to Problems Detected by Financial Analysis 490

The Coca-Cola Company Annual Report Project 490

In-Text Study Guide 491

Surfing the Net: Accounting Information on the Internet 493

Chapter 17 Financing 494

CHAPTER 17 Financing 494

Methods of Debt Financing 496

Borrowing from Financial Institutions 496

Issumg Bonds 499

Issuing Commerical Paper 501

Impact of the Debt Financing Level on Interest Expenses 501

Common Greditors that Provide Debt Financing 501

Methods of Equity Financing 502

Retaining Earnings 502

Issuing Stock 502

SPOTLIGHT ON TECHNOLOGY: Using the Internet for Stock Offerings 504

Comparison of Equity Financing with Debt Financing 505

How Firms Issue Securities 506

Origination 506

Underwriting 506

Distribution 506

Other Methods of Obtaining Funds 507

Financing from Suppliers 507

Leasing 507

Deciding the Capital Structure 508

Revising the Capital Structure 509

How the Capital Structure Affects the Return on Equity 510

SMALL BUSINESS SURVEY: Finaneing Cboiees of Small Firms 511

GLOBAL BUSINESS: Global Financing 512

Dividend Policy 513

Factors that Affect a Firm s Dividend Policy 513

CROSS-FUNCTIONAL TEAMWORK: Interaction between Finaneing Deci?ons and Other Business Decisions 514

BUSINESS DILEMMA: Finaneing at Cellage Health Club 514

Summary 516

Key Terms 516

Review Questions 516

Discussion Questions 517

Running Your Own Business 517

Investing in the Stock of a Business 517

Case 1: Financing a New Business 517

Case 2: The IPO Decision 518

Video Case: Determining the Proper Amount of Equity 518

The Coca-Cola Company Annual Report Project 519

In-Text Study Guide 519

Surfing the Net: Financing Information on the Internet 521

Chapter 18 Business Investment 522

CHAPTER 18 Business Investment 522

Investment Decisions 524

How Interest Rates Affect Investment Decisions 526

Capital Budget 526

Classification of Capital Expenditures 527

Summary of Capital Budgeting Tasks 528

Capital Budgeting Tasks 528

Capital Budgeting Analysis 530

Background on Present Value 530

SPOTLIGHT ON TECHNOLOGY: Texas Instrumonts Assessment of Prepesed Capital Erpondit?res 534

GLOBAL BUSINESS: Global Investing 534

Mergers 535

CROSS-FUNCTIONAL TEAMWORK: Cross-Funclional Relationships Invelved in Basiness Investment Decisions 536

Corporate Motives for Mergers 536

Leveraged Buyouts 538

Divestiturds 539

Short-Term Investment Decisions 539

Liquidity Management 540

SMALL BUSINESS SURVEY: Investment Decisions by Small Businesses 541

Accounts Receivable Management 541

Inventory Management 542

BUSINESS DILEMMA: Capital Budgeting at College Health Club 542

Summary 543

Key Terms 544

Review Questions 544

Discussion Questions 544

Running Your Own Business 545

Investing in the Stock of a Business 545

Case 1: Benefits of an Acquisition 545

Case 2: Ford s Merger Decision 545

Video Case: How Business Investment Decisions Determine Success 546

The Coca-Cola Company Annual Report Project 546

In-Text Study Guide 547

Surfing the Net: Investment Information on the Internet 549

APPENDIX 18 The Merger Process 550

Merger Analysis 550

Identify Potential Merger Prspects 550

Evaluate Potential Merger Proospects 550

Make the Merger Decision 550

Merger Procedures 551

Financing the Merger 551

Tender Offer 551

Integrating the Businesses 551

Postmerger Evaluation 552

Defense Against Takeover Attempts 553

Summary of Part VI 554

PART VII Special Topics 555

PART VII Special Topics 555

Chapter 19 Management Information Systems 556

CHAPTER 19 Management Information Systems 556

What is a Computer? 558

Computer Hardware 558

Computer Software 560

What Are Computers Used For? 560

Computational Models 560

Internal Information Systems 562

Data Processing Systems 562

End User Productivity Tools 563

Interorganizational Systems 563

Managing Today s Information Technologies 565

Managing the Firm s Information System Architecture 566

Acquiring Software 568

Managing the Development of Information Systems 570

Managing the Implementation of Information Systems 571

Mananging the Security of Information Systems 572

SPOTLIGHT ON TECHNOLOGY: Tbe Futmre of the Internet 574

Emerging Technologies and Their Implications 575

The Worldwide Network 575

Truly Intelligent Systems 576

BUSINESS DILEMMA: Infermation Systems at College Nealth Club 577

Summary 578

Key Terms 579

Review Questions 579

Discussion Questions 579

Running Your Own Business 580

Investing in the Stock of a Business 580

Case 1: Applying Information Systems in Business 580

Case 2: Will Computers Replace Good Managers? 580

Video Case: Reliance on Computers for Success 581

The Coca-Cola Company Annual Report Project 581

In-Text Study Guide 582

Surfing the Net: Internet Resources on the World Wide Web 584

Chapter 20 Risk Management 586

CHAPTER 20 Risk Management 586

Tasks Involved in Managing Risk 588

Identifying Exposure to Risk 588

Protecting against Risk 588

Exposure to the Economic Environment 590

Exposure to Industry Conditions 590

Exposure to Economic Conditions 590

Exposure to Global Conditions 591

GLOBAL BUSINESS: Risk of Coodvcting Business in Lass-Devsleped Countries 591

Summary of Exposure to Economic Environment 592

Hedging Risk from Economic Conditions 593

Limited Funding 594

Reliance on One Product 594

Reliance on One Customer 594

Exposure to Firm-Specific Characteristics 594

Reliance on One Supplier 595

Reliance on a Key Employee 595

Exposure to Property Losses 596

Exposure to Liability Losses 597

Exposure to Employee Compensation Claims 597

SMALL BUSINESS SURVEY: What is the Cost of Empley?? Injuries? 598

Summary of Exposure to Firm-Specific Characteristics 599

Exposure to Lawsuits 600

How the Threat of Lawsuits Can Affect Business Strategies 601

SPOTLIGHT ON TECHNOLOGY: Potontial Liability From Using Information Technelegy 602

Concern about Arbitrary Judgements 602

Conclusion for Risk Managers 603

Remedies for Business Failures 603

Extension 603

Composition 604

Private Liquidation 604

Formal Remedies 604

BUSINESS DILEMMA: Mzazging Risk at Collage Health Club 605

Key Terms 606

Review Questions 606

Summary 606

Discussion Questions 607

Running Your Own Business 607

Investing in the Stock of a Business 607

Case 1: Selecting the Proper Insurance Coverage for a Business 607

Case 2: The Decision to Insure a Business 608

Video Case: Protecting Against Properly Damage 608

The Coca-Cola Company Annual Report Project 609

In-Text Study Guide 609

Surfing the Net: Risk Management Information on the World Wide Web 611

Chapter 21 Synthesis of Business Functions 612

CHAPTER 21 Synthesis of Business Functions 612

Valuation of a Business 614

How Business Decisions Affect the Firm s Value 614

Management Decisions 614

Marketing Decisions 617

SMALL BUSINESS SURVEY: What Are the Majer Concerns of Small B?siness? 619

Finance Dccisions 619

Summary of Business Strategies 620

Relationship between Organizational Structure and Production 621

Relationship between Pricing and Production Strategies 621

Relationship between Pricing and Distribution Strategies 621

Relationships among Business Strategies 621

Relationship between Pricing and Promotion Strategies 621

Relationship between Pricing and Financing Strategies 621

GLOBAL BUSINESS: Intagrating Business Functiens on a Glehal Basis 622

SPOTLIGHT ON TECHNOLOGY: Software that Integrates Business Activities 623

Summary of Relationships Among Business Strategies 623

Business Strategies Implemented by IBM 625

Mission and Strategir Plan of IBM 625

IBM s Social Responsibilities 625

IBM s Assessment of Its Industry 625

IBM s Management Strategies 626

IBM s Penetration in Foreign Markets 626

IBM s Marketing Strategies 627

IBM s Finance Strategies 628

Conchusion about IBM s Strategies 629

BUSINESS DILEMMA: Integrating Business Daeision? at Collegs Nealth Club 630

Summary 632

Review Questions 633

Discussion Questions 633

Running Your Own Business 633

Investing in the Stock of a Business 633

Case 1: Integrated Decisions at Chrysler 634

Case 2: Impact of Marketing Policies on Other Business Decisions 634

Video Case: Integrated Solutions to a Firm s Problems 635

In-Text Study Guide 636

The Coca-Cola Company Annual Report Project 636

Surfing the Net: Directory of Business Information on the World Wide Web 638

APPENDIX A How to Invest in Stocks 639

How the Firm s Stock Price and Value are Related 639

Appendix A How to Invest in Stocks 639

Understanding Stock Quotations 639

Fifty-Two-Week Price Range 640

Symbol 640

Dividend 640

Price-Earnings Ratio 641

Volume 641

Stock Index Quotations 642

Measuring the Return on Stocks 642

Previous Day s Price Quotations 642

Return-Risk Trade-Off for Small Stocks 643

Economic Effects 644

Factors that Influence Stock Price Movements 644

Market Effects 645

Industry Effects 645

Characteristics of the Firm 645

How Stock Prices Respond to New Information 646

Identifying Undervalued Firms 646

Stock Market Efficiency 647

SELF-SCORING EXERCISE: New Much Risk Can You Take? 648

Stock Transactions 649

Market Orders Versus Limit Oredrs 649

Types of Brokers 650

Commissions on Stock Transactions 650

Purchasing Stocks on Margin 650

Stock Exchanges 650

Over-the Counter Market 651

Regulation of Stock Exchanges 651

Investing in Foreign Stocks 651

Investing in Mutual Funds 651

Types of Mutual Funds 652

Load versus No-Load Mutual Funds 652

Investing in the Stock of a Business 653

The Coca-Cola Company Annual Report Project 653

Key Terms 653

Surfing the Net: Stock Exchanges on the Internet 654

Choosing a Career 657

Type of Job 657

APPENDIX B Careers 657

Size of Company 657

Appendix B Careers 657

Career Versus Additional Degree 660

Pursuing a Career and Degree 660

Pursuing a Career 661

Choosing a College 661

Applying for a Position 661

Internships 661

Creating a Resume 662

Interviewing 663

SELF-SCORING EXERCISE: Cbeckllst for Building or Evaleating Your Rasume 665

Planning a Career Path 666

Where the Jobs Are 666

Survey of Knowledge and Abilities Needed 666

Working for a Firm Versus Owning a Firm 667

Surfing the Net: Career Services on the World Wide Web 669

SELF-SCORING EXERCISE: The Studaut Conter Career Dectar 670

APPENDIX C Answers to In-Text Study Guide 671

Appendix C Answers to In-Text Study Guide 671

How Firms Ensure Responsibility toward Employees 774