BRIEF CONTENTS

I' ART 1 TODAY'S BUSINESS E.NVIRONMENT How ~pt...,II ButinHipOCple Prepare fot Today's ChalloMgH 2

1 Stamng Out ........,. Tho """'"o"""" a<'"- 2 2 Ethks &: Social Respon5ibiity Sus.nnt a. a fltotrt•w fou 12 3 Ec:onomks How &lsineu &...Ids & Oiltrhrt•• Wuhh 60 <I Glob.lization R~V~g to tht' Ch• --tnge of Wo.-ld Comf)4'~ 10'1 "

PART 2 STARTING & GROWING A SUCCESSFUL BUSINESS 132 5 Form• of Ownership Butln.eu Er~t~IMt O•e•t & Sm1 132 6 The Entrepreneurial Spirit flu,~ ng the Dtfl'l!nt of Suec:Hs In Sn1a!l

8viln~" 160

PART 3 MANAGEMENT AcfUevlng Superior Resulu In th• Wor'kplace 190

7 Management & Leadership h a!itirg buptlor•l ltMUIU 190 I The EHective Organlution Berg Cl"lange O..•nte-d n al+jpHcl--:.rg'ng

Wot'-d 224 9 o,_r.tioM M .. nag•m.nt Geneorat1"9 Ou• ty ,._odfuCft 6 S«Yc" 2S4

10 Motivating Emp&oyees, Ad".-ngbcepoOI'Ia ~~~~nce!n lt!e __ ... 11 H\lln.M RHOUrU ~e~Mnt ~ tJ,e lt"'"t ,_...,lot S...:S."'""' ~' 314

PART 4 MARKETlNG Buo1d"g s.cdfyw>g Relaboml-opt • ·lh c-..... n 352

12 Marltetlng C..e:.u.g Succ.eUU eus::om- R•lao~tt- p.'"" !It o.w..ble Products 352

13 Pn.duct &: Pricing Str• tegtes Offe-t >f'lgGn!ll~t 1~ Wt~tComumers'

\Y.,.u; & NMds l84 14 Dlstrib~o~tlon & Promotion Strategloe• M.-"~aQ•I'ISI 'o• Hl'ltlef!t SYpply Channels

.. Pq.r~H-WI Gommunicat;()f'l 416

PART 5 FINANCIAL RESOURCES Achieving Profil&bllrty 460 15 AccCHJnting & Fln.&nc.lal StateMf!nb flowor in ttl• Nutnb~Hs 4-60 16 Fi:n•ncial MJ~Mgement A Bu!e Gv!d• to F.ntr"Cft, MOtley, & B&~~klfl.g 488 17 Se<:IJifties Markets lrl'lesting fo, !he Fv~Ute !.28

FLEX CHAPTERS Av~lable at -.mybi~h,b-.cotn t~nd Pear10n Custom Ubtary

Fa.x Chapter A 8usM5 ~ , ... Ch•pt.r B Ub¢1' M.ar-agoemenc "*"" Fa..a. Chapter C Rislt lrl.-n"'9'f"'*\t . ~MIC• , .... O.pt;« D .,.~ormatJOI" T~.ogy F!u: Chapter E ~__..,. fi~

Glo....y G·l ltefe.rences R 1 ..,.. 1·1

vii

Pr-eface xxix

From the Authors xxxvii

PART 1 TODAY'S BUSI NESS ENVIRONMENT How Exceptional 8u.sineup•opl• Pre~re for Todoy's Chollengos 2

1 ______________ __ Starting Out Business: The Driving Force of Change 2

FORKAST: \yt...-t't ..... ad on Th t 0191• 2 WVfNERS & LOSlJt$, In~ of Sucotit-TM ~ W.ya lhe\YtongW•y )

1.1 Business & Profits: The &sis of Wealth '

TH£ ESSEHTIM. OUUTlON •

Two T~t of ~iutM>I'ft:: ~fll • Noftprofrt 4 Fo1-Pro .. 1t Org.anirMtionr. Fo1 M.tting MOI'I.-y • Norpoflt O•ganiuto(Wis: f-or O(fe•ing ,..odw:tt or

Scr.lic.r. .t. Whtt vou ~tom ~~ Butnttt Is App-<11bl• nAry

Org11niu don 4 T"- Fllf\d8oment•lt o f 'Miat Butlnen• • Oo: Stlllng Gooch or

SerYic:es to Generate R...,.n..,• & Profits 5 He" ' th!J S11!~5 of Good~ cr S.Mus P1od\ic. Jt.wnut

& Pcsr.ble l'•ofu S a BRIEFING I S MAl l BUSINESS & ENTREPRI NI\JRS:

How One MM Mlfkcu hu plflft iOI'Ial \Wiling & Spukl-lg ~ RQvanue·Produ.r;in9 &••l.wu. S

The N.e" ' Ame•!C$tl Economy F•om Oooch toSI!fY c~ b

• BRIEFING /BUSINESS SKILl.$ & CAREER DEVElOPMENT: What"J th• P11y for lntry· leYol Job1 for College Gr~tes In 8~Hintn7 6

1.2 8u$lneu M Benefactor: Payoffs beyond Money 1

THE ESSEHTIAL OUl.STlOH 1 &.tsineu c.n ...,.ro¥e PeopWt ~ty o-f Ut. 1

R~i$.ng thlt SUncl.wd o, Uvng 1 Contributing to lb'lg & 11e. thy Uves & 10 Hvm.,

Knowl•dgct I ~u Slolppom ,,.,....,.. • • Gow~. • Co~y

lrrt-m 1

1.3 Risk, Entrepronounhip, & the Factors of Production: The Creative Fire of Business 9

n41l$.SI!NlW. OUISTION 9 TheWNh~~Ne111: 0oor 9 Do CWy ftiiNp'eMWt Take Risks? 10 F.aono-f~:~~erodcs ofw.M 10

ttoe hd:!!OI'I:lli fOI.i# ftoctonof F'rodl..dior- 10 AF"~F.-OI'of~~ 11 • utUIHG I EARNHG GRfEN BY GOING GREEN:

F.aOI'• o1 ~ioft M .-bt,.---..ial Fwt~ilure ......... II

1.• The BuJ.ines.s Environment Forces That Encour-.ge &: DiJ..Courage Entropronounhlp 12

TH! £SSlHTW.QU[STION 12 ( (IOIIoOrftlc: ForcM: ""• r .... ston .,_'--" Fno.tdom

&RedtWwl 12 T.ch~ogl~l Fore;•: 1M £fl.c~ on ProductMty

.. s.cvmy 12 Comp~iti- FotecS: Th• Influence on C.Urtc:wner, EmPoree.

I tnwt"tor SMitf.ctioft 13 Global FettUS: The EHea on Tr11de & Stability 1l Sodel Forc:ft: Th• Ch•gH in Popuf.._lon 13

1.5 Seven Key Busineu Rules: The Great Adventure of Being in Business In the 211t Century 14

THI! !S5lN1W. OUI!STION 1• St•lf--old•rs: lt111• 1- Vou Muu MHt ttl• N!Jttd'

of StakefM,Ideu,. Those Yoith an Interest in Your Org;~nlullon 15 • BRIEFIJ'+O I CUSTOMER FOCUS: Tak~g Cere <>f

Buyen: Ama1on Pays Close Attention to "The Cut tomer E~pe1le~e." lS

• DRIEFIN() I A WORlD OF CONSTANT CHANGE: A Mad i• Pr.,SC Huru Oomii'\>O's Plua. 17

I,Murt .. nty: Rule 2-Vou Must Deal with Constant Chang~. lnd\ldlrtg T~do~ul ChM~g• HI

Comp.-itlon: Rule 3-Vou Must M:aster tt.e Competiti'Ye E~nt t o St~ Ah•~ o f Ai'wl' 18 • BRIEFING / A WORlD OF CONSTANT CHANGE:

\J..$. ~C.nufactu1ing l$1'1'1 Oe"d: It's Bec.oming Moree \Jpu• .. 19

(_.,.,._ f~y: Rule 4-Vou Mun Deal with an lntMd~•nd..,t GloMI Economic Sy1;tem 19 a &llt£F=IHG / BUSINESS SK .. LS & CARED

O£VE'L()PM£H1': ~kw Col»g~ Gt'~Ck Find Jabs OvenelfS 20

ix

Ethia.: Rul• 5-You Must Bo Ethia l & Soci.aily R~ponsi::ll e 20 • BRIEFING / LE(iAl & ETHICAL PRACTICE$: WoU'

Fi!lfiiO r~ Ord-ered to Refund " UI'Ife'r & Dec.epu~· <h'«draft Fce!s. 20

S.Oc.ll'l Olfferenc.e~: Rule 6-You Must ~~m to O.e~l with Oiffe.-e11t kiflds of People 21 • BRIEFING I A WOALD Of CON:STArtf CHANGE:

U.S. Sodal Oiffer~n<lt!s .. thote 2 h l Cotentury. 21 s.H~D~Walopnwnt: Rulo 7- You Muli1 Acqllit• tho Porson.iil

Skills Needed fOf" Business Success 22

PRAcnCAL ACTION Your Business Career Starts • , , Now: Using College to G;~ Yourself" Boost tow:ud Career Svccess 2A

LEARNING & SKILLS PORTFOLIO 25 Summary 25 K• y T•rms 26 Pop Qui~: Prep 27 Critie61 Thin kU,g Questlons 27

CASES 28 VIDEO CASE: Ma king a Difference in Society: Saving

Uves of Senior Dogs 28 BUSINESS DECISION CASE: Apple & Google:

Relations h ip St.rtus Chiinge 29

BRIEFINGS 30

2---------------Ethics & Socia l R&sponsibility Bu$lnt $$ as a Positive Foret 32

FORECAST; \\'t!.,tl; Ahe:~d in 1hi, Ch:~plet 32 wtNNI!.RS & LOSI!.RS: Ethic01l &h01vhr-Coo..r~• 'l$t5us

Choteating J3

2.1 The Ethical & Social Responsibilities of Susineupeoplt: The Way You Uve Matters 34

THE ESSENTIAL OUE5T10N 34 CirVoll's Soc.lel Re5f)on&ibllty Pyramid: Profit, U w, Ethlu, &Citiz:e~ip 3A

Velueos, Ethlu &: l.iv.rs, &: Corpori:t• S.Ocl$11 R"POnsibility 35 V:~luos: Underlying B•li&f& Th01t H•lp O&t&rmtno

Bel-.,:,vior lS E;hics & L01ws: StOlnd.Jordi of Righ; & Wrong l5 Corporo:~te Soci~ Re:oponsibility: Benellting Sodety oll~ We-I

a~ the Org~.,iution 36 Oefl fllflg Ethlc.el OilemtnM 36

• BR.IEFING /lEGAl & ETHICAL PRACTICES: Ethial DlleMm& for th-e Thomas l(lnkede Compal'l')': Wi!~ It "Just &.~ineu~ to Exploit GaJ!c!ry Ownen ' Faith? 3b

Bt:rh.wing B.:.dl~ Bt:rh.wing Well 17 Behavng So:~d!y: The "Holer-tl-.. :m·lhou'" tffect ExCV,~;e'

Our ()v.n B&hNVior l:)u; Not Othorso' 37 Behavng We-I: 'freo:~\ Othen 11~ You Would Your5el( 37

X CONTENT$

PRA.cnCAL ACnON How Well Do You Dttal with th~ "'CM<JtingCu/ture"? 38

2.2 Doing tho Right Thing: How Organizations Can Promote Ethical Behavior 39

lHE ESSENlW. QUESTION ~ 1 Top M:~nagen Stron gly Supp«1:1n Ethical Climllte:

"We' re N ot Just GMt19 Lip SeMce" 39 • BRIEFING I SOCIAllY R.ESPONSIBLE BUSINESS:

An Eth\(.,;)1 Top Mt~nagor 01t CitiMottg.t~go k~Hp$ P~plo in The ir Hom~~. 39

Tho Firm Tries to Hiro th• Right Employo•s: 'W o W.:.nt Honest, Rt""Sponsible People Working Here" 40 • BRIEF-ING I BUSINESS CULTURE & ETIOUEn E:

Who Will You Asl< to Writ-e You e Ref..enc.e? (And Don't Forge t to ~nk Tlu:=m.) 40

Th.,..• Ate Ethla Cod•s &: Triliflil\9 Prognwn&: "We Need to T d l Employees What We Expect of Them" 40 Two I(~ of Ethlu Codes: Ccmpl!at~oe-8,ue<f

& lrleg.>ly-Bned 41 Eth::« Trt~ining & Ethics Officors 41

Sign o f Ma;or Ethical Problerm: W~ lnsideu Blow th o Whi li11o 42

W1lite-Golla r ITaud & tile Sarbanes-OXIey Reform Act 42

2.3 Corporate Social Responsibility: Conce rn for the Welfare of Socie ty 44

lHE ESSENlW. QUESTION 44 k Corpor.ilto Soci"'l R• 'Ponsibility "'Good Id a...?

Two Views 44 Tho Yw for CSit: "Comp,),nitn Aren''i Sop,Jort~;o

from Sodety"' 44 The UW! 11g ;~~in.$~ CSR: "Comp.1orie~ Should Ju~t M~k~

Prof"~ 45 • BRIEFING I EARNING GREEN BY GOING GRE£N.:

Subaro Proves G.oln.g Gr..en C&n Lower, Not lr~cr.e&s.e, Cosb. 45

Blended Viiiluo: Mo01suring R• w k s ir~ Both Economic & Social Areas 46 • BRIEF-ING I SMAll BUSINESS & ENTREPRENEUR$:

The Whit~ Dog Cafli EllfJf'f!'~ Btend~d Valuote in the " Triple Bottom line. • 46

S~l Audttlflg: Evalul'tlflg Corporate S.Ocll'l Reroponsibility 46

2.4 The Payoffs from Doing Good: The Benefits to Stakeholders 49

lHE ESU NTW. QUESTION 49 The NetC~tive Effec:ts o f Being Bad 49

High Co~t~ of Employe~ Fraud 49 O!m!n!ah.e<f Stock ~ c.e 49 Oinlini,hed Sale' Growlh 49 OOlmilging l .:.wwlts 50

The Positive Efferts of Bein g Good 50 Bo!bO:iting Customers 50 Benellting Owne" SO

• BRIEFING /lEGAL & ETHICAL PRAC11CES: A Food Gl.o.nt &enefiu lu Ownet~ by ~d'W~g Hungry Childrc:n. SO

&11ofifrl9 Em~o-os 50 8el'lefill'l9 Supplier~ ~1

&11ofifrlS tho l ou! & N.Jotionill Communi\)' 51 8e11efitng the lnteml!ltio,.-41 Communily 51 a BRIEFING I GLOBAl BUSINESS: Unillwor &notu

th-e lntetnatlon&l Comi'I\Unky by Addressing IMport.o.nt \1\!.ctld Problem~. 51

lnteo-dependen<.y It~ Sol..,lng Common Ptobltotns: The Thre;~~t of Globo:t.l Clim;~~te Ch:.r.ge 52 C&f\ Climat~ Cfl.&nge &e Re-.oersed? S3 8 BRIEfiNG I EARNING GREEN 8Y GOtNG GREEN:

Whilt Ciln &.•sin~»S Do to Fight Clima toQ Chb~? 53

Wh:.t You Can Do: Tha ''Ci..,ic Ganar.11ticn" (.lin Ba ;a F«ca f~Change S4 Wo•ldng Yfith Comp11nies :.:; :.or. Intern to Advise on ~ing

Er..ergy 54 Voh.an.tecring Your SetV:<:C'$ for Free 54

LEARNING & SKILLS PORTFOUO 55 Summary 55 Key Term' 56 Pop Ouiz Prep 26 Ymc.al Thinlci:ng Ouestkms S6

CASES 57 VIDEO CASE: Patagonia.: Social Responsibility

& Man.1ging Ethics 57 BUSINESS OECJSION CASE: Oprah W infrey N ot

Fotgotten: Th~ lmportanc~ of Gi ... ing Baek 57

BRIEFINGS 58

3 ______________ _ Economics How Business Builds & Distributes Wealth 60

FORECAST: Wl--4t'~Ahe:.d in l his Ch:~pt~ 60 WINNI!RS & LOSI!RS: (o11n You Prodict: Whe-thoQr i1 Mo\•i!J

W.l B~a Hlt? 61

3.1 Freedom to Succeed- or Fail: How Economics Affects Business 62

THE ESSENTIAL QUESTION 62 Economics: OC!'.3Iiflg with Scarcity & the Force-s of ~pply

&~tid 62 Delling with S.C:.:.rcity 62 a BRIEFING I A WORLD OF- CONSTANT CHANGE:

The Sca rcity of Su~ Bowl lo5e0' Cifa. 62 Th~J For~;.n of ~pp."y & Domafld 63

Two Major Fields of Economics: MacroecOf'lomics & Microoconomic' 63 M&O'Oecenom:a. Tht Stvd'y of U rge Ecenom< Units 63 Microeconomic:;: The s~udy of Sm:.U Economic UW 64

The lrnpOf't•r.ce of Kl\owled {tt 11'1 the New Economy 64

• BRIEFING I A WORlD OF CONSTANT CHANGE: Usll'lg Kn.owfedg.e to Sulld a Technology for Predicting Hit Movi~:=s. 64

3.2 Three Types of Economies: Command. Free·Mari<e t, & Mixed 65

lHE ESSENlW. QUESTION 65 1 Commo1nd ECOI'Iomio8s: Communi' m & $oci .ali5m 65

Comn1unlsm: AI f>1ope•ty I~ Qy,f'led by lhe GO\I¥f'IM9tl'; 4$

• BRIEFING I GLOBAL BUSINESS: The (Mo~tJy)

Comm~~r~ist C01mtries To<:l:.y. 66 SoOOa!iam: Su.te·Owned lnd\lstfl~ &: Reef _,;r;oo~ecl

We-31th 66 Fte+-M$1rke-t Economie': Cilpittli&m 69 V\,.-41 Ctelltes Weal!h? Ad~m Smilhl; l heory 69 Tho B9tlofiu of Cilpit~!ism 69 The Orlll'>bllcks of C:~p:t:.lism 10 Miud Economi.s.: P\lblidy & Priw1to8Jy Own .ad 71

3.3 How Free-Maricet Capitalism Works 72

lHE ESSENTW. QUESTION 72 Tho F-our B:.sic Rights urtdor (;;apit:.li'm 72 Four Types of Free Markell: Tile Varieties o f

Compotiriol\ 73 • BRIEFING /lEGAl & ETHICAL PRACTICES: The

Oligopoly o f H~:=11 1th lnsurcn _.. Some M11rk«s.. 74 The Wiy Free Mati<ets Wofi<: ~nd. Supply, & Mtarke t

Price 75 OemeM, Supply. & We-e<lng of M M' JS G1<'ophir'g Dem.:.nd & Supply: Re:~ching the Markel

Prico 76 HC7W Re.:.ll~ lhe Oem~nd' & Supply Model'? A Wo•d' about

ConwrmJr S<wMOignty 77 8 BRIEFING I PERSONAL FINANCE: The lrratlon.el

Desire of PTcf~:=ning to P11!fy by Cr~:=d it C11rd lnste11d of Cuh. n

Kow COWl C:.pit..3li$1'1'1 Surviw? 78 R~atien Ot' No Regult<ior~? Ja Wh:.t Would Ad~m Smith Do? 78

3.4 What Businesspeople Need to Know: How to Op• rate Succ• ssfully within the U.S. Economic System 79

THE ESSIN TlAL QUESTION 79 The Busineu Cyde: The Booms & Butts o f Ecot~omlc

Activity 19 Boof!U & 6usl~: 1he f our f>hne~of lhe Sus.:nen

Cyde 80 Ji'e-ct5slcn & Oeptt5slcn: Otdir..e & Wers~ Oedint 80

Three M.3j0f' lr.dlcat~s o f ECOI'Iomic Conditions: GOP, Prfce ln6e~e&. & Unemployment Rt te 81 Gro:;s Oont(l:;tic Product: Good/$ & S(ll'lic(l<$ Produced in"

Yo:.r 81 Price.Ch.,,.ge lndeJ(e~: Mell~urtng lnf'..alion & OeR.,lion 8 1 Tho Unom~mont Rato· Jcb&Jssno5~ ilm«<S Activo J<lb

SeekeiS 82

CONTENT$ xi

~ K.,. t o 8usiMu Surn¥111*' l.ll't1«l.Mfll Stal'dards 82 Whllt ProdvctMty IJ.• Mo~ Pro6.1dt Cre:a~od with tj,o

II'HOurc." Needed to Product Tkem 83 • BRIEFING / lARNING GR.EtN IV GOING GREEN:

-""-'""""'-~ ........ Tedtto•f..owotech~ U <An ~t.olty lmpro..,.enlt a. Dot-e ior s..va

lfldtnl•ie-.t •• they Were fer W •nufm~.Wng? 13

PRACnCAL ACTION Gorng bflyond Un~rnploy~Mnt to New CMf!l•r Possibiliti•s 64

fisul & M41'1•bry Polides: G0¥'1tl'lment" "Visiblt HMd"' ;,. 11w ..,.,.,." cp as

feat f>CI"CY Ad..,.u-g a~·· Jsubon & Borrovorog Appro.~ to ,t,d,,_ EconomiC

Sabillty as Wone~:.ry Po .cy: Ad~~;.,g th• Money Sl.lpply & ~teros1

R.at" to Adl!ove E«lttomlc Growth 86

3.5 The-Almost-Second Great Depnt5Sion: The Road to • Global Economic Crisls 87

THI!: ESSEHTIN.. QUUTION 87 A T~l• of Twolvbb'-: Dot.com • S.,bptinw 87

Jhe Oot..COfl' ltAibl.eo:: aw-.1~ Jedlnotogy S:ocb 11

Tht ~.me "-ttb~: O.Vtlutd Wtongagtl..otr't II From Boom tO ~st 18

TIM GCN'erf'lmtnt lnto,.,en•s: But Where Were tl\t Regul~on Orltlnlllly? 89 Fighting &e<k 19 \'ttl;a.tltul')'~'? 90

LEARNING & SKILLS PORTFOUO 90 Summ&ry 90 Kty Terms 92 Pop Qub: Prep 26 Critic.allWn .. lrlt Ques.tiom 92

CASES 94 VIDEO CASE: An Economic:t L•uon: Gourmet Food

Truc.ks Thrive 94 BU~NESS OECJSION CASE: T .. e Ivory Coast:

O.spite Unc.ertiinty. the Swe-etest Pl01c:• Oft E.wth 95

BRIEFINGS 96

4 ______ _ Globali<tation Rising to the Chatltngt o• World Competition 98

FOR!CAS'n \'h!at'$ AhoMt in l l'l!t Ckiipter 98 W1NNE.RS & lOSERS: Undent..MIIng Cukur•l

DiffaNncM 99

xii CONTENTS

4 .1 Globafization: Tho Slvinking of llme & Di1tente 100

THE ESS(NlW. QUESTION tOO • UIUUfG I BUSINESS SKillS & CAAIIJt

O(V(lOPMENT: \\!Mft"l the Best TlfM toT ... • Jab ~ 100

Th• o.-lopment of tit• Globll Wortq:tlac• *' E-(ommel'(lt 101

On• Big Market: Fre• lr~d• $ ttle Global Economy 102 Imports &- bpctU flo4 Ebb &- flo"' of t.,. G ebal

(«<fiO'")' 102 • Utt:ANG I SMAll IUSINE$S a ENTMPHNEURS:

Alm ~ s.loll Owrfolet h1porb ltuWU .. E~nflfl•lon• from lndl• 102

• IRIEFIOO I G LOI)AL BUSINESS. Exporttolg U.S. CMdtc.n FHt-A. Gr'C111 Ckii'WH'o ~liucy, 103

P011tl¥t &- Ne<ge<ivt Ef'ltctl of tht> G cbel EconoMy 103 Th• Rite of Two ICillds of "'t'"Noti~ &..MM•Ms::

nw Bit a- .,. Ow.dr t04 H..1p M-.ltil'!r'....or_..!s., ~g. Comp..,., ..,_.. I'":OL...g.r

Onet 10<4 Sm.all, Ouidt·Woving films: Starhap' Opera!e

WOI'Idwlde 10<1 • IRIEFtOO I SMALl BUSINESS & lN'TREPRENEURS.

Co"""""'"ation.' t.~ &l<lblft • 20-POt50ft W~Eq; r•t,.-•mlo~.telnllwee C.OU..uieL tOS

4 .2 Why Be: How Companies Conduct l.nternetlonal Trade 106

TM1 USANllAL ot.lll.mOH lot 1M<!)' ~triet TrMe Wtlh bch Other t06

Thte• ReHOn5 Court11'- Trade 106 ~te & Compa•et Yt Advaot!ta>g~: COI.of'!tt!es Pltylf'l9 to

rker Strengtht 107 ll•l•nce of Tnde, B.tl•nce o f ~llfttl.

• Countmn&ng 107 a..MIC• ofT~ CGmP¥...g Expert~. 1-~s 101 81.J11"!UofP~b ~rogJIJOPf:!'IM &tiON:Y

Ou< 108 COIIf'lte!trtd""9: 8artt•!ng Goo<b for Goodt 108

Haw CompaniH Ent..- For.ign M~rkeu tot

PRAcnc.4L AcnON U.S. Job5 in *' ErM of GJofMf o.....,..,.;ng: Whido ao. Whido s .. y t"

• BlllRNG I L£GA&. • rntlCAl ~ Gct.'ll Motors l-*swith~ ~ tn Jo"t \f.efltvfe toSeiiBuidtsiolfN,e, 112

4.3 Conditions Affecting International Trade 114

TMffSSlNYW..OUUT10H 114 Cultvnl Conditions.: Avo!dilng Mrw.ndw•tlondln!J" t U

• BRIEFING / BU$tN£SS CULTURE & n iOUETTE: u.S~Arl!b Culh~r .tl OtffQrQ~W;~X-Toud\ .. lntArpet5.C:WUtl

Spi<ie 115 E~ Cotdtions: ~auructur~ & Cwr"•My ~ 116

lnfrt~struauro & RHCurctn: \\1\dot AffoC'Is do N-t~ticn's Lovol of Oeve!opmer-1 116

a BRtEFIN(i I A WORLD OF CONSTANT CHAN(iE: Cel!phont11mptove the tr~ft9Wuctuteln Afrlc&. 116

Cun-cncy bch11nge R:.tes 1 18 • BRIEFING I PEA:$0NAI. FIN.ANCE: An AMerl<:8n In

london Delling with Currc:ncy Exclu.ngc-How Much b: That 8lg M~c, ReaHy? 118

Po li tical & L~l ConcStiOf'lt: Adjusting toOt~ C<M~ntries'

(iavommonh & Uws 11 9

4.4 International Trade: Barriers & Facilitators 122

THE ESSEN TIAL QUESTION Ul Three Kinds o f Trade ProtectiOI'IiStn 122 (WgM~Wtions F.acilit.ating lntMnoation.al Tr~o 12'3 CommOf'l Markeb: NAFTA. EU, Mercosur, & APEC 124 The World No Lot~ger Revolves :.round tile United

Sut~n 125

LEARNING & SKILLS PORTFOLIO 126 Summary 126 Key Tel'mS 127 Pop Quiz Prep 127 Critkal Thinking Questions 127

CASES 128 VIDEO CASE: The Mini: A Meg a-Mini Comeba(k In

tho Un~od Stoto• 128 BUSINESS DECISION CASE: Outsourcing Health Care

& Medical Tourism: Is;, Trip to an Exotic Country lndud•d in Your He;~lth 8en.fits? 129

BRIEFINGS 130

PART2 STARTING & GROWING A SUCCESSFUL BUSINESS 132

s ______________ _ Forms of Ownership Business Enterprises Great & Small 132

FORI!C.AST: Wh11t's Al'lo.t~d in Thii C.h.t~p;or 132 WINNERS & LOSERS: Me rge" & Acqui,ilion' 133

5.1 Basic Forms of Business Ownership: Sole Proprietorships, Partnerships. Corporations, & Cooperatives 134

THE ESUNTW. QUESTION t34 Soht Proprl•torshlp5:: O'*Owner Buslfle&ws 135

• BRIEFING I sugNESS SKILLS & CAREER OEVEI.OPMEttr: A Mlt'l¢f'lty·0WI"'ed Pl.lbllc Relations Firm. 13S

Fivo &nofit$ of Boirlg 11 Soltt Proprioton.lt:p 135 Fi~ ()r-,y,~cks or Beir-g 11 Sole Proprielor:;t- p 13S a BRIEFING I $MALL BUSINESS & ENTREPRENEUR$:

A Smaa.Su>Sin~u Own~r FinaDy Tak~s a V>llution. 136

P!Wtnershlp5:: Two or More Ow!\W& 131 "'!ype:; o: P:.rtn~hip~: Gerter:.l, limited, W.11:tter Limit.:d,

& Umltt>d Wobility 137 Four Beneli~:; of Being :. P:.rtt~e•*'ip 137 l htH Orawb11cks of Boing .fl P~rttbfJrship 138

PRACTJCAL ACTION P<Jrtnering in Business with OJ Spoustt or 8oyMend/GfrlMttnd: Oefln/ng Rofes & Setting Limits 139 CorporatiOf'ls: Fr-otn Motn 'n' Pops to World Goliatlls 139

Typ4s o: Corpora;icns; C, S. LLC, & 8 139 Fi~ Benefib or Beir-g in a Corpor,lion 141 Four Or:.w~cb o: Bring in" Corpor:.tion 141 • BRIEFING I LEGAl. & ETHICAL PRACTICES:

lncorpor.11ting >11 Sm.11ll8u$ineu in Ncv11d.ll . 142 Cool)tt'<~tive& : UMitil\g Powef of E<ldl S!»reholder 142

• BR.IEFING I LEGAL & ETH ICAL PRACTICES: A Rural l<Wm .t>.b<lndoned by Ni!tict1<1l Ch11ins Form' a CoopeutiW! D~parlmenl Slore. 142

5.2 Franchises: A Special Fonn of Ownership 144

THE ESSENTIAL QUESTION 144 F17111'1dli..s.: Kelp in $t.oarting :. Business 144

8 BR.IEFING I SMAll BUSINESS & ENTREPRENEURS:

Jot's41y '-fko's 5-l•b S,..ndwk;h Shop 0-Qvolops 11 Sm.:.ll Sus.'wlen Into~ Ft9n<:h1sor, 145

Typct'S of Fundli$CS 14S 8uslt~Ms--FO«nlll Fr&r.<:h .se: ll'91ng 11 Fr&l't<tll&or'"S N3me

& Formoat 14S Procluct ·O .s;rib4Jllon Fr&l't<tll&~: Selling a Fr&(ld'll&or'"S

'frlldtonll)rked Pfo<Nd 1-15 Mllnufttcti.Ming Funchi~;&-: M11kirlg do Product Using .fl

Frar-.d'liso•'s Formul11 146 FMI S.nofits of Owning .a Fnnchiw 146 Five Of'awbacks o f Owning a Frat~dlise 146 Trends in Fr:.nchising 148

Homt>-&ut>d 84JS!t~Ms~ 1~8 Minorities & Funchisirtg 148 Go!ng ll'lternellon&l 143

5.3 Mergers & Acquisitions: Paths to Business Expansion 149

THE ESSENTIAL QUESTION 149 How to (iraw: lntom.:.l & EJctom;al Ellpoansi ot~, Mergors,

& AcquisitiOf'IS 149 Why Morgen & AcquisitiOfiS Occur 1 SO

Shol'tM to Grov."Vl; Acquiring Jte~~ Then Oe~~t!o,>~ 11 C.:.p:~obillty 1 so

w eneg~t Talent: Aoqt; fi l'lg w eneger1al E:q>ertc!e ISO S:.•t-:tlg MOI\ey: Cons.o!id~ting Opeu~ions to Reduce

Cooa ISO Tax Benefib: Acquiring ~n Unprof~.oble Firm to Reouoe

ldoliOS 1$0

CONTENTS xiii

Tho Throe Typos of Morgen: Horizontal. Vertial. & CongeoMerit• 151 Horiulnu W.~ers: ~me lnci\imy, S~m~Ac:tivity 15 1 Vertical Merger~: S&Me lnclu$t')'. Oi&ferent

Activities 1St Ceng!emerete w ergers: Oi~eret'llt lndvstrle~. Olfferet'llt

Activities 1SI UnfriendtyMergers.: KouileT.alfeov..-s 151

8 BRIEfiNG I EARNING GREEN BY GOtNG GREEN: M<lltXilm AcquirtM Pa<::ilic Lum~r in a HosliloQ T.tkf!OW!t, 152

TendCf' Off~rs & PtOJCY Figh~s: W:I'J'o ~o l..ll.lnc:h a Ho=ni!e Takeover 152

"Whit~ Knights"' & "Po' $On Pi,_s": \Y:I'f'o to R~i=n-' Hostile Takeover 153

B«row-&·Buy Stntegies: Leveraged Buyouts & Employee Buyouu 1S3 L~~r11ged Bl.lyou! (L80J: Bouowir-gllgains\the As.lets of

thoFirmBoiM9A¢qu'red 1$3 E:nlployee Buyout: Bono<A·ng 119~ins1 t:nlp!oyees' Aneb to

Cteato 11n Emp!oyoo.Qwnod Firm 154

LEARNING & SKILLS PORTFOUO 154 SummMy 154 Key Terms 156 Pop Quiz Prep 156 Critical Thinking Questions 156

CASES 157 VIDEO CASE: Owni"9 a Slice of the Action:

A Domino's Piz:r.1 Franchise 1 S7 BUSINESS DECJSION CASE: Model of Success: Gr~n B.lly Paekers, S upet Bowl XLV Champions­A Nonprofit Professional Sports Team Owned by Its Fans 158

BRIEFINGS 1 59

6 ______________ _ The Entrepreneurial Spirit Pursuing the Dream of Success in Small Bu$lnt$$ 160

FORECAST: Wh:.t's Ahead in This Chapter 160 WINNERS&: LOSERS: Entrep1eneur~ 161

6.1 Small Business & Entrepreneurship: The Art ofthe Quick 162

THE ESSEHT1Al QUESTlOH 162 Beit~g ~ Smaii·Bu~ineu Own« "ersus Being atl

Et~ttepreMeur 162 Smll'll Bu$1ne~ O.....nCf'S: "I Just Want ~o M:.ke 11

Living~ 163 8 BRJEFING I SMAll BUSINESS & ENTREPRENEURS:

Tho Shock Brothot$' Smi111 Bu,in41st.-Gold Pro,pocting Adv~nturf!s. 163

Entropr9tlourt.: "IW;.n; to Build a Hi9h-Grc .... 1:h 8vsii'IM1 ~ 163

xiv CONTENT$

a BRIEFING I SMALl BUSINESS & ENTREPRENEURS: Chef ·Owner Moor~d Lehlou's E:ntri!prenevtl~l Small &.~incss-Aliu, N~ Morocun Cuisine. 164

Three Type~ of Etluepreneul'1 164 a BRIEFING I A WORlD OF CONSTANT CHANGE:

lntr<1pr,gnoo,.r S..amu' Bl~ckl41y Or,garru Up Microsoft's Xboll. 165

a BRIEF-ING I SMALl BUSINESS & ENTREPRENEUR$: A Reet!ssio~t-Decimated Hot· Tub '-i<aolter Ve.ot~s EnlrGpr,gnoo,.ri;)l T,gam' IO F"f'ld NJWJ Produ<;U IO

Make. 166 Kow Do People Become Entrept"etleurs?

Opportunity versus Neceuity 164 Oppor.unity EntrcprCt~eu~S: "I Bum to Pl.lr!IUe

Svoc:~~.. 166 Nece'-Sity t:r- lteptet~eurs: "I Need lo Replace Lost

IMCOm4~ 166 Oo You Have What tt Takes to Be at1 Entrepr~neur?

Four 0;ar.aC1eri•tic:s 167

6 .2 The World of Small Business 168

THE ESSENllAL QUESTION 168 The Contributions of Smaii Busineu 168 Some Types o f Small &u~fneue5:: Horr.e-8ued

& Web·~~ed 169 HOMO·B.)i:i;Od Bus.'no~o1os: Rt.~Mning Ywr Own Show from Honl~ 169

V\~b-8a~;od Busintnstn· Us'ng a V\~b1ito to Build 11 61.lsir:~ss 110

Owning Your Own Business: Buy « Stan? 171

PRA.cnCAL ACTION St.,rlit~g a 8u$in e.ss o n the Cheap: The Right Mindset 172

Buying a Sm~ BusilbOu 112 LookiMg 0.01:" & Nego~i11tir-g fo1 31\ bcisting

BusiMu 173 • S.RIEFt~ / INFO TtOi & SOCIAL MEDIA: AA

Entrepreneur Blt)'s e S log D~votcd to Funny U t Picture~ & Bulld$&~~plre, 173

Sdlit~g Your Bu~t1ess 173

6 .3 Starting Up: From Idea to Business Plan 174

THE ESSENT\Al QUESTION 174 h Begit1.s with ;,n Ide~ 174

• BRIEFING I EAA:Nl~ GAEE:N BY GOING GRU:N: Rc:=storing Buildings Using Green M.o11tc:=ri els.. 175

a BRIEF-ING I CUSTOMER FOCUS: Pl9nty of Fish, 11n Online Daling Site, B~gins u a Onot!·P~r'IOn Web-Sas~d 8.11sin~ns . 175

l Nrning •bout BusiMeU, Get-ting Ell.perience 175 Step 1: Rud about &sintn&-& Your Prc$poC1ivo

s~.~~if'l.eu 176 Step 2: T:.lk ~o Knov.iedg~:.b!e Peopi-Mento~S & Trade

A$SOO&tiont 176 Step l: Get E~tperienc:e 176

Wtlttng; a Bu&!ne" Plan tn Wl-.yWrite~&sin~sPiar-? 17/ How Do Y~ Cort()optu.ali;fo a Bus.'nos~ Pl11n? 177

I' I; R&<tlly Noco'1¥Y to Ct&.Jot& il Formill Busil'I0'1 Pl11n? The Re:~sons WI-ly Not 1 }8

PRACTICAL ACTION Creating a Successf uf Business Pbn: ~ke Jt Sing 119

6.4 Getting Financing 180

THE ESU NTW. QUESTION 180 f il'lancll'lg " New El'l t ... priM: Eigh t SourcH

of Fu nd$ 180 Othtt Support: lnwbitor9 & Etlteotf)(lse Zoo.s 182

ll".c\lblltOIS 182 Ent&rpt\$o lcl'ltn 1$2

6.5 Achieving Success in a Small Business 183

THE ESSIN TlAL Q UESTION 183 ¥11ly Stnall Busine suos F~il 183 Kaw 10 Krrop o:~ Sm;a\1 S...sinrru Krro:~lttly 1 &4

LEARNING & SKILLS PORTFOLIO 185 Sununal'y 185 Key Terms 186 Pop Quiz Prep 186 Critkal Thinlc'ing Ouu tions 186

CASES 187 VIDEO CASE: Ext reme Entrepteneurship: No Toying

Around at Wild Planc:t 187 BUSINESS DECISION CASE: Big Love in In d.,:

An OnHM G roup Dating Website Finds tts Place in lndi:.'s Ch:.ng ing Socia l C ulture 187

BRIEFINGS 188

PART3 MANAGEMENT Achieving Superior Results in the Workpla ce 190

7 ______________ __ Management & Leadership Realizing Exceptional Results 190

FORI!C.AST: Wh11t's Al'lrr-ild in Thii Glt<tp;or 190 WINNERS & LOSERS: l~11dership Ovaliti~s 191

7.1 Management: What It Is, How You Do It- The Four Essential Functions 192

THE ESSENTIAl QUESTION 192 Thrr Nrrrrd for Mlll'l.o:~g rrmrrnl: To Achi rrvrr Effrrctiv9nrr"

& Efficiency 192 Thrr Four Thing' Mlll'l.i19RI"' Mu•t Do 192 Pyramid Powe.-: The Three Levels of Manl'gement 194

Wh111t M.o:~n;,grrrs Do: Pnctiul De cision Mo:~lfing 195 • BRJEFING I SMAll BUSINESS & ENTREPRENEURS:

Jeff Srr~cn·, Major Decision: Whilt Kind of Compwny Should Amll~on Be? 196

PRAcnCAL ACTION How Can You as a Manager M.-,ke Gr~.:.t CRciUons? 197

7.2 Planning: You Set Goals & De tide How to Achieve Them 198

TH£ ESSENTIAl OUESTIOH Itt Why Plan? f our Benefits 198 The &sis for Pl31flflifl g: Vision & Mi~on S11111ement5 199

Tht \'la!on: "Ths I ~ What 'A~ W3nt to Become" 199 The Wis:~oiofl Sta tenleflt: "ll1e5e Ale Our 1-\md_,.,e,.Llll

Pl!rposo'" 1q9 Tlwee Type s of Planning for Three t-els of Mana9e'f"''e nt:

Stntrrgk . T.o1crico:~l , & OprrrAtion.o:~l 200 Strategic Plarming by Top M.:tn11gers: 1 lo ~ Yell" 200 l :.ctic:al Planning by Middle M:.n111gcrs: 6 ~o

2,. MCI'ltM 200 Openotiol".al ~nrtng by Sl.lpcrli~ory ~.bn.:.gcrs: 1 to

52\'keb 201 G~h & Objectiws 202 A'~ing Your Comprrtitivrr PoWtion for $tntrrgk Pl oanning :

SWOT Ana lysis 202 a BRIEFING I GLO BAl BUSINESS: Toyot.o:~ T•k~ 111 Look ~t ltsdf-A H)opothetic.el SWOT An~lysis. 203

Othrrr Pl o:~n': Conlingrrncy 203 • BRIEfiNG I A WORLO OF CONSTANT CHANGE:

AliKP'Arlnt:t$ Crc~\1:$ Ooom;d11y Conting~cy Pllln$ for <Cutren tfy) Ptofiubf.e C¢.Mpeo'll.es. 203

7.3 Organizing: You Arrange Tasks, People, & Other Resources to Get Things Done 204

THE ESSEHTIAl QUESTION 20>1 The Org:.niulion Cha n 204

Vertkel Hle-tercl-ly of Au~ol1;y: Who Report~ to Whom 205

Hcrilcntlll Spociilllut'on: Who Sp&¢<t!i:tn in Wh111 Wo•k 20S

Tho Slcills ThAI $tlll' Moano:~ grrrs N rrrrd 205 Ho"'' the Will o f Skills Ct-..:~nges as OM R~es to tl'le

T<lf) 206

7.4 Leading: You Motivate People to Wortc: to Achieve Important Goals 207

TH£ ESSENTIAl OUESTIOH 201 L.e111der V'ei'SUS Manl'ger. 0~11~ wfth Chtw~ge vei'911S

Oe-.:.li11g wit h Comple~il)' 207 Hewlee~Cope ... 1ttl01~~ 207 Ho'A' f-llll'lll9'" Cope voi!h Complexity 208 Ycu Nood Not Brr 11 M~n11sor to Bo it l.udrrr 208

l e ade"hip Styles: From Bou<ente red to Employee· Crrntrrr rrd Ut.o1drrrship 208 AutoCI~L.c ~~'"hip : "Oo 1his Bec&~e I S.:tid So!u 208 Participa tive (Oemoc:tlltic) Leadcrd\ip : " let W.e Ge~ Your

Thought& on \'hlat to Oo" 208

CONTENT$ XV

FrH-RQin I.A~dorship Sty'o: • HMe'' the Ciotti. Do Wh.ttt Y<X~ \Yonllo Adlie~ ltu 209

\\1\~t Si)'lo Worb Be,t? 209 Tr~l'\'5.tt«ioNiveN~JS Tr~nsfon'l\4ltlonill Le•dert 2·10

Tn.n.s.)Ction.al b:.dership: Promoting .:1 W~Run

Organl2a<1en 210 Tn.rt.$~Orm.:~1ior-.:tl Le:.dership: Promotrr.g Vision, Cte.:~tivity,

& El(oept>Otlal PerforMfllo'loe 2 11 Four KeyTk,ngs lhal f1ansfo•matonal Leod~ Do 21 1 • BRIEFING I EARNING GREEN BY GOING GREEN:

~~ i(~'s Mark Porter Ulmmuniclltf!s a Strong Sens.e of Purpo~. 212

7.5 Controlling: You Monitor Pe rformance . Compare It witt. Goals. & Take Corrective Action 213

THE ESSEHT1Al QUESTlOH 2:U Why Control Is Needed.: Six Re.:I<SOr.s 213

• BRIEFING I EARNING GREEN 8Y GOING GREEN: Becoming Awxr~ of Oppcrtunitt.!s-Ted Turner'~ Montdon~ Grills Off'lt Gr~Ht~ Gn1b. 214

Taking Control; Four Steps in tile Control Process 215

LEARNING & SKILLS PORTFOLIO 217 Summary 217 K• y T•rms 218 Pop Qui~: Prep 218 Critic&l ThinkU,g Questlons 219

CASES 220 VIDEO CASE: Triple Rock Brewing Company

Management Insist on a Relaxed Work Se-tting 220

BUSINESS DEOSION CASE: Is Middle Man~ement as We Know It Be<oming Extinct? Of Does It Ne.!d a Revival? 221

BRIEFINGS 222

s ______________ _ The Effective Organization Being Change Oriented in a Hyperchanging World 224 FORECA$~ \'hlat's Ahead In lh!t Chapter 224 WINNERS & LOSERS: Comp..,ny Culture$ 225

8.1 Adapting Organizations to Tomorrow's Marketplace 226

THE £SS£HT1Al. OU£STIOH 226 How Do Yo11 R~gfllte the Need for CNt~ge?Coll,t~s'& fiVe

S1<1ges of Ol'g.:llfli u tiona.l Decli11e 226 Areas In Which Ol~nge Is Oftel'\' Needed 228

8 BRJEFING /INFO lECH & SOCIAl MEOlA: Twilt~r. F4lcobook, dond Othor Soci411 ModiOJ Ch11ngo tho Approach to Cuslomot:r Servic~. 228

xvi CONTENT$

• BRIEF-I NO I EARNING (iAEEN BY GOING GREEN: &!sl Buy's New Strbt~y-"&ing u, Your Junk. • 228

Kow Are Ch.:~ngctS l"""lern.ented? 229 RtN:ognlu ProbleMs & Oppenun!tiM & Oe-.-se

So!vtion.s 229 Galt\ A !liM by CoMmvnleaiing Yovr 'Jhlon 229 (}.ot'f'c:ome Employee ReS>i$~.:111\ce, & Empower & Rew:.rd

ThMn to A&;hlevo Progreu 229

8.2 The Informal Side of an Organization: Culture 230

THE ESSIN TlAL QUESTION 230 Ol'gatlillllional Cult~.We: A Firm., "Social Glue" 230

HMoes: EKct?pticnal Pooplo Embodyil'l9 tho Firm's Values 230

• BRIEFING I sugNESS SKil lS & CAREER OEVELOPMEttr: AAne Mule<~hy BeeoMe& & Hero to Xe!rox. 230

Stoft.e&: Oral Hlttl)f!M &bout the F!rm't AchievM'Ien.u 231

a BRIEF-I NO I SMAll BUSINESS & ENTREPRENEUR$: The Baok~r·-. Story-Giving a Six-Time Felon One lnl Cht~nco 111 RedoQmption. 231

Symbols: Objects & tvents Con'll:')'ing a Fi1m's lnlportant Vt~lutn 231

RltM &: R Nail: C~!eobratt~glmportaf'lt O«at~ 232 Kow Culture Influ ences ~n Orga.niz.:~~tion's Memben 232

PRA.cnCAL ACnON SurvMng & ThrMng Jn a New Job: The First Two Months of l"rtting into .1n OrganiutJon's Cu#turf! 233

8.3 The Formal Side of an Organization: Structure 234

THE ESUNTW. QUESTION 234 Aulhority. ACCOOoln~bliUty. & R~poi'\'Sabn.ty 234 Authori~: M.:~kiflg Decisions & Gioing Otdet$ to

S~,;bord if'la~~s 234 Accour-Lsbility: Repottng & Justifying Resu'ls to

St:pMiors 234 R~ponsibility: Ob1igaton to Pe1form

Asiig~od Tt~sh 234 Division of Lab or: Work Specialheatiotl 235 Hier~rdly o f Authority: The Ch.:~in of Comm.:~nd 235

4 $p!WI of Control: NartOW ~s Wide 235 N;)rtow S~ of Control: M:.n.ager H.:l~ Few People

Repertlng 2l5 Wide 5p.:~~n of Conttol: ~ .. bn.ager H:.~ W • .:~ny Peopte

Ropcrtin9 235 Dele()8tion: Lin e vef"SUS Sttlff Positions 236 Lino Pos"tioM· Job$ Th.:lt Havo Docislon--Malo:ing

Autl-.ority 236

PRACTICAL ACTION Secomjng an EHective Dekg.1tor: Dos & Oon 'U 237

S~aff P~itions: Jobs 11-..:tt Ale Advi'-OfY 237 6 (.enuo:~izo:~tion Wtrsus Doc•ntr~l iU~tion

of Autllority 237 Centt.:~hed Authority: Big Oecl$1ons M.:~de by tfghcr

Maf'lagers 237

Ootq(ltT~!lztd Avthotlty• 81g 0ocl•lon1 M•de by I.O<A._r Wanagen 238

a BRIEFING I A WOAI.D OF CONSTANT CHANGE: Cisco's Fe1ed Eloptf'IMet~t of 48 06eenlr i 11Md • M~~oMgcmcnt Council~. • 2St

8 .4 Organiutional Structurea: Fo!A" Prindpal Types 239

THE ESSENTW. OUUTtON »t 1 Functlon~ $t Nctw•: GI'CM.Ipl"SiJ by ()((\ll)llhon ..

Spe<:ilftiH Zl9 2 Di'~Won~ $ttuctUN: Groupo"" by~ 240

u.ttoM«OivisloM. CifcuJ>1"9byCotnmort CuttorM!t 01 Cus1.ornw Groups 2.0 G~< Olw~~<CM: Gf'OI.oP'1"9 by •eoiONI S··•• 01

N eas. 240 P'focfls 0Vfl.<lf'l Gf~ bJ \\101\ Sp«.t , . ,_. 24Q f'todJct ov-s: ~ br s.-. :M l't-.cts or

S.V<ft 241 ~Oi.u-JC~~rG.:lhe~~teStn.cUe 24\

3 H)'bnd $tructunt: loth F~UOftJil .. ~ 242 4 Mt-trul ~· VertK:III & tto.u-t.a ~ S~ift a Grid 242

8.5 Networks & Te.,wortc: Two Ways Organizations Rospond to Chonglng Conditions 244

THE ESSENTW.. QUESTION 14.4 Organil:.ti011t ~ N~ Ccw~ Co~ United to

()vtsict. FinM 244 Organil:.ti011t lking Teamwodl: Benefiting from Common

Commit- t 24S Oiff~' IGnds o f Teamt: Act:iol\, ~aton. Proftc,l,

& Advice 24S ActiOn T~erM· Fot lMb ri'~Mng Hlgl'l CocwdNUon

.nor.g Tr-aif-•d Spacia!ists 244 Pr~ion TeilnK' Ft)f Performing O•y-to·Oiy

OperaLor.'J 246 Pro,Kt Teilm~· Few Do "9 Cr•ative Prob•m

SoMng 246 Advice ToMM· For Pfo.,dirlg Mort lnforM•l M 246

CI'Cm·F~Jt~<tl or~al S .. f-Mat»gttd T•~n~ 247

LEARNING & SKILLS PORTFOLIO 248 Summary 248 Key Ttenns 249 Pop Quiz Prep 2.49 Critkal Thlnldng Questions 249

CASES 250 VIDEO CASE: Hertnan M iller: From O fflce

Environme nt to Huling Environment 2SO BUSINESS DECISION CASE: New Corporate

Cutture : OHice Romanot on th• RiJ• & Ot.~t of th• Closet 251

BRIEFINGS 252

9 ______________ _ Operations Management Gener• Ung Qu~llty Products & Servkts 254

FOftlCAS'n \Yf,.at's At-ebd in I his Chaplef' 254 WINNUS & LOURS: En_.in9 Oullf.ty 2SS

9.1 Op«ations Management: How Goods & Services Are Produced 256

THE lSSEHTIAl OU£'STION lU Opel'~ Pn~dwdiOf\. & Operations M.an-s~ement What

Th.-y Are, How They WOt\ 256 ~or Op.r1~ Tran~c:rmjng R~ in:o

~,tt-.6 Pfo6\..ct5 2S4 .-.~~--~w.,.,.,Oper~ .,,..~ ru

~~~TMDtff~in Opwatic.n~ 2'57 tl~.,~ ................. Pfoduong Gooos 257 e UIE:FtNG I EARNING GRaN 8Y Ci01NG GR£EH::

MtcM MM...- ,. rt s»wedt So• Metffto Male New !<..&. 2S7 ~ ...... ,...... p~""9 Sf.tv<H 2S8 • U!UtNG I A W0M.D Of CONSTAHT CHANGE; ide

All.n ~Dr_, t,..Upcl.1ting Dlgil<ll M.s-.t"" Oft • ..,. c._.. 25l

N.Acn<:Al. A.CTJOH Tr.tMiottrNng Your Own Work l«oming MOtW Efficient 258

9.2 Production Proc•sses: lmprovlng Production Techniques 259

1'141 US!HTIAL OVlSTIOH JS9 Form UtU•tY: How ¢p«•ti0f'l.t Pr<H;eUI!'t Add Value 259

8,. .. 11'19 Down Mr.eriJ ~ ANiytc TtMSfotMat:cn 2$9 Cornbll' "9 Wateria 1: S)'!'ltletic lrans:forn\4tion 260

Cofttlnu~l ver11o11 ~t•rmittent Con'lllet'5ion P,oc•tto~• 260 Contii'IIIOVI l"na~Slolll: Or-going 260 lt~ttrM!tt•nt Ptocetset: ~ N~ed~d 260

A Sl'lcwt Hiltoty of Produ<tion 260 Improving Production! UH of CAO/CAM/CIM, Flelfibl•

M•I'Nf•ct\ltll\g, h•n Mtr'lufac:t~o~ril'lg, & Mess C~o~•tomll.ltlon 262 • 8RtEf!ING I A WORLO OF CONSTANT CHANGE:

Starbudc. Talu11 a.n "l..e41n"' Tocl'lniqtMX. 264 • BRIEFING I CUSTOM ER FOCUS: Tute&oolc U1es

Meu Cu:~tamiution to M•nufacturo P~n:on..&ud Coo\:boolct. 205

9.3 Operations Management Planning: Dulgning & Managing Production Oe-r•tionl 266

THE fS59ft1Al OUU'TIQN l66 F.dlity Loc-tiOft: S.l«.ting • Pl•ce for Your CCK1'1iP"'")''I

Opwttlont 266

COHTENTS xvii

F:.d tity Uyout: ~nging Your Production R~rceos 268

Putch;asing & I!'Mlntory: G$'1ring & Storing tile Bes.t R~tees 269 Oe•!iflg '<\'itt! S<.ipp!iCf'S: T...,.o Stutcgies 269 ln~ntol'j & lnvet'lltOo')' Centro-1: Keel)!ng the Goods !n

Stodc 269 Suppfy..QI~I I'I Minagenwnt & Jvst·I I'I·Tim.e ~ternS':

Storing tile ~pplieos That Suppliers Supply 270 Supp!y-Ch:.in Maon.ttgomont: lntegrttting Pre6.1ct3M frem

Supp..'" to Cu~ontl:" 210 JuS't~ 1im4· Lo; Supp{oos 8e Oo!ivored JuS't 11$ Thoy'ro

Needed 2}1 MRP & ERP: Using Computers to Ddiv« the

Right R"esou~ to the Rigt!t Pbee ft ttl• Rfght Time 271 Mttel1als Requirement P'_.M ~: Using a 8-.11 o~ Mtte11als

to Oeti•~~:r the R·gtrt W.11~eri:u on Time ~o the Right Plac:o 271

Enterprise Re$01Jrce Phnr.=t~g: lntegratirg All Busine"" Pt()()O'" •• U~ <tetOS'~ the En; t-o Ca'np:.ny 272

Scheduling Tools:: Gantt & PERT Charts: 272 Gantt Ch:rts: Visu11! rrrne Schedule~ ior Work

T1u.b 272 PERT Chllrts: tdcn~ifying Bev. Sequence of Produt":ion

ActMtiM 273

9.4 Quality Assur-ance: Producing Better Products & Services 274

THE ESSENTI AL QUE5T10N l74 Total Quality Managef'nent: Seeking Continual

lmprawiTMK!t 274 TOM: What It Is 27S The Four Components of TOM 27S

TlwH OvaUty.COntrol Tee:hnlques: ISO 9000, SUtiS'tl<:al Proceu Control. & Six Sigma 275 ISO 9000 Serie&: Meeting Sandt~rd& of Ind-ependent

Experts 275 St:.<inic,Jol Proco" Con trot: ToitAg with P4rindic: R<tndom

s~ml)!e, 276 Six Si!1Yit~ ' O<ttii·OrW9tl Wift$10 Elimina;o Oofocu 274

PRACTJCAL ACTION Tr~ining for Green Jobs: Focusing on P~.e. Pfttn.et & Proffts 277

LEARNING & SKILLS PORTFOLIO 278 Summary 278 K• y T•rms 279 Pop Qui~: Prep 279 Critic&l ThinkU,g Questlons 280

CASES 280 VIDEO CASE STUDY: Bladc:bfrd Gultats-.. Big Sound,

Sm-all Body" 280 BUSINESS DECISION CASE: My Coworker Is a

Robot 281

BRIEFINGS 282

xviii CONTENT$

10 ______ _ Motivating Employees Achieving Exctption31 Pt rform..,nce in the Workplace 284

FOA!C.AST: Wha;'' Aho~d in TM ChA>ptor 284 WtNNERS & LOSERS. Motivbted EmpiO)'f!f!' 285

10 .1 Motivating for Performance 236

THE ESSEN TIAL QUESTION 786 Motivation: What Ugtlts Your Fire? 286

Mot:V,..tion: Whil'l h Is. How It Work$ 2.(16 • BRIEFING I BUSINESS SKil lS & CAREER

DEVELOPMENT: A Motivlltion111 M:Fod G~mo for Su<:e.1s. 286

Two Types of Rew-ards;: Extrinsic: & Intrinsic 287 E>~'triM< R~"''&ldl: S&Uft(OOt'l It\ Rec:e!v!ng P11y er

Reco9"ition from OthCt'S 287 • BRIEF-I NO I EARNING OAEEN BV OOINO OA£EN:

The Extrinsic: Reward ' of lm~~sting in Gr~N:n Enf!rgy: Milking Mon&y. 287

ll'tnr-"ic Rewllrcb: ~ti,f.:tction in A«ompli,hirg ti-le Tnk

'"•If 2$8 • BRIEFING I EARNING GREEN BV GOING GRU:N: The

lnttT.sic Rc:'WWds of ln\~t:ng in Green Ett<=rgy: Gaining Fa.lt~g, of Ac:e:ompll$ti!"Mfft. 288

V\!hy b Modv:rtion Important? 288

10 .2 Motivat;on TJ.eory 289

THE ESSEN TIAL QUESTION 289 1 Tiylor's S<:lentlfi-e: Mtw~~gernet'tt : lrnprovii'ISJ Pro.du<:tlvlty

by Studying Woric Methods 289 Ftederi<:k Tty! Of & ttl~ Pt1t'ldples of SC>ent!f:.e

W•nageml:"'t 289 Frttnk & LilliA-n (i::broth & lnduS'ttiill EttgiMoring 290 The f>f-.:tctical Significance of Taylor & the G breth'

Today 290 Mayo & tile Supposed "'Hawthorne EHect"': Giving Employees Added Attention to Improve Proctu« lvlty 290 The Puctiul Significllnc:e o! ~he H;)Yo'thorne Sttlcfes 290 Mislow"s Hier~re:hy of Need5-: Meetil\g Ut'tS'ilbsfted Employe-e w..nts 291 Tho M.)GIO'N Hiou rdly 291 • BRIEFING I SOCIAllY RESPONSIBLE BUSINESS:

Fulfilling Higtl41t+LG\'ol NHd5-0no Miln TriG$ lo Strike a & lanef! betwe~n Saofety & Higher+l~d

NHd$. 291 Th~ ~&ctic:al S!gn!f:.etnc:e of Mulew's tdet~& 292

4 He r:tb«g's Two Kinds of Motiv.:.ting F01cton: De:.oling ""th EMployee Sabsfietion & Dit»bSfidion ~2 Motiv11ting F:.oc:tors: "Wh11~ Will Make Emp!oyees

St<lsf;.e<f?"' 292 Hygiene 1-'~cto": "Why Ale £mployee' Oi~"ti,fied?"' 293 Tho Pr•ctic,Jol Signi~nc:o oi Henborg's Rew¥<h 293 Job Enrichment Fitting Jobs to People 293 t=rtt·ns Peop!o >:cJob5: Tho Tochn::quo of Job

Simpl'ficat.on 293

Fo~t!$1 Jobf, to Peep .. Ttl• T-~ of Jcb ttl!.~ & Job EN~ 294 ,._.,....0 ~ti·"~--:Job ErwdWMf'tt 295

6 Mc:GNg«"s Theory X & fh.eoty V: Treating EmplopH OIH•r.nd)' 296 Ttloory X: The Pe:;.s-.rnirtc View •bcu~ Employees 296 Tt!eoty ~ The Os>tltnlttlc V •w tboot Empf.oyHt 296 I he Pt-.ctical Signific,nctt of fhecty X/Theory Y 297

7 Ow<ho's Thltory Z: Combor-ong Jl~s. & Am.nun M.arlage~wnt Approt<hd m no. ..... kit n..c,y z- 1 .-..ci""'J ~a-...,_,GW!o lii:~App~ 291

n..~ s~orn-yz 291 1 R .. nforc<tn'tltM Theorr a.M~r Mod•flcltiOft 291

How lte-..,forccmcnt Tl!.ory Wotirs 298 • BRIEAI'fG I SOCIALLY RESPONSIB4.E BUSINESS:

U•lng Rcinforcemcmt lo lmpt'O\IC Accaunto~~bility a lntewlty. 298

lt!e PtiKtia_ Signiliancr of Retn(Of'Cleml!'l'lt fi'leory 2'91 t ~·· bpecuncy TheOfY M_.lf'l9 (mp&oyre• ~~ 299 1lwo Calo..t.noN. olE~ 1Nory 299 'TheP.Kute S.gntf~of£~1Moty lOO

10 Adams's Equity Theory: tr.1tlng Employees. fllll'ty 300 Ttle Eleme nts o( Eauity l l!.ory Cornp :uing Your

Cor~ulbutloM & Re!vrm wl~h l hote of Othef1 301 I tie Ptectia Signific,nce of t:~lty ll!eory 301

t t 0•1-$otnftg Th.ory lo Mlln.,....nt by ot¥-ct;...e.s 302 lh-H 0<Knbfe Qul<t ft GOfk ~Maw lQ:l .,.,.~,by~ The f-Step~for

Mmiw1ting EmpiO)""s JO) The Pr.ct•ee S;gnlflu.~ of Goei·Sen.ng Thtocry 30!

10.3 How Forward-Looking Companies Motlv.te Their Employees: Perks. Benefits, Ustt'nlng. & Prais• 304

,.... fSS(HlW. Ot.ESTW:)N JIM 1Nh.n S~s Say TheyW""t .n • Job 101 T~~~Wd )(M

e UIEFING / CUSTOMER FOCUS: Cllonts l ik• Ad firm" HfiPPY El'l'lplo)'ees. 305

L•IIM!ng Opportunit:•s 30S Work--t!fe 8e-r".e'lu 305 B•lr.gNice 306

Tt~e .. M"'-' of L.in.eNnSt 306 fl¥.-w-· One ol the Most ...,..,.t Motft4ton J06

""'Cfi'"-"-AcnoH ~ y.,...c­Stm'-: P1.,tng Yow- Winn~ a.m. J07

LEARNING & SKILLS PORTFOLIO 308 Sutnm"l')' 308 K•y TenM 310 Pop Owl& Pr• p 310 Critk.t Thinldrtg OIMstlOM 3 10

CASES 310

VlDEO CASE STUDY: 2appos-Mottwt '"v Employees through Comp.1ny C!ohu,. 310

&USINESS OECfSION CASE: Pets in ttw Wor\plac•: lnete.sed Employee fnt .. m.nt cw S.rlcing? 311

BRIEFINGS 312

11 Human Resource Management Getting the Rj.ghl People for Busin•tt Suece:ss 3U

FOft! CASn \...,__.t't AN•d !M Th!s Chepttf 314 WINNERS & L.OSlR$: V1luing Humo~~n Ro:~ource• 315

11 .1 Finding Groat Pooplo: Building Human Capital 316

1H( lSSIJoiT\Al ~ lt6 • UJERHG I IUSIHESS SKLLS • CARtER

DEVELOPMENT: P'tcp•ing Now for Your F"lrst f'ou· Coii&Qt Job. St6

Hvfl\&n Retourc• M•n•g~ment M•r»ging an Otganila'tion'-s Most lmpcwt•nt R•.o11rc-• 317

Octet"mining th• Humtlfl R~sourr;" Need.-d 317 Job AN!'('is, Job Oetcript.cn, & Job SpKI~C.t-01'1 317 • BRIE11NG J A WORLD OF CONSTAHT CHANGE: Job ~a OncriptiDn b UPS on..ts.. 111

~Fw.lltEf!IP~NH>ck 311

11.2 Laws Affecting Human Resource Management 319

THE ESSEHTI.t.l OVfntOH )19 1 Labor & Untont: ()..ner .al Employ- Rightt )19 2 ~nutoon • hNfits: ~· PtMIOf'l'

& Perb J19 1 ~ Hilaltt.. S.al~ St.and.wds for I~ -- ,., -4 ~ Em!PIO)"NN''' ~ortunrty: a..wwa.g S.fOt'Y U1

0-~•m-r~Uon S21 A'firm~iv~ AC14tl 321 Se>~val Ma•M&mtnl 321 • BRIEFING I LEGAL & ETHICAL PRACll(($: Se11ull

Hara'"'*'' CMt Com Fofde.le Big· Time 322

11.3 Recrvaing, Selection, Orient.ltion, Tntining. & Development 323

THE ESSEHTI.t.L OUfSTlON .12:3 Tlw Recruiting Pfocen : How Comp;~nieti.Ook for O,.alified

AppU~nH 12-4 Gettng Noticitd by ProspectNe Emp oyen Online

N~twori!W'f, Pertonal N~t\'lo'Orlcirg, lrt•rnttllps_ & Trar':tllion ~ JZ!t

• BRIUING J IUSINlS$ CULTURE & ITlOUETTE: 1el.ng Cof'lttol of Your OigblltepbtiOft- 125

OOHTENTS xix

• BRIEFING / IU$INESS SKUS I C.AR£ER DEVELOPMENT: How loGo .bout N~worki~, !Zo

• BRIEFING 18USINESS SKILLS & CAR£ER DEVELOPMENT: Creat --g Voor Own Mt~r11shlp-How a Futu,. Cel.btlty Chef Got Stwt.G. 127

n.. s.l~ "'oceu : How <:.omp.l'llet ChooM , ... 1~1 ,.,..._for .. Job 327 • SRJEFING I l EGAL ... ETt41CAl. PRACTICES ~NOIM You

Tel These K1nch of~ 01"1 Y0111 Rl1um6? 3lf Ori~t.ation, Tr.tlniiiSJ.. & DetWiop!Mt'l1 330

,RACTICAl. AcnoN Prep.Jring for • Job fntcrvi.w: "~at the! Sm.tJI Sf'llfr 33f

()ri.enur-~ ,.-,....JO ";.0 90 ~.,. u. Job ll2 y,,.., r-g 6 ~t: lie-.pl">g ~ F.l Gap~ r

k'.r!olor.IPdge UZ N'Mtofil'lg G\r<flr>g N~CO~I· 333

11 A Performance Appraisals 334

THE ESSEHTW. QU(STl()N .Ut

TypHof ~~Mil: Fomwll-..-ws IMonMl. Ob;Ktiw WAin Subjective SS' • BRIEFING /BUSINESS SI<IU.S & CAREER

DEVELOPMENT: How to Prctp•t• fot 11 Perform•IIOI Revle"N 335

fot~!wr,.... ~lcmuJ.Perlorm,.,.,. Ap~l$ ll$ Ob«t.,..........a~PtriCII'~~·,.• ns

Ol:hff. ~uetCW'\ beside ~Who Un Repon Oft

Employee ~OI'fftiltlce 336 Reporb by CoWO!\en, Subordlnt tes, & C~.~Stetnen )-36 Ropom by £mploy~r. ~bout lhfomi...._.IK :).36 • BRIEFING I BUSINESS SKIIJ.S & CAREER

DlVUOPMENT: Hot14st SeN~u "'* ,...,...._. "' Reporu bt l_.,.body: Th 360-0-gree ~ m • 8R1EFING I IUSINES$ $KeLLS & CAREER

DEVEl OPMENT: Using Soti•l Nctworlo:ing- Slyt. Syttem' to H&lp w"rth 360•0egr.ee AsMSsment. 331

CHiding EmpiO)'H1o on till!' Curve: "R.11nk & Y•nk" )37 GMng & RKeMnQ Effitc::tiw PeriorlftMCe Feedbadl ))I

Hotrr. .,..,....,. g,oufd tbndle Af/P~ ~ "\\tl11-. N ~\'thy to c:;ou,. ... 111'1 EmplovHl'• 'll

MtACTICAl. ACTION How Empl-oye•s Should HM!dl• Appraisal Fu dba(!k: NHow Do I 0f'!.al with Crlridtm from My Bos.t'l" 339

11.5 Compensating, Promoting. & Disciplining 3'0

lHE ESSEHfiAl QUESTION 340 Compeil_,..tl~: Bese Ptty, Benl!',lll, & Incentives 340 ~M Pay- Wagt" 01 Sal¥ r. lAO Senefi~ Not!w:sgeCII'No'Tl•~Cornp~iOt' 340 lnn!nt~ ~ 10 ~ Pnlc:lua;woty )41

en- ftdvcf'l'lf'f'l• ~~ o!'lf \Yo!\ Hol.of• 3-42 Moving & Repi.Ong EmpiO)'H& .,.thin the OrganiratiOI"':

Pl'oMotlont , Tren,fet&. Oitdpli11!11g, & OiJmlt u lt SU

LEARNING & SKILLS PORTFOUO 346 s--y -

XX CONT£1'1T'$

K• y Terms 347 Pop Oub. l'r•p 34? Cr'ltkel Thlnldng Oue•tlons 348

CASES 348 VIDEO CASE snJOY: Jole de VMe Ho&pitallty-­

Cre .. ing ¥~ &notionM ConMCtion 341 BUSINESS OECISfON CASE: StWtk ~' Ink? Victim~ of Tattoo Leyoff• 349

BRIEFINGS 350

PART4 MARKETING Building Satisfying ReledonshipJ with CuJtomers 352

2-------Mari<eting Creating Successful Customer Relationships with Deslrttble Producu 352

F()HCAST; W~s Ahc-.11d , rt-..s 0..-ptf't l~Z WINNllt$ 6 LOSIJIS; Yo~~ MMht"'9? 3SJ

12.1 Mar'ke-ting: What It Is, How It Evolved 354

THI! USfNllAl OUESTION S$-4 ~.tWig: fh.e ~t <:un-em Odiri'liot'l 3S4 How ~eting E~ Four Periock SSS

• UIEfltfG I CUSTOMER FOCUS: Mlfbttng led-lnoiog)' to Boorne". 356

• BRIEFING /CVS'TOMER FOCUS: Ut.l<lg Social M~d~ to T~t Colklgo Studonts• Wanu a: Nood•. 357

Oei!Wiflng Volhl• : Wh•n Cuttomer'l p.,,.,.,. • Better R•t.l'-'hip ..rth Yfl/lil/f ~ verw• Oth.n' - 357

I"Widud t. P'todud UMtr, & P'to&td Mu .dl What Organization& tuw to Offe r 351 Product: A Good 0 1 Setvce l'hal Cal't S..llt:(y Buyer) '

NHck 3S8 Prodwt l!t!e A GrOiot) of Pto<i.lru Ot't19"ed for a S4,._ ar

lrlxlcet 351 Pfodwct w-< n.. (ornb,.a1oro ol AM"~~ lSI

12.2 Consumer Buying Behavior lS9

THI USENTtAL QUESTION S$9 Ttl• CoMt.lnwf ~ "'oceu: Ave St•pt "' Ma~DAt

o.cw-s. 359 F-«'.en ~...,.,.,.. ~ l60

Cv1ure & Subo.llh.ote: lhe lt!fluenef' of Vak>ft & A" tudes 360

$oc):ll Cl.ass:: f h1: 1nnuenc1: of Our Sodof!conom c OrOI.P 360

RtferC'I"CCe Group': rtl• lf'9uenao of Gro-.~p' We klt:ntily .., .. ""

P.-.on• I~•· Th•l..oot W• \Y~ 10 PtojH:t 361 S.1o.~l1o01"~1 lo"11Ucn: The tflect:s o( T '"'.nsl- tJ ood"- lmpul5e, E~ootu.,&SoOn 361

• llttlRNG I SOCWJ.Y MSPOHS.U 8USIHE$$e h Ill Ethiul to bplcit c-,· ,....ided ltltlt? 361

12.3 MOtkoting Strat•gy & Typos of Morhto 362

THE ESA!N t\AL QUESTION 3.61 Developing • M..te4ing St,...egy 362 For-ProG! M•rlleting to Consu,...... Goodt & S.Mc•• tor

Ponoftll Ute 361 ~ S.giiiC>IaU':ioe<: Dnr.d"'' dt. W.-bt by

i..oui!>Of'l 363 ~.,tuc.s~·cw.cl..,.d,ewarl:r.b'fA.ge­

G"'CHt. t!OOfl't_ &-So On 16l • IIIIIE.FING / A WOR!.O OF CONSTANT C:HAHGE:

H• loy-O;tvid\01'1 Mt'tfo:all 10 Hm..l• &.1101's. 363 Psyd!og11phie S~gmenU.Lor: OIVldlng IJ!e M~~tket by

Plycko!oglco~l Chuactotif-1:«,. V.!u•t, & ll(esly!~s 363

• 8RIEF-INO I EARNING GREEN 8Y GOING GREEN! Whlf• "'• the Supporters o f t"- Enll'lronment? )6.3

Bwoe"11. Se<gm~:ion: Divicf~ng dw IJ~tl~ by lhrt~ TM Ptope SHt r • P.-odun )6.4

Uwtlt.-re~~1het1•'-~bt

Ft~ofC~oo«~Uuge 164 r.stJ"SI ~1101"' ~ IV'I!et N cfo,t tJ...U.Crg

6 On-to-Ont W:i!rktiing )64 • IRI[FINQ I SMALl BUSINESS a [N'f111ENENEURS!

Pr•ctklng Nlcfla M.lrkotlng~ Utlnf tioga to 5411 P•1nt-.gl of $klegr;~~u Musid.tn1 364

Fot'llroRt M.ark.ting to Busirwues: Ooodt & S.Mcn lor a ... tln••• U•• 365 O•o!ill JiPhic: Segme!cntll:ion: Di'l..ding ~k• tJ ~tke; by

t.oc..toon 36S Cullor.• Bned Segt-entli::.CI'I~ Dwd ... !toe 11--Mbt by

Cut'Ofl*' Ch.anc:..--SX5 KS • PIUIHG / 8USINESS SKa.lS & CAMllll OIVIl~ENT: Goi'MW.al ,.,..._ S. ... R.ops c.1 on Olf~tt~t Type' ol nckntrin. 3oS

Prodvct U1o-8~wd ~1~t101"· 01¥1d1ng lt!a M.wtet by Cuttomtt" UM of tkt Product 366

Not-fot.Proflt M;,r\eting 366

12.4 The Marketing Proceu: The 4 -P Maric.t"ting Mix. 367

THI! I!$SfHTW.. OUI!SnoH 367 ~ ~ .,._. ProcNc:t:t; Fowa .. ..,. U1 The MM~ P"'-oc.eu.. -.ith the~~ .C.:

nw ... , st,.,~~ Prlo!olg. IlSke. & llromotiO!' 369 C.OI'odvc:t rg Re5urch & De-term\ro t1Q tt-. r11gat M.wte-t·

~It l~er~ ef'l Opportunity & • Group of 8uyeors for Our Ponble Product?.. :369

• BRIEF IlliG I EARNIOO GREEN BY OOI!IfG GMEEN~ I• Tha re • M1rke1 for an OH.C.mp.~t E .. ctric:.C,ar Cl\lrgfolg Stllll(ll'l? 36t

12.5 Marketing Research & the Martc.eting Environment 372

THE fSWH'TW. QUifS1lON J12 hbt41.toftgltetHrdt: Getting Accurat• W~;o., to ~e

MMt•ring o.dsion• !72 The M•lurtlt\g Environ~t Outtid • hC'tort Th.- lnfl1.1ence

Matketing Progr,.ms 374 Glob• Forc:H 375 flCOflorn < Forti!" 375 Soeloc:ulturel ~ces 375 Teclvloogica Fooc~ 375 Compet 1-N:wces 376 PoHol t·ou;:~, 376 ~·lt~:oty~ 176

The Wotfd ol MMtetin§F: ar--d to the 4 l"t 374

PftA("nCAL ACTJCW How You CMI A.H•d • Company'l Mrieting: Pro.,iding Web Fe«<b«lt ln

LEARNING & SKILLS PORTFOLIO 378 Summ.-y 371 Key T• rmt 379 Pop Oula Pr•p 379 Critk..-1 ThWdr~og Ouest.ions 3'7'9

CASES 380 VK>lO CA~ STUDY: U.s .n Jonet Sod.: Somnimes

Fluy. Sometll't'W!S Rat 380

BUSmESS OECJSION CASE: Can Co•rte language , S.xu•lity, & Nudity Be Effecttv. Marketing Te~hn!ques to Se-ll Denim? 381

BRIEFINGS 382

13 ____ __ _ Product & Pricing Strategies Offtrlng Great Products That Mtet Consumers' WantJ & Needs 38•

,OIIIICA$TI wt-_,t'5 ~e-ad in r~+s Ch.pttt" 384 WINNUS & l OS[R$: Oovolop'f'lg 11 N• w Portonal

FlniiN:• Toot 385

13.1 Tho StOtt of Product Strotogy: Determining the Total Product Offet" 386

1*: usenw. OWSl10H * n.. Tot» PNctuct Off..: 0.1~ How l"ot...-twl av,.n. (~e.~ 386 • lltiiFINO / lARNING GRUN 8Y GOING GRUN:

Th•loul Prod~~« Off~ ol t!MI Toyoti Ptlu,. 387 Coftwmer ven1.1s 81.1sinn:s. Martets.: The Pwton~ veFsus

die lnduttrl81 3.8? Cona+rnllf' M .. rketts: Good:$ & SeNICH (Of Par~oon .. i

Us• 381 lkltl~t Wltllteb: Gooc:b lit Senllce5 (Of l'h"ll Pro.,di-g

Goo01&Swrvic.H 389

co~ xxi

13~ Innovation. tf1e Product Ufe Cycle, & the New-Product O.Velopment Procen 390

1H6: USEHliAl OUUTIOH )90

How N- '' N•w? Con1fi"'\ICMII, Oyn.vnia~lly Cotltln\I0\11, & OiiCOITtinuous hw~ov•tfon 390 ContinucM; ..,nOVllliOn' ~ao.st lll'nprO\IOII'I'l""'tt HO Or ..... oean, Con~"'*"~~ Wat\ed o-- l91

• MIEANG I LEGAL . ETHICM. PRACna:S lin "Toning Sl'l01t•·-Oyn•mially C01'11ft.too..1 l~atleo'I-Too lthlry? 3tl

O.,oontinucx;s lrnov:.t!on: 81at1d New 391 tA!wl of lnflov~tlon: IC~ty to Typ~ oi Mark~t ng

Stro~~legy 391 Thct Product Uf• ~: F01or SI"SJft 392

• BRIEFING I A WOftlD Of CONSTANT CHANGE: bU. lkoited Shin Rudy '• " .. Credit C.d --? m

• BRIEfiNG I A WOILO Of CONSTANT CHAHGI: Growth of 'It!• ICINII• E·looll 393

Si• S~ges in Developing 1 N- Product 394

AAACnc.u ACTION UnbltXIclng the Mind 81ocltt: "O.stroy Judgm•nt. cr .. te Curiosity" 396

13.3 Product Differt'ntiation: Creating Product Difference' by 81".-w:fing & Podcoging 391

lHI ISS(HTIAl QU£STK:)H )97

'"" "d.t. 8r.11r~d N<llm.H, Bra~ Mllr!(&, 3: Tn~~d•~rklt Cr•"ting <11 Unique kfonllly for ., Product 397 8t~l'ld N~~ 8•blldt El(pltM~d ~~ WOI'dJ, Lett•••· or

Numbers 398 e,..m M~ Br-~ Thlt c:.a.nnot S. bpr"'td

....... .,. 391 ,,~~0--(:.du$-L.ega

P'rotKtocr 391 Oiff.r~tnt Types. of Brandl: M:.tlltfo.ctur-Ws & P'fi.n1 .. t.b.t.,

,.,,~ & ll'tdMd\1.111 Sfl w,.,vf.acU..If~s Br.ands: 1'01 Products Distributed

Net Ol'~lly 398 Pnv..t• Ubcl Bt~~nds: For 1'1oducts D':stributed by On•

S:or~ ot Chain l91 f.n'l ly Br¥ds: G¥..ng A.~ Pr-oc:kc.ts ti-e S~'nt

lund m "'ctvo..1 Sr~ G<Yfl'9 Or•trerl Comp.31¥Ptoawts •

~rflf!tB,.,o 399 Co-8tand•ng 8rlf'!ds of Two Noncompe1il'lg Products •••

Combined 399 Wh•t It 8rt~rtdl r'lg Suppot.td to Do? Fouf Golk 19• Judging the Value of a Brand: Br .. nd Equity & Brand

..., .... 400 lr•f'ld Avo·.,renen:: Peopl• t ecogr-.ZJe the ,..od.ct 400 .. at'd Pre>r~· heat> • .,.. tt-~ ProdL.cl

H..brlua'y 400 • .wldlrw:encrPIOI)I•W At:~ No~"lolf" -til

'-clr6f11"'9; PnrtMing I ~ a Product 401

XXII CONTENT$

13.4 Pricing Strategios: What Will Customers Poy? 403

THE ESSfNllAL QUESTION 401 'Mlat Pricing It S\.ppOk'd to Do: Flw Possible Goals 403

• BRI£Ft~ f SOCIALLY RE$PONSIBL& OUS.NESS: o-· ••• ., ltlelo:ptmive FurnitUIO "'' ~ Plenel al Ris:k1 CO(

Ul£f•NG I PEASONA&. FtNAHC£1 Pt~ to Ct-eato f'nt11~ ~.f'riaed .,...._ lt.uty T.-te Betw.-? 110$

Oort~ th. Re""""".e NHd.d to Gov... Costs: S..ulc>. EWt'l M~.!s o40S f.xed Cosb t~ses. fhat Don't Ch11nge 405 v_,l~l).'fl Co\11 Exf)4nws Th at Ch.ar~go Att()((l.f19 to

Numbor of ,.,ocfuds Prod.icea 405 Computing 8ut.ll1c·Ev~n Point· u..~g r cod Colits & V.iabA

Costs 40S • BRIUING I SMALL 8US.INES$ I< (HTltEPRENEURS:

A PQ, .. .......,.,. Ute:~~ & v.rilblt Com to C*-""• th. ar...ft·Ewen P'oiM.. 406

Pfinctptf Pricing Sttlt11Jiet: nw .. A,31p,_.ch•1 406 AkernatM Pticrt'lg Strategid: Sill. 01'-co Approadld 407

• BRIEFI~ I PERSONAL F"tNANCl: p,ychologic<lll Pric'hg Uw1 F•d That ,..edsc Numben S~ Cht-llfM!I Th1r~ R<Nnd Numhot5- -'08

c,.ecSt Term:t: Mothe-r lnduCI!'rnt!fl t 409

lEARNING & SKILLS PORTFOLIO 409 s.........y <149 KeyT«m~ 411 Pop OW ,...P 411 Critkal Thlnktng Questions 411

CASES 412 VIDEO CASE SnJOY: Smuhburger. "Does Ameriu.

Need Another HMTiburger Joint?" 412 BUSJNES.$ DECJStON CASE: Choke: •Mor-e k Sette,.­

CK "'leu k More'"? 413

BRIEFINGS 414

14-:---------Distrlbutlon & Promotion Strategies Managing for EffiCient Supply Channels & Pers.uuNe Communication 416 FORK.ASTl ~fs~nrt-.sOupt" 416 WINNIRS I LOSlRS: V~ Rel'lt•"' 417

14.1 The Dlotrlbutlon Mix: Marketing Channels 418

THE ESSENnAL OU£STlON •te The ....,. Mlrtl.t~ ""'- Gontinved: ~ (O!ltn~tior1)

Sfn«<tY a ,.._,Cion Stnt.gy 411 ~ CNM.dt. krt~ dlo. Okttribrion lA-.

& the Oit'ril:l"'- Stntoegy 411

• BRIEFING I SMALLIUSINESS 81 ENTREPRENEURS; Odtrlblltlon Sl!il+fY lor tn EnV'f"neur'1 "Redpe Deck.· 419

T~' of Oft.t ributiOtl Ch!tnn.t1: Cont~~mer & lklsineu 420 Oimbution Ct..• nrtelt l01 CoHum~r Goocb &

s"""l(;" 420 Olmb.ltion~follln,.~uGoocb&~ 421

How Do lflt..,.....~ Ad4 V .. ~o~• to • Pfodlld? 421 Oil.~ Sv.t .... T1wH Ktn4s of Mat\:ft ~~

lrrt:eftsiw. ~ .... r..ct-- 422 frltfoi"'Vwe Ooslr•btb oOtl ~a O...b.o~ M Wdefy M

Pou"bte· <tlJ Selett..,. tktrbt.t«- 'lti\ O.~rbl.te~ If!.- Pfoc:iUcl

W Gft~AttfontOf'l• 42:3 • IRt(FING I A WORLD Of CONSTANT CHANGE:

How Selectlo.e Distrlb\it;on oll..ull.vry Goocb H.es ChMigQd .. ,

b dusM Distribution "L.t't't Olstrlbut~ In" lmited w.,· 421

14.2 lntennedlarles: Wholesalers, Agents & Brokers, & Retallerl 42:4

THE F.SWNftAI, OUiiSTION •124 Y.'1lol~sale.-s: Sd!ng to lnttltullotu or ReUiile.-s 424

• BRIEFING I SOOAU.V RESPONSIBLE OU~NESS: Applying Hlgh T~ So &.!y.trs Can Us~ lh~ir Mobile Devicet to Trace • Food • So~,~rc:•. 424

A:feoM-1' S.Ok••: Peoplt 'Mio 8ring S...)'f!n • Se...,t Together f26 How 0o A9f""tl Dfff' frOM lrolo.f"'? 426 \\t-_x Make-s ...,.,.ta a w. ... Olf'a-~ '-n \\,..,~

3- hq, M1 4,. Store Reulen: Sel.ftg to l..lt.otMtte Cono...-en 426

Stcwo. l eu.'-" ~·LH-e -~ .. "'" & ~~ Jl:etto -en 421 ~c ... """ Ftom5tr>p,., .. t~to~~

C..-ten 411 Non.ucwe Jtetllil.n: From~ ~dlina to Online ~ 421 V~ding Mad- "'": 'u,t.. luttOf\ S.. "9 ol Conwrience

Goods 421 Oirect S~llirg: Ooor to-Door Sa es, HOI.,~-Por-1)' Sole s.

& Muhllev•l M~OI I'IQ 4:ll • BRIEFING / l fOAL & ITHICAL PRACTICES: Weighing

tt..~ Rl1h of MuhU.,.ol M~trhtlng . 429 Direct Workellng: ()red Mall, Cola og M01k1:Lr-g.

& TelemArketing 429 VIde o Mllfl(etof'IO' TV ~opp!ng Ch&l'lnels & Progams 429 ()njine Re!Ailing: Ct..:tron..c: CatAlog•, Virtual StordtOI"t'S,

& CybHM11t 430 • BRIEFING I EARNING GREEN BV GOING GR££N:

H ow Oo VC).II(now Eto·F-tlel\dly O.ims Ara Tr~Nt? £)0

14.3 Physlcol Dl•tribullon: Supply Chains & logistiC:$ .43t

THE ESSlNTW. OUffnOH 4Jt S4.lppty O..s & logbtia: ~ ~to the Finel

eu,.n 4lt • BRIEFING I GLOitAL IUSINlSS: lh.t ~"'

Journey of.,. liNn AIM CCM.~Ch. 431

Sl.lfiPiy-Ct..l!n M..,..gtom•nt: lho Slla legy of to/Oiling Matef.a!t & Producu •12

logist:a· The T1oic. of MOY'"9 tola t~Hiu & Produ~.s 432 Tr..uportn;on Tr..de.offt:~ Whit's the Belt 0 -o'ct­

Cheap. htt, ot R.tlable7 412 RaHr~ lr••l'ltAio• 8tttfOtl.tf9t, lk.lc.ylt~ •32 Ro~1r~1n.cbC.r~Oo~s1~~ 432 .-..,..._~ ~..,MAioeEMo.ni'Otliquds

&Gn 4ll wa~• TfWtiiPOtl 5I-.,. J- I•O" ,_ c;t.e.apn: bul

SIG'~t~We'St 413 Aif lr<1mp01'!· "'*"-~ fututbut ll.ost ~ 434 c~ lriMPOf" ,._odM lrit~ 9-t»ng &

(on.uiNf-.:nhOI" .,..

~· Stotii'IQ I DIU.tlbutoftg Gooch 4)4 Storage Warel-.o.ls-· lor \.ol'og lernt Stew age 434 0.'l."rl~tl0f'l CM!t•s For Stlort.TIIml Storage .UA

14A The Promotion Mhl: Tools. Goal~. & StrC~ttegies 435

TtiE ESSENTIAl OUI"S110H 435 Promotion, the PromotiCifl Mht, a tntegt•ted M•rketing

Communlc:.a110fl 4)5 The Pronlo!lon Mht: I he Combltt1tlon of loo!s U~d to

Prcmote • Produc~ 41'S lntegteted W ~rl.et+ng Cofl'mvn~te~IOI'I A Cornp,ehen~~;-....

Unified .-romo1..,.1 So-a1egy 06 TM Golh of P~tion; lnfotml"9o P•~edlng,

& RemiMitlg 06 • 8RtEFING I IUSINESS SKILLS & CAMER

OfVElOI'MENT· l!uolno>s Cords C.. II< Modo: wcm'Wit;... ... ~tw. eon--.. u'

• BRIEfiNG I l'£RSOHAI. IINAHCI: The • ..,. Tllo Nowt" ~ ol+t~to.Mrci.tk 411

Pron oOo ... Stt;n .. '"" P\1,.._"""""" M 43'1 The Push S:nt.gy A. moM at V<nlo;e~ers & R.uuers 437 n,. P\ASttetegy A,mocf It COfW.Im.trl 4)7

14.5 Advertising a Pubtie: R•lations 438

THE ESSENTIAL OUES110H 4.)1

T~ ol Adwttislng: Btend, lftttltvtlonel, & P1.1bfic Servlc:e 431

AdY~rtf~ng Sttat~gles: Jrom lnformat10I'Ial to Fear Appeals 419

AdY&rtfJfng Media! From ~P"IHf'l to th e lnterl\tt «1 Cre•~ing • Modi• Pl.w'l O.w!op.l'lg Med-11 S!rAtctgy 442 We-die Bvylng· Wt..e1 Aro lt!e ContlderatoOtlt? 4A2 Tt..e Gre.tt Uphea .... t: Ad1 MeN• to ~Ne>A' Wlldi• .. 442

Publicity • P\tbllc: Reladont 442

PRAcnCAt ACTION N•w ,...d;.. MM'k•ting A;ds That Can &MIJt ~II B!HiM.IH.I .Ul

14.6 Pononol Soll;ng & Solos Promotion .c.t4

l'H( f:SSfHT\AL OUQ1IOH ""

~~ bt~··~betweofllls.hr &Buyw ... m,..., b PetSONI Stll "0 .t.pptopr,ete1 ... S

CONTENTS xxiii

The S...!tn Til~h; Cte.JotiYe Sea"ng, OrdotJr Proctnsing, & Sa!os Supporl <1 •15

The Seven Stops in the Personill S•lling Process 44S

PRAcnCAL ACTION Cre~:tting ;:, SucceuluJ Fim Impression: How You Look. How Yoo Act. What You Say 441 Sill4tS Promotion: Stlort-Tertn Mati<etlflg to StiMulate Oe811er

Effectiveness & Consumer Buying 448 Tr&de ProMOt>Otl; lkls!neu-to-Bus1nM1 Promotion 449 Con:~Um~riel'ted' ~~e~ f>romo~ion : eu,r.e,~o-

CMsumor Prcf'n()f3cm 4<19 Guerrilla Mar1teting & Word·of ·Movth Mar1teting 449

Gti(Jrrilt.,Jo M11rkotflg: lnnov.Jotivo, Unuw.Jol. & Lo•.....COS.'l Method' 450

Word•of Mouth M~rkr:-ting: People Telling Otht'f'$ :.bout Pr~ 450

Applyi11g Diffe rent Mariceting S-trategiH to Oifferet~t St.otges of the ProduC' Uf• Cyde 450

LEARNING & SKILLS PORTFOLIO 452 Summowy 452 Key Terms 453 Po p Qui~ Prep 454 Critical Thinking Questions 454

CASES 456 VIDEO CASE: Michl:\ellevy of Pet Food ExpreH

.. Oel"'ers• Food, Supplies. & Community Support 456

BUSINESS DEOSION CASE' Should W•lm•rt F<><<e tts Suppliers to Compty with Its Green Goals? 4 57

BRIEFINGS 458

PART 5 FINANCIAL RESOURCES Achieving Profitability 460

15 ______ _ Accounting & Financial Statements Powt r in tht Numbers 460

FORECAST; \'lt!illll; Ahead in 1hi, Ch:.plet <100 W1NNI!.RS & LOSI!.RS: Rit.h & Common S.nt.o 461

15.1 Accounting: Users & Practitioners 462

TH£ £SS£HTIAL OU£S'TIOH &62 The Users of Accountlflg lnfetm.ation: ll'lsl6e & Outsl6e ttle

CompiWly 462 lntld~ Us~; w anagers & EMpl.oyHt ~62 8 BRJEFING /lEGAL & ETHICAL PRACTICE~ Using Op~Book M~n.olg~~t to Sh~t• Accounting Information with Employ~. 463

Outsido USH'$' Stockl'lo!dors, lend'otJr$, Supp{oer$, & ;l'lo Go~rnnlenl 463

The Practitioners of Accounting : Managerial & Fll'lancl$1 463

xxiv CONTENTS

Ptiv.:.te Vt:trws Public Pr.:.ctirionon: $etvi11g Ont:~ Organilation ~rws Semng Many 464 a BRIEF-INO / LEGAl & ETHICAL PRACTICES: Arlhur And~r~ Fa il' to~ lndependot:nl-and Fa il' as a Comp 11ny. 46S

Not-fOt·Prof!t Account.t~nts: WOtld~ for Govli!'mm.eot~U & No,.,roflts 466 Ge..-emMent A«<Ont8tlU: Oetetmitl ~ Wl'l~e Tt:< MOtt~

Go~ 406 8 BRIEFING I Q.IJ~NESS Sl(lt.LS &: CAREER

DEVELOPMENT: Working for lhe Gov~tnm~nt ACCO\Inlllb ility Offic.. 466

No~·1or~Pfofil A«<unt&l'b: Aiding Contriblft~ by Provic ng Fi:tt.,Jon<:iill Ttilr!Spilron.cy A66

Foret'lsic Accour'l tMIS: Financial Sl~vths 467 ifhe E-ffect of Information Tedln ology on Acc~mting 467

15.2 The Accounting Process: Six Steps for AnaJyzing an Organization's Finances 46a

THE ESSEN n AL QUESTION 468 Cieneully Accepted Accounting Principles: Relew~nce,

Rt:~l i.ability, Consistency, & Comp;~r;abitity 408 iJhe Six Steps of the Accour'l ting Pro«U 469

PRACTICAL ACTION How to Read an A nnuaf Report 411

15.3 Financial Statements & Financial An{IJy$i$: Tlu; VQ~b~l{lry Qf Af;f;Q~nting 47~

THE ESSEN n AL QUESTION 472 • 8RIEANG J SOCIALLY RES-PONS-IBlE BUSINES-S-:

A Finaflci.illlyConsclou$ BusiflCIU wi.ftl11n Unu5~.•<11 Purpo,~. 472

The Balance She-c1:: What We're Worth, H ow We Got Thel'e 472

The lncol'l'loe Statement : What O,r Revenue & Expenses Wete & ttle Re&ultit~g Profit or Lo~1 475

The SQtemerrt of C;tsfl Flows: How Money Came &Went 478

15.4 Using Financial Analysis to Dig Deep: Ratio Anatysls 479

THE ESSEN n AL QUESTION 479 Liquidity Ratios: How Well Cat~ We Piy 0vf Utbillt!e& i:$

They Come Due? 479 A«Mty Ratio~: How Wli!'ll Do We Manl'gli!' 0\.r Assets to

Generat e Revenue? 480 Debito Ownors' Eq\lity fbrios.: How Much Do We Rt:~ly on

Bo.-rowing to Finance Our Opeutions? 481 Profiubility Jbtios: How (iood Are Our Profits in Rol.:. tion

to Our ~les, Assets, or Owners' Equity? 481

LEARNING & SKILLS PORTFOLIO 482 Summary 482

Kay Twrms " ' Pop OW Prep 484 Critkal Thinking Questions 484

CASES 485 VIDEO CASE: POPS Diner. Accounting f04' Food,

Fu~l .. & Fin 485 BUSINESS DECISION CASE.: Ho lfywood Accounting:

Creat ive, but Not So Glamotous ftX Writers & Actors 486

BRIEFINGS 487

16 ______ _ Financial Management A Basic Guide to Finances, Money. & B:tnking 488

FORECAST: What's Ahc11d in This Ch:tp~cr 488 WINNERS & LOSERS: Sped~Uled Bank Loeo'ls 4$9

16.1 Financial Management & Financial Planning 490

THE ESSENTIAL QUESTION 490 • BRIEFING I SMALl BUSINESS & ENTREPRENEURS:

The 8lgge1t Ml~tak~s Stilrtups Make. 490 Fin:.ncial Mal'lagcment: What h Is, Why h's

lmport:mt 490 1 he Job of Fin11ndal M11nagl:" & the Ri5k~Return

Tr~do.Qf. A90 8 BRIEFING I SMALl BUSINESS & EN'TREPRENEU~

1M Risk·R"turn Tr11do·OH of Smaii-Businou Owne~rs ~vtlo Can't Pay The;, Ta~s. 491

The lmpor.:~ortcc of Fin.:lnci:.l M:tl'lllgcmcnt: So'Nt:nC'f & e~o.ency 491

Fiflancial Plllflfling: Foreasting. Budgeting. & Fin.anci;)l

Control' 491

16.2 Finding Funds to Keep the Firm Operating 494

THE ESSENTIAL QUESTION 494 ¥11ly Firms Borrow Money: Four Reasons 494

a BRIEF-INO I SMAll BUSINESS & ENTREPRENEUR$: Capital E~d"ltures for a Drum M~tker. 495

16.3 Getting Short-Term & Long-Term Financing 496

THE ESSENliAL QUESTION 496 Sources of Short.Totm Fin.ancing: Tr~o (Ntdil, Short.THm

loans,. Factoring, & Comme«:ial P~pet' 496 a BRIEF-I NO I SMAll BUSINESS & ENTREPRENEUR$:

Fr;end$ Help Eileen Fisher Get Het Clothlng Une Going. 497

• BRIEFING I SMAU 8USINESS &: ENTREPRENEURS: Using Cr<=dit C~er<b to St..,rt .o 8u$ineu. 498

S(lj,jrCfl of Lol'lg+Term Fi~nclng: loi'ISJ-TerM Loans. Debt FiB~ncing, & Equity Fina11cing 499

Fin;anci;al Lowr.:.ge & Co•t of C;.pit.al: Using Borrowecd MJ11ds to ln<:rNSe the Rate of Return 501

PRACnCAL A.CTJON Mon~y Mone-y, Who's Got Money? 502

16.4 Money: What It Is, How lt"s Controlled SOl

THE ESSENTIAL QUE5T10N 503 What Money Is: Five Olaracterittics & Three

Function• 503 The Five Ch:~1.x:tens~ia of Money SO<t The Thtee Fur.ctiort.$ o f Money 504

The Money Supply. Wht It ts 505 The Fedeul Resc!\'e Sy•tem: The U.S. GO\'emment'5 B,)rtk

fer 8el'lkers 505 M1, the N~rrow~t Menure: Quick Acuss W.ortey­

Curroncy, ChiJ(:k,, & So On 505 M2, ~ &~de1 Me:~sure : M 1 plus SICMOer·Aceess Wortey-­

SNVings., Mutu~l Funr.k., & So On 505 How Money Is Created: The Role of the Fed & Commercia l

EL:Inh 506 The Fed's 8oerd of G<>ven<~ers & 12 R~~ Banks 506 The Fed's Member B~.,b 507 G~ttl'lgWor..eytoth~&nb 507

How the Fed Controls tile Mo11ey Supply:- Three Tools 507 Tool t : Re&eNe R~qvil'emet~t-Speofy'l'lg Pe~cet~ag~

of C11~h s~~ks Musl Ho.d in Oepo,.-b (U::ed lrofroqu&ndy) 508

• BRJEFING /lEGAL & ETHICAL PRACTICE~ How B;~nh Hll\~ Ev41dod 1hoe RHCit'IQ Re.qur(Jment, Usflg Computer Program" to Transfet' Depcnitor"' Money. 508

Tool 2: Open·Market 0peration~Y~'~9 & Selling U.S. Go•ll:!rl1mcrrt Bon& to lncrcii~~:>/Dcc:re;):;e B11111k Rcw:r~es (U&ed Fre<~,ventlyt 509

Tool ): CMcaunt R;)tc- Speciiying the lntcrcv. R~~c on Fed t.o11ns to Momb4r Ba11k$ {Uwd Only with Tool 2) 509

How the Fed Cle:~1s Checks be~ween Different 8:~nks S09 Tho Er.:. of E.(:.adl: Monoy Goes Digit;al S10

€lect1onic: Money SIO D-ebrt C:~rd:>. Smiln Cilrds, & Co!!phon.n 510

16.5 Banks & Other Financial Institutions 511

THE lSSEHTIAl OU£STIOH St 1 CoMMetCI$1 8<W!Jt&: Fuii·SeMce 811nl" 511

"'!ypes o: Oepo~ Ac:col.lrrts: Checking, ~ngs, NOW, Meney MaO:e1 Ac(OUna, & Cert<flee.t~ of De-po&lt 512

How Conlmeftilll 8:~nks M11ke Mortey: L~n Interest t'ees fer S.Niees. & Fo.n from OthM hn~rt<:iill Produ<;U 513

Savings lnttitutions: Savings & Loans & Mutual S&'lli11gs EL:Inh 513

Vedit Unions: Depositor-Owned Financial CooperatiVfl 513

Nonb~~Jtic&: Ottler Flnaf\clllll""tltutions 514 lnVfltmerrt Ban.ks: lnstitvtior.s for R-.11ising C01pit.:.l &

HandiOI\g M..,gers &: Acquisi tion& 515 HowYourMoneyi$Protected S15

• BRIEFING I PERSONAL FINANCE: SU)•ing At,grt to Be Sure You Don't Lose Money with Your FDIC ln5~.1r41!U;O. 516

CONTENTS XXV

16.6 The Changing Banking Environment: Regulation, Deregulation, & Fincmcial Panics 517

THE ESSENTIAL QUESTION S t7 The hrly Trend towilrd R~gul ;ation 517 Tile Trend toward Ot't'egulation & Risky ln~sttnents 517 The Beginning of th~ 2008 Cr.uh 5 18 Llt~k& to ttle Global FIN~t~~l Systetn 5 1t The Question of Confidence 519

LEARNING & SKILLS PORTFOUO 520 Summary 520 Key Term• 522 Pop Quiz Prep 52.2 Cdtk.al Tt-.inlci:ng OuestkKis 522

CASES 524 VIDEO CASE: M oney. M ore Than Just W h at Banks

L~nd 52' BUSINESS DE·CJSION CASE: P~wn.shop: Lender of

Last Resott? Not Necessarily So 525

BRIEFINGS 526

17 ______ _ Securities Markets lnvuting fo r the Future 528 FORECA$~ \'hlat's Ah~&d In This Chapter 52a WINNERS & LOSERS: Looking for Gre11t Sloclu 529

17.1 The Two Kinds of Se curities Martc:ets: Primary versus Secondary 530

TH£ IESS£Hl1Al. OUESTIOH 530 • BRtEFING I PU SONAL FINANCE: Do M~les &

Feme~ HII\ 'C Different ln'VC5tment Stytes? 530 The Pritntary Securities Mtwket: Where New lu ws Are Firs't

Sold t o lrNestors 5 31 • BRIEFING I A WORLD~ CONSTANT CHANGE:

Should Tech Sta rl·Ups ~ise Mo not:y throug h en IPO 0#

Priwu~ lnv~tot5? 531 The Seconda ry Securities M arket: wt!ere Ell.isting lssues

Are Bought & Sold by l11veston 532

PRAcnCAL ACTION Determining Your Jn ve.stment Posture 533

17.2 Securh:ies~ Money Market Instruments, Bonds, & Stotks 534

THE !ESSENTIAL QUESTION SS4 Monwy Milrlf•t lnslrum~nu: Short-T•rm IOUs

frotn Govert~met'l lS. Corp<Wations, & Finat~Gal

ln.s.liturion5 534 80f'ld5:: Lof'l~ TerM IOUs from Goveo wnents, CorporatfoM.

& Finaflc ial tn.Uitutions 535

xxvi CONTENT$

Ra;ings ior Bonds.: From lnv~n~l"n(Jnt·Grado Ou~ity to Junk S36

a BRIEF-ING / LEGAl & ETHICAL PRACTICE$: \1\,.ro Bcnd·~ling Agendot:s Ho not:sl Whot:n Rating MO#tgege­&chd Sflo.•rit-.s.? 537

Th~ V&r ed Wey5 Bond& way Pay Off: Cell&bl~. Seri&'i, Sittking•f l.lnd, & Con•ter::ibte Bend~ 537

Stocks: Ut~iU o f Owf\~rs.Mp In Cctpottat!OM S3.8 How Much b a Sh~r<! ofS~ockWotth? Pa.r V11!ue. Ma-rket

Ve!u~. Book Ve!ve, Ovlde,..ds, & Stock Spll" 539 Comnlon Stock vetstr.S ~fened' Stock 540

St ock M:uic• t.s.: Doma.s.ric & Fouign Milrlf•tpl~ for S«'uriti" 541 Typ.n of Stock Maorkou: Trt~ding Fleer VM'5us. E!octrc nic

Nelwork ~ 1

U.S. S~odc Markcu: f0<.1t Are-na$ fer Tracf:ng 541 • BRIEFING I GLOBAL BUSINESS: A Germ a!\ Compt~r'l)"

&IY5 the! New YO#k Stodc EKch11nge . 541 Fof"~lgf'l S;od: w atkeu 5~3

Regulating Securities: The Securities & Excha11ge Commission 543 f>rovicle tnvestor5 wi!h Full t>h dosute of f in11ncial

Facu 543 Register with ti'le SEC & Ptovide ~pectu:;e:; &

Ropon s 543 AYOid T&king Advantege of IMde lnformet>Otl S43

17.3 Buying & Selling Securities S44

THE ESSEN n AL Q UESTION 544 Seleetif\g • Bt-oker, & Bo.l)4f\g & Sell ing Se<.,..lti~s 544

Choming a Broker: Fuii •SCtV·c:~ or Oi5COunt? 544 8vyll'lg & Sell1t19 Se<ufitl es: Pvtt !ng In the (l.-def $45

Morke t Otd'c r. " Buy 0 1 Sell ol ti'le Best Price Now Posi--blo" 545

limit Order: "Buy Bei~JW 0# Sel Abo~ Or-_1>f a C~Loin Pric:o~ S45

Oi~c:reton"ry Orde r. " Use Your f>fofe:~:~ion~ Judgm~t about When to Bli)' or Sdl~ 545

Keeptt~g U'p wfth ttle Mitk-et 545 The hading S~odc M11rk~t Indicators: Dow Jonc~. S&P 500.

NASOAO. &: W""jh!re 5000 546 Tr11d:rr.g Specific S~:euritie:;: How to G~t Price Ouot~' S44

17.4 Other Investments: Mutual Funds, Exchange-Traded Funds, & Commodities 547

lHE ESSENl\At. QUESTION 547 Mul\lill Funds.: Div~Jtsifi~d ln""'"tm~n1li b y Pool5 of

ln~stors 547 bc:h~ng•·T~od F.-'lds: Coll•ctions o f Stoclts T~od on

E•dl~nges thfougt!ovt the O~y 548 You Can Tr11dc an El F Mor~ Coi'I'Verie ntty 549 Fe~& Are Lewer Tt-..!~1'\ They Are f<>1 Wl/1\lel FVI".ds S49

Commodities Tr.ld i11g: Ri*Y Tr~di11g i11 Raw Materials 549 Fu;ure-s Cofl.tt&cH: Asfe~ments to e.~,~y Comi'I'IOdltiM at a

Set f>tice in the Future S49 Commodi"'Y Ex<:h<tng~n · At9tl~ fM Buyin9 & Soiling R~

W~ttetia'!, ~9

17.5 Investment Strategies. sso

THI US(NT\AL OU(moN UO FlY• lnv•um.nt Strftf91•• UO Yo1.1r Ow" Portfolio SS1

LEARNING & SKJLLS PORTFOLIO 552 • ........,. 551 KeyT..,... 553 , ... Qub Prep 553 Ctttk.J 11tinlring Qu.utioftt 5 54

CASES 554 VIDEO CASE: Capit..l Advkor~: A Oyn;vnic; A.ppro11ch

to Rl~k Management 554 BUSINE-SS DECISION CASE: Day Trading: ~itlty Business SSS

BI ~E INGS 556

Fl£X CHAPTERS AY<Jiilable at WWW-"'YbbWM-01'1'1 and P~arton Cwtom Ubtary

Flea Chaptet A "'''"'"' U. Flex Cha.pt•r 8 Ubcw Wanagemenl bsutt F1a x Ch.apt.r C Rl•1c M1nagcmcr-t & IMI.II'II'ICO

Ftex Chapter 0 lrlfoll'l\allon Techr-olog~ FleJl Chapter E Pe1sor..al f'inanO!!

Glossary G-1

Reference• R-1

Index •1

CONTENTS xxvii

BUSINESS A PRACTICAL INTRODUCTION

PART 1

1.1

1.2

1.3

1.4

1.5

2

,.. .......... ......,.. W't.lt .... JOI' for(fl .. ('f tfle -.y tomPI"irH Md ~I but.-..,•op .. operwt.1

1M1 _,.... au.notc Wh.t.,. Se'*' IC.ylual· ness Ruleo.s 10 obwrw '" purwlng bullnfll IUOC..,'

FORECAST: ~ What's Ahead in This Chapter You learn kow business ben-. eflu 10Ci4rty, how for-profit <tnd I\Onprofit organizations differ. how sell 'ng goods and $@rvices generatft r...,enue and proflu.. MWf how the U.S. economy has evolved. We consider how busi~ nenp.ople take ri1b and how fAttors of ptoduction ate the buildJng blocks of wealth. We next conJlder the business envi· roflment. FlnaUv, we present out Seven Key Bus.inen Rules for Succes-1.

R"l ~ !'a..._lpi;;UrQoo P..t.il: a ...__ ~ tl) • ..,.... .,_life oa 6e IIMI 11 ... 10 hW:I hooL. d -t, luW" :a ....... ~ ;a )at. -.11 lie a,. • .,.,. hbl· "'-"' 1114 a ..ep»turc IlK <..t )un ... He a),o

h•~ TV -.j r.J~ '"""'" aed he~ .. ro.IUIIIII' II' IC'II."ff~lO'\ Wh•t'~ ldu.nd ""' ~ .. '

stc~ .. kK>ll11• ' ''"' cnr Nt r:.wn:'f'C ,,. 1~. ,.i...-nqs piVII) £a. 1Qril~~> ,_ 1lh hi\ fMhet. a ruii!Mt tmp:onCf. "'' itOI mer Ulcre und t l Y.iA.l faJooo;JII.I.1inl(.'' ')u:yeo. """)'" ''I fllUll. ddlerml pop. lliiiC ar1111.d b.IDJ1IJ> lt>ltlll rn~."1llm••l ia the hold kllilie:c •• . I mean.. h v.a,. a 'lll~lftdcrtuuJ (,,. 11 lo4·)flar-<•kll.id.~

At 111. Y.1lb fund• •~"'' I;I YI"i! (MIIII) li:!.M'•n.,, 111: n::tutntd. to euruf<e \\ II\ II fftcn,J, l fld t ilt) lOuted)$ OOUiltrle .. lil IQ 'lliOCI." (_oil IJ'tc .;~oi.Jl 'f\l.n ~C(II I> l.dtr,lrlc Mano.J tcaclung IU\'el dn .. ~r.~~ umJ n:.aJI1cd he ~~kl nw.l.c Ua\•1'11"1)'

In 1976. a. 1>l..ncd hi~ (IW• kllilr, f urnpc Through the Back Door IGTIIO~ k.a..linll•c~ •·~on•e• i.n :a l'l'li.nibu:c umun.:J E.,. 1Qpl:. Fut )tar .. he ttl" ho. lr.a~cl hu~ino" oo :a JoQ.'>I'!IW lXIM:.

'o\1tllll MliJ..il .U.II I• ;1, IN!nldtMll ol Edmon~ -.a. .. h•!lliOn. wwJ lie .. (q~td.•No" the: Iiiii IIn alll'ltho' r-toldlc budJU'lg_ I• 19*). lit: ..ell JHINI..bcll- ll"t c:dtt.oOoflrl• .. tm>el ~b brd;, ,_,..,,.,.. '""'""-"' .... &l(t '""~ s~ he:~ .... \;.~lni\'C'" ~ldt) bala'. ~

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... ~I br!oL_, ·~ -. .. ~~r~E.- ETRD U.O t:.aadiCd a lh'td «** OllcMf •• • .,mu.. ..t .c~ ~ o.dft.. nor "*" olklr n .u..-.w:.. Of~,....._ .. ) fe*l*"l!l) ~ .. tv,......

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h.a. He nntnl) .. __ ;,l!:.,;;.J lllld •• M:t) 1996 t1earw llnlll

Rt~tol.._ puhlo.llet Cll dli!U"Cil'!O db~ .. u~ L .. ${.'./fv rllf.. f.,t,_.,., li{"'I.'C'¥a,tn tirlree )car> lhe S.SOO nullion fonl'l ,_ .. tllii'I~NJII Wll111 ll~~"

fll'l'tc:ad {II u•nu:nll'llli"JJ <•n the >:(1ft l'tl,in¢'i.._ cllli).:lrea'"' bcl(l~"'· Sn)ck• madc!j•llln!i In c:.:p.ad the hr.1nd 11:1 Gnlde" parcnti-a bool.-.. Ooldu fif.ll\.lly vidc11o., Onl~ pb)' cenkn:, Guldc• 11•t•t•C p:ul. ~.

Atl•i ~ ll•IIIW:I t:vltiii!II'IY• Sll)'dcr WU\ u • .:d Iii :.cllitlj; lu~ priced chl1J•cn'" I,!Ol .. lnn:ae••l.it I'<H"-1>1•:'«'>. but Guide• Oool' ~vllt (o'W S. l l') llfld It, Lufo't CU.IIItncr, Walrnart. UCIICd ~hem li\1! lll'lf Olhtr di,CI'IIIfll "IOIJ' Sll)'dtr )earned !I JOeY,' ll:nn. Jill 1o1ft' .tit r-.1.11: iltl v.h.ch a puhh-da lilA" uhlc: Ia

lttp ~wrc: •hr-lvu fi lkd Rut C'out..left "'"" • n:lhlc: In kc:ql them fl lkd 10 W.a.hurt\ ... u~ta:1t<•"

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Allhcwjl)l rnoll1t'ln' t'll ~ fk>o: ... , ·~ odJi.,, ~Ute cn~pon: blalduw4nu_n!:d o~h In 1998. the c:onmpxny went NoL!upt J h y,:., ~ »l;lfiiHo.l b) aacllhe1 bool. publ1~cr. RddomH<oU-.t

YOUR CALL 8ellev_.,g that readers ean letWn from bothtuceen!Md fallute, ~open tach ch&ptet ln thi' book with "Wr.net', & Lo~~~~ Clls.ti. llk t 1hlt OM. What polntt eM you takt awflll here? Is it fair to cornpilf'e running a tm;)il ltltcup but!neu with runn'insl 11 1.,-g• •xltting one? C...n we dr.rw le-sson• tkilt caukt b• :.pplilrd r•g,~trdleu of it finn'• tl.te?

MyBizlab

3

! t • i I

THI &IG IDEA.: Business seeks to ma\e a profit by s.tltng goods or services to 01he-rs We distinguish f«-profh organiutiont from not~proflt Ot"ganiutions end explain how businesses make t!'IOI'Ioe)' by ta'cing: 5n 'evenue

n-tE ESSENT1AL OUEST10N: ~ Is bu~nHs, and how are profits made?

My8b.L..Ab: Check your understanding of these concepu M www mybitlab com

H ,w.• "''''ltlld y;lu like tl) Wl)tk i1\ )'OUr c:u·<•c•· :•I•>•W. ,)1 in, .. , (\l'g~ll i >';•tiOf•?

M;.)Sl l:~e;_'Jlic. ~n ITlllSl rone Wlli\'C.S. h;J.\'C a i•M •lfhclp fn'Mn mhc110. Altboup )'~Ill may end up "'orting as 1 ~In uperut~tr, hkc )\)lnt \llk!l(l(Hple. rcsean.:heri.. and nttisu. mor>t people work with others in OfJIIfti.loll•,n<~

Two Types of Organiutlons: For-Profit & Nonprofit Even if I clc>ta't worlc for a for-profit Of9MiucNM, could I nil etpply the business skiDs I'Ve le¥Md1

An ~wu-. is a group of ptOplor ,.-Ito wortt IOlfiMr to atl"lllllptisb a ~ptcitk purpo$Jt- 1"lttTe are ""~ t)~ ,.,-nrpntntto.lft" fo,..pn¥/il and ~

Fot"Profit Organizations: For Making Money A Jlor·prt,~fo "rgani:.P-tiilii i,; a bus lnt'Ss-au Of'Jtltllb.:.tl(ut fOI'tned to maU ltHllltty, or prufils. by selling &oods (If' .stnlt•es. I• ~ h<~'l"lu l n bu!li~? It c;an he . Art runners and rnocber.s 1vofit oricnlcd'.1 .M'~"l ute.

\\'brn )'(lU. dlinl.: ()r I)USi.fl~(,j;C(,, thiol: I)( all til<' r,,...l'lf'''fit m'g;llli 1a1i,)f)(, dt~t :Itt tf)'tng t" .~ell )'OO something, from A<:lna lnWr.lll~o.~ w Zcplt)'r Paintball

Nonprofit Organ izatio n s: For Offering Products or Services 'fht purpos~ uf a 1w!JJ!i!jjj_1 orru,hul•mJ 15 not 10 dl~trlbute ll'l surplus fund$. "r pr~tnt~, t1• nwners but rnlher ••• rurtlutt• lu !lO:llt, l::xmnplcs ate nlo.lS.t col­lege(,, m:1ny hospitals. an;l nh>St S<~)cial·wcl f:iti~ :1$-CI'I..:ic .. tthc f:t(\1 Cmss. Save lhe Cbildrc:n). Cllhers arc: die Ur&itcJ Autll W\lfkcn. the Ocucr Bu'lines.'l ButellU, the Ne.., Y.-wk Firt: lkparunc:nt. nnJ die Natioo;;~l F.x~tbull L.c:~;ut - M•~t fhla.profi!S. raY the.r empi;J~C'S. Some. MKh as lhc Uni\(t'-.•tY ''' M:h.\lk:hu~u~ an: in the: public SCCh'll': odlcts.. suc:b 3S H30-:wd Uni,cn.ity. an: in the rftwtr '«rot-

Wlwrt You Leom about au.inn• I• AppliCJOble In Any Organization The biUCS~ ditfettftCt' 31tn011J liksc nr.o ~' i' lk tne:tiUre of ~ (lill..t.mrftc •• for-profib. the mcasun: rcntn.ll)" ,, ,....-. hY ~· In oo.profll ~:.i.Dtioos.. JOOI'II!'Y and expenses .-c lmpoltaM f''~'«m'- but fiB«"«S is usually n-.rawrN by lto..w. etft:etiw~ly scmces :w J...-11\'C"ftd

E.xnmplcs: (!'Of a c-.>llegG prcsiJcnt. ooe measure of accomplishment is the I)CI\."'t lll;lg<: ,,( snJdO:::tlt:S "'"'' gratiU:JIC. For a police chief, :JCCOfllt)li.shtncm rnigh1 be mcasurod by lbe number ._,( crimes that i'lf'¢ w ived. Whale\'Cr the ptupos.c~ tl1t> skills )'mi lnun lfl .(tWc~c-d i11 bushw.t,f-.(tl(''' tu JlltlnilJ;t'lllnJt .tkills-·an /11'/p )'dli

ti r·fli.-l't' .~ltcn•,U in rHfwr J:intl,\' r( r'lrgtmi;:_rilhm.~.

The Fundamentals of What Businesses Do: Selling Goods or Services to Generate Revenue & Profits

How does a business actually make money?

What, in fact, is. a business? A .til Is any acti,·lty that seek.~ to ma.ke a p••ofit b)' Satts·r~ing n«>ds llm>ugll selling goods or sen'kd 10 generdlc rt''c:uue.

How the Sales of Goods or Services Produce Revenue & Possible Profits Let's .sec wfwt the purt.o; of the foregoing dctlnition or busiAC$$. mean.

M11fiii Is the txchangt or goods or ser,•lces to•· nn agn~td sum of money. This mooey from s.'llcs is known ···s rcl'C'IIUU, tbc total ••mOOn I or money Hmtlhe se.lling of goods or se:rvic~ produc~ for a business during a den ned pel'iod of time. such :.:s C\W)' J '" 12 .n~)fld•s.

Gu9J{i art dtliru:d as tangible pr·oducts-dlings yoo eun touch-such as f<.>od, cl-.)(hing, at)t)li:ti~S. ga...~line, ancl books.

Scmn•i are derined liS inlaugible prOOutl.s-thingS yuu can't tuuch-suth a.o; e~.l ucation, recreation. or health care..

What:~ btrsil.eS.S.J>ei'S~)fl is. "''ping to ge• ''ut of 1h is 3C1i\•it)' is.:~ fjjf}it, t11e amount or nwnt)' a business makts nrtcr- pa,•ing for its salar-ies and all other l»SIS-th.-t Is, rt,•enue minus e~ptu.ses.. n .e Ol)t).l$i tc M profi1 is a~. " hlt:h oet·urs when busiuess expenses an: lar ger- than reve11ues.

BRIEFING I SMALL BUSINESS & ENTREPRENEURS How One Man Makes Inspirational Writing and

Speaking a Revenue-Producing Business. J;)Sh Sl•iJ,I), 29, h:lS ,., yoothfuJncss •·md ins.pirtttional message that on lCal to high sch•'lo.)] stu~.lcms and young adults.l Using n~.mting bt.Jt words an•l idco·•s.. how has he built a business?

As an i.nspirutionul writer. fC()()l"f;S small-busine.o;s maga:tine fm,_.,, he makes IY'II'IlC)' by rurning his iciC:JS in•ogor~tt( d1:J1 p¢i))>IC wiU p\1)' for- 14·mgible things such as a book, DVDs, T-shiru. and higlt .sdl\)1)1 ctlucati\)naJ m.'ltcrials. (The bo,)ok i:s 11Jr- Tt-m '.s C11idl" In n'twltl Dtlmi,wlimt: Advkt' m1 Liji'. Libe-rty. <md illt> f'W'JIIil~>[ A \ t' I"JI)Uit''lt'.SS.) •

As :m inSt)i.r.:ui,,n::ll sp¢aker, I.e ;l)S() makes tn1."'f''¢)' b)' J)l':r· fonn ing a <t>rvia-gi.vlng St:lOCchcs, at about S5.000 apiect~ tt.•·•t t)C()p)e p:~y h) hea.r. coming away with n•)(bing rong:ihle but with a pos.sibl)' inSt)i.ring cxpc:ricn~. tTIK)' M•o:::n buy the bl'll.)l: ancl other go.:)i)s as well.)

The tn~)fl¢)' ~~3 l i~cd fr..>1n Shipp's. sales. is l'l"l'l"lwl"-clo..~;C •~) S2 million i'l ye~·rr. If be SpcnJs 11.10 much on travel, productitm expenses. alkl the other costs of running a business.. he might t 1k l lit) with :J lr'l.u. Howc,w. by k¢et)i.ng t)!J)I': I\SC$ less d 1:1n rc\'enues. he makes a pmjil. •

0 W.ant to Know MoN? ~ Who Ne Some M~jOt ;;,.for<- I Profit e,.,toyers? Go to www m~bi:d_, com.

-=t to Know More? 1-3 Why Do &~11esses h il?

Go 10 W'MI" m~bt.~W:o con'! ,

0 h oducts providctf'. When rno­tiv&t!onal spt&ker Josh Stl!f)l> 91V~ ~pc.x:he~. he pro-ide~ r.t.:.rtgib!c

~:~~~~~ 0~~~-': l)f"'v:d~ tangible procluc~od~.

CHAPTER 1 Stan-.ng Out 5

The New American Economy: From Goods to Services Frt'm an ectmomic stand1:h.J'int. providing scn•ioes-intangiblc lhings-is what ll)()St Aroerict~n~ d\) mday. BUI it Wa.'\1\·t :tlv.'tlys ~o. At the time l'>fthe founding of our '~l)ubl ic, the gre:.1 m:.j~.wity M 1hc W•lrtJ~wcc was t n'J)III)'Cd in agricuhur¢-o thtlt is. Pfotlucing und selling goods such ns food. coooo. anJ lcatbc.r. Since then tcchn•ll\-,gy has. ot .. 'll.le fam1ing and ra.nchinf so efficient th:u hxhy Jess. tMn 2% of lhe population is employed in ··•grieulturc.

During the bte 19th a.nd ~Oth ccnruries. the United Slate~ :~IS•} C\'\})\'etl fmm a.n agriC'IIhUI':ll '' ation into :111 intlu:wi:d t)f'IC, selling •mnuf:lCTIII\.~18t)i)(ls: Slctl, 1011ls, und m:lchines-!Ycrytbing from ship..; to locomotives to automobiles to toosten;. lndce~.l . Ame1ica ·s in~.l u:>tri:tl power bocame the envy \) f the world an•l mode a huge Jiffercnee in turning the tide toward vict.;wy Juring W1.1rld War II.

Thday. h<}\.\'C\t'J". American busines • .; is principally concerned with •level\)ping atld ,s¢1lil'lg ,s¢rvicts. ll'l•'«•L. tlurit~g l).c l:;tS.t 50 )'C:•r& jl1bs i.n-..X~I viou:;nufxruriot::;­the pruJuctioo of gooJs---h:roe declined. rroinly bocause of gl I uutswrc;ng, or olt.;hol'ing, d1e u • .<ve or suppliers outskle the l}nJted St:lte..o;. such as dtOse in China and Ind ia, IU prU1'ide lolbor, goods, or S4.'nkes. ln lhe United St&c:s in the bst 25 )'C:lrs, m<}SI nt"\\' j•lbs can be attributed 10 the gJO\IOth in se1·vices: entenain· •nenc, l.calth, l~gaJ, fi•~nci::tl , cduc:ui(ltl:.J. flCI'St)(l:ll care. rep:ii.r, ja:nitori::tl, :11-.1 ''l)ter services .

•

BRIEFING I BUSINESS SKILLS & CAREER DEVELOPMENT What's the Pay for Entry-level Jobs for College Graduates

in Business? Some of the fustcst·growing new job..;. such as those of janitors and seclllity guardlt. :.re lm\•er paying tMn manuf:~cturing j•lbs.$ However, thi>SC tMt require more educt~tioo :tl)tl training ure among the highc.r·p<~ying

jobs. and roost l}f these provide services roilier tMn g\-x>tls. II) this C<'llcgt,ry. reocnt business g.l'\lduatcs have dtme very well. Ft.1r 2011

college gmduates c.mcring the job ourkct. avemge st:t.tting s.:tl:l1ies ranged fmtn $J2.2&3 a )"(::lr f~w d~<)S.C wit11 cleg•~s i.n oe lcmenl:il)' t¢ad1¢r education to $66.886 for tb~>Se in chemical engineering. 'Ole an:ruge pay was S50.46:?.

Most of the Cl'l tr)'·level sabries fm· graduates with bus.incs....;·•'elatcd •legrees fell in the middle r.wge: lntem<'lllooaJ busi.ness $37.714, markcting/ln;·rrketing management $44.43:?, business. adminisu:ui\Wma.nagemem $46.83:?. :te· counti.ng S50.Jl6. ti.nan~ 553,048. :.nd ¢C.\I'l()lllics. S54,6~.<~ •

Some Ctlllegeedu.C!lti•WI will be impcrotive in the years to Cl.}filC. "'High sch\"X)I gr;·•duoncs anJ dropouts wtll find themselves t ;·~rgety left behi.nd in the coming decOOe :~s employer ~.leman•l fm· wmkers with postSOC\)ndal)' degrees C\)ntinues t\) surge." S:l.)'S a feJ)IIrt by the Qmcr ~)(I & luc:lti•'n and 1)1e w,,l'kf;)rC( :.t Goorgc111wn Univcrs.ity.' In W18. it prodi.ets..lhe number of jobs r<ltluiring <'lllc.ast ,., tWi.l·ycar :~s.. .... -x:iate·~ degree will .:.utstrip the number l}f fl'C\)ple qualified h} fill tf'l\)SC. j•lbs. by J rni.ll io" '" tn()re.

Business as Benefactor: 1 2 Payoffs beyond Money •

THE IJG OEA; Eklsiness can raise people's standard of IMng and contribute to long and heolthy lives ond to human knowledge It benefoU SO<Mty by p<o­~dng useful good. and -*es. p<ooldlng emploY"$ w~h poyd>e<kJ and benefrt.s. paying tPH, ind donating to cornmun ity causes.. ' THE ESSENTlAL OUESnON How can business benefrt sode1y?

My8iz:L..b: Checlc your understanding of these concepts at YNIW mybidlb com

I n recent ti.mc~. the Unhcd St.'Jll!!l: anJ die world ba,.ve n.am.l'l•oly avtrtc•l V.'hat m:1ny fl':uetl ...,.,IUid he (hi' S~\1\IJ Oreal l)el'll'eliSi l)rl , the l:l'iC'Il ~~\1'11\t'll!C

t.II)Y.nwm \ tm."t the 1 ~3()., Tl'll.l3y v.e may ...,dJ be lhmg in a \\~riJ ""hen: the run;e o{ fin:~A~Ci;tl out""'"~-un.l t i.!J:-is much wider than LltlfmaL1

f;.1r many rc,~plt , "~'nfide.,._e tn ~ busmess V.\'lrl~ lY~m ~" bu)'tnt: IIAI.I ~Ibn~ 0011 trliJtnc v.c •~ usal ~ bcea dtxply slktkn. \\1th mill~o~._'fl~ nut of \1io\WL, 10 yut .. or ~l mart.te a:~Uts "iptd out. ::~nJ ~< v.,'ll"'h ,,h,.thll·\1. .. '"' an.~ ollhctt {,'of1l'll(l" .. -akat. d.m.- ~c bttn maD) angry aitk"i •ho wy bu'oint'-"' .w.~~~tn Mil Rln:aJCD .ur pttdy. rutbks.s.. 30d ~ ~ ckw.. .... tcnt.aM•J if'( tNC' 1ft \(Nn( Qi('\.

Bw.lct'• .a,_._ r.-.nt out thai. •ka b1cted by social and kpl wmul\ 10 keep abn<o4'' '" cl'tc\:1., hY"~ can t.r a p:w.Mul fnrtt for goooJ • t~(i: ~ ho;~ 8

Business Can Improve People's Quality of Life

How c1n business make peopfe's lives better?

~"i.J!f.!._ifJ C'<prt.<O<Of'.<O 11 MK' it:ly's gcncraJ ''fl'll-bring lt.!l mea-­sured by .~tandQ•·d ur lh lng, llea lch ~..-are. edueiltltJn:al UlliHir· tunilil'll, fr cedum, hnppln~u. art. em·ironmcntal hcallb, and lnntm ltlon.•·· Vlcim.;ncly, bu,inr-o;;( can l1dp S~'ICtcty by Cllrichillg people'!~ ,cu:•hty ol' life.

Rai1ing the Standwd of living

1\ lolf'J( pm ''' an cnhan..-c:~ol quabty cf bfc for mdi.vi.duab rnutb fmm :u1 impNO.-cJ"' J uf}.j•Wt. ddiatd b~ bow Lln.u~ JooW a.-d sc.nkrs ~oplt .. ,. .. bV) MChh the •noney the> ha\t. Ab.'lllt IJ btUKWI of W .. ~-. ... ·, 6 9 billion J'IO)ple ~ ia C'.Uf'Cm( pmvty. li\'i• oe Sl lS • ~,.or b."-. ltftl1 M~r :l billioa at diem JO ..,.P>. C\cr}' dl) 1 The~ <ft Lqd~ oubidc: tK scystc:m of bw.stoc~ sn.-c they li\~ .111 ~bt.lgeocc k\~k By «lfU'3st.. lrfon- dire GrQt R«a.­\Mlft ,,.. ~ 2(I(W at tta;.~. A~ (13di~Jty CttJIY.''Cll ~uiw- a hlp ~ (I( IiVlA,, hi pell pan because of tbe ,;rods. ~"leo. and p:~.ychrd.J, bu~nc" pn)\·idct>.

8 Good buslt~HL SigS.""y Sol• ru""fxtwes sol.-pOW'el'ed trnl'l ~ Tt!e car-; held up to 32 9S otiS ~ COIIlpxled ~.,.,. ¥!d CJtl'r t1t10 te.t' ~to J cilln Wfwt' .,..en ttl~ cans - ful. \'h-en AfiJOtta Str.e ~ ~ wsong lt!e oev«"\, the CQ.Iy trW pcbp ""'"'~loonc.ea•'Cielr hn't th<S a a!le ol bus~ be-ng a forete

""900d'

CHAPTER 1 S~rh'l9 Out 7

• PANEL 1.1 Top 15 most Uv· •b" countliel. TheM (Ountries, n~onkcd "'v<=ry high hum""n devd•

:::'~!~:~r::ft~~n~l~st elso ha~ $trol'lg t.odal safety nch, wch as h<=a.lth CM<= and pension systems,

1. Norway 2. Auwati:.

3. Nvw Zo11 a,nd

4, United Satts S. lrelend

6. Li!XhtoMtein

?. Nettlerl&l"dl

8 . C3r-..:.da

9. Swc:ccn

10. Gormany

11 . J.:lp~n

12. Koru (Rc:pub!ic: oi)

13. Swinorlllnd

14. Frel'loe

1S.Is~l

s....-·\ho .. ; .,., ..... c...-.,p""Y.....,."' _CI<wi.,.......,~.:JRJO.!o;!o>w..;.,.... 01o~·)l~l>lO'..!>~Il~....., Ao!)l'< U, :»Uj

Contributing to Long & HeaJthy Lives & to Human Knowledge Ousincs~ research. prt'tiucu.. a.nd services may help lt• odvaocc human de\'elopment. The United Nati\1ClS. Human Deveklfmtem ln~.lex mea:wros the :wcr.1ge ochiC't'C· n-.cms i.- :. couniJ)' i.n (1'1.1« tl itnc.-sio,,s of hum~n cle\•clopnloenc: ( J) life CXJ)CC(!IIlCy, (!)educational tutain.nent. :mc.l (3) inrome. (St>t' • P01wl / . I.) 1be wp 15 countries on the inc.lex trth.litimlally have had sLmng business envimnnlefUs and cultures. aJlhough poor world~o~.•We otooomic ooDdilioos h.;'l\'e drastically .;dlered recent ra.nk· inp. (lcelan•l. once 3 \)R the list. is oow l7, an•l Sp.:~in, \)ACe IS. is fi\)\\' ~. lmlanc.l. ckspite being 50" d1e liS(, is :11$\> unwell,)

Business Supports Employee, Government, & Community Interests

What are four ways business can benefrt sodery?

Busine..o;s ean advance the interests of society in four ways:

L PnH:Iudng Goods & Sel'\'k--e.o;: Fmxl an•l medicine, dt:~thing anti shelter, heat and light, ~ntl od1er ,.eccssili.¢5 of life :.r¢ gcnc""'ll)' l)t(MJuccd h)' businesses.

! , l•nwiding l'aycllecks & Btm:lits for Smployws: Typict~lly. there arc scores or hun.lrcds. of c•npl<}yecs. depending <)fl. every busines." \l\\·ner fm· paychod:s. i'lnd beoofits. such as bc~dlh i.nsuraDCc aDd a pension JJia.-.

3. l•aying Taxes to Suppor1 Con:mmtnt ScniCi:S: MI)S{ busincsse..<> pay taxes 1\f s~'ltnc S<uc. (rn New Y(>lk._, f1\r i.nstance, d1t1\Ugh d1c J>Ur<:h3SCS diC)' •n:.ke, busincsscs po.y 25% of local sales tottcs outside New York Cily aDd 41% of tmal pmpeny ttlxes.>'· Morw\•er. cmplt:~yoes of the bus.ioos." also pay wxes. The govcrnmcnl"s a.bilily to fuDd public hc;dlh. social securily. educalion. defense, anti othe r services is based priroorily on u eombiiUlti.{)n 1>f tax e.<> paid b)' businesses :md (heirtn'J)II\)'OC&.

4. Oun;Hiug Fuuds , Goods, & Stn'iet'S for Cummunil)' C;wses: In m.Wy C\)mmunitie.s. businesses are .stmng SUI)Jk)flets of ch:ttit:thle causes, such as. cl~)f'l:.ti.ng SUJ)))Iies t~) l1elp c:.r(I'IIIU~ke dis:as.tcr victims, rn:a.J.:.ing '"~)llCt:l.J')' C.\ll· tributi.oos t<) Unitoc.l Wuy. buying ads in high school ycaftx)Oks. and sponsor· ing Little Wgue baseball teams. 0

€) S...sinass don11tions. Companios ~r<X~nd lhe world donated to lhe relief or 2010 H~ li e~rthquako victimli. Genorlll Eloctric. for in. sL:mce, provided this $0br·powered w:.ter pUI'if~ticn uni1, \\tlich Clln tt&~t g'WI'IdW<t· let', wrfaCIC' water, :.nd recyded r~nlo\'llter to produco de~n drinking waotM. Whil; kind& of busine~ supporl of c:onlntunity C:IIUS~ 1-..:~~ve you c~orvod?

Risk, Entrepreneurs~actors of Production: The Creative Fire of Business

THE BKi IO£A: Entrepreneurship means taking rislts to cr•at• new products or il new emerprl:se Envepret~eurstlip, natural resources, capa.tl, and human retOUrces consth\l'le the four fundamental resourws. or fa<tors of pooductton. needed to cn•tt ~afth. Some scholars also add lmowledge as a fKtor of P"oOU<1ion ' THE ESSENTIAL QUE >ION· Wha1 a<e 1he ma;n sources of wea~h?

My Biltl.ab: Checlc your understanding of these c:onoepts at www mybi.d1b COM.

M 11ny flt.'t 'Pie tut llflli,lled with a career w(lrking for an l)fganit<~llml , \\he:! her t'ot·pfllfit ,w ll')llfltdtil. Bur ~)Jlle like Rid: Stc\'CS. dc:)I.CribcJ in the:

"\\'intiCI'\ & IA''>CI!I .. :•l the liC:;tl1 M rhis d r:tprer, v.·:uu a career 1h:" :llll'l'A'~ them to fulli.ll thcu JKWfl'ii lndrpcftlkntly. The foollder or Europe n.ro...,h the B.uck Door. StC\'C:\ by l'loi,.,.. ; .,. no Wubt 1A>'d.ithy. tbouJb he orten cootinucll to tr.a\·d in c.bc ncar·~'lllabl"lfltJ \~.~)' '" v.hio.:h be: .)t:lfkd. Thi..$ suggnu the qUC':Stk,n. Whn ere the •calthy i.• Arnctka.al'kl...._ ..&.! they cet tlut way?

The Weahhy People Next Door How did most woo/thy people make lheir money?

1ft thtir """"- TJato M11f1,_,," Nt'ft Dnnr. rtY.31daers lltorn~~ S.~Ak-y alltJ \\'ilh~Jn l>an&:o m't'&kd ~nc ~rrriliing (xu:

MoJI 'nallhy ptctp l~ ~ H:tr-tmplo~·~ busintsS ownr:n: It'll ~~eldom in• hcnt .. I\Ct, l1w:-L, :l\1\'otnoW dl'gn~ or f'\"Cn intell i~l'loCC th:u C'n.;.hiC'\ l~'l'lle Ill runN ff'ltUnc!l "\t''"' ''' lhc affluent ln Amcne;:. arc bu.s.i~ 1)\H.CI~. 1tk:lud· in,g ,\df·clnl'''l)'~l pmfoosioo.:~ ls." they Y.Ti.te. '1\\·enty percent 1)1' lhe :tJlluent h\'Mt...rlt\'llh in Arll("rica o:•-e lt<'3detl by reti.recs... Of the rrrn:1inins, I:I<Yif.. tnNr than tw,•·lhil\k nrc headed by self-empl\)y«f owners o l' busincii!IC\,"

Tl1c S«-IJ-~mplu)'fd llrt: murt likely than tht l1:1l:1r ied 111 bt: •·k h: "In An.crlca," they l}llnlinuc. ''(e'oller than one in five housebnhl~ ..,. ltboul 18%. ill headed by u ~oC I I'·cmployed busine.<>s ovmer or professional. Hut tlwtt' tt'IJ· l'l'lf'/tt~t'l/fJt'ilfJft' (tfr jfmr 11/JI,S IIUIIP lit,/'f /11 b4-mi/JlmU1Jrr.\ tlmff lft,fl(t' .,JfiJ wnrk }•" ,,,,.,.,., .. Cthc:ir c:mpha!>i\) ' 3

Wh~o~t type •'' ~Inc:" is 1nost apt tu make you a miiUonaire'' Sbnlcy und OardM ~)' d1JC tf•e ..:l13r;)I.."U'r n( cht busin.ess o\lo·noer is o~e i.mr~tant lho\n I hi': Und o( buJtnt\J lA rrt..l!Cdn;. k\<cl of · ·(':al:th. Wbafs interesting. however. lJ thai the buJincsse' t'JI Jelf<mr'-1)'N milli.lft:t.i«s an:: lkX USU311y Jl:trliOI'UUS. 'l'ky in.,;likk StKh L"OO\'(ntJ('«''.ll ~,..-~.7up.lltom b po.ltOriaJ..scnir;a (;(Jo!J;k'Wf, cafcctN 0'\loftCf.

~ rumcr. pcq:-ronctol ~« operat«. liquor ... ~. Nncnl hococ oren· IIW, anJ ~·M.I.'\CIAf C\wn..11"W H 0

0 Maluft8 moM)' fr-o"' ttMh. w.,.,. HuiMng.a -1. a wl1--fTI~ b- ON•re (and fom'lef' o._., of 'It!• t1 .ami Ootphim footha.l team! ~!nt-t 'yt'MOeMOnlt'yln&W!f')' OfO.f\III'J ..,_. cf ~- ........... -· eo....,...-_.... ~-..!d-tM.•-al)'?

0 The •rlttel)"ff'l•vr. Lot Ange!e~ bued Roy Choi, formCf' chef in New York's fancy L& &en<~&ldil\ restaoutent. took 11dv:.nt11ge of :;cvCt':.l trend­taco trucks. MultietM!c cu!tne, IU'ld Twitte~-to l:.unch Americ11'~ iir!it ··>Ar&l.-ettaurantt."' two ro>Ang Kogo Kore11n tuo ttuc:h. He u~:; Twitter l& "'<ebtite that allow-s u-s~~ to sh8t'e their .... here~~obouu. .... 'ith irlend':;t to anf'IOI.;noe tt:.e evet'·changlng !oce~ tiort.$ of ~he trucb, ...,t!ich disopert.$e tecos ~~uffecl Y<!th ( orean food. Nc-NW•:celt de$0i'bcd the produc:t':; eppeal &t ·market pro<fvce &l'ld un1:~mili11r prote in.$ prep:~red !Of' tt-_. eutket'ltlo~a<Ang ... pe•ate 11nd sokl.aot rcce~ion•re:.dy price: tS2-SJ). ~ C&f'\ you ttllr'lk of a ml.c of unuw:.l e lements tha~ migh~ r~u!t

if\ a new product?

• PANEL. 1.2 F~tors of f)f'oduction.

Tr:.dition"l factors Nerural res<:~~Jrut Ulpit<'l

Htlm.~~n rc~rcc:

Entrt?ptO!bOutship

W~tny no.,..• also "dd .

• KrtO'N!edge

But. or eoursc. most sclr~mployetl people oon·t become mil· li•' n:li.res. just as tn~)S( ~tnploy¢CS whl' ""'"" fororg:~nil:.li •'nS suctr as Genera.! EJcttric dvn 't become millitrnain:s. What docs it tnke to s.uccce•l in business? This is. a fmm.lation:tl qucs.ti,)n we will 3d· tlt¢SS tltrough~'ltn this b~".-'11.:.

Do Only Entrepreneurs Take Risks? Which is more risky- being an entrepreneur or being a salaried employee?

f(l.\k In the business re:alm Is denned ~s l11e possibility ChM the owm:•· or owners or a business ma~· inn·st Ume and montl' in the e.ntet·priJ;e and rail-that I~ nOt makt a proOL ·

T;dd ng risks is what cntn;:prcncurs dtl. An t!!!!fl!_rrm'M" is a pcrsun who s«S a new oppurtunity fo•· a pmdut·t ur n rvkt ~nd risks his or her time ~nd •noney Co st:u1 ~ business w make a profit. 0

But risk ls Mt~f'l in the eye ,,( the belrolder. St~u•ley :.lld O;·mko, <'IUthoD o( 1'11t> M illimwirtt Nt'..ft Dm11: tell the story tlf a pmfess.or \)nee asking a gmup <}f 60 Ctlrpornte exccuti\•es the <IUeSti~Wl . "Wir:.t is ri$1.:?"

One replied . .. Being an entteprcneur! .. lbe otb« executives agrocd. 11ren dr~ t)l"')fCSSI" :lnswe~d his own 'IUCStion wit11 a 'llu'le fn'tn :.n

enercprcneur:

Whal is tisk.? Ha\'ing M C: SO\J!CC: 61 inoon'C. Btllt)IO)OC:S ate at t i!<k. . • . . Tbc:)' b:a~·c

;r sin~le :eource of ii'IIXlomc Wb:rt ;rl)c,M Ure e n ltepf\":1\C:'III who .;ells j;;111itmi:d So(l"\'i«s

10 )'OUr cmpiO}'¢U? He bas hundred~> and hundreds of CU:<itomcn; . .• hundred<> and htrndn::lh (o( .«"ll.rri:d C>f ulC:Prm::. u

~{!.}SL pc<'lple prefer dte sorority <}f a job an•l paycheck an•l benefits, ahh\1Ugh. as many t lniJitlycc:s found out during lhe severe ectrnomic OOwntum o( W07-2009 Ulld it.o; af'tcntUJth. the risk in Wl)fking fl)f a single employer i.o; that you might be l:.id 1,ff, But. of e~'ltl rsc, :lS St~u•ley :lrkl O:lnk~} g~} 1\ll II' J)l' i.nt out, therc is :ll$():. lot t'f risk ln bd ng a self-employed IJC.J'SOO or business owner. The diiYcrcnoe i$ th.;n. in investing money. time, and reputtlti<)fl, fftt- 1"1Urf'pl't'11t-ltr'.t ri.d: i.t tlj{.fl"l by rhl" po.~,o;ibility rif grt'ot r ttr\·o'lls. Indeed. the prtlmisc o( high returns is the rci\Son why ent::n:prcneurs take the risk..o; that they do.

Factors of Production: The Building Blocks of Wealth What are facto r$ o f prodvcrion?

Wealth lsll ' t <:r¢:lt¢d out ,,( th¢ sJr~er energy :.lld n~miv:.ti~Wl of :ln t iii!CI)r¢neur ulone. Whether a business is an individual pun;uit by ooe person or an organiUJ· tion M (h~'ltiS;:l tl(l$ ,,( tmplo)'t~S.. it r¢lits ''~'~ fucl1.1r~ p,(pri)JJJ,·Ji.(,IJ, or resoun.-es • ht c:re<ale weallh- rmtu ral resoun:es, l.'<~pital.lmmau n:suurc.es., aud enln:pre· neursblp. S\)fOC :l<ld 3 fifth fach'lt: km,wlf'd8~'· (SI"t- • POJ:I"I / .2.)

The Traditional Four Factors of Production Most scholan; emphasi:te just the tlm four fuctl)fS or productioo.

N:ttural Rt sOUI"(t s . 'Aui«JJJI rt'~JJn·<'li corl!list ur produl'lklu iupuls that an: useful j ust a~ they appe;:~r In nature, such a.o; Jafkl, forests, w:uer. wind, sunlight, rnirw: r~l l <k::positS, :~ntl dre like. M\liStr\:atur:ll rcsour.::cs c:.n'1 be <:r¢:lte.l; drey tn ust be mined. hai'\'C.<;tcd. httrnesscd. or purified.

10 PART 1 Today', Busin~?SS EnYronment

Capital. [!!piral i.ndudcs tht buildings, machines, tools, and tt'l:hnology used w p•·odul't goods ::.nd servlc:es. As. used in 1his SCilSC~ '"'WC\'er. ca,,i,:.l tlocs. ttol include money. ahhoog.h mooey is used lt' acquire building$ and .xber caiJilaL

Human Resources. 811t!UULnwun:~$ 1;011Slst orl::.bOI', the phy.slc;'lland intel· l«tual contributions or a t•ompany's cmplo~'«S,

Entrtprtnturshlp. Ft~trt/!_rt'flrfmh lli is the proc.ess of Inking risks to try hi l-'t'eat.t a new entet•priJ;e. Entrepreneurs are busines!>people wh1.) rocogni:t:e an l.lllnlCI ne<;d :md US¢ 1hc ''W'O•tunity to cr¢~ue a new J)ro docl or service.

A Fifth Factor of Production-Knowledge Management phi),}So.)pher Peter OrOC"k<:r suggested adding a fifth factor l.'>fpmduc ­lion. J:mm·lnlgt~. which he thought wa~ the most im)XIrti'mL1

" Koowlcdgc has boen revolutioni:t:ed by the applict~ti•)l'l of computers. u:ltt-.)OtnlUnict~tion~. and daL'l· ba...~s.. wt.ich allow l)te cmr¢pr£•teur II' quiekl)' clet~r~ni•te ttew v.':ll'l($ anti nctds Ulld quickly deliver new goods and scrvice.o;,

f!!!!!'.:l BRIEFING I EARNING GREEN BY GOING GREEN ~ Factors of Production in an Entrepreneuria l Furniture Busi-

ntss. In Z006. Seth ~'ltyer. nO\V 40. •·•nd J1.1hn Wells. 45, !ta.rtcd a Seattle-based bu..o;iness. Meyer Wells. that make.o; C'llSII'Ol t\lrlliture fn)tn urban tre<:s. (J)I\'1\htCtiOn factor: uuwral 1'1",\'fllllt'f'<) l.h:n have been C\ll •l\-m·n owing t\) dLo;case. Sb.mns, or development.

Each furnitore piece has ·••·• dis tinct botanical naiTati\'c." says aNt~"' l~1rk 1'imt~.{ story. ,~ What clifferen1imcs d•<: fl.rm fn)Jll ~)(her CUSII'tn t\ulli· tore makerS is empha~is oo "'the big. slab. fumi· rure that C\lUid bring intl•'lo.m the I':X\\' J)o,l\\'Cf of (he (:tl\'ir''MlCill r:.thcr d•:.n a boiltlcr's. vision" (production factiM': nur~pmu>W'$Itip) . 0 Por in· 51a1.e(, MC)'er Wells buill a W()l'ltlen k.itchcn b:lr for Rich:.trd and Dtmm·• Majer with ,., ··cowyonlike cmd: ripping right down its mkl~.lle." taken fmm a Sl~'lfm·d:unag~l o:.k i.n d•<:ir )':trd. " I see (he beauty of the h111d life the troe had.- .suys Mrs. Maj-er. ''Aild it hcii)S me tintl 1hc be:.uty in my 0\'/n life's $Cal1.."

lbe firm currently ha.o; 32 employoes (pmducti\)fl factor: lmmtm rdrlw'c~"!') .

Drying. milling. design. Jt'ining. and finishing ta.k~; IJiace in an 8.000-squ;·u-e· foot. high-ceiling building (production foct<:lr. capiUJI). Coffee and dining l:tblcs. C;)S.t $3.000 II' SIO,OOO. :tntl conference 1:.blcs :.roolld $20.000. The company h•·•s been profi t<'1ble from lbc. start, with revenue rC<lC:hing S850.000 in 1009.

Meyer grew up learning from his s tepfather. ,., fumitore m:lker; Wells made furniture in high school and 1>nc:e ron a one-ltUln custom furn iture shOI), 11•-ey tlcpclld f1't a steady S(1'¢3tn of ''ltl, dl'lt.l•ned 1re<:s n~)( ''Illy ~'lfl "(1~e t~.wers· anguished calls," ~ys the Timf'<. "but incrca~ingly tm nel\\'tlfks with other busincs.ses and design pmfessil.'>nai.C tpc\xl'uction factm: spcciali:t:ed l:.mm·lf'dgt<). •

rO- ~ W.ant to Know Mort~~? 1·6

Whleh M the Mo~t P..¢fltable U.S. Comp11nic5?

0 f&ttOf'S of p rod!JctiOf'l. Meye1 Wou, o: So11trlo turM tho t!~ti.Mal re:;outoel of 1ecbin1ed urban tree' into modorn furnittWO th~t ro:IIXU •an intimale rela to,._.,htp wi!h our m~torials th.at y:.Oid~ di,tirt(-tiYo .and compellil'g te$1/U. • A!t .. .ough the comp11ny'' rt»Jdon;i.al bu.$inos,s do­crellled dun_,.g the rece:~:~ion, lhe grcwth in (OI'pouto commis,sioM m,:,de up the o_ffefence. What would yotJ wy K tho most di,tAcNo fac;:;or ol p1oduclion in lhil5 bus.:nen?

CHAPTER 1 Start"'9 ()1.1; 11

8 PANEL 1.3 FOf'tet in the busln•u anvio:onr'IWit'lt.

THE BIG IDEA: Companies operate within the business environment, which c:on.sists of economic:, technolog ical, competitive, global, and so cial forces that encourage or discourage the development of business.

THE ESSENTIAL QUESTION: What major forces affect the way comp&n!es and individual businesspeople operate?

MyBizLab: Ch eck your understanding of these concepts at \OJww.myblz.lab.com.

B usincss a.nd cnlreprc:neunhip don ' l c.xiM ln a vacuutiL Ci.1mpa.nic:s bolh l~c :lll<l s.mall OfiC::rate within tttepmil1(,, .. ,. f"' innm 'II 1 the :U'ell:lOf ftwces lhal

encour:~ge or di~our.-.ge the de,•elopment of business. T hese forces lndode economic, tt'l:hnological. compctith •t. global, and .s«;iaJ. (St>t' • Panel / .J.) l et's. bric::lly Ctln~dcr these.

Economic Forces: The Tension between Freedom & Restraint

How do freedom and regufadon affect business?

A cootinual source of tcnsi.oo is that between the amount of freedom allo·wcd for J)t(>))lt II' ts.t:~blish :llk l nu• d•¢ir bu$in¢SSCS and d•¢ Mnount ,,f r¢W:•inc th:lt gl>\'emmcnts imp;).se on bus.iness-some of which is noce.o;sary for bu..o;iness to be succe.o;sful. \\'bethcr rcglllati\)R is. l ight or heavy affocts . . .

Taxation: S<'lilte Ctlumries (and st:uc::s t h:l\'c:: higher tax rotc::s on busincs:~es, which rewiccs hO\\' much companies can invcSl in \'arious business prt,grams und keep as pmfit.o;. Contr:u1 et1rorcement1 In CQUnttics. th::u cl~'lil' t h:IVc s~rong tnf~'We¢tncnt M contract ln\\'S. bu..o;incsst>cople tue rcluctunt to enter into lc.gul relationships with \)tf'tct bu.<;;inC.S.Sj)COplc::. Corruptlon: Cotm~riics ~h:n don't pttni.sh CQIT'Uj)ti~'ll'l :lnd bribery aiiiM ut~cc.-.. tttinty dult hurt.o; hoocst bus.inesspc~>plc.

Technological Forces: The Effect on Productivity & Security

Can technology borh improve and impede prodvcriviry?

![cdwvliiil, iududes not only dlgiMIIet;ltnology-cumputers.te~ommonlc:~ · lions. and giant data storagt---but alw all mnchints ~quircd to he.lp a t'Otn· p:111y get things done. v.; ltetJ~r tleliVCI'f v:u\S, \'t';nding m:~chincs, or surveillance camcl"\lS. Tcchnolt,gy ca11 have bod! poSilive aDd ncgath•c effctlS i.mpOCting . . .

l'rududivity: 1be pl.lrpose of installing any technology is ro impro\'e 11 com· t):ln)•'s ):!!VdJJ,·li~. whkh Is den ned as lite amount of outpol gh•en lite

12 PART 1 Today'' 8-usin~ Enwotu'nQnt

amount ur input-s.uch us. the number or doughnut." Pfotluced for a gi\'cn IIU1nbf:r ,~( I10UI'S "\Vl.'-e.l. Set·urity: Mt•re ct•mplc:\ tcchnolt•gical :\ystems can ellhaD(:c prt'CJuctlvity but they ct~n :.IS\l C\liUpmmise security. s.u<:"h as. :. llt.}Viing hackers h} bteal: into C'USII~tncr crcolit files.

Competitive Forces: The Influence on Customer, Employee, & Investor Satisiactlon

Does competition make a cfrfference in how custo mers, emp loyees, and Investors may be 3ffected?

l~;wlng no comptfiiiJr~· people- or org;mitatjuns thort t'Ompete rur J;USIOme-rS o•· l'e!Wtul'l-'e.<;-<)1' having lt.'llS or C\liUI>etill.m can ccnaiJlly dctemtinc the :lf!l\lUnt M cff•~rt d•:.t a c~).ftlp:lny is. willing to I)Ut i.nt~) s:ui.sf)'ing . • .

Customers: A a~tnp:uly S.lid• :.s. 3 public utiJil)' that is (he onl)' (ltlC in its. in· J ustry has no putticulnr inccnti\~ to impmvesen•ice with ito; cu.o;tomcrs. since it knt.)V.OS tbey htl\'c oowttcre clo;e h} go. Empluye-es: A tothDt•l~ company trying tt• recruit a.nJ keq J top tnk.nt will g\l h} grc.ater lengths if it kn\)WS there are other C'tlmpanies ticrccly com1>eting for th:lt t:. lem. I rwestors: A bank l.h3t is the tmly ooe in il state t•r country may pay its i.1wt'~· h'lf'S whatever it v.>t~ms..

Global Forces: The Effect on Trade & Stability How do global forces offect busineu?

Glob:• I f;)rl-"t$-(f311e p:.cts, t<:~lf'lomic at•\)en'.CtltS, rni.li t.::u-y :tlli:.nccs, C'LIITE:f'IC)' tX· changes. immigration policies. cnvirunrnentnl influences . nnd other mauers---can h::we 3 t)IMcrful i.nfl u.encc .~n bus.incss i.n d•:lt !Jtey can :1tl'ect • . •

'rr·;ule: F;)Jtn :lli ~ctl at•~CnloefHS, such as tr:.do::: t):t~'tS.. c.an f:lcilit::ne d•c tX· change or gooJs anJ scrvice.o; hctwoen nations, which in turn cnn nft'cct a na4

titln's manufacturing, cmpl\lyroent, trowel, alkl t.'llber policies. Stability: Wars. tc.rrorism. rcccssitmS... currency p;;·rnics. cpidcrnics. n;:f"ugec fl\l\\'S, :.nd CC'tlklgical changes C!ln undennine nati\>nal stability.

Social Forces: The Changes in Population

WJ/1 people from dlfferenr b<Kkgrounds affect how business operates?

Changes i.n a C'tlunuy's {lenwgraphit'1. l11e mea­surdble du•r acltris:tk:s or a popuJaUun, suth as genJcr, age. mcc. family comrx)siti.{)n. and the like, c:~n ch;i•tge the numbers of cus.tonw:tS and C\lStt•mcr DC-ed$ .wd tasleS.. h c~·rn alw change lhc empltlyoe pot.)) ant.l skills that :. C'tlmp:~ny ha.-. t\)

Jcal with. O

0 Changing 5ocial forces. A !JI<ino m&rket n Lo' A~~t l!t or..e s-gn of ~he exp;.os.ffll grov.1h of ~he H;.;~,.;c: p¢S)I}~tion, wh!ch dOt;bltd <J>Je¥ tht ~:-1: 20 ye~~n to SO million, one out of ' lx Am.erleaM. lfl the nt&r futute, ~he number:; of Hi~p11nic:; :.nd other r&c.la!le~nlc: m!I'IOI'It!M &re e:cpKtt>d ~o p.1<:1::. the numb~ of non Hi~nic: wtlitet 1t1 tt-~ Unltt'd Sates. In whtt w:r-p. do "ff'.. think ~hill dcmogr:.p}ic thlft ~~~ d'l8(19e tt:.e "11'J u.s. bu11· nc~c5 opcr.uc?

CHAPTER 1 Start"'9 ()1.1; 13

1 5 Seven Key Business Rules: The Great Adventure • of Being in Business in the 21st Century

' THE BIG IDEA· The generJI universe of ch.angl.ng forces suggests you will need to observe Seven Key Business Rules to be successful in t oday's business world: {1) You must keep en eye on 10 typei or groups whose interes.ts are affKted by your firm's ectivldtt. (2) Y04J must deal with many uocertainties. {3) You must strive to assert your competitive advantage {4) You must operate in a gJobal tconotnlc system (5) You must try to stay true to your values. {6) You must deal with others who are dlvette., rilce. ethnic:ity, religion. and so on en You must develop superior p61"1onaJ skills

THE ESSENT1AL OUEmON· What .,.. Seven Key Business Ru'es to observe i-"1 pursuing bus•ness succeu?

My&Qt...b: Check your understJ~nding old\ese concepts at www my~l&.b COf'li"'

S uo.~•ns *'" ~~.~~,\ ldd.ay 1\ a hu~ Nl»e10~ ._, b you dral ~irb a genc'r<l.l W'la\ft'\C of "-h.anrina fM.~~. ttdiMiogic:tl. ~m-e. gkbcll..

:anJ '-!'C1111 ~llfl~n'"n' fnwn ~''-t th;.C )'JUI fCUtfiiS. 3nd gr-3n..lp:iftnl'§. f::w::ed durin~ the !CJtb IXAC:Ury BalilllCin: lhe.\c rornpcong lnttrc:sts Whik aying tO hone your P'~C\_,.iol\11.1 11.1\J l'lefl,;~l ~uu, tu\!.1 ~~.t: i.n 3 rc:s;~ibk v.-ay sugges:ts tbett o1tt .X•Yn Kry OrH ml' \ \' Nulr-. jM Sucan yoo \HII n«"' lo oM.en'e in (_Ydcr to thth~. a_, flllllW.<"' r.Y, • Ptllo l'l I ol, )

• PANII., 4 S•v-'\ IC.y ~~ Rul• s for Success. These ~re seven ruks to be obte~ In 1M PUf"HI o' butiMst suc~uln tM 21 5( cent \If')'

Sl•lrehold•"'· Rvlt 1- Vov mutt Meet tNt Nteds oi ttaketloldets, thot~ with an ir11ere s1 in you• ~nlution

Vnc.rt.tMry. Rv!• 2- Yov mvr1 d•• ...,.hh COfl~t~t~t d!J~ongo. indvdin9 ted'lno!og:.C..I ct~ .. ng •• Comperitlon. Rvl• 3- You mu1~ muter the cornpet:tNe env7tol1rnent to 5Uiy :.he•d ohNtlt

Commo1• KOitO"')( Rv!e ot- You m~~s1 de~! w!th an n !e1depender.l global ~lc•")•ll ......

EtNu. Avl• 5-Yov mut t be •~1-t!u •n6 socially respol'ltlb!~.

SodetM dJHw•nu~ Mv!o 6-Vou mvstlea1n to deal wilt- di~eterl kinds or people-.

S•lf.d•wloJHM~tr. ltt.e 1- You rNJ~t .cqv!ro tho petiC)t'l~llkills noeded fet bu SII'If'.IUCCel't

The ~tv".t.nt ~aJcr • ·UI n,lfi~ lh.11 tht initial leuns f.:rr the-se rules speD f lolt1 l'fC

Th1Al )'fiU' rt UJ'I hlf lhew: L1n..l' t'l{ i:'halkngt"~l The purpose: ol tins book i$ to help yoo rllC!d them

Sta keholders: Rule 1-You Must Meet the Needs of Stakeholders, Those with an Interest in Your Organization

Who are 10 stakeholders that I must re<ognize and deal with?

Busi .• .eS$JlC'lpiC pt;ICiice d•C art ~'lfhuuwgvmtnl, o•·g:~rtftlng :and \'.(K)r(Un3ting lh e acth·itks of an t.ntct·prise aet·ording to n .rtnin policies to acbic\'t. certain objet:· dves. As a m:~nagcr. you will or~etatc in :m ~vg:mi~::nio••;aJ cnvi.ro•unenc tn:tde up of various~. tl10se wllo.w inltrt.Sis are innuenet'd by au org;miu1tkm's acth'llielt. T he illusat~tion below .shows S()fOC plindp.1l s.tlkdl\))dcrs.: you may think ~'If S(>nlC osJ.crs. •il ($~!" • Ptmd / .$.)

• PAN EL 1.-5 The IM"oivet>se of business ttekeholders.. Th41 org ilonh.oltion's ~\'ironm~t.

1 Owners: Hoping for Profit but Rjsking Loss

T ht (.l*''u-,.j ur lHt urgrmllatlon;H't Chose who c;;Ht claim It as Chelr le:g~l prop~ crty. In the foc·pmfit world. there arc SC\'Crol forms of owneNhip. One r:uniliut cbss ~.}r owners is , · ·lw ·r. o•· I .r , l' l , ownet•s or

0 hcebook suppol"l. hccbook, .... t~!(tl dr~ MOr~ ...!~tors ttl&!\ Goog!c in 2010, i~ bf!COf'l'ling :~ growil'lg d'I&M~I fOf' c:uttO(I'I~ &ul)· port .w~d ::oCtVicc. h .1ll:O ::oc!\'~ ..... e11 ~or "F-c:om~rc~"-Facebook commcrc:e-thll~ i~. 11 p!.1cc !Of' wstoMe~ to bvy product~ froM a c:omp~rty.

~-sh11res ur ownership- in a t'Umpany. The good o( the owners i.o; ro maJ:en protlt. but they :ue risking loss-perhaps the II'SS ~'( C\'C1)'thing they'V<: i.MtStCtl. www. facebook .com

Wecoosidcr types of o·wr1ership in greater Jctail in Chapter 5.

2 Customers: The Focus of Business Why dt1 ex.pcrUsay the f~tstla~o~.• o(busincss is to tukt'ctm' rif tlw nl.Wtltllt'r1 BOC!lusc fl.Mfuu41'$. :II'f: the people whc) pay t() use lHt organl~~llun's goods or servkes. CuSlon-.ctS may be d•c r~ ... cus of niX only rnr-proiit organizations hut also nonpmfit ones. such as stu~.lems in C\')l!cgcs. A ne\\' C"h:t.l\001 f\'11' reaching <'IUt t\)

custotnC=JS ls social moJia. such as Twitter a.nd F'acebook:. ' 4 0

BRIEFING I CUSTOMER FOCUS Taking Care of Buyers: Amazon Pays Clo se Attention to "'The • Customer Experience." Atn:t~on founder and CEO Jt ff l3c~os says

he is. '"obscsSl"d" with what he C<dls ··the customer experience." Thus.. whereas the :.vemge V.'tlit fm cus.t\)IOOr service at Facebch~ has been (\)Und h) be 99 tnil'lutCS (r:tt¢•1 "h~wriblc" h)' users), r~'r Anlazon ir is L minure f'cxccllcnt"').

CHAPTER 1 Start1t19 ()1.1; 15

G Ctatomet'-obseoss.ed. Jeff Be.tos, fa.~ndor and CEO of Am.u:on ~om. dedllte' hinlse!f lobe •obs~sed with tho ('ii$~CnMJr O)(porion()(J " What conl(»nin can yoo think of ~t go tho e:tttil mi!o to do right by lheir custom'"? Oo lhey appe:~r lo bo more WCQOnful?

nae c~>m;pUily alw offers an easy-to-use website. with online oochn~>l· og.)' tat¢•1 •Jll'r¢ em:w-frct !)':"' thi))¢ of ri.\':.1:; \Val.na•t <:,),n ancl Target .ooan."» It bus tu.xHiay free shipping on ull package.o; for an annuul foe of just S79 and a r¢atl i1)' :avail:ablc cu:;.t()nloer·scrvice pl,.,ne munbcr. In odditioo. it is wHLing to quickly ct•mXt mistakes. even those that are not its fault. F<'H' instance. it rcpl~ccd-for free alkl jus.t i.n time fm· Christ· m.:as E\'t.-:1 $500 Pla)'Station 3 Clul:;ttnas pre:;cnt d•:at a c·usmtner l•:ad o n.lercJ for h is son but thtu haJ J isappcn.red alt er being J clivered to his :t~ment l)uiJtling.. ~ ·

Custt•me::rs ·\~~·~~e about h3ving the lou.'<:st pri.ces... h~·win.g 't'\lSt sckction. so they have choice. alkl getting the products .. . fast." Bczi>S has saiJ . !.! "A1kl d•e reos~)(l I' •n s~) obses.sc•l with d•ese drivers of d•<:: <:u:st~lftler expc~ rience ls th:.'lltl believe th.;n the success we h3ve b;'1d O\'Cr the past i l )'Ci'II'S

Ms been d:ri.'t'en exdus.i\•cly by tOOt cus.t\)roer experience..'' 0 •

3 Employees: The Need for Performance

HaYe y\-m e''er U.\)(kctl f\W a "'h}Xic org~nizati\)n"? This is the name that Stanford University business professor Jcf(n.,-y Pfefl'c:r gives to firms with high turOO\'Cf and I<Y\\' proJucti.\'ity. eompanie..o; that dri\'e empll>)'· ¢CS :.v.':ly.tl "'C<}Otp:lnies that manage;c•lple right will ourpcrf\}1'1'0 th\)SC th.;n don't by 30% tt• 40%:· be ~ys.

An exa.npk. \) I' a OOiltl}Xic <}l'g:tnizatiml is Men's Wea1flmlse. which h:a.s. lower mmover- ::mtl dillS lower r¢plX(tnent :t1kl (!':lining c~)St:S­thtln its COIUJ)Cliton; because it wmi:s at creating an en\'i.mnment in which empl!oyoes. thrive an•l V.'tlnt h} SLay.

4 Suppliers: Providing the Parts for ttte Product

A ~liJJplh·r. o r I'Mdor . is a person or an o rganization til at lluppU.ell rnw mate.rl· als, sen'kes. t'C)uipnu:ut. labor, or entrtJ'-IO Uther organh:aliuns.

~ • Example of Suppliers: Makers of the Appl~ !Phone 4. WOO m akes. the

I iPtlone 4. Applc·s smartplloDC.? Not Apple. bot a number of Asinn. Amcri.· can . Ulld turupcan companj.c.s, Samsung fSouth Ko rea), Toshiba (Japan ). and 81\'Kitl~'tn (United StateS) $UJ>I)I)' l)rocess~)f'S and the dc\·i~'s nash·•nen-.ory chip. Other chipS are m4'1Je by Gcnnnn chip m.;d;.er lnfint-'tm. The g)'ll.lSCt•pc is made by STMicmelcctmnics in J[aJy and France. Manufacturing an•l ~sscm· bly is J or.e by Fox.conn in southern China. ll3vi.ng e.fl\x:ti,•e relationships with suppliers is OOviously ~nportant to Appk. since the loss of co,·en one eoold c:~usc •mjor he:a(bchcs. s •

5 Distributors: Directing Products to Customers A di.,·rtibuttlf' is a pe.-lWm or an o•·ganir.alio n. such as a dealer 01' rel:ailet'. that hetpS 54.'11 goods and S4.'n'k:ts 10 ('USIUmtrs. Ttckci.S to artists' )>erfonnnnoes might be soiJ to Y',u through d istributors such as Ticketnulster. Disaibutors cnn be quite iiY'lJ)I)rt:.nt in indus(r\cs (such as clistributors to tnaga~inc t~ews..t;,t.:an•ls) in which there is limited competition because they have , .• lot of 1xrwer over the price ~nd pltlcemcm \) f the pmduC't.

6 Lenders: carrying the Company When Money 11 Short

Bu.o;ifle.sses often rely on lendc.n; such as banks. S3\'iflg:i nnd l<)ans. and insurance <:~lftl J):inics to give d•eol iO:'ItlS v.hen r¢\'Cnucs :tr¢ l()v.' (lor when they nct.lt~) bl'm.w.• money to finasace exp;;·msion. Some entrepreneurS fln.;·mce their new cntc:.rpri.s.cs by using their pct'S\mal cretlit ct~rds f \)( ct~sh ~·lvances m expenses.

16 PART 1 Today'' 8usinqu Env tOtU'IWnt

7 Nearby Communitie-s: The Lc><:al Environment Nearby c~>mmunities arc im1>0ru~nt stakcboklel'$ bocuuse schol>ls anJ municipal g~wcm•nct~t:s ·~I )' Oil bo:sin~sscs r.w:. J)I'rtiOil M thci•· t:.x base. Ill :t.~ll l itiNl , f:.znilics ;Wd merehan~ dc)>Cnd Oll lhe employee p;·•yrtlll ftlr lhci.r lh•clibt'Ods. i'lnd nollprolil orgttnizati,)ns such as. S.l)l)rtS. leagues may de1>efkl <)fl. dt<:m for <kmations.G When D~IL Ex1)r<:SS... f.;w1ner com1x."litor to F'cdE.x •·md UPS. abandtmcd its U.S. busi.ncss in :?008. it.'i hub city ~>f\Vi lmington. Ohio (populution I :?.000). v.rus Je\'QSCltcd by the loss ,,f&.OOO OHl .. j~~.~

8 Government Regulators: Local. State. Federal. & World tw•·enmtmralr•·gu.~Pwr.£ a1•e g,o,·ernment agencies that establish l'ules and regulatkms under whkh organh:aliuns um)' Operalt' aDJ in tum are often af­foc tetl by these orgallilations. '£1)(SC.bi)l.)ic:s may tllllge from l<>eal planning Jepan­•lle iiiS to st:.tc cornmissi•'n:s t~) fe.~raJ agc.w:-ics anll bo:lrds at1d even i.mcul:ui,,n:ll agen<:lc:s (Such ···s lhe W.;wld Trade ~alli1Jtlkm. wh ich O\'Crsces i.nlcrnillkm:ll tr:tdc).

L • Example of Govetnment Regulator: OSHA. The O:C'Upational Safety und

I Health Acltn iniwatj~lf'l (OSHA). an agency of the; U.S. l)ep:.wnent ,,( la\:M't, issues •·md enft,rccs w.;wkpla.ce health and safety rules ti.' l)fC\'ellt "''1-'rk·relatcd illi)CS$.C.S. injuries. an•l deaths. Critics haYe debated whether OSHA rcgub· ti•'nS ;·,.Jd too mucl• i.n tJte v.':ly ,,( c.'sts ill ren~rn f~lf' d1~ benefi ts, but one srud'y foonJ that regulated industries typically m·ercstimatcd the c~pcctetl cost of imi)IC•nt:•" illg I)'OI)I)S~I OSHA St:.'lnti:Jrds.'H •

9 Interest Groups: People with Specific I u.ues The Sicrrn Club, tbe N:tti\)1\:tl Rifle AsS<'ICi:tti\)R. the Uniu::tl Aut..) w.)l'kers. and the Ch:lmbcr of Commorce an; e.\amplcs of mtarl·f J:JJ!J!ps. or spqcial-inlcrcsl gruups-groups whose mtmbcrs try lo influcnct businesses and gunnm1cnts on SJ)e(lnc Issues. I merest groups. m:.y tr)' t~) ('XCII pol itic;ll intlucnoo. as i.n c.,n. tributing funds to lawmakers· eltctkm campaig.llS tlr in to·•unehing leuer· 1.1.'ri ting d l',)I'LS 1\) businesses. ttnd politicians.

10 Media: From Print to Internet No businesspc.n;oo call ut)'.;wd to igniM'e the 1xw.rcr of news anJ cntcrtaimncllt •no­clia. These i•w:-lude nm onl)' new&J);ip¢l'S, m:ag:a~i.ncs, •';)I Ii~). anti TV bm al$1' f;IS(· nxwing Internet svci;·.t meJia, such as Twitter. F'atcbook, ;Wd You Tube. Because the media C!ln r:aphlly and widely dis..;cminate news both bad and go.hl. Ol\)St midsitcd at1d lmger bus:i •te&.~s h:avc 3 poblie·•~lati(ltiS j)Cf$()1l ~lf' tncd ia ciC]mtmcnt to communicate effectively with the press. In addition. top-le\'cl exeC"Utives ot\ell 1\."C(i\'t :SJ)I';Ci.;ll instJUction ''n ln)W II' best deal wid1 d•e .ncdi;i.

BRIEFING I A WORLD OF CONSTANT CHANGE A Med ia Prank Hurts Domino 's Pizza . S.oroetimcs Ctlmp:tnies cxv cricnce prvblcms that oome out of nO'W'here. In W09. Domint,·s

Piua expc.rienccJ 3 public relutioos nighutUU'e when 3 Pfllllk \'ide-.> mude by tWI) o~ltnino 's COlpiOy¢CS in N(>lth C tn)lina ;iPJ)t:!f'(;d (>ll \\ltiTube. The \'idCI' featured scver.d gross-out ··•ctitmS. one of which involvoJ tmc t'f the pair stk killg chocse up his ll<}Se an•l prctendillg h) snce::r.e int..) tt sandwkh he was maki.ng. usi.ng lh<'ll cbec:se.

D-.>ntino ·s got high nwk..'i fmm crisis·m:tnagemcnt expert." fiM' respond4

i.ng ljUickly, using :. C(>I\Sl.ltnCr ;affaiJs bll,g, n~ C•'llSUnl~ri&t, WII(>SC readers

IF EVERY FAMILY IN THE U.S. SI'ENT AN EXTRA

TEN BUCKS LOCAllY WE WOUlD ALL FEEL BETIER .ASOLJT THE ECONOMY.

-----·-... -·--..

•

I IIDEPEIIIENI , WE STIND I

L.,;.;;,;=--=~=-"'=-li 0 Shopptt~g loc-'· lnd'epel'ld~t We s~:.nd is .11 n.11tio1'1Wide movemerrt of ottdePMdently owl'ltd Joeel b~~ ne$$e5 thll~ promo~c:s the bc:ncfiu of <:OI'IojuMer~ ahlftt~g soMe of tt-~!t spcrtdirtg from n11~ion.11.! cha~~ to loeel small bvtlnMse~. "'vou <:en sup· port ~he ~e 11nd hdp rC'II'ive ~he !oeel eC¢t'IOI'I'I)' by akopp!ng &t your irie nds' .)rtd neighbors' ~etes, ~ U:f!l the Of'9_,1'11l.&tion . .. S~.:y theif p~od­uC'::r.. E:.~ th.err food. u~c: ~heir ser­V:ee~ . ~ lh!~ actMty v.ill puMp cloi J.&r~ into the local economy by W1rf of a•es.. !»)'tOll~. enclpurcl'..,~~. wh!ch will ~m'de money fet schools, ro&dl, s~!ce~, and t~ew jobs.

K•y Tatc.away 1·1 St11keho!ders iniluc:nccd by 11n orgar'lllat Ot\ !ndvde OWt:-e(~. cu,tome,, enlp!oyees, :~Upp!ien., distribute"· 191'1d4r$, M~rby conlmunlties. governmer-1 t iJ91t iltOr$, interost groups. ;md the Media.

CHAPTER 1 Start1t19 ()1.1; 17

helped track down the guilty employees. It alw used ·rwittcr ro rcuch out t<) (he I:A•blic alld b¢gin to reinstitUte IJ\ISt.

Lesson learned: A Ctlmp;·my needs to monittlr its rcputatitm tmline i'lnd reSJkYid rnpidly to incklcms. ··~\:!th ing is local :~nymm-e." said :~ o~. .. ntin\)'s. Sl)l.)t,cspcl'$0n . • .,,;at's the ct.:.ncnge of d•c Wc;b v.wld."lll •

Uncertainty: Rule 2-You Must Deal with Constant Change, Including Technological Change

What kinds of ch<tnge do t h8ve to be alett for that could 8ffecr my work fife?

He•-e's something new: "'reces.'>h)n psych~.}Sis..'' lllt.'IU£h n~.x t.}tlicially I"Ce<)gni:t:ed by the I~Sychiatri.c professi.oo. it describes symptoms of p;'ltients suffering mentally from the :?007- :?00CJ worldwiJe financial mcltJ~W<o·n. i.ndl.kling seYcre anxiety. sui­cid:•l tCil<k::ncics, anll ".:l(:lu$ions of J)IWC1t )'." (N" i.llSl:lnOO. one we:dthy v.l)m;an became so wor~OO tbi'•t she ' vouldn 't have enough nx mey to buy grOCeries that she 1-efuscd h) eat.)·0

1\vi.sts anJ turns in the OCOD1.1my me only one t•f the many uD(:crtnintks that bu..'>ine..<>SI>eople must deal with in the 2 1st cenrury. Anotb« i...'> the speed 1>f i.nfor· ll\3tii)ll f11IW$ l)r11U£:)1t :lb~'IUI by C.ltnJ)liiCtS :!lld d1C lntCrDCt, SO t)l:lt t•tnail :llltltCXI •ncss;'lging between potential im•csttlrS ls nearly i.nstantaDCOUS, quickly drh•ing SI\>C"k \'a lues Up--lt di.'Win. )(; In :tiktition, t:•tuJitlltt:rt: • or eledNmic commen:-e­the bu)'ing and sdling or pr-uducts or senk ts u,·er- t·umpultr netnorks­is remlutionizing entire int.lusuies and reshaping the "ery it.lca of what n com· tj,Y is M,;)fe ii"J)IIrt:lllt t.han t-«liYhntn."'(;. infonmtilllltechnolllf!Y l•:.s f::~ci l i t:lted ~ , using the lnttrnetto r~.(·ilita te <m.:ry 8Spe('( or running a busintss.J1

We; remrn 111 d•e subj~ 11f t-eommcn."t in d•e furure 31kl discuss i.nforlll:ltilllltc;ch· Dt•logy in F'lex.-Chaptcr D.

An cYcn mme dtluming uncertainty is that ,-,r C"linute change. which th.rc~II· ~ns ll~X llllly I)I.)Jar be:•rs. I>C.-guins. :.lld marine life but :.)S~} the \'Ct)' stability 11f human society.3 ~ S-till. the crisis lends it.wlf to grent ~>pportunitics for green bus.i­ncsses. wessing the d•re~ Ps of pt•lfit, J)I';OJ)It, :ilkl t)lanet.u '(!i£iifbu:.·Uusst·s, :U'e those th<H adopt prac:tkes roc the ust or r-t:ntwable moun.-es and otherwi.w operate in ways that soh·t:. ralhtr than cauSt', both t:nvironmcntal and socia l p•·oblems. Cal if•~rni ;a, for cx:ii"J)It;. has fount! d1:lt energy-.efti cicncy I)I.)Jici ~s. ere· •·•tOO nearly 1.5 millioD Jobs from l977 tt• "!007.l-' 1be OOOma adminiSO'tltioo has ~11.-:.1 f11r 3 DCW cr:. t•n.J>hasi~ng p!\}jcets. cm):)r.lcing :•ltcm;a(i\'C CllCf£:Y S;)lln."ts such ···s winJ and solar.J) We cover clim;'ltc change aOO green business throughout the b()l)k .

Add 111 d•~sc unccrt:lintits 111hcrs. such :ts d•re:.ts fr()•n te•To•ists, tlrog car­tels. ant.! compuocr c-riminal>; (hacl.:crs). ant.! yoo can see that going forward will C\Witinue t\) be the "':tgc ,-,r surprise;· :~n ern in whk h we will be rco.Juircd to :td:tpt quickl>··J"

Competition: Rule 3-You Must Master the Competitive Environment to Stay Ahead of Rivals

What are four <treM Jn the cornpedrive environment r must mastet to be successful?

E\•c•y org:~n iz:tth)n has h) be :teth'cly :..v.>t~re of it" C\"llni)Cfill.m. Fl\)list shops :.nd Jclicatesscns must be aware tt.•·•t customers can buy the SQ:me pnxhJCCS at Saff.'\vay or Kroger. Ant.! with the lnccmct as 11 medium for ..<>elling. c~>mpctition is more gStll:xll th31l ¢ \ 'et.

18 PART 1 Tod.JY''Businl?$$ Env ..rotU'Mnt

:\II bus inesses mu:u d<'!al wilh C<'ll'li'Cihi\lln-·F•W MtlCflf' Cc,, mu't tl)lupc:Cc ll;)t only :\g;•in'f ofhl"' U.S ;mt(,m;•k<'h hut nl~' ng:airht clla'tn:ak.:'l'll ilt Eum :lC :ukJ Asia. Thi~o means a bu~inc:lli muM t:l'tl\tllllll)' \CCL. v.ltiU'!. k.n~n :IJ t"'' rhirr IM11'611JiJit. the a bility (If a n o•·~;mh.atl<•n 10 pro(httf' ~tHKh Ot' M!n·kc." mure ef'l'tc:lhtly than IC$ n utapttUurs.

~ BRIEFING I A WORlD OF CONSTANT CHANGE ~ U.S. M anufacturing Isn't Dud: lt't Be<:oming Mo,.. Upsale.

1bc COO\tnlitma.l "'M.Iotn j, tho~t "'Anlhan' ~~ nwde in the Ul'lllcd ~s anymo~: it's all ~"ll<'! •'t\'cnt"M,"' Ald.c'IIJ:'.h lhe p:".ttenta,c: ollhc Amcri· e:an l3bor ft'lf« lllli.Jing IMn~o~f..c:NnrtS)'W in ~II v.;~' tWIIy9'l, dl.w.a fl\~m ~in 1960. the: UnitN Sudt·~o ~ott II tc'mo~tn~o tht .,.,, .. 'kl., k.M>nJ; ~ufiX'rurtr­by '':ltue of g.».Js proJ~d ·r'()f a·oy $1 nl,~luc pn:idtra.J in Onn~·~ fx· torit's. .. J!Olnb oot ont ~ncr.-, -Ammca Jtntnllt\ S.! ~ .. ,.

\\"h.Jl's happenin~ U tb thr UfWtcd St.lttti ho m.JJ..tnJI clunp tNt other countries C30'1 or dM't-f,-.. c::u~e. f.min, a.tU•f'III'ML ~~.:~ mNical ('~ ~ tvrilt~n. ud JM'('~Io!61 (,~INn T\'\. IU) •• (' .. Oo. ud ocbtt i.rrrftli foond in rtta.il axu. e

,,\i mtllli~ ch( Obafna admin1!oCnho.'ln ~ ta~td a.-.. .1 IN)'W IUtlfonal

J!OO.l tile mab.n£ of dn~ ~ipmenc., qch as •lAI.ImtU~ Md ~ p::~nels. •

Ullks.s yoor ~ is thr Oldy lWf:ntntioll ~RI a D.lttct. yw aast C'OOSl:ll!ldf Stri\'t (-..-., ~itht •h~ kl 't3lvt a rmfil "'n...~ hnRJ Pf\Hil­o.ble is.. of course. tht: finl rrqulmnrN or bel•; a f\ll'·fll\~l buwncu Th&~ mens :Ill tq::lftintion--aoJ you pcNolO!llly-muu uy "' ~)· ahcoad in foJW ~. f I) btin: rnpons~'c to cu~ome", t!t ma1tftJ '"'*IM~al •mpto\(mtftt 11'1lht q~.aal~ ity or yoo:r product or ~mer. jl) findlftJ '3)"" kl 4kll~-cr 1'1<'\ .... bc:tra producb t'W Stn'lceS ( .. t.ar•\ Cilllc.J IMI'A(f(llllll), 11..00 l ') :\en\ IBJ ft'lf tlllpkt)'OC cfficit~)'

.---• Example o f Employ .. Efficienq: Ellml".tln.g S•c,..tarie• Cau.te• M..11"119·

I ets to Be More Effideftt. 1\lday many m,mat~•JcJ by tt~Ci.r dc~t~p romputt:rs-d.;) •nucb 1..lf their .w.n ~:wr«p~ll'l,k:l'lee Utld fil•na Secrwrial sraffs h:lve l)t(n ft' lut.'t"k hut n( ~~~~~~~( the J~t.:l\'!t:ari:a l \\I'll"~ tem:ain.o,, M, 1n:tn· agC'n ha\-e ha~..l hl learn Ill be 1nnrr: d lidcnc •

Common Economy: Rule 4-You Must Deal with an Interdependent Global Economic System

Whar is globalization?

'l'lle .. commo.··m CC\' Iltlmy" is the g/o1N11 f'o 'flliiWI)~ ,.,. il/otmlb lfwli- tht' t~nd of the wurtd ecunomy Cow;u·d bet·uml ng-. m ort, l nltrdtJ)l'.ndt.lll &ystt.m . Nf'll' )i•r'' 7;·,,..., columruu T h,lm!l!i Fric:dmun, in hi~ h,111,k 1'Jw mn'IJ I,, /o'lo1. l1.t11t 1\tlintOO out the !CV\liUti~)ll h)' which ghlhalhmtil' n htL"f. IC\'c:IC;I (ln:t~.lc ,.lliLf't dtc \'Oinpclitivc playing fiekls bet'ol.een iOOuMria l nn~.l ctncr~:tn' 111Jrkcc \'(\Uilll'kl 111

A1oong dth<'!t' coBcerni>, 1hi,. h:Lt. led Ill V.('l1'iel0 ubnut U S. i•'b" Ji,apj1C.:aring M Mexico. Chin:t., and l i)Liia. 0 Acw;ally, th~ biggct• eanl'"')'rncm lhrt:u M Am••rica.11 jobs. pan:icu1ar1y in manufucturing, is prnbably nm fm·clrn C\'lni)(Li tioo but OOdgct cuts. :.nd improved ~chnt.llog)' !It ho•nc. acCI'Wding M ,lAC \'ie'ol.pdinL" In f:2oct. a.c· Cording lo.l o ne rtport. fl'lfl'tgn·i)a!>ed finn~o ,a,•tuully I>C"J (ar 11'\o!ll't 4'ff"'-"t \I.Ufk to lhc United Statt:s than AmcricaB eo1n1' aAie$ liCikJ ubn"kk '" AnJ. in "'Inc ficld11. m'erst.:i.SCOOlpetition is..l~ins it,. Jlricr ;~~.h "'I""Bt· ;;ll,~i i'J -.m:;ll US amll'li.lnic~; to c;a,pil:IIL:tr on cherr hcnnt·balot"d m..nuf<i('IUrit'l, :t.. Plnl,uklf'lhiJ c"\l.h·n# tl'lal..C'r Boathouse Sports b:ts, v>he.n risinJI31liw and tr.lll!ipi\l'bf io!'lll 1.'1'1\~ 11'1:1dc A~oi.:a more ~'Cpt'ftl:;i\ll"-4 1

49 8feil'l d1ein to India? lndia·botn Kuna O,.M WMI'I'1 ill!c"'-.d 10 $'iN( in th~ Unil~d St.11:1; when his wo1k v-;a ~•pi11Jdin 2001, so horo;I.M'tl4ld ~on•~ ~ncl sla~~d SnapOeal ir hi$ nativo co1.11;ry, Nc"'' tho ccmpilny, <A.,ich offers daily discount deals~ SO"JI>;o 90% in~jor etos ll'l lndia, is en p!IC'e to ;op $100 millior- in­nutl rownllo in 2012, POttlop5,. 5omo ~ JUggcst, :rnrnigrants h..-e .,.~. opportunitin ovtllioo the Unile<l Slates, and so .some foreign· bom ongnP«"S •nd sci~nts~5 havo ~n le~~Y~ng-t b1110n d-t •n. Do you th;nt th~ Uni:ltd S:ates coulo ovor lo~ itt •nncwa!i~ ,..,... t bec:lll.l$1e of 'on•9"' com.,.~~on?

CHAPTER 1 Su.rt.ng Or. 1 9

i) Enrotl b efore the fall. The ce#>

perate c:u!tu1e of the Te:.:a~ut>d crtergy comp11ny m~dc it 11 "•~ery 11,.. rogar'lt place, w!th a ~e~ r'l9 of lt!.vl'l· cibiity, .. u 'd Sh~rron W:.tkins, 11 vice prMdMt who wemecl top M&(l8get'S the firm w11~ going to "'imptodc"' bec:&4Jse of Irregular ac:countltlg p.,.cticcs-¥~hich it ultim;ul!'ly cf.d. Oo 'fOtJ ttlll'lk '/Otl would be able to do the right ~hing in l$\lch 11

hlgh1)r~$Ut'e, h!gh-pov.-ered c n•.,(rotuncmt?

~ BRIEFING I BUSINESS SKILLS EJ & CAREER DEVELOPMENT New College Grads Find Jobs Overseas. In this gi .. Xlol CC'tlll ·

1.1my. the ch.;·mcc:s are grcalc.r tb.;·m C\'Cr tt.o·•t nl :w~ne J>tlinl in yoor can:er you will end up working ovecseils, whether for n U.S. or a foreign company. Some new ~~neg<: gr31Ju~ues may prefer to cl~~ d•is Sl'll)f'l~r r:.1hcr thatt Lncr, e:.g.ctly applyi.ng ror jobs bcyoDd U.S. blmkrS i'IS a way to sec the Wi.lrld while also )>t'>lishing their rtsumC-s with international W<'ll'k experience. Others.. h\m·ever, may be more. n;:l\lt tnnt. rcganling tWerScas em.ploymenl as tc.Jti.J>tlr;·ll'y gigs to tide them 1>\'er during 3 tough U.S. jOO market.

w~"*i••g :tbF\lOII call (13)' otr pr11fcssiona1Jy ill the furore. b-..""C:luse U.S. t:tn· plt')~rs "really Like px1pk. who tnkc. risks aDd gel intemonional ex.pc:rknoc.," says Diane M\)tg:u\ \) f l•)fl<km Business Scf't,.)ol.~! h can als1.} pay ~,)ff pets\mally. "h will really t'I)>Cn your eyes lt' what business ts like. outside the U.S .. " she. goes on. "und e:ti)I)Se you to J~>t.o; or different cultures anJ 1>eople. Thtlt"s in\'uluahlc.."

T11 get a job 0\~ts.e:.s, s.he ~h·iscs lcanling about d1c 1~1 et1lrure, using the. lntcnw:t to linJ , .• local nt."\\'Spover written by Alnc.rlt•·ms living thm::, i'lnd using your college's ctarcer placemem center and :.Juotni rd:ui\1nS. w make conne(:tions to those i.n odler countries. Yoo then g.<lin information about pru-­ticular employers und johs anti tlll'get your rC$umC nnd CO\'Cr letter directly 111 dl¢tn-f¢chni\IU.¢S. )\ltl would :tl$11 t!Se ill pliJSuit of any jl1b, reg-:m .. llt&S ~lf country. ···s we'Ll discuss in othc:r "'Ousinc:ss Skills & Career [)e,•clopmenl .. Bliefin8J' in this b()l)k.•

The complex. ongoing challenge of gll>balit.ntioo is CO\'ered in Chapter 4.

Ethics: Rule 5-You Must Be Ethical & Socially Responsible

How Important ~re ethical behavJ.or and corporare sodal responsibility in business?

\\'ith the press.ure w make pmtil.S-\)f, in a .. 1\m·n ocooomy. even keep dteir jobs-businc:sSIXX)IJic. can find tbemseh•cs Collirtmti.ng elhic<d dilemmas: dcclJ . ing between economic pcrfl)fmtLocc nnd social pcriOrmunce. "It's n tough issue. cii()IISing lx:tWCCil being 3 I:!W•abiding pcl'$0n and IOSillg f11Ur job," S:\fS one l.;w1yc.r. wbt1 rcprescntoJ a Wt1man rrred ft,r Ctlmplaining i'lboul running her boss"~ office 10..x0011 1)1,)()). •l

But ethical behavior is , .• signili.eo·mt J:~<'lfl .,,( dt1ing business, o·•s was n;:.adily upptuent in 3'001 when F.:nron. 3 Houscon·based energy company. shoc-ked the Anlcrican l)ublic wid1 rcvclario••s :l\>llot itS i.rTegul:.r fi.nancial tlc;llings, which ltd to tremendous losses ior sh;·~rc.bt,ltlcrS •·md employees. The Ctlmp;·my, tmoc. the. se\'emh l:ugcst finn in tbe United States. uhim:uel)' wem bankrupt, an~.l seYcral t,}( its to)) c.xccutives went ll.l pristm. e

Businesspeople :.Js .. ) nocd h) be :aware or the impmtance j,)f Ct,)(pcltt~te social ~~po•tSibili ry. 3 c~lf'lccm for tak.illg actions th:lt will benefi t rhc inrcr<:Sl:SIIf SI)C'iety tLS well as the OJ"',.;tnit.ntioo.

D BRIEFING I LEGAL & ETHICAL PRACTICES ~ We ll.s Fargo Is Ordered to Rt fund "Unf:tlr & Dec:epti've"

Overd raft Fees. \VeiLs Fnrgo alkl ~,)(ber b:lnks haYe l•lf'l£ insisted (hey l,:.,•e the right ro pro.::css ci1¢Ck$, debit cart! rr:.n:;.-.crions. and biiJ (13Y· nlent.o; from the highest dollar amount ti:l the l..w.·est.. rather than in the order the ll':lllS:lCti\1nS. h'l\)k place. 0 1.}ing it this. V.'tly. they say. gives plii.)l'ity h) imf)\)ft:tnt IJaymc:ni.S for nx ,rtgo·•ges aDd .:~·~rs. However, it odso emp<ic:s , .• bank a.ecoonl roore qukkly an•l thus generotcs mt.)I'C foes. when other. s.maller checks onu;r be C~WCI'Ctl by d1¢ !xlnk'$1)VCrdr..'lft PJIIIOCti~lf'l.

20 PART 1 Tod.J)'''Busint?SS Env..rotU'Mnt

On August 10. ~10, a C!llifmnia fcdcrn l judge calkd the t)r:.cticc "unfair :tnd d¢ctt)tivc" and onler¢•1 Wells Fargo to rcfunJ S:?OJ million in O\'erJrnft fce.o; to Culif<>mio customecs. 11a<: judge said th:lt the b:lnl.: had d¢\'iscd "a (l';ll) da:.t W•~uld tlt:a.latc a single overdraft into as many a.s 10 through the gimmick of pr\'ICCS.sing in descending order. It thefi exploited (hat tr::tp with a \'tnge:.ncc, rxlting ul) lnmtlre.ts ~\f milli~)fl$ off the backs or the working poor. stuJento;. a.nd others with· I~Ut the IUXUr)' ~)( amrle a.:::c.~unt b:llanC($. .,.,..

l•le v.'ent oo tta say th:n Wells F'~o·s Jomin.;·rnt moth'e .. was to m3ximize the number 1>-f m·crdroft::s anJ s4uceu: as much as possible" out of cust~'ml<:I'S v.;ho sp¢nt rnorc da:tn they had in lhei.r Q(:Coonts.43 nae bank. whieh had collected nearly SJ .8 billi•'n in ~lVCr(h':l.ft fcts. in C31if;)lnia :tll,ne frv•n 2005 I;) 2007. s.'liJ it would ;'JpJ>t~·ll. • --... - .. ~ ..... __ ---.. --.. -·----.. .. --........... _ . .,._ We remm 10 da<: subject of C(hies :tnd S()Ci:~l •'CSI)I)(asibility in

Chapter:? anJ thmughout this bool:.

-_ .. _ ... __ ... ___ _ :::,:_""':".;.:.-::::.:: =--~:::..=:."..!:..~-:'.=.:":"'

Social Differences: Rule 6-You Must Learn to Deal with Different Kinds of People

~--- ~~::::~-:.-.. ; -·---·- ·--..---·-.. -·-"'

Whar rrends in d'rversiry are occvrring rhsr I shovld be aware of?

During me next halr~cnttuy. the mix 1>-f American raeiollethnic and rcligioo.o; gr•~urs will change C;)I\Sider.lbly, as will da<: namr¢ of the Anl~ti e:.n family. s.~rne CEOs recogni~e th3t h~·wlng diverSity ln their wor\:ftar-<:es is a maner taf surviv;d. r-or instance, Eric J. r-os~ CEO t.lf the Pepsi Bouling Gmup. :ugues dwt "tlu t Cflll)l~lycc b3se nctds t~l OC retlw ivc M ~ltlr CUSlon-.cr b3se. As •~ur cust~lfllCtS continue to bocome more diverse. it 's impmtant duat organizationally we look like them.''*

Seott E. Page. a PfO(cssor or complex systems, polL tical science. nnd oconom­ics at the Uni\•crsity \)r Michigan, suggests that variety in stafting prlll.luce.s orgta· niT..;·•tiooaJ strcnl,1b. "Di''CI'SC groupS or pcxaple bring t.ta organizations more i'lnd different ways or seeing n problem." he says. "a.nd. thus. fnstedbcuec ways of sol\'· ing it." He adds: "there's e<:rt:.inly a lot M evidtmce da:.t p¢0)>1<: 's identity groups­cdlnic. mdol. sexual. nge-IIUltter when it come.o; to diYecsity in thinking."r< C~rly, the challenge to busines.SI>Ctlple is t.l be :thle to maximi:r.c the C'lll'l ·

(•ibutio•tS .~r txttenlCI)' divci'S(: employees anti to ~n·t the •.ee .. Js. of ext.remely di\'en;e custornecs. t9

~ BRIEFING I A WORLD OF CONSTANT CHANGE ~ U.S. Social Differences in the 21st Century. Tlll.lay one in

three U.S. n;.siJc:nts is a member taf a r;lcial tar cthni.e minorit)'. O;·•bies born ro non-Hispanic whiEC women declined h> 5J% in :?008. compared with 65% in l990.111 A1kl ... ~n-Hisp:.nic whites in da¢ Un i1eol St:.tcs are pr•~jected 10 docrensc fmm 67% or tbe population in 2005 t<> 47% in 2050. Africt~n Amcri­C!IM a.re projected ll.l remain dtes.:une :at 13%. A">ians ant.l Pad tic Jslant.lers are proj-ected to inere~·•se (rom 5% to 9%, anJ l~ispanics from 14% to ~9%.~

Auirudcs. hl\.\o'tlrd religi»n :areC"hanging. A survey f»und that 53% l.'>f Amcri­c:ans have chattgt.l their f:liths :lt lcas.t once, with CatJ,.~Iics leaving lmgely bocuusc or di.o;agrcements with church tetachings. ilnd Prmesmnts because 1>-f life changes s.udt as marriage or mt.wing.50 Tlll.lay. I 5% l.'>f Americans check '"DI.I n;:ligitm.'' a.lthoog.h b;df or the '"DtmcS" still believe in ; ·1 higher PQ\\'(.r.'' An"Mmg th\lSe whc> ancnd relig:imlS stt\'iccs.. 26% say they del St.l at mm-e than

____ , ___ _ 4D F•ce& of the future. 1t1 tfr-J ed, Intel, th~ C~ifomi:. technology com f»l'l)', prem<>t~ the dlvers-ty <>f Ia cmp!'oy.:e:;. The ~;wiftne:;5 with ..... hich the Ur'litecl StatM hu bt<»Me e mote divci~;C na~ion....,..,or~ H;.;p~c

er-d Aslel'l, m<>t'e e .... ·ere of muttll'tdel idlmtitic~. mor~ tolcr:.n~ of Urrttll •

0 t>Of\.81 f&Mily swetures-!n the l:.r. tvo·o dcc.ad~ hll~; stUMcd 50cial eb9eNets. ~ay 2050. Amerie!M'I'9 '<\~II look back :u the contro•~~:•~;i~ &round !mm gtt<IOI'I, .. I)!' edicts soc:l­ologir. Rober:: l.wlg.. "corrtrO'K'rsie:; &bovt 0Ntw'Sity. encl Y<Onde-r wt-..a.t the b5g d~al wu.~

W•rrt to Know More? 1-8

How b die Uni ted St.,tes Chinging Oetnogl'<~phicelly? Go to ww.w.m~b<Nb e0t11.

CHAPTER 1 Start.ng Q\1; 21

t! $tJINf•wlopiTMtnt. Is &eAortt'ng:. specific kiMd of job ttle mo$1 inlpor· tant lhiMg you ~n do in co!!ogo? Achr.,Uy, it',; or-_1>f one'~ Equally 01 moro importan; aro &eAorMg to th.'nk 11Malyt<:ally 11t1d le:.ming to inte1· aa wo!l with p!J<)pltJ, Oo y011 :;hink you've al1e:1dy n1aste1ed these t.,..'O ski!li or aro lhore wAo}'l- 'fOtJ could impro~?

one place.$! Almost duee~roonhs of 18· to ~J-yenr~IJs say they're more S))i.ritu31 (h;ill religious . .u

Changes are nls~> nffccting the.>\mericun ramily. More marriages ure bct\lit:cn Sfll.'luses or different t'3CC.S orethnicities.. with white-Hispanic nu1Tiagcs being the mosl COtmnoll mixOO·elhni.c unioo.~ 0\'C-T lhe pa.Sl40 yc;.us.. Amcric;W Wtllncn

have \)Utp:ICCd men in bm.h etluct~tion :.n•l earnings gr\)\\'th. and. C\1onlfXlretl fl.)

l970. ;i 1:\fi!Cr sh::lfe ,,(men t~'ltla)' are •Mf'liCtl to Wt'•nell wh;)SC tduc:uioll atld income excceJ thcir ()'1,\'ll.~.s Yet 40% of binhs ill the UniEetl S.tltcs are oo single ''"~~'(hei"S, a ~nd (h:t1ls cspo::iaiJy com•n.'n ill d•c mit.kllc c-Jass.SA

Finally. the Orc3l Recession has h3J a huge impact. Suborb;W homeleSS· ness has boen on th.e riscY More families htl\'e h3tl oo lll()\'e in together. nnd diV(II'CC r:IICS 11:1\'C f:dlt':ll :l$ C~'ltiJ)I¢S. Sl;ly l~lg.elhCr in 11\II'OCS lhC)' can'' s,ell . .sx Ml)fC. chiiJren ha\·e fn.llen into poverty as family incomes htl\'e shrunk. more older Wl'll'kers h:we been d..lggcd by firwncial wmries :.nd have been reti1ing early lo drow tm St-c:i;d security. anJ 1nt1re families have been strugglin.g lo put food on the toblc . .s9 •

We discuss di,•crS.ity anJ Ch;Wging de1nt1graphi.cs in more de(ail in later ch:tp­tcrs. such as Chapter ll .

Self-Development: Rule 7-You Must Acquire the Personal Skills Needed for Business Success

To be success ful, what personal skills should 1 cultivate?

Bcc001ing nn eft'ccti,·e bJsinessperson is not just n maucr or succc.ssfully nUJnag· ing: '" ;;~ali llg: with 1hc l :.rg~r f~)I'CCS we •nelltioncd. lt :liSt' mc:.ns tn:ln::tging your. self. This meuns using your cducntioo nnd experience to deve);)p three importllllt skills-abilil)' If' fh'rjimll a .~pn_·ijic joiJ, abiliry w 11ti1Jk mwlylica/1)•. and aiJiliry w ilfft'l'a<·t ll't'll witl1 pt!tlpf ,_;." •

1 Ability to Perform a Specific Job R.ick S1eves. win>•» we discussed ill l)te "\Vitu.e1s & ~I"S., ca...~s. inttt'ltluci.ng this chapter. C«tttinly htls aeo.Juiretl the job-specific knowledge nceJetl to runccioo in the \loorld \"lf the rnwcl in•lus.uy. (mining the ability to pe1form:. sped tic j•X> is. whalm;Wy )>Cople think they arc in college for: to bcct,me ;W engineer. a nurse .. a chef. or whatever. G

22 PART 1 Today',Businqu EnvtotU'IWnt

L • Example of Gaining Skills to Perform a Specific Job: Hotel Management .

'

If you were planning a career in hmcl ounagcroem. you W<'IUid ta.ke C\lUI'SC.S

ln ft'Od aDd be\'enl..ge management. martcti.ng .;·md tourism, human resources management. alli.l communication. ns well tLS do internships that rct.~uircd v.'O•-king in bmels alld rest:.ur;uus . •

2 Ability to Think Analytically Steves. :.ls..l ha.-. the "'big picture- kn\)Wkdge of all the steps. r~uircd Tl.l :.urnct eustome:rs to his tro:vcJ bus.inc.ss. a.nd tt• m.;·m3gc the v;~rious tour& his rum runs. The ubi l i ty to th ink urudytically roenns being abie to Jcal with problems that nre am­higllm~t. a J):lrtit'IILHI)' inlJXlrt:.'mt skill (;)rbusiness ~w.rnei"S :~ntiiOJ) n\:ln:.gcrs. Ana­lytiC;ll l.hinki.ng mctulS. being able tt• vlsu<tli~c an o~ani'l..;ni.oo as,., wbt•lc. break it d.:w•n into its. C•)fl.S.tirucnt p:~ru.. alkl understand h1.}W the parts wml: hlgedlcr.

r • Example of Abllity to Think AnatytleAily: Eliminating Ambiguity at a Gro·

I c.er. Or.e ,,fl).e anlbigu~'ltiS8~l:li S ~)fT<:SCO', Il(W.' 'B1'it:.1in's leading g.n:~eer, w:.s to Jo a better job of .. liS«:ning to cust<)fOCJs:· Tcsc1> exocutivc Terry Lcnhy lxoke that goal •1\l\Vn into .SJXIcifi c acti<)fl.S. Fm· instance. ea.o;hicrs were taught to call for addititmal casbi«s whene\'tt mvre than tmc shvpper was waiting in the checkout line. In n\klition. says one utticle. · ~re.~o received 100.000 querie.o; per W<;Ck fmtn CUSIOIUC1S. Lt:.hy's. IC:'Inl nl:ltiC Slii'C th:Jt all T¢$C~) m:tn:Jgti"S h3tl uecess to customer concerns.. (If yoo wunt to listen to cus:tomers. yma had better mal:e sure your m.<tnagers l:oow what they're saying.f'f>' •

3 Ability to Inte ract Well with People

The ability h) internet well with .m.cr pc<'lple in order hl get things •1\lf'M:. may well be die most di(JicuJtsct or skills to m3SlC=T, requiring the ··•bility lo mo<i\'ate. to ln· spire ll'USl. nnd to communicate with others. Such ability is neccssuty for bu.o;incss ''wnc;rs :t•• l n\:ln:.gcrs ,,f :111 1¢\'Cls, :.nd tlcveli)))int lnunan·intcr:.ction sl:.ills. m:.y be i'm ongoing, lifekmg cffmt.

Rid: Ste\'CS has :.n <::lSygoing m.<tnncr. an•l e\'cryone in &lm.:lf'lds. W:.shington. knOVo'S his name. 11e <dSo gcts along wcll wilh the wide r.·mge .,,( J>OOJJk. be mocts in the coumrics he visit.o;. Most imp~>rtontly. he is popular with hi.o; cuscomcts. JndecJ . his f;u\S scern t~) trc;n him 1n!WC like :. n)ck st:.r d1:.1n a (r..wel wtit¢r, (ThC)' ¢\'tn have a name for themselves: "Ridmi.ks." )

In neatly all l'e.~JXICtS. dten. Steves. h3tl and Slill ha.o; wh:u it takes. h) be a SJ:ar­ltl be highly successrul ln business. C

What aboot yoo'! ln the rest of th is book. we hope to pmviJc Yi )U with the tools(\)( achieving this l:ind of sueCCM.

Key T~eew<~~y 1·2 SMI-dovo!opnwmt consisa o: l~am!ng ~ to perform a $f).:<:ilic job, thirlk :.n;~~lytic:dy, :.nd !nt~act .,.~II w!th peep:'~.

0 Rick St~s. ll'lo toundM o: Eurcf)4 'n11ough the 811& Ooo1 ch~~1ly 1-..:~s le:.med to do tho 'P'Jci•ic job of runn.'ng :. trN>-91 busitt.eu. Equ-.J~Ily 01 more inlportant, he has le~med to ;hink ilnil!yt~l!y ;~~nd to inter~ct wol <A<ith people. Wl-..:~t other $kills cioyou tl-.=t~k arc im· portilnt to $UCcoiJd in businoM?

CHAPTER 1 Statt1f19 Q\1; 23

TN PrrKria1J At'rin• bru-n.. .M""f ._;c• tN B•d•tn $J:llls & CtJI'tN' fH1'tlqpmttnl omJ RIIJlnm Cultflrt _& Stjqu(f'(t~ Ont'/WJ:'f, irl tlli'f book r'.lft'r prac llo·ol ltlh-lc't' tJINml lwll' 111 Altllrf't'll )4mJ' c tfl'l"t'r by •ding )'tmr r'• lllt"i(t'

t'{~rtnwf' w,. 'II dHc"u lwiiJH, lf'~lmwmt, p,.,J/11/~Iy. Jtl)(}/ .WffiJtt. ICI't\lo•Jftillg. IWNI4wiN.~. ''dlll.'llOTifHI. nhi.· (, ta..J tlMihtr t.~te-

Moybe you d~Jn' t 1hint oC oolki!C !1£ having much l il J ;a \loilh (he "tc:•l \1.~'11,1'' M bus inr~o~o Om ir dOC-40, hr.~nu~oe It gives you an cnviron•nc:.nt i.n "'•hlch, to ~\'dOl) ccrt~in t.~k'ntS dw -.ill r.tr.'t )'I)U \\ell tn 8Clhng a j.OO :u"' htin,g w..:-4'11."581'ulm ~our \..Olftla'.

&.Hming to focw .. Ufe.- says Winifred GaUaghc:r. author ,l( Ropt. "l."lhe ~um \"lf'wh:u )'.OU (I}I."U" .-W'I.'"l

Anocbcr wrh« says. "You c:un Jri\'e ~·oonclt' cm_ry lr)ia&"' fP.llbttU: !lftiJ 3fiS..,C'I' ~cry email ~e ur ..an~. Or yu~ an ~~)'00' brain's falk c.ap.IOI)' filf' ~ng lnf\llll\Jti,oo.

~lulriw4inB ifi shifti•'B fi'IC'U" fmt'tl one l;lcJ: ,., t\n · \Kilcr in f'dl>hJ Ml.,;-1.~~\ion. W ht ll )'t"IU rti'ld thi~ ICXthtk>k while listen.ina "' .nusic :lll•l 'oliliiC: hi.ng TV. you may think V\)U're Mtnulf.l~sly dl"na thrtt wp:~~:~~t c;a,li;s., bu ~·re rnlly DilL -lfs liJ:c rlayi•g DeODis ..,.,m 1hrtt t~anS_ .. {;:1\'t ON f"lpM .,.

TodaY multaln.•.:king is easy ami (\X'US is harJ because ,)( 311 the tfling~o \lcfll31'lding 001' (ltiCI\Iillll-ICXI lnc:!AA!Iges,

e-n~'lil. 'f\\.incr. facebook. MySp;1et, v.ebslt<: ... bh,gs. IOOSk. ooc. w ,nc:ation plk>ne c:aalh;, rudio. an.J TV Plus et.t cbs..._~l"-lm h'lf onlint) inqnto;-~" oyiflg hl Jtl h" ;'If krpoiln~ti

To sue~ in business. )"dU n~d to bt: able M plY attention, Vn''I'CCtJ\'e cmpl\)ycr .. h'tlt at ),.JUJ gr,lliCII ~ pmof of tbil1. Will )'tWiw\'e been focuscJ enough IO tw\'e &JadeS YdU'II he j'lf"i,U;I \)o~

PM! .ll ~"' NlkJc ls kaniiiJ RC'Ito ~pli.e -.1 nt'A ho~h-1~ flcre arc M'll~ ti~ (rom GJ.II.-a:her on k.ltm· ing to Cl'lnttntr.lte:")

Rtlllltc vou' rc ah•II)'S making chok~" a bout ~·our ftM'U~-~nd 1n:.kt the rlg.ht c.ne': "'P\'O:lpl.e l.io)(l' t re,.Jll'c tktt aacntMM L\ll fiailll:: rOOOr~'t. hkt: mooc')'."'

Jk u)"'. ""Do )U.I • .dl ro i.a\~ your eofnilh~ casll \'lft rnJic-G~t ThinNing'" 'lt't ~;~trfins '" C\'IUCh p.;ulil­m1 (wulChing TV)'t" lllsewberc she lhiJ \ , ' 'Where diJ d1e idr::t CM\C fmul 11\u( ;lllfl'l'le who) WQOI!IIO Cl)fllllC'I Y• 'U elm do so at Wl)' time? You ocW H' tal e t.harge or \\tul yoo pay atkati.:la to ~ ol r~~ ~ lht bttu stio'Ju)j....,. "• ("UO'If"k.lo.) tth"'-i. our ftOii,t, you Clift V.'e31' eupiU:~ .., hik readmJ!. •o t'f\'".111! yoor ""'n "Mimulus shelter .. l)nnte the first 90 minutes ur )'UIJI' day tu ~'Our mo~t Important ll"k: Writins a l"'l)tt'' Stlk.lying bi\x:htrl'lis.tl')',. Malt '' )'I)Ur fuSt tllcJ. tlf the .by. ami ("{ln('CIIIr.dc: oo 1l fur 90 milll£~ After thaL }UUI' bn.in •ill probably llttd 3 rc:sL -.1 )~ C':.UII ::sftS\ler e·rn.nl und tcxo.. tttum phone call,, und won. OIJII until tfl:.t first brc .. k. d!)f'l'l do an)'thin; d~e, becau.~;,c it c;m (::tke d~t: bt:1i11 2() minutes II' 1\'fl\:"'·

Pr-"'!1 £tiq-(Jrqwfft'-loiJCiall)' ka"pQbk bcba\llW-ml)' ~ 11!1 old~b•hi<'lfted \\ooJ. hut le:lft'ling i.t i.s cruci:tl w llusl~ SIJCi."t"'· ;~nd ir Sl!II1-S 'ollilh )','lour l)cha\'i<ll' in (II( dao;;~l\)<\fl'l Now'11 the time til prat ticc

\V11Ikina inw cla.u l:uc, talking \\lith \llhe_r sntdenfj,: lelUiftl in-.. tt.a.J o( h1«n1nl to lbc k:..:tUI'C, faUn~. ya•n~ in~- ~.f\\rt:hinJ. aad tddU~l dlcsc dkw. disrespcd; ~ thr in,INc:tOt' If he- \"' 4lt- "'eft )'IUt ho.l!IS 2t "''--.\•

imag1ne what kind of 1\Crf\'Ormance fC\'1~' y<'~u would gel Oi.\.eU-'>\ n bonus 1)1' p1\llni'lion1 Ntlt you,

S,~, ni'~''S the tiJIIC h~ bc:gin txtrd,in, basit CUUI'­tc!i)' and JOO.C\oers \\oilh )'•lUf instructl)f'-. just as you' ll l'Jt t 'pt\."U'll 10 Jo •ith )l"U bl'IS.~ anJ C'IW.l"Wttt~ 1ft

bw.lnc\•

Summary

1.1 Business & Profi ts: The Basis o f Wealth TH! !SSI!NTIAL OUI!STION: \1\"h.lt is bcnin~?.u, 01f'ld how 01r~ profits m&dt:?

£wn tr I don't wort f1>r a ror-pront organlr:at~n. w uld I s lill llflply lht bu~inm $kill$ , .,." lt:emtd't There are 1\\'Q types I)( ~atli:wtion.<>. al\d bul\i~s cduc:aLioR is applicabtc to b<llh. A ((ol"pcl)fil <lt!:'Uti).2l.M'loll ~>o Sm1ply :·• busme<s. an (orJtan:e· 7.alioo formed 10 make n)()(lc)'. or profi~ by sctling good~> and ..:a\·ii:t:S. A lllmpn~fit i.<l d .. -sig.ntd IU pnovidi: pRoduC'IS IX ~wi.:"I:S

10 clkolll ntbcr tboolo make a pro(Jt for O-A'I\(1'10 nOO mooa.,"¢rs. How dod a bu§lneQ§' aduafly n•ak~ n~•~~ty'! A busi.,es.~ is et'l·

'"'cd in IJ)"in# 1ro n»J:.c ;J pmlit by o;elling good< ( tangible prod-1.1\.-'1:•) l)t (t(Vic<:s(inlllilgibtc t:<f<ldlK1..;). 1'he ptJfJ)Ile>C of lhe selling X ti,·ity ., to g.:nl:r.UO: n::w:nut. lht tcoUI :·tni('IIJnl ofm.:w,.._·y lh:'lllhi: ~lliu.g ~uOOuoes dutiu.g a <lefilkld ~'Criod of time, Aft-er the 001'1};

of Sal:lrib and othtr busini:S~ optn:ots :·Ill: sublr.li:tOO ftllfn lhi: rt\'tt'IUC, the C)WOC,... will ki)C)¥.' whether the bo!tine~ realiud a 1di1 <It KoOk :1 It),;,~ (whl:n 0:.\1:..':11.~~ ;·m: l::u~a l.han m'<:1rud).

1.2 Business as Benefactor: Payoffs beyond Money THE ESSEHl'IAL QUESTION: Mo-..., c<m Mi~~ bMefit $0Cicry?

How e.'UI bul!iiK'i$ ntak~ p«tple'.ith·~ bottte.r? 8u:'ino,.can h<:l.p sockt}' by eMich.iog people's qu~li t)' of ljfe. the cx.prcs­"'icon I)( .«~oeiety'~ £Cill:r.d wdl·bi:ing :1~ lfl<-~tlftd by St:lnd:lrd or li,•tn:. freedom.. b:•ppi_neo;;-<.. :1,11, cnvironroc:n1.al hc:•J•h. a.nd inncwation. SWldatd 6fliving is dcfii\Cd by h<)W ntaRy good!> ;,ncJ :ecsviccs fl<:tl'Pic: e<11n buy wilh tbc: money lbey b.wc. 131111i• 1\CS.S. ba.<: boc:n foond toconuibutc to tbc sund:u'd of li\'ing. a.~ VI'Cll a:< 10 a lon.a a.nd br.altby life :ond ;,eoc:s,.lo l:nowlc:d~c .

Wbal a~ rour ~·aJ't bwint$S can btndil socltt.y? 8\l:'ii~ 1:..':1~t:fit~ S0.::1I:l) by prO!tudnt £(l(llh and M:l"\'i>tc:~: pno,·idin& potyc:hed:;c :ond bc:nefil.< for ernpl (.))-ccs~ p:•ying 1a.xes 10 :euppon gow:•~1ment ((:(\'i.:cs.: and dooatin..g funds, goods.. :.nd J>etvicCli for axnmunit)' a uk"<C:<,

1.3 Risk, Entrepreneurship, & the Factors of Production: The c,_~tlve Fire of 8u$lne$$ THE ESSENTIAL QUESTION: W1wlt !He! the main sou~s ol \W.l!lh?

llo"' d id niOSI Wtalthy t~oplc make their money'! Mo<.1 V~'C:lllh)' people ate J>elf-emplo)·<:d but>inc:AA .W."l'IC:fl;. 'The sc: lf· cn1pk>ycd are more likely l.h;.n l.he :e:•J:I.ric:d 10 be rieb .

Whkh li nu>rt rkk.r- bdng :an t>ntrt>punt>ur or b\olng a 11al:arfed otmplo}'t-e! R.N. ., dll: plx<~<ihdit) th:1t a bu~<ints~

ov.•n«" n)tl}' iU\'C"t time: and mooey a.od (aiJ to make a profit. 'l':ll1n& ri.'\1..~ iJ. wbal enln:.Jltl:llctiN dco. l:.ei')}IJC: whO M:l: a 1ll:w opportUnity f()t a prcxluct C)( o;ervice and risk their time and tn(lnl:y K• ~<1:l.tl ;·1 bll:'indS. S<ltne entn:.~llt:U:Ill , •jew S::ll:lfi.l:d workers as t<\l:.ing more ri.<ks b«:nos.c I hey b:we oo\y <l single: soufOC: of i.l\ootuc: v.•hcrc:a.~ an c:tutcprcnc:ur oftcR ha.; SC\'Crol

SOIIJ'OCS Of inC(l(llC,

Wbat an: facaors of production? Wealth is <:rtaled from tilt:' fat~ c>f prU!tuc·btm, which i:Con"'i"t t\1' natural rd;(lul\:d, capitul. buman re~~ and entn:'pe'l:11wr,r.hip. Sotne alro add lt.lllrwt.l:d£e. Natur.d n::SC)IIN'~d c<ln~<i:'t Co( l)l'lxlui:tioo input~ th:1t arc: \lsefu\ j u<.1 ;,"l.heY :•Ptll::l/ in 1'\.11\11'1:, C:•pil:d indude" build.­in..g.~. machines. t<xMs. t~•ld tcctu)l)lo,gy used t<> pfovidc: goods :md sc:n•tl,lcs. Uum.<~J~ R:SC>\II'Ce" .,;on..q<.1s of l:•bor, I he: pltysi· cal and intcllc:cwal COOtl'ibtJtion~ of a company's empl-c))'C:Cli. l;nlreprr.nc:ur.:bir i,.; l.bc proc-eo;;< of t<\l:.ing ri"<ks 101ry 10 e~•c: a oew e.ntc:rpr'ii.e. The pl)'iSiblc: filib factor, knowJc:dgc. ba,; bi;.,.,, n::w.Jullt)nir~d by tl)mpUII;I~ ll:ltronununi.;athm.~. ~lll.

database".

1.4 The Business Environment: Forces That Encou111lgt & Oi$C:Our~g• Entrepreneurship THE ESSENTiAL OUEST10N: Wll~t Mafr# forces ~ffe« the Wo1)' compMiic$ Jmd individcml bu$iiM:u.pcoptc opcndc?

llow d o rrterlom and rt"gul~tion arr~t b\l~int$$':0 The :Ufii)Utll 61 ftoc:OOm that go~·cffi!IIC:tll~ all<w.• tlOCIPI<: to ruR thcit bcl.qneo;;<c."< \ 'U<.\IS tbe amoun1 of re<.'l,rainl l.hey pcu Qn lbem (::10 affect wx:.tioo, <:ontr.l!Ct c:nfon:e.mc:ot. and <:onuplion.

Can tedu11.aollV both hnpruv~ and hnj*de p l'"QduttiVIly? Tc:cltnok>,)'. V~'belber di.JI.il.alw Qtbc:r.o.•i."<e, e:•n b.wc: lxKh posi­ti\'C: effects.. i~rca.~in..g produ..'tivity. ru)d negative: ciTc:cts. hiR­dc:rin.& :o t'i.rm'" s.ceuri.1y.

D01.·.s con1pdilion n1akc a di tftrcn« in bow custoniU'S, otmplo}'t-es, :and h•vtStQl'SI nt.'ly be :llfed~? 1'ho: ~ce 11¢ absc:I)Ct of oompelil~ <:ao dctMnine the amount 6f c:ITM a C(lfllpiUI)' iJ. will in& K• put in tl> ..at""fy custOmi:N, t:mpll.v)'i:d, :md invc."<IC)t"-

Huw du Jtlc>b:LI roriN'S afft'd buitntSs? Glob:ll ii:wcc:s can aJ­fecttr.ldc :lmCout n;'llion~ and thl: ...tabihty •\I' n:l.ti<·m.~ .

Will pcopk l'ron1 difftn:nl l»>~kgroonds affct1 bow· busi­ntss op.-rati'S? A oounuy 's dcmogr~hi.:$, the: niC:a..;uroblc clla;,)I,;1Cri..<.1il;s of a pop11L11ion, (:an (:b.1n:e .;u<.10iliCI nocd" as wc: ll a.; lhc: pc»> fiOOI y.,hicb a oompa.l\)' dtaY;--s empt'I))'C:Cli.

CHAPTER 1 Start.ng Q\1; 25

1.5 Seven Key Business Rules: The Great Adventure of Being in Business In the 21st Centu ry THE ESSENTIAl. QUESTION: v.rnat ltl~ ~wn K~y 8usi~s Rufi?$ to obsi?tW in punwing bcnini?.u scH:lilnS?

We 'l•l!&e<.1 lhc:re are Seven Key Rule:< fror pursnin_J blk""ineo;;c (.U.:OC:AA. abbreviated by the inilial lcttei'S SUCCESS-fo•· <.1:1.kc:broldc:r:e, unocrtainl)\ compe!iliron. a.wnmoo COI)n(lmy. elb· iC11.. societal diffe1'coccs, nod sdf-develo~'mCt'lt .

WluJ 2~ HI .IIL'l.ktholdt:r$ th:u I nu1s1 rttx:lgnb:t and dt.'lJ "ilh? Tbc: un.i\Ulle ofbtl'llne<:;<o~ slal:ebroldc:r:e-tbe f'l«l'Pk: w~c: int<:rcSL~ ate affttltd by the org,anizatioo's a.-livilies~~isl~

of owt~c:rs (((lnte rof wbc>m may be: :t.U.X:I:.hroldc:rs, owoc:rs of qock.~ <M'Shal'ts of o ..... net'Ship). cus.wmers. cmpl())·ocs, supplif!tl; (lb<KC wh(l suwly ra"'' m:•lc:riat...._ .;uviccs, <111d C:Cillipm<:nt I() lhc: C)l'gaoi:tation). disl!'ibut«" (wbo help sc:llgood~> and .o;ervk~ to Cll\tllolntts). !codas. ni::U'b)' <Xlolnmunitks. sovc:mment rttul:l· tors, intew;t g.roopc;(u.-bl''<C meOtbcrs uy to intluence bo!tinc~><;(1; :11.! t<Yo'C:mml:nL~ lm .(pi:Clfl>t ~UI:~). :lnd m .. -di:l. Wh;;:~l kinds or ch;;:~ng~ do I h:~,·e 10 I.J.e lllf'rl for IIlli I could al'rl:d m!t' •·ork Hrt? Bu.~incS$CS must deal wilh a t.l.l\ge of llncenotinlic...., Theo;;e i_n.::ludc: lwi...,ts :•nd cum"" in tbc: ccroll(l(O)', ~bnu.gc<> brought about b)' inf()(matioo techoolo~ and the ln­tant:t (ini:ludm£ e-comnl!.':n::.:. t.ho: bU) iu£ and ~i:lliut ().( p«ld· \JICI/l or ~<¢rvioc~> O\'¢r oocrrputer nc:tv.'Of'ks), and climate c-.hange (which m:1)' provnk (oppOrlunitie, l'or grt:o::n bo"inl:~,e,.. t~l: !hat adapt pr..tetkes (()( tbe use of renewable w;ourcts and l)tbc:l'wisc opc:l'ate in V.'a)'$ !hat ~>olvc bc)th etWitOOmcntal and <;Qei:•J probk:ms).

Key Terms

Whal 11r t ((14Jr llrt~S in tht oomp.:lhive en\•ironmf'nl I n10st mas1~r co bt Sth·~tul? Moq bus.inesscs must de:ll witb .,;rompc:tilor;e.. JlCOple ror <Xl:•nit:•ti-c>ns tb:•t OI)Qlf'ICIC fQt custoo1er,.; or n:1iOUfC~ Firms orust suive f<W a ~ompc:ticivc :ul\':lulagt. tl> pRod~~>.-"<: t<l(•d~ (•r M:nlict~ mort tftec:tiw:l) th211 their compctitOt,<;. Foul nrtas a Li1m must uy to excccd in arc bi:m£ rt:~plm.~ivo: K• C'Ul<tlmJI:~. m:U.int coutmu.:ll improva nl:nt in I he qu:.lit)' oftbc: product or:euvice, lindin' u.~ys1ro dc:li\'c:r nev.• or bcucr pfodii\'L~ O•' SC1Vief!1;. and (,tfi,•ing fo•· employee efficiency. What is &lobalh:ation? Globalizalion i,o; tbe vcOO of tbc world ro·l!IJ(>JU)' t{o~~o-ard bi:C(lfning a n~ iutt:nkp•.':ndo::nt ~y,.,1an.

llow impc>rh1n1 lire ethlc111 I.H:ha~ior JHJ(I corronlt .sod:tl rtSpOIKibiHI!t' In buslneu? &!tic-al bchal'i(l( is a (,ign.if)(:ant p:l,lt rof doing b\ISi llC.'QI , $(.) is C(lrJlC)f;JIC: SQCi:d n:.""PI'IIl:~lbi}i l)\ a roncetn for llll;in.g :ll."tioos tbat will benefit the inle!<:SL~ I)( ~utit:ty :1~ wcll a~ t.h~ OrJ!;aniUblm.

What lrtnds in divmil)' arc o«urrin~ that 1 should ~ a•·are or? Outing t.hc next h:llf cemuty, the mix I)( AmcricM r.-::ioal or c:thn.ic: gmllpll wiiJ dl.1n'e OI)QSidetal:>ly. "''ith otbQUI half the U.S. P.:.i)ld:ltion be-inz nl3!lc up 61 etlu'lic mil\(l(itie$. Tbc: 10llle<.1 cb.1n_Jeo;; \viU he :• n:d01;1ioo in I he number of nron­His.pa.nic .,.,,hites and tan inCf'C:lS<: in the numb<:•' of As.ians, P.J.· dfi>C bJandc:rS;, :lJlli.. pll.flli:ubriy, Hisp:ani~.

T<J ~ su«cssful. w·hat pt"rsonal skils &hou.ld I cultil'!ltt"'.' You U.ould use }OUr cdueatioo and expeticnec w dc\•e~ lhl'tt improrunt :ekiJl-:•bili~y 10 pc:rfQm ;J llf'ICCili.; jOO, ;JhiJily I()

thiok analyli.:-all)'. and abilit)' to inlt1'3et we-ll y.,jlb 1x:oplc.

MyBizLab bu~in~~ 5 btJ,inC""' cawironmcan 12 C:ap1l:l.l I I

a!Qtl:l) (IUI<:(Illn;jn,g 6 :loMii1.a.tioo 19 gOo')(!:.: 5

proli~ 5 qual it)' of life n:w:nu~ 5

(lOnlfiCLiti\•e nd ..... t. 19 C.loii\P<=lllOf~ IJ c~me-!ll 1$ dcmogtaphi~ 13 f,li~ltii:IIU(Ir 1li c-bu:•inc.o;,~ IS ~·C:CXOillC((C 18 COIICJ,.-COC:W' 10 C:Uiti.:IXCI:K:U!-..htp I I

fnct«" of l'ffl(lucliou 10 iix·IXIlfil urg;mil~llo'>n 4

go\-etMlCOlal regulaiMll 17 Sl\."\:11 huMIIOM:S 1li humJJ'I re,ouroc:.. 11 ime:rc~• group!1 11 lo(S $ man:age:mem IS n:•lurnl fe<:(ll•n;e:e 10 nol\l'l(O(it o(gan.i:tauon. 4 Org;mil~llo'>n 4

ov.-netc; IS pnodlk:ll\ •1)' I ~

26 PART 1 Today'sBusin~?SS EnYtonmerot

ri.<k JO ....:nms 5 ~/Vic~ $ Ulat<:~dc: ... 15 <.1:1);c:tlrol(lc:l""" tS ~>tandard olli,·ing <.10CI.: u qod..ldk::rs 15 ,uppbc:r 16 IOChnok~y 12

Pop Quiz Prep

I. Wh.;u i." :' ll()(lpmli t<>rg:•ni't-11ion?

1. How is ,,~~nUl' &::Lined? .l. Hc)W is MUJtdut~l "/ t1villg dc:lined'!

4. When biJo;inc:so;e" ;t.pron:~ror tiule l...e.1Jf11C: tams Qt hc:lp diswoter victimc; by n)Uk.ing O)C)J'Idar)' cootributioos, wltkb n•o:dll'>d •\l' bu~<int:h<:~bi:nd'itingsuti<:ty diJO. this illustr:.tt?

5. According to n:sc:arc:h mc:nlironcd in thi>c cb:1pler. Vlo'b:u g.mup 61 pc;OJ)Ie is roost likely to be .,..'taltby in Ameti.:-a?

Critical Thinking Questions I , Booket T. Wa:>.hing10n .... ..u aR Af•'itatl Atnc(;c:.n cd~a­

IQr, :llllhQr, or:uror. ;tncJ prolitic.tl k :•dc:r. lie: n:pre:<cnlcd tbc: las.~. genctJ.tioo 61 lcadc:K bom in sl:wc: .. y. One hundl'td )C:MS ayo. W:u;hingiCon s:·ud, "h l,.ta<\ily so:en.. th:1L ir evc:ry member of the: taet :<ihou.ld slti\'¢ to make hin)'ielf the: mo<-t indi.,.pe:n>::lbk m:ln m hl'> C(lfnll\unit) . and to~ ~u.:x:c::s"rul in bu:<.i.~ bO-A'C\'C:r bumble tbat busine1is might be, be ~~oOOld <Xmtributt nwi:h ti)W:ltd Snl{oOtlufl& dll: p:1thwJ.y (o(

his ()'o\'n :•nd (\IIUtC gc:nc:r~liron.~""' U1ili~n_J Ule lcxlbool: al)d da.~s lc«urcs, inlCI'P•'t't tll)d discuss l.his qootc.

2. Wt:ah.h is ~n.."21<:d fn·1o111 tl~o: f;~ttlml (I( pnoduct.tlm. "''h~s~ coAAi<.t of ootur.tl w;ouJCC!\. capital, human w;ouJccs, en· l.n':l~~w-..hip. and, :ltUording 10 som~ o:-.\ptrt>.., knc.wl~dgo!.

U.Qn_J the .::ritc:ci:o of nc::ding ~~o-c.1ll.b. rn.nk lhc f:•clro"' of pccxluclioll in order(}{ inli)(Ht:'I•MX:. &plain )OUr tan.l;in.g..

.t A,. discu~ .. -d in th~ ch:l.pU:r. a i:(oUntry•.., dcniOJV:lphii:s (th~ Otea:$Ur.tl>1c cbantctcrislics of a pc.pulatioo such a;.; rae< ;'ul!l ;lS~) afto.Xt ~u,.1(on!Cf n~o:-d.~ a.. ~~oi:ll :'IS tilt pOI'>I l'rom whkb a oot'IWWl)' dmw<. en'I~'IIO)·ccs . l)i,"'-~,;s boY.• lbe fol· kv4•i.ns dcm(ogr.lphic tn::mh mis ht h;l\'e an •mr :·ll.'1 on U.S. t•usinc.'QI ~lice.' :•nd give c:x;,n1pks rof hO""'' blk~neo;;<c.-c could •'tSt)l)l'ld 1c> tbc:se chat~ges.: (a) lhc i•)C•-c:ao;;ed nuinbc:•· rof minori1i01, (b) :n'l illl!-ing workfron;e (b:•by broc>nlCrs born bc:l""ttn 1946 at1d l9(',4), t~•Ml (c) the: gfo .... ·iog number of singlc-pove:nl 00\•sc:brolds ~nd (:b.1n_Jin_J f.'lmily :t.VUI;UII\':-" ,

4. A Na1iooal Public Rndio (NPR) article. "Ocliniog Oi,'¢r· ,.it)': lk)OOd R~ ;'md (i.tnda ," s:.ys t.h:l.l diw:..sily in th~ current worl:pl..1ce oflc:n gue" beyond 1bc: c.r.odiliuon:d gc:ndc:r

6. In tc:mls of l.he t;,cwr" of t>roduclioon, wh:a.t arc l)uildin.J.' m:~chinCli, tcxMs. t~•Ml toehoolo,gy con.o;;idc:rcd'!

7. Hcow is an llol"g:81i.::uion lil.d)' II> bo!h2vc: if it h:'t~ no oomp::lilioo?

8. Ho .... • is wmll«:lillfly defined? ?. WhO art th~ di~<t.ributco..S ().( ;1 buJ<ind!l;?

10. Wb:•t is slnffllli.:JIIimt?

:l.ild taec qootioolS..M Tbc: :ttlick: l>t:'ltes l.hat Mll'lp:t~tiCli tlO""'

include f:u:1ors .<u::b <l" sexual prcfc:l\':n.:'IC, d is:•bililic:s, \'1::1• cttlll s.arus. weight. :l.ild wo•king patent l>t:'lllJS ti cx.:.ropk:s ().( d1W.r;.it). N"1o1 in.>ilano.."e, Motcon'ol;l dcfino. d1W:r;.ity ;IS ioduding gay, k:~biao, bisexual. c.r vnn<.g«~der :<.tatU:<i. m Abbl>tt. ;1 h~att.h cart comp:'ln). iocludcs 11ex.bk work ~.hedule<> a;.; part of il.'> divep;ity ~'lan.M Hzy.o.• wou.ld you do:-.fi1)(; di\•en.it) at )OOr M:IWCol. ~~o'<lri:. or a C.'loll'lmunit)' group in whkll you're in,·oh-ed·• Is il defined diffC1'col1)' than ti'Udition:d age, gcndc:•·. t~•Ml l'\loX .. ? Explain.

5. l\uy Ne>~hing l)ny (Ul\1)) is ;.n inlc:m:•tioon :•J d:•y of prc>!C."I ~ain~l ¢01\.<iUm«"ism obsen '¢d by .c;.oc-ial uOOvisl:<i. BNO w.l~ foo•lllo-.l b)' V.Wc<lu\'er :'lrti:u 1t:d U:ow and pn'•nWU:d by Adbuslers, an nolicoo<.Un)(:r\,((1) ocgaoi7.alioo.11 In lhe Unito:-d St:ito.. BN'D i.~ ctl~br.U~d 00 "81atk friday," tilt day tiller Thanksgiving, u.-bk h is the unollkial kickoff to the holid:l)' sll(lpping ~>cao;;on :l.ild o.ftcn the: bus.icst sbl)ppi.ntt doty rof tbc: ye.1r. 6uy Nrolhintt l);,y is olli.::ially defined ti '"a 24-bc>ut t'l)l)(81(lc'jum on oonsun)C•' ~pcndin.g.. dc:sil!-ned tro remind bc>lb I he .,;roM\InteJ :•nd tbe rc:1.1ilc:r of tbc: lt\IC pov."t''' 61 the bu)iog public. It i~> at1 cxctcisc in tin;llltia l ~lf·c<lnt«'>l. It is n::cl:·un:•ticon l>f COII.>I.un!Cf contn'ol of lbe market~'~laoc: . h i,.;; a gc:1itutc of -protest (or tf)c)<;e of us who I'~ d. all II)() Mt~n. a~ ,( Cour li\'CS ;lnd dtl.'::un~< h:iw betn mtlftclcd back to lK. Participate by 1'10( paJti.cipating.""! As a n..-:mbtr l>f tilt bu}'•n& publie. \'Aould )M bi: inU:n..'Sitd io parlicipatiog in this? Do you lbink BNI} is effective io ach.iC\•ing its go:ll ao;; (.latCd abcwc'? OiscoAA.

CHAPTER 1 Start"'9 Q\1; 27

VIDEO CASE Making a Difference in Society: Saving Lives of Senior Dogs

II c a.tl )'00 teach an old \k)g I)(:W tJ'i.:k..;?'' tht ques.tioo iJ> :1:~k.ctl Wilh l.he hclp of m:~~~y dr.die011cd ~nd pa .. "iu'l·

me dog-loving ~uhmltei'S. Sbcn-i f'l'ankli.tl. found<::•' of Munvillc StniCor l>I),S: Rl:~l).';. ~ U>d:'dt bo.-.::n able 10 fi1.J -t'llll:\'0' hConll."S" lbr O\'tf 1.300 n)itun: f-ull)' friend!\. Since foooding the <log l'l:l'· cue m 2(1(17. fnnUin h:l~ ,;:u~ by '1.:-.dun& no:w lfid:~" 10 Sao Ftar..i!O.OO Ba)' Area pet owoe" b}' oouvinciQg.lhcm that :l ~nior rtl.C\1.: OOS i~ an excclknt a lto:m:u.svc: It• pun:ha .. int a puppy (mm <l Pl'PP>' mill • .Muuvilk Senior l)Qg RcS~;ue define:< (CI\icltdog.~ a..;lhll"e '"Sc\'CI'l yew-s )OOng'' and more. ft.l.l'lklinal\d 1tet w lmnccrs h::lie\"e lh:•t l.his m:ullfi ty tvin.ll' irt::rc::•S<:d k>\'1::, Mtnmiunc:nt. al\d COO'PQ.t~ioooshi1).

Mull\' ilk is ;J nronpn:~til <Kt:•ni'lolli(ln, .Mu.~h ofils C:)l:iJIIC:I'II;C depends on lhe :c:ncr<l!'il)' ol donoo> who colltlibute ncCC'isary l'und.~ 1.0 cuw:r w:ll!ri.:na.r) U'X\t.. and supplie, fix dcog... who nughl othc:rwic;e be euthaoizcd. While Muttvitle'~> foco~> i~> to fmd IWtnb fOt 1L~ C2!111)(: kid~i;, l.ho: jP~ ptrf<lni'IC:d within l.ho: (org::l · ni:.oation are similar to I.OO<ieat a for-~'roGt COOlJX!ll)'-iocluding Cl'tatin.g J)(l)jC.."tii)I'IS. fwa.n.:-iaJ p)at~ning. nccoun.tin.g. budget· ing, 0\l t.rc:a..~, m.;vl.:c:tin_J, a.nd >~lr.•ICJl.iC planning. A.Jsq o;imjl.1r I() a (,w·pi'Oii t l)(j!,<ln.izatii)l'l, MUU\'ill<: lw. chosen a boofd of d inx:too. The l)o.ud men,h<:rs are individuaL" V~'bo.;ve 11()( only ~~.;iooatc about OOg.~ but po~$CliS iO'JXlltaut ~kills ~h a.; ~ld, publk A':l:l.blm.~. tin:lilCC:. ati:Ounting., so-au:gic pl:lnning. det·dopmcot.. and marketing..

'l'ht viduo higl'lli&hL~ d1:1t Muuvdlt ha~ ooagr<w.•n itli; i:ur­rent locatioo. and that j~o; voluntcc:1'" and board me.mben> arc ~~o'<K1.1ng dilit.::ntly on a .::apit.al i:atnp:ais n to raiso: fu•lll~ 1.()

cxp.'Uid to <l new lro:.::•tioo- in mueb l.he >~:m'e w:1)' :1 for-pmlil .... oold. The ne .... • spooc is needed to 1)11'()\•ide o.!fx:e ~p:~cc. to nc:ue :10 adoptiron :•nd fo,;tcs mocting -n,aH:bing" ;t.p:u:e, 01nd I)( OOUI'SC w ten'J')(li'\Uil)' house mofe dogs-all wilh lhe goo! ofin::n:a:qn# lltro\lghPIIl 01nd savin_J (I)C)J'C procious li\'C:ll . ...,.be numlx1 of~ io need of t1 (C)(¢\'~ bomc is nC\'¢r io sOOrt ~up­ply," S:l.)'li; franllin, .. :.md l.ho: m(oll: h:l.pp)' hl)ll'ltli; '4'0: C2n find, tbedo.,;cr u."'¢ come to reucbing oor goal of saving "''C)rtb>· li\'¢1>. or euur.Oc:. it all rtquiro an i:n111101.~C: :lm{oUnl c)ftin)(: and plan· ning to n:acb oor gt.•.a.ls, tiOd :.,; you may k:t!OVI', t10 iocredil>1c n•nouRt ofmooey."'

Jtra.nklin'" n:•t111al re<;()l•n:e" (bet dog") l:•nd ~• Mcuwille'>~ hc:ldqUattt'I'S fc:w tWO tn:lil\ (Ca.~OI\ . .;, The lit'l>t i.s. thei•· ~c. Be· t;:•use !hey arc: roldcs, man)' f'ICC)ple lind tbem le(:-1 adoptab-le than the pu1~s u.ilh ll.'bool the)' Mlllpttc. The S<CMd rc:~soo i$ th2t tl)(:ir <'Wmt~ :In: no longer :lbl<: to c:art ((or thtm due 1.()

illRe~. f«ccburt. or otb~ rea.<iOAA. forltlnately. Fraokljo·~ t:uln':!xi':c)(:ulial s.puit, mll(',.<ali\'C apprU:li:h. t:lrJ!.eled outn.-ath. tiOd mtlfkcting t.:am retnnin committed and det¢mlincd to find IWtnb fl)l all .::amne IJorphan:~-mtiuding ~.:: whc> an:: Itt J!.<t ~s <l rc,;ul! of <l d ifti(:lll! houo;ing m:l,l\:et, wbidl b:•s rc:,;ultt:d in tl tCCO(d numbc:•• l)( f~l(le.lJ!CS. "'\\'heR boolCOU.I\C'I'S (ea lize

!bey a nno• affrord 10 li\-e in tbe home !bey once: >~aw 111" !heir 'Amc(iC':UI 0(Catll.' uilfMUit Ucl)', lhe OOtt-CO\-eted and loved

family 1:..-':t bti:(omd It:~ l\l' 3 l)li(onty and S:UII). c:M) longa a n-.::mbcr of tbc ftllltily," say~> FtnnkliR.

fr:mklin ha.~ crtattd aw.utcX!i;~ 1>1' a nkho: ma.rket. Sho: h2~i; in::~o;cd dem.1nd (through adoplion,;) fror lhe."~e :-~eniw dogs th(Ougb c:u-eful educatioo tll)d ad\'«:IC)' at ouucach events a.nd weU-de\'ck>pcd I)J'()If<lms. One: of Fr.~nklin'" pm.;r~m:o~.,

.. Scnioo fo•· Senii)(<..."' matches. loving. ~tai tlcd. al\d .... 'ttl· bc:b:l\-cd o;c:n.ior dro.JI' in ncr.d or <;()(l)e TL.C ~~o·i tb I<.Wing senior oonrpanion~. Ke.nz.ic:~ a beautiful scboouur. bw; foond h~ for­<-"\'O:r h(ome in S:~ut.:a Cru"~ C'21i((om•:l. with h -an. a retired :lclli widowed <c.¢hoo1teacbcr who ltntc:mi-us with other dog-k>ving nt•ghh<orS dunut d:lily walk~i; in lh11i; beautiful (ltt:ln·~ido: C(om•

munity. Kcur.i<: has provided l\'ttO with in1mcnsc IO\'C. plea· ~U(e , companionU.ip. al\d cxcrcise-fc:w whi.:h be is eXtJ'tl\lC:Iy gr:udul. "I t;:•nnC>I imagine my life ~~o•i tbo\1 1 my girl Ken~ie,'• 84-yeat-o.Jd h•:~n (:;l)'ll lovingly, like a 1:trood papa. ThClie ~>oc · ceo;;< stmie." .;ve M•utvilk'" ~11C:!il pro.fiL l)roc:,; Muuvjlle SeRio•· [)c)g Rescue wi~>h to incrc:~S< its. p(otiL.:: by ~>:wing •n;:u-e sc:nilx dl>g,~·~ Tho: :lm:wer '"' ocx loud .. rutr," wh1i:h tr.m.~l:llt:li; to a definitive ')'(1;~ "

Whl:'!t's Your Take?

I. '"Qultlity of ljfe" n:fl((tl; a roci~)"~ g«c~n1 "''Ctl-being a.~ mc:a.;-urtd b)' ~landatd ().( li,·ing. frttdPc••· h2pp md:S, art. Cl)'lli.ronn)Cotal bcallh. tiOd inno\'nlion.n Ultimately. hololcX~i;~ can htlp ,,,x:kt)' b)' c:nnc:hins pt(opk '$ qu:~lit)' of life. 8 a.<ied upon lhe dcfinitioon of quality of life. u.-tlk b 6! tbc:se mc:~sutcmenlS is cYI(le;t prevalent in the w<lC'k th:lt Shc:rri Ft~ni:Jin :•nd Mott\'ilk ScniQr Oo# Rt."~Cllt f'!Crform w imprtwe the: quality 61 life f(l( bc)th dogs. and hun\3.1\s?

2. In l'ilol'·!lo!Utit OrJ!,aniUblm.~. lht mc:a.::ur.: lx n~o:.tni: ().("'tic­~ i~> gcoc:rally pro(Jt (« k)..;~>) . In nooprofit o~gani1.a· tilm.~. money :·ulll c:xpen..::.:s :lri: impOt'l:'mt UoclCtm~. but socc(1;s t~ \l:'iUally n)Cw;ured in 00\1.• cf!~tively scrvk.<s are dcli"et'Cd. Name at k::IM five wa)'ll )OO woold m~•'t the >~uece.'IS ()( M11Uville Seniror I.XIg Rc~ue.

.t An t:ut.n:txtlli:Ur "' ;·, pcr.l;()n who M:i:S a llt:W llOJIPOrtumty (or a p~ c.r scrvk.t and ri<J.:s hi." or her tinx: and mC11Xy 10 st;'ut 3 bu~<ini:S~ 10 mi:d lh1~ <lppl:ottunit)'· w•lh lbe llhim.;ue '(ml ofm:l.king ;, pmli t. Oc:serihc: OOw Sberri Ft.l.tlldin c:~n be: coosideted an enttep(Ctlcut. What "'--ould )'0'1 >~:oy are l.he prim:lf)' d il\'erence" lx:lween Fr:•nklin'>~ ''SUll'l-tlp" and 3 (,w.pi"Oii t CllltC:IllfCI\CUi ial (.tlltt-IJI)?

BUSINESS DECISION CASE

4. J)lll. you lt.1:M·rw l.h:l.l it j, dli:g::ll 10 :lb:uldcon a pd'' 'l'hink about and e.,vlain :<iOme of the rcw;oAA v.'b)' C)WOCn> n)tl}' surn::ndtr their dOJ!,.~. WhiCh ~ d1ri:C1 n:::<ult~ ().(the' ec:on~ QroY't Wb:u do yrou 1bink tbe imp.~• or lbe ccoi'IC)m)· b.1s been OR animai•"CS<:oc O(g.lll\.izatioos like Mutwilk: Swi« I.XI8 Rc~ue?

Apple & Google: Relationship Status Change

A t ooe time. Goog)c :<iOt.d advertising and Apple !OiO-Id hard· w:~n:: . 'l'his c:~...e .:-.\piOti:S ~· a ~urg.: in mobil.:: dcv.ct

\l:'i;J;g.e hw; changed tbc: WII}' usc~ are <KC(1;~ing tbe Internet. 1'his i.l\ tU(Il lw. C(Cll.tcd a grov.•ing compctitioR between Goo,glc: ;Jnd Apple in mrol:>ik crompulinJ.. mohilc: applicouiron:< (apps), ru)d ot.het telatcd tlll'oduclS..

In 2006 wben lhe i.POOne w:•s mweikd, Ol>ogk (..'EO Erie Sdlmidt v...u oo stage with Apple CEO S~e~·e Jobs. Coogle: ~ i:Collabcor.l.t.:d w.l.h Appk on mapping lix the' ,Phone, and Sctmtidt.QI. oo Awk:':<i board of directo,.... The compani.c~< v.x:re .ldr.l.lo.'Sic alliel.. and l.h.: CEO~ (oRtn Spl~.: l';h'<H'abl)' (o( IloilO: ;·m· C)tbcr. to the next few y~ ~'¢\'t1', :<iigniticnnt change~< took pi~ m the Smattpi:M'Jon.: matkd mul tlli: A':lat.Mm.~hip b.:.twi:.:n lbe ' "''H;romp:•nie ... ~

CompetilioR bc:tv.-oc:n the: two C0011:oo:anics began when V.X>gle a.nnrom~ecd i1s mobile phooc: ;Jnd Android or~r.r:uin~ A)'Stem-1100 when it b«:ime dear that s01at1pbclonC:<i "'llUid bo! thi: computa.~o l\l' lhi: l'utun:.. Solm l.h.: ODI'>tk: CEO g:l.\'0: up his .(.(<lit on the: Apple blwd of dircctooo. The late S~eve Jol)<; i:o; ({ll(oltd a.~ ~:I) ing, "Efk'~ .:: fr.xllw:n.:SS ;·t~ an At)J)lc: bD:lrd mem· be.r would be .o;,ignif.cautly diotinisbcd, because he will ha\'C to (CC\ISC himself ffom even lat)lct pclttioos ofl)llt mtttin.g.~." The riv:•lr)· &fC:\\' wbc:n 01'()gk ropc:ncd ;a Wc:l:>-1:>0\(((1 s!QR: fror ;Jflp< !bat run oo mobile dC\•i«:s ptW."'C!<:d I>)' iL~ A•)(Jtl)id softwatc. indodin8 MC>IOI\)1<''>~ l)roid ;.nd UTC C«Jl((rn.lil)n"s 1;\'Q. ' 5

Bot.h AtYPk and Googlc tu'C hypc:(focuscd oo the g.ti)Will..g mohik C(l(I)Jllllin¥ m:ul:.el Cromp:u-ed 1ro lbe Wei). dQII.an; in mobile ad\'cni.<iin.g are :<itnall-but .~tudie:<i :<ibc>w that more usc~ h2v.: bi:gun I() :·~ l.h.: Jntt nli:t duougl'llhi:lr mobil.:: dtv•i:d n,; comparod to the traditiooal desktop computer. MUJ}' Meeker or MOtJan S~.anli:y pr.:d1i:ll. l.hal within fi~·e )'t:~ mort us.::~ v.•ill tap ioto the: loleruct via mOOiledevke:<i than ~ktop PCs.~ Mcorg::ln S~anli:)''S &lob:ll tt:i:tii:M'>ICog:y ;'md tdi:«•m anal)"t~ pn)­joct that m~.>bile dC'\•i.oe~< witl C\'Cntually out.;hip the global ne1· book and M tebook nwkct.. and tha by '20 l1. Snl3ftilbi)l'IC$ "'ill alo;q ou1sbip l.he u.lolul PC ro;vkcl, wltidl ind 11dc:s ll()Cc:b~, 1\Ctbook.~. ood dC1>kt.<lps."

It i.~ 11()1 surprising tb.11 lbe r.oelC for dc:li\'<:rin.& (.;ronlc:nl i.s intcii.S.ifying: the •'tl'eru\"h !inu Gan RC•' !)(OJCCtcd that the n..'\'i:nui:S g.:nerati:d by :lpl)), v.-.)ll ld ttiplt: in 20 llto ti:M'>rt than SIS l:>illion, and by 2014 1't''Cnuc (rom npp~ would rt--nch SS8 billil1o11.ll Tho: oomp:lnit:~ an:: ;dM) C.'lol11pi:lin& (Cor tll(l.b.Jt: :ld· veni,;in.g dollar~<. BlliT<:II A~<~Joeiale~<, ao a<h ·cttising, re:<icarch

and conrulting, lim), forccnsl" that :r.pe.nding for ad:<i dcli\'Cred b)' ti:M'>hlli: apphi:abon., will mC:A'::lM: t(o S8.4 b11lion by 2015 and qx:OO.ing oo ads deli,x:rod through a m~.>bil<: l:>row:<i~ will l'l.'::l.:b Sl(t9 bilhon.l'\1 Ar. lbe race II> dclivet Ml'ltCnt intcn~i­lie:<., il :t.ppeaflltbal lbe two rompanics arc:n"t 111" ftic:ndly as the)' o nce ""'C•'C.

Wha t's Your Take?

I. 1.~ this just a .<;it-u.alion of capitalism and fricOOiy compc:ti· ti•·m'' 1.)1> >•)II h2v.: :lny idi::l~ 3~ h) wh2t l.h.: (utun: I:M'>Id~ io tcm~ of the competitive land!OCapc be1.wc~ these two coo11:oo:anics?

2. Alll.he eompc:tiliun belwc:en Appk: a.nd Of'IC.),g.k «.J((Iinoc:s to intco~ify. 00 you think. tbat AP~'Ie may decide to dump CM&k 3~ the default ..e:ln::h ensine ( Ill iL~ ll'l()bli.e di:\'iCO.? IJ the}' 00.. who might tbe)' turn to for :<icatth or hO"'' tbc:}' \'Aould de:ll with So..-a1t h on thi:lr do..'\•i.c:.::s?

J. Are lbere a.n)' hl:nc:ti.ls for tbe O()(ISillllC:r of inc.te.1S(d OO«'lll)clition?

4. If >•")\1 wc:n:: co'""idt:rins pun::ha.~ins a ~<martplwn.:: (il)lwn.::, HTC. c.r 8\atkbe.rry), or replacing an older OtOdcl, "'OU)d any (o( thi: C.'lol11po.':tith•t lli:\ui:S (oUtlined in dli$ C:lM: bi: a (;u:.

1ror in )'<.ll" Pl•rdla-;e't E,%pl..1in wb)' IJleo;e W;oc:s wt,~uld ()( "'--ould ll()t aiTc:ct }OlJt dccisioo.

S. In an ei1'M: tO tali: Srtata <:Untn'ol and I() incrta._.: profiL~, Apple i~< 010\'ing, to a :<i)'Stem of dcli\'cring and l:>illing fix t:lt:i:ln'onic i:(outt ut 'o'li:\\'i:d On it~ devico. by r.:({lllnug publi,;hcr.~ of book~<, n)tlgalinC:<i. nod r~oew.~po.pcu to oon­dui:l ~a.li:S •\I' i:Contt ut within a1~. bandkd by the iTund !>ill in¥ ..y>~tc:m.>~• l>tlbli~<hen> are nm ~'leuscd witb Apple'~< an.nOUni:al'li:nt bi:eau!.t: ,r thi: (ltd) w:o)' f<w user~ II) 1)\l f'" ebase clec-ttook cooll::ot. f'IC\II':<{Iapeu, and magazine<> i~< thfoogh lbe iD<:vice. thcy lose: \ ':lhwblc: iRfMnou ion about tbeir sul,)...::rilx:l'll. $1ll)saibet inform:uiron is lbe li fel:>lood oi 31\ ot~line r.ellct btt:~usc: it i~ ur.cd II> marl:ct and build lon.&·l<:m) rel..11ioo~hips, a.nd of (:OIIJ'o;e, upo;c:ll ror m:&J. l:et similru· products b:~sc:d u1» n infonn:~tioo !tOO) pa.q puJX:h2M:~.M

As a U:<i~. if you wooled to pureha~ oontctlt. "'OU)d )'(•U bavi: ;·m is~ue if you h:'1d 10 do so l.hrough tlli: content Pl•l)lishc:r'>~ \\\':~te, fror e )(a.mple, or :•n iT11nc:s >~tro~c:'!

CHAPTER 1 Start1t19 ()1.1; 29

(iQ 10 W\\"J•o.myb-i71..11wc~m (C)f online: ;Jt li\'ilic:s :md cxerci:<e:c rc:L11<:d 1ro tbe lime}): 1ropioc disti.IS$ed in Ibis chapte•·'~ Bticlin.g.~. a.~ \\'CII ns :ldditic)tlallben)(';·I'Ciatcd B•'i<:fwg Stmtlialru hii!)lli@iling hco..,·lhbe C(lni:o:.pt.. apply in lOdily~ bu~in.:ss e•witlmment.

In-chapter Briefing: A Media Prank Hurt$ Domino's Pizza U.S. Manufacturing Isn't Dea~lt's Be<oming More Upscale U.S. So<:ial Oifferen<:es in the 2ht Century

In-chapter Briefing: What's the Pay for Entry· Level J obs fo r College Graduates in Business? New College Grads Find Jobs Overseas

In-chapter Briefing: Taking Care of Buyers: Amazon Pays Close At· tention to "'The Customer Experience"'

In-chapter Briefing: Factors of Production in an Entrepreneurial Furniture Busine$s

30 PART 1 Tod.JY'' Busin~?SS Env ..rotU'M nt

A<tMty' Developing Marketable Business Skills - Forces Affecting Bu$ine$$

A<tMty' Developing Marketable Business Skills ­Knowledge Workers vs. Manual Workers Getting Your Career in Gear- Comparing a For· Profit to a Nonprofit Going to the Net! -Emotional Intelligence

Activity: Developing Marketable Business Skills ­Customer-Driven Bu$iness Developing Marketable Bu$iness Skill$- Types of Stakeholders

A<tMty' Developing Marketable Business Skills - Green lniti.atives Going to the Net! - The "Go Green" Initiative Going to the Net! -Home Energy Use Going to the Net! - The Greening of Society

Briefing SpotUght: • Change Is Our Business

Briefing SpotUght: Drafting Your New· Grad Resume

Briefing Spotlight: The Customer ls King/ Queen!

Briefing SpotUght: The .. Do llars & Sense .. of Sustainability

ln-<hapter BrieTmg: • Well$ Fargo I$ Ordefed to

Refund "Unfair and Oecep· tive" Overdraft Fees

In-chapter Brieffng: • How One Man Makes lnspi·

rational Writing and Speak· ing a Revenue~Produeing Busines$

N Ac:klhlon•l Briefing Spotlights U available at MyBizlab:

• BUSINESS CULTURE & ETIQUETTE • GLOBAL BUSINESS • INFO TECH & SOCIAL MEDIA • PERSONAL FINANCE • SOCIALLY RESPONSIBLE BUSINESS

Activity: Ethical Dilemma Case ­Profits or Princip les: The Booming Bu$ines$ of Es$ay Writer$ fof Hire

Activity: • Going to the Net! -

Are You Ready to Start a Bu$ine$S?

Briefing SpotUg ht: • Teaching Ethical

Behavior

Briefing SpotUght: • Young and

Entrepreneurial

2.3 n11 ISSINTIAL a..snoN: What are corporate $Ocia/ re1pons•b•hty. bfendt:d v"fUI:, "" d 500.1/ "ud•tlng'?

~==~ ~== 2.4

32

TMI ISSINTIAL a..snoN: (n what ways do custome!rs, Owm:r$, empfoyet:s. supplier$, ;tnd the cammumly ~nefir from ethics and corporate $OCial r~nsibif· Jt)'(CSR)?

FORECAST: ~ What's Ahead in This Chapter This chapter exp lains the e thi­cal and social responsibilities of businesspeople and how o rganizations can p romote ethical behavior. tt al-so explains the concept or corporate so· dal responsibility, as well as the concepts of blended value and social audrting. Finally, it describes the negative effects of bad business behavior and the benefits to stakeholders of good business behavior.

yon mcc1 il? Af1t120 yea~~ a.~ a phamlact•.ni.:-al

s:•ksman li.w .Mcrd ~Co,. in J995 ~•g Durand joined TAP Pbarmaceutkal Prod· ui:t~ m LU..C N'xt,.'l, lllinoi$, :l.l a ~alary c>f

Sl40.000, witb the procnisc of a SSO.OOO boou,;. M. n new vice pro:Sxknlllf salts, L>urand ~~o-a.. ~<IWd.cd l{o ht::lr his Salts s r.atr io a conference cnU C)Jl('n1y d~s!\iog bOY.' tO bribe u~i~~> (lo'lil.h a 2.tf "admini~'lltiOO fct") (()( I)(CSCI%ing TAP's pfos­c:•k (:.11'11;Cr drug. l. .. upmn, lie :•Jsq le.1roc:d cb:•t f<X rc:lf:C TAJ> t'Cill'i had encouraged flh>•(,ician~ t l> dlat)lC gow:l'nment tncdi.cnl progr..m:c (Wp.1ycs fmukd) full pril;e fllr L.upmn I hey n:· tti\'<:d ftoc I)( at n di~"'Unt. n tlll.'1ic dcs.igned tc> bc:l1) cM.ablis.h Lupl'lloll as dll: ~lalt t~.umen1 c>f ehcoict.

Gfnduall)', OumOO karned that TAP. in<-lcad of using co:-i· o::ntt to pn'onWU: it.. prU!tuct~. n:: lied on S..id.::l~.::ks :11lll fret· bic~giving big·!Oen:«< TV~ COOlfiUieU, nnd golf \'~liOU<;

tO C(l(optr.Uin& Ufi>ID~iSL~. HI: :'IJM di~tm::n:d th:1t. thOugh mq\li.rc:d by tCdr.rnl hw, rcro; could 11()( 0\l;tromn ti.w b:•Jf of tbc:it LU):II'OO samples.. Tcuilied he migbt be (.CtlilCJ!.OO.tcd ii:w tbc: illegalilic:s, be: tried ;applying 1ro o1her Cl,lomp;anje:c lb:•t b:ld offered him job~ bc:fo1c: TAP but found thc:m all'tady lilk:d.

Evm111011IJ)., Ournnd bc:l$aolro sc:crell)' document TAP's aboc;eo; and lioully m:Uiod the evi-dence 10 a friti'ld with cbe tib tl> an :l~n.1ant U.S. attom9• spc:d:di:zins in mtdi.:::.l fnud. Tbc: fri<:nd u~god him 10 sue: TAP for fr.wd ~ain~t the :o"em· nll:ut unda ~ federal whiJ.tlt:bl(•~~o~r prosr.:m1. (A whi:Uit:• bi{)Wc:r i,o; an employee wOO report.<; o~gani1.ational mio;,oondun to tbc: public.) It ~~o"<W~ 't c:l~>Y f,w him tc> de> Sl>. ""The: Kk::.l)( suin# 41.; ;, ""''ltisllc:bk>wc:r i.nlimitbled me..·· Ournnd saKl, ··Ko­body likes:. whiJ>tlcblov.~cr. lthooght it could end tn)' o:-arc:c:t."

tn tbc: end. bov.'e\-cr, he round binlselfbc: lievin.& il was l.he t ight thing ll) 00.

t b3ta..'1Ct? WiJ[ia_m n Swanson, .::ltief C:liCCUii\'1::

I!.-~;;;;;~~ offic" of Rayth('()(l, a miliwry oonr.ractor, bot:lmt: lo.illroo.on ll>. ;·, managantut >::lgt r ...

hi~> Sl1'tm.f.Cm 'r Un~~o•durlf Rui.M iif Mtnwgrffttlfl. a folk$.)' ¢01· I..Xtion (I( 33 rul~ l\l' bu~>iill:>:~ ~U!Vi\:l.l. f:x:lmpl<:,.:

Ill l.'tJI'n m :wy "l•lnn't bww" 1/ tl.~l'(ill>'}&tn (lfl/lr'fiJlri(l/1', it wffiMaJM ojll'n.

11'2 • • t..'~t•t-r hr ujmi rltfl Jry .wmJrthing nn~ Rrwl4'wWr, tJtl tJnm· 11!1.11 ~/Jt em dli: lfltJI tllfl'l'\'ed II jh"N)t/w/tJifl Cl /cJ•'gl! lf'IIIIJl 11/

profn .. t itHUIU /mill Jh4' Tilank!

R;;a)1br.ron pmmotcd l.he book ron I he C()(llp;any'.c .,..-<:bo;ilc tll)d g:.\·c :.way mo1c: than 300.000 ropics.. Tbc: maga:tl,c: Bud· n~st 1.(} (.._·~uun..-d l.h.: bll<lk lm it>: 00\'t:r. :'Iilii U$..\ Tmla1· d1d a o;tol'}' about iL ·

'l'lll:n o ml: :·In e·m:l.il fn·)ln a San Uit:t<t dll:nui:al t:utilll:l:r named Ctui i)Urrcnb«g". wOO pointed out thai "oc:atl}' all of lhi:~l: ·unwritll!n rulb' h:Wt: i1lllel:d b..".::tt writtt:l-ti)' aoothcr aulbror in f;N;L, 6(} years ;a.gq.._ l\f.r Swanson b.1s pl.agi:ui;tcd from the: liule--l:nov.n ( l9441 book. TM u ... vrintn IA\i',~ II/&~

sinenil•f by W. J King " It ~o~~--a.; t!ls.oP IC\'C:lled that Swatlsoo had pit:Jted 1\JicS I

lh.roug.b 4 from a eollcx:1iron kOC>WI'I <lC "Rum<!dd'o; Ruks" by U.S. Sccn:tar}' of l)cfen,.;c Donald Rum~fcld. ~o~~-bkh wc:re pu~ b~hod in Lilt: ll~lll Strut Jmmml m 201)1. Rull: 32, dr.lwing a life: le<.<;on about rode trc:;1uncnt of waitcu, was ~imiJar to .«ltill.':l.htll£. writtt:n by bunl()t i:•\l umni~t U:.ve Jhrry.

UltJmatcl)'. Swlll'lron bad to Kwc: o;tatc:tnc:ul/l ol rc:r« nOO :.polo,;;y. "I did l'lilt p1'tlpcrty chc:dt ~fCC: ma1t1ial." he J>:Ud. "I :IJ'I)Iro,i:te 1ro tbc)cc: whQSc: m:uc:ri:•l I wi<JI I hild vc::•tcd wil.b f gtctll¢1' Cill't • ...: X

j Ev.:ntu:all)' hi: Lei\ '!'AI'' lix A . ..tr.-..\h:n."l :'Iilii l:.ll!r ldtifitd j aga.inj;;( hi,; fc.rmc:r c:mp)oy('C<; ood ool\.eugueo;. Tbc: rcrult: The ~ SOW.rn.li'II:UI '4't:Ut ;·,fta '!'AI" :lnd tin.._"() il bt:tl\'li). 1

For his (-;;ailurc: IQ Jl,i\'1:: credit (()I pl..1gi:ui;tcd (l);;liCI'i;;al, tbc: l Raythcoo ditttiOI'S took awa)' aln)C)I;t S 1 millioo in Sw:.n~I)'J> k 2(106 C(lfnp•.':n:•ati()n. 'l'bt: puni~lunl:nl mis ht h:1\'e bi:.::n h2r>.ha If bad the board not dc:c-idc:d tbal the elhkal bn:ach was "tmiu­lt:nti•·maJ and lll>l nt:glig.::nt. It wa.~ ju~t piXlt J\ldgm.::nt ... )

j

YOUR CALL The ptoblem of plbgi.atls.m-presentlng others' work as your own-dettrly is.n't limited to college s.tudents writing term paper& (for which they can be flu.nked). \Vh.llt would you 1\av~ don~ In Swa.nso.n·s ease? Do )'OU th1nk the puni:shme.nt fit the uimc? Wh~t sign~ls docs SwMson's bc-hl!Vior send to Rt~ytheon's st~keho!ders? Could you do the right but difficult thing that Durand did? Would it affect your opinion to know thM DurMd received ll $77 million rcwMd under the feder~l whistk:blower stilt• ute? Still. you should know that whe-n he made the decision to report TAP's behavior he wtls not llW .IHC thbt he could bendit so wdl fiMncilllly.

MyBizlab

j

33

2 1 The Ethical & Social Responsibilities of • Businesspeople: The Way You Live Matters

THE BIG IDEA: This section describes the global corporate social responsib il­ity pyramid, which suggests a g uide fo r thinking about moral me~tters. We etl.so describe values. ethics, laws, and corporate soelal responsibility. We define ethical dilemmas and d iscuss the "holier.than·tho u" effect.

THE ESSENTIAL OUES'nON: What is the ord er o f priorities fo r a businessperson?

MyBlzl..ab: Check your understanding of these concepts at www.mybizJab.com.

• PANI!L 2.1 l .. g.al, ..,..u.ic..._ bolt!, or IW!Ither? lhes.e c:at~gories lhow how diffeten~ ~Chon~ Cl!nv~ry

in b.:ing l~l Uld e thicbl

1, Both ille91l at~d unetllic.al Embt-nlemcrrt Ccnw mMfraud Se>~ual h&ltwnet~t Cash J)'ymcnts to ~oid ta~es

2. ~~ bo.lt UI'U!ttll~l M:~k>.r-g sle:tty, :hort.Jived p4'"0cfuctJI

CMoolil'lg comp.wr.y rotitMn9f'l; .... Avoio ng lllle.CS on U.S. rev· cnu..::; u~.ttg off:;hore b~11b

3. Etl-oical b ill illega l PNying m«0 d.xpite union «ntrect lim a Sel!irg ,_ mJk for hunll)l" ccn~urnption

4, Both legal and e thir;.al Green busin~:;~

Ccnw mM-friel'ldly boh.ttvicr Em,>loyee fr,ng.e b~'lt~ Comtn\lnity contributions

H :.rd CC<H)Illllic times.. such as th\)Se \"lf the recent Great Rocess.iml. can fm~:e 1>00plc to tolkc dcspcr;ltc •nc~··surcs ti.' fi.nd or keep a j ob 1.1r to attra:ct a.nd

keep cuS-t<)mers. HmJ.' fur would you go to bend the rules- to push the ethical b~'ltll,ti:Jri ~s-if )\'ltlr job was on the line?

Prl~1r ti.' deciding whcthC=T a c~mtemplatcd acti.~m is appropriate~ :wggc:sts Hewlett·P:.ckard's code \"lf business C<)fldUct. an empl<}yce sh\)UI<I )>I.}SC :. simple test: "Ocfore I m:lkc a decision. I etmsidcr h01ov it 1.1.\luJd k'Ok in a nf.""'S story."~ Ccttt~in ly in dte foreg\}ing "Winners & Losers·· accounts. [h-,ug Durun•l k~o.1kcd

g~'II.'KI in d1c:; he;idli•.es. :Jnd WiJiiam Sw:tnSIIIl l~)(>l:c:;d b:•d. So. ns Yi)U comcmplate making a que.<>tionabie move that might make yoo

(<)I' )'<)Ur companyt ama7.ingl)' lich, \.\ttwt kind of imagined tele\·Lo;cd lle\\'S images. would m<lkc you think l"''ice.? Yoo in handcuffs a.nd an omngc priwn j umpsuit? y,.,.,. in court :.s defct~da.nt in an ugly ci\'il lawsuit? You f:.cing shmning rcponen. who wam 111 know hi)\\' )\'ltl fctl aboot deJ>I ~ling the life:; s~wings. of i n r~nt vie· tims--evcn though whut Yi)U diJ v.ros entirely legnl'!

Maybe y \lU would be ll)() I'C uoublcd by the idea <}f g\1ing h} j :.il tMn of 1\)l)king sle.tty. Not •'111 unethical <lClions nrc llkgal. al\er all; there are lots of nuaDCcs. as tbe panel :.t left OU!kes clear. (S,.. .... • Pau .... t 2.1.) But it should be )'<'IUr g\1<11 hl be />111/1 k:g:.J :\lk l et)l iC31,

Carroll's Social Responsi bility Pyramid: Profit, Law, Ethics, & Citizenship

Whal~ a way of framing my morat p riorides?

Univroity of Georgia bu..<>iness-ethics scholur An~hie U. Cnrrull provides a guide f~w d1inl:.ing al:x'ltlt such J>••tctic:.l at1d nl(>l~l l tnaners.. His~ (' IJ'JIQra t q«iiil C!!JIUII.si6ility PJ'NWiij/, suggests th~ (lb lig_at ions (If an (lrg_ani:wUon in t ht global econOmf are to make a p••ofil.; t c) obey the ~w. to be ethical. and to be a g,c.OO global corp()t'81e d ljzen. Some petJPlc hold lhat a oompany·~ fli'St and only duty is to make a profit. H..w.·e\·er. Carri)ll sugge.<>ts an orgunibltion ·s globtLI resp;msibili tie.<> Sl'lllultl l•a\'t d•e foiJ;:w.·ing t)ri(>l-i li ~s. with profi1 be-ing d•c:: tn(lc)t funtla•ner":.l (b:.se of the pymmid) anJ <:<:llpOJUtc dti:tcnship at the top~

Makt> o pmfit consistent with expectations for intellUlti.ooal business. ('rllis is called c:;c.,nomic r<;sponsibilir)'·l

34 PART 1 Tod.JY''Busin~?SS Env..rotU'Mnt

Obtry flu• !em· d[ [ll)st counnies as well us international law. (This ls l<::g:li i'CS(l(lti.Sibility.) Bt! t'iflia1f i11 ii,\' practit-t'S, tllking hoSt·COUntry o.nJ glOO.d stalklards. into C<)fl.S:ider.tti,)ll. (This is ethicaii'CSJk)RSihiliry.) 81' '' gmli"l gloll'llil'r'lrllflrtll~ dri:nl. as defi.•w:d by l)te h~)S( coumry 's c~pcC'Ulti.oos. f l"his is philallthropic responsibility.)

'Olesc pri<lrities- protlt. law. ethics. aOO citizcnship--coukl :l.J)I)I)' ~~~the CNJ)()r.:ui ,~n ·s 31kl its c.npl~)yces' business bch:.vior i.n its ht•mc counlry •·•s wc.IJ. 0

Values, Ethics & Laws, & Corporate Social Responsibility

How shoufd I distinguish among values, ethks, laws, and corporate sa<jaJ responsibility?

We n\:ly d•in_l: we kn~'W.' wh::u l 'illu~t>, t-tllk-t, lnw.t. :mtl ,\'r~W.:iril l't'.fpt)l/&ihility mean. but do we'! Let's take a d <>set look.

Values: Underlying Beliefs That Help Determine Behavior Undcrlyi.ng ethical aDd legal syMc.ns o.re l'(llur:.·, the rd;"llh'ely pe1·manent and deeplf held undet·l~·lng belld~ and attitudes

0 Good eorpori:te cl titel'l. In 2006, ~een Bleke Myco::kic ..,..;u ttll'ldil'lg il'l Argcntir.:t, v.hcre he ob• &e<Ntd thet m&ny d'lll6'en h&d no $~8 to f)(Otea tke<f' icet. On rettltnil'lg home, he fool'ldcd TOMS Shoe:: :~::"' «~ml)&ny tt-..,t wou!ci-"One for One"'-yNe & new pe/r of ::hoc5 to 11 child il'l I'IC<ld' :or ew:ry p.11ir p.~rch.ucd. Otter thet ~er he ret~.WY~ecl to Atget~tlne wttl femlly, iricrtds,. o\rtd suff member$ v.ith 10.000 p:~irs of dloc: m_.cle pos,11ble by TOMS c:ustomet't.

th.-1 help determine people's beh;n•lo•·· All cx:unple ~~f 3 \';I hi( is humility- the opp;>site of 1>\'elbcaring pride (hulxis)--as in SL Pnul 's aJ vice. ··tn humility count others as better than y,1t.lrselt'.'" Values are d•c Ulklerpinf'lillgS for ethic:. I S)'$tCtnS.. as in the oath physicians take ti> ··f':irst 00 Ill> htutn'" h> n patient (Hipp;)l;ratic ~.~th t. and legal system~ as in bv.yers· ple~.lges to uph,)Jd the law an~.l the U.S. Cooititutioll.

Ethics & Laws: St..,dards of Right & Wrong

f:iMt are prlndplel> or right and wrung that influent-'t: behavior.~ ::II'e rule-s ur ~.~uuducl or al'lklu rur~m•JJy ret·o~nil:ed IU biud.ing or cnrort·ed b)' .. contrulling authority.

$-l~rne st;llkJanls ;iJe nearly univcrs-'11, such :'IS d•c belief d•:~• k.iJJing is never ju:s­tilied except f\lf' the most impt•ru·mt of reasons (suth ···s self ..defense). Other st<·m· dahls are culnu-:ally hosed, varying according Tl.) what a pa.nicular C'Uiture c~.msiders

right or wn.mg. This is p;·rrticuJo.rly true in international business. where wh3t tme culture consider,; wrung both cthicnlly anJ legally is coosidercd perfectly ne<:ept· :.blc i.n an~)fher culru~ .

.---• Example of Acts That Vaty Ethically ot l~gally AecCH'dlng to Cultur~ : '"'h

I Thiit a Gratuity o r a Bribe?" rl'l m:."y ~'lli.n An-.ctic:ln :ll'ld Asi:.tl COOI'lttiCS.. tipping n public oftlcial is cons.idcred a gratuity, a gil\. a doot~ti.oo. a c001mis· si<'lfl, ,-. eYen a con:wlting fee intended 10 reward St.)Otc<'lfle for pmvidillg )\)U

with ,., competitive ad\'i'mtngc t•r beUC=T sorvioc.. ln the United S tltes.. Can3tla. nnd many pans of ~Um)>e. howe\'et. the

sa1ne act is c~'"sidered a kick)).'ld:, &•'C3&.::: n'o()ncy, a bribe. which is CC1tainly unethical nnd usually illegal. An Amcricun busine.o;spcl'$(>n pcrfl)(mingsueh an act with a foreign official is con~dcred to be in vi<)l:lli»n ,)f lJ .. ").law-.s)>eeifi· .:<dJy. the r-orci.gn Cimupt Prattiocs Act-although it may be perfectly legal in the bost counuy. •

W~nt to Know More? 2·1

Key Term$ & Oeftl'lltiOI'I$ tt~ Sequential Or-dew- to Study .as Vou Go Along

Go to www m~bilW:I CO"!.

~ ::-~ W~nt to Know More? 2·2 Wh;at Elw C;an Be to.;arned about Carroll's Pyramid?

CHAPTER 2 Ethlr:s & Soo.al R~ponsibllity 35

f) Ettlial COI'Iftict1 P11intor ll'lomM Kinkade's comp~r-.y '-''~' 01ciered to pwy dllmil945 to •ormor gal!ory owners. l l'ley ~CCU$-C!d' his com­pany of oxp!oiting thoir f11ith to fon:e them into 11 bus.:nen in .,...hod; they competed 1.M'!f11il'ly with ;l'lo Kinbde comp11ny it::eff. Do you th'11k it'5 llttopt:.b» fOt 11 QC)tnp ¥1y to piTt h111d~ll (j( leg~lt nloney· mak~ p-•c;ico5 111bo11d of othM consiocr~tions?

Corporate Social Responsibility: Benefiting Society as Well as the Organization

,.----• Example of Corporate Social Responsibilrty: Pepsi Stops Selling Sugary

I Drinks in School.s. l ll 2006, ~S(!Oik ling II' a 'tnplaims :.l)(lom ptl'ltiU<:IS lin.k~d to childhood obe&ty. both CokG and Pcp.<>i agreed to stop selling sugary soft drinks in U.S. schools. In M ar" h 2010, Pepsi wcm t)fl t\) \'tllunmrily :.grce hl

n::mtwc high-caloric swcc(cncd soft drinks from 5ehools ft•r children up to lhe uge 1>1' 18 in IDI)fe than 200 other coumries..

1l•e CQIY'IJ):ln)' 1\."C(i\'td c~'mlJ)lin-.cnt:s frool d•c:: Center f~'W Scitnec in !Jtt Public Interest. "We applaud Pcp..;i lOr its gSobal commitment..- n SJ>OI.:CS· !>CfSt.)f\ said. "'But Wmc t.)f\ CtlCtl.Ctlla f,)l' insisting on targeting high scht.)o."ll studentS in most oountries around the W\lf'ld."" •

Ctlrporote soci:.l tCSJl'"lRSibili t)'. or being a g<)l)tl corporote citi:t:cn, rests at the tOIJ of Ci~rroiJ's pyrtunid. This rcOctts global society's C.XJ>CCCiltions. s.'lys Cilm)l]. "tlwt busine..;s will enguge in soci.ul acti\'itics dult tue not lt\llndmcd hy law nor gc•.e•·ally C::Xp¢et¢d Of bu:silleSS i.n :tn td1iC:tl S¢1'1$¢.''«

We di.scu...;s corporate social responsibility further in Soction 2.3. first. how· e\•er. let us gi'ie mme Ct.)fl.S:i dcrati~.-m to ethical bctwvit.)l'.

Defining Ethical Dilemmas How would I recognize when I'm In an "erhical dilemma"?

An t'llu'Ciil diW"2!!Jf! is a si1uation in wbi(h people luu•e 10 de<.ide nhe1her 10 pu1•sue a l-'f:rtain action that may beneOt them or l11elr o•';.1:ani:tation butlhat ;s unelllil."al or tl't u illegal. ln bo!iness. a f~ucnt soorce of ethical dilemma~ is the conflict between the competing demunds to nt:lke mooey yet also be fair nnd h~)fleSt in bUSillCSS rel:ttii)I\Ships..

BRIEFING I LEGAL & ETHICAL PRACTICES Ethical Dilemma for the Thomas Kinkade Company: Was It .. Ju$\ Business .. to Exploit Galltry Ownt t$' hlth? Scl(-

dcscrihed "painter of lighC 1b~>mas Kinl:nde is n horn·again Oristian who uses religi •~u:s thc.ncs in his att. But l•i:s c~).ftlp:ltty ats~) u:sctl sl•!lf'JH •Igetl m~ keting •·md busiDCss caetics tt• make mooey from that art. CuuJd Kinkade h.;h'c

found himself in :.n ethical t.lilemma between foUowing his. religious v;ducs aDd ways of selling his products?

At u prescnmtion ror pri)S)XX:ti\'C Kinkade SigiUlrure Oul· lery O\\'nC1S, S;:~itl the f~'W.ner J)I'OJ)rict~)f'S of a Vi.rgjnia galle!')'. Kinkade and his rcpn;.Sent<'llh'Cs \lSlxl wonJs suth as Cllrisfi(m. Cod, ptJrtut'r. ant.l tniSI to create "'a cenain religimls <:nviron· mcnt dcsignOO to i.nstill a S]JCCial relationship of trust.' .o What the Ct.'IUplc was nm h)ld, their attorney said, was dt:lt they Wt'IU id

11:!\'C to sell K.ink:311e :!rt'A\Vks :.'set ret:lil prices. CVCil v.;hiJc (he lbomas Kinkade Co. simuhuncoosly uOOcn:ut them with its ..-m·n discount sales. f)

The rcsuJt was the)' were forced tt• close lhei.r gallery .;·md I~>SL the lire .stl\'ings they hud in\'estcd • . >\11 appeals court rokd

36 PART 1 Tod.JY'' Busin~?SS Env ..rotU'Mnt

that the Kink.oJe compuny twJ to pay the couple SS60.000 in dnmage.o; plu.o; SJ .2 miJJj~)f') in t'l.hcr fees anti expenses, which ui!Unat¢1)' letl t~) d•<: f11m's OO.nkrup«:y.

Regardless of )'t.'lllr religi,-ms beliefs, lL.l y,lu thin.k hardball business prnc:­tie<:s are ''just business"~" "just part ~)f the g.-:.nle" :t1kl d•<:reft'r¢ -:.II~'W.':Iblc? Or Jo some tactics I>OSC an ethical dilemma for yoo? •

~!<!having Badly, Behaving Well Why m ight l attribute purer modves to myseff than to others?

Sam Waksal. ).·10. founJer and CI!O of hnC'Ione. a bii)(O(hn~>l~>gy company. le:.rned- bcforc th¢ news w:ts rnad¢ public-that (he U.S. £:MC11lnl<;nt would rcfu.o;e ro apPfove lmCione's new cancer drug. a dcci.o;ion C«tttin ro Jri\'e JOV/n the C\lnlpa.ny's surl price. W~kS:tl quickly triet.l h) sell SS million of his fmC lone stock. an acto( insider ero·•ding for which he ultimately was sentenced to 87 months in prison anti finetl S3 million. buidt•r tnuJ!!!.g is the illtgal use of privnlc- com­p.iHI)' inform,.don to further one's own ro•·tunes or tltost of flHtl ilf or friends. (1b i.o; v.a s the case that affected h~>me-dCciM' und life.o;tyle guru Martha S.tcwan as well.)

Behaving Badty: The "Hol ier-than-Thou"' Effect Excuses Our Own Behavior but Not Others'

\\'h:n makes so•nc: bu$inesspc~)J'Ie tltillk it's :teeCI)I:lbl¢ "' .c;ng;ig¢ in such mor..'ll skaziness-insiJer uading, decepti\·e ad\'eltising, shaJy banking Pfactices. und the like? Perhaps I>Ctlple 00\•e ~ .self·inllated bias ~b..lUt thcm~lves.. a Ct.Wlditi,ln known a.s tbe lullittr-tlum·tlulu ttf{t'cl. 14 M;lny ._,( us O\'eJUSti•no·•tc our willingness to dt.) what's 01\lt:llly right. ~nd it can greatly inllue1\00 h,m· we jutlgc other I>Ctlple's acti•'ns. such as cheati•tg ''n restS. 0

Re.o;ean:h shows people will make genemus forecasts about their own moml beha\•i,lt and less. genemus pret.licti,lns abt.)Ut thei.r peers·. But the negative pre­Jictloos ;lOOut others turn out to ;·•pply not ooly to others but to themselves as wc ll. 11

The holicr-tban-thoo effect diminishes qulckly when people boco~ne i.nvtii\''Cd in the actual experience they are judging. As one writer .says. "Dubioos accounting l)r:.criccs wiiJ :•pp¢:tr less sJ•-:.tly ro 1.he I)Cf$()11 wl•o has hatl to J>UI a 8~)1)(1 fX<: 011 a failing oomp..,ny."' ~ ln other words. i.s it really the situation, not moral ch:tra.cter. that guitles. beh:lvi,lt?

Behaving Well: Treat Others as You Would Yours•tf

Why be ethical? Why be good'! Moybc. suggest.o; a lxain srudy. people pcrfiM'm selfless acts lk'l just fl)r a" <:tnotio••:ll rev.':lrd bur boc:msc rJtey're acurcly nuw:d in tt1lhe needs a.nd actkms ~_,f otherS.. •J ··.>\OO therefore: · says ooeof the.stlldy autho~. "r tnigJ•t want tl) ttear !)ten\ li.k¢ l might want them tl) ttC:tl myself." "

When you g.roduo·•te into the business world. will you dt1 the right thing? Earn­ing money is certainly acceptable, but many students hta\'e decided it 's equally Un!)l)ltanr t~) OC ethical and S~'ICially responsible . For example. a l•igh p<;rccntage of the W09 1~ ;·11\'anl Business ~hool c la.ss gro·•duating with master·~ degrees in business. adminisu:ui,ln (MBA) signed the l'/JM (){lflf~ a voluut:u·y lltudenl-led pled&t' of inlt'ntion to servt' the gn:<ner good. They promised to acl n:spunsi· bl)' and ethically and rt<frain from a dvnndng their "own narruw ambitions" ~II he expense of others. "N~) '"''¢ W:lnt:S tt' haw; (heir fiuur¢ criric-iz~l as a J)Llce 61100 with unethical bc:haV"iors." sa.iJ Mo'tx AnJeoon. a pledge organizer. He ;·•nd his classmates. wam hl learn from the ethical failures of the pas.t, "\ l,l things dif· fercntly. ;·md acocpt our d\lty ttl lc~·•d rcS]xmsibly."'1' Is this the way you wo-uld like t\) be a." well '!

!=Mo-.?;! The Inside Story on Inside~' Tr ;1ding with lmCiono, S:.m Waksal, & Martlla Stewart

0 Oleating. Obv otr.~ly, ~udenl~ ""ho dcm't do tl'lo work them$0~ 111e not INrnil"g ~.d. r~e:m:h $11ow;, they s!ip bohind in l:nowl. edge ¥Td grode~. HC7W do you judge other stvdotJn"' clwutting on ttnis? How do you iudge your ::elf?

w,.nt to Know More? 2·4

EA,.. Somo Taus to Uso to mine tf an Act h Etlticaf?

"""""'.m~bt:Wb com.

Arc. we a nation ._,( cheats •·md li~? lhvi•l C:tllahan, authm of 1Yrt- Clwming Cuilul't',

Wl)lriCS :t\>ltut "or.:6n:uy I)I':OI)k's willingness to decciv( othe~ und cut cornc.n; purely to makG ml)fe •noney or win some pri:r.e:· •~ James Ste\\o'tltt, \.Vtl\) Wl\)tc Ttmgll"d Wt>IJS. think$ there is so much high-level lying that it i5 ''threat­ening to swamp the legal svstcm. stymie the coo.ns. anJ $11W C)•nici.sm 1\:tti(loltWid~."'"?

Why docs such unethicttl behavior happen? Pcrtwps. suggest tW\) expcn.<i, many of us :.re guided by IIWtii 'Oit-d

bfi,ldllt>f.<. Th<tt is. we overlook inft,rmatioo that works ttgt~inst our best interestS. f!"l)f exampk., when we are bu.<>y fv.::u$ing ~)f'l •trg.-:.n i ~ation;ll t~l:li S such :.:s. s:tJcs, they 53)'• ''the ethictJI implications -.>f iml)l)fU)nt dccisioos can fode from our minds .. .. We end up en~aging i.n or ~m•l\)ni.ng the beh<Wi.or we woold condemn." '

M\)ti\'atcd blindness lwgin:> in sd111rJ/ and is c:t.rrie•l inf~) bu$in~ss.

School Cheating: Design for Failure Clwuti'IS· getting unauthorized hei1J in fulfilling gr;·•JcJ assignments such as tesLo;. :.nd plogiarism. representing lllhCfS.' Wlll"k as your II>A11'1, :If¢ 11\:tjl)l' C~)f'ICCil'lS Ill CtiUCa· tors-anti to empklye~.19

Cht":lti.ng is widcspre:.tl :.mo••g higJ• sd•OI'I sn•d.:::nr:s.. with 64.~ in one sur\''t.Y admitting to ic. oftc:n o.WOO by cellphi.)fl(:S :.nd the Internet.:» Cheating is alw an :11:1rrnint pmblcm in collctc. with 87% of unllergr:tdu· atcs saying tbcir J>Cers o.t least ·'someti.mc:s" pla.giarize from the Web, 1'\)1' ex:unple. ~~ h eYcn occurs in gr.tduate stbt10l-S6% t'(y.Wuate business ~tudcnts were (ounJ to h:t\'e chemed.··

How("' smtlcnts ;lttcm!)( "' justify this? Son~ may tbeo.t oo .w c.x;·•m •·md say. '' I don "t usually &.1 this.. but I really haYe t\) •I\) it." They would rather che:u. that is. than sh~'W.' d•~ir f;unilics (hey g•" an F.H Wh<ttcver the motive.

38 PART 1 Today',Businl?$$ Env totU'IWnt

rcsean::h ShOVo'S. students who cheated •·md thus didn't aC'Illally d\) tbe a.o;signe~.l wmi: were Ll)()I'C likely ll.) f:til. ! '

Worl<ploco Chooting & Lying: Wll It Como Bock & Wredr Your Career? "Smdcnts don't just 53)' 'OK I c~:ned in SCIM'II)I , btn n~'W.' I'm in the workplace anti it enJs here:·· .suys nn .~ri;wna f)I\Wcssor. '1'hC)' Me f•trrnint bad habitS th:tt CM•'Y OV(r into the martel."!)

Slipping int~) m~j~v d•~:lti.ng :1ntl lying begins with ·•small infnlttioos-4.1kga11y downloading a few wngs. skimming snl:lll am .. 'IUnts. from the register. lies~,}( omis· :)io.- on t:.xcs-ond gt•tw:s. by incr¢mcnts," suggests sci· ence wriECr Benodict Cnrcy. ·rncsc "small infractions" can bcc.ttnc 3 way M l if~ t.h:tt t rows into 3 deliberate Wategy of dccepti.tm or (raud. :»

Why •I\) I)Ct)ple engage in theft an•l frnud i.n the w,)l'k· pi3Ct';'? The rC:tSQnS :trC fl\.'linJy CtWlli(ltl:.l:

Corner C-utting: Pc.tplc subc~)f'I.S.Ci~'IUSiy seck sl•ort· cuts-as by ehcating-more than they realize • .suys Ca1-ey. We Ct,)fl.Sitlntly make ch .. )ices "berwocn shmt· a.nJ long-term g<lins.. ... between the •norc V'irtuoos ch-.>ice and the less o,-·inuoo..<> one." Resen1ment1 We juStify chc:tting anti lyint because we h:t\'e resentments of an authl)fity or of a specific rule. Unf~lt•ntss: "Pcli•:.ps d•~ most J)IIWCI"ful urge tO cheut.- snys Carey. "stems from a deep sense of unfai.mess''-such as the fxt dwt .. wr peop5e had ildvanta.gts you did DOl. Still. does that gi,•e you .w e:tC'U-"e to. say. tul:e C'I"Cdit t'l)f other people's WOt'k'! re~r of being~ C-hump: 11te biggest fe:.r.night be ,,f "niX being smurt" nnd "finishing oot -.>f the nlimey." S1.) Stmng i.s this f~r thtit many p!:\)ple chct~t to :tV\)id h<Wing to deo.l with feeling like chumps.

Doing the Right Thing: How Organizations Can Promote Ethical Behavior

THE BIG IDEA: To foster hfgh ethlcll stand61'ds, 1 company needs to have support from top management ror 1 strong e thical climate, hlte ethlcCJI em­ployee-s, and Institute., code o r ethics and trofn!ng programs ln ethks An indicator that a firm ha.s ethico~l problems it 1 history of whisdeblowers. Pub­lic <::orporatlons must now comply with the Sarbenes-oxley Act

THE ESSENTlAL QUESTION: What are fOYt wwys orginludons c.-n foster high ethkll sta.ndards?

MyBbUb! Che<;lc yo~ undefstandjng of thes• COI"''~IS II www.mybiz.lab .COf'T'I.

H tft'•S 21 rotlt\."h.W'(o iilt'rl\, 1f )•IU '-";1ft fin.J tl Cht 64--t~lf ""EM.-.. C~lo,lt t)( £thio..- The ~·~ Cncfl)' rompall)' -.~, Ill!« dlr M:"~Uith ~

COO'IpaOy d the UlliJcd Star.n.. OOt il ~ inhl bul.Nf'CC)' mftt:r dis.:bwre of tuply inq\llar ~'ial dt~!np. bnn;liii!J cmnc:nr.klU\ kllt>~t.l\l ~NL~ ud c:~~ and pri~ lc:nn' IAJ W)IIX' (J/ 1t1 tllfhc'\1-tant••; cx«uth~lii

Clit:.rly, any t\llflll\aA.Y caft .,..,.,.l up \4.)fllr ~o~.W1 '" C\lJt ,.r ('(h!C' h'l p.~ in ~he cmplo)tt luncfu"ocw. But how c.n "-e '-*"' 1f i• iti ""~wtin.; IIC'Ih-rty 10 f..s1er high cdtical SUlldmls1 We ~UFJCiol then: an: dln:c NFRS. M l\\i'IL (.-v

1 Top Managers St rongly Support an Ethical Climate: "We're Not Just Giving Up Service" Js top m anagement support realty nec.Jttry7

1t may be Lh:tl I~W<er·kvd empl•lf«'lo will !ltl e1hk.1ll)' nftll hooor.lbly. Out if t"'' Clltcutivc ... \\i111t: 111 cdllcal p-tlblems. I•M'~ the dther way. J,)t)ge them with legal h\I')'IIMi e~o. nr .Q:Cf'lernte public ' clmiOI'IS Mllol:<'toCI'CC1'"· !hey 01\"' clearly f:uhng 111 ll.'ad by cxnmplc. l'hls wtll make c:JU)'h')'CCll tynkal "~'UI d•e l 111~ elhical climalc. Why &hnuiJ 11 c lc1t IW'I JUeul fmm !IIC 1\ fllec supply <:abi1M.:t when the f"-"'111¢ at the l~Jo)' lU'C u .. iiiJ; the Ct»n· pony jet f1)r personal \':•cation tnn'd'lJT 0

BRIEFING I SOCIALLY RESPONSIBLE BUSI NESS An Ethle~l Top Manager at CltiMortgage Keeps People in Their Homes. A big JLhWY in the 2007- !()(W l'eCC~•)R \.113!0 ho.)\\'

the @:\)\rCI'nn'ICIII ~unc f1"'oll:u.1 t.' inJ~I bill1\>lh t}f ~l,,ll;tl":' inhl b.'lnt .. 111 t:er-11 them hom failing. Many ponplc t't'l'nplai.Md, hn\IICVCf, th31 the banks lnl)'ill)' useJ dle money to sh!Jfc up their rc~LC:r~-c:" •v IX•)' eltccurhe h!.)OUSCS rather than to rc~uc fk)'tl,it•~ l.lf nw1n,-<11( h.1klm 'ollh.'-.c h,,,ne~ \oliCI't' in d;mJ:tt !)( fun::dosurc. Antibank f~hAJ brooJht !he mlwuJc .,t em11l))lc=« ,)f financi31 ii'I<OtilUli()n:t W ~ll·linlC .. l'Ali

One such iru.titub\)11 ~~s Cu.\t\)f\llliC, the AUChlR'~ h"MJnh~l.ltldli'OOrtga.,~ lentkr. part l)f Citiaruup. ~ hkb ~'Ca\-al So&.S hill inti iA U S fitl:uledl r~w=

--------------~1 0 Top-4e-wl eJtalt1)1e, ~ Jure 2009, eJcocvtiwl from four bMliM receiving bailout money fron• U.S. 1-'"f'l.-y!H'$ 'WOte roportod to h~-..o taker corporate~ ror tJ-er -~ '0!\ill ~~-code forv..a'tion-as n flying ore's family to a luxury·~ In We~ Virginia ICI'Ic .... r.g ;hi$, if you Yrlt'l'e a CM·I~ b,nk t'l'llployee-, ~you fMI il> 11!1 guilty if ycu ~ont"d ir" "',;dt• to go to 11 ball iilm•1

(HAPTU l EV.O t. Sooil& ltesponsblr:y 39

' ' ' • L. 0L ~· t Cl I 8 An ethical MOf'tgage loencStt. CitiMortgage, hc11oqu~rtcred in St. lOti -s.. beeaMe a Seed~ 11'1 doing ~~ing po~s.ble ~o :.•l(lr:: f~e:do­surM. CEO Set~jlv OM e>~e-Mpllf!e~ the kind of exccl.ltivc we could .111 ~ to ~e More o:. Hit dt>dlce· tioro ~o keeping mortgage holder~ It\ the if l'lo~t duMg ker<f times rcpre::oem::o _,,.. e~hiu model ~h:lt Mel'ly ot~ WI&:~ fei!ed to r ... e up to. Do you krto'N :tny busil'l~:;pcoplc

Y<ho~ ettla ere e:c:c~t~l?

runtls. OkK)m nmong cmployc(':S wus augmented by the wave of fl)feci~N~re tiling:s crippling rJte I~<)USing m.atke,.

F'"a.ghting these problems OOt•·une the job t•f Citi~ lort.gage's DCW CEO Sanjiv lhs, :.ppt>imed ln 1008 1\) hcttd the St. Ltluis- hc3ti4U!Ittercd Ct)mpany. The lndi:.·b~'lm Oas, (hen 47, s:ticl one of his go:·• Is. v.':IS 111 bl1ls,:rer ¢ttl('loyec IY'IIIr:.le und another v.ras t<) av«t foreclosures. To those ends, he hclpcJ pioneer a tlm­•lf~a-kind l)r.)gr.ltn at l)te b:ittk 111 hell) ' ">•neowncrs. wh~) I;)S.t d•¢ir jobs by :.I· tu~.~.•ing them to lower mortg;l.gc payments ft•r thn:e monlhs while lbc.y looked ftw nC\1.' j•,bs. He :.1St) ptt)Olmcd I•}Qn m•hlitication:i. fin .. ling :. v.11y h ) kocp s:i.x clcl i•~JUCnl b~'M'I\)\l,'ei"S in IJtei.r h~)JllCS for CV¢ty one f~wecl~lSCtl upon. 0

' 'Our manu11 1\) (empl .. )yeesj is very clear," Das. S!li•L "h 's :.bmu keeping 1:1e01)k i.n IJtei.r l•o•nes." He ,J rcw UJ)IIn his value $~t¢nl :.s the $On of an lndiatl urmy 1>fticer to muture 1'0()1\lk by expre.o;sing purp;)Se and integri ty. " 'Ole No. t thing I wlk alh)Ut are the cuSb.)lncrs. Each .. lay. my busioos." is h) keep them in lbc.ir homes. Dl.' matter wh3t."' •

2 The Firm Tries to Hire the Right Employees: "We Want Hon&st, R&sponsibl& Peopl& Working Her&" Whtll can companies do ro screen job 3pplicanu?

Few companies delibcroncly try tt• hire dishonest. i.ITCS)xmsible cmploycc:s, but h•)W do you screen them out? Onec•)nlltl()ll nlCth\1d is h) have pcr.sonaliry tests., but IX'IOIJk. have found ways tt• chco·•t on these.~" A1~11hcr i$ to run :IPJ)licantS thf11U£:J• 1!-Verify. the federal program that allows employcn; t<> 4uid: l~ chock oot the legal st!Jrus t)f Jlt"XCntial empJ\-,yees alkl l'Cill\)\'e illegal lmmigrnms..· Fioolly, t)f COUI'SC, lbc.y must chcek~call)' check-applicants' rtsu•nts and rc.ferooces. tWc dis<:uss upplicant SC'fCCfling in eonsidcmble detail in Chupter I L )

~ BRIEFING I BUSINESS CULTURE & ETlQUETrE D,l Who Will You Ask to Write You a Reference? {And Don't

f Otget to Thank Them.) Oetting re:id)' 111 apt)l)' for th ::lt fll'$t job" llopc you're one t•f lhosc grc~·• t people th.;·•t ct•mp;·mies are always looki.ng fm? Ttte :.pplicati•)fl dft)tt can't begin h 'lt) ~rl)'. as you need to dlin.k alh)Ut (he p¢i)))lt you will ask to wri t¢ I)C!'Wnal re<:Onllnt i~Jati lln$ for you. N1r IUI)S{ students. it will be their instruet.;m. wh1> nre l'requcntly valueJ by em· l)l~)ycrs f11r (hCi.l' insigJ11 i.nt~) StOtl¢nt:s' \\Wk l•:.bits. (Anti. b)' d•¢ wa)'• gtii.'KI cl3s:s attcnd;·mce and particiiJatitm dclinilcly wt•rk in yoor fa 'tOr in geui.ng a reference.)

But here's $1)0lCthi.ng itn (ll) tta:nt tO k!li'IW: IV/t(',("t'('r JH't'f'l~ dh )VIii afiilv,r. yr'm llt't>d r~> ll'l'ift'o lld/t> orrr·moil Mlllank r/wm. 1bink thtlf sobvioos'! .>\ctu.t~lly, many l:leople IJ•ittl: d1::11 ')»I irene$$ ::\Ill I nl:l"lter$ S«tll 10 ha\<e 8f11ll': d•c V."'a)' of the: di.n<>­s.·•urS..''.n One womun high up in a lurge eoomcties C()l~)y dcddotl to refuse to help fcUov.· ;l]umni (l'l)tlll~r J)l'e9igioo:suni\<er$it)'. 11<te rem••: 0 \·tr at1 18·•Y'II'n1J• IJCriod. $he h3J gt~DC out o( her way to help six ah.umi network i.nto ne"'' jobs. In 1'eSfl'1ClSC h) all htt etftn.;... no.-x :. s ingle .. me took the tinlC to dlanl: her.l1

TI1us, when iiiS.:t.rUet~li"S write )\ltl refcl~nces. OC $UI'C t~) tlltml: l)ten\. By sc.DJing them a noc.e. It's clco·rrly the right thing to do. (And. from a pun;ly sclf­Lo;h SLan .. lpoim. Y•ltl nocd to re!Jii:r.e you may need their help again Sl)OW•Iay.t •

3 There Ar& Ethics Codes & Training Programs: "W& Need to Tell Employees What We Expect of Them" What are two kinds of ethks codes?

A fi.JIIk_tJ! ~;Ihif!S cunsirto; or a written set of ethical stauda•·ds to help guide lUI urg;mitadun's iH'lkms. Most codes s tate to)) man;l.gclnent's C.XIX:CCil.tions r...,

40 PART 1 Today',Busin~?SS EnYronment

cmployce.o;. ~>t'rcring guidance on hi>W ro treat cusromcrs. suppliers. anti com· p¢tiii'I'S :1nd Pf'' hibitillg a 'nflict:s ~)( intCr¢St. bribc:f'Y. :1ntl tn:llting false :lCCOlulling Mntcment!. JCP(:nncy. for insl4·mcc, is well kno~·n for ilS code of ethics •·md C\lS· h1ontcr service ct~Ucd "Ptnne)' Principles: ·

Two Kinds of EU.ics Codes: Complianc•Based & Integrity-Based ElJ•iC$ c~'ltiCS ln:l.)' be ¢ithcr r·llmplimwt-·brMnl ~"' ;,rt-grity·l,m,tn/.

Compliance-Based Ethics Codes. c;v,IJ,lumn·r;a;til rrlm~1 attempt to prevenl ('rimirual mis~:ondud by iru;reasing l'Unlrol and by punishing. 'iola· I OI"'i. E-,r instance. many Cl)nlp:tnies :.sk empl .. )yees h) sign oondi.scl .. lSUre agree­men~ ln which they atkoowloJgc lhat if they lc.'lk conlidenti;·d infonn<ttitm about products undc.r development they con be fired and even sued.

• Example of Cornplian(.•Based Ethiu Code: Apple, Maker of Comput -

1

~ts end lPods. l'='ew eompanie..o; "arc more secreti\'e thun Apple .- according to a Nt-u· l 'tlrl: 'Timt-.t $1;)1')', "11r as !)unitive 111 (h~lSC wl•o dare vi11lat¢ the <:(>n'o· p;·my·s ru l es..-~! Employocs are flfCIJ ft•r leaki.ng DCWS tt• ootsiJcrS.. Everyone must sign n .. )fldi..sclosure :.groenlCnts.. 'Olose wmi:ing t)R pri•>rity pmjccts nm.st J):lSS.: t)lr.)ll81' a m:r~c 11f $CCUri ty (Sill.ws. When thcl'l..CEO S t¢\'e Jobs h::ltl a liver utmsplant in :!(}OC:J. the news was kept secret until he was safely OOck at wmt .n •

Integ rity-Based Ethics Codes. flllft•grilV-biJ..,·tvf tthio' tulle.~ attempl to en­a ble rt .SpOu.Sible empiO)'ei: \~tmdutl b)' lTe'dling au cm·irc:wmeullht~l supports tthicall)' desirab lr btha,•io•·. 1bis approach suesscs a culture of fair play. hon­csr}'. :1:1~ 1 cli\'trsit)' :i1~ 1 tn'J'hasi~cs sh:lreol acc~'ltuu:.bi lit)' a1Y'111ng ¢tn('loyecs.

il Example of lntegrfty-8.Med Ethics Code: lnnoe~nt, Maker of Uttle Tas-ty

I Drinks.. Oritishs.noodlie maker lnDtiCent-·;wc call lhcm innooc.nt because. our d1inks are :.h ... 'tlys C()mpletely pure. fresh. and unadultcroted." says the Ctltn·

J):itiY'$ wcbsit¢-oha:s bec~lOlC known 1'1()111nl)' tilt l<te:-11)1)' ingredi.cm:s bm :•l:so fiM' it..; social commitrnent. By gi,•ing JO% or its profits t<> charity. pro,•iJ ing help to the h•llneles."'- :JI'ld usil'lg recycled bmtles, )fll)c)CCfU. .suivc.s to create a cuJture o( ethical •·md MICially reSponsi.ble beh!lvior. In 1009. Ct'lea~Ctll:t ac4uired a fllii~Wil)' $1ak¢ in (he Clllllj).'ll\)'•.\4 .

Ethics Tr-aining & EU.ics Officers To reinft'ltce the ethics c .. xles.. m.'lny Ct)mpa~ nics provi.de ethics tr;lining. often presenting employees with possible ethical dilemmas d!C)' Ol::\)' e\~tlnl!lll)' CnCIIUI'ItCr, l :uge C()ll\t):l.· nics (n:qucntly have an ethics oflicc. bcaJOO by :.n ethics officc.r. The job of the t"tlikf W. 'C'C'F i$ 10 intcg.rt~le lhe Otglmi'.J..Uion's tthk.s an d \'alucs iniUati,·cs,l'ompliancc ac­llvldes, and business condul1 pra~;tkes Into the "~umpt~ny's det'ision·mnking prt)(·~ Ct-,mpanies with ethics .. )meers indu .. le the Ch.;·•se CotpOrotitm. ~Htrosoft, and Yabt10. 0

0 y.,hoo ;w~d ethics in Oi.,;,. In 2007, th-e ll'lten'let·~IV:<:ts C:OMp.e!'ly titcd its fir!>t dlicf compli:11'1U 11nd ~tti!C3 ofic:er. lhk fol!ov.~cl e bo&rd mc.:-tirlg in which Y;,hoo Wll~ criti c:l2t'd ~or c:ooperett~g ... ttl th-e Chi­ne::..:- gov.:-mnw:nt on ccn"'r.~hip ~~~ Y<ell&~ pt'CYdiflg~t~:Ofl'l'l8tlol\ &bOvt 11 Y:.hoo W.11il U$Ct,"' Chine$(! joum:.l 1st.. who wa~ &treated and 'entet~<ecl to 10 y.:-;,r$.. Oo you think g .:-rtirlg -'"' ~tti!C3 ofic:er <:CM.ld ~oMeti~s b~ e comP"'ny'::o v;:.y o£ whitt-W:.::ohittg"' probleM?

CHAPTER 2 E;hiu & Social Rcll,POI'I$1bility 41

2 3 Corporate Social Responsibility: • Concern for the Welfare of Society

THE 81G IDEA Corporate social responsibility is concem for taking actions that will benefit sodety This te<tion also considers blended vJiue, measuring rtsults In both economic and sod1l areas, and social auditing to e"'aluate wr• porat• social ruponsibllhy.

THE ESSENTIAL QUESTION· What are corporate social responsibility, blended valve, end sod at eudidng?

M yBUUb: Checlc: YO\III und.,standing of the-se concepts at www mybizlab com

I f nh1cal rt\l'l'lll~blhty l\ attiNI hoelftf a f('Od 1nJa\lduaJ C1bl:m. ~~ 'f«illf ftl'!pututhlaty tC*SRI if; Alllt hdAJ ~ Soo.l orpei:r.:uioo:d citizeo. As 'GOC S3id..

CSR i'- a ~"".n..vrn f~• W.t"' a..-1Mv.' lh31 -..ill btntlil tht inttrCS~S of $0..-'"iety ~ Viidl 1H the OI'JIMUt.IIIOG ~ may f":ln1!C from spoMOrShip of Link league sports ~m 111 <.rndii'IJ ~ppllt$ t.l t..n.h~l:t: 'i.ctitM..

Is Corporete Sociel Responsibility a Good Idea? Two VIews

0 Whose problem? If fon '"*-' conttbute to c:lim1111t chang. tn• dueling suth e'fecu "' mdtll'lg lc:e ups, ~ld enffft;lf companies be 1-:elc a«our\Jible? Wt·..,l thovld lhey do by way o' m11k>flSI .llf'Mnds, if IIMythirg?

Whet •r• rho lrgt~ments for and against corporate sodaJ roJporttlbiflry1

It u~l h) hr lh:u 1 e~'mll:l")'\ Ill•~ iulp<'ft:tnl &•\.11 \\':tS to •nal:.:' money pn:ny much any wuy II 'Wilntcd. n=J:nl\lle!is ,,f the con~"'uences. Todny. h.w.·e\u-. mn.ny f\'lf"'fJWfit cntt!P•i~t> I'A.'Ike n pilim 1lC co•mih.uing hl society as well ~ t.leri\'ing 1)~\ll ti'N\In ic

44

The Case for CSR: .. Companies Aren't Separate from Society ..

1'hCI'I!! Ute dln:C ptill'lllty lll'y::\IIDenl:{ f1" Ctlrlltli'UlC .!ii'ICi tl) r<:SJ)\"lOS\bi.Jity: 17ir'L lliriCC hU!iillC\\C\ <:rCOll~ fo.l\nll) 1"\)hl\'rOS ("UCh :t~ til\'itMWlCI'II:l.l ))llii'U·

ti0on), they ,,l~'u ll.l help h' ~onlve !hem; uftcr all. C->mpanid an.:n't SCJ)\l.nUe from the: I'CI>l .,r ~>nciecy. Nw cx:unple. 411 n11e Wliltl' put it, "the prices JX'l!ple pay for •:•~'liiW' , Clr.cCric 1\IW,Cr, 1\1~1 «'lhCr cnrrgy !W•'IliUCII; \lon 'c reflect !heir uue ~<:;~~;, 11111\HI)i them ti'IC lmp:rc1 t'f prccntw,usc glliCs.'' 11' Q

Stctlll,l, "'''h.e~ finm ,,,,t,, h:l\'(' the teli•~ll\."'tS co soh·t pn_lbk o'ls dlor the ''~"'l'lti.lfl t ..c..:1nr di'!C' ntW: Thu,, 'o'hlle they ha\'t" no obhgation '"do so. they can male a bia "hffcrc!kc: if chcy cbil\llic m al•nmir td foojar support.

Fi11:1lly. bell'lj, lW:I'I:ially '"''l"'lfl,ibk' aivt' Nrnp:~llies a J)llSiti\'t public itn3gt that c11.n hc: lp haul (!<0' ;ov~rn1ncnt rrguhttion.

Thu,, in the ''l'~+"toln ,)( 1!'\.\~\0'Iist P..-ut Samuets-.m. \\hil rtcetldy passtJ :1\l,':t)',

ll4'01f!J~Y 11hi\Ukl he c,)ft(:cmeJ ""1th ,'lll'll.:icty'll "'etfare a-. "'ell as OOI"ppO'ate profit~ ''A I:J.'ll~ Wl"p\'nl~,n the<;;c d::ays llllt only may cn~a.~ i.n S;:ICbl respoosibility.-~ '""iJ. '"'it had d.1mncJ \lot II Maer try (o)\lo) <o~1'"* The S3me'.cl coon.e~ 4.-oold be said !ib.wt J.ll\Jll i;ilrpolrJCinM ~n..l a·cn J!k'll;l1-Gf'ld.Jl'lP busineucs..

PAR'T1 Tocia(sawsm-f~

The Ca.1e againlt CSR: NCompanles, Should Just Make Profit5•

''llloe ~~~d •tl n:' J}tXt'ibillty l)(tlll'iinc"-" i\ M mal..t: ptllfib." "-1\ltc: the li1te eoonomi.u Milton Frict.lman in 11 rarnnu'i 1970 urrklc ''"There i!; lWIC and only ooc: social tt:"l\l'lll"ibili ty ,,, btr .. i~~e" h) \hC it:'i tC'>~lUn.'t' on~.l tng:~ge in acri ... ities de:sigt~Col to illl.'fC~•:k ~~ P"'fi~ w I,M\1 il\ it \tay\ ""1thm thc ruk, ~'r the game. \\hich 1S ro say. en,ppc..~~; in \JPC=R anJ l'n=c c.,mpc:tili.-W'I \liithollll t.lcccptillft or fraulL- tN.:~~:c tbc: WC~~ tWII ....... ittMUt tlt~pei,Wl'' l~'tpCi•ln, unfl'r1Uf\.1f('l)'. Oftl'ft being Cfi(IS.i,lere.,l \\'tthm f.ur OOun..k by "'wnc: bu~lnc:~"~')llc:.)

FtieJ1nan a~ lh..l& 1f a t'inn '4J.:~ tli'i.lr:KCtd fro lin it" •nl,"'>im'l ft( ln:l'ICimiJing profi~ h \loOUkl (.a;,l w ptl\nlt ~-,..1\l, an.l )('nl ... 'h and btrl(fit 0 wocU.Okkn. lhucby al<10 l':a.ihAJ M t:tmcc: )')tK :a.lkl apan..l «llfk'ltl'lk JN'o''tb-tbc real So.'JCi.al ju-~;~if-.'lOitioll'l r.v thr ,..,,""~> ·, nn.rtn...v

Mon:: IDJ more. ~C\'Cr, C\'ll"f'Gtlle\ ~ fiaJ.:n,g 1hac bring socially «SppG· ~;.iibk Cllft ac~~~ally c~hano.:t rn.tih 4a J'l'l'lnC •t tAt- up :~pill ill ~· ... 1;..., !.&)

f!!!!".l BRIEFING I EARNING GREEN BY GOING GREEN ~ Subaru PrOYH Going Gr••n Can Lower. Not Increase. Costs.

The"'*'~ •kd.n i .. tb ..... '~pin. tmihwnenully rritnlly rn,_...,.~~' ~ kl c.ht aN of d--..., a.u,.~_,. But 1!\'lft'IPI!Ws c::ao d.> •"tO by ~ JOOd. -'lo '-""'C ck_~C'\ CUt ic"r; C:'Ptftil\"'t" ~ C1lp ~ and pro­~ w~ -~.-ot.cn~ ,,,l ~me .. sdh.ll~. '"But ... me r.x:us !ohould111'1 be a..dt-.~ upaiiMI th ... -.,.,1>-thr (().'U' !>hc1Utd be 011 ~~ kss fiiL$S to~~~~ •ilh ... ,

n.,. !0 )'C";!J'\, dlt l.af.1yrccc rt..nt ,)( Suharu o:rl ln.liaru Aut\-.nnti\'t' PI~ p«n ll'ltttali\t-" dlnnJ the {'\lUOtC t--r t!Qnu(;k"tUnn~ 800 \t'htdC"' a day ""\\'ich cmpkl)'tt' a1 n1:ry k\d c,r che pla11t l!'lo•ing r.x w."'3:)'1i t.l ~~ ~. ~ \\ a-'UC". anJ tn.rmlly nl.ll.t P\)l.."t(Oo(". ll'k'lf't ciY'icit-.- rtp:'tl 11M' schl..-a3;r'S.. ••\IIIII" •ocru.ure o( 1tt: ~IK'«ll' j<;; a 14(). rc~.hw:noft in d«lrid!y ronsumptiM ... .since lOOO An rYcon bt~~tr ~hiC\comc-nl It h;i~; QOI tiM~J :.ny '\I. :lSI~ Co) a la•"Jtill l ~ou"-"CZQO.I.]" e

0 ~"' of Indian. At.ltomoti.,.. ~ • lt•t• tl-.-t 0« 46.000 •uro job\ In t .... ~st OK:.d~. Sub.llolkd ~~ mo1t"' to byoff!!l and ,.. fact kn gver~ WOf'kels" w•g. Ina•"~ """"'Y ~~~~ ON o' 1tl• tl'"!Of •-vt ttl• ~~~'~Y has ach~ this 1\ ttT10ug~ a relf,ntln.t fools Of! tl'q'CI....g, 1~ ~t" u~ by~. and compo'lt· ng 9ft of ct-. pllll'!'t"t wur-p.~p..-, plaWlC, gi~Kf,, f'M't.all, and to on Cofolld ttl,-; 3ppo.cfo. b. aJlf)l ~ 10 • .AI'Mt!C.!'I Industry.,

1(.-y ,_. .. ._.y lo1 ro f~»ter 1- 'I' ettl<.l st•ncl•d\. .. c:omp.w!'(i tfl ~l'l.,.. '"'* 'l(JfJI'Ifiy Wppoft ,. HI- uJ

~· ., ,. ttl• """ l!nd ol ~ ....0 tww tlfl.a c:ocles and tr-....,.... prcl9flf'M

Sign of Major Ethical Problem.: When Insiders Blow the Whistle

Do I rhink of a whisdeb'ower •s b."'g 1 ,.Jttlfch•?

Soolctimes a «tl'tlpll\Y ~ an ~111 cllnurc tbt h3f\J v.:ay-by h:ning i" dirty lawU)· C'~ b)· • ~li.utli , ... ,.. •• utpkl)« •ho ~Tports ergub:a· t1o91 mk«mdlld to tb~ jrO\~maaut Of' tbt publk. wch :as conupcioo. fr:moJ. MY~, ·--a~, ("'I' hea)dl :agj Q(tey J"'*"''" Dl.lOJ ()ura.J. fll ""\\'i:n*"'S & l.ostn- • thC' start of this~.~ onr JO.:b e~ampk Anatbtris John~· s.ti. 3 f~ pb:vm:t«ubcal ~nu •lh.l ~ fMr'e th:!n SS 1.5 mill toe f;;w a •hiWI:bkw."Cr b.•'Wlt ~mt Pft1cr, the ""-wtd't. t:.:rw dru~m:d..cr, f..-.d pl)ly of prornac:ing ~p f;;w unappm'o'o.l u~ :and di't;«

Although c:mpl~rtl ha\'C b«n J'rl\lhihllc:d hy t.c;,tth and safety bws from liring employees who report w c_lf'kl'lucc: hatardli, in carlitr years about N;.;lhirds ~r-•-e fir<'1 l anyv.':ly.)(, Titt:fl, in ~l. thr S:utK•ne~o·O'dey }." (iliscu~sed bclo\\'1 became low. giving whi.o;Ueblc:M·clli Jlf\ltCCtion fmm rcmliution. Still. taking the b l'3\'e Step o f exposing C\Yp\Y:ttc '4'tollf:\k\illg UliUIIII )' CtltUCS til :1 CO.S.t. A ltbi>Ugb tile JNblk: riglltfoll)' re~~ .,..,hi!lllcbft~W<'r ... ~· !( l•c:n•e ... cmpl • .ytn. and fellow em· rli\)'OC.'" may consjdcr thcn1 "snitc-he ... "

White-Collar Fraud & the Sarbanes-Oxlay Reform Act Whilt is Sarbanes·Oxley?

&rn:ltd ~bJotf was C\)f'l<§i,Jctl'd 1ltlt' n( tht v,,,..,.. ... 1'1'11\<\t ~~ful lm-estors.. foonder oftbc Wall Strttt firm 9cfn;&ri.J L.. MP)ft' lm~ull"'aU ~C'IIrities LLC. Then i:• [)ecti'J'Iber :!008. a.s lht' US tC\'IIk'lm)' ~ ,J."Nonv.N \t:al.Jtf O)n(esstd w la!il<liiSihllli.. ilr><>tlllClJI> •m: Ill'\..., hr l~<" -~ 11\C>IJllnO 01 allbutlilba ll $SO billioe p, •.:J klklllk', usma ~froM~,... lnusten to pay an 61drr ones.«~~ ... ":tS Ra!'\Y\1 r,, Owt~ f\'tftn. an ltlli:Ln invnig:rw ,,.,., me· tictd lht fTaod in lk early 19CI>!.. ~ lhe ~ it'C'H' is far~) ~bOOK's "\lft'tt'l((Sooly~ tO~ .. '-1)""\W' tt"p.wt. ~ ht t\'MJ 00 1nngtr raise dJt money (a ~urocc of the Gmll kett .. .,M.,)M L«p hllo 114.-heiOC' gung ... ~ A few roontJts l3t«. tbe pet'PC'U'3l« of~)' the ~.v1.,1·, btgreg fmu.J. theft age 71. V.11S.

""ncr-'.c.ed to J 50 )'eaJ1 in f'l'i. ~ltl •• 0 J Madoft' joins a long list of Mule'" "C''UnJttlli wh~ nai.Ties came to light in the e:u1y ~I s! cenwry. Eru'lict there ~ere T)'Cil lnlematioo:.l C EO Dennis. Kozlo'Wski (now scrvin~ prl\lm tin'IC (,,t 'runi.l larcc:ny, t~ocunbe' fraud, a1xl tlt.hcr crimes). WorldCom head lkmard £bbcr" I Jilin,; 1S yeut'> fnr fmuJ ). Adelphia

G BHntrd MtdoH. Pt•Pf'~• tlfJf of poJ5bly .,. g••a~•~~ (t•ud In hl• tory. M•dotf .... Nl'll~td ~o 150yqa••~n ptiJOf', OY'"' a ~riod of 2S yetra, kt dot~4fii1Jdtd !I'!'YHIO!S 6f bq~~l:'f\ S12 bill-on ll'ld $20 billion. He 1 tdledu!ed to bt ' ' ttted ftOM p1i5onon Ncwemb.,. l.t , 2159.

42

CIZO J~''"' Rigas (IS years f1)r c,•n~l>ir:•cy an\1 b1lnk fl'aU,I). ;uk l fomlN Etu\)il chief Jetl·rey Skilling (24 yean l'tll' .!oimilur whhc-<<'llur crimes). The vtuious f\VtllS •lf decei1 prnctice•l by Skillinp. Rip1111. ml\1 \l'lbet hlp-level m:tna,gers gene•·· <ltcll a grc~•t deal of publu: -...ull't\};c dw1 ulluntucly led t•\ rd'mm kgisli•tioo known os. Sarbancs--Oxley.

, he SiffbUIU'i· OXIt!:r 1a ofJI}()J, ofit.n kouwn simply II<C so:r or SorbOx. t'!ltltbll:s:hecl prure.:tions f()r u tllstltbluwers :md rt>quh•t.nltiiU ror proper n.wndilll tTcord l.«ping for publk l"Umpanid and penulll~<e for noiKUnJpti· Aftl.'t. lkli•k:s pNrtttin1 vobistlebkwoers from c.>mpwl)' n:tii.I~Cil'\1\ (pN\·Uiin;, t.v rtl"'extllW'ftf 02~1 ~pay (()t dlost -~\ h:...-~ btcn J!UftiMJ by thtir tttlplol)'· Ml. tht b• rnpires a finn's chief oec\lrivc offiC'cr and chlC'f firunria.l oftit'ff to

rtr-"lftl.H> CMif)' tht ~~ 's ti.~~l ttp.'Wb.. a .. ~ • ,th \OVWI.o~ OOie'f r'lf\'1\-fta(Wl"-~ fSu- . ,..., u l

1. PrOI*<'f•v.h•st'-blow~r• Cpeopt.v.ho ~pol1 comP'Jrty \-aud 1o1M g~m•ntl f1om ...nployet •eul!&tior-

2. PrQY\aes for )Cb reiM~at~t and batk p•y to ...... "tleblowen .too lN'e punished by their employers.

3 . R•qultes p~!ic corporation~ to inr.itutq ~111fTU fat" omploye•• to an.on~usly 1-,ort ~ltlng ~ li()COIIf'l;ing ~UIK

4 , Prohlbhs • t.,.•tlon or dtn~ructicn ofk&y 11~1d 1 dca!m41nt• un-d., P•"' of MV$r~ cr1m n1! penaltes.

5. Requl1es 11 nrm's chief q)(~L'Ye offi~, (CtO~ and tfo "'f nn,ncl• officer (CFO} to P•~JOf'-lllly cWLfy ti-e otglU"liu:ion'• r~.v.e:.al19p0f'tl.

6. Proh1b.~s C£0, CfO, and comp.ary dirqctors ~om talt1ng pwtOna loMs or lito•s of cr.cl't from tN COft'IPM''f

7. Atqu•IM CEO w<:l CFO to re-tnb!JI"M tile CIOfl'lp.at~)' f0t bon1M1..-d •rock apt10nt .tlen lftl'oo.teO by rnt.tement of Cl:llpOfltl! pro~u

I ll"l'l<IH tf-.e CCIInfl.ar"Y to to~ estabf~ pt«:f' .. ft .fld pot! ti<H lot ltiJO t ............ t . ("Piibo..,... the "'-broe Comp.Jny kcour•.rg ~~t &olwd • M ; * ...,

cor-«<ee ~ tt>eSea..~atld ~ ~ ~•oM..,. ~ 0WtS<H'Jf109 tt-e a<CCIOI..drg rous.1ry.

2 3 Corporate Social Responsibility: • Concern for the Welfare of Society

THE BIG IDEA: Corporate social responsibility is concem for taking actions that will benefit society. This section also considers blended vetlue, measuring results In both economic and sodal areas. and soelal audlting to eva luate cor· porate social responsibility.

THE ESSENTIAL QUESTION: What a re corporate social responsibility, blended value, and social auditing?

MyBlzL&IIb: Check your understanding of these concepts at www.mybizJab.com.

0 Whose problem? If rossi fuM contribute to clim.Jot~t ch11ngo, in­dueling such effects~~ nlehing ice CliP\i, s.~ld onM!tf comp1.nio' b4 held accour-L:Jb!e? Wl-..:tl $hou!d lhey do by w11y oi mt~IN'Ig ¥n9t'lds., if llnylhirg?

I r ethical n;.$j)Of1Sibility l,s ObotJt being il gvod indivi.du31 Citizen, CIITf'tll.(l(t" ,w-,cia/ l't'.tpmt.~ibility (CSR) is. about being 3 go.hl <'lf'gtlnizational citizen. As we said,

CSR is a a1nct•n f~'lf taking :.cti11ns. (hat will benefi t (he i.mercst.s of SQciet)' :.swell ns the orgnnizution. ·rnesc may range from sponsorship of Little League sports teams to sending supplies hl eanh\jtwl:e victin\S.

Is Co rporate Social Responsibility a Good Idea? Two Views

What are the arguments for and against corporate social responsibility?

It u~l I~) be (hat 3 CQIY'll)an)''S Ol~)S( itnpo!tant 8~\.1.1 W:l.S I() ll\3:kC tU()I.e:)' pretty much any wuy it v.rnnooJ. regardless of the conSClJUenccs. "IOOuy. h~>v.re\'Cf. muny f\lt·profit entc:J>•ises mol:e :~ poim of contributing hl S<'leiety as well as. ~.leriving profit from it.

The Case for CSR: .. Companies Aren't Sepanate from Society" 1berc ure th.ree primury arguments for Cl)fi)Ol'IUC social responsibility:

Fitst, s ince busillCSSCS ere~ue some pr.:>blcms. (such as ttl\'irlllltnemal J)IIII'U· tion). lbey sbouJJ help to solve them~ •d'ter <dl. comp.wies an;:n't scpanue from the rest of society. Fm· cx:unple, as one writer put it, "the prices pctlple pay for gaSQlil~ c&ectrie J)IIWer, a1kl ()l)ter ellei'£!Y j)flldUClS don'' renect (heir tfiJC COSTS, nmong them the impact of greenhouse guscs:~•u Q

S<:c~)(ld, busi•.ess. ti.nns oflen haw; the res~'ltlrc(S to solve pn.~lctns d•~u t.he nooprofit sectt•r di.ICS not. Thus, while they have no oblig:llitm to di.• w. the)' can make a big diffcreoce if the)' dlo.lSe 1\) C\lmmit t\) •noj\Y .suppmt.

Fi••;liJy, bci.ng S()otially I'CSI)I)ilSiblc gj\'CS eon'),anics a J)IISitive public itmge thut can help hc:aJ ..,.t)· g.;wcrnment regulutioo.

11ms, in d•<: Ol)i.ni~)f'l ~)( CCOikltnist Paul Samuelson. wh11 rcccmly J)a&,~d away. a <:om1)any should be cooccmed with SO(:iety's welfare as well as Ctll"))l.lri'lle prt•6ts. "A large corp•muion these days ll<X \lnly may engage in s.oci :~J responsibility:• he said, ''lt had d~mln<:d w~ll better (f"Y t~) cl~) Sl'·"" The ~me, .,,(course~ coold be said t~ho.lut small C'Orporotitlns an~.l even ot\)m-and·p..)f> business.es..

44 PART 1 Today',Businl?$$ Env totU'IWnt

The Case against CSR: "Companies Should Just Make Profits"'

'1'be MX-:ial ft"J'IOO:sibility of bu~iM~S i\ hl maLe l'lti'fib," 'W IHlC dl( l.1tC Ct.'X'I'IUftUSI; Miltoo Friedm.:ltl in 3 f:urw'IU~ 1970 ankle. 1 ~ "'lltc~ i' l'lfiC' and only lWIC liOCLILI ~nsibility of biJ(.iftt~~~~l UI;C' iti rc-..nurcr .. ani.! C'I'IJ.ol$1" ul o.~cli \'ilir" ~k-"i~tiC'o.l ro iRCfUse L~ 1'~~\'fi~ 110 loog lh i1 \lo.y .. '41lhm W ruk .. ''' lht ~llC, -.h1d11~ to sa~•. en~j:!:eto i.n open :and frtt c,-,m,l~li li~-w. '4ithool ~'lllt_WI i¥ frJ.Ikl ~ fJ'~)lC the (.(ff(;S oo 'ithl'IUt ~i'--w.·'-lr«J){fl.'lfL. unf,._.tu,.Oitcly. ~,.fltft bC''nl con,.,J..~I'<'J within fo:sir bounds by some tm.i.nc""I'IO."'Jlk. •

FrihiJtwl :trg\W"d dt;.t if 3 ftrnl ~:;t.~ JllituCIN fr\llrt 11\ 11'11\..\.i\M\ i.t tn:nimi1n'IJ pufib.. it \I.OO:&d faiJ to rnmdt ~'l.xl\ iliAd loCI'\k.~\ •W bcr.cfi11ti Mod.,ho.Jc:-1'\, w_..t to KltOW ~12·10 l:tw!ttby :lh.o f:1iliaa; to erote ~ snd o~ CC~olfkl!lnic Jn.,..tb-dac real liOC'i.al Miton ~·sF~ jusaifiC31iM (('If dlt cx~· .. t~i"tt'"n« Article

}ltn ud mort. OO..n~.-. 4'\1C1'IIpllnl« ~ findlftl lha.t bnn., WJclaJiy ~ Goto-~UJ~"" Sl'"blttu ~lly tftb\.."(' rn\#it..(a fl'"lllnl ~t tAt Uipiplft in ~ .. 1 '"' ~ .. ) _____ _.

~ BRIEFING I EARNING GREEN BY GOING GREEN ~ Subaru PrOYH Goltlg Gr••n C.n Low•r. No t lnaeas., Costs.

The C'OCI\~1 ~A.iid.n h. th:ll .,.~ M\\1\'lf\mCIII:llly fncndly rn>o-~WS adds kl tht C\~ of d.."RJ hu"tnt"" 84lt ~"""J\l"~ r.";;n d.., """ by doing good. -~ onr dispu1n lhat il'' Ct"f'Cmi\"C ., ('.p un.lkollltb and f'I'O­cess ~S 'A.~t,"'" ~~ I'A.~l ~nl \I,."WM' "'BW &he f.xus l>hou&Jo't be on c~n:: up .tAd th \.'\l'\&\-lht ""'U'\ VM.-,uld tit un ttt.11lng leu r'llCU h) bcp'l 'Aith.-- l

f.Jr 20 )'(3Jlt.. tht l..Afl)tUt plane ,)#' Su~l'\l ,)f ln.l1~tla AUC.\tl'IOCI\'t' pui"SSJt~l grttn uutuuiu·) dUMJ: the: cooM or m.tnuf*-'Wnn' WO \(h~k• J Jay "'\\'idl cmpl.ly«s a c-.·cry lc\'d 1li tbt pl31'1t l&l!.)lins (,>r W:l)"' h> J.;~\c: cncr~:~. tfdu..x \\iN~!, ; nd gtner.ally tll:ILC f"'\~~~ tflt.)ft cr'ficknt;' rt: j'll)f\ lhc ~fh.}!Olr'lo, '\mt •nea<;UR .X its success i.s a l~tJ. rtducn~-m in dcctricity t:llmt.llnpboo . <r.tn«

2000 An t\'(1'1 htgger .a~hieo.tl'llent II h.u ... \f. !Oti1Jlf'C\I .uty lll:tt.U' M :1 IJn.lfi ll [stn~c~t."O

0 $\.!baN of ktldlana Al.ltOt'I'IOtlve. Itt. • tt•1• tM ote 46.000 1\JI.O JObs •n tt.. ...:151. oec.:ade, Sub.:.fu hn ..eW"f ·~sorted to l~ft •I'd ... '•a "-• a~ worlas. wa~ .ncr•u. ..,.,..,v-ar ON ofth•rn~lor"'-.yld'• ~.,y ~~ adl.-..cl ::h·s ·• thfough ~ felent.lns foals Oft teeychr9. ·~ .... t(Jif utfl by~ • .rid cort~pot(· .,g 9Mr. of the plltlf"t. IO.'.m~fiiMI'. pi~ gllltJ m~H•'•· .nd to on Covld ~'' .!tppfO.Jd. be .11pp ted to 1 .-.,_.an ondu~Uy"'

G Triple bouom IM.. Judy Wick~. ..... 1'10 fourlded ttl• Wklt• Ooq c.fe 11'1 !'&.~delphia. b. -. tfolat ~p,of t il • tool. The ~"~•P pVpoM of bloltl. nHt; is 10--• Jlor. tpKil'o IJ, the ~to tN CIOI"«p11ht' profu •• ~on. pi o( 'oc'.-1 bw"'Hi ttloeo...., ~so'h '"Gipie bo._ . , ... - .... ~ ""90ltoulll'lllil....,~«<ft­~Ooyou.,_.,..,_~3'

46

Some lessOM to~ dr.:twn: (II 1~,111, etW~X by mcTca~i~ d :licieDcy and reducing W:lQ.:', 3hlli'11Jg_h they don't ;II \\.;~)" "'me imrt\C'oJi:uC'Iy f.~) \bn~goe· mcnt lca<bshlp l' \'LLill m !o('llinJ t:t,.l, .anJ '-'trun~ ~ntnb {I') cooper.ue. f)} Froodioe \\OfUn h.!\'r t.l ~ CftJ;"a,ed in linJi.ng \UfS to rtduce.. reuse. ~nd n..~'dt. {4) Suprlitr;;. I'I'N'I ht' ~ottt1tl3fty iw.,lh't'J., a .. il'l Slt'cl Qlppl.icrs. puvii.Mg rolls of st«l of O:at't dt mcn!'I(.'M t S) All •:as&:es must be: roosid­tftd ~~ rn>Jutt"- :til" eaftema ""'-\lt httftl ~ w :a •"aSk"~ ~a- pbna. f6) Grtt• ,,.ti.Jtr\~., I'\'( a C\'Wfllll.ft)' a.JU~pct~tnc *"~· ti i• redxina rosu :ukl ~ u, tGCtJY '" •

Blended Value: Measuring Results in Both Economic & Soda! Areas

Can business succ~ss be judged by othtr w~yt than pt'o rrt?

''\Vc tend to categorize \'tllue as ccnnomk nr w.;;tlll," 511)'~ kd l!mersoo. a roonag· ing tli.t'tcll)r of Uhun1 Capit:J;I M~n:\gen.rt~l .. Vtltl tithe•· Wt)rl: f\lf' :1 no•lprOO• th:u crc.ates social value or you W«' l't fnr 11 f'''"l''nfit th:1l Crt'iltc..o; CCI}fK>mic value:·•J

In rc:.lir)'• 1~<)\\'t:\'Cr, ·~'npr•llit:-t (wl1ich ff. IWC..rnt 7lJ «'f dt<' U.S gn:~~Ss cl\'11\lC$· tie prtll.l uct~e totnl dvllar vutue tl f 1111 '\~t~xl~ nntJ ll(rvice." prot.lu<:OO) cootribute CC'iUhlmic \':tlue l\)1.'). bccau10c they Cl'eiUC jnl'l!l 1Uk.l consume B~ nod services. Co.n·'<:~ ly, f<>""J'I\)fi f~ C'1~a1t ~nci.:lf v:"llul\ '"' wtll 1'hcy pay l.liX<'$ 1h:tl suppnrt Jlt· cal communities. produce ptdJuct' lklt bciLCr rcoplc'" IIYes.. allJ crenre jobs that \<'cp f:l.UiJy unir~ SDbll" Emei"'('on h;i., flf"flOM"'I I he y:~rd~1kk of ~~·tl ruluf, in "hkh tiM: ouh:orne or all busi.nt'Ss ln\ t:\hnulJ ~Muld be rneldurt'd in both t!mnom.k and social realm~ "'lbcf'e iii. n..l 't•'Jdc o.~r bcno:cet~ the t\lt.'O,- be $£3U$.

"'bt.n r.111hcr2 C\,..,.."'lm".._I:IUf',Uil \)(\'.:llur-- ~~h 114\o.'lal ~kl fil'l3nci:ll 1'1lt- NiOC)pC't'­R rogcdtcl'. in~ al aU tifi'Jiet.. ""

BRIEFING I SMALL BUSINESS & ENTREPRENEURS The White Dog Cafe &presses 81• nded Value in the "'Triple Bottom Line.• Judy \\"w.1.., •h..l r,~l'\dcd die \\'lute Oor Calt ••

Pbi.bdclphi.3 !S J\"lii''S ne~ ha.\ her ('Non \1C"\ of -.h;a business shouJ.J do. '"Prl'l6t i.~o: a tOOl," ~o:tte uy"~> "1be tna)IW putp.):'.C or hu~nc~o;,~o: i.~o: tO ~·t.""'

Afll!'r opening her rt-staurwu, \\lcb rtahJ'Cd <~he V."JJ~ spending so •ooch time m:.kins ir W(lrk th:tt thc l'lnl)' \l.l)' ld be J~Ueially lk'1i\'e was duuugb her business. Thu.s. the V.'hite Dt~ hectul'l( ~ntw.n ,,,r buyin,; 1t!ekctricity from wind 1)0\\'C-r. obUJining r mduec ft1Ull <lfiMiC folrnter!'i, anJ getting lnctll. pouJ· ,,-y, :and flSoh fn)•n (lt'l'll luccrs pt'lCtit;IIJ lmm:uw: trc:ltJIW'nt t)r ani.n;•ls. Wick~ nJso I)J)COCJ up the restaurant tllO 11n cdui:ud.wwl l'<lf'Um with gue.'>t !ipCilken; nod I() sha.rc i~s w i th Cf»nperitfltS,

.. OU.r customers nml emt' t<' )'ttS ' htu-e U\H' \'i! lue~:· !\he 8.'1)'8. "anJ come here for a sense of community, fi'f 11 ch~1nee IH be alignOO with Sl)ltltthing greater 1h:1n thtlllf,CI\'1!11:.'' 0

\Viets is also rofounder ~'r l.tiC Budne"~>~ Allhanl'C fiJf Lxal Li.,.ing Gco~ mies.. 3 .oonprotit nmt.'Or'l: C!>l!lblidted in .!001 lo prumote !be "tri1>1c bactom line." the C0f1CC1}l thal local hJ...,jM.._., W\UkJ n<lll ('101)' be profi~ble but <Liso fos&a" social atld <"tl\'ironmmml a•~k11Jql(l,!> e

Social Auditing: Evalu11ting Corporate Social Responsibility

How ~n I evalua«e • company's socW petfofrnlrtee7

The obo.iws proble-m '4tth lhr bkndt~l-\alue 1dea " that It IS faaty C'a:JY to rneasutC" progrt'$S io ftn:tnci:ll prrf.-wnun...'C but n.x .w C'tif fD ~ social

pel"'hnnancc tsuth us em·iroo.neM.ol '':ilue). It ha' hecn ooly in the la~ol rcw years Uwl "\CiC'I)' Ita.~ be-en gr3ppling wiEJw C'n\·i~nmr-.-1 ;~ 1 unp.;xc, r,,. t\o~mplc 1l•us.. l!tntNWI bdte\Ch, it ma~· weD t.al:c s.evcr.d yean. Ln ~am lt~w. h) ~U;~tdy tneL. llllkJ rcpwt lioOC'i.aJ \"33UC.

l;whU\:IIrly. lhrtt' j~; :l~)' 2 ~ f\lf ~\~~fll. ~loCi.liU)' IT'\fl'~Mihlt bu-..1· II('•" .:tinbo. and il is called so. itJI odili111. A ~lot • .\),..C'Rlalic as­qssntt:nl ot a tOntpanJ"S ptrf..,..:u•n: bt l••pl~ltnllrt' ~bU) ruponslblie pt'OirQintS. onm based .,. pmkfillf'd goab.

Soolt c.•:wpks of the pls 3ft" 2S f\llbn.

1 Corporate Policy: Positions on Politic.af • Soclalls.wes (m'P""''"'' p o dt$•ril)es: IM posltl(utS a ron•p;~n.) lll~t..ll 0 11 pttllllt"' .. l :uW Jc)·

cl11l I.MU~. Many com(Xltli<"-S tlke pct;:itions on <"nvironn~entaJ .nallen.. lb.wnpk: 0\liACr\ of the New Belgium BtN'CI')' •lecided 111 ~ •"Wu.ct lh:"1t tt1c Nrt Colliru.. Cul\l'l'lklt' beCT 1n.'lker \I.OUkJ be kind w the envimnnN:nt, '""' u became ltiC 1111t U.S b~\l.cry to be powcret.l <"nti.rely by wind. 111

2 Community Activities: Sponsorship, Fund·Ral1lng, Donations, & Other Support

\ ·t .my Cllmpanic~> COilll'ibure l() 1.hr Unite; I Way, t>p:wu.o'lf ' 1'1\"HII> tr.:ull'., hu.y ads in !ICh\)\\1 nc:.w.!opo:I:N:-1'5. dooate to mU!K~ums. en:~blc <"l'nplil)'Ce .. c.;, \".;,lunlocr tiJne til cho~ritictr., anJ suppon s.imibt communiry !IC"tiviri c=s., Eun'lpk C -.liM Skaccbo.:ard!> ,-,.f Oai.Jand. Calif()nlia. Ul a bilcter of the l loo.J o...nr~ in f!.u-4 o.ttrtl .. nJ fiJ~ South Central Los Angeles. community n·enu. feaJUrin.~: !iil.:~tclltlol.rdinp. mu!.ic. and f.a.IJM•-n -" fb)l) GIJIW!'S M"'tnt$ Pftt''~ :t \l.;,:y fiv )'""ttl", .. bl~wdn" rnu~­c~.~m. and othc~ to perform. voitb C"\'C'tlts aftd mm:h3MJ\C bcinp ~ to C'nncb tk "'mmunlty. e 3 <:au ...Related Marlceting: Supporting Wortny cause•

fiiHt·h'lditilntdr~ or sfmp4) ~IUIH ....,t,nilfl• I~ I C:Oilllllt'I'C"bl a.,"th· IIJ' In whid a a bw iot'S$ ron1s a partnership whh u rharil,y or nonprofit lo JUp port :. w1•rtby l.':tu.,e. product., Of' sen it-r. Eumplc rr )\)II ~l.lb!K'ribc tl} ttll· f'h!'M'IC (Oinpany CREDo Mobllc. C\ery tim<' yoo moLe .a phl'l'lt (alllhc: t"l~tnpany ~'lll 1nakc 11 donati.t!n tl} nonprofit group!i like t.br Alhancc (,,, Oamatc Protection ,,.. Uum:u1 Righ1~ W:tl!!h

4 Social Entrepreneurship: Leveraging Buslneu for Soci•l Change

,..(1( ial ('llirfJIUII('fii'JIIip is dt:lintd aS innOVIItl \•t:, 'IOC'IIll \'IIIUt...,C'rttaling IU'lh·· 11.)' lh111 C'lut (K'fUI' wltllln or a.,:ross ror· prunt o•· nonpruMI SCt'IUrs. nw- fi)CUS ill !t(n{'raJiy "" <:renting !«ial value rnthcr th1111 !.harch~.,J,Icr \l.(alth The 1Cb\'1ly i11 llb.i) l'har.~Cterized hy inoo,•:trioo.. or Lhe crc:.tit'ltl or ,_.l,nelhin,a new. •-:al.he•· than ~~~~ly lf."l~ll•lSl''CiSii••g: busint:S.S pn.:::ticts.. "1

• EumpM of Social EntrepteM urship: Acd&n ~ltH Smal Loans to the POOf. \\'btn Fa\1 ~ ~ n::IJMJ 4~ ~m'N:\INI ~--~;aAi7~ fgr •b 2007 Social Capitalist • .\'4"3nl. ir toin:Jrd oor fimK "'-lf'Littt m aft'~ s.:-• za ~my. liur.lcy. 3llld che M'<iroomctU dDt 'Aft'C' II')' ... ~ rnMc a diffC'I"· MI.~ b)- llJlli)'llll fru--m.1rtd .sci~Ql& to 3tiCimt (., chc .,.....,·~ ,t~JtM rM"*rm. 1!.1.~ Oft microlerdog ~ such M. A.c.'tioill 1~1ftll. •tKb ~r.n~ f'OOI' dicn~s -.o IQQn:s. f., as fit:dt "-" SIOO \\1lh .,.hi;,.,._ Ill \t.ln bu:si· llC*". ~~ Aootbcr .such micnxrrJit orpl!li2atalft is Wollllll, fuuniJN by tv.-u !$-yrnt·nld S:ln Fr.u.ci.~:l\\\liDCtl to.> ~l .. •n.'lll tnCrrp-c-~'*"' u'l Ch11U '! •

• Comat Slt;at•~rd• W f)I)OI'I I Hood GarnH. M.-.y contpMles IIJP" port v.-.riol.-s CClf'I'Wn\llity •~Mtl­·~ lew. d"''"9 economic good l"'H Comot Sb1~bo¥ds o$ .-. bt unu-... in ~9 ~~ eompeol_i!ION n r..noriry Nl~l, -.do M ft I - ... tmO~..S. c.. t-.._ \..,."' wcuidbt~ ~ th~ ft~~• CJ:Jnpery to~,

W.ant t o know M01r11? 2·11 l ~t Cofl'lp.anlet Rar~'c H1gh for Soci~l Responsibility?

Goto-.l"')ttitl•b.col!'

Key T~kuw;,y 2>2 A soc:!&l w<f t may emu .11 tltm':; corpou te policy, QC)mmuni\y ~C'Iivities, Cllu5._ t<!ll!lted' m.:.rkeling, :;ocial entt9ptenourship, smt~int~bili1y, .:.nd ph..&nl~topy,

$ $umin~ility. Foondod in2001 by Tom Snlty, thon~ 20-yo-ilr..eld ~;en~ vcr,ily rre$hm.:.n, Ten-oCyde ;;, 11n eco-friendly rnovolor ll-..:.t COI'"N'Ct~' non·recydable er hiltd·tO·tiX)'clo willnlf into avor 1,500 cf.MMent ptoduru, such~ thew shewn hMo People 11Md organitatons who p:n one of i b "bngade'u lite paid to collect .:.nd 'end wt~sto to them, such~ uwd snt~ck b~ 11nd drink pcucl'lo'-

5 Sustainabiljty: "Green Is Good" 5iiffii£ilobi!f!1 ls dtnned ~s ec.-onomk de, tlopmettt th:~t meets the needs of the present without ~:om promising tbt ability or futun generations to mcd the.h· own neech Y Clm.lp:.nics large :.nd s.n:11J I1!1\'C l :.uncl•~·l {!.fe(tl •Mrketin_J campaigns promoting environmcntnlly friendly cnuses. products. or s.tore..-:.:\' W Example: By using recydetl texcilcs in his pmducts., R\)b Alklerst)fl trnnsfot~ncd hlh.~•f;,cc, ;i (i(:(»gia caJI>C' m:uluf;,crurer he fountlcol, into d•~ \1.\Wid's ti_•'S' billion· dollar sustainable company-.. taking nothing from theealtb that is niX rapidly nnd narumlly tellC\\':thle. :.nd doing ll\) ha.rm to the biosphcre.".ss

6 Philanthropy: "Not Dying Rich" "'He who dies rich dies thus tlisgmcetl.'' S\l said 188(). steel nt..'lnuf:terurer Alklrew Camcgie. Mter he turned from making ltM.me)' tt• pliilat~ilm.tpy, making (h;u i­tabl~ donations to benefit humankind. Camcgie bocame well known as n sup· J)l'rtcr of fre~ pt•blic libr:~rics.. anlong ~)(J·~r {!()l'ltl v.'(lrt$. M~•re reocntly. ~'licroSt•ft's Bill Oates.. unc of the richest JXVSOOS in the world.

:.nn\)Unccd he woultl focus on spcntling billi\lRS from his fmmtlation t)fl health . educntitm. and overcoming poverty.'" In 2010. Oates •·md fellow phi.l.wthropist W:.rren Buffett were jt)inetl by dir<:eh)l' George l ucas. Orocle daltlb:lse billionaire l :tn-y Elliso•t, anll38 ~)(J·~r tnegawe:.llh)' J)C(}J)IC v;J,., J>l¢dg¢d II' '-"'n:u~ tJtt major­ity of their riches to charity.s""

Nm \lnly intli\'itlll!lls, but :.1St) Ctlmpanies prnctice philanthropy.

~ • Example of Philanthropy: Mary Kay ConUibvtes to Organi2ations Work-

'

ing to Stem Violence against Women. The Mnry Kay Found!lth)(f, created by the late cosmetics comp<·my founder Mary Kay Ash. has m3dc donations to orgnnizations that wmi: ro stem \-'iolence agninst Wi)roen. awarding more than Sl J tnilli,,n in pantS ti) shelters f~w Wl'tnen and child~n in :.1150 st:.1cs. In 2005. it also lobbied Ctmgn;:ss to conunit more than SSOO million ln federal fund<o 10 combat domestic \'i\')lence. sexual assault. anti stalking.SII •

The Payoffs from Doing Good: 2 4 The Benefits to Stakeholders •

THE BIG IDEA: It might be expectEtd that customers and the community should benefit from ethical behavior and corporate social responsibility, but thi-s section also shows how owners, employees. and suppliers benefit as well.

THE ESSENTIAL QUESTION: In wh&t ways do customers, owners, employees. suppliers, and the community benellt from ethics and corporate soda I respon­sibility {CSR)'?

My8i2lab: Check your understanding of these concepts at www.myblzlab.com.

When nil is said nnd done. why .fllmlld n company be ethical and sociully r<:sponsible? A d~'SC look suggests there arc pr:tetic:11 r¢:tSI'~'~S. for d1,i.ng

g~o~rcasons i.mportant to •·my hardheaded busiDCSS)>C-JSoo.

The Negative Effects of Being Bad What are ways rhat ilfegsl behavior can hurt a company?

" It takes. JO y~al'$11' build Ul) )\'ltlr c;:>n'J):llly's ri':J>UI~nion," says lcgentl31'f itl\'CSmr Wnrrcn Bul'rett ... but 10 soconJs fiM' voo to I~>Se it.'~ Indeed. Buffett foond his own rerAu;nio.- diminished O\~tnight ;lfiC-r •'ne of his txoouivcs J)I'ICket¢•1 S3 tniJiit'n from tr.tdin.g ln lhc stock: of a chemical Ct'mtx·my DuA'eu's fum wo·•s atquiring.M

llleg~l beh:wim can resuh in whopping jail semenccs and fines. as. we have S«n. Une(hic:.lt't illcg;ll bch::wit't can :lJ:w d:unage n~v •'nly a coml)an)•'s I'CI)Ut:l· tion but its tlnunce.o; us well. us foiii>Ws.

High Costs of Employee Fraud Eln1Jk1yOC. frttuJ . which Ci'm occur boc;tuk of wortcrs' )>C-rteptiom~ of cmplt1ycr unfairness, mis.tr~tmem, ,w m:uwgcmem h)'J)\lCtis.y. c~Ns employers alh'lllt 5% of ever)' ci~)Jiar C:llncd. Fr..uds h)' CX¢CUti\~$ arc J):l:lticul:.tl)' C;)S(Iy, ruulting in u mcJ ian loss ~>f$723.000.011 4D

Diminished Stock Price In one survey. 74% ._,( pcx1plc polled said their pcrceptitm ._,( a C'tllllp:lny's honest)' affected their docisi,)n about whether w buy its SlOCk .l>~ The announcement of certain k.iDJs of Hkg<ditics.-tax eva:•>i,)n. bribery. or violati,Wis ,)f government C\)l)rt:lCl'i~n hun a con')):iny's SlOCk J)ricc, :tcct'tding to S(>nloe resc:llch.'1 Od1cr ~ .sca~h shows thut im·csnncnt.; in uncthicul ti.nns wrn abnonnally neg~ti\'e returns for )~)fl.£ perimls ,)f time."'

Diminished Sales Growth A company con\'i<:tcJ of illegul a<:ti\'ity may sutTer from dimin· i$11Ctl S:l)CS g..rl)Voitll t.hatl:lStS f3r longer IJI:lll the d~tn:lge II' d1C Stod: price-iDJced. it may lo·•st for scver;d years.~

ab

G FraiM:!. DeU Comp<.~tcr confc~~d tt-..at fer fOI.;f' ye&f'9 It !tnl)rop~ly in!htt.:d rcpor.:~ of ffr.artcial re SUIU. 'The tvoO MOSt <:OMMOI'I fl'&l;:(l $d\cmc~ .)re corrl.lpdon, v.hich the As1odatlot\ 01 C!!'t't<fiecl Ftavd E>~em-­irter.~ 11.)')'$ OCCI.ll ll in 27%> of :~U Cll~~. el'lcl fl'evdv!Mt billll'lg sdlemes . ...,.hich o~r in 24%. Fin:~nci:~l st:~tc·

ment fteucl ls me most costly type . ...,.ith ll m.:di11n lou of S2 ,.ion in 2008. He·.-e you tleerd or read ebeut 11ny M'lp!oycc iuud h11ppcning ...,.ith e f ;m Jo<:eted n-ear yoo?

49

0 Ending cllild hunget", CoMgnl'' c11mpilign to end child lk!nsor benef.l, everyone: hungry chiJ. dt9tl, ::l'lo QC)mp;.ny's btilnd,, 11nd of cou"e ConAg1a's own~-lhe st()(lcholdors.

so

Damaging lawsuits

Lawsuits n;.S:uhing frtlm a oompUny's illegal bch;wit•r ciUI clearly hurt iti prt16t· :.bility. Tile exccuth•cs. :tOO •lirectoN. of former energy C'tlmpany Enmn were sued f~'lf intl:ning emnings to tlrivc up the st~'ICk J)rice (atld e~,)Jiect Sl .l billi''" in 1''\)fi ts on the stock they personally ownod).

The Positive Effects of Being Good How do srakeholders benefit from a firm's good beh~vJor?

There arc 1:h»ith'e-aDd prU\'C-1)-f'ca.soos for a rum to obscn•c w und ethical i'lnd soci:.lly responsible procticcs..

Be nefiting Customers ~thicnl and .socially cooscioos busine.o;se.s may actually enjoy 11 competiti\'e edge wit.h CU$11,)tllel'$. n te e\·idencc;:: In l,)fl(: $tlf\'Cy. 80% M (he l)t\lt)k l)lllltd said I)~ dcclde t1.1 buy a finn'$ gtiOdS or services p;·1111y 1.10 thei.r 1>erception 1.1f its ethics. ' rll a•~~t.her sur\·ty, 7.!% 11f 31Jult:s said d•e)' WOtild t;lthcr bl•)' J)r.)(IIJC'tS anti ser,•ices from a oompUny with cthiea.l business pf'\ICtices aDd higher prices thiln from a Nmpany with \jUCsti\-w.hle business. practices an.d 1\l\\'ct prices.•7 lll 3 third .sur­\~)'. 76% Of the I)Ct()t)le l)lllkd said tJtey WIIU!d $Witch (rom (hei,r CUITent br;llld tO one associoncd with a good c.iuse if price a.nd quality were etJUO.I.01

,; l!'irwlly, &8% of r<:$JXlntlents in a f11urt.h SUI"\~)' saicl tJtey were n'O•'C a1>t tO b}!?' fmm C\lf!lJ):l.:nies that arc StiC:i;dly reSponsible thiUI from companies th:n an:. not.

Benefrong Owners

rll {!CttCt;ll, srudiC$ $hi1W, pr\)lit:Jbil\.:1 is t nhantX;d b)' a C\llnJ)~n)' '$ rei>Utatioll f11r honesty anJ corponuc c itizenship.' In addition. companie..o; thnt maJe 11 public <:ommitment t~) ethics I1:J\'e been foulld to h::wt :. higher •naJk:Ct \'ah•t tha" eom· panics th.;n mc.n::ly ··•doptcd .;·m ethics ctlde or those that didn't have an ethics code m all.11

BRIEFING I LEGAL & ETHICAL PRACTICES A Food Giant Benefi ts Its OwnetS by Feeding Hungry Children, Americ1111 f(>OJ companies lul\'e rome unJer attlck 1'\)t' de-

signing f\-x)tfs dwt cau.o;c obesi~·· 3 matter that threatens sales :.nd profitability aDd the O~A'ners' i.ll\''CStments.. ~ The iDduwy rcspoDds that it h.;·•s modifi-ed lll<)I'C than. lO.OOO recipes fl.) reduce calories 3n<l eMilfied children's. 1V ach. t~) Shi)\\'<:3Se lte:~lthy ch~lices suet. :.s JOO% f1\lit jui~. '

Omaha-btLSed CooAgra f-ooct.o; has gone bey~>llil these mo\·e.s in backing a campaign called "Child Hunger Elkls Here," using TV specials and s.c>· cia! lt)Cdia .;·md pro.,..iding .250 millivn 1>t1uDds of food to Feeding America.. 11 group that supplies f<>OJ banks. ConAgro is also J <mating ooe meal for t:~ch t ight··digit J)a<:-kage c.1t1e-up 111 :!.S tnillio" meals- Ill SJ)eci:.lly

J marked ConAgrn bmnd.o;. s.uch tLS Chef B~>yardee. Henlthy Ch1>ice. and ~ Marie C:.llendcr's. 0 d ~'lilny coosu•nc.n> think m:llt.eti.ng crun.paigns that link a company to, .• s...,.. o dol cnuse are dooe "only for publicity and mt~rketin.F, purpose..o;. not because f t.hey truly care :.bolu the is:su~." s:.ys one actount. 1 H11wever, s~'ltne fim\S ~ h;r.·e risen alxwe dwt bar-Pcp.o;i. 1ide. Nike, and Newman's. Own being , identified a.o; th\>SC dwt "place a.o; mu<:"h imJ)l)rt.'lnce on supporting :. s..-x:ial j .:~·•use as they pl;lce on prolit." •

Benefrong Employees

A N:ui111lal Busi•te&s EtJ1iC$ Sur'\~)' foontlth :~t 79% of ¢RlJ'Ioyecs said d•cir f11ms' coocem 1'\)t' ethics was 3 key reason they continueJ to work nt their reSJ)CtCti\'C

rompanie.o;.'$Thi.o; is particularly true for membc.n; of the younger generation. who. points ~'ltlt 8rMill(''t,~~'r-t'.l.:, are "den\:lnding nl;)re attention 111 St:.'lk:eh~lltlers a•ld sctk· ing mvre from lbcir Jl.lbs tt..;·m just 9-to-5 work houn> a.nd i'l ucad)' pQychock."' As 3 res.ult, C\lnlp:tn.ies SOC"h as Home Depm (which C\)mmined 1\) building 100,000 affo•..:l:lble {!.fe(tl hOOlCS :.ttd pl::mti.n£! J rniiJio" t~) are (l~ing t~) beo:>rne 1Y'IIIr'C socially reSJ>OOSible h> help atunct the..<;e anJ other W\)t'kCJS. li

rn adtl iti.~,)fl, rcsp:>•\Sible bel.:.,•i;)r e:~n impn.we (he quality of a eoml)an)•'s jl1b applicants. In 1.10e Study or l.020 people SUI'\''C.yed onliDC., 83% ra.tcd .;·1 Ctlmpa.ny'$ re<:l')(d \11' busincs..o; ethics as "'vet)' impmtam" wtlcll deci<ling whether fl.) accept a job offer (l,)flly 2% ratc~ l it ''\lnirn1)1.'1ft:.nr")."

Benefiting Suppliers

One way in which CSR·Constioos companies c.;·m be beooficial is i.n insisting 1.10 the eliminatiml \) f SWt>OIJII,>p working Cl'lf'iditimls am!.'lf'lg suppliers. A s .. ·~·aJShtJP I!< a sJ•op. r~c:wry, or r~nn In which tmploytt.S work long hours at low wages­or- no wages, in tht case or pri.sou or .sla\'t and somt child labor-usually undet' envh·onment.ally. physieally.or mentally abusive l-'(Hidition~

Ahhoogh we may tend to think th.;'ll sweatsbvpS exist 1n.'linly in de\"C.Ioping C'tluntries.. they can :.IS<) be f\-mn•l in the United S-mtcs. ill S<)fOe gannem f:teh)l'i es anti upl•olster)' Shllps. a nil on some f:.r•ns employing iiJegal itntnigf;uu.s ."~ \Vhell supplien;' standards are roisod. niX ooly d1> their employees benefit but .so d1> the vendm-s themse!Yes. \Vh\) may :.urnct :. better diem base.

Be nefiting the Local & National Community When :. s..-x:ially responsible company gives its empl<}yees time off fm· Y\)Jumary \\Cli\•itics, supporU social c~•uscs. or dvniltcs mooey. goodS;, aDd servi..ees. it clearly benefit.<; the community.

ii Example of Benefiting the Community: Hurricane Katrina Victims Benefit

I fro m Ccwporate Goodwill- an d So Do the Dono rs. After HU1Ticane K.:.trina destroyod much of New Orle1111s nOO the Gulf Coost. corpomtions responded gCflC(()USiy.

P'J:pa John's employees h.;·mded oot thoosa.nds of piu..;·•s.. Emigr;·mt S..wlngs Bank depositotl S I ,O(X) into the account of each cusromer in the arcus htitde.st hit. Gencr:.J El.:::ct.ri<: cl~)fl~te.l tnillio•\S of tloiJ~ of <:ash anti ¢lJUipn-.cttt, i.lldlld· ing a mOOile l,.,....·er plant. BiiXOChl)(>logy c~>mpany .>\mgcn dooated S2.5 mil· li\"lfl. ~-,rgia Pacific sent 65 oucki•Xltls <}f consumer g\-xxls. \Valman donated IS v;·•eiUlt buildings to reHcr i'lgencies.. Pfi.ZC=T sent a. steady strciUn or drugs.

While such mens.ure.o; cei'Uiinly ge!lert~te ~>OJwill. they nlso .scn·e ro pub· lici:>!C the li.mlS' bUSilleSS tV 1)1\)()UC't$. '~ .

Benefiting the International Community Sh\-mld 3 timt buy g\'lo.-xls pmduee•l by a country empl\-,ying slave labor? Shclul•l it J)ay bribes t1.1 gel its lmportS through aoother cvuntry's borden>? Shoukt it be concemeJ abmlt globnl climate clulnge1 By the actioos it pun;ues. a corp:>mtion Call ll\ak¢ an ilnJ}I.'Ifl:int di tfercn~ ill $Ucll tn:IIICrS.

It .:~·~~~ .;dso benefit itself by helping t1.1 sh:tpc the laws and regulations cmerg. ing that goY ern e\)!p\Yate beh:lvim :.t rcgimlal <)I' imernati\)OO) le\•els. The thinking goes: Jr regulation ls coming anywa.y, "let 's J)lay i'l p..-ut i.n sh ~1vlng the rules of the gru:ne 1111d le\·eling the playing field."~»

ttm BRIEFING I GLOBAL BUSINESS ~ Unilever Benefits the lntemationa.l Community by Addres-.

sing Important World Problems. Unile\'er. a S40 billion Dutch· BritLo;h lival fl.) Procter & Gamble. isn' t C\)fiCernedjus.t with selling consumer

Key Totk•.a~ 2·! Sotial!y responsible behav or b&nofiu 0\'MyOI'bfJ-c~A~omM$. owr:.crs, employees, supp.'crs, .,nd the community_

tissue. soop. anti J etergcnt. It ulso want.o; to help fight poverty. v.rmer scn.n:ity. :ltld rJte cffeets ,,( clitn:u e change. F~'lf ins:t:.ncc, d •c:: CQmpon)' hCIJ)S V.\ltnen in remote lndian viU;·•gcs Mnrt mierocnterpri.ses... fin.;·mccs oco.frlcnJiy ''driJJ,. iiTig:ui\)n for furmcr.s. recycles waste at a h1\)tbpaste f:tet..)ty, oper:ucs 3 free cornmunit)' launtlr)' in:. Srazili::lll slum . :.lld is r¢tlucing c:ubo.- diol!:ide c:;m is· sions at its factories.

Tile reas~)f'IS 3r¢ ll~)( ju5' for public rclatiO•\S: , "St'tne 40% of 1)1e oC:OOlJ):itty's sales i'lnd most of its growth no"'' ~.;·Ike pl;·•oe in develt.1ping n3ti~ms...·· nctonl· ing h) Bu.iilu-.unt,..,.t. M•)(COYcr. "tiS cnvimnmenml regulations gmw tigtltcr :'llt'und d•c:: worttl, Unilt\W must in\'CS:t in g.te<:tl tcdu~,l~lg.ics '" its lc:;311CI'$J•iJ, in pad:.ogeJ fooJ s.. soaps . .ond other goods eoold be imperikd.''R' •

One imporl4'mt coo~uc:DCe of the focus o n gocxl glOOal ct•I]X»'.Ue citizenship is the Global ( 11tnf!_at·l a \'Oiuutary agreement eJ;tablished in 2000 b,- dte United NMions dtat promotes hum an rights. good i~OOr pr::ll.'dces. e rwlron nlttlt:. l pro· ttt·tion, and anlicun·uption standnrds fur- businesses. (See • l'ont>l 1 .J .) Abmlt J,(XX) busincs:se:s (indulling Ni.kc. Levi StJaiiSS, at1d Hewkn-P:u~l::•rd) irotn n•.ore th;·m 100 oountric:s h3\'e si.gnOO the comp;·•ct.l!

8 PAN!l 2.3 The 10 priroQples of the U.N. Global Comp•cL Th1ae are! intended to p1omot~ soclef er~d ef\vlronMef\tel prir~c:lpf~s for buslnt15es. Why would ar~y comP-fny re!lut.e to sign en to and abide by theW! prT.ci~?

Princ:ipiiK

Hul'l\01n Righ u

S...sinau should .

1 . wpport •nd r~ct the protoction o: intomationillly p•odaimed hunlar' rights; ar'd

2. m~:~ke s!.ll'e th;U they :.reno~ comp&:h in hum~n rights 11bu~~.

l~b.v Sund~r~t l . uphold tno 0t44d6M 6f .U1t':c.'.a>tior. )rtd tho- of"oetNo •r:cognition of the right to collective b:11g.,in.ng;

4. uphold the c!il'lin:.tion of :.JI form~ o:! £orced .)rtd carnpul$0ty lebol:

S. uphold the abolition of ct- d labo•: 11nd 6. uphold the c!il'lin:.tion of discril'lin:.tion in emp!oyrner't :.nd ocwpat~.

1. SUJ)pOrt a l)l'eceullor~aoy e~proedl to ~vir~tal ch~!enge~;

8 . undMtako initiativ~»to protn()ttJ &nv"n:~nrmmtill re-;ponsibility; •nd

9. en.couuge ~he acvc!opmen~ .,nd ~ion of en•ironmerrtat!y frlft'IC'y techflooglt'S.

Anti-<:Of'ruption 10 . work 11gains1 conup~ion in all b forms. including c>~o\oriLor' 11nd brihory

~U..fod <~ ot-.a...... C..,.....c~.w ....... .....,....,__~rr·.c.on..r.,.p,.,.,.q,bl......,•"''""(-..d ,. ,,,.US.,;II)III

Interdependency In Solving Common Problems: The Threat of Global Climate Change

Is climate change forcing ctoser cooperation among rhe t:o•.mtries and companies of rhe world?

· ~rhcre is really no such thing as nurure untain ted by I>Wple." an an icle in Scient't' l)l.l\ntsout. lndectl,asM J995, ''nly 17%Mthcwo••ltl 's l:.ndare:. rc.na in~dcliJ~~Iy uninfllJC.necJ by humans, i'md the amount is surely less by no"''·t '

52 PART 1 Tod.))''$ 8usinl?$.5 Env ..rotU'Mnt

1bat huroon footprint. most scientistS believe, has contributed to wfwt has been called ''d•C:: tno5t Cl'tnpclling i$.S.ue ,,f ''ur titne": glii/N1l wm·mb1g, tW g/ii6tll f fi"'atC' c119.!!.1.!J an in('n.'OIS4.' in lbt' <l\'f:l1"1gt' lempt:rd(Ur(' ur tlu: ~lr-lb'S aliiiO• s phere.*' Sciemisto; generally t~grcc g l\)ba) w:ttming is caused by dte cmissi•)fl of cil.Jbon dioxide produced by the burning of f~•ssi.l fuels anJ industri;·d pollutants. The f\M'esceuble effcct.o; ure noth ing .short of the greatest calamity: ltl()f'C severe lnnYicancs attd tom:.doc& m~'lfe ligJIIni.-g ancl wild fires. n-.chi.ng g.l:.ciei"S, •ising sea le\'clS... er~•p J evaMntitm. •·md ch :.lnging an imal mi.groti.~ms... A W06 report by ccon~.)n\ist. Nich,)la.s Stem found that if n\) :teti\)R is t:tl:en to Cl.)fl tml g recnhi.'IUse g•·•s emisskms. the costs and rish o( climate change "\viii be. et(uivuknl to losing at least 5% of g lob'tl GOP (gross domestic pmtluctj each year. no·w anJ forever:"'

Can Climate Change Be Reversed?

Is it p;,.ssibie to re\'ersc the serious en\'i.mmnentol COOSCo.JUenccs from the changing climate? Jt,~\~tSibk c trocts o •• l)l:tnts, :.ll itnals. fa~tning, and wcad•c::r are :.lr¢311)' nppo.renL The glaciers in Gl;lcicr National Park have docrc~ISOO in number fn.•m ISO hl ~(i since 18.50. The sn\)\IOS \)f Mt. Kilimanj~m are S\"X>Il h) be history. Shrin.k· ing. s.t3 ic<:: ma)' r¢ducc the number ,,f poLll beatS by tWt,·d•in ls. by 2050.~ MM)' scientists toke the g i;)Omy view that there nwy be no retum .17

T~) be sure, there are s~'l-tnc:; :.gg•-css:i.,~ aucmpts to «;in in cncf!lY u:sc. Ft" example, envi.ronmcnt m in iMeD in Europe. citing their mond Juty to future gcn­croth'lf\S.. have t~greed h) cu t greenll\>use gas entis.o;i\)RS 10% beltl\\' 1990 kvel.s by :2(120.~ As. for (he tWt' l:.rges.t grecl'll•ouse g.:.$4>•\)t.luc-i.-g eotuu.rics t40% ~)f d•c:: world's t.xal). the United States pledged in l'l'IO'J h> cut emiss.ions 17% from :!005 lco.'cls by ~10. and China ~noounccd it \\'tluld cu t emissions 40% h) 45% by tb:u year.~ Left unilnS~A'crOO are questions ~·f ho~A' bod~ mni.oos will ilcht.eve such cuts.

~ BRIEFING I EARNING GREEN BY GOING GREEN ~ What Can Business Oo to Fig h t Climate

Change? In the Unite.! St:itCS, the U.S. • PANEL 2.4 F"rve rusons why bu$ineu h•$ become ChMnber t•f Ct11nmorce. which is s upposed to rep. lnt~•tt+d In d lmat• dlanv•· resent the \'iews t,}f business. b:ls been lllt,}SL resistam tO elitnatc cha:.-ge l cgisLnj~)f'l.Q(' llov.·evcr. a number o f companies, inclu~.ling Apple and Pacific Gas & Elc:;ctric, t'CSigncd fl'l)tn d •c:: 01atn0Cr in fWt'le$( ... 1

Pclhaps. then. business c.on begin to takG the lea~l. Afte•· years l,)f being .sltl\\1 h) oo~.lres.o; dimote cMnge, m•·•Jt•r CIM'JX•r;nkms-ineluding industrial gi;·mts th3t mtlke prOtlucts ranging from ekctricity to chemicals to bullll~l:l:ei"S-h:wt begun tO c:.ll ft" limits ~'~~'~ 8"'001 wurming emi.o;sions.' 1 Five rc;JS(mS for this change are .sfH>Wn at rig ht. (¥t< • Porwl 2 • ./. t

()nc:; Wa)' d1:!t 11:1$ beC::tl J)I'OI)I)SC~ I to r¢dUCC COliS· s ion of greenhouse guscs i.o; for the world 's fUltioos h) level t1 g l\)bal ca1b.)n tax on any\)f'M:. w h1.) d1ives. a c.·., o r uses electricity prOOuocd by fossil fuels. with So.)lne wx l'tYcnoos being used 1\) help the p)l)r and d•c:: midd lt dass ... J A seco•lti system is "'c~··r ~·md trade,'' in which g\wernmcnto; maOOate limits (caps t o.- calboll ctnissi~)f'IS :~ntl gi\'t CQmponics ctnis· s.ion-reduetion ullov.'Once..o; (crc:J its) t<) emit specific am1.'1um.s. If t1 C\)IUpa.-y d\>esn' t r~ch its ct~p. it ct~n trade its credits tt• other finns that neOO to increase their emissi•)fl allowances." ' •

1. Mof• ttWilfMen of &oclal r••f>OMJbllty. There It a grow­Wig :.warcr:.es~ tha~ dim~te dutnge could ru:'n corpor:.te .e&ders who C¢t'ltlnue to det~y lt. Ccfporevet'lt have be· come 1/N:I~e thllt theY e.xi!itencc. like ~he rest of the world, '-; connoc:od to 1he orr.v·r<ltlm4tnt.

2. De-sire to inftue""!• regvl&tlon. Some <»Mpat~let bellt'Ve gover~ment regulatior' of carbon a1oxide enliss-Or'!J !J

fnovi;ab!o. • nd ;hoy want ;o haw 3 ~ fn policy making. so~~ lo recivoe the bu•aen on themseiYM.

3 . Saving on enet"gy use. High fuel prices punisl- inefficien­cy ,.,...ilk'ng ttilnr.pottilt3cln, matW::.(1vring, 11ndworkplilce he:~Lng 11nd cooling more efficier'\ lr:dl..'<l!!s energy use • nd saver. rnortJey-<15 wei as roducO& c:.rbon emiMions.

4. Finding nllW mil!rltats. Some companie-; $00 !ucut:Ve r\JIJw

m111ke~s in de:tn-energy technologie).. suet- as m11te1i11'!s u~ed in sola-r cdl~. win.d ~•.ubines, iv.el cells, :.n.d light· we< ght ev~omobl!t'S, " tl!dl will all beC¢Me more 0'-etlreble WI a world inv.ohich Qrbon emi~s'~ e111ry., em~.

5. Desire to crush competition. Being iir!Ot to marke~ v.oith an ~viro~tally :r!('r'ldly Pfodt;.ct-M Toyote hat bee!' with its hybrid Prius, "'tlidl run~ on both guo!ine :.n.d elec\J'Ioty-lt a wtty of beM!ng e¢mpetltort .

What You Can Do: The "Civic Generation" Can Be a Force for Change

What are two ways I could be an "'activist doer"?

If )'<'IU ·re a young adult bo.ml between 1982 :.nd .?()(X)-pan of the so-called Millen· ni.al Ocncrotion-yuu •. lf'C •·m '";lctiviu dt-cr,"' , .• ~nember of the most Ci\'ic-mindcd gcnerati\lR .si.oce th<'Y.\e ,}{ dte 1930s alkl 1940s, acc,lt\ling Tl.l expem.9S

b there a way you ~a.n tnkc this impulse to ser\'e aDd cx.ercise it in the business WIM'Id'! Lefs cons.idcr })()'A• yoo might g~> aboot it.

Working with Companies as em Intern to Advise on Saving Energy An illft't·tt is a ~udent or a recent graduate wb c) undec•goes supet'VIsed practi· t·al trainjng_ in a busiru:ss S4.'Uing. (We discuss interning furthC=T in Chapter J U Recently. some companies ha\'C been bringing in srudcnt interns during the sum· n-.cr to hCIJ, thenl :lll31)'ZC d•cir energy use Ulkler a 1>•\)gr;.1.n ~lied IJte Oinl.:tte CotpS fellO\\'Ship SUPJX.lrted by the En.,..ironmenta.l Defense Fund.911

Ctlmpan ies that included c B:.y. Hewku·Ptlckahl. and S<)flY Pictures used the rese:•rd • at1d r¢e;'tntncnd:ui•'n:;of S¢\'et:l.l i.niC11l$ to saw:. h)t:ll MSJS million (W<~r five yenrs. Student Joh n Joseph. for instUIIce. helped Intuit, n Mountain View. Culi­f,)l'nia. softv.>t~rc C\liUp:tny, find h<Yo.\o' it c,-mld cut SSOO,OOO a yC:lr from its energy bill lhrough such stepS ···s setting lights in tbc. n:stroonlS to turn t•ff automatically when nm in use.

Volunteering Your Services fOf' Free 1bcrc's nothing to stop Yi)U fmm giving away your services. It's a good way to c~:ue g~xx.lwill d•:.t •n:•y le:ltl to a pG)'ing.jl'b later."; K:uheri.nc Y;u\)S.. f1't in~t~u.ec. S)>ent her freshman spri.ng break from the Unh-c~ity of Michiga.._ocarb:)m huild · ing a whoelchait ramp S\l a pa.r:tly:r..e•l Octr,)it ot .. 'ln c,-mld let~\'C' h is home. T he second ye.v. she S)x:nt spring VOC<'Illoo worting a.t , .• rcsi.dcntlal treat~ncnt ocnter for troohlcd girls . .. V..,.Juntcering is niX such n cusuul thing anymiM'e.- says Ynros. l9. "Givinglxld: is l);e_,, .,f our own way of being Ctn))l)\l/¢rt';d t;) c~~te a positive du.nge within the c~>nununity ......

54 PART 1 Tod.JY''Businl?$$ Env-fOtU'Mnt

Summary

2.1 The Ethical & Social Responsib ilities of Businesspeople: The Way You Uve Matters THE ESSENTlAL O UEST10N: Wltclt 1$ the tNdfN of pr~h.IM lor It btnirn:·upet'llon?

Whan a ~2)' ur rranll t•Jt ,,,,. nwraJ priorit~? A~ha: c>.u-­roll's pyumi-d sugg~~> n COOlfKll'l}' m no individual sbou)d be prMitahk:. oboey l.h~ !:·,....,, bi: t:thii:al, and b.: a l!'I'Xld corpl)f;lte c ili;tc:n-oin lh;.l rordc:r.

Huw s:boold I dlstlngul~b :unong nlutS. d.hl<'$. la.rs-. :and wrpor:ue socL'lJ reiponsihilitf! V:~lue, :·m: lht relaliw.ly Jla'• n)3.n<:nt aoo deeply hdd oOOert)'ln.g belief" and attitudes tbilt hl:lp dttermi•)(: Jl'-"<lpLe'~ bdlavM'lol'. f:tluc~ :ue the su•l!bnl.~ o f right and -A'tong that influei)Ct bdaavi{)l', La"'·" are ro.l~ (}(~on­dl)(;t or acblloll lhnmdly n::« ogniled 3~ bindins (or enfiJoOC<:d by a con~rollin~ a11t.h<.lrity. Corrte)fale >~N;i..1l I'C."'P"n."'ibilil): (CSR) is a .:oocetll. (,w ttlking action~ th:.t will bc:neli t lhe inltfc:st.:; of sN;tc:ty as wcll a:< oftbc: <.Hl:•ni:t.11ioo. How ¥rould 1 r«ogniu \ll'btn l'nJ in an .. t'lbkal dilt'mma'•? An t:thii::d dik:tnma i~ 3 ,.ituaticon in whi.:h ptC•pk have:: U> d .. -. dde whether to pursue a oour,<;e of nctioo that may benefit thcco (or lh<-"lr ()fga.tu.:atWn but lh21 iJ. unt:lhX:al <It i:W:n dli:Bal.

Wh)· mil(hl I aurib\l tc 1•urt"r motives to mystlr lhlm to othfrs? Illegal 1.1'\ldin.g is the illegal usc of p(ivate company mf()flfl:'llWCI I.() (urtho' (lni:"_, (ollo'tl ((ortund Or th•~..e (o( (:uml)' or fri<:nds, Pco~'le indulge in ~h ~unctiocs pcrtlaps because o f lilt: hColia·th:ln·t!Wu e11'i:i:t: a M:lf·inflati:d h1:'1.~ in which ptCopl e n~ g<:I)Crou<> prod.icti.ons about tbeir()Y.'O 010011 bdtavi« ahd k:~"' g.::nac)US pri:diction:~ a.fl(out thi:lr pi:i:rs". Somo: stud.::nt~ ;'!L

l l:..rv:~,~~:l l\cl..Uneo;;< Sl:))c:.ol sigt~r.d :•n MOA roal.h , :1 \'OIII l'll<l.r)" studcm-led pledge of inten.tioll tc> SCI'\'<: the g.t<:ate1' good rolhet

l.bn ad\':ll'iOC lhc:ir ~.>Vm narrow in1c:rcs1.;;,

2.2 Doing the Right Thing: How Organizations ~n Promote Ethle.al Beh.,vlor THE ESSENTlAL O UEST10N: Wltclt are fOfff waY' I>T9ilf'lrt;,. tiom ClHl fo$lct high cthiaf ~tllrnlMd$?

4 htl) ntana~c:n•c:nt support re.'lJiy nti:~ry? I( lOp m::u12g· C1'l> wink at ethical problem~ tbC)' f:Uito lead b)' cx.nmpk :u.l tlllke anpl(•)'t:i:S <)ni.c:d. Wh111 c.in con1p11nies do to sc-rcrn job apptiCIIIII$':0 Mouu,g. etS chttk 31:¥Plicnut~ by giving them pet~alit)' tests, 1\Jnllill,Jl. lht:m lhA•Uth &\bif). :Ill!! above :Ill Chi:d,ins thi:lr rC,;:un~~ and rcfcrer;oes. What :aN t•·o k inds o r l'tblcs MW! A Ct>dc of ethic~ ooo­si<.'ls of Ol formal wriuen set of <:tltia l S(.11'1tb!do;; guidin~ ;.o Ol"gt~ni:wtioo'~ actions. 'The(<: at<: t""ll kinds I)( ethiC$ code~ :

(I) Crompliou'll;e-l>;lo;cd ~rocks attempt IC> ptC:\"C:nl ai_rnin;,l miscondu..'t by iRCI'~ing con.trol and by punis.hi11g violal(l(S.

(2) lnle&~i tr-b:•sc:d c:thioc «.KKc:.< :•llr.mpt IQ enable re<;fl(lnsibk: cmpJoyoc: co11duct by ,;-(eating at1 en\•itoom<:nt th:.t J>uppott~ ctltia llr .cJeo;ir.tble bc:b:"'"" Sc>mc: co~n.ic:.< hire: ao cl.hic.< l)ffittt to intcgnuc !be Otganizatioo's ethiC$ and \'ai\ICl> illiti:.· li\"1.':-<;;, CC)mpli:mce ~li\'i lics, and bll..Uor.so;; condn.~l pr:.ail;e.< into the: ¢Ompao}'"~ dcci~iOI)·mak.iog practiocs.

IJrtJ ltblnl: or a whliitldtiower 3S btln~ 2 "'SI•i tc:h··? A whis· lkblowc:r ~ 4111 c:mplroyc:e wbro rql(lr1 <;; " 'J<Il'lj>:ati-c)nal mi.<«.ln· duct to the gi)\'<::l'ttlncRt <>t the public.

Wl1:11 iS Sarb:antS·Orl¢ V:UiM"' kind~ (o( hu"'ini:S"' fraud inq>ired tbc Satbai\CYO:dcy Act of 2002 (SOX « SnrbOx), wb1i:h est:lbliShi:l. prOt.xl!On:~ lhr whistleblii\.W:t.~o ;·ulll "-"quite· menlo;; fm ~'roper (inaOC;ial record koc~'ing for public oompanie-; :Ill!! pi:n:llhi:~ f<lt llll!IIC(lfnpli:lllCC.

2 .3 Corporate Social Responsibility: Concern for the Welfare of Society THE ESSEHl'IAL QUESTION: '.Vhat are corpt>riJte j.(>Cia# te· spoou..ibiYity, bfcrnkd v11luc, 11nd $QCiJIIliCiditing?

Wl1:11 art th~ arguntta•.l~ ror 3nd 3lah~t eitt'JMir31~ socL'lJ responsibility? The ¢lise for CSR i~> tbat ( I) :t.ir;oe businoe<-<ie<> cn:a1.: >;(ltne probli:tm •• they J>i'IOuld hi:lp .«<--ve them; (2) bus1· neo;;< oAen ~o;;l.hc: re.<oun;es 10 .<rolvc: prob-lem< in "'."Y" lh:•t 1bc: IIOOP(Oiit (O(:t<>t doc:s not: and (3) being J>ocintly (CSJ)<)IIsiblc a.i\eo;; biJo;inc:so;eo;;;a t;,vt,lf'ab.Jc: publi.;; im:•gc: tb.11 ~1o hc:lpbc:ad off g<Yo"<::l~tment l'tgulatioo. The case ag:Unq CSR is that buJ>iiiCS.~ ItO\.;; ronJy ooc: n:sfll)nsibitity-lc.> c:nga~c in acti\•ilics dc:si.g.ned 10 increase its proli b> ~o long :v; it eng;.J;g.e<> in open and free compc:titWn withc)Ut di:ttpiM'l!ll or fr.uxl.

Oln bu~inm-~1KCt$S lx jud~td by othf"r Wli)'S lh:m prolil? The yar.:btick I)( bk:.,dcd \'all.ic b:~s been p(OI)(le;(;d, in ..,,h.ich lhc: 0\IICOntC: rof ;.II businc:ss in\'C,.1mc:nls .<brould be nlc:.\'lln:d in botlt c.-"'Oomic tll)d SI)Cial .-c:alnt'>.

How can I "''alu:.t~ 3 t.-.unp:.ny·s sod:~J pc:rrorntano:~? One:: tool f« evalu.at.iu.g ~odnlly n:sponsibk businoe<-<i acti.vitie<> i.~ thi: sc~otial aud1L. a ... y~tematic a.~M:>:Stni:nl ().( :1 i:C•m}liUI)''S pc:rfrorm:mce in impk:menting scx:ially rc:!ip(lno;ible progr;tms, Mten ba~cd on p(cdctilled gooJs. Six exan'fl'Jcs of the: gu:aiJ> are (I) ~le lll>li.;;y, wltidl 1,.; 1bc: positic)ns a CC)mp;.ny llll:Cl> 011 pc>litical and soci:ll iAAucs; ('2) corrununity a.."tivit.iCl> a ~rompany C(l(llribtueo;; c.c.>; (3) ca\lsc:•n-:latc:d m:ul:.c:tin,Q.. Ol w m­mcreial acti\'it)' in which a busine-;s fonn.;; n pani)Cn;hip with :l Cll2rity <It lllmpno(jl I.() "'"PPillll :·1 w<l111l) C:l\ISi:, pRoduct, C•r o;ervicc; (4) a oon:rpan)"~ .c;,oc-ia) entn:'pr<:l\e\lt<ihip.. the: inno"n· llw:. SOC1:ll \ ':ll\1<---cti:ating atti,•it)' th2t i::l.n clo:'X:ur w.lhm C•r UCfO!'<;; fCJtt-pro{Jt Cltl' I'IOO~'I'Ufit SCClCJtt<;;; (5) SU~IaionbiJit)'. CCI)­IIOOti¢ dcvdOI)II)Cnl Lhat meets the I)C:Cds of the: pl'(;l;('nl without ~rompmmio;in_J 1br. :•bilily rof fot\1~ J;ener.ll iron< c.c.> n'lr.et lhc:ir I)WniiOC:ds.: atld (6) ph.il:.nthf(ll)), making tbru'itablc do~~atioll.~

IO lx:nc:til h\lntOlnJ:ind

2.4 The Payoffs from Doing Good: The Benefits to Stakeholders TH! !SS!NTIAL OU!STION: M wfl.lt 'Nil~ do ~11$1Cm9t.S, owne~. ~mployt:-es. '"'f'Pti~rs. and tht: comm~t~~ily ~efit from cthk$ Mid corporat.: s.ociai rc.spoou.ibility (CSR)?

Wh;;:~l ;~re wny5 lhal ille~l b"'h.l1vlor can hun;~ oompJ~ny'! Eth~all)( illegal misbc:bwior can hattn II()( on.l)' a com{XUI)''l> rc:r•uat«.lon blll 011t~o its lin;tnoc:s, as in loso;e" (mm enlplor<:e (raud, diminisbod i'tock prict. din1ini<hcd sales growth, and d:ama&in& law:.uit~.

llo .. • do $h•kth(lld t"rs bt"n~fil rron• 01 n rn•· .s ~ood lxha,·lor'? Po~iti\'t rc:a.~s (I)( 3 f11•n'~ obsetvinz SI)Und· cth~nl and J>o­~iod l)· te"Jl((n"il:>le pr:u;lil;es <lfC lb:•t it wiU benefit CliStQroCrs, I)W•)(:•'S. c:mpl'l)y~. ~-uppiie«.. the loc:al and natioo31 ootnmo· n_ity, :•nd 1bc: intcm:•tioo:•J ec>mmunitr Or>OO COIJ'Ir>r:.te (:ilk:c:n­.<Jajp basre~-"Uli.Od in the Gklbal ComJlQCL n w lun•arywectnent by lh~ Unit..-d N:nicon~ th:IL pn'•nWU:~ human nght~. !<ICII! lah<W

Key Terms

prac:~il;es, cm'irc>nroenl:d procc:ciM.lon, :u'ld :•nliCQmlplion Sl<lln.­datds fot bul\inessc:s.

l~dhn:.te d 1jlnlt' rorcin~t dO!i«ei.oper:uk.a:.n•tMIJt th~ eiJtW.• lrics and .:on1pani<N" ollb~ world? Global dimalc change. the •nat::l..e in lhl: :wc:r.l.gt: km1~un:: ().( lhl: e:lrf.h'_, :.t.tnl~phae. i~ causod by the: erni;~sion or earbr>n d ioxJde prc.xloced t>y l.hc: bum.­in.g 61 fu-;~il fuels. Md indusltial pc>llutMl". lffCVc:•-siblc effect;: on plant<, :.njmals, f.vn1ing. and wc:•Ulet :u-e <~.t.n:.ad)' :&Jlll:artnl Th rein in encrg)' o~. &lropean go~--cmmetus. luwc: ~ to rot Sll:l:n!Wu>.e S~ o:mi.~~ion.;: 20~ hc:IIY4' 199() kW:l~ by 202(). 'l'ilt UuiiOd Stttcs ba;o; ~'ledg¢<1. to cute~" 174 and Cbina ha,; plo:lgtd k '>CUI t:nni.~i<111~ 4(1'-': 10 4!5~ by lh:'IL )'t::lr.

Whl•l llr~ . ... o " 'IIJl l oould I.H: "" "~telhist d~r'"! One: w:.)· i.s. to bc:come M intc:·~~·)(: .,.,,00 undc:•"g«:S l>UJlCr\'il>t:d uai.n.iog in :.l)lk..r.ineo;;..r. sc:uin.a- in <~. eomp:•ny 'Jio'be.te )'0\1 mi,Gbl :advise: on sa,•ing Ct'IC~)'. for in,.o;;tancc. Anotbet .,.,.:'!)' il\ to \'c)IIJnlter you1 Sl:n<ictS (<It (ro."e :l.~ :l W.l.y to Cro:'.l.l~ l!"'Xld-...,il! t h:1L tn:ly lt::'ld 10 a paying job later.

MyBizLab blended value 46 c~u~·n:lat.cd m;ui..cting -17

gk-N.tl din)ile cban;e 53 Ck>!Jal Cump:u."t S 2

f'hibnthropy 48 Jl,:-.nzi ,.;:hem~ 4~

Sa.rbanc,·O:<.Iq· Act of 2002 43 "'"'·•al amht 47

code of cth.ks +0 Ci'omph:ull:.._-..ba>;._-d cth11:~ c o't!ld 41 OClfP(lr;JIC r•nlie)' 41

g)c.b:.tl ¢01')'10tile "'OX:i.ill't'ifiC)I'ISibilit)' l))rall'lid 34

akltt:•) v.~umin. $) CO!plltaiC: l>OCial i'C'>potl.,jbi!it)

(CSR) 36 elbic31 dilemma J6 ethics JS

io~ide• uading 11 inleirily.{t.'l...r.ed c1hi;;s code>~ 4~ in1e1n S4

((lei:•) entn:pn:ne\lt'lhip 41 ~U\taioability 411 <;;W(.Olll..r.hop $l values 15

];,w;: lS eth.ic' off)Ctr 4Z MBAoatb 37

Pop Quiz Prep

I . According to the global OOfPOI'llte soci.il re<:pou;:ibility jl)'r'311'1id. wh:'ll ptiority is atlh~ UJOP •\( thl: p)'r.l.mid'!

2. Wh0111 i."tbe ddin.ilioo of tthit·.<t J. HC)W do oompanic:1> use E-Verif}' with regard 10 job

:lppht :'lnt•t!

4. Wh0111 i."l.he n:•tute of;, con•pti:mc-e-l,>o\(.()1] c:thioc (.;f\tle?

Critical Thinking Questions

1, De> you tbin.t; it's ethic-al to ~uri the Web fo•· pc:tsonal usc Qn lbe ~omp:•ny's di.me't Wholt, if 4111)\ do )'0\1 lx:lic:\'e is an ndc:quaiC amou.nt I)( time empl())·c:cs should be: all<w.'Cd to uS~ lilt Jntl:ml:t ((1¢ nOnW\'uit·ro:.l;.'lll:d purpt-\>d'!

1. Can yoo gi"e exam~'lc:1> of OCJoll)panic:1> lbat. in you/ upcri­encc. arc: fCSJ)c)l'lsiblc COI'J)I)(tltC: citiztns? Hc>w did ) '®

le.1m of l.h<:ir el'fl)l'ls, :•nd >~pc:cit~lly "''h~ :~~e tbr.,;e ef­fon~·! Aft )OO nWM'C i.ndined to fliJfCha.~c thiogs f.-om these 1ypc:s of eomp!U'Iic:s?

J. lo the pruot.. WC1'C: you C\'Cr n)()tjv:ucd 10 purtbase a ~U\\duct n::l:.ted to ous~ nl2rkellu,. Sui:h a.. Lilt J,ink Ribbon c>.un· paig,n or Product Red CampaJgo·• Wbal Wil'> the prcxluct nnd """" the "'cause" 3 maJO( dc:cis.ion-mal;in.g factc:w io YQl" pu.t~:b.1><e? If )'0\1 b.we no1 purcb.1S(d >~ueb:. produCI,

56 PART 1 Today',Busin~»S EnYronment

whJ<.1lr.hi(M-<:r 4~

5. What ;.. n OCJoll)mou argument ~W.Mt oorpor:uc :.;odnl rd.JICIIlSibilit)'':J

6. Wb:•t is<~. p~l:>lenl wilh I he bkndott.-v:•Juc: idc::1't 7. What is tbe Global Cool-pact? 8, What ate: the: potential OOt'IS<:qUCO~ t() tl OOt'llJ)(Olll)' (I)(

igll()Cin.& unc:thli;:•J QC iUc:!$al bc:b:•\·i()(t

what t)'llCS of (:c)ll)l):lny ad\'Cnisc:ment;:, if an)'. ha\'C you sc:en't Expl:•in,

4. l)o you agtte tbal the slake.boldcn of a company (custoc:n­as. in\'O.lO~ anpiO)«l.. b;'ulkS, ,;:upphl:~. :lnd 1:..':<!pLe m the communi!)') oocd to ki)C)Y.' inunedialel)' when rut oil~ of i.nlC•"CSt to purchase: is made w a company'! If you were a_n ernploycc: of;, ec>mpo111y, h<.J.',\' S()(ln would you 'Jio';mt U> k•)I)W if the: Mll)J)(Oln)' might be Sc>ld ot if there wct'C fi•'-111-ci:•J 1~11{)-ks?

5. If you dcci-dod todooatc the majoril)' of yoor furure riches to l:hatiL). a.. S ill and Mtlind:l C:uc::s and W:u-ren Sutrctt ba\'C, what would }'OOr caU:'i(l; ordwitics be? (Bill Gales is fouildC•' and fOI'U)(:r CF...O of Mictu-;ofl: Buffett i.s. CEO of tl<:rk<bi.re II:.Ul<li'Jio';ty, which O'Jio'n...r. Sllbsidi:lfic:s engaged in numC100s bus..i•)(:~S a.."tivitic,.o;;.)

VIDEO CASE Patagonia: Social Responsibility & Managing Ethics

II W ould you rcpclott )OO•' .:oow.an.y if it .,.,'(;:,'t illeg.all)' d1m1pin¥ Vl';l<.1C oo pubti.;: l:md, m•c:n if it co,;t you

you1 JOb?" Tb:.t's the question y,JI.h ...,•h.ich this video about PJ.­t:!SO•li:·, b.:gm:~. ttc::·•dQU2r~rtd m V.::ntur.l. Califonua., 1'>-.:.ugc>­ni.u luke<> great pain!> 10 make QJre it i.<; not thi.<> kind of oot'l~)'.

P<lu!llkd by Ywm Ch(ll.lin:Ud in l972. 1\ ll.agooi:l-natnc:d f« the "'Uthe.mmo~ n:gioo of South An)Cfi.cll~l:1iigAA aod m:ll;o. 2J)Jlll.rtl :lnd eqtnpml:nt t'or outdll<lt type:~ wha biko:.. hilc:, ~ki . li$b, ror ,.·urr. (Yon ma): howe: sc:m fdk>w studr.nt,< wearing Pam.gonia •'illn ,ackct~ al\d neocc-li.ned cooL~.) A eul>ti)l"nct's dc:cisiQn I I) buy fte>m !his ~rompany w;uaUy b.1s 1(1 00 "''ith not only purchasing quality pf\ldu.:1.<; but also doing busintl's with a ((lti:•lly re<Jlron:<ll)le and c:lhi.;;:l] a.lobal ~i1k:c:n, ooc: n:•n)C:d .. ,Coolest Coolpari)' oo the: Plnoet" by Fmtl.lllf' in 2007.

As p:lrt (!.( ill. f<'lCUS. J~t:l.g(lltia i~ invoh-ed m :1 ntm1bo!r of «~viroom«~taJ and wildlife cnmpa:igM.. iocluding Pfe\'<:ntioll (o( oil dtilling d1:11 m:o)' endans.::r anim:d b(.:.. I t~ dc~otion to «~viroom«~taJ cau,;cs is dcmonsvmod m tbe coMtnKtioll of it~> Rc.,o. NC\':lda. di~>lfibutioR cenlC•'· which fcarutcs gftttl dcs..ign :md tccllnrol~ie", In 200$. Pa.t:w'nia ""''()!'~ tbc ~Fric:ndl)' C«np(al\)' ()f Uu,• \'cat awru'd at t1 uadc u.o .... • in Munich. Oetnu ny.

In additioo, P:nt~gooin lw. aR en\•iroomentaJ int<:•~lU.ip

pn'ogr:·un. whx:h ll«"'idi:~ t:mpll:w)'i:d wid1 up t(o two mondl<.' paid ka\'C with full benefits so that they (!Ill) do wluotcer work Wllh 3 n(•ltl:.ro.til (org::lni).2ll0n l\l' dli:ir eh(oi.ci:. It ai~O bi:k'mg~ tO the ''1% fortbc Aa.oct'' alliance. a~ram m u.-bkh bo~inC1i~<C~> dOn2tt 1<': (o( their sal.::~ I.() thi: IXi:M:f\'aliOn and n:stor.,ti(on l>f tlx natur:•J C:ll\'i.ronmc:nt

Finally. P:nagooi:~ is a ycat bclicvct in CO{J)Ilt:uc uanspo.t­ency. In l.he pas1, proi n~" ro1u COO C1.;,ey Sbcahan, Soi)Jne cxe.;~~o< tivcs might h:l\'C ron~idci'Cd it a.."\."'CJ)Ill.bk: f<>ta company to hide srome of ils less dc:si.r<~ble 0\l.:li\·itic:s , No"''• he S:&)'(, "'you b.wc: tO bc:«lt''X: ttan~partnt witb C\'CI')'thing fOO do bocauioC C\'Ct'llU· :l.ll). with~ ptw.er (o( thi: Wt:b and soti.:ll nwdi:·l., cu~l.(')mer~ arc going to Gnd out u.-bat rou'redoing a~tywa}'· '4 why not tell

BUSINESS DECISION CASE

them?" With th~" tbooght iR mind. the: company qays iix-uscd l)n ibl <;QCia.l rc~poosibilitie" :•Jron.f with tbe qnotlity of its pnxl· 11\'L~ tll)d iL~ CCOII()(lliC pcrl<>tm:li)CC.

Who1t's Your To1ke?

1. l>i~>coss "'hat is. meant by the: appl icatioo of "'tt.l.llspru-ency" in l\112.£00i:l~ hu~ini:~~ l)f:li:ticd. H(ow i$ thi: <X1o111pany 11)'• lng 10 nccompli,;b thi:o>·• PfO'o•ide c"u.rrrplcs.

:z. In whatw:lf!> is. PatagoRia 001runittcd to 1:-:roduc:ing 1:-:rodi.K:l~ onder I<:.Jal, t;.it, s:l[e.. :md bumane ~J~o'Qf\ing CI)Tlditioos?

J, [I) the video. Jitll)un)iin. P:u.agunia'o; Oitttt«ol E.rl\'itOO· ma~tal An:d)"'i~. st:~lb !.hat~ ,.1att .. -d re:~li.-.ing a.~ a com· pall)' that u.-bat we make poUutC1i.. a.od we bad been known ~ an i:n~non.mi:nl.al Uompany." Wl'l:u :uc w.l)·~ thi: U 'loll1·

pall)' pollutes, a.od what allC:mati\'C" i~> it implementing?

Oprah Winfrey Not Forgotten: The Importance of Giving Back

Tbe clla.pccr di<;e~lsscs lbe ~1sc fror :•nd :•g:l.iMt troi'Jll)f~l<: ~oci:al (CSJ)I)l'lSibilit)-and the: po~iti \'C cfiCcts of "'be­

in: &ood'' :md c.rying IQ mal:e tbe wortd ~ bc:uc:r pi ;;M;e. M:m)' limes, soda.l reo;poo"ibility a.od -phibntbropy are nscociated mlh comp:lnie, :llllllllmpnofil llol"g:l.m.::uion~. hot h:1w )C)U t:W:I' .<ilopp<:d 10 tbinl.: about tbe differtnce a single individual eno m:lkt? Wh1Le S(onll! U'1o1111:011id ;'nlll n(•nl:.ro.tiL~ h:l\'C: tiri:k':~-"1)'

OOCitributod to bctlering roci~y. cmployc<:1i.. custoox:rs, a.od the: klcal COOlMUI\itiCS in u.hicb thC)' l)llettltc. b:l\'e fOO CW:t

dll.)1,1gbl :•bro1u :•n indi\•idu:•J like ()prall \Vin(re)' ;.nd l.he pov.'\Y

sbe Jli)IQICSse" :•s <\ pbil:•nllt.ropi.•.1'.' Wbat is it tb.11 in."Pi.rcs srome pc:c)l)lc to gi\t in ~>uch profound tll)d imn)(';R$<: Wa)·~"'?

01:G.h's c:biJdhood rc\~S mucb :•bront bcr pbi11nlh,rropic 1\'11)1!>. She ha~> loug beliC\'Cd that cdtliCiltioR i~> the door to free­dom. c>f'tel'ing a chant.: at :l htighl.:r futun:..'H She wa.~ r.1i.~ .. 'd in rural ~tis"i""ippi by her yandmollu:1'. who n:ad books to her :Ill!! in.~hll.:d in IICI' a 10\'t: (1.( ri:ading. lt::lming. and £Om& I.() thi: lihrnrr Oprah began mcn)Q(itin,J tlible \ Ul'G" a.nd pc:rfronnin# fl){ het gt.l.lldmot.ht1's f(icl\ds at the t~gc ()f Woe:. At t.he age of li\'C, sbc bc:3an kindc:'l;arten....,...IJudy l:.nc>wing bow to 1'1:0\d <~nd

Vl'fitc. olt• lo m.idctle :ecboe>l ;a 1e.1cbc:r :eugges1cd lbat Opmb at lend Nirok:t High School io Gk:.,dalc. w,~"'Osi o. At Ni.-"c)lct. ()pt-.lh \\';\<; tbc: ronJ}' Afric:•n Amc:ril;.1o <.1utk:n1, btu :ebc: W;)S l:uerc1uroeed n,; saying ... lo 1968 it"'""' real hip to kno11.• a bi~J~Ck pen;c.ltl, ro I ~~o-a.. w:r)' p(lpul:u-."11" $hi: wl:ut (on tu gr:·ldu:at.: ftlloiO TtiUidM:I: State~ u.-tu::re ~e e:rned a degree in :t.pe(('.h nod dfnma.•·•~

{)pn:h i~ lhi: tniX'I IXW.'t:rtul A(rii:an Atnl:ni:an v.•lloll1:'1n of all time. Fi•tiMs magazine ha,; calcula.tCd her net wonh at 52.'7 billion..- ln 2005. she: bec:.mc the fi•"l't AfticaR Atl)(';ricatl peto;oo li.~led by Ou.fin,.,.,~m·,.k mol,&oatine in i ~o; tQP 50 phil.10· lhf(lpisu. list-•~ncdly givinz away M'tt 5300 millioR of 110' <'Wm n'llloll<-")'. Sbe i.o; commronJy IOUied wilb lOll billio.& of lb(ISC oc:lcbfitics who gi~--e away lbc la.-geM pc:•\."CRtage of lhei•· 1>Wl1 mooer. Wb:11 bo; proJ'IClled ber 10 l.hc:<e heigbto~ :md ~~o·hy bas !>he git·en Mck SC> :enerotKI)'?

ACi:<ordins to a Rusitur.~~i't..k intt n •iew. Opr.lh ',. in.-.pir.l· lion a,.<; a ~'hilnnthro~'i.~t came OI\C Chri.<itma,.<; nt around the 3gt ().( 12, wlll:n !<.~ lo.lli:W l~rt \'Aould be Ill) gift.~ undtr thl: voe~ C\'eo n voe, Whc:o a trio of nun.; sbc>wed up at bcr f:.mily 's home with food and gifu. (atld a d(llfl}( he:•' very (W.•R), <Jie :e~·s, - 1 rc:menlhc:r fcc:lio: 1b.11 I m:uw:n:d enouJI]I U> 1besc RUns-who I had I)(';~'C'I' met at'ld tO lhis day (.till do 1)1)1 k1)1)W lbeir n:une!l.......and what it (I)C;.1f'll lbat lbc:}' b.1d I\': membered me. I v.-a~n't !Otgouen." ''ti

01)f;lh'~ c-.lu~I:S ~ n:: lau:d 1.(1 eduo l!On :IIlii em~ml:nt. Her Angel Nctv.wk. v.'bk h began in 1998 .. ha,.<; gi,'tn 0\'tt S80

million 10 Y.ll'iouo; Qllk'<CS ;)od nooprofil;(. Oprah J'ICI'Sron.\11}· donaiCd ~I I milliooo 61 he:•' I)Wn tl)l)l'IC)' 1.(1 Hutri.:a.t~c Kauiltll ~i.::tim.-..'1" In 2007. ~Ill: ~pi:ul $40 milli(oll tc) budd t.h.: ()pn:h Winfrey Leadership Academy for girls io Jobnnne<.burg. Sooth A(ni:a. ,.~ IXC)ji:C'I ·~ 111<-':lnl tO l:tnp<owtr youns sirl~ tO bi:i:(om.: k :•ders of tbc:ir ccxnmun.itieo;,11

•' On her rooce!\<;, Optah st~}<;<;, -What nl:l.taial ):U.z«~~ doe..,~ ll«"'idt you with t.h.: ahdity to oonc«~r.nue on other thing.; that really matll:1. And that i:o; being able to make aditret'C~'C. not ooly in)OO•' (W.'I\ life . but in (ll.het people's lh'C.~"*'

What's Your Tak~?

1. Are yrou :1w;)re rof QC.h<:r oc:k:1>1i1ico; wOO b.1\"C n»de si.a,nili­Clll\t COI\ttibutioos ti phil:.nlbropi,;u,. and if so, what arc tlll:it ousd'~

1. It is .'ittltod th3t ~ompanieo; are Jl()( ..,;ep:wte (rom roci«)'. Ate oc:lebtitics. ,;epataiC ftOO) ~iet)'? De> }OU think ee­kbrilies willt Cllc.llbit.anl c:l,l'nin~ h:wc ;)R ol:otigatioo 1ro society'! Ex1)1ain..

3. Opr.di i~ qum .. -d a..~) ing. "l{o whom miJth ., given. miJth is upeeted." Ho11.• do you io~tthis? Explain.

.a, [ )(I you think Optah',; childhood COI\ttibuted to he•· t~ilaR­

th!npic aenc:~ey·t ll:ld :ebc ~rome Cn:lm differco1 man' do you think 1\hc:'d still be: ti ge•)(';f(IUS'?

b • . . Go to wwY.'nl) bill<lboom f()t oolji)C nctivi6e!> and exerci.<>eo; rdatcd to the limclr topi~ di~u>:S .. -d in t.h., i:h::lpttr•, Hridius,-.. a-. well :~~ :Wdiblmal t.ha•'ll:·n:Jatcd Brio:rms

St>fltli,hn bi.&hfi.gtuing hO""'' l,heo;e CQl'lcepc.o; :q,ply in l()(l:•y':e l:ollsine'QI 1.':0\'ironroc:nl

In-chapter Briefing: Who Will You Ask to Write You a Reference? (And Don't Forget to Thank Them.)

In-chapter Briefing: Subaru Proves Going Green Can l ower, Not Increase, Costs What Can BusJnes$ Do to Fight Climate Change?

ln·ch•pter Briefing: Unilever Benefits the Inter­national Community by Ad · dres.sing Important Wotfd Prob lems

PART 1 Today'' 8usinqu Env tOtU'IWrot

I Activity' • Developing Marketable

Busi.ness Skills­Volunteering

Activity: Going to the Net! -McDonald's Potato Energy & Other Best Global Practices

Activity' • Going to the Net! -

The Gap's Soci.al Respon­$ibility Report

I Briefing Spotlight' • How Much I$ Too

Much?

BrieTmg Spotlight: Rolling Out the Green Carpet

Briefing Spodight: Hot Steam to Cold Cash

ln-chaptH Briefing: Ethical Dilemma for the Tho mas Kinkade Company: Was It "Just Busi.ness" to Exploit Gallery Owners• Faith? A Food Giant Benefits Its Owner$ by Feeding Hung !)I Children

In-chapter lk'lefing: The White Dog Cafe & · presses Blended Value in the "Triple Bonom Line"

In-chapter lk'lefing: An Ethkal Top Manager at CitiMortgage Ke-eps People in Their Home1

Additional Briefing Spotlights available at My84zlab:

Activity' Developing Marketable Business Skills -Te-chnology's Impact on Ethic$ Ethical Dilemma Case -Going Mainstream & Downuream? Going to the Net! -Natio n.al Whistleb lower'$ Center Website

Activity: Going to the NetJ­Social Entrepreneurs: A Hybrid o f Nonprofit with For-Profit

Activity: Developing Marketable Business Skills - The Toyota Recall Developing Marketable Business Skills - Activism or Slacktivism? Developing Marketable Business Skills - Two View$ of Corporate Social Responsibility Going to the NetJ- The Philanthrocapitalism o f the Gates Foundation Going to the NetJ- The 1 00 Best Corporate Citizens: What Makes Them the Best?

A WORLD OF CONSTANT CHANGE BUSINESS SKILLS & CAREER DEVELOPMENT CUSTOMER FOCUS INFO TECH & SOCIAL MEDIA PERSONAL FINANCE

Briefing Spotlight: GMAC - Robo Cop$ o r Crooks?

Briefing Spotlight: A Gvy Who Work$ for Peanuts

Briefing Spotlight: Just Good Corporate Citizens

:.======; 3.2

3.3

:.======; 3.4

3.5

60

THE ESSENTlAL QUESTION: What is econom~s prmci· paiJy cona~meclw•th, and what are •ts two major f~ekls?

THI ISSINTlAL C..SnoN: How do the rhme cMfr:rr:nr economies of me work/ dlfftr from etdt other?

TMI ISSINTlAL awsTION: What are the basic ufl<kr· pmni"fr' of rfl~ fmc m.ariC~:r'

THI ISSINTlAL C..SnoN: Wh.1t do I nm:d to know about the U.S ~cooomicsysr~m 1'0 operar~ sue· f!C'.~ffuffy wtrhin 1t?

Tht:-Aimos\-St:cond Grc:at Dc:prt:ssion• The Ro;~d to" Glob;~ I Eeonomoe Crl\1\

THII'SSINnAL QUISnoN: What faul)(:hed the Gre.at R~ce-n~on?

FORECAST: ~ What's Ahead in This Chapter Atter deicrrbing scarcity and the f actors of pro duction, we d is· cuss communism and socialism, c3plt&lism, Md mixed econo• mies. We consid er the und erp in. nings of the free market : basic rights, kinds of competition, and suppfy a nd d emand . We d iscuss major ec:onomic indicators, p ro· d uctivity. and the b usiness cycle . We e nd by anafyzi.ng the recent global economic crisis.

The film Bo.\'ic l 11.\' fi11-t1 is an c:m1ie •M Uet stvrin# Sbaron S!OOC tJI)d Midlatll>c)UgW.. It w.-.~ wriiU:n b)' Jot e~ni:r'ha.~.

then the hig~l·p:Ud scn:-enu.Titoer in H(l.llywolxl, and dm::C"Icd by Paul Vetboc,x:n. Relea;o;cd in

MMi:h 1992. it W.l~ "'~k ((or :In o:stim:·ll.cd S49 tmllion and wm1 on If\ J:IQS" S;,\53 millklon Vllt.Jddwide. Un1iJ tbe 'lleee"< of lbat movie. Sto•)(': wa.; W-11 tJ tcl:ati~·c onk:tlo...,·n and mx-ivcd oroly SSOO.OOO for hc:r ro.Jc

Wh3t do srudio cxoculi~-cs do w 11y t-1> etb""Utc a n)Cwi<: will be a hi!'.' U"" aiJy I hey IJ)' I() hire '"l);utk:o))k' " ._,:ltX.. bi.gb· demand ac1ou witb coough hi"' that the)' add value to n film m ti:nn~ •\I' gc.uing it fin:lJltl:d and u.~ tamtr.l~ u\llins . Hanl· ab-le "':m; ttpp¢111' oo n tCll'itoer callod '"'the A liq'' (wbk.h th~ ud udi:d Mich:ll:l J)(outla.~) . S.uptrSt:l~ appe::u (on thi: <:h2nt· iu.g "A- li.;f• -fl)()l;t rooeoll}'· Will Smith, Jobon)' I.X:pp.. Btnd Piu. Thm Hanks.. GC<lc')lc Cl .. )(l(IC)'. Will Ftffcll. Roese Witbc:l"· SJ"IIl(.l(l, Niw l:•s C:o~c, Lc:ro~Wdc.> OiC:•prio. ;and Ru,.<dl CIVWe. Less po1)U!at a..."'10(S ate oo A. 8 +. 8, and C li~l~.

The A [isl i" b:•S<:d oo .<(llllC.'ltbin.~: (,;:•llcd I he: Ulmer S(:<lle, a method dc,•iscd by James Ulmer, a \'Ct<:l'an cn.tettll.inment JOUml lt\l, (I( qu:mtif~mg :·• ~u.r·~ v:due: ltWnlint tC• h1t C•r her SIXC(1;1<CS \ 'Ctsu<> f:lihl!'e". pro((1;siooal demeanor. and willing· ni:SH•Hr.l\'d and promClli: lilm.~. lfan :lttlltl" ha.~ 100 pOint.. (on the Ulrn« Scak: fc.r a gi\'CO film bod.gel. tbnt m¢11D" a mo\'ie o n h:we 10(>"< L\1' it.. 6ll2J..ting gu~ti: .. -d. b:lM:d SL\Iely llti"J tb.11 :oaor·,. p:orti.::ip:•tioon. U<Kh l.he A li.<l ;ond lbe Utn1c:r Sale ate po.tt.~ 61 a guide: entled 71,,. Hmi.J.\1 . .,.,,h.ich rotcs the ba.l'lk· ability of mrorc: lb:m I.J.OO :&CWrf" :•nd 600 di.rceWrf"·'

f Movie budgets. and box oOioc: ~~ ate po~tcd oo J Tbe K11mbe"' website For inst;on.x, tbe big-bod.j;el Tiumk ... (r<:leni>Od J)ccembcr l997) OO'it S200 nlimol) to n)(lkc and l gn""o~,o;; ~2.2 billion ~~o"<lt1d....-idi: . But 7716' llhlir Wil{'ir J•mj«.t : ( 1999) OOI't ouly 535.000 ton~ and yo..;~<Cd 5248 mil· i lilloll w<ltld....-idi:-111~ nJ(o~t pu\l'itabLe film t:w.r tn:ldt, ba...ed E oo n)C)I'I<:y earned ~ompan:d 10 moocy spcnl (rtturu oo j in\'CM.tncm).

Why do n)C)\'~ ~>rudio~ make all ~e (,()tj\lel- tbe .<ueeC."Qif\0: t-1> Star \lilt.\ (7 tl)IWic:S). James Rood (23), llatmtm (7) , Harr.\" A lilt> I' (5), SJMU·.W<Jn {3), n00

M on?' Cli::Uiy, invcStlltl"ll ll("!pl: lbal lb~ rman.:ial ... tto..'d:S c>f the original hit movie will be repealed. U!O:Ually sequel~> gen· t:r.lli: :In :1\'i:r.l.gc 211l. n~ ~-.cniM: th:·m l>mnb r st:·ulll~:lklnl:

liJ11!!'1, l:o\Jt tbe)-" (:<In be: d"ds a:< VI'CU ) A1lll Sl) 11 w:l~ d1:lL afla m:lny )e:l~ Mdtb)S, llf~\·ir: 11'1·

.~tiMJ 21ioolly aJ)ll(afcd (tden~>Cd io Mnrch 2006. 14 yenn; ttftoe•' !be C.t"' lilm). Nooc t>f the (l(iginal caM and etCV~' I'C-

1\lmed cxoc:p1 fror Sb.1rron $1rone 01nd lhe prcxlueet O,S1ing $ 70 milli .. )l'l. Bo.\'ic /11.\IIJI-tl 2 grossed only S5 milliooo in the Un.itoed St:ole ... making it tbc: mf\<.1 llnpn:~ti.labk film or 2006--a ll"IIC box t>fficc bc)l'l\b.

E\'en A·b~t ,.1:U;. an: not i.twin~1bk. In tb2t .-:am~ )'t::·Jt. Ru~· o;cll Crowe strock ou1 with ~• G("N)t/ J~m. Nk.holns C~e witb u.~ ro::tl1:lkt \Vi.ch>,. Ma11, and $ .. '2n Pam with tilt ~mali: All

'''" Ki"g 's .W~n. The C)(iginal A-li:<.t u.Titoer nOO direct« l<M" 8mie ln.dinr.1, Joe E,.t.tcrh:l~ :UJd l"':·oul Va iW..."\'t:n , b2vc h:l!l lbei.r l"k.lps -'" .,..-ell, brolb or tbr.m n:ec:i\·ing R:o~~ ie Au.md-< {fror Gt>ldc:n Rt~S{lbcl't) - l.hc woKt) for the 1995 tl)IWic: S/,ovgfr&. Sb.1roo Stone berc.clf b.1~: b:•d .<et'er.tl ye.1n; of boml)<. •

In <:xuemc ca.~cs. tJ ~inglc film's poor petfofmatle<: (,;:•n push a sludio into li.ltoln..~i ;;al ruin, a.-< 1/,oa•'t" ',f Gmt did (C)( United M ists and Rai.ft> tit~ 'Tir<Jnid did f<M" lTC Enlt:l'l:lllllfll:nt.'

By ~ontt:.l.'it, <;(K:Ililcd .d UJI"" film,( "Urprio;c C\'Cryone wil.b u. .. , r hi&h di:grt:c L\l'~>u~o.'d~ rtl:lLi\'e to thi: mO!Ibt t:xpo.XI:l.·

I iron.-< in\-e<.1rors b:•d r!lll.hem A slcc:roc:r liJm i;< an ll l"llkr-1llt00)1)ttd ti lm lhat bocomcs tJ hit o~"« time lbi'()IJgh. \\'l)(d

or ml>'lt.h :md ~ p11b-lio.~i l)-" .~:ener.olcd by ~()()(I review,;(.)( :.wani s.." E.\:amplcs arc. of ooutSc. TM Bldu mrdt Pmfrct, ti w~::U a .. , tmtrir·<m Pit-. Ourht'nht'f'· Mrm.«tr',f 8<11~ My Ois N11 C"i!k \\hhlm..f. TM 40· y,.ar·Oid \1'#"· tJ•Ml 1\~ra""'"'al Aciivi.t.\". 'l'bt 201)6 ,.-kep•.':r l .iltf6' Mi.~.\· $,.m/litu g:l..rl~t:rtd four Act~d<:m)' Awnrds and yo..;~<Cd StOO:l million inlcrnatiooally.

YOUR CALL The task oft~ entertainMent busl~ss i:s to determlt\e eustOM· ers' economic demands and then try to supply the products to me4<1t th0$8 demand5. But t~ failure of many sequels attd remakes and the> success of many sle-epet s lettd c:rede-n~ to f&mcd scr~nwritcn Will i-l!m Goldm~~on's opinion th~t ~Nobody lcnows Mything"-th~t even seasoned movtemakers can't predict whether a film will be a hit o r a bomb. O nty 6% of Hollywood fl:lms &ccount for the bulk of the industry's prof its, &ccording t o Arthur DeVany, author of Hollywood Economics.' In other forms of the ent ertainment business, only 10% of t~COrd ll'lgs &etual ly t urn a pt oftt, most new network TV shows fall, and most new books are busts.8 If succeuful entertainment p roducts are so scarce. v.+.y would anyone t ty to supply t.Mm?

MyBizLab 61

J 1 Freedom to Succeed-or Fail: • How Economics Affects Business

' M

Wilf'le to KMW ..._,., 1-1

Key Temu & o.f!MiOM l!\ s.c.u-.w 0rct.t to Stvctr nYouGoAI-. Go•- ....,. ....

62

THE BIG IDEA: Economics, whict. is dMded Into macroe-conomics r., a nut· shell, 1¥$'!_ economic: units) ~ mkroeconomkt (small units), is concemecl with stucfytng the production~ distribution, and con:nwe;; of scarce goods and services. We also consider the imporl,tnce or lc e in the new O<Ono..y

THE ESSENTIAL QUESTION· What Is economks principally coneetned with, and what are its two maior flekfs?

MyBbL.b: Check your understanding of these concepts at wwwmybf.zlab.eom.

II N obot.Jy knlW<~ anylhmg''-Wtllimn O<,khnan·, c.'rnment on lhe 1nc.wie i.ndus.:IJ)'-3f1Piies 10 ocher til'ld!> llfb.L~oii)C~5 :u. \\--ell. Jf cc:rtai..nry were

•e:.lly f'I'~SII:lk. Wn" woutll be' n\l 1,~ .. ;~" \I.CII 01~ "innn"S. 1'11) brombs :a~.; wt:ll :tS h<ts. oo busts as 'AtcllM boo1n1t 1ll:11 i' \\ hy hJ,u-.;:'' Lt. so much about taking ri!>ks.

Propk OOee llri'3ot 10 detiy the ~~bili1y of 1'U.k Bd....-c the retttll glOO:lJ «ooamic ensis. few- imcaatt. m..ny tW'\'Ic-t.~okw..al•n\e\.1.«.~ tbot.ll,.-ht. m the •oois o1 one f"CPOIU't. "'dley bJ ft.....t m \1.2)' e.-. ir.:reDC" tkU' pufiiS v.itboot okiaJ n.t rid>,'" using ~-:21W ~ltl'lputrf fiu..YI n_.'ldtl\. • n.ty rttti\Yd :a barib --~in lhl: fi:a..locial twa that tn.hcmll.ft die 2007-~ GR-.at Recessioo.

Risks. thtn. :ue pan 3nll parttl ol our ftC'C'-rAMLd !>)"slr:ID. To bqi• m apptt:i­a&c thi.J. "C D«d toN,\~ 10mt l..lftd(-nllllkf nt or· t\.'unom•~

Economics: Dealing with Scarcity & the Forces of Supply & Demand

What is rhe definition of .. economla .. ?

A $UbJCCI thai CC.\I'l()misf' think ;1 l1l( o,ho-,.11 j,. M'tii'IIIJI. Air \\oi\UliJ $CC1n (() be one thing that's plentiful-os in '' ni free"" lhc air we brcu.tfte"-but, or coo.rse. hr'<'ath:1biC', he:dtb)' air IU:l.)' W('ll he ltel\f'Ct P~w elc:ltllJll<' , fii":OI)k: li\'il'lg_ il'l a,n::a~ with higher kvcl~ of ai! I'IVllutit'lfl l!uve fl ft''tater ri~ok u l' Llt\'tiUJ'ing heart au.o·•cks • . !>ll\1l:es. an•l other c:u-J I<Wa~:eubr <h~ocu~ 11 N\• v.o1k.lcr houses near a frt:C\\oay ilr co..'li.OOming f)lanl <'lf'e l"heilptr ct.:m th<' ..C: th.ll urt nN

O•allng with Scarcity

~Is c;(tnC'en~ "'lth thr prudur tlo•. dlstrlbul.lon. and consun~plion or scar« goods a lld st.n itt:S. whkh lnrtud~ dM' fot'«'S or s upply and dftlland. Although nat :lO ~.w; 2ptt. 11\1)101 belie\".: IIWft: fl_,, is impon;lnt to lbe ddi· 111000. Tbe Idea is thai. 110 mallt'f h!w. rw.."'h of ~J~ then: SC'cun 10 be. all dli11p ~re c:ssaati.ally .scact: or timittd-el ka1a f« ~ propk.11

~ BRIEFING I A WORLD OF CONSTANT CHANGE ~ The S<ardty of Super Bowt losers• Caps. ~aft« die clod.

dicb d;.w;o w 00:00 iR ll our" t.:~~\htp prot. C2pS :lQIJ shi.rts.

« ldnting the win inswntly appear OR C\'CI)' Jllayc.­''ll lhc ~\«Ui tt:IJn.-411: i_n ''SUptt 8n'41 XliV Ot.ampion~o." '4'itb the logo of the '4Jnfting 1010 s~ Otic:ans Saints..

BUI v.l.a h3piltt1)§ to) :aU lilt h3ti anJ T·~rl .. mak u., in ad''aOC'e fur me ~eam dw diJn'a ..... ~h a. .. the- 1010 Super Bc:'M:I ~"i ln.liaN1-lll" c~~' '1'bt ~Football ~. -.h"'-t...,.,... run tk pl'\'ldkii.."Cioll o(boch -..-wung 3n!IJ.-.ina h:ati, dt~.tll~ thx .-~· itt('OS ION M\"'tf ~on kkvUaoon.. cBay. or any p.ut or U.S. soil. ai'IIJ s-> lhc ~rtn.l:..upl)..."il'l*~d t(}iJDI'»ni'~ ('le'l.''*· 1a..ually m Af'rk;IL (The National Bus.lctblll A'\ow,.. t.:iution :also do.lftalCs fio:ll pby.Mf klsers' cl.xbina Ill dr~riay: r-.klJOI' Le:.gue B:tseball destroy' ir )n

Villagers in Etbiopi3 :..p~datt the ci\'Whin; hec:IUl!C lll.:lilllfac-nii'Ctl g~)()(ls of :uty kin~l :ue 'C;•rce 8111 "'"''ulil "'"'c .,r thcllc: items e\·c:r find their way bud: hl the United State:~. lhey wHuiJ enter :1 tlirtCrcnt Wtwld d( sca.rdry--lhat <lf :.whl ~'llcCt•'lt~ t\( "fl<'ltll mcm,wabili:• v.•htJ Wl'l.lld t'aY (;rr more lhan the $20 In $30 thut the d ''lhe..: art ••nminaJiv •.wwth. O • ~

The Force1 of Supply & Demand

Sc-:atcity h:u. :1 g:rea1 de:ll of be::uio £ oo the f lltcr-lt\ of {tJI'P'>' imd t/t<1NJttJ. \\'e e-x. r lorc cht.K L'-' nctpb lalc:r- in thiS chapter, but hen: lc:t u~o ~otmpfy \OIY l.h1il

Suppl): $qpply upressa bow •.uJbng and .Jbtr ~nco. art to pny. Kk ~ anJ ~ at differt'lQt pices. ~ny. tht ~n~w w:arcc:: • pmduct is. die nklft' a ~Utr 'Vt.iO •--:aM IO ~ f~-. il And tht tt..._ .. ~tt Chr JW\~ tht h!> • !C'Ib •ill be llbk to~·

Dt•t.a~~d: I.Jnttl..J expresses tt.. •illift.a: mllll.l able buycn ~ lo pu.n:flasc: "~and~~~ 81 daffcn::nt Jl'l'."C'~ G:ar,-,,u~ \pt.d.taJ.lftt lt"M :k:llr\.'C a prudi;lct is. the ks.s buyc:n •iU w.ua li.l pay f\'11' h An.J lhc ~ K'lln.T. the 1r.'lf't huy~ -.ill bt -.Uiing t.o l'l'lY

Two Major Fields of Economics: Maaoec.onomics & Miaoeconomics

How do "macroeconomics" and "microeconomra:" drff•r?

I::C•'nmnic-.!> is J ivklcd inhl tW() maj•>l' fields-mrwnwwmm•lt·t, the lltud)' tlf l.:•rze (~lllltllllk onits. owd mknlof'CIIIItlmkN.lhe .!>hilly llf limltll unih.

M•croeconomics: The Study of Large Economic Units :\tat'IY•{"umm~ti~ s tudies tl~ tt·onomy us a wtwlc:: h t'(lltft'nlr.lltes un hlr&t' t4.'••numk Ullil\. sut.fl :t.'i the opera.l.ious nr n uatktn'lt tronomy and tflt> tflect Olt le or .go,trn•nt•H polk-tes and all0t1.~1lo11 or resouiTH. F.w in-.r.:.ncC', •n:.cro· ('C(~•~Mll mtgbc. swdy ...

The U S. llfUM domestic product. or GOP ttht r.ltal drti"&at \'&luc at aJJ lhc ~~-...._,.and ~~' 1~ io lbr Cnir~ SUtt~). Job P'-""'th and ...-mploymtot; Qro.1lt "' -.... .. prodactioo: Thr con~ pict iftdt1: 21!1d simibr br~ tt\"'ntilft..C Ul!.b~-;lk"'· Mil '41h~o-hJtrUtdtnCJalldmuKS(J:Ibons ha''" a bmrr tra.:-L ~,,J '" tn'IJifU\trt( tile­U.S et~.

e Scarcity. ~ un •.a\' 'y find ON of these New 01feans Sa 11b' ~ Bcwt XLNv.inner·s CilfX, tk• k:f'ld tl-~tlhe lritlmpkanl playen don 111 ttt.o 9fld o: tho gam• 81f1 tlo\'o •u!ly could you fird a ~Supl!f 8CW~~I Ch•m· pioM" 1'1.11 tor the lndl.~t~•pollt Cdlt, wko o~ the contest, How rnlld! would wch .1 &;.~p be wo'*' •• • c.o&. lector',; Item?

W..t to Kftow u-1 S.2

A~ Maooeco:ooc • Perfrormance il!i Oemocntk

.. bpublliGitt ~~­'f'ttltlidl An Better? (Yow M.y h -Go10-~~

CHAPTER 3 EoCOIIQtruu 63

f) E-boolfs :.nd bookloellon. In N lly 2009, e-book re~d~~ like lt---"0 Amu:cn Kindlo mad4 t:p 2 q" oi ger:.e1~l (l111d'e) book s11 es, bul by f(Jl)ru.Joty 2011 they h11d grown tc r:.e~rly 30%. Thi~ :~nd other new comP.fJ;i;ion {~ from on!ino $0!1-'") h:~s ro,oed lhe big book5et!el chaiM ';udl ll$ Bamo' & Noblo if" to signific:~nllos.se~ (.:tnd Border~ into ~nlcruptcy and &V91'1>ua!y olft ol e>ti~encel 11nd CIIU~ed tl'lem to roovlllu.Joto thotr stta;o9ios.-11 worthy wbjed or sludy ror microoconomi$1$,

Microeconomics: The Study of Small Economic Units

acrtX'CQfiQm•n sludits the t'('Onomk beluu•ior or indh•idual et·unumk un its, the ope••ation~ or p:U'ticular gn)up~ or people. bullbte.. .. lltS, organi'lations. and martet.s. Mieti'ICO:>•~~(ll iStS tnigJIT be CQn~rned witl• $Ucl• nl:!lll': lS :lS.

How i•M!f"C:.SCS in cuiri 1~n f~cs ;l fl'.xt c.~lltg~ enr()llnl(:ti(S.: Haw changes in gilS price.., atToct what size CUI'$ people buy: The impact \)fa blnck market on prices of legitimate g\'lo.1d"~

How I)IX>fessi ~~n :~l Sl)l)ftS·IC:.nl mo•~lpol ies :1 tfeet telt\'is.ion 11\:lfkets; The ciYott or coupoos on consumers' buying behavior. and Haw the inttoJucti.oo or e-bo<~., atTocts bi)Ok sales. f)

The Importance of Knowledge in the New Economy Why does spedollzed knowledge m3ke a difference?

110\\' are goods ··•nd services erc•·•cod? This falls within the an::.a of rt':JQitrcC' il~· 'ifflupmf tll. the study or how tc) develop the ··~ourc:~ fo•· c1"eating and be...,t utiUting goods aud servkts. The resources m3y be devclo)>Cd by the government (as with the intersttue highway system or the Internet) 1M' they may be developed b)' buS-iness (a:s with AJ>I)k's iP:ld 1" am~)fll:lk:ers.' t lccttic ems•.

The means for dcvdvping goods and services a.nd satisfying dcn'ilnd are the fanrus •if ptt)t.fm·Jirm. which as. discussed in Cki(Xer I are . .

Natural ··~orces-.n:tteri :.ts suwli~l b)' n:~ru~. &lid• as l:.nd, s~m. w:tter. und minernls. CapitaHhe buiiJ ings nnd toob used to pmduce goods and services. Human rtSOUrc:tS- d•e lnun:m etf;)ll, b~)(h nwmt:.l and l)hysical, ret(Ui.rctl to pmtluce goods and service..,. f:.n tn-prencur.ship-the proce..,s of taking risks to crctue u new entcrpri.$e. Knowledge-1he t¢ehn~)Jogical <:Xp¢rtiS<: anil l)r:.crieal experience d•:ll a ii~'W."'S entrepreneurs ro quickly determine new wants und neotls und deliver new pmtlucts.

\\'hat has boco•nc <:rlJC'ial in 101J:\y'S eco•~'tnic S)'Sletn i:s the tiftl• l)r.)(IUclion f:.c11"· knowledge. As inf\lf'mation tcthnt•k•gy docs more of the wort rormcrly dvne by humans. kn\)Wicdgc: is becoming a C\)mi>Ctitivc: advanwge. Techn•:>)\)gical change: has incre:.sed the 1.e~•H f1" "k:llowlcdge w~'ltktlS," tJ~'se wi1h gre:.1 1eehnical skills who nre gootl at absunct thinking nnd problem solving.

~ BRIEFING I A WORLD OF CONSTANT CHANGE ~ Using Knowledge to Build a Technology for Predicting Hit

Movies. Coulll i1 be that we we•~ wt~,ng to sugg.cs1 1har "nob~"'Y knO\\'S anything" a.bout how to predict hit mo.,..ies? A ' 'kllOWicd&oc work .. c~o•m­pany called Epng\"lgix. Ms devised a V.'tlY of predicting m~.wie hit., that relics. 1\n analysis of scrips r:ttJ.er than on the "b:lnk.abiJil)"' 1lf an)' Sl:l.r$. HiHl'llwie script clements were given to n Cl)rtlputeri:t..ed system callcJ nn atti.ficiol neural nCPA\'Itk, v;hid • 1~".-'lk.s f1w J)ancms in la1ge :~m~'ltuus of d:.ta. After (h~'ltl$3nds t lf odjustments aoo tests ••.• rormuJ3 was dc\'iscd that pmlictod the fin.wcial success l)f e\'C:J'Y m\wie analy7..e•L

A smdi~) 1hen 8:l\'t EJ):\.g~'gjx ni1-c unrcltased m~wics, and d•<: scripts. were t~ru~ly..:cd without reference to the sturs. diroctor. producer. or •nutketing buJ­get. 0" l)u~e tihns, tl•<: Ep:!gogix cstin\:ltCS ~~fbox ~)ffice gross we1~ v.-ay ~)tr. On the remaining s.i.x.l.hey comx:tly identified whether the film would m:lke or k~e m~.mey. "Had tbe srudio used Epagogix f.)fl th\)SC nine scripts befme filming Sl:l.rtcd." ~itl a SIUtl i~) executh·t, "it c~'ltl ld ha\'e savcti iCI\S ~~f miJii~)I'IS of doll.nrs: ·u •

64 PART 1 Today'' 8usini?$S Env tOtU'IWnt

Three Types of Economies: Command, J 2 Free-Market, & Mixed •

THE lUG I Of: A Of the thte~ types or economies-comm<'nd (communism lftd socialism). frH--mltktt (capilJiist). Jnd mix~siness opH•tH ~st whhin the fr11~rk of uphalsm AI three ec-onomic: systems hwe the-ir own bM­ef'rts and dr~s. ' THE ESSENT1AL OUES'nON: How do the three diffenmt e<ono,_s of the wor~ differ from each othet'?

My8 W..b: Ck..ck your understanding of these concepts •t www myblzlab.com.

To butld :1 htJMnc ....... mo .... t people wouJd asw.ne. it helps tu h..'l\'(l 01 pt:u ck.tl nr C(l)l)l'lfllil: frtt..k"'n· Which do you dl.itl.k \\-ouiJ offer IUOJC of th~: H;'na Kntli

•• the Ut~itn.l SLtlc.,'• Oc-nmarL OJt hpan? O\JC11 it \Urrr\'lie you that, in the 20 11 lnde."C of l!oooomic f!!recOOrn tby the

Ud// Sttt>rt J,~muJ/ W t~ 1-kriu~ Foolkl:uion). Hoog IWng. v.bktl uKII t-l bcl<>n~M tht V•tliC..S Ki~t~cdom and 00'4 bt-longs tot,:ommunnt l."'han.a. V.JS ra.nl.c~l I oo d~ li.\1 ud !he lJniftd Scues v.-as r:utkaJ 9? lb. lkamart.. \lt itb iU atco­C.i\t u..lt·'\.4Jfl(lllltk'"d ~tt.. t..b.'11~WI, W s-Jcillt~.:tlflrt tnlft4rM. V..li r..nl:~l Jt. v.k:mu J~ ,.. ratlb=d 10't You mi.~ rmd TW Glnblll Ct,."'"'frln"r"'n Rrl"'ll'f 10/tJ..lOII by tilt \\',vtd &"MMfttic Fo:wum ab o ~- ~ince il D~ thl-\Jft•Ud Sl*' a~; .a l~l'4tt fh'tnl ,.sa:"'~ ~.¥S bcf..:wt'). brhsnd S\lo1VnloiiW.. S•cdt-L Ulrd Sinrllp"K • ...-ith F'i•land.. the .Ndbertands. and Omnwrt .. ked 1

thruup 9 tSN • "'""' 1 / _) At. \lot \lo1ll o.«, Cl)Untnc~o "'e may tend to think of~ .. !oOCL:tlt'-lic"' NY ·~'

erthc-k:Mo h.r\ 'C t.LfOOJ (rtt·m:utet C\llnpoDems. Lt-t u.s de!Oeribc the tllrec c:l:Ji.~ic l:itM I ~ ,lr CC\'n,~•nit' C I ) l'lllll"lt"'r/ t'Cim.mmt'c, (1) [#l'r·rmu l.rt t'f'f mumi,. ,, and ( 3 ) miwd ,., mwu•lf•c.

1 Command Economies: Communism & Socialism What's tM diHtrt nc• between communism and socialism 1

Commaml t'111r111mif :. (M' u ntral·plilmJil1g ctctrmunit'.f, art U41Dimllc ~ystt111 11 sut·l• {d \'l) tlltllUttl'!m 1111d $04:lallsm, in "hkh the gU\f:i'IUIJ t<lll (J\,riS ltiOS-1 bud· Ut'..'l~ts :md rtjtU~It~ th4! am(tunt~ tnws. :md prkts of good.'l and sen-k·e..c. n,c 1'\\n pri~•JJQt \Mi:lll'"'-" ''t cornma"'-1 economies :att r·nmfotm•N" (\\h•~h j,"' dlxluwe) anJ 'IH.iolifM.

Communism: AU Property Is Owned by the Gov~nment

fPit,..artm han f\"'nomk systtn~ In wh~ an p ropert) ls O"IM'd b' lttf 1-• ' ·tmmmt 1111d "~~OM w-ortts for tW go«.n.111a.t. 1bc DIO\'Cf11Cf11 Ofili· uN .... 19llt<cMU')' Ckntwl phiW.opber Kart ~tarx. • 00 fc:lt tJul pri\':ltt

ow. om.htp IN 1o lht c:ttr'"'tation of •uting men and -.OIIIC'n Cun\1n«d {'/ ~ need (.,.. • DC"A ~ !i)'Siettl l»st"d Oft 1'=rom eacb ~g to tu~ •bthU«, h) e-ach .lll."t..•dfdtnJ t+.l hili. M'N, .. \t~ V.' f\lte llft" Cml'l.ti'Wnln Hnmjrl.lit in 18-'8

0 rWMit to Know MOON? 3-3

Tt!4l United Stet~s ""· ...... u of .,. World: liggett Contpflitors to the United St<ltH

<lo•-~co,..,

• PA~R l.t 11wl World ~~ Fon.rl's c:'OUil'by ... ~,f._,..~ 201W01t.

1. Swrtler and

1. s .... "'don

S. S.f19ap0f'e 4. United St11tes

S. Oerm.any

• · Jap&n 7.f r~nd

&. Ne~h01lands

t, D•nm.tc

10 C:anad.i t1 . Hong1COI".9

12 ...... t.O KI" $JICI'OI"' tJ r ..... "WI .......... tS.. Fflfl(•

.. _ .. """'-• c.. .... ,..,.. @11M Go-·---·,__.. ,... __ ,... .. _ .... _,.

(1~-·-ou~·-­,.._ "'- u .,,

€) ShHI.d!en. Louted !mrnftd!tt~!y l'loOr'ltl of HCIISJ ~ ~ 01'1• of ltte f.nt"l 9fOW!ng ciU~t In Ike ..,.orld. $h.,7h~W~ b•cM~o tk• flrtt of Chin•\ Spe<!• tCOI'Iom c Zon~•. 1-.:rxt~ tJSS)() b+ll-on !1'1 ~OfO'On irve-slmem .fl both fully ownH •Ni pint ~I.IHI COI'IIp.tt'IIM Would you tt-.... kacty .... tk ~~~f'l.nd cf""il"('' .. ,......,.. "'M.ng • a .. ~.·~,

The Rise & Continuing Fall of Communism. Marx'.s. thoories inspired the ri(oC uf \'!lrious J»litic31 :lJl!l N:~'mW: rtf•wm l'lkWC'ttlC'nt" lht1liJgboUI Eurllf)t The Jno!>l im]lOIUnt o( ~ be<am~ cht CtMIUr"'mu•t P.oll1y. ~ lucb J,.'Tt'""' out of the Ru.ssiu Rn'Oiutiae ~ 1917. Afta W~ \\•:u 11. c.wnlURis.ln spreOO throcgboot Eas.ltm Eur\ll')t. and in 1949 i1 'll'ti t~1 .. MJ 3\ [hlo m:IJlW' ~e S)'Sit"ID t'l( CllinL By the early 19S(k. abMt ont_.anJ of'lk •01\J's popubboa liTed UBdo' Q)f'n1l'JCiniW, ~ in dJt So--itt Ullit"' and '" lht Pt-.'Pic''f. Rtplblie of Chi~U;

SIOCC the crosioa ol c.'OCtllUJ•L\m tn &1\ltm Cun..,Jt 111 the bk: 1 ~and W ~:n:atup or me SM-ict ulli~lft u. 1991, lk iAflucn« or comi'IIU.ni.scn 1a3s dedintd. rcanicul.:wly ~ C()mlnuni~ ~tti'II'M'I'Ih ~'t\1 '-'-»lml U\~ thtlr ~ rt<> stimubb: gfO"tll. Today llbola Mr•\fl:rttcr or 1bc (Jt'l'J)k of the v.·ortd li\-e in Com­•nul'li.;t couOO'i.es.~n~lSt •)(che•n in Onn.1

~ BRIEFING I GLOBAL BUSINESS lliii!iiJ The (Mostly) Communist Countrl•s. Today. North Korea is

. . I)I"'ba~ly the lfl•lS4 C•)fllJI\Uilt-.1 c:~'Ufllry 1\'nlllini•lS 1\)d!ly, FQUr ()(her 1;\)\IO(riCS-Ouna, Vietnam, u.,~. Ulkl CuM-eire ai)M) l)lllllinally ¢Oirununist. ul th•>ugh some hus.i nes..~ acti\•il)' i.~ rnknuc,l, cCuba in 201l :•cruully encour­:tgr.l"w" privme Cntti!•prif>l\ th•'M.I£h n•lC callins i1 ll\:11 •'~ h• Nl)l'rh K·'~3 :.nd Cuba • .severe ~mtages rx i~l-in.tc.cd. In Nnrtta K~a. there Lo; widespread sturvatioo. In Chi.na atld NOflh Ko'lf'C:t, ,;L1vc l (lbo•· als.o .uill exists.

China and Vieln3m h:.,'e relaxed ~ouue conm"t1 (>( their e<:onoroics i.n order to iocre.:.se growth. F~)l' inSlllntt, Chinn hllll tnUJlutcd •narkct·orieniCJ SIXX'ial Eov•u•nie Zoot-10. u.hidt are· f•\-e ,)( otntm l t;\t\('rtunc'fu ~'~~"roL One such 70DC. Shen7.hen. w~nt from • \'illll.IC lt;l 10 mllltoo people in only~ yean. 0 Arocric:lll. Eu~ ::~n;J J:ifW'(""C' ~\lllj).lntf\ arc ~n C'\'C..'\I'VIhctt in Olin:! tiJ.uK'k is a f-.nurite carol the Chtnctoe) ~

0.. thiC' ocher lund. \"".cuum·, tnin'tmcAI kN-"011\1 a mad.ct ClOllklCnY· v.iai"' btp" id 1986. h2s lrfi tn311Y of dtt p.l!o.W hchiAII, uruuti.., lo) pay f"" fooJ ....t medical C2R'. "~ "1llw! ~ Jltlbal n:.-.nmic ~ affcatd Oiu as it did •t.t: rtsr d dJt ""'ld. * .. m''""· ,'1/,h'll'lt" "'"""'bid o~r·· •

Th• Drawbacks of Communism .. 1lrc~ ate- tM:c INJOI' JlR)bk:m.s 'Aitil ccm­multism.:t.s f~-s:

Ceulr~~l planning Oa~ot'S: In ll )lUrt c,xnmunl\l gtWtrnmcnt. Jcd:~i.oos ;lbout wtw pruJucts and scrvii."ti to lll;lke ure mll!lk by hure:wcruu iB a cenrrul o(· fia: Sec:tusc prices Stel hy lhr go)\·cmn-.cnt :ltf _..1t au\lc indic:ul)f I)( "'lpply and demanJ. die centrol pl :.n~r.; n~\·cr ,euit~ kn~Wo· "'hill or bi.)W much to produce: they have m gucs."f.. With t hi~; ki1\lJ ilf p.lm· in(mm.1ti.oo. tbc Sllvirt Union tonlinu:tll)' fnileJ I!• udc~IUIIlcl)' flnllcap.llCl illld ll'IL"t( llernanlls r .. , rood und ht.'!Us ing. which lc,l hl l•lrlg lhM:i. Mll wuiting lillCll amt.lfiJ citi1.cns. l .:tek or IJu:euth•e: Despite the ~·J !IIltill.ll (lfilllliloC (~f \lo\Vk CI'll being te\\o'llf'ded "each according toJ hi\ need!.," tltrrr i .. n\) l nllll~.:~twn (..w "''U.te~ to Wtlrk "coch occocd:ing co his abil ities." lkcou~>e "'•'•tel'\ t.lo noc benefit t.lirectlv from 1hr ir u.o.t and ~usc- tilt g.w<'rnlnc•" !:\XC''< 1n1'"' of 1hc-i•· c-aming:f>, thert is. 1)1,) need to "-O.t han! Tbttc i .. ll.l'ol' n<, ""''llli"Ctllk'n and thu~o oo uiCcnti~ to imprm'C: blsji'IC':ss deC'is.ion mati.n; 01\i.J h1 ''bui.kl a ll«rcr moo.st:tr.lp.-

T oLill g_oH.ntnltlnl inlrusion: G.:J\~mmrnt contn.\1 mer the eetWKWnv atcol:h 4or cu exlt'nd) rt<> it.1tcrfcn:noe w.iJh JIC"lfllc''- J'fh..-.&.c li\"t'i. W:uu lo.l fwxuec :l a:Tuin rrligio.' 'The &\"'M•nNIIC riW)' no.JI Ilk,.... 11 \\'ar~~ ~ cNnge jOOs 0r residencc?Yoo"l n«d w tn ~· rcmw.~~tan

Socialism: State-Owned lndvstries & Rt'distributed Wealth

Dcmcd rrom Mnst pn.ni.1rk'.._ ..: .., n k •• ('('OtH»mk SJ.5tcn• in *bkh som e major i:ndus:trles art O\n ed b > l.ht jtO\trlunt.al. but smallt. r busines..ws

66 PA RT t Today'1 8""1nov; Er'll"ffO''IT'Ant

• rr 0\\l:lt'd by i:ndh·idwds. Mut:h Cl( lbt' wt.alth or $utplu~ of falgb hw.·o1116 is rtdiSCI"lbulecl by tht gonmment thrvugh iOflal prO(lni!IIIS. Unhkl' c''II'IIUUI'IiSl .._.,.\i.lntne, ,.hkb Iiiii ~ lhot.Yrtiotally) h;,\c: only (W' c:nlrl<')'c:t-chc \l.il&e~· dahW.: oounlries allow ciriu:ns. to \\UI'k fllr ~idler the fc"l\>emmcnt"'"'DOJ indusuies 1'1f 1,;\~t bu~fll'~ OOA"'fttd by in~.li:\"id1,12l§.

Wha t. Euctty. Is a SoOariSt State? Tf)'iq: k"\ rm:htly •ltftofy :a ~)1.""\:alisl ..wee ~.-u bt d•ffi"''- foc Sie'ttal ~

"'Soc:W&m- ill 1WDt ollly: Somt cm.•lrir~ ~ueh •~ C,ypt. Libya. J\)ttupJ. anJ Sri Unb.. tO:&t~ reftrtn..'"t51~ ~'li:UJ,\m 1n 1htu '-'-»\liw· l*'-"'" but 00 OOC: s.ubso:nbc: to Man.ut pi~tetrk,. StlltNJwn~d mluprists: Socialist counrrir~ h3\~ lit.'lle-ll\\incd c:nkr· pn"c'. w.:h :..; 'lf\1\\:ay's swe·O\\ned gas pip:-li..c n.ct\\ot'll'l; But many ""~i~IL"t ~""nlnes alw ha\e lat~ prwatcly tl\\ot~~rtl cr~tnpon,c ... *'~has Swedish M.atcb (srooke·f~c t~\bacc,l prddUCL~l Of C:t'M.Ir~. even the United Sl:.tcf> has g..wemnlCnH l\o\l' rk"tl (!lllt'"rpri;;e;; the inttr .. t:ll•' hisfi· way lly;stcm. fo•· instu.ncc. or publi.: universitic~,u tho lCml :r•l4 itrl­l.tm \f.<'lll ~ h) sug,gcs.t 1hcrc is :1 l:11gtr l' ,."l'•'lf1il'li ''' g,wfrnmtnl:llthan tl( priWilCl ccnn\)mi¢ ~tivity. Wtlfan lll:lle: Many coomries with Stllt--fWoDCd in~.IU~I Iic!o pllvit.lc tJJftr I)Col•l)lt ~A'Ilh I ,.-('(jiir-(' }/QI~&OHrflnlt!fll Mki"l ft' l'\lr.:~ lu 1/,hc dtit_nu « 'OIIomir ~Nrily by pro\'ktilt& f11r them when tht>' ;11•e tutt.mplo)ed. Ill, ur- dderty and. ht some rountrlts. l)t'O\Idhtg SUbllidh:«< tMI('g( «<uc-.tli(tJJ$ and ~: hild nu't". rr~n~·c:·, \\'ll,:iW '\('r• \'ice., cxpent.lirures ~ qui.te extttlS.iv~~ the ClNiltty ~nJi .;!.8.41'J, of iJ.s fl\~!o d-.'lnt!iJlk 1~ on them. s ... a~m !Op('nth !l.lfl< TC"mh·r.tnlo..cd ~up! spends !!..5!f. By ooomst. Canadl t •ilkh ~-.nc ~ ld:c M dt~ftl: 1( ~'ilfjg_ uuint}' bt.el:u.st of iL .. "-'~"M~·M~ ht.it.hh ('It( ~~m) ~ anly t61}q.. tk U•ltd SIM\ \p:n..h 16 2•.1Dd Muko s.ptftlh 7 .1Cil 2f'll«<g ).& il'ltllwri:ali:lol rub.».~ triAl by the o.p........,. I<>< [<....,.., Co-q><r.lbOO lind Dr•<~- IOCCDI ,. 2007 ~ISH a PfMf'"l J.2)

IHJtb taus: Counuies 'oloitb a bi~h k\'1:'1 llf J'»'trnmMt ~" i~cs m:ay .tbo rend lu ba',: high tUC$ As a pcrc~ent~ (,, rn"'~ d-'ln'l(,tl< ~ lk..'t in 2001l. Oenm:ut·s share of tiiU"s was -Ui.J~. •nJ S\\cdcn'" w;1s 471 ':l 8y C1)Jltf':t$t, C •na.l:l r.lnke.l 17 (Of 26 ~·'M.In(ne .. tot ~221), the UMW Stale~ r.mkcd 22 at 26.9%. ;~nd Mr:tic~, v,.a, r;•ntt~.l 26 (IJlll I>L•ce) at 2 1.1 %.'0

(St't< a Punt</ J.J.) American\' current rcdc:ml tax. bul\lt n is Ul the I~Woest kvcl Sin\"t 1958 " '

The 8 • n• fits of Socialism. Un•lllt's.tii)l,;l~l y. ;;nck•l i~otn ill DIII'GCiivc 11, m:my J'Cople, whkh Lo; why it is found in lio muc-h olf Eun~. Africa. and lnllia, SI'Nnc pluses :u-e :.s folt."l\\rs:

Mort be~ttftiS to ddzens: Ci6v('nli rtcr-i\-e 'Uoeh bfnrt'ib "~ (tte

~uc-alion C\"Ct'l thruu~ college. fully p.1id htafth tn~.UUI\CC, fn::c clnld Cll.l't. toll ~fer \"3C'!ltions.. job security. :md ~encn."'W> ~irc•neAI p.KI:.IIjlc:J.. Thull. MXt.a.lhl cwnlnCS knd to ha\e too...« Lnf.Jnt rn~:'4t.ah1y rOIL(\ and w,.htr .autt bfe expectancy mcs ~ to rr:so.ny torttlll"-t COUD­

tnC'' (lknl'fl~. f-..."idenl:t.Uy. \l2S foJtll'd hl t11t lht hallt"t-..t c.:MJ.nlt)' in cht- •lWkl ~ 10 a~· by die- li.S ~:.Unn:al So:irncc I.:OUndl­la.. tk l:nllcd Sales '"U Dflta116.)!1

1.ess JOtbl 1.-qldllty and Pl''trt): By EU1ft,J rtk'lft ,'( \lr.rld~tn pa.tpk's mwmc'S and mlistril:uing it to J'0'1m' rropk ttw\."Qa:h I=""· ft'IUIIHI ~- Sl'!Ci:ilism I"C'JuctS dlt ilmolUIU o( "'-'lo..Uf inc:"fWW''ity ill'ld pv\crty t:um~JQKd to ~ii:OIMt (:ountnif.\

• PANE\ 3.l WeH•e "-'es; P.u~ of !JI'OU ~die ,..duct tpeJit: on~~ tcKs.l ~ 2007.

1. Fr.anc:e 11 12. 4 2 .. S~ 111111111111111.11111 21.3 3. Aurui~ 1111111 Ullllllllllt 26.4 c . Bll'gium llllllttllllllf'llll 26.3

S.Ott~~•k Dllll!"!lllllflll 26 1 6.Georm~y ll:llllltlllllllttl 2S.2 7. Finl~no .. 111!!1 IIIIIIU 2HI

a. Italy 11111!111111!!. 2• ~ 9. H-uns-)' llllll.llllllt 2'3 2

10. Portugal Ill 122.5

25.Canld• II u t69 27. Ur'llt~ S:&tH 162 J.t. atl''eU:o 7.2

,.._ouos....~.,_.t_..._ ........-Dno. ...... tl_ .. , ___ .......,.. _

_ ...__...1IOCII.-.!e.,._~-·· ....

• PA_NEL 3.3 Tn~ Tot;~~ tM rtldo M • ~~of grou dom.stk prod~ for 26 dewloped ~ ....... 2001 (provisiOf'lolol).

1. Oenm.wk

2. Swodon

3. Selg um

4. Italy

s. F IM!CO

6. Au~'tr'lt

7, Finland

•. No"""'¥)' 9. HVf'tgery

10.~

17 .. Car-..acb

22. t.lr..:.ed'Sta:es

26. Wu.co

lUI Hllltt 111111 411 3

1111"!111!' Ulll!f' 4 7 t IIUYIIIIIUIIIIII <t<t.l IU!I lii!IH Jlllt0.2 1mr.mm 11143,1 1111.11111.1429 1111.1111! .. 4211

llf I 42 1 lUI [ 40 t

..... 38.3

32.2 .... 211

eo.. <>-t"<CO.OGCO~s--... ..... .-~ ~-A. ___ .......... .IU~·· ~ ....... ,_;jO<l

CHAPTER 3 E~onotruca 67

0 Socialt,.m. o.t'l~ •~•· OM' ltfllat~d S.-.ed•stll c.•Uze.'lt PlY t~ ~tUNS o( 26 ~~rl•l;nci l"-8tiO,.,. He~ng "'V till"- tlow­- · ~·t-., t~-. o .... 'l.,. 1mpoo;et ~by N ~of gowtl"ftWW"'t; ,.. ,act. ttl•• PM' apllo

lf'l(om.•~ .... sf":ol.,..,~ ir~_ ... ..,_ ...... ll'l ..

""'tfO Sir" ""'-".you 1tw* rlCIF'--lOCl•..-1 CIOWI'Ir- couid -­from ~ttt·· .lf,f)tf «'<<t,

68

The Drawbacks of Socialism. •l"hc ln.liJtW cridd\m'i: of ~-xoialism are as follt>WS:

Prublcnts w ith t:t'tllr'11J plamth•a: Li.ke co•nmunilit CfM.rntri(S. StX'i:tlist SUiteS

dn tat:E: hugt prOOk•m. if ctntrJI1)1Jnntf' f:ull•lt:•'lfl\'ctly :an1icipare the ris.ht lind ;nd .,...aooty of good~ lll1d '<f\'ti.'C1 h• pn~lu~c

HiP laXt$: A frequent cribt"bm ot lhc \\ch;n s.t:uc is that it n"quires big~~ tnes.. ~ly. thi< i\ t4'-ntlimt" lrut, Oh ~.,by tht t1'C r.UtS ()( Oenm::atk IIOd S~alro. dooll.lcd WliCr 8 On lllc Oilier """-1. il an be IIP.IJCd lh3J ~ nh) St)n.5e rourwrit" :at It .a"'· h..M· h"r)· "''~i\t ')"SllttDS of t1Ulioo. -. .. idt don't dLsproportaoo.s~cty bw\kn the mlddk .-d poorc'r~ ad dlq­h2.\'e bip.perlllfming ct'\liOIHio Possfbt.e 4)raln drain .. : 5t1fnt ••JW 11~1 "'"''ialr~ ((we« rn>(t'S.Sioo21s :and ec~rrepreoeurs to lea,·c &he country 1\'l •n-.u.l h>:;'h taxes. lbis so-c:aUed brailf drtri•, Ctl' entiJratlon or hlahiJ' 10klllai llttt=lltt'tual :md teebnkalla.bor to other t:oontries in urdt'r Itt ~Ut:r 11~1r f't'onol'uk c-ouditto11. could be a probkm. altboogh the C"o'idCAcc lS miltcd.

Oen~ri:-, the O>tllllr:Y lha.1caJilll$ "''d• S\\tdtnl h;•' eh.- higtK'st tax r.ut":, has reportedly had probkmli rctmnina educulC~I )'<WnR workers. who h.:r\'e been fleeing tooth« coumricli \lo'hc'.re IIIXCll ufe lower:· Tbu.s, nuny D~oish <:tJrnpanics.. cncooro~..gtd by lh(l #IWt tnmr nt, hJve l'll'<:n k.'Vking oiYt.borc to recruit ttLicnted rorcign workc~ I .ell~ job and n·e:~ lth crtgtlon: nw: luck t)l' i1\Cetu:i\'C1 un•lc•· St)C'ialism. it's. illgued. tcDds tu di~t.MJ.nlg~ 'll.mkc~ ftnm \\'lWl-ulf,: h hard lb the)' <:an. Ct.JfLS(· quently. socialist counb'ic:$ an." n\tt 011 eft'ec1he ll\ ea1'1itulist countries at c:mu­ing jobs ()f crt-:~ting Y.c:l lt_h POSiibk gu,ernmtot dendt1~ S.Jcll( "''Ciah""·tyr: gt)\'tmtnenb in dC:\'C'Iopcd c:oo.otrit"s :ve runniAJ OOdJ« 'Jifi~ '' uhh ~ftdlnJ. uceedin~ int'Ome­that is. tn-oenut from tau~ F,w 1A-..un..:t, ''"'r ~x-·bbiot ~'IIJtiQ'i,ts Porrug::al. ltd:nl Grtece. 1*1 Spain ~calkd f1GS~ ~indy coo:sidcml to be so hi'hly i.nddud zs b> dlf'ea111011 chc: a;oo.>mk wabUity llf m~rlll oi the resL of Europe Uhc Euro zone. ~'ntonl•• 0..ottT ..&)

Ytt C'\U ....-..sociali.sa. ~ call N8 II dd.:it. Thr CIA ltbrlJ Ftld 8nnt 20/J r31));:hJ 112 O."'IW'I~ ... tth 20)1 ~ ddiciti 2S 2 ~~ of gross domestic puducL 'The nc.II'IM'I\:"Ilt.hq Unu£d Swt-s ~ ~·hip :u 27 (tnlgct def.cit 8 JI'J. of GOP I ~ lhc Uaittd Kitlgdom J'3f'll:oj 31 !1.

Three socialist countries were C\'tn highcr-lrc:land Wll'\ rut1.keJ 2 tbudget dcfi~it 37 %*}.Spain 2.4, and 0«-ctt 1S Fr.u":c ro,nkcd :u. f\'lfNpll'l. :ln•l ..... ~l~n.l 44

Yer n.x :all s.xi.:alistcoo.nuies run hia;b Jc6dbl. ~1nc ")l.:i.:tliu c~'ltuuries io 2(M)J r.an&.,W ::a~ btutr l:h::m dtt UnireJ Scu~ Ntlhr'rl..ml' f:lft&.td 6..l. AtNri:a 10., lktlm3rk 71. Italy 7-t Bdgiam 17. <:i«tnoMy IO.l. 11•1-.1 110. -.1 S•"'(:· .n 1481~<k6cil 1.46'11 " c-b""l.<d81

2 Free-Market Economies: Capitalism Whal Is the basis of capilafrsm?

In a ru·marto uom1flri) abo rontmonly calk-d Dlutafiliii; tht' produC'I.ion ~nd dlstrlb"Uun or goods omd ser,·k es :u•t t'Otlt rollr.d b~· prha1t lndh !duals natht'r th1111 by the J:O\'r.rnment. Ca(»talism h.-u trud1Li11nally teen 1hc txuii!i o{ die CC\'Ultkllies of the Unired States. England. Japan. !lnd \C\<:r.1l \-.thet dn~l•lfled

C1"1UIIlnr\.

What Creates Wealth? Adam Smith's Theory

Scnui~h c=Ct)f'ldmi.st Adam Smith. considered h) be: the ft~Yn•ler· t)f •n~)(Jcl'rt ceo· ""'min, Wll\ nne of the firSt (I) imagine a !)',.lCin f\Jif' Cl'tliliniJY.Colhh tlnd impnwing the h\·~ t)f e\~t)'Ufle-from tt'lp to bottom. Wbcrc<~ll other thlnkct'i: hciM:vetl tbiU fixe.l rc"4~~tf> had tt) be diviJeJ :IIOl\lf'IJ c()mpctin.tr i '"'"P'• Smilh '"IJIC'lt-d thas: te~'urce' couiJ be l't{'f.ntdl'd so th:M. C\cr)WIC cuukl h(<l)ft'IC ocher lh' thc•Jrk! \\CI"C put (.vth in hJs. 1176 book An fnq~UJ"j Jm,. '"' NiJiiUt• t.iH.d ca~tWf 1( ,, "mill. tt/ Noritmr.. uSt.QIIy simply tailed T,,. Wt'otlh 1'/ Na1i11H' 8

Th1 •tnviSJ"ble Hand• of the Matlcetplace. Nr ~;.apicalrtm m.> w..vk. Smith h:he\~ pemnnl offidafs 5holdd play .o rok '" ~~~~~n: •lttt.."it rroJ!,k'b ..... Jen'itts should be produoed. briM• tWy •'\llliliJ be ~ lnd htl'll they •"lJUid ht J•\(nbu1N ht~ Sroilb ~tJII. if ldl alo.W' thr- m.:wt.tfJ'II.t« v.ould ,~,. ., choorh ruided by aft .. Urri.ri5/; ltontl. .. •ith illdh ldulit.J• drh(' ror pros-pnity prodl;ldn• •H.ded goods aod serd~ that would pro' k1t f'C'(I•(Imk and fiOCial btndib lo all.

The lmport•nce of Incentive$: Ri$kS and Rewards. Stllllh bclil"\·e-..1 eh:u if fltnneno. •n:.nurn<:ru.--cr.;. nnd bu.o;incss 0\ll·ncn. wcrc oUn"'ed lhc r~cdom hl earn prt\fitlO fmm !.heir labi.w. they would be •noth'<ltiXI ttl "'•\It 11" h:1rd Ill> po,;s;\ble in ,,nler M 1,.--.,lSJ'Cr and bene-lit their familic~ lnccnll\'(ll., lhCI\, Me c:u~mcly impoor· cam If io .. livitluuls are to tnle b ig ri.~ks . there mu\1 be big rC\\'!m l'l

The Benefit$ of Capitalism

Ahhnujl;h N_,ine!>~poople "''ooJd be wort.ing pnnto\rily '" imr~rw .. c their n"""n b\'~, their ciY,wu; woultl ~bo. Smith sugg~. prOtlu(:e a:onlllnic bcnetih. l'lw twbers.. Su..:t1 hcntfib. he (t•o)Ught. Wo)UIJ occur i" thi'N \\:tY'

MOte Jobs and Incomes. Business O'llont:B "'""IJ h&tc llr.lditk.m31 ... ~. fin,., ldiftJ more jObs Md in.;umc"$.. 'l'lld bcncfll.l'ti'Ulttly '"""b) hJ\C IU1'16l 0tA til) be U\JC'_ Unlitr: rommtulism :md socialism. v.tu..:.• .-ra'lai r:cYectin 0.1 adrift& ,_~ capitlil•<un las ttctlkd :tt job ett21.ior'l.nl.,. ral''"' u~t.'\'ofr'l('lii

BuU~~aS~eS lit<: Yahoo.~ e-Bay. _. r....:OO...~ •hii.-h dtdn'l n-cntxlsta fCOA ~:aR az.l,lm"C: proo.ided tbous300s ~ jdM. and dltr JW1 of Cali(,..,.i2 i.• •1rltcb they ......... ~n~. lh< s.. Franruco Boy ........ - .~ oht hipc.o .......wu, cl '" i~; '" the v.\ll'ld.

6) Ad~m Smh.h. A Seottl&k &oc!tl philo::opt--er, hl! taught mot"al philo• opt.y at ttl• 1)1"-!.0et"SS¥ of GIMgow .,., M l:!t:CI li!•, h• trn•l.d d1roughol.t e..,.~ ""••~~ng ,~·"•ctvel , ....... tt..en re:urned honw and 'J*'It 10 y•ars •f!ttrog ~ W.•fdt of N•tiON. Do you btli ...... a-s be d•c:l. U,a t.:.. pattdf19 re110Uftfl etr" mal:t ~ ~ rictret? How modo do you ... ,t; ,..Jat« g,o-itl 11'1<1 lnctt....o cr-..o f'lfi9rt .._ ~.-d Smol:h'l ...........,,

w_..t to KnoW MOA1)·4

The Wealth ol Nation•

Go lo-~i'l"b~o"' J

CHAPTER 3 Ec:onom•cs 69