Student name/ ID
Principles of Management A case-led introduction to the environment,
functional areas and interactions involved
in everyday business.
Professor Karin McDonald
Office: Room L513
BED01 Professor K.McDonald
BED01 Professor K.McDonald
Table of Contents
Unit 1: Business Basics I 1
Unit 2: Business Basics II 11
Unit 3: The Operations Department 23
Unit 4: The Marketing Department 35
Unit 5: Supply Chain and Channel Management, Category Management, etc. 46
Unit 6: Reaching Global Markets 56
Unit 7: Corporate Organization and Planning 68
Unit 8: The Finance Department 80
Unit 9: The Accounting Team and Financial Statements 94
Unit 10: The Human Resources Department 112
Welcome to POPCO
For the purpose of this class, you should now consider yourself an intern at the
fictional manufacturing company, POPCO. POPCO is a Korean-based toy company
that started in the 1980s. They make a variety of toys and traditional Korean
games. Their main products are soft toys (in English language, stuffed animals).
They have recently launched a product called Clucky Chicken. Clucky Chicken is
an artificially intelligent chicken soft toy. It relies on basic computer
programming via a computer chip inside the stuffed toy to interact with
consumers. POPCO launched the Clucky Chicken toy to compete with the wildly
successful Zhu Zhu Pets line of toy hamsters.
Class discussion and exercises will focus on POPCO to describe theories and
principles. Your job as an intern is to participate in helping the company make
good decisions, considering the new theories and principles you have learned.
Later, you will spend a week or two learning about the way each different area of
POPCOs business works, including the types of jobs in each department, and
their responsibilities and activities. We will discuss in class how these jobs,
responsibilities and activities might be different in different kinds of companies.
The purpose of worksheets is to help you check your understanding of the
concepts and skills in the reading, so that in class we can demonstrate and
practice applying that learning. Worksheet problems and questions are very
similar to those on the quizzes, although the quiz problems and questions are a
little bit harder.
Included in this CP are questions that raise ethical issues. Ethics are a key
consideration of the global business environment and interactions within and
without a business. Ethics are more than just corporate social responsibility,
though. We will discuss ethical issues in business throughout the course as time
allows. Ethics-related questions are marked by a Dongguk lotus emblem:
Like any field of study, business has its own jargon, and requires learning a lot of
vocabulary. To avoid confusion where the business meaning of a common English
term may be different from the definition you know, or where common usage of
a business term may lead to confusion, this CP includes common terminology
explanations marked with a speech bubble:
Business Basics I
Learning objectives of this unit
In this unit you will learn the following concepts:
What is the goal of a business? What are the resources it uses? (in class: resource diagram)
What is profit, and who receives it? (in class: profit calculation)
What is a competitive market, and how does supply and demand work? (in class: graphing supply and demand)
How do businesses interact with households and governments (in class: circular flow diagram)
with regards to resources?
What trends are common to competitive market economies? (in class: productivity calculation)
What are economies of scale, and how can a company get them? (in class: economies of scale diagram)
Unit 1 Vocabulary
Factors of production (): Things of economic value needed to produce
goods and services
Net Profit (): The money a business earns when revenues are greater than
Revenues (): The money a business earns from activities like selling goods or
Expenses (): The economic costs that a business incurs through its
operations in order to earn revenues
Supply and demand ( ): Supply is how much quantity that sellers in
the market can offer of a specific good or service at each of various prices, and
demand is how much quantity of a good or service buyers are willing to buy at
each of various prices in that market.
: , / :
Households (, , ): The population of an economy that consumes
goods and services and also own and contribute other factors of production
Stockholder (): A person who owns stock in a corporation
Stakeholder (): The different people who are affected by an
organizations activities and decisions
Productivity (): The amount of output produced by a given amount of
factors of production input; often measured in quantity per unit of time.
Economies of Scale ( ): The cost advantage that arises with increased
output of a product. For many (but not all) firms the greater the quantity of a
good produced, the lower the per-unit fixed cost because these costs are shared
over a larger number of goods.
Specialization (): A method of production where a business or area focuses
on the production of a limited scope of products or services in order to gain
greater degrees of productive efficiency.
Growth (Globalization) ( ()): The tendency of investment funds and
businesses to move beyond domestic and national markets to other markets
around the globe, thereby increasing the interconnectedness of different markets.
What makes a Business
There are many ways to define business. One way is to combine the purpose of
business in a definition with the resources required by business activities, and the
goal of those activities. Below is a common definition of business.
Business is an organized effort to combine and manage resources in a
profitable way in order to produce products and services that satisfy the
needs of customers.
Purpose: The definition of the purpose of business has changed over the years
with changes in economic and business thought. However, most people today
define the purpose of business as satisfying the needs of customers by producing
and selling products (also called goods) and services.
Resources: No matter what type of country or political system you are working in,
business activity requires the organization and management of resources.
Generally, you can categorize resources as material, human, financial, or
What are the specific resources a toy company requires to produce and sell toys?
In economics class, you probably learned to remember the categories of land,
labor, and capital resources, also called factors of production since they are
required to produce goods and services. Sometimes these are referred to as
Historically, different theorists have emphasized different factors of production
when considering what makes a strong national economy. With increasing study
into the factors of production and political economy, academics today also
include the categories knowledge / information and entrepreneurship as
important factors of production.
More and more, technology is also an important factor of production. People still
measure the economic strength of a country according to the factors of
production it has and how the countrys political system manages those resources
to meet the needs of its own customers: society.
Goal: Most people consider that the goal of business is to make a profit. But
many businesses do not always make a profit every year. And some businesses
are started to make a profit for some owners this year, but do not have the
resources or management to be successful long-term, creating losses for often
different owners in future years.
The general term profit simply means that, in a given time period, a businesss
sales revenues are greater than its expenses. Sales revenues minus expenses
How would you calculate profit for your own activities?
People often use the general term revenues instead of sales revenues.
There are many words and phrases that mean the same as profit: earnings,
income, and the bottom line all mean profit (specifically net profit). But be
aware the terms operating profit and gross profit represent different amounts.
We will learn more about these terms in the accounting unit.
Who gets the profit? Profit is often invested back into the business. It can also be
distributed to owners of the business. Most people think of business owners as
those who manage the business day-to-day. But this is not typically the case. Any