Better Business, Second Canadian Edition, 2E Michael Solomon MaryAnne Poatsy Kendall Martin Solution

INSTRUCTOR’S MANUAL for

Better Business Second Canadian Edition MICHAEL SOLOMON MARY ANNE POATSY KENDALL MARTIN JEFF SHORT SANDRA WELLMAN KERRI SHIELDS

Revised for the second Canadian edition by David Gaudet SAIT

Better Business, Second Canadian Edition

TABLE OF CONTENTS Preface ....................................................................................................................................................................... iii Annotated Syllabus for a 14-Week Course............................................................................................................ vi Video Library .......................................................................................................................................................... xiv Chapter 1 -- Business Fundamentals .....................................................................................................................1-1 Chapter 2 -- The Environment of Business ...........................................................................................................1-1 Chapter 3 -- Economics and Banking ....................................................................................................................2-1 Chapter 4 -- Entrepreneurship, Small Business, and New Venture Creation .................................................2-1 Chapter 5 -- Business Management .......................................................................................................................3-1 Chapter 6 -- Motivation and Teamwork ...............................................................................................................4-1 Chapter 7 -- Human Resource Management .......................................................................................................5-1 Chapter 8 -- Marketing and Consumer Behaviour..............................................................................................6-1 Chapter 9 -- Marketing Mix: Product, Price, Promotion, and Place .................................................................7-1 Chapter 10 – Operations Management: Goods and Services .............................................................................8-1 Chapter 11 – Financial Management and Accounting .......................................................................................9-1 Chapter 12 – Global Business ...............................................................................................................................10-1 Media Assets Guide (Business Today Videos and BizSkills Simulations) ....................................................11-1 Online Appendix 13A – Securities and Investments ........................................................................................ A-1 Online Career Skills – Ten Easy Rules for Academic Success and Beyond .................................................1W-1 Online Career Skills – Constructing an Effective Business Plan ...................................................................5W-1 Online Career Skills – Business Communications ..........................................................................................6W-1 Online Career Skills – Finding a Job .................................................................................................................8W-1 Online Career Skills – Personal Finance .........................................................................................................13W-1

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PREFACE This Instructor’s Manual to support the 2nd Canadian Edition of Better Business, by Solomon, Poatsy, Kendall, Short, Wellman, and Shields, provides a guided tour of each chapter and contains features to help you facilitate your course. This includes a detailed outline of chapter topics; suggested solutions to chapter discussion questions and exercises; and comprehensive notes on each chapter’s MyBizLab resources.

In addition to the in-text material, the Instructor’s Manual also supplies supplementary materials, such as in-class “ice-breakers”, group exercises, additional discussion questions, and unique, compelling suggestions for learning activities which encourage the student to dig deeper in their understanding of chapter material through independent research and investigation. The manual provides clear, concise direction on how to best use these supplemental exercises in the traditional classroom setting, but also provides suggestions on how facilitators can enhance the online learning environment.

The Instructor’s Manual offers the following features for each chapter: •

Chapter Opener: A brief introduction to the material covered in the chapter.

•

Learning Objectives: A list of the learning objectives for the chapter.

•

Key Terms: Includes page references to the definition of each key term.

•

Detailed Topic Outline: A point-form summary of the topics covered in each section.

•

Suggested Solutions to Discussion Questions: This section contains suggested solutions to the discussion questions from each chapter’s Opening Discussion and various feature boxes, including On Target; Off the Mark; Better Business, Better World; and BizChat.

•

In-Class Activities: This section begins with a table that summarizes the selection of activities, both in-text and supplementary, available for classroom use as “ice-breakers” or to encourage student discussion/participation. To assist instructors in planning their time, the Bloom’s Taxonomy classification and an estimated time requirement for each activity has been provided. In some cases, handouts are necessary—these are also provided in this section.

•

Suggested Solutions to End-of-Chapter Questions: Contains suggested solutions or teaching notes for end-of-chapter material, including Critical Thinking Questions, Team Time, Ethics and Responsibility, and the Closing Case.

•

Supplemental Material: includes supplemental Critical Thinking Questions, Application Exercises, BizChat features, Discussion Questions, On Target features, and more. Suggested answers are also provided where applicable.

•

MyBizLab Resources & Teaching Tips: Please note that not all chapters include all of the following resources. The manual provides teaching tips for the following MyBizLab resources: •

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Business Today Videos: To access the current video library, go to “Business Today” under Instructor Tools. This is where you can find videos and other video resources throughout your semester. The Videos Appendix at the end of the syllabus lists the videos and BizSkills

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simulations that are available by chapter.

•

BizSkills Simulations: includes a synopsis of each chapter’s BizSkills simulation, as well as a list of questions that students should be able to answer after completing the activity. A great way to use these BizSkills is to assign them as homework before your first lecture on the chapter. Ask students to print out their feedback page, and then have them do the BizSkill again at the end of the week to see whether their scores have improved. Throughout the simulation, students can refer to several resources, all of which can be emailed, saved, or printed when the simulation is complete: i. Mini Quiz: Enables students to test themselves on content related to the BizSkill. ii. Summary Sheet: Presents students with a list of the key points made in the BizSkill. iii. Glossary Review: Allows students to review key terms presented in the BizSkill. Key terms are tied directly to chapter content. iv. Output Document: a summary of the entire simulation, including the simulation description, the student’s decision overview, and a list of skills/core business concepts.

•

Decision-Making Mini-Simulations: To access this resource, open the “Student Resources” folder, and then click on Decision-Making Mini-Simulations. These self-paced simulations walk students through key business decision-making scenarios to help them understand how business decisions are made. At each point, students receive feedback to help them understand the implications of their choices in the business environment. The IM includes a list of the simulations and a list of questions that students should be able to answer after completing the simulation.

•

Learning Catalytics In each chapter of the IRM you will find two Learning Catalytics questions that have been correlated to that chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page. Learning Catalytics is a “bring your own device” student engagement and assessment activity that helps instructors to guide their lecture, generate classroom discussions with students, and promote peer-to-peer learning with real-time analytics.

To access Learning Catalytics, students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

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•

Document Makeovers: Document makeovers are interactive tasks which require students to analyze and correct business documents such as e-mail messages, letters, memos, blogs, and resumés. A list of document makeovers for each chapter is included in the IM. To access this resource, open the “Student Resources” folder, then click on Document Makeovers.

•

Career Skills Modules: The online Career Skills modules are concise, engaging lessons that cover topics of interest and importance to students as they prepare for careers in the business world.

Career Skills cover such topics as academic success, effective business plans, business communication, finding a job, and personal finance.

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Enhancing the Online Course: This section provides teaching tips to enhance your online course, including suggestions for group projects, individual assignments, and research activities in an online environment.

Additional Instructor Resources Better Business includes an innovative supplement package for instructors. You can access these resources from within MyBizLab or from the Instructor’s Resource Centre (IRC) at http://catalogue.pearsoned.ca/ INSTRUCTOR RESOURCE Image Library The Image Library contains image files for all figures, photos, and tables from the textbook, online Appendix 13A, and the online Career Skills modules. The Image Library is available on the IRC. PowerPoint Presentations Each chapter presentation includes twenty-five to thirty high quality slides. The PowerPoint Slides highlight key points from the text and are fully customizable. The slides are available on both MyBizLab and the IRC. Computerized Test Bank and Test Item File Pearson's computerized test banks allow instructors to filter and select questions to create quizzes, tests or homework. Instructors can revise questions or add their own, and may be able to choose print or online options. The Better Business Test Bank contains multiple-choice, true/ false, short answer, and essay questions—approximately 150 questions in total per chapter. Questions and tests can all be authored online, allowing instructors ultimate flexibility and the ability to efficiently manage assessments at any time, from anywhere. A Test Item File in Microsoft Word® is also available. The Computerized Test Bank and TIF files can be downloaded from the IRC. Business Plan Project This project walks students through the steps of how to create a clear and successful business plan.

The instructor notes for this project are available in MyBizLab, under “Instructor Resources”.

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ANNOTATED SYLLABUS FOR A 14-WEEK COURSE WEEK 1: INTRODUCTION TO BUSINESS 1.

Read Chapter 1: Business Fundamentals

2.

Read and prepare discussion questions for the Opening Discussion – “Starting a New Business – The WhyHire.me Innovation”?

3.

Ask students to select TWO of the following feature boxes and prepare solutions to discussion questions. a. On Target – Newman Forge & Pattern: Turning a Hobby into a Business b. Better Business Better World - Do You Prefer to Do Business with Companies you can Trust? c. Critical Thinking Questions & Application Exercises d. Team Time e. Ethics And Responsibility f. Closing Case

4.

Online Career Skills: Ten Easy Rules for Academic Success and Beyond. Take some time to walk through these “Ten Easy Rules” in class. There are invaluable tips contained in this online supplement and students should take the time to read them.

5.

Test your knowledge: Students can go to MyBizLab and prepare a study plan for this chapter.

Instructors can prepare a set of 25 random MC or T/F questions from the Test bank for students to try at MyBizLab.

WEEK 2: THE ENVIRONMENT OF BUSINESS 1.

Read Chapter 2: The Environment of Business

2.

Read and prepare discussion questions for Opening Discussion: Coffee, Economics and Fair Trade”

3.

Read BIZCHAT - Apple: Taking a Bite out of Microsoft.

Have students prepare solutions to the discussion questions.

4.

Discussion Groups - Create three groups in your Course Management System (CMS), and assign students equally between the groups, then assign students in each group into “pro” and “con” subgroups. Give each group one of the Application Questions found in the End-of-Chapter exercises.

Have students discuss these topics online.

5.

Quiz - To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for the chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

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Better Business, Second Canadian Edition WEEK 3: LEGAL, Economics and Banking 1.

2.

3.

4.

5.

Read Chapter 3: Economics and Banking Read and prepare discussion questions for Opening Discussion: “Emerging Economies” Have students work through Critical Thinking Questions and prepare responses.

Follow the instructions in the Team Time exercise, engaging students in “The Great Debate” topics.

Quiz - To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for the chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

WEEK 4: ENTREPRENEURSHIP, SMALL BUSINESS, AND NEW BUSINESS CREATION 1.

Read Chapter 4: Entrepreneurship, Small Business, and New Business Creation

2.

Read On Target – Facebook’s Mark Zuckerberg and answer the following discussion questions: a. Why do you think Facebook is so popular? Is it without problems? b. How was Facebook able to grow so quickly? What marketing strategy was used? c. Research Mark Zuckerberg on the Internet and read about the history of Facebook. What characteristics does Mark have that relate to those of entrepreneurs?

3.

BizSkills - Have students complete BizSkills Simulation: Getting Your Business off the Ground.

(Located in: MyBizLab).

4.

Group Activity - Create groups of four or five students in your CMS. Assign each group the task presented in the Team Time exercise found at the end of the chapter.

5.

Document Makeover: Outline of CEO’s Speech; Interview Questions for Owner of a Small Business.

(Located in: MyBizLab).

6.

Quiz - To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for the chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

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Better Business, Second Canadian Edition WEEK 5: BUSINESS MANAGEMENT 1.

Read Chapter 5: Business Management

2.

Read Opening Discussion on Effective Management – Creating an Experience to Remember and answer discussion questions provided

3.

Read Ethics and Responsibility: Assessing Social Responsibility Step 1. As a class, in small discussion groups, discuss the following: the planning and organizational changes that might need to be implemented , the controls that a manager might use to measure and monitor the results of his or her social responsibility initiatives, any changes in leadership styles that might result from a focus on social responsibility Step 2. After this discussion, research companies that are known for their social responsibility efforts.

Then discuss what impact their efforts have had on management.

4.

Discussion Board Forum Topics – Assign Critical Thinking Questions

5.

Decision-Making Mini-Simulation: Organizational Structure. (Located in: MyBizLab)

6.

Career Skills: Visit the Career Skills module Business Communications in MyBizLab, where you’ll learn how you can improve your verbal, written, and electronic communications skills.

7.

Quiz -To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for the chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

8.

Test 2: Starting and Structuring a Business (Weeks 5 and 6). In your course management system, create a test of specific questions pulled from the test banks from Chapters 5 and 6 that best reflect the information discussed and covered. Allow students only one chance for this test, and make sure the time allotment is conservative enough to prevent them from looking up each and every answer (1 minute per question is generally enough).

WEEK 6: MOTIVATION AND TEAMWORK 1.

Read Chapter 6: Motivation and Teamwork

2.

Read the Team Time: Forming a Successful Team. Discuss the following questions: a. What role is each team member taking? How are team members evaluated? b. If the team has been together since early on in the course, what changes, if any, need to be made to improve team performance?

3.

Decision-Making Mini-Simulation: Motivation. (Located in MyBizLab)

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Better Business, Second Canadian Edition 4.

BizSkills - Have students complete BizSkill: Motivation and Teamwork.

5.

Quiz - To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for each chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

WEEK 7: HUMAN RESOURCE MANAGEMENT 1.

Read: Chapter 7 – Human Resource Management

2.

Discussion Board Forum Topics - Create three groups in your Course Management System (CMS), and assign students equally between the groups. Give each group one of the Application Questions found in the End-of-Chapter exercises. Have students discuss these topics online.

3.

Document Makeovers - Have students work through the document makeovers in this chapter.

4.

BizSkills - Have students complete BizSkill: Human Resource Management.

5.

Resume and Cover Letter Exchange - Have students locate an interesting job opportunity online and create their own resumes and cover letters for that job. The students should exchange resumes and cover letters with another classmate for peer review.

The reviewer should create a document that comments on the resume using the following criteria: a. Is it grammatically correct, free of spelling and typographical errors, and well formatted? b. Is the objective statement specific for a particular job? c. Is it organized well? d. Does it show education and relevant work experience?

The reviewer should comment on the cover letter using the following criteria: a. Is it tailored to fit the specific job? b. Does it say what the candidate can do for the company? c. Does it explain why the company should hire the candidate? d. Does it fit on one page, and is it neat and free of grammatical and spelling errors?

Reviewers should return cover letters and resumes to the candidate with their comments. Candidates should revise documents, then turn in everything – original, peer review and revised documents.

6.

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Read Bizchat – What is Recruiting 2.0? Place students in groups and give them time to discuss the following questions: a. Do you think it is appropriate for an employer to view your Facebook page before an interview or before they hire you? Why or why not? If an employer viewed your Facebook page, do you think it would affect their decision to hire you? Why or why not? b. Have you established an online “professional” image using a professional networking tool such as LinkedIn? If you don’t have an online image now, do you think you should create one? What will it say about you? What can you do to ensure your online image is portraying you in a positive way to potential employers?

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Better Business, Second Canadian Edition c.

7.

Some people say they don’t care what others think of them. Should you care about what others think of your online image? Why or why not?

Quiz - To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for the chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

WEEK 8: MARKETING AND CONSUMER BEHAVIOUR 1.

Read Chapter 8: Marketing and Consumer Behaviour

2.

Discussion Board Forum Topics: Read the Web Case: Focus on N2 Ingredients: The Market for GlutenFree Food. Place students in groups and have them identify the immediate issues of the case. Prepare to discuss online.

3.

Read the Closing Case: The iPod Started a Love Affair. Place students in groups and have them prepare answers to the following questions: a. What was Apple’s target demographic for the iPod? Why do you think that Apple chose to market specifically to this audience? How would Apple have to change its product if it wanted to appeal to a broader market? b. How did Apple meet the socio-cultural, personal, psychological, and behavioural needs of its target audience? c. Consider what you’ve learned about marketing to audiences in this chapter. What methods do you think companies should use to help them establish a target market?

4.

BizSkills- Have students complete BizSkill: Market Research Matters. (Located in: MyBizLab)

5.

Decision-Making Mini-Simulation: What Is Marketing? (Located in: MyBizLab).

6.

Document Makeovers: Competitive Analysis; Dusty Strings Letter; Lektonik Presentation

7.

Critical Thinking: Prepare solutions to the Critical Thinking questions.

8.

Quiz - To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for the chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

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Better Business, Second Canadian Edition WEEK 9: MARKETING MIX: PRODUCT, PRICE, PROMOTION, AND PLACE 1.

Read Chapter 9: Marketing Mix: Product, Price, Promotion, and Place

2.

Discussion Board Forum Topics Read BizChat: What’s Behind those Catchy Slogans? Prepare to go to the online discussion board to answer the following questions: a. Are you familiar with any of these Ad Council’s campaigns? Which one do you think has been most effective? Why? b. If you could choose an issue to be covered by an Ad Council campaign, what would it be? Why? c. Currently, the Ad Council is funded through public donations. Do you think all taxpayers should help pay for Ad Council ads? Why or why not?

3.

Group Activity - Using the Team Time: Developing a Promotional Mix, as a guide, have groups of students develop a promotional mix for either the Shine Breakfast Bars as described in the exercise, or students can create a promotional mix for another product that their team agrees upon.

4.

BizSkills - Have students complete BizSkill Simulation: Product Development. (Located in: MyBizLab).

5.

Decision-Making Mini-Simulation: Product Life Cycle. (Located in: MyBizLab).

6.

Group Work – Have students get into groups of five or six and ask them to read and discuss the Closing Case: The iPhone: Revolutionary Product or Rip-off?

Have groups prepare solutions to the following discussion questions: a. What was Apple’s target demographic for the iPod? Why do you think that Apple chose to market specifically to this audience? How would Apple have to change its product if it wanted to appeal to a broader market? b. How did Apple meet the socio-cultural, personal, psychological, and behavioural needs of its target audience? c. Consider what you’ve learned about marketing to audiences in this chapter. What methods do you think companies should use to help them establish a target market?

7.

Quiz - To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for the chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

8.

Test 4: Principals of Marketing (Chapters 11 and 12) In your course management system, create a test of specific questions pulled from the test banks from Chapters 11 and 12 that best reflect the information discussed and covered. Allow students only one chance for this test, and make sure the time allotment is conservative enough to prevent them from looking up each and every answer (1 minute per question is generally enough).

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Better Business, Second Canadian Edition WEEK 10: OPERATIONS MANAGEMENT – GOODS AND SERVICES 1.

Read Chapter 10: Operations Management - Goods and Services

2.

Discussion Board Forum Topics - Read the BizChat: Technology: Too Much of a Good Thing? Then, discuss the following question in your online CMS discussion forum: a. In what ways does technology make you and society more productive? b. In what ways does technology make you and society less productive?

3.

Read Off the Mark – Quality Catastrophes and answer the following discussion questions: a. How do companies recover their good reputation after such a blunder? How does it make you feel with regard to purchasing from these companies? b. How much time and money do you estimate companies spend recovering from these types of situations? How do companies stay in business after these types of mistakes? c. How could such mistakes be avoided?

4.

BizSkills Case Simulation: Improving Business Operations and Quality. (Located in MyBizLab).

5.

Decision-Making Mini-Simulation: Supply Chain. (Located in: MyBizLab).

6.

Quiz- To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for the chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

WEEK 11: FINANCIAL MANAGEMENT AND ACCOUNTING 1.

Read Chapter 11: Financial Management and Accounting

2.

Discussion Board Forum Topics – Post the Critical Thinking questions online and ask students to use the discussion board to share ideas.

3.

Class Wiki: Create a Wiki page in your CMS that everyone can access. Have each student locate current ratios for two different companies. Have the students organize the companies by industries.

When all the students have inputted their ratios on the Wiki page, see if any conclusions can be reached as to the similarity of ratios between companies within an industry and differences or similarities of ratios between industries in general.

4.

BizSkills - BizSkills Simulation: Financial Management. (Located in: MyBizLab).

5.

Team Time - Industry Analysis - Assemble into groups of four or five and assign the Team Time activity located on page 398.

6.

Read: Off the Mark – Department of Defence Makes Some Big Errors a. How can such errors go on for years without being noticed? Is this any one person’s fault?

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Better Business, Second Canadian Edition b. c.

7.

How might the government prevent such errors from occurring? Is it important for the department to publicize and correct the errors? Why or why not?

Isn’t this just a small oversight with nothing to be concerned about? After all, it is a government agency. What might be the effect on the Defence Departments’s public image?

Quiz: To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for the chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

WEEK 12: GLOBAL BUSINESS 1.

Read Chapter 12: Global Business

2.

Read Opening Discussion: Japan’s Disaster Affects Imports, Exports, and Productivity around the Globe.

Have student’s prepare solutions to discussion questions.

3.

Discussion Board Forum Topics - Create three groups in your Course Management System (CMS), and assign students equally between the groups, then assign students in each group into “pro” and “con” subgroups. Give each group one of the Application Questions found in the End of Chapter exercises. Have students discuss these topics online.

4.

Place students in groups of 5 or 6 and have them read the Ethics and Corporate Social Responsibility exercise at the end of the chapter. As a group, students are required to create a group answer to the following questions: a. As a business owner, what are the costs and benefits of moving half your production overseas? b. Do the benefits of outsourcing outweigh the costs? Why or why not? c. What might be possible alternatives to off-shoring?

5.

Decision-Making Mini-Simulation: Global Marketing. (Located in: MyBizLab)

6.

BizSkills Simulation: Going Global. (Located in: MyBizLab)

7.

Quiz - To test student comprehension of chapter material, create a test in your course management system that will pull a random block of 15 - 25 questions from the Test Bank questions for the chapter. (Only show the students their score and their submitted answers. Do not show correct answers in the feedback). Allow your students to take the quiz up to 3 times, and report their highest grade. This forces students to look critically through the chapter.

WEEK 13-14: REVIEW AND FINAL EXAM

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VIDEO AND SIMULATION LIBRARY Chapter

Learning Objective

Media Asset

Video or Simulation Title

1

2

Video

Honest Tea

1

3

Video

Save the Children: Social Networking

1

3, 4

Video

1

5

Video

Muttville: Seven Key Business Rules in the Pursuit of Success MINI: Working in a Virtual World

1

7

Video

Dunkin’ Donuts

1

7

Video

Stew Leonards

1

7

Video

Sports Drinks Science: Is it Hype?

1

7

Simulation

Technology Direction

2

1

Video

Soda Wars Heat Up

2

1, 2

Video

Subaru America: The External Environment

2

2

Video

Talking Politics in the Workplace

2

2

Video

Tylenol Creators Release New Medical Warning

2

2

Video

The New Global Challengers

2

2

Video

MINI: Globalization

2

3

Video

Burger King Markets New Fries as Healthier

2

3

Video

2

3

Video

Communicating in a World of Diversity - Hewlett Packard HSN: Retailing and Wholesaling

2

3

Video

ZipCar: Business Technology

2

1, 4

Video

iPhone-mania: How Long Can It Last?

3

1, 4

Video

Fresher than Fresh: Economics

3

2

Simulation

Supply and Demand (Moondogs Coffee)

3

2

Video

Gas Prices Plummeting

3

3

Video

Job Search Help for Young Workers

4

1

Video

New Toy Company Inspires Little Girls to Build Houses

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Chapter

Learning Objective

Media Asset

Video or Simulation Title

4

1

Video

Fruit Breeder Invents Cotton Candy Flavored Grapes

4

1

Video

Convertible Heels: Shoe Transforms for Day, Night

4

1, 2

Video

Wild Planet: The Entrepreneurial Spirit

4

3

Video

Toms

4

4

Video

Dominos Pizza: Franchising

4

4

Video

My Gym: Organizing the Business

4

4

Video

Fun Facts About Franchsisng

4

2, 4

Simulation

Getting Your Business Off the Ground

4

9

Video

Elm City Market: Organizational Structure

5

1

Video

CH2MHill: Decision Making

5

1, 6

Video

Southwest Airlines: Leadership and Decision Making

5

2

Video

Acer Vs. HP: Can Acer Surpass HP?

5

3

Video

Life is Good: Marketing Ethics and Social Responsibility

5

2,3

Simulation

Plan for Success

5

1,2,3,6,7

Video

azTeen Magazine

5

5

Video

CH2MHill: Organizational Structure

5

5

Video

Rudi’s Bakery: Organizational Structure

5

6

Video

Red Frog Events: Leadership and Managing People

5

6

Video

Herman Miller: Managers as Leaders

5

7

Video

Controlling

5

1,2,3,6,7

Video

Pizza Hut: Functions and Skills of Management

6

2

Video

CH2MHill: Motivation

6

2, 3, 4, 5

Video

6

6

Video

Whole Foods: Teamwork, Motivation, and Communication CH2MHill: Work Teams

6

6, 7

Simulation

Team Management

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Chapter

Learning Objective

Media Asset

6

6, 7, 8

Video

7

2

Video

7

3

Video

7

3

Video

7

3

Video

Lululemon Searches for CEO with Help Wanted Signs Building Careers and Writing Résumés - Giant Robot Magazine Applying and Interviewing for Employment

7

2, 3

Simulation

Human Resource Management

7

4

Video

Wilson Learning: Training

7

3, 5

Video

Best Boss Ever Pays Employees to Go on Vacation

7

4, 5

Video

Patagonia: Human Resource Management

7

6

Video

Gordon Law Group: Employee Separation

7

8

Video

UPS: Union-Management Relations

7

5,8

Video

7

9

Video

Fast Food Workers Walk Out, Demanding Higher Pay Woman on Track to Become First Female NFL Ref

8

4

Video

H&M CEO: Our Models Are Too Skinny

8

4, 5

Simulation

Product Development

8

5, 4

Simulation

Market Research Matters

8

5

Video

8

3, 6, 5

Video

8

3, 4, 6

Video

8

7

Video

Abercrombie and Fitch Under Fire “Exclusionary” Tactics Target to Sell 99 Dollar Wedding Dresses

8

8

Video

Eaton

9

1

Video

High-End Designers Embrace Plus-Size Market

9

2

Video

Subaru America: New Product Development and Life Cycle Strategy

9

2

Video

Konica/Minolta: Advancing in the Digital Age

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Video or Simulation Title Mastering Team and Interpersonal Communication - Hewlett Packard Holiday Jobs: Where to Find Them

Finding, Evaluating, and Processing Information MELT Jones Soda: Marketing & Consumer Behaviour

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Chapter

Learning Objective

Media Asset

Video or Simulation Title

9

3

Video

Gogurt

9

1, 3

Video

9

3

Video

DC Shoes: Product Development & Pricing Strategies Extreme Couponing' Expert Tips: Name Brand vs.

Generic

9

4

Video

Fast Food Chains Beef Up Dollar Menus

9

2, 4

Simulation

Pricing Strategies and Objectives

9

4

Video

Smashburger

9

6

Video

Kmart Has Web Shipping Their Pants from Laughter

9

6

Video

9

5, 6

Video

9

7

Video

Mountain Dew Ad Called ‘Most Racist Commercial Ever’ Kmart Goes From 'Shipping Pants' to 'Big Gas Savings' Medtronic: Personal Selling and Sales Promotion

9

5,7,8

Simulation

Promoting a Product

9

9

Video

Beyond Food Carts: Building a Mobile Business

9

9, 5, 6, 8

Video

Pet Food Express: Marketing

9

9

Video

Nike

9

8

Video

Nestle

10

2

Video

Blackbird Guitars: Organizational Culture

10

3

Video

‘Made in America’: Shipping to China

10

3

Video

PTC: Green Management

10

3, 4,1, 7

Video

Method: Operations Management & Quality

10

1, 2, 6, 3

Simulation

Improving a Business

10

4

Video

Olympic Athletes’ Outfits Made in China

10

4

Video

Olympic Uniform Uproar Riles U.S. Manufacturers Toyota: Outsourcing and Logistics

10

3, 4, 6

Video

11

1, 2, 3

Video

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Big Apple Circus: Sources of Financing

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Chapter

Learning Objective

Media Asset

11

1, 2, 3

Video

11

4

Video

Johnny Cupcakes: Financial and Cash Flow Management Facebook Stock Falls to New Low

11

4

Video

Capital Advisors: Securities and Investments

11

2, 7

Simulation

OBM and Financial Statements

11

5, 6, 7

Video

12

1, 2

Video

POPS: Financial Information: Accounting & Financial Statements Globalization and RIM

12

2

Video

Bringing Jobs Back to the United States

12

3

Video

12

4

Video

12

5

Video

Comparative and Competitive Advantages in Global Competition Government Intervention: Spotlight on China and Germany Regional Economic Integration: Outlook for the European Union

12

5

Video

Made in America: Mexico

12

5

Video

Emerging Markets: Spotlight on India and Mexico

12

7

Video

Pirate Joe's Resells Trader Joe's Popular Products

12

7

Video

12

7

Video

MyGym (Mexico): Entry Strategy and Strategic Alliances Airbus vs. Boeing

12

7, 2, 5, 8

Simulation

Going Global - Emerging Markets

12

7

Video

Entering the Chinese Market

12

9

Video

12

10

Video

The G20 and the Global Monetary and Financial Systems CH2MHill: Management in the Global Environment

12

10

Video

Impact of Culture on Business: Spotlight on China

12

6, 10

Video

Gawker Media: Business in a Global Economy

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Video or Simulation Title

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CHAPTER 1 BUSINESS FUNDAMENTALS CHAPTER OPENER This chapter opens with a profile of “Whyhire.me”an eportfolio hub for students and career seekers. This openers serves two purposes. First it should get students thinking immediately of themselves as aspiring business professionals. Second, it demonstrates a real life example of how businesses are born, and how they are sustained.

Discussion Questions: 1. Visit the WhyHire.me website and compare this social media tool to others. Perform a PEST analysis for WhyHire.me (see Chapter 1). Do you think this was a good business idea? What are the risks?

(Bloom’s: application, analysis, synthesis) 2.

Do you think WhyHire.me could become as popular as LinkedIn or Facebook? Why or why not?

What can these partners do to grow their business? (Bloom’s: synthesis, evaluation)

3.

What types of issues or problems do you think these entrepreneurs have had to deal with or will have to deal with? (Bloom’s: application, analysis, synthesis)

Answers: 1. Answers will vary. The PEST analysis should uncover some issues around technology for this business. The company has to keep up with technological advances to beat out the competition. The company must operate within the laws of Canada, but also if they offer their product in foreign countries they will have to abide by laws in those countries as well. This may have implications around how technology is used and the privacy of information. There are competitors in the market that offer free personal career platforms on the Internet so the company will have to find ways to remain competitive. The socio-cultural environment plays a role in the aspect that most people don’t want to pay for something they feel they can obtain for free so marketing WhyHire.me as a different product that will do more for consumers is integral to the company’s success. The company is operating in a fast-paced technological environment and will need to continually offer consumers new features and options to stay competitive. Some opportunities may exist for partnerships or for acquisitions of smaller companies in an attempt to grow the business. As well, the company might consider selling to a publishing company that offers learning management systems to colleges and universities. This would permit these companies to integrate the Whyhire.me e-portfolio tool into their own offerings.

2.

WhyHire.me is a different platform than Facebook or LinkedIn. It may become a popular tool for schools teaching e-portfolios, personal marketing, and online branding. LinkedIn is a networking tool more than a place to exhibit artifacts, videos, photos, blogs, etc. Although, as times are advancing LinkedIn and other social networking spaces are adding functionality and features all the time.

Facebook is mainly used for sharing photos with friends and family, but the company is adding features all the time that may lead to business uses. If WhyHire.me were to open its access to networking with employers and others it would be in direct competition with LinkedIn, but currently the company is not large enough to make that expansion.

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3.

The main issues the entrepreneurs deal with include: advances in technology and keeping up with storage space requirements, obtaining funding for expansion, competing with free-ware in the market place.

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

2.

3.

4.

5.

6.

7.

Define business and explain the importance of profit.

Describe how business benefits the members of society.

Explain the difference between for-profit and non-profit organizational goals.

Describe the factors of production.

Explain why entrepreneurs and technology are essential to the production of goods and services.

Describe the private enterprise system and how competition affects business in Canada.

Identify and describe the main purposes of the functional areas of most businesses.

Many students come to an introduction to business class not quite sure about what’s in it for them. In fact, the course has something for everyone, from those who have been in the business world a while to those new to the idea. As the book unfolds, you’ll develop an understanding of the foundations of business, and you’ll be able to apply what you already know about business to many parts of the course.

Following the “Whyhire.me” discussion, this first chapter dives right into the world of business, with the bold question, “What is Business?” Immediately following are key concepts and essential terminology.

Specific emphasis is on: • Profit, loss, revenue and expenses • Business’s role in society Differences between businesses and non-profit organizations • Various business sectors • Factors of production • Functional areas of business

Next, the chapter covers the ways in which competition, social environment, globalization and technological growth challenge and provide opportunities to business owners. The PEST Model is used to explain the impact of various environments on a business.

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KEY TERMS business (p. 3) entrepreneur (p. 9) expenses (p. 3) factors of production (p. 7) financial capital (p. 8) functional areas (p. 10) goods (p. 3)

information and knowledge (p. 9) labour (p. 8) loss (p. 3) natural resources (p. 8) nonprofit and voluntary sector (p. 6) private business sector (p. 6)

profit (p. 3) public business sector (p. 5) quality of life (p. 5) real capital (p. 8) revenue (p. 3) services (p. 3) standard of living (p. 5) technology (p. 9)

DETAILED LECTURE OUTLINE LO1

LO2

LO3

Define Business and explain importance of profit 1. Integral financial components of business are presented? a. Profit b. Revenue c. Expenses d. Loss Business Benefit to Society a. Standard of living i. Successful businesses provide needed goods and services ii. Provide jobs iii. Contribute to tax base

Difference between profit and non-profit goals a.

Non-profit organizations do not go into business to pursue profit, but rather to serve the community

b. Business Sectors i. What is the difference between the public and private business sectors? ii. The public business sector includes goods and services produced, delivered, and allocated by the government and non-profit entities created by public administrations. iii. The private business sector includes goods and services produced, delivered, and allocated by private individuals or groups, usually as a means of enterprise for profit.

The sector is not controlled by government. iv. The non-profit and voluntary sector includes non-governmental, non-profit organizations that receive support from individual Canadians, governments, and businesses.

LO 4

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1.

LO 5

What resources are needed to create goods and services? a. The factors of production are the resources used to create goods and services. These five factors of production include labour; natural resources; capital, both real and financial; entrepreneurial talent; and technology.

Importance of entrepreneurs and technology 1. Entrepreneurs innovate and create businesses which in turn set off the entire “benefit to society” process 2. Why is technology a key factor in production?

LO6

The private enterprise system and how competition affects business in Canada 1. Private enterprise system based on 4 basic rights, demonstrated in fig. 1.2 2. Competition is the basis of private enterprise

LO7

Functional Areas of Business 1. What activities are needed to operate a business? a. 7 Functional areas in businesses are often separate departments where business activities are grouped by similar tasks or skills, demonstrated by fig. 1.3 i. Sales and Marketing ii. Operations iii. Customer Service iv. Accounting and Finance v. Human Resources vi. Research and Development vii. Information and Technology b. Explanation as to why all areas must work collaboratively

NOTE: End the lecture by asking students to write down the main points of the lecture. This will allow you to know what might need to be reviewed during the next lecture.

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SUGGESTED SOLUTIONS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: • (Level 1) knowledge (recall data), • (Level 2) comprehension (understand), • (Level 3) application (use, apply), • (Level 4) analysis (analyze structure/elements), • (Level 5) synthesis (create/build), and • (Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Starting a New Business – The WhyHire.Me Innovation Discussion Questions: 1. Visit the WhyHire.me website and compare this social media tool to others. Do you think this was a good business idea? What are the risks? (Bloom’s: evaluation) 2. Do you think WhyHire.me could become as popular as LinkedIn or Facebook? Why or why not?

What can these partners do to grow their business? (Bloom’s: evaluation) 3. What types of issues or problems do you think these entrepreneurs have had to deal with or will have to deal with? (Bloom’s: application Answers: 1. Student answers will vary, however one consideration is that Linkedin, in particular is a much more established social network, and likely more sought after by job seekers and employers.

Students’ ability to determine whether or not this is a good business idea is largely reliant upon their ability to determine level of competition and market demand. Risks would be predominantly competitive.

2.

..

Students will be able to make the comparison to facebook more than anything else, and will thus deem it impossible to reach the same level of popularity (which is true), especially given the billion plus facebook followers and 250M Linkedin users.. In terms of growing the business, students at this level may be very challenged to suggest any recommendations other than introducing the very elements which have made aforementioned sites so popular – accessibility, updates, instant messaging etc.

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3.

Capital and cashflow would be key concerns. Founders don’t draw a salary and yet cash continues to flow out to cover costs of technological tweaks, addressing user requests, erc. The other concern would be overcoming the shadow of other social networks, particularly Linkedin.

ON TARGET: Newman Forge & Pattern: Turning a Hobby into a Business Discussion Questions: 1. Do you think the initial capital investment John needed to start his business was very large?

How do you think he might have got the money to start his business? (Bloom’s: knowledge, application) 2. When John decided to start his own business, what factors of production do you think he required? (Bloom’s: comprehension, application) 3. How do you think technology might help John expand his business? (Bloom’s: application, analysis) Answers: 1. Yes, in purchasing space and equipping it properly, start-up costs would have been significant.

In terms of source of funding, answers will vary. The start-up capital is likely to come from personal savings, private or “angel” investors, grants or subsidies from the government or other sources.

..

2.

The factors of production are standard for most businesses. These include: labour, capital, technology, natural resources, and entrepreneurs.

3.

Technology is likely to come in the form of machinery. However, a company website, electronic cash machines, inventory scanners, electronic customer list, and the use of email are other examples of how technology would help John. Finally, it is quite likely that the accounting function is performed with the use of computer software, another example of technology that these entrepreneurs would find helpful.

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IN-CLASS ACTIVITIES Time Required

Description

Supplemental In-Class Activity 1: Ice Breaker: What Do You Know About Business?

This activity helps students assess their level of knowledge about business and set their own learning goals for the class.

20 min.

IM – see below

Knowledge

Team Time: The Competitive Edge

Students divide into groups to establish businesses and respond to consumer demands.

25 min.

Page 16-17

Knowledge Comprehension Application

Ethics and Responsibility: Standard of Living vs Quality of Life

In small discussion groups, half of the class develop a case that supports maximum productivity, while the other half develops a case that supports increased emphasis on quality of life.

25 min.

Page 17

Knowledge Comprehension Application Analysis

Closing Case: GE’s Imagination is a Factor of Production

Students read a supplemental case study and discuss how it applies to chapter concepts.

30 min.

17

Knowledge Comprehension Application

Supplemental In-Class Activity 2: Structuring Businesses

by Industry

Teams of students discuss which legal structures are most appropriate for businesses in different industries.

10–15 min.

IM – see below

Knowledge Comprehension Application Analysis

Learning Catalytics

These activities allow students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

Any level of Bloom’s Taxonomy

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

Sketch Animations

This animation is meant to explain one difficult concept: • Political Environment

variable

Videos Appendix and MyBizLab

Knowledge Comprehension

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Reference

Bloom’s Taxonomy

Activity

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SUPPLEMENTAL IN-CLASS ACTIVITY 1: Ice Breaker: What Do You Know About Business?

Activity Overview: This activity helps students assess their level of knowledge about business and set their own learning goals for the class.

Time Limit: 20 minutes What to Do: 1. Each students needs a sheet of paper, divided it into two columns. In the first column, direct students to write the most important four or five things they currently know about business. In the second column, have student list the four or five things they would like to learn. Advise students to use the Table of Contents of the textbook if they are having difficulty creating their lists. This task should take about 5 minutes to complete.

2.

Separate students into groups (less than five is a manageable size) and ask them to share their lists with each other. As students listen to the lists of others, they are free to change their own list as they see fit. (5 minutes)

3.

No that students have shared lists with their first group, ask students to change groups. Each student will be in a new group, with new people. Have them repeat the task set out in point 2 above. (5 minutes)

4.

Once again, ask students to switch to a third group of all new people. With this group, the goal is to synthesize their lists into one big idea of what they know about business, and one big idea of what they want to learn about business. This will require that they combine the points made by the group members. (5 minutes)

Don’t Forget: This activity encourages students to participate and use their communication skills. It also allows students an opportunity to get to know each other. The underlying agenda is to get them talking to each other, setting the stage for active participation throughout the class.

Wrap-Up: Wrap up the discussion by having each group report back to the class. You may want to record their responses on a white board or post them on chart paper for reference as you move through the course material.

SUPPLEMENTAL IN-CLASS ACTIVITY 2: Identifying Factors of Production Activity Overview: Gives students an understanding of the many components (factors) which go into the development and selling of a product.

Time Limit: 10–15 minutes What to Do: Designate student teams (4-5 students per team). Have each team select a quick-service restaurant (no duplications per class) that operates in the local area. Have the team identify examples for each of the factors of production used by that chain. Have a member of each group scribe their responses on a whiteboard or flipchart in the classroom.

Don’t Forget: Encourage students to identify factors other groups captured, which they did not. Also

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discuss factors, which may be unique to certain restaurants – possibly representing unique competitive advantages.

Wrap-Up: Ask students what they learned.

LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

Learning Catalytics 1 Question Type: Word Cloud Prompt: Identify a goods-producing company which is currently making news. Choose any one of the five factors of production and ask students to type an example of that factor of production for that company.

Answer/Explanation: Factors of production include labour; natural resources; capital, both real and financial; entrepreneurial talent; and technology. Instructor can prompt the students with any of these to have them contribute to the Learning Catalytic Word Cloud. For instance, the instructor could say Kraft has just introduced gluten free mac and cheese. Using your smartphone, access Chapter 1 LC 1 and type in one example of natural resources which could be used to make gluten-free macaroni.

Notes: Encourage students to conduct quick online searches for gluten-free alternatives to wheat, or to state alternatives from their own knowledge and experience.

Learning Catalytics 2 Question Type: Match Prompt: Molly’s Cheese Block sells high quality domestic and imported cheese. Her sales for 2015 totaled $950,000. However she spent $700,000 purchasing the cheese she sold. In addition she spent $200,000 on salaries, $50,000 on advertising and another $50,000 on rent and utilities. The difference between her sales and her expenditures equals $50,000. Using only the words “revenue”, “expenses” and “profit or loss”, match the correct term beside the numbers below.

Answer/Explanation: The numbers will be placed on the table in the catalytic. Students must populate match the numbers to terms as demonstrated Notes: A detailed explanation of each step can be found in the text.

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Term Revenue Expenses Expenses Expenses Expenses Loss

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Financial Data $950,000 $700,000 $200,000 $50,000 $50,000 $50,000

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SUGGESTED SOLUTIONS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS 1.

2.

3.

4.

Consider all of the factors of production: labour, natural resources, capital, entrepreneurs, and technology. Is each of these resources a vital part of the school you attend or the company for which you work? Which factors do you believe are most important to the goods and services provided by your organization? Why? (Bloom’s: application, analysis) Give examples of the ways in which each of the five factors of production can affect the business performance of McDonald’s or Walmart. (Bloom’s: application, analysis) If firms competing in the same industry have access to the same labour market, how can a company use employees to create a competitive advantage over rivals? (Bloom’s: analysis) Considering the rapid increase in ecommerce, it is likely that you have purchased or sold some sort of product online. If not, you have probably browsed the webpages of eBay or your favourite clothing store. Can you list a few companies or organizations that do not offer their products or services online? How does their status and growth compare with similar companies who do offer goods and services online? (Bloom’s: application, analysis)

Answers: 1. When it comes to the production of goods and services, all the factors of production are important.

The relative importance of each of these factors will vary, depending on the specific organization and the kind of production taking place. The key to success for any organization is productivity. This requires an investment in the education and training of its workers. In order to increase productivity levels, organizations have to invest in state-of-the-art capital (real capital examples include plant and equipment) and technology. It is also imperative that organizations promote a culture of entrepreneurialism and innovativeness throughout the organization. Organizations should never underestimate the importance of Customer satisfaction. In many business classes, the general consensus is that the most important of the factors of production is entrepreneurialism - without entrepreneurs there would be no businesses at all.

2.

Technology – used in placing orders.

POS (point of sale) machines - track inventory levels “Drive-through” automobile orders required because of stiff competition.

HR – recruitment, training, succession planning will always be significant in the performance of an organization Natural resources – more impactful upon McDonalds as it’s core product line consists of prepared food.

Capital – both companies are huge publicly traded firms with high market capitalization and wide range of options to obtain capital if needed.

Entrepreneurs – Long established nature, and sheer size of firms makes them less nimble to change and thus the entrepreneurial spirit is practically non existent.

3. The solution to this problem is at minimum two-fold. First, specific attention, detail and best practices attached to the very recruitment processes and procedures can maximize the chance for employers to obtain the most qualified, skilled and talented personnel. Second, establishing and maintaining a corporate culture, which focuses upon, celebrates and rewards customer service, will help ensure employees are buying into customer-centric approach to their work.

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4. Answers will vary and it will be unlikely that many students have penetrated corporate B2B websites, having spent their personal time most likely engaged with B2C organizations – all of which will have transitioned to an online buying experience. The B2B’s however, for students that are able to think openly in this regard, will be almost unanimously absent of an ecommerce activities.

TEAM TIME: The Competitive Edge Notes: Answers will vary. However, the focus of this activity is to stress the dynamic nature of competition. Businesses which are responsive to market demands and offer a unique high-quality product at a reasonable price will win greater market share and earn higher profits. Other keys to business success include: (i) fostering good customer relations, (ii) earning repeat business by remaining responsive to changing customer demands, and (iii) anticipating trends and customer preference early.

ETHICS AND RESPONSIBILITY: Standard of Living Vs Quality of Life Discussion Questions: 1. What are the strongest arguments in support of focusing on standard of living? What do you think we can do to increase standard of living in Canada?

2. What are the strongest arguments in support of focusing on quality of life? What can we do to improve quality of life for Canadians?

3. Is it possible to have both? What could we do to create a balance between standard of living and quality of life?

Answers: 1. Answers will vary. The focus of this exercise is to encourage students to discuss the divisiveness surrounding this debate. At the same time students need to practice the art of critical thinking.

Therefore, answers should be derived only after seeing pros and cons of both sides of this argument.

Arguments for standard of living would likely be variations of the concept that productivity increases personal wealth, resulting in higher quality of life. That is standard of living is the means to the desired end state of higher quality of life.

2.

Answers will vary. At the same time students need to practice the art of critical thinking. Therefore, answers should be derived only after seeing pros and cons of both sides of this argument.

Arguments for quality of life would suggest that life balance is a necessity of life in order to create a healthy mind and body. This in turn precedes ability to increase standard of living individually and as a society or economic base.

3.

Answers will vary. Class discussion, however, should probably arrive at the agreement that we MUST have both and that they are interdependent.

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CLOSING CASE: GE’s Imagination Is a Factor of Production Discussion Questions: 1. How important do you think it is for a business to be innovative? Is the newest idea always the best idea? Do you think GE would still be a successful company today if it continued to focus solely on electrical technologies? (Bloom’s: evaluation) 2. Why did Edison Electric Company and The Thomas-Houston Company merge? What challenges might have each company encountered if they had remained competitors? Why is it beneficial for businesses, particularly technology-based businesses, to merge? (Bloom’s: application, analysis, synthesis) 3. Thomas Edison is often credited with being the inventor of the light bulb because he created the first light bulb that was appropriate for use in a person’s home. Is it important for a business to create products that are practical? Why or why not? (Bloom’s: application) Answers: 1. Innovation is critical because it ensures product relevancy. Innovation keeps products in the lead in terms of satisfying customer needs and wants. The newest idea is not always the best idea, especially if that idea fails to result in a product that people want or need. It is quite possible that GE would have continued to be a successful company, even if it had focused solely on electrical technologies.

However, GE is not likely to have become the successful multinational company that it is, has it remained focused solely on electrical technologies. The broad vision of GE leadership and their focus on imagination and innovation has distinguished GE from most other businesses and has allowed it to become a global success.

2.

Merging affords the opportunity to “pool” – talents, skills, resources, etc. In the absence of a merge each company increases the likelihood that they waste valuable resources in their struggle for greater market share. Instead, these resources should be focused on creating ingenious new products.

Technology-based companies often find that pooling resources will create a synergy that results in products that might otherwise not be possible.

3.

Practical products meet a need or a want. Practical products provide utility in that they provide satisfaction. Thomas Edison’s statement that “sale is proof of utility, and utility is success” is accepted by most people. The reason for this is that sales reflect the product’s ability to meet consumer demands. Successful companies satisfy customers – their reward is profit.

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SUPPLEMENTAL MATERIAL ADDITIONAL CRITICAL THINKING QUESTIONS 1. You own a grocery store and need to consider whether you will purchase local produce or import the produce from a foreign market. Outline the advantages and disadvantages of each. What if the foreign-grown produce is cheaper or of better quality? Does consumer demand have any influence on your choice? (Bloom’s: application, analysis) 2.

What can a manager working in a post-secondary educational environment do to benefit the community other than provide jobs and educate students? (Bloom’s: comprehension, application)

3.

Discuss an incident where you, as a consumer, have received outstanding customer value and also an occasion when you received very poor customer value. Did these experiences have any effect on your attitude toward the business? Will you likely shop at the business again? Would you communicate your experiences to others in an effort to persuade them to stop shopping at the business? Do you think the value the customer perceives they are getting is an important factor in customer retention and competitiveness in the market? (Bloom’s: application, analysis, synthesis, evaluation)

Answers: 1. There are many advantages to the local community from “buying local”. These include: keeping money in the local community, supporting local farmers, the public image of local community contributor will likely boost sales, food is generally much fresher because of low transportation times.

Some of the disadvantages of local purchasing include: forgoing the more exotic-type of foods only available in distant markets, failure to establish a chain of suppliers. The advantages of buying foreign goods are: greater variety in terms of product lines, greater supplier system, increases the trade balance for some countries, potentially superior quality or cheaper than purchasing domestic supply. Disadvantages of foreign purchasing – low transportation times may reduce product quality, longer distances result in greater lead times, regulations/tariffs/etc. on imports, the product may not sell in domestic market.

2.

A manager working in a post-secondary environment can benefit the community in more ways than providing education and jobs for community members. This can be accomplished by: (i) starting programs for various groups of community members, (ii) offering special programs that help build skills where the labour force is limited, (iii) surveying businesses to gather employment needs and develop education programs and diplomas/degrees to satisfy those needs, (iv) donating used textbooks to the less fortunate or under-developed countries, (v) donating old technology to those who can use it, (vi) working with government to provide “back to work” programs (i.e. Second Career) for those who are unemployed, and (vii) creating programs which educate students with technical skills, as well as an understanding of global citizenship, embrace diversity, can problemsolve, have critical thinking skills, and all the other many soft skills that are necessary to compete in today’s workforce.

3.

Answers will vary. Generate a class discussion on bad experiences with businesses can quickly lead to viral marketing or negative word-of-mouth publicity. This may cause sales to decline, or potentially more destructive, legal dilemmas.

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APPLICATION EXERCISES 1. Calculating profit. The Bagel Bar is a small restaurant located in the food court of a local shopping mall. Last month the restaurant sold 2,000 bagels at a price of $3 each. The Bagel Barn purchases their bagels from a supplier at a cost of 50¢ each and spent $500 for cream cheese, butter, and other assorted toppings. The two employees are paid $10 per hour and they each worked 160 hours last month. In addition, The Bagel Bar paid $1,000 rent to the mall. How much profit did The Bagel Bar earn last month?

2. The private enterprise system. Canada’s version of capitalism allows for freedom of choice, competition, the right to own private property, and the right to keep profits. Go to Industry Canada’s website at www.ic.gc.ca and create a brief summary of some of the ways that government helps to support fair competition in Canada.

3. Entrepreneurs. Did you know that there are services available to help people start new businesses? Go online and find out what business incubators are available near your community, and write a brief summary of the kinds of services they offer.

4. Customer service. Think about the last time you received excellent customer service. What were some of the reasons you feel that the service was so good? Make up a business and write a brief policy that you believe will guide your employees to ensure that customers experience excellent service. Share your policy with the class.

5. Functional areas of business. Assume that you are the CEO of a midsize sporting goods company.

Describe what kinds of functional areas you would set up, what each would do to support the company in achieving its goals, and how you would ensure there is coordination between each area.

Answers: 1. Profit before interest and taxes is $300.00. Profit calculation should be set up as an income statement in a way similar to the following: Sales

2000

3

6000

COGS

2000

0.5

1000

Gross Profit

5000

10

3200

Expenses Toppings Labour

500 320

Rent

1000

Total Exp

4700 EBIT

2.

3.

4.

..

300

Answers will vary based upon date of entry into the website, but they should provide any number of the services, ranging from provision of financing and funding to advice, recommendations and market/industry analysis.

Again, answers will vary depending on location of students and the date/time they accessed online resources. Local chambers of commerce, economic development organizations (municipally and provincially funded) should be on students’ lists of findings.

Answers will vary depending on individual students’ experience. Customer service policies in general should acknowledge importance of relationship building, customer value and interpersonal skills.

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5.

Functional areas of the sporting goods store should include: sales & marketing, operations, customer service, accounting & finance, human resources and information technology. As a retailer, the company should have each of the functions noted in the chapter with the exception of research & development.

Chapter 1, Related Websites http://www.ic.gc.ca

Industry Canada works with Canadians throughout the economy and country to improve conditions for investment, innovation, global trade, and build a fair, efficient and competitive marketplace.

http://www.tbs-sct.gc.ca

The Treasury Board of Canada Secretariat provides a list of Crown corporations, departmental corporations and shared governance organizations.

http://www.statcan.gc.ca

Statistics Canada produces statistics on population, resources, economy, society and culture in Canada as well as comparisons with other countries. This information provides a solid foundation for informed decisions by elected representatives, businesses, unions and non-profit organizations, as well as individual Canadians.

http://www.bbb.org/canada/

The Better Business Bureau ensures high standards for trust are set and maintained between businesses and consumers. BBB is a key advisor, a reliable evaluator and objective expert on the topic of trust in the marketplace.

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ENHANCING THE ONLINE COURSE Business Biography: Ask students to consider the role of business in their lives. Have them write a two paragraph business biography that highlights their own background, but with a connection to the business world (such as “my uncle owned a hardware store”. Ask students to post these on the discussion page as they would their typical biographies at the beginning of the semester.

Profit vs. Non-Profit: Ask students to develop a visual using open source graphics to depict the differences between profit vs. non-profit organizations and goods vs. services. Have students post their “illustrations” of these concepts on the discussion board.

Mindmap: Ask students to create an online “mindmap” (a chart with connected “branches”) using the graphics tools on the computer. This mindmap would depict the factors of production as they relate to business. Ask your students to write a paragraph describing how all the branches contribute to the business and post these on the discussion board or post them as graded assignments.

Business Function Slide Presentation: Divide the online course into five groups. (NOTE: Most online platforms have a method for doing this randomly through the system itself.) Assign each group one of the following topics: sales and marketing, customer service, information technology, accounting and finance and human resources. Ask each online group to work together through the discussion board and chat room features to post a 5 slide presentation on the major points related to the topics.

Environment Video Presentation: Divide the online class into five groups. Assign each group one of the following topics: sales and marketing, customer service, information technology, accounting and finance and human resources.. Ask each group to prepare a 10 minute presentation. The online groups will need to “elect” a leader/presenter. Require them to use their microphone feature (most online platforms provide for this) or ask the groups to create a video using their own camera phones. Have students send it to you digitally through the online platform.

Podcast: Create a short discussion on the topic of types of businesses. Record it using the microphone on your computer. You can create a podcast of the mini-lecture using the RSS link that is usually one of the features in an online environment.

Business Interview: Divide the online class into groups. Assign each group one of the forms of businesses. Require each group to interview a representative from their specific form of business and to prepare a written summary of the discussion points related to the pros and cons of each business form.

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CHAPTER 2 The Environment of Business CHAPTER OPENER The business environment is comprised of external forces within which firms must operate. The chapter covers the ways in which competition, social environment, globalization and technological growth challenge and provide opportunities to business owners. The PEST Model is used to explain the impact of various environments on a business.

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

2.

3.

4.

5.

6.

7.

Describe the macro business environment and explain why managers must be aware of changes taking place.

Explain how managers use the PEST model to analyze external business opportunities and threats.

Explain how sociocultural and technological forces can impact the profitability of a business.

Describe how Porter’s five forces model is used to analyze the ways competiton affects an industry.

Summarize the four degrees of competition that may exist within an industry.

Explain why government in Canada allows some monopolies to exist and how consumer interests are protected.

Explain the impact that perfect competition has on selling price.

KEY TERMS business environment (p. 21) competition (p. 30) competitive environment (p. 21) diversity initiative (p. 27) economic environment (p. 24) four degrees of competition (p. 32) globalization (p. 24)

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green economy (p. 27) legal monopolies (p. 33) macro environment (p. 21) monopolistic competition (p. 33) monopoly (p. 32) natural monopolies (p. 33) oligopoly (p. 33)

perfect competition (p. 33) PEST model (p. 22) political–legal environment (p. 23) Porter’s five forces model (p. 30) sociocultural environment (p. 25) technological environment (p. 28)

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DETAILED LECTURE OUTLINE I.

Business Environment Introduction A. The macro business environment 1. What strategic issues are outside of management’s control?

2. What are the different business environments in which organizations operate? a. Political-legal environment b. Economic environment c. Sociocultural environment d. Technological environment e. Competitive environment II. PEST Model A. Analysis of the business environment to identify opportunities and threats 1. Identify and analyze political legal factors a. Government policy and political decisions can affect many vital areas for business.

Factors may include ethical considerations, employment laws, competition laws, product regulations, consumer laws, sustainable environmental practices, and health and safety legislation. b. How does the law affect an organization?

2. Identify and analyze economic factors a. Changes in the local, national, or global economy can affect business operations. Factors may include interest rates, economic growth, industry changes, inflation and exchange rates, and taxation changes. b. Globalization involves the merging of economies around the world as technology, goods and services, labour, and capital move back and forth across international borders.

3. Identify and analyze sociocultural factors a. Socio-cultural environment is an inter-connected system of different demographic factors such as race, ethnicity, gender, age, income distribution, sexual orientation, and other characteristics. b. Consumer behaviour and preferences will affect decisions about product offerings.

Environmentally friendly business processes are affecting demand patterns and creating business opportunities. Other factors may include social trends, population, demographics, and ethical considerations. c. How does an aging population affect business? d. How does diversity affect business? e. How does the “green movement” affect business? f. How does the socio-cultural environment affect you?

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4.

Identify and analyze technological factors a. As technology changes, companies must adjust business practices to compete in the global business world. Factors include new technologies, online shopping, research and development, and global access. b. Items and services such as smartphones, computer software, and digital broadcasting make businesses more efficient and productive. E-commerce, document management, workflow technologies, and identification management software all provide these opportunities. c. How expensive it is to keep up with technology? d. How has the internet changed the way business is done? e. How do tech changes affect business?

III. The competitive environment A. Analysis of competition using Porter’s Five Forces model 1. How does competition influence business? a. Threat of new entrants b. Threat of substitutes c. Bargaining power of buyers d. Bargaining power of suppliers e. Rivalry among existing competitors IV. Degrees of Competition A. Summary of four degrees of competition 1. Monopoly 2. Oligopoly 3. Monopolistic competition 4. Perfect competition

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SUGGESTED SOLUTIONS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Coffee, Economics and Fair Trade Discussion Questions: 1. Why do you think coffee has become so central to our culture? Can you think of any other current social–cultural issues that might be shaping our society? (Bloom’s: application) 2. Thousands of small coffee farmers are victims of the volatility of coffee prices. What could these small farmers do to strengthen their bargaining position and increase there profitability? (Bloom’s: synthesis) 3. Why do companies like Starbucks and Tim Hortons participate in fair trade programs when it forces them to pay more for coffee? How might this be good for business? (Bloom’s: analysis) Answers: 1. Student answers will vary, however one general response would be a variation of what the discussion refers to as “coffee culture” and its centrality to society as a gathering place and social activity.

2. There are a couple of tactics farmers could consider. 1) Organize to control production based upon global forecasts; b) Negotiate higher minimum price to be paid when supplies are greater than demand.

3. Fair trade programs don’t only ensure supply of coffee inventory, but also adds to the firms’ sense of corporate social responsibility, which appeals to a growing and more enlightened consumer base.

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BETTER BUSINESS, BETTER WORLD: Do You Prefer To Do Business with Companies You Can Trust?

Discussion Questions: 1. Why is it important for businesses to build trust with consumers? Why is it important that consumers can trust the businesses they buy from? (Bloom’s: comprehension, application) 2. Why would a business want to obtain BBB accreditation? Does this accreditation mean that consumers can trust the products the business sells to be high quality? (Bloom’s: knowledge, comprehension) 3. Have you ever been “scammed” by a business? What was the situation and what did you do about it?

Did you go to the BBB for help? Why or why not? (Bloom’s: application, analysis) Answers: 1. The corporate image has a strong and potentially lasting influence on public relations and the future direction of a business. Trust is a critical component of a corporation’s image. A loss of trust will have a certain impact on any business. In most cases, the effect is straightforward and immediate: consumers will stop shopping at these businesses. The damage to a business can be extensive as consumer complaints and discontent often appear in various media, on the internet, in newspapers and magazines. This spreads the “bad publicity” and makes the poor corporate image known to a wider audience.

2.

Most business accreditation is good for business. BBB accreditation sends a signal to consumers that the company supports honesty and agrees to the BBB conditions, has been audited by BBB and met the requirements set forth in the accreditations. Don’t mistake what the accreditation means: It does not guarantee quality, but rather that the company will be truthful in the marketing and advertising of the products. This permits the consumer access to complete and truthful information with which they can make informed decisions.

3.

Many students will have a story about how they might have been “scammed” by a company in the past. Many will wish to share their stories. This is a good opportunity to get students to participate. It is likely that the solutions involved some form of compensation, but in some instances there will still be anger about the experience and the general conclusion is that they will not go back to that business again. This will likely influence the others in the class, who hear their stories and make the decision to avoid that business as well.

BizChat Apple: Taking a Bite Out of Microsoft Questions: 1. Some people say that Microsoft imitated Apple’s “look and feel” in their user interface. Why might they do that?

2. You likely remember the TV commercials that pitted the cool Mac guy against the awkward PC nerd.

Are these ads effective in illustrating the competition between companies? Why or why not?

3. Are you a Mac or PC person? How do you think you developed this preference?

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Answers: 1.

2.

3.

If it were true that Microsoft imitated Apple’s user interface, the action could only be attributed to Microsoft’s admiration of the software, and more to the point – Microsoft would have acknowledged the market potential of Apple’s platform. As the saying goes, “imitation is the highest form of flattery”.

This is a purely subjective question, so each student will have his or her own opinion as to whether the ads were effective in illustrating the competition. A follow up question (and discussion) might be, “were the ads successful to Apple in not only positioning them as the cooler brand, but positioning PC (Microsoft) as the somewhat less relevant brand.

This question can be treated as a class poll by show of hands, with the follow-up “How” question aimed at selected students as part of the discussion.

ON TARGET All Kinds of Tablets Questions: 1. A market that was once thought of as a pure monopoly by Apple has now opened up to some interesting competition. Or do you think Apple and Samsung have a lock in the tablet market?

2. In what ways has increased competition in the tablet market benefited consumers?

3. How do the manufacturers of tablets attempt to differentiate their products to compete for sales.

Answers: 1. To answer this question, it will be imperative that students access the most recent data by simply performing an internet search using a search phrase such as “global tablet market share for (year)”, then making observations and conclusions accordingly.

2. There are two key categories of benefits to consumers, which always result from monopoly division.

They are: price decrease and quality increase.

3. Differentiation is likely a fairly new word to students at this point, so it is worth while pausing to define the term. Following this brief discussion, it would be beneficial, as with question 1, to have students go to the websites for each involved firm, and explore how each are being represented.

Alternatively, again, another web-search using “tablet comparison” as a search phrase would reveal data and spur discussion.

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4. IN-CLASS ACTIVITIES Time Required

Reference

Bloom’s Taxonomy

Activity

Description

Supplemental In-Class Activity 1: Ice Breaker: Knowledge is power.

This activity helps students begin to appreciate the value of environmental analysis.

20 min.

IM – see below

Knowledge, Comprehension, Application

Supplemental In-Class Activity 2: Porter’s Five Forces

Continuation of Activity 1, this activity uses the same company, but utilizes group discussion to discover the many forms of competition facing that company.

10–15 min.

IM – see below

Knowledge Comprehension Application Analysis

Learning Catalytics

This activity allows students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

Any level of Bloom’s Taxonomy

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

SUPPLEMENTAL IN-CLASS ACTIVITY 1: Ice Breaker: Know the Competition Activity Overview: This activity helps students begin to appreciate the value of environmental analysis.

Time Limit: 20 minutes What to Do: 1. Divide the class into 4 groups, and secretly allocate one of the 4 PEST model categories to each group.

This can be done by simply writing the letters P, E, S, T on separate sheets of paper and delivering them face down to each group. Caution the groups not to share the name of their category out load with the class. Give a brief description of each PEST category, drawing their attention to Table 2.1 (p.

23). Next, announce the name of a well-known company – preferably one that is currently in the news. Instruct the groups to brainstorm and create a list of forces facing that company, which fall into the PEST category assigned to each respective group. Provide guidance where necessary. (10 minutes) 2.

Have each group approach the front of the class and write 2 of their discovered environmental forces on to the white board. (5 minutes)

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3.

With each group’s list on the whiteboard, discuss class-wide to determine which PEST category belongs to each list. (5 minutes)

Don’t Forget: This activity encourages students to participate and use their communication skills. It also allows students an opportunity to get to know each other. The underlying agenda is to get them talking to each other, setting the stage for active participation throughout the class.

Wrap-Up: Wrap up the discussion by discussing what each of the PEST factors have in common – namely that they are externally generated and uncontrollable forces to the firm. Therefore they provide the firm with both opportunities and threats. At this point you can even scribble an “O” or a “T” beside each point written on the board.

SUPPLEMENTAL IN-CLASS ACTIVITY 2: Porter’s Five Forces Activity Overview: Continuation of Activity 1, this activity uses the same company, but utilizes group discussion to discover the many forms of competition facing that company.

Time Limit: 10–15 minutes What to Do: Using the same groups as designated for Activity 1, have each group come up with one example of a potential competitor for the company discussed previously. Descriptions of the five forces, found on pages 31-32 can be used as reference.

Don’t Forget: Encourage students to focus more on the “New Entrants” and “Substitutes” as these can often sneak up on firms.

Wrap-Up: Ask students what they learned.

LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

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Learning Catalytics 1: Question Type: Matching Prompt: Match the environmental force example, from the list on the right, with the appropriate PEST category on the left.

Answer: Definitions, descriptions and examples are found in pages 21-29.

PEST Force Political-Legal Economic Sociocultural Technological

PEST Force Example Millennial work force in Canada (S) Biofuel innovations (T) Decreasing value of the Canadian Dollar (E) Increase in legal drinking age (P)

Learning Catalytics 2: Question Type: Confidence Prompt: You have four votes to place on any of the options to the following question. If you are certain of on response, place all your votes there. Otherwise you may distribute your votes according to your confidence in the given response.

Question: Air Canada and WestJet make up the vast majority of Canada’s commercial passenger air travel industry. This industry is an example of what degree of competition? a) Monopoly b) Oligopoly c) Monopolistic Competition d) Perfect Competition

Answer: Definitions, descriptions and examples are found in pages 32-34.

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SUGGESTED SOLUTIONS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS Questions: 1. It is not unusual to encounter businesses that have streamlined their activities to accommodate for environmental forces. Can you think of examples of businesses that might be forced to alter their business decisions based on how they are impacting the environment? How might these decisions affect their profits?

2. Most business owners agree that keeping up with the pace of technological change is a challenging task. Imagine you are the owner of a new restaurant business and must decide what technology would best suit your needs. From what types of technology would this business benefit?

3. You are considering the possibility of opening a grocery store. What kinds of government regulations do you think will impact your business? What are the advantages and disadvantages of government regulation of business?

Answers: 1. First, instructors must pause to distinguish between the two contexts of the word “environment” being used in this question. “Environmental forces” are those discussed in the chapter, categorized and analyzed using the PEST model. “Impacting the environment” is clearly a reference to the natural environment of air, land and water. Once that clarification is made, the responses provided by students will vary, but common examples would be those businesses receiving media coverage due to environmental activist scrutiny. Any business involved in energy or manufacturing, for instance, would be a reasonable response. When operations activities are altered in order to adhere to political-legal or socio-cultural forces, there is typically a decrease in profit at least temporarily due to capital costs of such alterations.

2.

A restaurant would benefit from advanced technologies in a wide range of categories including: • Database management systems for orders from suppliers and sales tracking • Customer relationship management systems • Website and social media communication with customers

3.

Government regulations affecting a grocery store would be extensive. Student responses will vary, however common themes would be around ensuring public health with food being sold and zoning regulations which would be unique to a grocery store (parking, delivery vehicles, etc)

TEAM TIME: Cultural Awareness: An Unwritten Law Discussion Questions: 1. What were some challenges encountered in your business scenario and how did you overcome them?

2. Why is it important for multinational companies to research a foreign country with which they intend to conduct business?

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Answers: 1. Answers will vary. The focus of this exercise is to encourage students to discuss the dynamic nature of competition, from both sides – consumer and business. Organizations which are responsive to consumer demands and offer a unique and distinct high-quality product at a reasonable price will win more market share and earn greater profits. Another key to business success is developing excellent customer relationship. Finally, it is crucial that organizations work to earn repeat business and gain customer loyalty by remaining responsive to changing customer demands and anticipating customer desires before they are expressed.

2.

Answers will vary. It is critical that multinational corporations (MNC) research the values and customs within a foreign country with whom they intend to conduct business. Even the most well planned businesses, with the best plans and limitless financial resources, can go failure in their endeavours if foreign cultural sensitivities are offended. Some of the more obvious of the cultural factors include language, educational, literacy, gender relationships, etiquette, and religion. Also, attitudes toward cooperation (between management and labour) and toward work in general are important considerations.

CLOSING CASE: How Much Snooping is Too Much Snooping?

Discussion Questions: 1. Do you think it is an invasion of privacy for a government to want to monitor digital communications? Is it the government’s right to do so? Why or why not?

2. What political–legal and sociocultural pressures is Black- Berry dealing with?

3. What might happen to BlackBerry’s sales if it permits monitoring of digital communications? If the communications service provider does not oblige the Indian government, do you think the country would ban the service? Why or why not?

Answers: 1. This question should prompt discussion (perhaps heated) around the foundational aspects of an individual’s right to privacy vs the greater population’s need for security and safety.

2. Blackberry is dealing with federal governments’ obligation to protect their citizens from terrorism, supported primarily by the socio-cultural insistence to hold governments responsible for such things.

On the other hand, the socio-cultural factor surround right to privacy creates an opposing force to the mandate of security.

3. Discussion around this question is speculative based on the time of publishing. It would be prudent for instructors to direct their students to conduct appropriate web searches to determine the outcome of this issue.

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SUPPLEMENTAL MATERIAL ADDITIONAL CRITICAL THINKING QUESTIONS 1.

Distracted driving laws in Canada are an example of political-legal forces impacting cellular service providers Rogers, Telus, Bell and others. However, the political-legal force was not the only area of the PEST model involved in business decisions by these companies. Identify the other areas of PEST involved and state whether they posed threats or opportunities for big cellular service providers.

(Blooms: knowledge, application)

2.

Walmart is the world’s largest retailer, while Proctor and Gamble is the biggest consumer goods company on the planet. While they have an interdependent relationship in order to maximize sales, they both also represent a form of competitor for one another how is this so? (Bloom’s: comprehension, application)

3.

Unlike other planning activities, which are formally conducted annually, semi-annually or quarterly, PEST analysis should be an ongoing activity in that managers should constantly be mindful of PEST activities all the time. How can an obsession with PEST forces provide firms with a competitive advantage?

Answers: 1. The socio-cultural forces of public outcry for laws against distracted driving was the first environmental factor to begin the movement which eventually became law. In this sense, the sociopolitical force was a threat. However, technologies available between major automotive manufacturers and their partnerships with digital communications firms such as Blue Tooth, provided a technological opportunity. Finally, the general societal addiction to cell phone use, was certain to ensure that cell phone use would continue unabated, regardless of laws.

2.

Proctor and Gamble imposes bargaining power of supplier upon Walmart, while Walmart represents bargaining power of buyer against P&G.

3.

Answers will vary, however, a case could be made that constant surveillance of any of the 4 areas of PEST and or competitive forces will provide managers with knowledge that could help (opportunity) or hurt (threat) them. However, the best answer would be constant observation of ALL macroenvironmental forces will serve firms most fully in their efforts to seize opportunities or thwart the impact of threats.

APPLICATION EXERCISES 1.

Demographics. Imagine you are starting a new retail clothing business in the city where you attend school. To what demographic area would you market? Think about the following factors: race, ethnicity, gender, age, income, and sexual orientation. Visit http://www.statcan.gc.ca/ to locate reports on the demographic area you are interested in. Do you believe your business can thrive in this area? If not, what area would be conducive to your obtaining future customers? Would you have to change your retail clothing products in any way for the demographic market?

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2.

Languages of the Global Marketplace. As globalization increases and the world markets become more intertwined, language barriers become important. Investigate online resources for automated translation tools. What happens if you want to read a Web page posted by a German firm? Can you make online purchases from a company based in Asia? What resources are there for translating telephone conversations in real time? Investigate Babelfish.com and personal interpreter services like LanaguageLine.com.

3.

E-commerce. Did you know there are Web sites dedicated to keeping businesses and consumers upto-date on the latest e-commerce news and trends? Check out www.ecommercetimes.com and find a recent e-commerce trend, and write a brief summary.

4.

Political-legal Environment. The Political-legal macro-environment of business affects business operations in many ways. For instance, the government has changed the consumer tax structure into a single federally administered tax, the Harmonized Sales Tax (HST). You will find information online at http://www.cra-arc.gc.ca and http://www.hstincanada.com. Previously businesses applied a goods and services tax (GST) and a provincial sales tax (PST) to most sales transactions. How might this change in the legal environment affect business operations? Does HST apply to all provinces, all businesses and all consumers?

5.

Socio-cultural Environment. Public opinion has a huge bearing on how companies and the Canadian government act. Conduct online research to find a recent news event that discusses consumers responding negatively to some business venture or change. For instance, communities often respond negatively to garbage dumps and nuclear plants being placed in their neighbourhoods. They protest through rallies, writing letters to government, posting online discussions and opinions, word of mouth, meetings with company leaders, emails, etc. Share your findings with the class.

Answers: 1. Answers will vary. Students need to examine age groups and products that may sell to those age groups, examine ethnic groups and clothing that appeals to those groups, income levels will affect the price range consumers can afford to pay for clothing, etc.

2.

Refer to websites to learn about options for translation tools that aid global online business.

3.

Answers will vary. E-commerce is growing quickly and there are always new trends occurring.

4.

HST is being applied by most provinces, albeit at varying rates. This would mean that businesses would need to reprogram their POS machines to incorporate such changes in tax laws. They also have to incorporate changes in accounting practices and reporting practices when HST is used instead of GST or PST (and whenever there is an increase or decrease in percentage applied for HST).

5.

Public opinion regarding opening a new business (such as large bulky wind turbines, garbage dumps, nuclear plants, or noisy factories) that destroys parks, lakes and streams, historical sites, etc. is often negative. The public can quickly take a negative view of any organization which disregards the public value of the affected site.

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MYBIZLAB RESOURCES & TEACHING TIPS ONLINE CAREER SKILLS: Ten Easy Rules for Academic Success and Beyond Visit the Online Career Skills module “Ten Easy Rules for Academic Success and Beyond” in MyBizLab, where you will gain insight on how to become an academic all-star. You will learn how to get the most out of all the resources your school provides and how to build transferrable skills that you can apply to your academic and professional careers.

Chapter 1, Related Websites http://www.ic.gc.ca

Industry Canada works with Canadians throughout the economy and country to improve conditions for investment, innovation, global trade, and build a fair, efficient and competitive marketplace.

http://www.tbs-sct.gc.ca

The Treasury Board of Canada Secretariat provides a list of Crown corporations, departmental corporations and shared governance organizations.

http://www.statcan.gc.ca

Statistics Canada produces statistics on population, resources, economy, society and culture in Canada as well as comparisons with other countries. This information provides a solid foundation for informed decisions by elected representatives, businesses, unions and non-profit organizations, as well as individual Canadians.

http://www.bbb.org/canada/

The Better Business Bureau ensures high standards for trust are set and maintained between businesses and consumers. BBB is a key advisor, a reliable evaluator and objective expert on the topic of trust in the marketplace.

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ENHANCING THE ONLINE COURSE Competitive Analysis: Select a business currently in the news. Have students write a five point summary listing each different form of completion from Porter’s Five Forces, and an example of each facing that company. Ask students to post these on the discussion page.

Oligopolies vs Monopolistic Competitions: In analyzing the four degrees of competition, monopolies and perfect competitions appear to be fairly straightforward. More subtle differences exist between oligopolies and monopolistic competitions, however. Ask students to develop a table to depict the differences between the competitive degrees of oligopolies and monopolistic competitions. Have students post their tables on the discussion board.

Mindmap: Ask students to create an online “mindmap” (a chart with connected “branches”) using the graphics tools on the computer. This mindmap would depict the socio-cultural factors as they relate to Lululemon. Ask your students to write a paragraph describing how all the branches contribute to the business and post these on the discussion board or post them as graded assignments.

Environment Slide Presentation: Divide the online course into four groups. (NOTE: Most online platforms have a method for doing this randomly through the system itself.) Assign each group one of the following topics: competitive environment of business, social environment of business, globalization, and technological environment of business. Ask each online group to work together through the discussion board and chat room features to post a 5 slide presentation on the major points related to the topics.

Environment Video Presentation: Divide the online class into four groups. Assign each group one of the following topics: competitive environment of business, social environment of business, globalization, and technological environment of business. Ask each group to prepare a 10 minute presentation. The online groups will need to “elect” a leader/presenter. Require them to use their microphone feature (most online platforms provide for this) or ask the groups to create a video using their own camera phones. Have students send it to you digitally through the online platform.

Podcast: Create a short discussion on the topic of macro-environmental forces and how they reveal opportunities and threats. Record it using the microphone on your computer. You can create a podcast of the mini-lecture using the RSS link that is usually one of the features in an online environment.

Regulator Research: Divide the online class into groups. Assign each group one of the various levels of regulators of Canada’s oil sands industry. Require each group to research the mandate of that regulator and to prepare and post a written summary of the research.

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CHAPTER 3 ECONOMICS AND BANKING CHAPTER OPENER Chapter 3 covers the fundamentals of economics. This chapter discusses the functioning of the market and considers how business decisions are shaped by the forces of supply and demand. Different economic systems are introduced and the varying degrees of competition are described. The concept of the business cycle is described and the various macroeconomic indicators are introduced.

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

2.

3.

4.

5.

Define economics and describe the different types of economic systems.

Describe the laws of supply and demand and how equilibrium price is determined.

Understand how economic indicators, including gross domestic product (GDP), price indexes, the unemployment rate, and productivity, reflect the economic health of a country.

List and describe the four stages of the business cycle.

Summarize how the government uses both monetary and fiscal policies to stabilize the economy as a result of business cycle fluctuations.

KEY TERMS auction process (p. 45) Bank of Canada (p. 55) bartering (p. 44) budget deficit (p. 56) budget surplus (p. 55) business cycle (p. 53) capitalism (p. 42) circular flow (p. 40) communism (p. 42) consumer price index (CPI) (p. 51) contractionary fiscal measures (p. 54) cost of living (p. 51) Crown corporations (p. 43) currency (p. 44) deflation (p. 51) demand (p. 45) depression (p. 54) disinflation (p. 51) double coincidence of wants (p. 44) economic indicators (p. 44) ..

double coincidence of wants (p. 44) economic indicators (p. 50) economic system (p. 41) economics (p. 40) equilibrium price (p. 46) expansionary fiscal measures (p. 55) fiscal policy (p. 54) GDP per capita (p. 51) gross domestic product (GDP) (p. 50) gross national product (GNP) (p. 50) inflation (p. 51) law of demand (p. 45) law of supply (p. 45) macroeconomics (p. 41) medium of exchange (p. 44) microeconomics (p. 41)

mixed economies (p. 43) monetary policy (p. 54) national debt (p. 56) nominal GDP (p. 50) planned economic system (p. 42) privatization (p. 42) producer price index (PPI) (p. 52) productivity (p. 51) purchasing power parity (PPP) (p. 50) real GDP (p. 50) recession (p. 54) scarcity (p. 40) shortage (p. 46) socialism (p. 42) supply (p. 45) supply and demand (p. 44) surplus (p. 46) unemployment rate (p. 52)

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DETAILED LECTURE OUTLINE I.

The Basics of Economics A. Economics Defined 1. What is economics? a. Economics is the study of how individuals, businesses, and government make decisions about how to allocate limited (scarce) resources to best satisfy people’s wants, needs, and desires.

2. How do government, businesses, and households interact? a. The cycle of interaction between government, businesses, and households is known as the circular flow of Canada’s economy.

3. Why is it important to study economics? a. One of the most important reasons to study economics is to learn about how people get the goods and services they need and want. Economics helps us understand the impact government decisions have on firms, industries, and nations.

4. What is microeconomics? a. Microeconomics is the study of how individual businesses, households, and consumers make decisions to allocate their limited resources in the exchange of goods and services.

5. What is macroeconomics? a. Macroeconomics looks at the bigger picture. It is the study of the behaviour of the overall economy.

B. Types of Economic Systems 1. What are the different types of economic systems? a. Economic systems include: traditional economies, planned (or controlled) economies, market economies, and mixed economies.

2. What is a planned economic system? a. In a planned economic system, the government plays a greater role in determining the goods and services provided and how they are produced and distributed.

3. What is a market economy? a. In a market economy, individuals are able to make their own economic decisions.

4. What is a mixed economy? a. Mixed economies are a blend of market and planned economies with a mixed economy of privately owned businesses and government control of selected social programs, such as health care.

II. Business and Economics A. Supply and Demand 1. Why do business managers need to have an understanding of economics? a. Business managers and owners must understand the principles of economics because the nature of business is to provide items or services for purchase in exchange for something, generally money.

2. How does supply and demand affect business? a. In the days of bartering, when people traded goods or services without an exchange of money, the “price” of something was determined by the needs of each person in the bartering exchange and what they were willing to trade.

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b.

3.

4.

5.

6.

7.

To offset some of the difficulties of bartering, the concept of currency, or money, was developed.

What does supply mean? a. Supply refers to how much of a product or service is available for purchase at any given time. b. The law of supply states that the amount supplied will increase as the price increases.

What does demand refer to? a. Demand refers to how much people want to buy at any given time. The amount demanded increases as price declines. b. The law of demand states that people will buy more of an item at a lower price than at a higher price.

What factors determine price? a. The equilibrium or market price is the price at which supply equals demand.

What factors affect supply? a. Determinants of supply include technology changes, change in resource prices, price expectations, number of suppliers and price of substitute goods.

What factors affect demand? a. Determinants of demand include changes in income levels, population changes, consumer preferences, complementary goods, and substitute goods.

III. Economic Indicators A. Economic Growth 1. How do we determine whether the economy is growing? a. Economists primarily use the following three economic indicators to determine how well businesses are performing overall: gross domestic product (GDP), consumer and producer price indexes, and the unemployment rate.

2. How does the GDP act as an indicator of economic growth? a. When the GDP goes up, the indication is that the economy is in a positive state. Goods and services are being produced and businesses are doing well. A downward-moving GDP indicates problems with the economy because fewer goods are being produced, fewer services are being sold, and businesses are not doing well.

3. How does producing more goods and services result in lower cost? a. Productivity measures the quantity of goods and services that human and physical resources can produce in a given time. Many factors go into measuring productivity.

B. Inflation 1. How is price stability measured? a. A consistent increase in the consumer price index indicates inflation, which is a rise in the general level of prices over time. A decrease in the rate of inflation is disinflation, and a continuous decrease in prices over time is deflation.

2. How are changes in the price of consumer goods measured? a. The consumer price index (CPI) is a benchmark used to track changes in prices over time.

3. Does the CPI measure changes in all prices? a. The CPI measures changes in prices of consumer goods only. It does not measure changes in prices of goods used to create consumer goods, such as capital and resource expenditures. The producer price index (PPI) tracks the average change in prices at the wholesale level (from the seller’s perspective).

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4.

Why are price indexes important? a. Business leaders watch the CPI and PPI to determine the rate at which consumer and wholesale prices change, respectively.

C. Unemployment 1. What other indicators are used to measure the economy? a. The unemployment rate measures the number of people who are at least fifteen years old, are seeking work, and are currently unemployed.

2. Why is unemployment an important economic measure? a. High unemployment results in an increase in unemployment benefits and government spending on social programs, such as welfare and health care. High unemployment can also result in increases in mental stresses and physical illnesses and can bring on increases in crime.

3. How do economic indicators help businesses make decisions? a. Watching the indicators over time allows business decision makers to get a feel for future expectations and helps them make better business decisions.

IV. Government and the Economy A. The Business Cycle 1. What are fluctuations in the economy? a. Over time, the economy naturally fluctuates, which means it goes through periods of increased growth (expansion) and decreased growth (contraction). Economists refer to these increases and decreases as the business cycle.

B. Controlling Fluctuations in the Economy 1. How does the government control fluctuations in the economy? a. To smooth out the fluctuations in the business cycle, the government influences the economy through its fiscal policy and monetary policy.

2. Why does the government increase taxes? a. The government increases taxes in an attempt to offset rising inflation.

3. How does government spending help stimulate the economy? a. Increasing government spending is a fiscal policy tactic that the government uses to help fuel a lagging economy. Government spending increases cash flow to the economy faster than decreasing taxes, because it provides an immediate injection of funds into the system.

C. Money Supply 1. In addition to fiscal policy, how else can the government stabilize the economy? a. The Bank of Canada manages the country’s money supply through its monetary policy to control inflation.

2. What is a budget surplus? a. A budget surplus occurs when the money coming into the government exceeds the money being spent by government.

3. What is the money supply? a. Money supply is the combined amount of money available within the economy, but there are different ways to measure it. The standard measures usually include currency in circulation and demand deposits.

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4.

5.

6.

..

Why is controlling the money supply important? a. Money has a direct effect on the economy, because the more money consumers have, the more they tend to spend. When consumers spend more, businesses do better.

What are open market operations? a. One of the main tools the Bank of Canada uses in its monetary policy is open market operations, which is the buying and selling of government securities (bonds and Treasury bills, or other financial instruments).

What is the overnight rate? a. The overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or “overnight”) funds among themselves; the Bank of Canada sets a target level for that rate.

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SUGGESTED SOLUTIONS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behaviour, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behaviour to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms—most difficult level).

For example: A situational question at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower-level answers.

OPENING DISCUSSION: Emerging Economies (Which Emerging Economics Are Gaining Global Economic Power?)

Discussion Questions: 1. Why do you think Canadians might associate globalization with job loss and lower wages? (Bloom’s: evaluation) 2. What opportunities and challenges might arise for Canadian businesses as a result of emerging economies? (consider small and large firms)? (Bloom’s: synthesis) 3. In your opinion, has a global marketplace changed the way we work, our business laws, or the technology required to do business? If so, how? (Bloom’s: synthesis) Answers: 1. Many Canadians are likely to associate globalization with job loss due to fear. Competition brings with it fear that countries with low wages will be able to do the job more cheaply than at home. Local producers and workers fear that outsourcing production will result in the closure of domestic production facilities or the relocation of those facilities to low wage-paying countries. These concerns have existed for some time; they are not new for many Canadians. However, because of the increased participation of countries like China and India on the world trading scene, these fears are prominent in the minds of many Canadian citizens. Take for example the increasing importance and use of IT—this alone has increased globalization at an incredible pace and our borders are opening

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up to foreign countries like never before. The BRIC (Brazil, Russia, India, and China) countries are a potential threat to Canadian markets. Thus far, the losses have been limited to low-cost, labourintensive industries in the manufacturing sector.

2.

Globalization and the new landscape of international competition brings with it both opportunities and threats. Many emerging economics are seeing unprecedented growth of the middle class. This will manifest in fast-growing consumer markets that will offer many unique opportunities for North American organizations who can gain a foothold in emerging markets.

Canada is not a significant player in terms of trade and investment with BRIC nations. There is an opportunity for Canada to exploit comparative advantages and economies of scale by increasing trade and investment with BRIC member nations. Canada can take advantage of low-wage labour and low-cost manufacturing available in the BRIC countries. Canada could specialize in knowledgeintensive goods and services. The emerging economies within the BRICs union have an incredible opportunity for growth. They can capitalize on this opportunity by importing knowledge (technology) and capital from the western world.

The impact of globalization can have a favourable effect on Canadian small and medium-sized businesses (SMEs). One way to capitalize on these opportunities is to form partnerships, in the form of strategic alliances or joint ventures. This would permit smaller-scale businesses the opportunity to enter markets that they are unable to penetrate on their own due to the high cost of development. An alliance with a foreign business would permit the export and distribution of their products in an unknown market by a partner who has local expertise. These partnerships would make the acquisition of expensive technology more feasible as well.

3.

..

A global marketplace will certainly change the way we do business. For instance, multi-national corporations will have to be diligent in abiding by the laws of the foreign countries in which they operate. The Internet and other technologies affords businesses greater flexibility when it comes to the physical presence of workers, allowing employees to be virtually “present” in two or more countries at the same time. Research and development will likely take on a more significant role – multi-national market delivery requires a greater emphasis on meeting the needs of a very diverse customer base.

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IN-CLASS ACTIVITIES Activity

Description

Time Required 45 min.

Reference

Team Time: The Great Debate

Students divide into groups to debate topics related to economic regulation and control.

Ethics and Corporate Social Responsibility: Economic Inequality

Students discuss the idea of economic equality and debate whether or not it is feasible.

20 min.

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Knowledge Comprehension Synthesis

Supplemental In-Class Activity 1: Comparing Economic Systems

This activity gets students to compare the Canadian economic system to other systems.

30 min.

IM—see below

Knowledge Comprehension Application

Supplemental In-Class Activity 2: Case Study Discussion: Supply and Demand for Pollution Permits

In this activity, students apply their knowledge of supply and demand to a case study about the trading of pollution permits.

(Includes handout)

30 min.

IM—see below

Knowledge Comprehension Application

Learning Catalytics

This activity allow students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

All levels of Bloom’s Taxonomy

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

Sketch Animations

These animations are meant to explain 3 difficult concepts: • Business Cycle • Economic Systems • Supply and Demand

variable

Videos Appendix and MyBizLab

Knowledge Comprehension

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Bloom’s Taxonomy Knowledge Comprehension Analysis

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SUPPLEMENTAL IN-CLASS ACTIVITY 1: Comparing Economic Systems Activity Overview: This activity asks students to compare the Canadian economic system to other systems.

Time Limit: 30 minutes What to Do: 1. Divide the class into small groups. Ask the groups to assume they have just overheard a classmate say, “Canada is becoming more socialist every day—with all the government control.” Have each group list reasons why the statement could be true and reasons why the statement could be false. (15 minutes) 2.

Reassemble the class and discuss each group’s thoughts. (15 minutes)

Don’t Forget: Remind students that a government’s level of control distinguishes capitalism from socialism. If you have foreign students in your class, you may want them to say a bit about the economic system in their native country.

Wrap-Up: Wrap up the discussion by reminding students that the Canadian economic system and a socialist system have certain similarities and many differences. For example, workers in socialist economies often work fewer hours, have longer vacations, and receive more health, education, and childcare benefits than do workers in capitalist economies. On the other hand, the federal government does control some basic services in Canada such as health care and education, as well as various aspects of the market through regulation agencies.

SUPPLEMENTAL IN-CLASS ACTIVITY 2: Supply and Demand for Pollution Permits Activity Overview: This activity asks students to apply chapter concepts to a case study. A hand-out is provided for this activity below.

Time Limit: 30 minutes What to Do: 1. In advance, make copies of the Supplemental Case Study below and distribute them to students.

2.

Divide students into groups and ask them to read the case and answer the questions in their small groups. (15 minutes) a. How does trading in pollution permits at BP demonstrate the laws of demand and supply? b. What would influence the demand for pollution permits if they were traded globally? c. Should companies be allowed to trade permits? Should countries be allowed to? Why or why not?

3.

Once students have answered the questions, discuss their answers as a class. As students discuss their answers, making sure they touch on the following points: (15 minutes) a. Those who want to buy permits and those who want to sell them have created a market where the price is set by the action of supply and demand.

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b. c.

The strictness of government controls on emissions and the individual company’s ability to meet the quota, as well as the cost of failure and the price of the needed permit.

Answers will vary, though there will be much debate about the ethics involved in buying and selling permits.

Don’t Forget: Make sure that you keep students on the topic of supply and demand.

Wrap-Up: Wrap up the discussion by asking students for other examples of environmental issues affecting supply and demand.

SUPPLEMENTAL IN-CLASS ACTIVITY 2 HANDOUT: Supply and Demand for Pollution Permits When Julie Hardwick, a manager for a division of BP Amoco PLC, checks her computer every day, she’s not looking for information about her company’s stock. She’s finding out whether other divisions of BP are looking to trade their permits to emit pollutants that cause global warming. Units that have leftover permits after meeting their emission-reduction quotas are allowed to sell them to other units that need them to cover shortfalls in their own efforts to meet their goals. The company reports that it is saving millions of dollars through creative reductions in fuel consumption, prompted by the use of permits.

Other firms in the developed countries are using permits as well, hoping to reduce pollution before their governments make it mandatory.

Some believe that trading permits between companies or across national borders will prove difficult because of the wide variety of sources of pollution and the problem of maintaining fairness in the use of the permits. For instance, should heavy polluters be made to clean up pollution instead of being able to trade for permits to continue to pollute? Some corporations already use an alternative called offset rights, which are positive steps that offset the pollution a company can’t easily control. Some typical offsets include the use of clean energy, such as solar or wind power, and the planting or protecting of forests and fields that absorb carbon dioxide, a major pollutant.

The Nature Conservancy has used several offset deals to fund rain forest preservation projects, for example. Others believe that trading can succeed, and that measuring each country’s use of fossil fuels will provide a usable gauge of how many permits it should be allowed. Once rules for trading have been established, the cost of complying with pollution controls will drop, and opportunities to come up with creative new sources of energy will proliferate.

(Source: Janet Ginsberg, “Letting the Free Market Clear the Air,” Business Week, November 6, 2000; 200, 204.)

Discussion Questions 1. How does trading in pollution permits at BP demonstrate the laws of demand and supply?

2.

What would influence the demand for pollution permits if they were traded globally?

3.

Should companies be allowed to trade permits? Should countries be allowed to? Why or why not?

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LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

Learning Catalytics 1 Question Type: Composite Sketch Prompt: For this question you must sketch a graph using your mouse or by touching your smartphone screen.

Question: Sketch a graph showing the general slope of the supply curve.

Answer: The sketch should be a fairly straight line sloping upward from left to right.

Learning Catalytics 2 Question Type: Direction Prompt: Students will graphically draw an arrow indicating the direction.

Question: Using a horizontal line where movement to the left is decreased demand, and movement to the right is increased demand, draw an arrow showing what direction the demand would go if prices fall.

Answer: The arrow should be drawn showing an increase—direction to the right.

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SUGGESTED SOLUTIONS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS 1.

2.

3.

4.

5.

What might happen if the government did not attempt to control inflation? Inflation can be both a good thing and a bad thing. Explain. (Bloom’s: synthesis, evaluation) The text discusses the unemployment rate as a measure of economic performance. Another way to gauge economic performance is to count the number of people employed in the economy. Is it possible for the unemployment rate to rise and the number of people employed to rise at the same time? Is either measurement better than the other? (Bloom’s: analysis, synthesis, evaluation) Look in the newspaper or on the Internet to find the most current economic indicators, such as GDP, the unemployment rate, and CPI. Statistics Canada is a good place to start. What forces are working to improve or worsen the economy? If you are interested you can visit the Bank of Canada’s website.

Once there, you can access the latest report on monetary policy, which is filled with valuable information that relates directly to this chapter. (Bloom’s: analysis) What are the advantages of capitalism? What are the advantages of socialism? What are the disadvantages of each? How does this information relate to your everyday life? (Bloom’s: comprehension, application) The text defines the GDP as the measurement of economic activity—the market value of products and services that are produced in a country in a year. Think about other things that may “help” the GDP that are really not good for our society in general, such as the economic activity required to clean up oil spills or increases in consumer debt to buy more goods. Other situations could also “hurt” the GDP by limiting expenditures on items, but help the overall good of society such as reusing plastic bags or installing solar water heaters (thus limiting spending on oil/gas/electricity).

Does the definition of GDP need to be revised? (Bloom’s: evaluation)

Answers: 1. If the government did not attempt to control inflation, prices could rise very quickly and consumers could experience decreased purchasing power (i.e. they could buy less with the same amount of money). Inflation is good in the sense that it indicates a growth in the economy, yet bad in a sense that prices increase and consumers must spend a higher percentage of their income to acquire the same amount of goods/services than before inflation occurred. Inflation is difficult for consumers, especially if the growth in their wages does not keep pace with the growth in the prices of goods and services. In this case, consumers find them themselves worse off.

2.

It is possible that we could experience an increase in the number of jobs, or people employed, but still experience an increase in the unemployment rate. This can happen because as the population grows, more people seek jobs in the labour market. Many of these new job-seekers may find work, thus increasing the absolute number of people employed. However, the percent of people seeking a job and finding employment may not rise. Therefore the unemployment rate can rise even though there are a greater number of people employed. The unemployment rate is a better measure of economic performance because it is a relative measure of economic activity. That is, a falling unemployment rate means the economy is performing better because a greater percentage of a growing labour force is able to find work. The trick is to get the economy to grow (increase in GDP over time) at least fast enough to absorb the growing labour force. If it doesn’t grow fast enough then the unemployment rate (the percent of people seeking and unable to find work) can rise even though the absolute number of people working rises.

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3.

Results will vary depending on the phase of the business cycle currently under way. Although economic indicators are closely watched by many people, the driving force behind changes in all of them is the amount of overall demand, or total spending, on products. If total spending (the demand for products) rises then businesses will produce more products to satisfy this increase in demand.

More production generates a greater demand for workers and pushes the unemployment rate down.

A greater percentage of the labour force employed translates into a higher overall income level for households, and therefore more shopping. This increased spending generates still more sales, more production, more jobs and more income to spend. This is what happens during an expansionary phase of the business cycle.

On the other hand, a decrease in total spending in the national economy results in fewer business sales. Businesses respond by cutting back on their rate of production, lay off workers, and therefore the unemployment rate rises. As unemployment rises people have less income to spend. Spending and sales fall. Businesses produce less and production falls further generating still more unemployment and less income to spend, etc. This is what happens during a recession. Economic indicators try to forecast changes in total spending in an economy in an attempt to forecast changes in the business cycle.

4.

Capitalism has the advantages of efficiency and freedom. The capitalist system is extremely efficient in allocating scarce resources into the production of those goods and services most desired by society.

Competition among businesses ensures this. Business must first produce products people want or they will fail. Moreover, they must produce these goods and services efficiently in order to minimize their costs to remain price competitive. There is also a lot of economic freedom of enterprise and choice. That is, there is a minimal role for government. Business people and consumers are largely free from government influence to pursue their own self-interests. A few disadvantages emerge from capitalism (sometimes called market failures because the market mechanism inherent within capitalism fails to promote the general well-being of society). These include monopoly power (monopolies produce less and charge higher prices), the over- or underproduction of some products (society may want more or less of some goods and services because of their social consequences—we would want fewer products that may damage the environment, for example, but more education because of its social benefits), the lack of public goods and services (some goods and services may be so beneficial to society that they are so grossly under-produced by private companies that people call on government to provide for them—examples roads, bridges, police departments, and national defence), an inequitable or unfair distribution of income (some people may argue that the distribution of income is not fair and government ought to intervene to redistribute income), and macroeconomic instability (we have a business cycle that creates problems like unemployment and inflation that hurt people).

Advocates for socialism point to a more fair distribution of income and the opportunity for government to address many of the other shortcomings or market failures associated with capitalism.

However, just as the market system can fail, so too can a government fail. Government failure, or failure to improve the well-being of society, often results from corruption, ignorance, or succumbing to a special interest group political pressure. The major disadvantage associated with socialism is that it is inefficient in producing a combination of products most desired by society and doing it in a costeffective manner. State-run economies determine what they think ought to be produced and are hindered by bureaucratic inefficiency and significantly higher costs. After all, there are no competitive pressures to produce what the people want and to keep costs down. Critics of socialism also point to a reduced degree of freedom for individuals to pursue their own self-interests.

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5.

Although GDP is often used to indicate the economic well-being of a country, it really measures only how much we spend and therefore produce. It really doesn’t indicate the well-being of a society or economy. It’s a subtle distinction, but critics point out that what is included in the GDP are expenditures toward some of the negative aspects of the economy, such as cleaning up the environment after a bad oil spill, the costs associated with fighting crime, and treating illnesses associated with smoking, to name a few. These expenditures increase GDP and we may be better off.

On the other hand, the GDP does not include the economic activity associated with goods produced at home but not sold (cooking, gardening, crafts), the sale of used goods, or charitable donations and volunteerism. A case in point is national disaster incurred by weather, such as Hurricane Katrina in 2005. Oddly, factoring in the increases in the construction, equipment, service, and industrial supply industries used to rebuild New Orleans and the other regions severely damaged by the hurricane, the disaster will end up having a more positive impact on the nation’s GDP than negative, even though the well-being of that region will be hurt for a long time. The massive amounts of donations of money, supplies and volunteer time also are not tallied into the GDP. The positive impact of volunteer efforts, the significant amounts of donations, and grants attributed to Hurricane Katrina and other disasters do not show in the GDP and do not reflect the activity of our society since these volunteer and donated activities do not produce a final good or service that is purchased. But since these variations are difficult to measure domestically, and to compare internationally, the current method of computing GDP is adequate and remains a good economic measure.

TEAM TIME: The Great Debate Notes: Answers will vary. However, the point of the exercise is to help students understand the process of monetary regulation and to discuss whom has a right to regulate how money flows in the economy.

ETHICS AND RESPONSIBILITY: Economic Inequality Notes: Answers will vary. However, be sure to have students consider how the type of economy in which they are currently living influences their answers to this question. Would students living in a planned economy, such as communism or socialism, answer the questions in the same way?

CLOSING CASE: Lingering Effects of the Great Recession Discussion Questions: 1. What kind of monetary policy was the Bank of Canada pursuing in 2008–2009 during the Great Recession? Discuss how the Bank of Canada would use the two tools of monetary policy, the overnight rate and open market operations, during that time.

2. How do interest rate decisions made by the Bank of Canada affect the public service charges made on the national debt?

3. How does the Bank of Canada’s rising debt burden private citizens in their personal lives? How does it burden small businesses?

4. Looking at the period from 1998 to 2008 when the Canadian government was able to run a budget surplus and pay down the debt, consider what sacrifices had to be made to achieve these gains. Do you think Canadian citizens would be willing to make these sacrifices today to reduce the debt load and associated interest charges for future generations?

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Answers: 1. The Great Recession was triggered by events in the second half of 2007. By 2008-2009, the Bank of Canada had been forced to deal with increased demand for liquidity and had therefore increased its overnight interest rate in late 2007. However, by 2008 and through 2009, the Bank of Canada had introduced monetary policies geared at stimulating the economy. These included bringing the overnight rate down below historical levels and buying Canadian securities in its open market operations. Both actions, accompanied by the Canadian government’s Economic Action Plan, helped reverse the sudden and significant negative impacts of 2007.

2. Based upon the principles of demand, an increase in interest rates will discourage borrowing and slow down the economy. This policy would have been adopted from 1997–2008, during which time Canada’s annual budget surpluses allowed more efficient debt servicing. Conversely, decreased interest rates encourage borrowing, thereby increasing debt.

3. The Bank of Canada’s rising debt increases the need to implement more restraint in its own monetary policies. These might include increasing the overnight rate on a consistent basis—the result of which discourages borrowing for things like houses (private citizens) or capital projects (small businesses).

4. Answers will vary based upon students’ opinion of current psyche of average Canadians. Consumer confidence indexes would more objectively shed light on this topic. The Economic Action Plan, implemented in 2008-2009 demonstrated both aggressive open market spending and generous lending rates—both of which Canadians have become quite accustomed to. Both of which have also, in their own way contributed to the current peaks in national personal debt. Thus the removal or noticeable adjustment of said policy would no doubt create some degree of general resistance from Canadians.

SUPPLEMENTAL MATERIAL ADDITIONAL APPLICATION EXERCISES 1.

Buying a Home. How much would it cost to buy a home today in your city? Decisions to buy a new home often centre on mortgage interest rates. What are the current mortgage interest rates in your area? What is amortization, and how does this affect mortgage loans? Find a mortgage calculator online and calculate the monthly mortgage payment for several different scenarios of home cost, interest rate, and length of loan. How do these variables affect the amount you can afford to pay the bank every month?

2.

Government’s Roles. The Canadian government plays a variety of roles in the Canadian economy.

Consider each of the roles discussed in this chapter and state your view as to whether the government involvement in each role is excessive, insufficient, or about right. What criteria did you use to make your assessments?

3.

Surplus and Shortage. Find an example where a surplus of a product led to decreased prices. Then find an example where a shortage of a product led to increased prices. What eventually happened in each case? Why?

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APPLICATION EXERCISES 1.

Getting Acquainted with Canadian Banks. What bank branch is nearest your home or school? Go to the website of your local bank and determine what the current interest rates are for various types of investments. What are the latest policies? What other kinds of information does the website give you?

2.

Pro Sports and the Economy. How do professional sports and the economy interact? Play Peanuts and Crackerjacks (http://www.bostonfed.org/peanuts/index.htm), and test your knowledge of basic economic principles in the context of professional sports. Write a brief summary of your experience.

What did you learn from playing the game?

3.

Learning More about Supply and Demand. Go to www.lemonadestandgame.com and play a round or two. Using information you learned from this chapter, write a brief paper about your experience.

How much money did you make each time you played the game? What are the important variables?

How does this game illustrate the effects of supply and demand?

Answers: 1. Answers will vary, but should include the five major banks in Canada (The Big Five): Royal Bank, TD Canada Trust, CIBC, Scotia Bank, and Bank of Montreal.

2.

Answers will vary, but students should see a correlation between supply and demand from playing the game.

3.

Answers will vary. Students will simulate selling lemonade, and adjusting the supply depending on sales and weather.

Chapter 2, Related Websites http://canada.gc.ca/home.html

The Government of Canada website provides links to reports, statistics, laws, department and agencies, etc. and provides information on a number of government-related topics.

http://www.international.gc.ca/international/i ndex.aspx

Foreign Affairs and International Trade Canada manages Canada’s diplomatic and consular relations and encourages the country’s international trade. Information on doing business abroad, controls, permits, etc. are provided.

http://www.international.gc.ca/tradeagreements-accords-commerciaux/ncppcn/index.aspx?lang=eng&menu_id=1&men u=R

Canada’s National Contact Point for the OECD Guidelines for Multinational Enterprises (MNEs). The Guidelines provide recommendations on voluntary principles and standards for responsible business conduct, consistent with domestic and international laws.

The Guidelines represent the only multilaterally

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endorsed comprehensive code of conduct that 41 countries have committed to promote. http://www.actionplan.gc.ca

Canada’s Economic Action Plan provides assistance to Canadian businesses.

http://www.tbs-sct.gc.ca/reports-rapports/cprc/index-eng.asp

The Treasury Board of Canada Secretariat provides reports on Canada’s economic performance.

http://www.competitionbureau.gc.ca/eic/site/ cb-bc.nsf/eng/home

The Competition Bureau Canada ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

http://www.statcan.gc.ca/start-debuteng.html

Statistics Canada produces statistics that help Canadians better understand their country—its population, resources, economy, society and culture.

https://www.cia.gov/library/publications/theworld-factbook/

The World Factbook provides information on the history, people, government, economy, geography, communications, transportation, military, and transnational issues for 266 world entities.

http://www.bank-banque-canada.ca/

The Bank of Canada is the nation’s central bank.

It is not a commercial bank and does not offer banking services to the public. It is responsible for monetary policy, bank notes, financial system, and funds management. Its principal role is to promote the economic and financial welfare of Canada.

http://www.conferenceboard.ca/

The Conference Board of Canada is a non-profit applied research organization. It is not a government agency but is often hired to provide services for all levels of government.

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ENHANCING THE ONLINE COURSE Online Lecture: Define the terms “microeconomics” and “macroeconomics” and use examples to distinguish between the two disciplines. Visually record yourself giving the short “mini-lecture.” Many institutions have video cameras for your use in the library or you can use a digital camera with the help of another professor. Load the short video online (using procedures as specified by your online platform).

Have your students watch the short video and answer a quiz afterward.

Economics Model Search: Ask students to search the Internet to illustrate each of the world economic models (planned, market, and mixed). Require students to develop and send in a table with graphics and examples in each of the cells to illustrate the differences between the systems of economics.

Create a Model: Ask your students to use photos or other graphics to show the relationship of supply and demand. Limit the written discussion (in words) to one page to be emailed back to the discussion board. Ask the students to relate the content of their responses to current events posted on the Internet.

Price Points: Require your students to check the prices of products for three weeks in a row (suggested products: bread, eggs, chicken, tomatoes, milk, oranges, coffee, potato chips, and gasoline). What could account for the changes in price? Ask your students to report back on the findings of their “study” to analyze the price differences, and, using the information in the text, to develop some ideas about what has caused the price differences. Students can post the reports via the discussion board.

Chart the Course: Ask your students to create a chart with the GDP of ten lesser developed countries in U.S. dollars (suggested countries: Zimbabwe, Cambodia, Chile, Kazakhstan, Pakistan, Uruguay, Paraguay, Mali, New Zealand, and Vietnam). Have your students compare the GDP of these countries with the GDP of the ten most developed countries. Ask them what could account for the difference.

Have them post their responses.

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CHAPTER 4 ENTREPRENEURSHIP, SMALL BUSINESS, AND NEW VENTURE CREATION CHAPTER OPENER Chapter 4 introduces students to entrepreneurship and new venture creation. Various forms of small business ownership, including sole proprietorship, partnerships, and franchises, are explored. The chapter explores how a variety of available resources can assist small businesses. The formation of a corporation, including non-profit corporations and co-operatives is presented. Finally, the different types of mergers and acquisitions are examined.

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

List the traits of an effective entrepreneur, and describe how these characteristics often lead to business success.

2. Describe the factors that lead to small business failure, and explain why a business plan is crucial to small business success..

3. Compare the advantages and disadvantages of starting a business from scratch to buying an existing business.

4. Outline the advantages and disadvantages of franchising.

5. Summarize the potential benefits and drawbacks of each major source of small business financing.

6. Explain the advantages and disadvantages of sole proprietorship.

7. Explain the advantages and disadvantages of a partnership and describe the importance of a partnership agreement.

8. Explain how a corporation is formed and how it compares with sole proprietorships and partnerships.

9. Describe the characteristics of nonprofit corporations and cooperatives.

10. Summarize the different types of mergers and acquisitions and explain why they occur.

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KEY TERMS acquisition (p. 87) angel investors (p. 80) articles of incorporation (p. 85) board of directors (p. 85) business incubators (p. 78) business plan (p. 73) bylaws (p. 85) capital (p. 83) cooperative (p. 86) corporation (p. 84) double taxation (p. 85) due diligence (p. 75) entrepreneurial team entrepreneur (p. 66)

franchise (p. 75) friendly takeover (p. 87) general partners (p. 82) general partnership (p. 82) grants (p. 80) growth entrepreneurs (p. 69) home-based entrepreneurs (p. 69) hostile takeover (p. 87) Internet entrepreneurs (p. 69) intrapreneurs (p. 69) liability (p. 82) lifestyle entrepreneurs (p. 68) limited liability (p. 81)

limited partners (p. 82) limited partnerships (p. 83) merger (p. 87) micropreneurs (p. 68) opportunity niche (p. 66) partnership (p. 82) private corporations (p. 85) public corporations (p. 85) shareholders (p. 85) Small Business Investment Company (SBIC) (p. 80) sole proprietorship (p. 80) synergy (p. 88) unlimited liability (p. 82) venture capitalists (p. 80)

DETAILED LECTURE OUTLINE I.

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Entrepreneurship: What’s in it for me?

A. The Traits of Successful Entrepreneurs 1. What is an entrepreneur? a. Entrepreneurs are people who assume the risk of creating, organizing, and operating a business. b. An opportunity niche is a need in the marketplace that is not being adequately fulfilled.

2. What are the traits for successful entrepreneurs? a. Although luck and timing play a large role in entrepreneurial success, research has also shown that successful entrepreneurs: are innovative, take risks, are motivated to succeed, are flexible and self-directed, work well with others and possess good leadership skills, and are “system thinkers,” seeing the whole process rather than just individual pieces of it.

3. How are entrepreneurs innovative? a. Successful entrepreneurs see problems to be solved or opportunities that aren’t being addressed in the marketplace—they recognize opportunity niches.

4. How do entrepreneurs take risks? a. Being an entrepreneur involves risk, encompassing the risk of failure, the risk of losing one’s career, and financial risks.

5. What makes entrepreneurs motivated to succeed? a. Pride and personal fulfillment, among other things.

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6.

7.

8.

Why do successful entrepreneurs need to be flexible and self-directed? a. Entrepreneurial ventures are subject to uncertainty and risk, therefore entrepreneurs need to be able to react quickly to new and unexpected situations.

Why are people skills and leadership skills important to entrepreneurs? a. Entrepreneurs rarely work by themselves, they need to be able to lead and work with others to be successful.

What does it mean for entrepreneurs to be “system” thinkers? a. Entrepreneurs must focus on the entire process of turning their idea into a business in order to succeed.

B. Types of Entrepreneurs 1. Are there different types of entrepreneurs? a. Beyond the traditional entrepreneurs described in the previous sections, other entrepreneurial categories have begun to crop up, including: lifestyle entrepreneurs, micropreneurs, growth entrepreneurs and intrapreneurs.

2. What are lifestyle entrepreneurs? a. Lifestyle entrepreneurs look for more than profit potential when they begin their business.

3. What are micropreneurs? a. Micropreneurs start their own business but are satisfied with keeping the business small in an effort to achieve a balanced lifestyle.

4. What are home-based entrepreneurs? a. Home-based entrepreneurs run their businesses out of their homes.

5. What are internet etrepreneurs? a. Home-based entrepreneurs create businesses that operate solely online.

6. What are growth entrepreneurs? a. Entrepreneurs who strive to create fast-growing businesses and look forward to expansion.

7. What are intrapreneurs? a. Employees who work in an entrepreneurial way within the organizational environment.

C. Starting Your Own Business 1. Why would you want to start your own business? a. Some incentives to starting a small business considered in this section are: being your own boss, fits with your lifestyle, makes better use of your skills, may provide financial freedom, you had a great idea, unemployment conditions necessitate that you create your own employment.

2. What are the advantages and disadvantages of owning a business? a. Substantial benefits await the successful entrepreneur, including financial rewards (profit), social rewards (pride, making a difference, worthwhile cause), and independence rewards (work for yourself, at your own pace). With these rewards come potential risks, including: financial risk, social risk, career risk and psychological risk.

3. What causes excessive debt accumulation? a. If the new business does not generate returns quickly enough to begin to pay back the initial loan, there is temptation to take on more loans to keep the business running.

4. How does inexperienced management lead to failure? a. Many businesses fail due to high levels of debt, which can be a sign of poor financial and business management.

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5.

How important is planning to business success? a. One of the biggest reasons businesses fail is that there was no formal plan in place to begin with. b. A business plan is a formal document that states the goals of the business as well as the plan for reaching those goals.

II. Starting a Small Business A. Starting a Business from Scratch 1. What are the advantages of starting a business from scratch? a. Freedom to do what you want b. Grow the business over time c. Satisfaction of starting and growing something from nothing d. Create the image and reputation desired.

2. What are the disadvantages of starting a business from scratch? a. No proven track record b. Time required to build a reputation c. Nothing is established d. No existing cashflow e. Difficulty in obtaining financing B. Buying and existing business 1. What are the advantages of buying an existing business? a. Ease of startup b. Existing customer base c. Financing opportunities 2. What are the disadvantages of buying an existing business? a. High purchase price b. Inheriting the previous owner’s mistakes c. The unknown 3. What do you need to check before you buy a business a. Due diligence should be exercised in all aspects.

C. Buying a Franchise 1. What is a franchise a. Method of doing business whereby the business (franchisor) grants the buyer (franchisee) the right to use the brand name and sell the product developed by the brand 2. What are the advantages of franchising? a. Proven system of operation b. Strength in numbers c. Initial training is part of the deal d. Marketing support is provided e. Market research is provided 3. What are the disadvantages of franchising? a. Lack of control b. Startup costs c. Internal competition d. Share common problems 4. What are things to watch out for when buying a franchise? a. Competition

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b. Franchise system c. Support and training d. Financial strength e. Franchise relationships D. Small Business Support 1. Where do small business owners go for help? a. Several governmental and non-governmental sources are listed in this section.

2.

3.

What kind of training is appropriate for small business owners? a. Business incubators are organizations that support start-up businesses by offering resources such as administrative services, technical support, business networking, and sources of financing that a group of startup companies share.

What other support options exist for small business advice and assistance? a. An advisory board is a group of individuals who offer guidance to the new business owner.

III. Financing Considerations A. Personal Financing 1. Where can I get the money to start a business? a. Personal saving, friends and family, financial lending institutions 2. Can I use credit cards to finance my business? a. Credit cards are a convenient means of acquiring short-term cash, and nearly 50 percent of small business owners use personal credit cards as a source of financing for their small business.

B. Loans and Grants 1. What if I need more money than I can provide myself? a. New business owners sometimes obtain a loan, borrowing against their own assets, such as the equity in their house or against their retirement account, but the consequences of the business failing are very severe.

2. Can I apply for grants to help start a business? a. Grants are financial awards usually offered by federal and provincial governments and some private organizations. The Canadian government realizes that small business is a significant part of our economic growth; therefore, the government’s Small Business Finance Centre (www.grants-loans.org/small-business-grants.php) provides the necessary financial resources to facilitate this.

C. Venture Capital and Other Forms of Financing 1. What if I need additional sources of funds through investors? a. Venture capitalists contribute money to your business in return for some form of equity—a piece of ownership. b. Angel Investors are wealthy individuals who are willing to put up their own money in hopes of a profit return later on.

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IV. Forms of Business Ownership A. Sole Proprietorships 1. What is it called when one person owns a business? a. A sole proprietorship is a business owned by one person and not protected by limited liability.

2. How do I start a sole proprietorship? a. The minute you begin doing business by yourself—that is, collecting income as a result of performing a service or creating a product—you are operating as a sole proprietor.

3. What are the advantages of being a sole proprietor? a. Ease of formation, greater control and flexibility.

4. What are the disadvantages of being a sole proprietor? a. A sole proprietor is personally responsible for all the debts and liabilities of the business.

B. Partnerships 1. What are the advantages of bringing in a partner? a. A partnership is a type of business entity in which two or more owners (or partners) share the ownership and the profits and losses of the business. b. There are several reasons why joining with someone else in starting a business makes sense. More owners help contribute to both the starting and ongoing capital of the business.

2. What are the disadvantages to adding partners? a. Adding partners means sharing profits and control.

3. As a form of business ownership, how does a partnership compare to a sole proprietorship? a. Partnerships and sole proprietorships are very similar; in fact, the biggest difference between the two is the number of people contributing resources and sharing the profits and the liabilities.

4. What goes into a partnership agreement? a. Capital contributions, responsibilities of each partner, the decision making process, profit share, and departure of profits.

C. Corporations 1. What is a corporation? a. A corporation is a specific form of business organization that is a separate legal entity, that is liable for its own debts, and whose owners’ liability is limited to their investment in the company.

2. How does a corporation raise capital? a. Public corporations are companies whose shares of stock are widely held and available for sale to the public. b. Private corporations are companies whose shares of stock are held by only a few people and not generally available for sale.

3. How is a corporation formed? a. Articles of incorporation lay out the general nature of the corporation, the name of the corporation and its directors, the type and number of shares to be issued, and location of the company’s operations.

4. How is a corporation structured? a. Shareholders are investors in a corporation who buy shares of ownership in the form of stock.

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b.

5.

6.

A board of directors is elected by shareholders to govern and handle the overall management of the corporation.

What are the advantages of incorporation? a. The advantages of incorporation are the corporate structure of limited liability, and continuity, or perpetual life.

What are the disadvantages of incorporation? a. Double taxation means that the corporation must pay income taxes on its profits and the shareholders must pay personal income taxes on the dividends they receive from the corporation.

D. Non-Profit Corporations 1. Must a non-profit corporation be legally incorporated? a. Incorporation is not necessary, but to receive limited liability protection, a non-profit organization must file incorporation papers and become established as a separate legal entity.

2. Do non-profit corporations generate profits? a. Non-profit corporations are not in business to generate a profit, unlike for-profit organizations; however, they still need to generate even a modest profit to survive. Nonprofit organizations generate their revenue primarily through fundraising and donations.

3. What are the benefits of being tax-exempt? a. As a corporation that has received tax-exempt status, the donations that are the organization’s primary source of revenue are tax-deductible to the donor, which encourages funding.

E. Co-operatives 1. How do co-operatives differ from the other forms of business ownership? a. A co-operative is a business owned and governed by members who use its products or services, not by outside investors. The primary purpose of co-operatives is to meet the common needs of their members.

2. How are co-operatives structured? a. Co-operatives depend on their members to volunteer for projects supported by the co-op and serve on boards and committees.

F.

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Business Combinations: Mergers and Acquisitions 1. What are mergers and acquisitions? a. A merger occurs when two or more firms combine to form one new company, which often takes on a new corporate identity. An acquisition occurs when one company or investor group buys a corporation and the identity of the acquired company might be lost.

2. Why do mergers and acquisitions occur? a. Synergy is the business buzzword often used to justify a merger or an acquisition.

Synergy is the achieved effect when two companies combine and the result is better than each company could achieve individually.

3. Are there different types of mergers? a. There are vertical, horizontal, product extension merger, market extension merger, and conglomeration.

4. Are there disadvantages with mergers?

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a.

Employees may be nervous because most mergers result in the elimination of jobs and some may actually leave the company, feeling their jobs are in jeopardy, seeking a more stable environment.

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Starting a New Business Discussion Questions: 1. Lee mentioned that the experience he gained from past jobs and what he learned at college helps him in his business. What experiences do you have or what are you learning in school that you think could help you be successful in business?

2. What do you think are some of the biggest advantages and disadvantages of working with a partner?

3. What types of issues do you think Lee and Sean have had to deal with to start and grow their business.

Answers: 1. Answers will vary, but likely any experience students can cite which demonstrate the correlation between necessity and invention, or need and satisfied need, will help them understand the foundations of business. Basic communication and math skills are also helpful.

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2.

The advantages and disadvantages of partnerships are not deeply examined in this case, with the exception of the statement that the brothers’ respective skills compliment one another. This is one of the most obvious advantages of partnerships – the broader notion of shared resources.

Disadvantages are further examined in this chapter, but typically reflect issues with personality differences and lack of control.

3.

Lee and Sean needed capital and expertise in various aspects of their business once the actual product was designed and produced. Pricing, distribution and promotion were specific areas in which the brothers required specific strategies and tactics.

ON TARGET: Facebook’s Mark Zuckerberg Discussion Questions: 1. Why do you think Facebook is so popular? Is it without problems? (Bloom’s: analysis, synthesis) 2. How was Facebook able to grow so quickly? What marketing strategy was used? (Bloom’s: analysis) 3. Research Mark Zuckerberg on the Internet and read about the history of Facebook. What characteristics does Mark have that relate to those of entrepreneurs? (Bloom’s: comprehension, application) Answers: 1. Answers will vary. Facebook began as a Harvard university social networking tool. It grew in popularity among that age group and is considered the leading social networking site among college students today. (Refer to http://net.educause.edu/ir/library/pdf/ELI7017.pdf) It is now used all over the world, by many different people. It was the first of its kind, it is available for use free of charge, and many people have access to it. Facebook allows users to upload an unlimited number of photos while other image hosting services do not. It’s a fun social tool that permits people to stay connected.

However, Facebook is not without problems. One of the main issues revolves around privacy. Some countries, including China, Vietnam, Iran, Pakistan, and others, have banned Facebook on the basis of allowed content judged as anti-Islamic and containing religious discrimination. It has also been banned at many workplaces to prevent employees from wasting their time on the site during work hours. Some students find themselves in hot water because they lack the discretion to present themselves appropriately online; this may cost them a job opportunity or implicate them in wrongdoing.

2.

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Answers will vary. Facebook has affected the social life and activity of people in various ways. It reunites family and friends across great distances. It allows students studying abroad to stay in touch with their families. It allows friends and family living in different places to stay connected. Many companies market on Facebook and other social media sites because they know they can reach large numbers of potential customers. Facebook generates income from selling marketing spots to businesses. Facebook uses market segmentation to appeal to the college student market. At least that was the focus until 2006 when it became open to all internet users: kids, students, young adults, and not-so-young adults. This major move did not change the way the site was designed, the type of services it offered, and the metaphors it used (for instance, most older adults do not super poke each other). Facebook’s initial focus on college students is what drove its success, now that it has grown out of its segment it needs to find ways to mini-segment to make each group of users feel that the product was created just for them.

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3.

Answers will vary. Facebook was started by a Harvard undergraduate, Mark Zuckerberg, who was working with three Harvard graduates, Divy Narendra and brothers Cameron and Tyler Winklevoss.

The three claimed that Mark Zuckerberg stole their idea and a lawsuit ensued. One of Mark Zuckerberg’s entrepreneurial traits is innovation. He is not afraid to experiment with his product by changing the user interface and shaking things up in an effort to break new ground. Aspiring entrepreneurs should develop the mentality of experimentation when developing their product or service. Zuckerberg acknowledges the other side’s point of view he still uses some controversial programs on the website and he fights to keep them in Facebook. Being tough when warranted is another trait Mark has and needs, otherwise, his competitors would be able to create leverage on his business if they thought that he would back down from a controversial situation. Mark also has a competitive trait and put long hours into his business in an attempt to stay ahead of competitors, and he continually makes improvements to the product to satisfy and delight his customers as well as leave his would-be competitors in the dust.

BIZCHAT: What’s in a Name?

Discussion Questions: 1. Can you think of a company name that you are not fond of? Do you shop there? Do you wonder why the owner gave it that name? (Bloom’s: knowledge) 2. Can you think of a company name that is difficult for you to pronounce? Do you think this causes a loss of business for the company? (Bloom’s: comprehension) 3. Why do you think some business owners name their companies starting with an “A” or an “AA” or sometimes even an “AAA”? Does this make it easy for customers to remember? Can it be confusing for customers? (Bloom’s: comprehension) Answers: 1. Answers will vary. Some company names may not translate well into other languages.

2.

Answers will vary. One example of a name that may be difficult for some to pronounce is the company, JYSK. This company was established in Denmark in 1979 but is now present in 34 countries. Not knowing how to pronounce the name may not deter customers from shopping there.

A quote from the JYSK website (http://www.jysk.ca/pages.aspx?id=&docid=237): “Often times our customers ask how to pronounce our name. So to set the record straight, here it is: JYSK (yi-sk). We honestly don’t mind what you call us, as long as you call us again and again.”

3.

Answers will vary. Students should understand that using “A” at the beginning of a company name gets it listed first in the phone directory which some businesses feel is important. This does not make it easier for customers to remember the name unless the “A” is in some way connected to a catchy or fun phrase that relates the company’s core business. Yes, this can be confusing. If you look at the phone directory you will see multiple business with “A” or “AA” or “AAA” at the beginning of their company names.

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IN-CLASS ACTIVITIES Time required 30 min.

Description

Ethics and Corporate Social Responsibility: Social Responsibility: Forming a Plan of Action

Students work in groups to determine how a potential business venture might contribute to the community.

Supplemental In-Class Activity 1: Finding an Entrepreneurial Niche

Students find an opportunity niche at school and envision how they would start a small business to satisfy the current unmet need.

30-60 min.

IM – see below

Supplemental In-Class Activity 2: Today’s Entrepreneurs

Students participate in a class discussion that highlights entrepreneurs and the qualities that they possess.

Students address how growth within a small business can bring about additional legal challenges.

30 min.

IM – see below

30 min.

IM – see below

Knowledge Comprehension Application Analysis

Supplemental In-Class Activity 3: How Big Is Too Big For Small Business?

Reference

Bloom’s Taxonomy Knowledge Comprehension Application Analysis Synthesis Knowledge Comprehension Application Analysis Synthesis Knowledge Comprehension Analysis

Assignment

Page 91

(Includes handout) Supplemental In-Class Activity 4: Who’s Next?

Students discuss the possibility of achieving synergy through mergers and acquisitions.

30 - 60 min.

IM – see below

Knowledge Comprehension Analysis Application

Learning Catalytics

This activity allows students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

Any level of Bloom’s Taxonomy

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

Sketch Animations

This animation is meant to explain one difficult concept:

variable

Videos Appendix and MyBizLab

Knowledge Comprehension

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Legal Forms of Business

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SUPPLEMENTAL IN-CLASS ASSIGNMENT 1: Finding an Entrepreneurial Niche Activity Overview: This activity encourages students to think creatively, finding an opportunity niche at your school. Then, students should envision how they would start a small business to satisfy the current unmet need.

Time Limit: 30 to 60 minutes What to Do: 1. Have students pair up or divide them into small groups.

2. Review the definition of “opportunity niche” and provide some examples of entrepreneurs and businesses that succeeded by satisfying unmet needs.

3. Ask students/groups to think about and discuss potential business opportunities within your school that would satisfy current unmet needs.

4. Have each group report to the class on its ideas.

5. Discuss the feasibility and potential for success of each idea.

Don’t Forget: Allow students at least ten minutes in their groups to brainstorm potential business ideas.

Wrap-Up: Remind students that filling an opportunity niche is a great idea; a business that does so will have customers as soon as they open for business.

SUPPLEMENTAL IN-CLASS ASSIGNMENT 2: Today’s Entrepreneurs Activity Overview: This activity allows students to participate in a class discussion that highlights entrepreneurs and the qualities that they possess.

Time Limit: 15 to 30 minutes What to Do: 1. Have students volunteer the names of entrepreneurs they admire.

2. Write the names of each entrepreneur on the board as students say them.

3. After compiling a sizeable list, have students explain what they admire about each entrepreneur.

Don’t Forget: You may need to help students, showing them that even if they are new to business studies, they know plenty of entrepreneurs. List a few examples to get them started. Students seem to enjoy thinking about entertainment entrepreneurs such as Oprah Winfrey, Jay-Z, Michael Jordan, among others.

Wrap-Up: Compare the list of traits that students admire with the list of entrepreneurial characteristics from the chapter. There will likely be plenty of overlap, as well as additional characteristics that you can add to the chapter list.

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SUPPLEMENTAL IN-CLASS ASSIGNMENT 3: How Big Is Too Big for Small Business?

NOTE: See handout provided on the following page.

Activity Overview: This activity asks students to address how growth within a small business can bring about additional legal challenges.

Time Limit: 30 minutes What to Do: 1. In advance, make copies of the handout on the following page and distribute them to students.

2. Divide students into groups and ask them to read the case and answer the following questions: (15 minutes) a. Do you think fears like Levin’s are justified? If so, how can an entrepreneur protect him- or herself? b. What advice would you give an entrepreneur who faces a decision about whether to hire the one additional employee who would bring the company to a new regulation threshold? c. What is the purpose of the kind of legislation mentioned in this case?

3. Once students have answered the questions, discuss the answers as a class. Make sure they include the following points: (15 minutes) a. Adherence to federal legislation, such as OSHA and EEOC, is mandatory; professional legal advice may be necessary for businesses facing this type of situation. b. Opinions will vary as to whether the business owner should hire the person (assuming the firm is already in compliance with the law and can relatively easily accommodate any additional restrictions) or whether it’s better to reorganize the workloads of existing employees to put off the hire. c. Answers will vary, but students should indicate that the purpose is to protect employees’ safety and welfare and prevent abuses in the workplace.

Don’t Forget: Be sure to keep students on the case topic; a controversial issue such as this often invites extended discussion.

Wrap-Up: Bring the discussion to a close by asking students for examples of additional compliance issues not mentioned in the case.

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SUPPLEMENTAL IN-CLASS ASSIGNMENT 3 HANDOUT: How Big Is Too Big for Small Business?

When a manufacturing company hires its eleventh employee, it must begin to keep and post data on employee injuries in order to comply with the Occupational Safety and Health Act of 1970 (OSHA). When a firm in any industry hires employee number 15, the U.S. Equal Employment Opportunity Commission (EEOC) can investigate complaints about any alleged violations of the Civil Rights Act of 1964 and the Americans with Disabilities Act of 1990. With 20 or more employees, a small business is subject to federal-age discrimination laws enforced by the EEOC. “I have 65 employees,” says Frayda Levin, Vice President of Regent Cook Company in Lodi, New Jersey. “And you have to understand, I have only me, myself, and I to deal with this.”

Levin says she lives in fear of being sued every day. And while it’s true that as a business grows in terms of number of employees, it also becomes subject to more federal employment regulation, experts disagree about whether that’s a disincentive to small-business owners to hire the people they need.

“I don’t think the 25-employee threshold or the 50- employee threshold really has any impact on a company hiring or not hiring people,” says Bill Anderson, a partner at a national law firm who heads the Palo Alto, California, employment-law-practice. According to Anderson, many start-up firms are outsourcing their human resource functions to companies that pay employees and handle all employment-law compliance issues for them.

Still, a spokesperson for the National Federation of Independent Businesses hears Levin’s fears echoed among its members. “We’ve had some. . . tell us that they haven’t hired additional workers because they don’t want to rise above a threshold and suddenly have to comply with a new set of regulations,” says Jim Weidman. “They may not have the manpower or the money to comply with every regulation.”

(Source: Mike Hofman, “CEO’s Notebook: Stifled Growth, the Myth of the 25th Employee,” Inc., September 2000, 107–108.)

Discussion Questions: 1. Do you think fears like Levin’s are justified? If so, how can an entrepreneur protect him or herself?

2.

What advice would you give an entrepreneur who faces a decision about whether to hire the one additional employee who would bring the company to a new regulation threshold?

3.

What is the purpose of the kind of legislation mentioned in this case?

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SUPPLEMENTAL IN-CLASS ACTIVITY 4: Who’s Next?

Activity Overview: This activity gives students an opportunity to use their knowledge of mergers and acquisitions by listing companies that would achieve synergy through either a merger or acquisition.

Time Limit: 30 to 60 minutes What to Do: 1. Divide students into groups or allow them to pair up.

2. Ask them to think of companies that would be great candidates for merging or acquiring one another.

3. Have each group explain their best merger or acquisition idea, why it is a good idea, and whether it would be a merger or acquisition.

Don’t Forget: Allow plenty of time for brainstorming possible mergers and acquisitions. Encourage students to think creatively, instead of just listing possible merger or acquisition candidates they have heard of on the news.

Wrap-Up: After each merger or acquisition has been presented, have the entire class comment on the synergy created by the two companies becoming one and whether, as shareholders, they would agree to the deal.

LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

Learning Catalytics 1 Question Type: Word Cloud Prompt: Upon instructors directions, students must enter a single word into a small box on their device screen.

Question: Enter the word you feel is the most important personality characteristic of an entrepreneur.

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Learning Catalytics 2 Question Type: Short Answer Prompt: Fill in the blank with the word(s) you feel best completes the sentence provided by the instructor.

Question: The legal concept which distinguishes corporations from sole proprietorships and partnerships is limited _____________.

Answer/Explanation: Liability In sole-proprietorships and partnerships, the owner(s) assume full (unimited) liability for claims brought against their companies. They are, in essence, the company. In corporations, the company is a legally separate entity from the owners. The owner’s liability is limited to their investment in the firm.

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SUGGESTED ANSWERS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS 1.

2.

3.

4.

5.

Bill Gates, Donald Trump, and Oprah Winfrey are some well-known successful entrepreneurs. What common traits do these individuals possess that have led to their success? (Bloom’s: analysis) Compare the different sources of funding available to small business owners. Which sources of funding seem best when a business is just starting? Which sources of funding seem best once the business is established and is looking to expand? (Bloom’s: comprehension, application) Imagine that you are planning to open a new business in partnership with a close friend. Briefly describe the skills and abilities that your new partner can offer that you lack. What are the pros and cons of partnering with this person? Write examples of terms you could include in a partnership agreement that would help the business run more smoothly. (Bloom’s: comprehension, application) Discuss the different risks facing someone who is creating a new business on their own and someone who is buying an existing small business. What risks will both new business owners face? Compare the advantages and disadvantages of each option. Which would you rather do and why? (Bloom’s: comprehension, analysis) Businesses, especially small businesses, often compete for customers through customer experience— customer service, quality of the experience, or exceeding the customer expectations. Imagine that you open your own business. Identify how you could build a competitive advantage by offering a better customer experience. Be specific. What would your business offer customers that would entice them to buy from you instead of your competitors? (Bloom’s: synthesis)

Answers: 1. Bill Gates, Donald Trump and Oprah Winfrey have all demonstrated the tendency to be innovative, they have taken risks, are clearly motivated to succeed. They each are self-directed, but work well with other people and can lead others into seeing their vision and accomplishing their goals. They all have visions of what they want to accomplish, and can see their vision as one big goal as well as can break the goal into smaller, more achievable goals.

2.

Personal savings is often used as a financing method when starting a business. Money is sometimes borrowed from friends and family to help fund a business startup. Bank loans may also be a source of revenue. Angel investors or Venture Capitalists also would be options for funding a new business startup. Depending on the size and type of business some businesses will require more startup capital than others. For example, a brick-and-mortar store with product stock would require more startup capital than an online store that only orders stock each time a sale is made or an online store offering a service, such as Google.

Once a business grows it may be advantageous to sell shares in the company by going public as a method to gain funds for expansion. Selling corporate bonds is another way an established company might gain funds for expansion.

3.

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Answers will vary according to each students’ personal experiences. Standard components of a partnership agreement would include: capital contributions, responsibilities of each partner, decision-making process, shares of profits or losses, departure of partners, addition of partners

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4.

Whether or not a business is started from scratch or as a franchise, a new business runs the risk of not operating well enough to be profitable. New businesses must be able to attract and keep a solid customer base by providing a product or service that meets a need. Additionally, a business needs to attract and keep good employees and run efficiently to keep expenses down. Financing a new business from scratch is often more difficult than financing a franchise. Bankers often feel that there is more perceived risk with a new, unknown business compared to that of a franchise that has a larger corporate structure behind it, and a more well-known product name. Additional risks of starting a business from scratch include the business owner is making all the decisions regarding the business on their own. Depending on the business, a small business might be competing against other businesses with better name recognition, a savvy marketing program, and cost effective purchasing strategies which ultimately affect product costs to the consumer. Risk of buying a franchise is not being able to pay the ongoing franchise fee, or having to stick with corporate policies that might not match your particular customer base.

5.

Some businesses compete by enhancing the customer experience. Things such as loyalty programs, personal service in hotels, the atmosphere in a restaurant made through décor and decoration, and sending thank you cards or coupons in the mail all enhance the customer experience. Other improvements to customer service might include: no-wait checkouts, easy return process, quality products and services, and guarantees that are supported.

ETHICS AND RESPONSIBILITY: Social Responsibility: Forming a Plan of Action Answer: This exercise raises an interesting question: To what extent is social responsibility the concern of ALL organizations, regardless of size? Should small or entrepreneurial businesses have different standards for social responsibility than large organizations do? After the students have created their social responsibility plans, have them exchange the plans among the different class groups. Ask each group to evaluate the plan it receives on the basis of cost to the organization—that is, how much of an impact will the social responsibility plan have on the bottom line of the corporation? Small businesses may find that they have to be creative in order to be socially responsible and profitable at the same time.

CLOSING CASE: The Fish That Pulled Him Under Discussion Questions: 1. What entrepreneurial traits does Hengeveld have? What made him want to start his own business?

(Bloom’s: analysis) 2.

Analyze the situation. What do you think went wrong? Did Hengeveld make mistakes? If so, what were they? (Bloom’s: analysis)

3.

What might Hengeveld have done differently in order to continue his business success? Search for one or more sample business plans for a retail fishing store (you should find at least one at www.bplans.com). Review it. What stands out in your mind about the plan? Do you think Hengeveld could have done better with his business if he had a business plan to start with? Why or why not? (Bloom’s: analysis, synthesis)

Answers:

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1.

Obviously Hengeveld had a passion for fishing, was an avid fisherman, and always wanted to be his own boss running his own business. His dream of owning a business and love of fishing lead him to start a business.

2.

Yes, Hengeveld made a few bad decisions, but the economy and competitor situations also attributed to Kevin’s failed business venture. See #3 below.

3.

Answers will vary with respect to a retail fishing store business plan.

Changes that could have been made include: • the decision to buy a second store - may not have been the right choice, but then again, the first store's business could have declined and the business could have ended.

• excessive product diversity - trying to manage equipment, bait, web site, licenses - may be too much, but without diversity how does an entrepreneur attract diverse customers and expand market?

• too much task diversity for entrepreneur - magazine, web site, seminars, many products (and bait may not be best choice) • focus on target market and focus product offerings to that market • two stores and family kept entrepreneur spread thin, maybe could not focus on main tasks most entrepreneurs do put in 50-70 hours per week at new businesses • staff problems - change staff, but this is easier said than done - it is within the entrepreneurs control to fire employees, but where will he find qualified replacements - out of entrepreneurs hands • difficulty with lease - this is out of entrepreneurs hands, but maybe better investigation before leasing might have helped • recession – this is out of the entrepreneurs’ control, this is devastating to most business Things which were done well: • security cameras • web site • diversity in products (although, too much diversity may be an issue) • trying to expand business by opening second store was a good choice, but difficult to manage • diverse product offerings attract many customers and diverse customers, maybe too many things to handle • community group - trying to bring customers together for loyalty - seminars, web site connections - get a customer group that is loyal to store and fishes together (great marketing idea) • started a business in an industry he knew and loved • operating at times the customers needed the store to be open - but if bait was not for sale through the business, the business would have been able to change hours of operation which would have helped the entrepreneur in other ways, but with that said, he may also have lost existing or potential customers because the store did not sell bait • buying up competitor - this was obtaining second store - good choice initially

Summary: Much of what makes or breaks a business is out of an entrepreneurs hands - recession, weather, government regulation, law, how much initial capital can be obtained, number of suppliers and supplier prices, availability of qualified staff, and bigger competitor moving in next door.

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•

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Some things are within an entrepreneurs control - leasing a second store, choosing to offer live bait as a product, hours of operation (to some degree), product offerings, web site, security, choosing to offer licenses, modality of selling - online, in-person, wholesale, retail, etc.

Most new ventures do not see a profit on business operations until about the third or fourth year in operation due to expenses and repaying initial loans, etc. It is always a risk to open a new venture, but the rewards can far exceed the risks with a little luck, good management, and the financial backing.

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SUPPLEMENTAL MATERIAL ADDITIONAL DISCUSSION QUESTION 1.

Discuss the benefits of forming an entrepreneurial team when beginning a small business. Are there drawbacks to a team approach?

Answer: Entrepreneurial teams are good if all the team members’ skills and capabilities complement each other. Team members bring different opinions and strategies often offering alternatives that a single person might not consider. Additionally, members of an entrepreneurial team can also help with initial financing and can provide coverage for vacations and illnesses. Partners generally tend to invest more time and effort into the work of the business than regular employees. However, the drawback of an entrepreneurial team is if the members disagree on the direction of the business, or in any of the decisions, such dissention can jeopardize the team synergies.

APPLICATION EXERCISES 1.

A Closer Look at Franchising. Using the Internet, research a franchise that you think would be a viable investment opportunity for you. Put together a brief report that outlines the following information about your chosen franchise: fees (initial and ongoing), location/site assistance, training and ongoing support, marketing assistance, competition (both from other businesses and additional franchises within the organization), and the pros and cons of starting a business with this franchise.

2.

Micro-Financing: A Little $ Can Go a Long Way. Visit www.kiva.org and click on the “Lend” tab to view the list of entrepreneurs. Use the drop-down menus in the “Find Loans” search bar to locate an entrepreneur or entrepreneurial team to whom you would consider lending. In a brief report, discuss the entrepreneur or group you chose, including information on the loan amount requested, the percentage of funds raised, the entrepreneur’s country of origin, and a summary of the entrepreneur’s business venture. In your report, explain your reasons for choosing to loan to this particular entrepreneur.

3.

Do You Have What It Takes to Be an Entrepreneur? Visit the Business Development Bank of Canada’s (BDC) website at www.bdc.ca/en/. Go to the Advice Centre, Tools, and complete the Entrepreneurial self-assessment. What aspects of your personality make you a good candidate to be an entrepreneur? What is holding you back?

4.

Business Combinations. Look on the Internet for a current example of a business merger, takeover, or acquisition. Explain the circumstances of the event. What companies are involved? Was the event friendly or hostile? What are the reasons given for the combination? What is your opinion of this business combination? What is your opinion of this business combination? Do you think it is a good business decision? Why or why not?

5.

Small Business Owners: In the results of the 2006 Census, Barrie, Ontario, was named the fastest growing community in Canada. Imagine that you want to start a catering business in Barrie (or other fast-growing community). You see that a catering business is for sale in Barrie for $150 000. The company specializes in catering business events. The owner, currently operating the business from

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home, is moving to another country and wants to sell. You will need outside investors to help you purchase the business. Develop questions to ask the owner about the business. What other types of information would you need before making a decision to buy this company? Either you will purchase this existing business or start a catering business of your own; therefore you should investigate the feasibility of each option. Once you’ve gathered the necessary information, visit Sample Business Plans (www.bplans.com) and search for a sample catering business plan and review it. Visit www.inc.com’s Tools page and download the Business Plan Executive Summary Template or recreate it in a document, and complete the business plan executive summary for your catering business proposal.

6.

Why Did it Fail? Go online and research a business that has been unsuccessful. Analyze the business’s failure. What caused the business to fail? Would the business have been more successful had it adopted a different form of ownership? Write a paper analyzing why the business failed and explaining what you might have done differently as the owner.

Answers: 1. Answers will vary. Some considerations might be Tim Hortons, McDonalds, or Subway.

2.

Answers will vary. The purpose is to give students some practical exposure to fund sourcing.

3.

Answers will vary. The purpose is to get students looking at character traits of entrepreneurs.

4.

Answers will vary. This would be a good exercise to discuss in class for students to get acquainted with current business changes in mergers and acquisitions.

5.

Answers will vary. This exercise gives students practice with business plans. It is not a detailed business plan, but rather an executive summary. Students will review samples before they create their own.

6.

New businesses fail for a variety of reasons, but some common reasons for failure are due to a lack of initial planning. Good planning enables a new owner to determine what kind of work/effort is needed to make the business successful, and to assess the competition, the size and scope of the market, etc. In addition, new businesses fail due to a lack of sufficient funds, whether there are insufficient funds in the beginning of the business, or an inability to manage ongoing expenses and income that eventually result in failure. Lastly, new businesses might fail due to the business owner not having some critical skills, such as marketing, finance or sales skills.

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ONLINE CAREER SKILLS: Constructing an Effective Business Plan Visit the Career Skills module “Constructing an Effective Business Plan” on MyBizLab, where you’ll learn that writing a formal business plan is a crucial part of a successful business. You’ll gain insight on how to write an effective business plan and learn how to use your well-developed business plan to help obtain financing for your new business venture.

Chapter 5, Related Websites http://www.canadabusiness.ca/eng/

Canada Business is a place where entrepreneurs can find government services and assistance.

http://www.ic.gc.ca/eic/site/cissic.nsf/eng/h_00015.html

Industry Canada, Canadian Industry Statistics presents and analyses industry data on a number of economic indicators.

http://www.cfib-fcei.ca/english/

Canadian Federation of Independent Business (CFIB)

http://www.servicecanada.gc.ca/eng/subjects/business /index.shtml http://www.cfa.ca

Service Canada

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ENHANCING THE ONLINE COURSE Five Hot Innovations: Ask your students to identify the five most innovative products they can find. Be sure to have them identify what makes the products new and different. Ask your students to send you the information via e-mail with graphics attached to illustrate the unique aspects of the products.

Pros and Cons List: Ask your students to list the risks involved in starting a new Internet business. Have them post these lists on the online discussion board. Once all students have responded, ask them to send another list, this time noting the possible opportunities. (Benjamin Franklin was famous for these pro and con lists.)

Online Debate: Are leaders born or made (i.e. trained)? Divide your online class into two groups. Ask one group to take the side that entrepreneurs (leaders) must be born with certain characteristics in order to succeed. Ask the other group to take the side that entrepreneurs can be developed or trained to be successful. Debate the question online using the chat room. Be sure to provide an incentive such as extra credit for the winning debating team. You may want to provide some structure to your debate by assigning students to serve as the debaters (leaders) or you may allow any student to break in and support the topic at will.

To Be or Not to Be: Ask students to decide if they would be a good entrepreneur based on the criteria listed in the textbook What does it take to be an Entrepreneur? Have the students explain their positions in the discussion tool or the chat room. Determine which students are really planning to open their own business and discuss the types of businesses they may be considering.

Eye on Small Business: Ask your students to choose a type of business and then investigate that industry via the Internet. They can search government sites, professional association sites, state sites, and chambers of commerce sites. Require a 1 to 2 page abstract of the free resources available to entrepreneurs in that industry. Be sure to leave the parameters open to all types of resources.

Specifying Structure: Divide the online class into five groups. Assign each group one of the following structures: sole proprietorship, general partnership, limited partnership, corporation, limited liability partnership. Require your students to work together to create a 10-minute presentation, reporting on the pros and cons of each type of structure. Students can be required to create slides, add audio, or include small video segments using digital cameras. These can be posted to the chat room, discussion board, or blog for your course. You can also require students to purchase microphones for the computer and have all students log on at the same time to hear and see the presentations during an online class meeting.

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CHAPTER 5 BUSINESS MANAGEMENT CHAPTER OPENER Chapter 5 introduces students to the topic of management. Students explore managerial skills, including: technical skills, interpersonal skills, decision-making skills, conceptual skills and time management skills.

The management functions of planning, leading, organizing and controlling are presented in detail. Other key chapter concepts include: goal setting, SWOT analysis, organizational structures, leadership traits and styles and corporate culture.

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

2.

3.

4.

5.

6.

7.

Describe the ways managers apply technical, interpersonal, decision-making, conceptual, and time management skills to business.

Explain how corporate vision and a mission statement help to keep the company focused on achieving its goals and objectives.

Describe the implications of tactical plans, operational plans, and contingency plans within the context of management.

Explain the significance of organizing and how most organizations are organized.

Distinguish among vertical organizations, horizontal organizations, and network organizations.

Describe what makes a good leader and the various styles of leadership.

Evaluate the implications of control within a business.

KEY TERMS affiliative (or laissez-faire) leader (p. 109) autocratic leader (p. 108) conceptual skills (p. 96) contingency leadership (p. 110) contingency planning (p. 102) controlling (p. 111) core values (p. 100) corporate culture (p. 100) decision-making skills (p. 96) democratic leader (p. 108) first-line managers (p. 104) goals (p. 98) horizontal organization (p. 105)

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interpersonal skills (p. 96) leading (p. 107) management (p. 95) middle-level managers (p. 104) mission statement (p. 99) network organizations (p. 106) objectives (p. 98) operational plans (p. 102) organizational chart (p. 104) organizing (p. 103) planning (p. 98) Six Sigma (p. 111) strategic plan (p. 98)

SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis (p. 101) tactical plans (p. 102) technical skills (p. 95) time management skills (p. 97) top-level managers (p. 103) total quality management (p. 111) vertical organization (p. 105) vision (p. 99) visionary leader (p. 109)

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DETAILED LECTURE OUTLINE I.

Skills of Successful Managers A. Working with People and Resources 1. Who are Managers? a. Management is the process of working with people and resources to accomplish the goals of the organization.

2. What skills do managers need? a. Technical Skills, Interpersonal Skills, Decision-making Skills, Conceptual Skills and TimeManagement Skills 3. What tasks do managers perform? a. Administration can be defined as the universal process of organizing people and resources efficiently to direct activities toward common goals and objectives. In some organizations, management is seen as a subset of administration.

II. Functions of Management A. Planning 1. Why do managers need to plan? a. Planning is the process of establishing goals and objectives and determining the best ways to accomplish them. b. Goals are broad, long-term accomplishments an organization wants to achieve within a certain period. c. Objectives are the short term targets designed to help achieve these goals.

B. Strategic Planning 1. What is the highest level of planning in an organization? a. A strategic plan is the main course of action created by top-level managers that sets the approach for achieving the long-term goals and objectives of the organization.

2. How is a strategic plan developed? a. A good strategic plan reflects what is going on inside and outside the organization and how those conditions and changes will affect the organization in the future.

C. Vision and Mission Statement 1. What helps define the direction of a business? a. A vision identifies what the business wants to be in the future.

2. What helps define the purpose of a business? a. The mission statement is a description of the organization’s purpose, basic goals, and philosophies.

3. What makes an effective mission statement a. Employees must feel owner’s passion come through b. Mission must be integrated into the daily work of employees 4. What are some benefits of well-defined vision and mission statements? a. Keeping management on track by ensuring strategies are consistent with the organization’s goals b. Inspiring employees c. Giving investors insight into the values of the organization 5. Are mission statements only for businesses with a profit? a. Non profit organizations also have a mission statement

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6.

How do managers define a company’s values? a. The corporate culture is a collection of values, norms, and behaviour shared by management and workers that defines the character of the organization. b. Core values —the fundamental beliefs about what is important and appropriate when conducting company activities—affect a company’s overall planning processes and operations.

D. SWOT Analysis 1. How does the management team begin to move a company toward achieving its vision? a. Management must assess the company's own strengths and weaknesses as well as its position relative to competitors.

2. What is a SWOT Analysis a. SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is a situational analysis of strengths, weaknesses, and anticipated changes that helps determine the strategic fit between an organization’s internal, distinctive capabilities, and external possibilities relative to the business and economic environments.

3. What happens after a SWOT analysis is completed a. Managers establish goals and objectives b. SMARTER goals are designed (Specific, Measureable, Acceptable, Realistic, Timely, Extending, Rewarding) E. Tactical, Operational, and Contingency Planning 1. How does management decide how to execute a strategic plan? a. Middle management generates tactical plans, determining specific resources b. Budgets are developed 2. How is a tactical plan translated into instructions for employees? a. Operational plans determine the process by which tactical plans can be achieved.

3. What if unforeseen events occur? a. Contingency planning is a set of plans that ensures that the organization will run as smoothly as possible during an unexpected disruption.

4. How can planning help companies weather unexpected events? a. Contingency planning encompasses how management will communicate, both internally and externally.

F. Organizing 1. How are plans put into action? a. Organizing is the process of structuring the capital, personnel, raw materials, and other resources to carry out the plans in a way that best matches the nature of the work. Part of organizing is to establish an organizational structure.

2. Are most companies organized in the same way? a. Top-level managers are the corporate officers responsible for the organization as a whole. b. Middle-level managers are top managers for only one division or a part of an organization. c. First-line managers carry out operational planning. d. An organizational chart shows how groups of employees fit into the larger organizational structure.

3. What is a vertical organization? a. In a vertical organization the company is organized by specific function, such as marketing, finance, purchasing, information technology, and human resources b. Levels of expertise within functions are developed and managers can better keep track of economic and environmental conditions.

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4.

What are the differences between a vertical and horizontal organizational structure? a. In a horizontal organization (or flat organization), the traditional managerial pyramid is flattened, and the management layers are collapsed.

5. What other types of organizational structures are there? a. Network organizations are collections of independent, mostly single-function firms that collaborate on a product or service.

G. Leading 1. Why does an organization need leaders? a. Leading is the process of influencing, motivating, and enabling others to contribute to the success and effectiveness of the organization by achieving its goals. b. The best leaders are defined as those who: 1. Challenge the process by not always accepting conventional beliefs and practices as the only way to accomplish tasks. 2.

Model the way by serving as a living example of the ideals in which they are asking their employees to share. 3. Inspire a shared vision and appeal to people’s values and motivate them to care about the corporate goals or an important mission. 4. Encourage the heart by showing appreciation, providing rewards, and so on, to motivate people in positive ways. 5. Enable others to act by giving people the access to information and empowering them to perform to their fullest potential.

2. What are the traits of a good leader? a. Determination, inspiration, flexibility and empathy, innovativeness, honesty, selfconfidence, knowledge and competence.

3. What styles of leadership exist? a. 4 main styles of leadership exist: democratic, autocratic, Affiliative, Visoinary 4. What are democratic and autocratic leaders like? a. A democratic leader delegates authority and involves employees in decision-making. b. An autocratic leader makes decisions without consulting others.

5. What are affiliative leaders? a. Affiliative (or Laissez-faire) leaders (or free-reign leaders) encourage employees to contribute ideas rather than specifically directing their tasks.

6. What makes a leader a visionary? a. Visionary leaders are able to inspire others, believe in their own vision, and move people toward a shared vision, and move toward a shared dream. b. Contingency leadership is a more adaptive style of leadership in which managers recognize that they need to be flexible and use whatever style works best for the particular situation.

H. Controlling 1. Why does a company need to adapt to stay on course? a. Controlling ensures that the plans and strategies set in place by management are properly carried out.

2. How do managers measure performance? a. Bureaucratic reporting tools such as financial statements and sales reports are used to measure performance.

NOTE: End the lecture by asking students to write down the muddiest points or main points of the lecture. This will allow you to know what might need to be reviewed during the next lecture.

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SUGGESTED SOLUTIONS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Effective Management – Creating an Experience to Remember Discussion Questions: 1. What are some of the most important skills needed by a manger like Jon? (Bloom’s: comprehension) 2. Why do you think Jon says it is more difficult to manage temporary workers than his usual core team? (Bloom’s: analysis) 3. What do you think managers should do to make sure their employees are highly motivated?

(Bloom’s: analysis, synthesis) Answers: 1. Managers need planning and organizing skills, decision-making skills, time management skills, people skills—which include communication and motivational skills—and problem-solving skills.

2.

By Jon’s admission, temporary workers are not as invested in the success of the firm, nor do they always know exactly what to do.

3.

Answers will vary, however, as Jon says, simple respect and etiquette is a good place to start. Also, giving employees some personal interest in the success of a company. The suggestion here is that EventSing employees might have some equity in the firm as Jon indicates, “they have a vested interest”, however, this could also be a reference to any number of different financial incentives or a variety of non-financial rewards such as job security, customer loyalty, etc.

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BIZCHAT: Social Media: How Do Web-Based Tools Make Time Management Easier?

Discussion Questions: 1. Such tools have proven useful to many managers, but some people argue that Web-based tools can make simple tasks more complicated and can actually make us less productive. What do you think?

(Bloom’s: analysis, evaluation) 2. Some employees complain that this kind of technology blurs the line between work and home life. In what ways do you think this technology could interfere with work-life balance? (Bloom’s: analysis, evaluation) 3. How effective are the tools you use to manage your time? (Bloom’s: evaluation) Answers: 1. Answers will vary, but students should conclude that a time-management system of some kind is a necessary skill for managers.

2.

Answers will vary, but students should already recognize how digital accessibility to work (work or school related) is both helpful and hazardous. As with anything, students should suggest that the operative word is balance in the way in which technology is integrated into our lives.

3.

Answers will vary entirely by each student’s unique perspective on how technology-based or nontechnology based time management systems help them – or if they are in need of help.

ON TARGET: Loblaw’s Restructuring Discussion Questions: 1. Does Hutchison’s leadership style seem to lean toward autocratic, democratic, or laissez-faire?

(Bloom’s: application) 2. What are the advantages of flattening the layers? (Bloom’s: comprehension) 3. Does is seem that Hutchison is acting in conjunction with the three core themes of Loblaw’s? Why or why not? (Bloom’s: analysis) Answers: 1. Definitely not laissez-faire because the article states that he is very hands-on. Most leaders use all three styles as situations dictate the type of style needed. Hutchison is acting autocratic (it seems) when he is making decisions about restructuring, but he is acting democratic when he is talking about sharing ideas seamlessly. Most likely, contingency leadership is his style, whereby he applies whatever style necessary to handle the current situation.

2.

Flattening the layers means faster response time because the reporting hierarchy is shorter. This is better for taking action on decisions and may mean beating the competition in some cases (advertising, new product development, etc.)

3.

Yes, it does seem that Hutchison is acting in conjunction with the three core themes of Loblaw’s. The themes are: Simplify, Innovate, and Grow. He certainly has simplified the reporting structure by flattening the layers. He also says he had an opportunity to get to know the team and their strengths and areas for growth—knowing this will help him place skills in the areas he needs them and help grow the company. Innovation is applied in the restructuring into five brands.

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IN-CLASS ASSIGNMENTS Activity Team Time: On a Mission

Description Students compare mission statements from several different organizations to determine what makes an effective mission statement.

Time Required

Reference

Bloom’s Taxonomy

30 min.

Page 114

Knowledge Comprehension Application Analysis

(Note that this in-class activity requires students to prepare at home before coming to class.)

Ethics and Corporate Social Responsibility: Assessing Social Responsibility

Students discuss how organizations might control their social responsibility efforts.

30 min.

Page 115

Knowledge Comprehension Analysis

Supplemental In-Class Activity 1: SWOT-ing Walmart

Students complete a SWOT analysis for Walmart or another well-known company.

30-60 min.

IM – see below

Knowledge Comprehension Application

Supplemental In-Class Activity 2: How Do Your Goals Stack Up?

Students set long-term, intermediate-term and short-term goals.

30 min.

IM – see below

Knowledge Comprehension

Supplemental In-Class Activity 3: Good and Bad Managers

Students identify positive and negative traits of managers/leaders.

30 min.

IM – see below

Knowledge Comprehension Analysis

Learning Catalytics

These activities allow students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

This animation is meant to explain one difficult concept: • Corporate Social Responsibility and Ethics • SWOT Analysis

5 min. including discussion

MyBizLab

Any level of Bloom’s Taxonomy

1 to 10 min. long videos + discussion time variable

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

Videos Appendix and MyBizLab

Knowledge Comprehension

Business Today Videos

Sketch Animations

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SUPPLEMENTAL IN-CLASS ACTIVITY 1: SWOT-ing Walmart Activity Overview: This activity allows the class to create a SWOT analysis for a company with which everyone is familiar. Students will see how top executives begin to develop strategic plans.

Time Limit: 30 minutes What to Do: 1. Divide the class into groups or allow students to partner up or create their own groups.

2. Explain to the students that they are to consider themselves top executives in charge of strategic planning for a major company with which they are all familiar, Walmart. (Students can use another large company such as Apple, RIM or PepsiCo.) 3. Ask each group to list and record at least four internal strengths, internal weaknesses, external opportunities, and external threats for the company chosen.

4. Bring the entire class back together and have each group list their best contributions to the SWOT analysis they have created. Write these contributions on the board.

Don’t Forget: It is important that you choose a company that every student knows well for this exercise.

Wrap-Up: From the SWOT analysis on the board identify at least one important strength, one weakness, one opportunity, and one threat that should be included in the strategic plan and develop a strategic goal for that item.

SUPPLEMENTAL IN-CLASS ACTIVITY 2: How Do Your Goals Stack Up? Activity Overview: This activity is designed to help students understand the construction of SMARTER goals.

Time Limit: 30 minutes What to Do: 3. Ask student to write down one personal goal. (10 minutes.)

4. Ask students to now focus on developing that goal to meet SMARTER goal design.

5. Ask students to identify any of the SMARTER criteria which they find challenging to apply to their goal-setting.

Don’t Forget: Remind students that in order for goals to be evaluated, they must conform to SMARTER criteria.

Wrap-Up: Remind students that goal setting in organizations is driven by corporate, tactical, and operational strategies; however, the process is dynamic. Organizational environments and situations can change. As a result, goals may need to be reshaped. People, like organizations, may need to have contingency plans.

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SUPPLEMENTAL IN-CLASS ACTIVITY 3: Good and Bad Managers Activity Overview: This activity allows students to identify positive and negative traits of managers/leaders.

Time Limit: 30 minutes What to Do: 1. List two columns on the board, “Good” and “Bad.” 2. Ask students to think of managers and/or leaders for whom and with whom they have worked and list characteristics that manager/leader displayed that they considered to be good and/or bad.

3. Write the student contributions on the board.

Don’t Forget: This exercise can be a good time to introduce students to the difference between traits and behaviours. After you have put all the characteristics up on the board, ask students how they know these things about managers? For example, how can a student tell if a manager is friendly? Then try to create lists of behaviours that are associated with each trait posted. When you are finished writing, ask students to tell you which information they would rather have if they were going to be trained to be a manager.

Point out that behaviours are more useful in training, and in performance management, as well.

Wrap-Up: This activity is a good way to introduce the democratic, autocratic, and laissez-faire leadership styles.

LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

Learning Catalytics 1 Question Type: Image Upload Prompt: Use a piece of paper, the whiteboard, or a computer graphics program to create the “Continuum of Leadership Behaviour” Answer/Explanation: The “Continuum of Leadership Behaviour” consists of an easy sketch of two overlapping circles. One of the circles should be labelled “Autocratic”, while the other should be labelled as “Affiliative”. The overlapping segment in the middle should then be labelled “Democratic Leadership”

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Learning Catalytics 2 Question Type: Priority Prompt: The text lists seven traits of effective leaders. List the following in the order you feel are most important from 1 through 7. Determination; Inspiration; Flexibility and Empathy; Innovativeness; Honesty; Self-Confidence; Knowledge and Competence Answer/Explanation: Results will vary. It would be interesting to have students respond at the beginning of class, then complete the exercise again after the class lecture. Discuss the traits that students believe are most important.

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SUGGESTED SOLUTIONS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS 1.

2.

3.

4.

5.

Contingency plans are important in any business. Discuss what kinds of plans your school might have in place. How would these plans differ, if at all, from those of a local business in your area?

What are a few possible scenarios that would require contingency plans in your school or at a local business? (Bloom’s: application, analysis, synthesis) How do you rank leadership qualities? Rank the following qualities and compare your results with your classmates: honest, loyal, competent, caring, determined, ambitious, inspiring, forward-looking, self-confident, and imaginative. What are the top three qualities? (Bloom’s: comprehension, analysis) Analyze your own ability to be a manager. What already polished skills do you have now? What skills would you need to improve? What skills would you still need to acquire? How could you go about acquiring or improving those skills you do not have? (Bloom’s: analysis) What differences might you expect to find in the corporate cultures of Google and CIBC? Do you think there would be any similarities? (Bloom’s: comprehension, application) Perform a basic SWOT analysis for the school you are currently attending. Indentify at least five strengths, weaknesses, opportunities, and threats. Suggest several ways your school can take advantage of opportunities by using it strengths, and several ways in which your school can protect itself from threats and overcome its weaknesses. (Bloom’s: application)

Answers: 1. An academic institution might have some of the following contingency plans in place: fire evacuation routes/drills, snow day plans for school closure and how students will be notified (radio, phone, email, etc.) of closures, and procedures for refunding student registration fees and managing student timetables when courses are cancelled due to low enrolment. Contingency plans for businesses might include fire evacuation routes/drills as well as procedures for handling refunds. Businesses often have contingency plans for natural disasters; for instance, if a bank was destroyed due to an earthquake or fire what would happen to all the clients’ bank account information? Most schools, banks, and businesses have processes in place for backing up data and placing duplicate files off-site.

These procedures and are the results of planning for contingency. Most school’s have plans in place to keep the organization running in case of a disruption to the normal course of business. The details should include internal and external communication procedures, and should also outline those departments which are seen as most vital to an organization during a crisis.

2.

Answers will vary. Being a good communicator, leader, motivator, having good technical skills, being knowledgeable about the business/industry/product, good decision-maker, and someone who can visualize a problem and understand what’s necessary to solve it are all positive traits of a good leader. Good managers are also seen as people who are organized, can delegate well, and clearly articulate what needs to be done. A bad manager would be someone described as being lazy, poor in communication, cannot delegate, lacking in knowledge, someone who shows favouritism of select employees or who takes credit for other’s work.

3.

Answers will vary. Individuals vary greatly in terms of their skill sets; polished, adequate and those still needing to be learned. This question is intended to get students thinking about skills they are in need of acquiring and thinking about ways to acquire them.

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4.

Answers will vary. Students should research the similarities and differences. Google appears to have an informal atmosphere with a culture of innovation, creativity, and employee empowerment. CIBC appears to have a more formal culture with less emphasis on innovation and creativity.

5.

Answers will vary. Some topics which ought to be considered are location, capacity, leadership, and competition.

TEAM TIME: On a Mission Notes: This exercise requires that students compare mission statements from several different companies and rate the statements on how inspiring they are. As the students compare these statements, remind them that the mission statement should capture the organization’s purpose, basic goals, and philosophies.

There are many possible responses to what makes an effective mission statement—consider these two sets of rules, for a start: A. From GetEntrepreneurial.com, posted by Marcel Sim, August 24, 2007 (http://www.getentrepreneurial.com/operations/create_effective_mission_statements.html): 1. Mission statements need to be short and sweet.

2. Mission statements should be focused and to the point.

3. Mission statements need to be about customers.

4. Mission statements should be a mantra—everything you say and do should reinforce your mission.

NOTE: The above rules were developed based on the author’s observations as he walked around the floor of a large technology conference, looking at mission statements.

B. From “Mission Statements Exposed” by Tahir Sufi and Howard Lyons. International Journal of Contemporary Hospitality Management. Bradford: 2003. Vol. 15, Iss. 4/5, pg. 255, 8 pgs.

1. The mission statement provides a point of difference within the industry. Therefore, it needs to be distinctive.

2. The stakeholder analysis needs to be focused.

3. The mission statement needs to be simple to be communicable.

Interestingly enough, the second set of mission statement rules (which closely mirrors the first) was developed based on the authors’ evaluations of 30 top hospitality enterprises. After carefully identifying ten potential rules for writing mission statements, and 28 components commonly found in mission statements, the authors objectively analyzed the lists to develop the three rules shown above.

ETHICS AND RESPONSIBILITY: Assessing Social Responsibility Notes: In this exercise, students discuss how organizations might control their social responsibility efforts.

Look for students to mention things like monitoring the reputation of the company (outside marketing agencies often measure this) and more objective measures, such as decreases in pollution or improved living conditions in areas where the company does business. For example, Nike has stopped dealing with vendors who use child labour, which means that the organization has to conduct independent audits of its suppliers on a regular basis.

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CLOSING CASE: The Toyota Way of Management Discussion Questions: 1. Explain “The Toyota Way” of management. How is it related to kaizen? How can kaizen be used in other types of companies, particularly those that are not manufacturers? (Bloom’s: comprehension, application, synthesis) 2. Imagine yourself as a manager at a Toyota factory. How would you look for ways to continually improve the work processes of your employees? How would focusing on what doesn’t work, as opposed to what does, help you look for ways to improve? (Bloom’s: synthesis) 3. Would you consider “The Toyota Way” of management as laissez-faire? Why or why not? What problems might a company such as Toyota face with laissez-faire style? Is there such a thing as giving employees too much power? (Bloom’s: comprehension, analysis) Answers: 1. “The Toyota Way” of management uses criticism from all members of the organization as a way of constantly improving organizational products. Kaizen is a Japanese word that represents “a system of continuous improvements in which instances of waste are eliminated one by-one at minimal cost.” By combining kaizen with human respect, mistakes and failures are recognized in order to improve systems in the future. Almost any organization can use these concepts, for example, a non-profit such as the American Red Cross looked at past mistakes made during Hurricane Katrina to improve services for Hurricane Gustav.

2.

Managers at Toyota and other quality-based organizations use two primary techniques when looking for ways to improve. The first is empowering employees to bring information to managers, and the second is called “Management by Wandering Around.” The more the manager is on the floor with employees, the more likely he or she is to see things that need to be fixed.

3.

“The Toyota Way” of management is about as far from laissez-faire as it is possible to get. At Toyota, managers must constantly facilitate employee meetings—helping employees to find the resources to solve problems on their own. In addition, because managers are expected to be on the front line of the work process, they must work twice as hard as other employees. After all, they are expected to not only do the work, but to constantly be on the lookout for ways in which work can be done better.

This involves constant learning to improve their skills as well as the skills of their employees.

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SUPPLEMENTAL MATERIAL ADDITIONAL CRITICAL THINKING QUESTION 1.

Why are some companies turning away from vertical organizational structure? What seems to be the current trend for organizational structure? Why?

Answer: In a vertically organized structure, there are typically long lines of communication and a complex process of upward reporting. This creates the difficulty of time lags and makes response time to customers lengthy. In addition, there is the added complexity of long innovation implementation time because of the lengthy process of keeping each division of the vertically integrated structure updated.

Vertical organizational structures have been criticized as being overspecialized and inflexible. Some businesses found they were more successful operating within a horizontal structure. The benefit of the horizontal structure is that each team has greater responsibility and greater accountability for their results. In this structure, there are fewer levels of management. The majority of companies are structured in the traditional vertical or horizontal way, however, ‘network organization’ is a new innovative structure which is emerging. In a network organization, there are independent, single-function firms that work in collaboration with one another. This may not be ideal for everyone; however, it may be successful for companies that need to be flexible, quick to respond, and innovative.

APPLICATION EXERCISES 1.

What’s the Mission? Check the Web for a company that produces a product you particularly like and use often. What is their mission statement? Does it adequately reflect the company as you perceive it?

2.

Organizational Charts: The Big Picture. Check the Web for a company’s organization chart, an organization chart for the company you work for, or the organizational chart for your school.

Analyze the chart and determine whether the company or school is structured vertically or horizontally. Can you find an organizational chart for a competitor? Critique both organizational charts. Are the two company’s organizational charts similar? Do you think your company or school could be structured in any other way? Why or why not?

3.

How Well Do You Manage Your Time? Time management skills are important for a manager to have in order to work efficiently and accomplish all the tasks a manager is expected to handle on any given day. How are your time management skills? Even as a student, you are your own manager and can benefit from being more in control of your time. Find a quiz online that assesses your ability to manage your time. Write a brief report answering the following questions: • What online assessment did you find?

• What were the results?

• How can you improve your time management skills?

4.

Manager Wanted. Search the Web for a classified advertisement seeking a manager. What sort of qualities is the company looking for in a manager? What sort of leadership skills does the position require?

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5.

Corporate Culture. Choose two companies in the same industry (e.g. fast food, real estate, tourism, media, electronics) and compare and contrast the corporate cultures of each. Are they similar? How did you determine what the culture of each was?

6.

Culture Shock. New employees often need at least a few weeks to feel comfortable in the corporate culture that comes with their new job. Search the Web for a corporate Web site. How specifically does the company describe their corporate culture? What does the description tell you about life as an employee at that company? Would you want to work there?

Answers: 1. Answers will vary. This question is intended to get the student thinking about how effective organizations are at implementing their mission statement.

2.

Answers will vary. There is a wide range of organizations available. Instructors can augment this application question by asking students to select two different structures and prepare a comparative analysis of these.

3.

Answers will vary.

4.

Answers will vary. Many management positions require some specific technical area skills or knowledge, but also require project management, people management, and decision making skills.

Many job advertisements require the following qualifications: negotiating skills, works well under pressure, multi-tasker, self-starter, innovative, team player, excellent communicator, and seeks continuous improvement.

5.

Answers will vary. Some options include: Best Buy Canada and The Source, Loblaws and Sobeys, Sportmart and National Sports.

6.

Answers will vary.

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ENHANCING THE ONLINE COURSE Database Search: Require your students to use the database resource of your institution’s online library system. Have them search for recent case studies involving planning, organization, leadership, or control issues. Ask students to share the case studies, along with their write-up of the possible solution, by posting them online. You might also have students submit the case studies for a grade.

Graphic Illustration: Have your students find an open source graphic on the Internet to illustrate each of the following: technical skills, interpersonal skills, conceptual skills, decision-making skills, and timemanagement skills. Have them write a paragraph explaining how the graphic they have chosen illustrates the skill. Then, ask students to write a one page paper on why all of these skills are necessary for a person to be a great manager.

Control Cycle: Ask your students to create a graphic to illustrate the control cycle, using their computers.

Have them submit the graphic (with detailed explanation) for a grade.

Time Management PowerPoint: Have your students develop a 10-slide presentation on time management using at least the four tips discussed in the textbook, as well as other tips gleaned from Internet research. Have the students send you the project for a grade and also show the presentation to a friend. Use an evaluation form that includes the friend’s name, e-mail, and telephone number as “proof” of the successful completion of the presentation.

Strategic Search: Have your students search the Internet for a link to the Fortune 500 company list. Ask them to search the Web to find a copy of a strategic plan from any of these companies. Students should review the strategic plan for the following: mission statement; broad direction and vision; information; format; SWOT analysis, action plans. Each student should post his or her findings on a course blog so that the information can be shared. (This is also great information for possible job hunting at a later date for your students.)

Tactical Search: Once your students have completed the Strategic Search, have them look for the tactical or operational plans from the same entity. These plans may be more difficult to find. If your students cannot locate both a tactical and operational plan, you may have them review not-for-profit institutions to find them. These public entities often post their plans more readily than profit companies. Ask students to review the plans for types of actions taken to achieve one goal in the overall strategic plan. They should list the numbers of actions required to reach even one goal and post them on the discussion board.

Students will be surprised at the numerous actions and efforts needed to support one goal.

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CHAPTER 6 MOTIVATION AND TEAMWORK CHAPTER OPENER Chapter 6 covers motivation and teamwork. Students are given an historical overview of motivation theories and are introduced to some of the more contemporary theories as well. Next, the application of motivation theories in the workplace is presented, including how to motivate employees using Vroom’s expectancy and strength-based management. Finally, we review teamwork including: what managers can do to create a good team, the challenges teams encounter on a regular basis, and how students can be good team members.

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

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Describe several ways that you can improve your own level of motivation.

Explain the benefits of having engaged employees and the problems organizations face when employees are not engaged.

Describe the intricacies of Maslow’s hierarchy of needs, McClelland’s “three needs” theory, and Herzberg’s motivator–hygiene theory.

Distinguish between extrinsic and intrinsic motivators.

Summarize the implications of Theory X, Theory Y, Theory Z, and the Vroom models.

Describe various tools employers can use to assess personality traits and explain how this knowledge can improve employee satisfaction and productivity.

Explain the advantages of using teams in the workplace and outline the best practices to create and manage effective teams.

Describe the roles that members of effective teams play to help the team achieve its goals.

Explain what you can do to become a more valuable team member.

KEY TERMS Big Five (p. 128) Cattell 16 personality factors (16 PF) (p. 130) cross-functional teams (p. 134) engaged employee (p. 119) equity theory (p. 126) extrinsic motivators (p. 123) flow state (p. 119) group flow (p. 133) groupthink (p. 132) Hawthorne effect (p. 127) Herzberg’s motivator-hygiene theory (p. 122)

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industrial psychology (p. 127) intrinsic motivators (p. 123) management by objectives (MBO) (p. 126) Maslow’s hierarchy of needs (p. 121) McClelland’s “three needs” theory (p. 122) McGregor’s Theory X (p. 124) McGregor’s Theory Y (p. 125) organizational psychology (p. 119) participative management and empowerment (p. 126)

personal motivation (p. 118) scientific management (p. 127) Seven Habits model (p. 135) strength-based management (p. 127) team (p. 132) Thematic Apperception Test (TAT) (p. 130) Theory X management (p. 125) Theory Y management (p. 125) Theory Z (p. 125) Theory Z management (p. 125) virtual teams (p. 134) Vroom’s expectancy theory (p. 125)

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DETAILED LECTURE OUTLINE I.

Motivation: The Basics A. Personal Motivation 1. What drives you to do your personal best?

2. How can you improve your motivation?

B. Motivation, Engagement and Flow 1. Does time fly by when you are engaged in your work? a. Flow state happens when employees are completely involved and focused on what they are doing.

2. How motivated is North America’s workforce?

3. What engages employees a. Engaged employees are fully involved in and enthusiastic about their work, and thus willing to act in a way that furthers their organization’s interests.

4. What are the benefits of keeping employees motivated? a. More productive b. More creative C. Early Theories of Motivation 1. Do basic needs for food or shelter motivate us to certain actions? a. Maslow’s hierarchy of needs suggests that our primary needs are met first before our higher-level needs are addressed (see fig. 7.1, page 182). Maslow suggested that different people find themselves at different places in the hierarchy and so their motivations may be different.

2. Do we need to form close personal relationships in the workplace? a. McClelland’s “Three Needs” Theory: i.

The need for achievement—to accomplish something difficult on your own ii. The need for affiliation—to form close personal relationships iii. The need for power—to be able to control the behaviour of others 3. Do we need a safe work environment? a. Psychologist Frederick Herzberg’s (1923–2000) motivator-hygiene theory (or two-factor theory), developed in 1959, suggests that two factors influence a person’s motivation— hygiene factors (cause job dissatisfaction) and motivation factors (cause job satisfaction) (see Figure 7.2).

II. Motivation: Business Applications A. The Complexity of Motivation 1. Do managers actually use theories of motivation?

2. What can a manager do to enhance employee motivation?

B. Motivational Models used in Business 1. Besides early theories of motivation, what other models are there?

2. Do most people dislike work? a. Theory X management proposes that employees have to be coerced and controlled by management in order to be productive. This leads to an authoritarian, hard-line management style.

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b.

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McGregor’s Theory Y suggests that people view work as being as natural as playing and resting. People are naturally motivated and will direct themselves to work for the aims of the organization if they are satisfied with their jobs. c. Theory Y management assumes that, on average, people will accept and seek out responsibility. Such managers have a softer style of management that involves the participation of many.

Do most people like to be included in decision making? a. In 1981, William Ouchi put forward a Theory Z, based on a Japanese management style that relied heavily on collaborative decision making.

Does working hard result in a better outcome for the employee? a. Vroom’s Expectancy theory suggests an individual’s motivation in any given situation can be described by the relationship among three psychological forces, illustrated in the formula: Motivation = Expectancy x Instrumentality x Valence How can employees’ perception of fair treatment affect motivation? a. Equity theory focuses on social comparisons—people evaluating their treatment by the organization relative to the treatment of others.

How can employers encourage workers to be self-motivated? a. Participative management and empowerment involves encouraging employees to become engaged in their jobs and loyal to the company by inspiring them to be selfmotivated and giving them responsibility with the power (empowerment) to make decisions.

How can employers motivate employees through goal setting? a. Management by objectives (MBO) is a performance goal–setting method in which management and employees work together to set goals and evaluate performance.

Should management invest in employee skills development? a. Strength-based management is a system based on the belief that, rather than improve weak skills, the best way to help employees develop is to determine their strengths and build on them.

C. Evolution of Motivational Theories in Business 1. Have motivational theories changed? a. The Hawthorne effect describes the increase in productivity caused by workers being given special attention.

2. How do these theories apply to the modern workplace? a. Uncertainty management theory suggests that when people face increased uncertainty, fairness becomes more important to them. b. Sociocracy is a system of organization and management in which the interests of everyone are served equally.

D. Personality Traits 1. How can we measure someone’s personality?

2. How can we categorize human personality traits? a. The Big Five, also referred to as the Five Factor Model, is one of the most widely accepted models of personality. The model categorizes most human personality traits into five broad dimensions and then assigns people a score for each dimension (see Table 7.4).

3. What are the implications of the Big Five model in the workplace?

4. Do we have a consistent and constant underlying personality? a. The Cattell 16 personality factors (16 PF) suggest that each of us has a consistent and constant underlying personality.

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5.

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How can describing pictures give insight to our personality? a. The Thematic Apperception Test (TAT), developed by Morgan and Murray of Harvard University in the 1930s, is another personality test. Similar to the well-known Rorschach, or inkblot, test, the TAT presents a person with a series of images and interprets his or her responses.

What is the perfect personality tool?

III. Teamwork A. Advantages of Teams in the Workplace 1. What is the value of using teams in the workplace?

2. What are some of the challenges teams face in the workplace? a. Selecting teams for optimal performance is another challenge. If a team is not carefully selected for a range of skills and attributes, a type of narrow-mindedness can emerge.

This is the phenomenon referred to as groupthink.

3. Do teams always improve the development process? a. Are generational differences really that significant?

B. Best Practices for Teams 1. How do you create an environment for achieving the best team performance? a. Groupflow occurs when a group knows how to work together so that each individual member can achieve flow.

2. How can managers form the best teams? a. Some important aspects to be considered are size, time and status.

3. What are cross-functional teams? a. Members are selected across a range of critical functional divisions of a business.

4. How might technology affect the design of teams? a. Virtual teams have members located in different physical locations but work together to achieve a goal.

C. Your Role on a Team 1. How can I be a valued team player? a. There are many skills that you can build to enhance your success as a member of a team 2. What habits will give me the best chance to contribute to a team? a. One way to organize these skills is the Seven Habits model developed by famed management author Stephen Covey.

NOTE: End the lecture by asking students to write down the muddiest points or main points of the lecture. This will allow you to know what might need to be reviewed during the next lecture.

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SUGGESTED SOLUTIONS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Employee Engagement; It’s All about People Discussion Questions: 1. How can having engaged employees help a business become more successful? (Bloom’s: comprehension, application,analysis,) 2. Scudamore says that hiring the right people is critical. How would you describe “the right people” 3.

for a company like 1-800-GOT-JUNK? (Bloom’s: analysis, synthesis) If you were a CEO, what would you do to try to engage your employees? (Bloom’s: comprehension, application)

Answers: 1. Engaged employees will want to work for employer and with colleagues. This gives them a sense of purpose which leads to overall corporate benefits.

2. Got Junk people possess physical and personality attributes and skills. The junk removalists must possess clean driving records and a keen sense of accomplishing tasks efficiently. Office personnel must possess people skills to take orders, answer to complaints etc. All employees possess customer service skills.

3. Answers will vary, but the notion of providing employees with influence into decisions is a proven employee engagement tool. Giving employees input into company objectives and strategies gives them a sense of ownership, which spurs engagement. Other responses might include: focussing on

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employees’ strengths, providing employees with a sense of autonomy, and of course, compensating them fairly.

Off the Mark: Dream or Nightmare Discussion Questions 1. What steps can companies take to ensure they don’t hire someone who won’t work well with the team?

2. Does thinking differently mean two people won’t get along? Why or why not?

3. How much time and money did Disney lose over this situation?

Answers: 1. Using a thorough hiring process helps companies hire the “right fit” person. Ensuring that there are many layers in the process whereby the potential candidate interviews with several executives or team members, will help ensure a good fit. Some organizations have first, second and third level interviews. Administering behavioural tests and situational interviews can also be revealing about a candidates ability to fit into an organization. Possibly having the person ‘try-out’ the job for a few days to see if it’s the right fit for the candidate and for the company. Don’t hire someone just because they are known in business as an “all-star,” each company has a culture and a way of doing things and just because someone has made a name for themselves does not indicate that they will fit the team or abide by company policy.

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Certainly not. There must be a certain level of respect, on both sides, for open-mindedness, forward thinking and opinion. You don’t have to agree with each other, but you can both “agree to disagree", and then form a compromise to get the job done. Sometimes people who disagree solicit other points of view to break a stale-mate, or they arrange beforehand how disagreements will be settled. Very often in partnership companies, a contract is signed upon creation of the partnership and in it there are details for succession and solving disagreements. Don’t make it personal, be objective, be professional—don’t get hung up on pride and emotions.

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A very large amount of time and money were lost. The severance pay, the court fees, the money Ovitz spent off-task while president, the time and money to replace him, and Disney lost an effective leader in Eisner he resigned the same year the law suit was settled. They also lost reputation which might have also cost them customers and fans during that time (sales that cannot be recovered and then-money that cannot be invested).

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IN-CLASS ACTIVITIES Time Required

Reference

Students work as a team to design a new flip-flop sandal.

30 min.

Page 203

Ethics and Corporate Social Responsibility: Ethics in Teamwork

Students discuss a scenario in which one member of a team notices that someone else on the team is behaving unethically – what should be done?

30 min.

Page 204

Supplemental InClass Activity 1: To The Moon

Students must solve a problem both individually and in teams.

This exercise demonstrates how teams can improve performance on a task.

30-60 min.

IM – see below

Knowledge Comprehension Analysis

Supplemental InClass Activity 2: Intrinsic or Extrinsic?

This activity allows students to practice listing motivating factors and classifying them as intrinsic or extrinsic.

30 min.

IM – see below

Knowledge Comprehension Analysis

Supplemental InClass Activity 3: What Are You Looking for in a Job?

This activity asks students to express their opinions about important job criteria and compare these with other students.

30 min.

IM – see below

Knowledge Comprehension Application Analysis

Learning Catalytics

This activity allows students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

Sketch Animations

This animation is meant to explain one difficult concept:

variable

Videos Appendix and MyBizLab

Knowledge Comprehension

Activity

Description

Team Time: Forming a Successful Team

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Bloom’s Taxonomy Knowledge Comprehension Application Analysis Knowledge Comprehension Analysis Synthesis

Any level of Bloom’s Taxonomy

Maslow’s Hierarchy

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SUPPLEMENTAL IN-CLASS ACTIVITY 1: To the Moon Activity Overview: This activity helps students appreciate how teamwork leads to better results.

Time Limit: 30 minutes (10 minutes for individual work, 10 minutes for teamwork, and 10 minutes to debrief) What to Do: 1. Give the following scenario to students: You are an astronaut and, in attempting to rendezvous with another space team on the moon, your spaceship encounters mechanical problems that force you to land more than 100 miles from the intended rendezvous point. Your spaceship and much of the equipment in it is damaged, and you must now leave it in an effort to make your way to the rendezvous point. Your task is to rank the items in the list presented—from 1 to 15 (in terms of importance to you in your survival mission). ___ Box of matches ___ Food concentrate ___ 50 feet of nylon rope ___ Parachute silk ___ Portable heating unit ___ Two .45 caliber pistols ___ One case dehydrated milk ___ Two 100-pound tanks of oxygen ___ Stellar map (of moon’s surface) ___ Life raft ___ Magnetic compass ___ 5 gallons of water ___ Signal flares ___ First aid kit containing injection needle ___ Solar-powered FM receiver-transmitter 2.

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Have the students complete this activity as individuals for the first 10 minutes.

Then, have the students get into groups and compare answers, adjusting their rankings, if necessary.

Show students the list that NASA compiled.

Ask them if their rankings improved after they were able to use teamwork and communicate with one another as to their choices.

NASA Solution: Items below are listed in order from Number 1 (most important) to Number 15 (least important).

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Two 100-pound tanks of oxygen. Oxygen to breathe would be the most pressing need for survival.

Five (5) gallons of water. Water is essential to all life.

Stellar map (of moon’s surface). This would be your primary means of navigation.

Food concentrate. A good source of food and efficient way to carry food is in concentrated form.

Solar-powered FM receiver-transmitter. FM needs short range and line of sight (required to communicate with mother ship).

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6.

Fifty feet of nylon rope (this will be useful in scaling the cliffs you may cross, and if anyone is injured, it would be helpful for tying them to others or to objects for transport).

7. First aid kit containing injection needle. Used for injecting vitamins through special aperture in space suit.

8. Parachute silk (provides protection from sun’s rays).

9. Life raft. CO2 bottle in raft may be used for propulsion.

10. Signal flares. Distress signal can be used when mother ship is sighted.

11. Two .45 caliber pistols. Possible means of propulsion.

12. One case dehydrated milk (duplication of food concentrate, but much bulkier to carry).

13. Portable heating unit. Useless on dark side; not needed on lighted side.

14. Magnetic compass. Magnetic field on moon is not polarized; compass worthless.

15. Box of matches. No oxygen on moon to sustain the flame; matches won’t work.

Don’t Forget: One way to determine how well both individuals and groups did on their rankings is to subtract a person’s individual ranking for an item from the NASA ranking for the item, and then take the absolute value of the difference and add these figures for every item. For example, if someone ranked water as 15 and oxygen as 2, the formula would be 2 -15 = -13; 1 - 2 = -1. |-13| + |-1| = 14. This person would clearly have done more poorly than someone who ranked oxygen as 2 and water as 3.

Wrap-Up: Many students resist working as a part of a team, but after completing this activity, they will usually agree that they make better decisions as part of a team than individually, especially when they lack expertise in a subject.

SUPPLEMENTAL IN-CLASS ACTIVITY 2: Intrinsic or Extrinsic?

Activity Overview: This activity allows students to list motivating factors and classify them as intrinsic or extrinsic.

Time Limit: 15 minutes What to Do: 1. Ask students to list as many motivating factors as they can in regard to attending college, earning good grades, and earning a degree.

2. List the motivating factors on the board.

Don’t Forget: Depending on your class, students may have a hard time thinking about what motivates them to go to school, other than to get a degree, which will lead to a job. If the students are having problems, ask them if anyone felt any pressure from parents or other members of their family to go to school, or if anyone is totally enthused about what they are learning in their classes.

Wrap-Up: Ask students to classify each factor as intrinsic or extrinsic.

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SUPPLEMENTAL IN-CLASS ACTIVITY 3: What Are You Looking for in a Job? Activity Overview: This activity asks students to express their opinions about important job criteria and compare them with other classmates.

Time Limit: 40 minutes What to Do: 1.

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Ask students to think about what is important to them in a job, ranking the following items, with 1 being the most important and 10 being the least important. (10 minutes) • Working Conditions • Quality of Coworkers/Mentors • Salary • Benefits • Location of the Job • Level of Responsibility/Challenge • Training Programs Offered • Advancement Opportunities • Job Security • Job Title Divide the class into four-member teams.

Ask each team to compare their rankings. What conclusions can they draw? While they are doing this, students could potentially go to the board or an overhead slide and mark their rankings on a table you create; this would give you an overview of the class. (10 minutes) Reassemble the class as a whole and have each group share their findings with the class. (10 minutes) Look at the list of items that people ranked highest in general. Talk about how companies can actually accomplish this. For example, how would a company provide ideal working conditions for its employees? (10 minutes)

Don’t Forget: There are no right or wrong answers to this exercise.

Wrap-Up: Wrap up the discussion by reminding students that this is the challenge in any organization as people are motivated by different things. Business owners and managers must find ways to motivate every employee, so they have high job satisfaction.

LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this

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chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

Learning Catalytics 1 Question Type: Matching Prompt: Maslow’s Hierarchy of Needs are listed below from 1-5. Another list of examples are listed from A-E. Match the example with the need it most closely resembles.

Answer/Explanation: 1. Physiological 2. Security 3. Belonging 4. Self-Esteem 5. Self-Actualization

B E A C D

A. Joining Facebook B. Buying groceries C. Seeking recognition D. Discovering spirituality E. Investing in RRSPs

Learning Catalytics 2 Question Type: Highlighting Prompt: The following scenario describes a situation confronted by a marketing team attempting to develop a new and improved product. Using your finger or mouse, highlight the passage which best represents Stephen Covey’s “Synergize” habit.

Answer/Explanation: “After struggling all morning, trying to come up with solutions based on their individual opinions, the team members decided to break for lunch. When they returned in the afternoon, they agreed that they would pool their ideas, and then come up with a solution, which represented everyone’s ideas. By the end of the day, the team had achieved its goal.”

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SUGGESTED SOLUTIONS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS 1.

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What factors are the most important to creating a team that works efficiently together? What problems have you seen in your own academic career when working in group settings, and how could they be prevented? (Bloom’s: comprehension, application) Are there personality differences between genders? Between generations? Explain your answers.

(Bloom’s: analysis) Stephen Covey’s Seven Habits model is focused on making you a more successful, efficient person.

What impact would these seven habits have on your relationships with your friends and family?

(Bloom’s: application, analysis, synthesis)

Answers: 1. Key factors include proper selection of team members; appropriate mapping of their expertise and personality to a specific role on the team; a clear definition of the schedule and responsibilities of the team; a proper use of technology to assist the team’s efficiency; and a use of best-practices in managing and conducting team business. The second part of the answer will depend on personal experience. A good answer will use the vocabulary and concepts of the chapter rather than just relate anecdotes.

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Several examples are given in the text. Additional timely examples can be found by looking for latest psychological research findings. Good answers will not however be based in anecdote or opinion.

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This will be an individualized response. Look for an understanding of all seven habits and an authentic, honest application of these to relationships.

TEAM TIME: Forming a Successful Team Notes: Answers will vary. There is no single solution. It is useful to clarify that this process is an exercise in teamwork. Do the findings of the team lend any insight to the efficiency and creativity of the group’s work on this project? Encourage students to really think about how they will map personality traits to the work that needs to be done—are there other characteristics that might also be effective in choosing team members for example, skills, past experience, knowledge about specific topics or tasks.

ETHICS AND RESPONSIBILITY: Ethics in Teamwork Discussion Questions 1. How would you handle this situation? Would you voice your objection or go along with the team?

2. If you decide to voice your objection, do you address the entire team or speak to members individually? Why? 3. How would you reconcile your role as a loyal employee and team player with your need to uphold ethical standards?

Answers: Answers to the questions for this exercise may vary, but most students will probably agree that they will speak up in this situation. Encourage a deeper understanding of the issues involved by asking

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students to write down their answers on a slip of paper—no names! Then, tally the responses. Read some of the different answers to the class then ask the class to decide which ethical code might have prompted the response.

An alternative exercise might be to ask students whether or not they have ever seen someone cheat in a class. Again, call for written individual answers; then read some of the answers to the class. Ask them to define what it is about the team process that might lead someone to act in a particular way in that situation.

CLOSING CASE: Toyota Teamwork and the Prius Discussion Questions: 1. Why do you think the Toyota Prius design team was so motivated to create the car? What needs were being fulfilled in the development and production process? Where do you think it would fall in Herzberg’s two-factor model of the workplace? (Bloom’s: comprehension, application) 2. Review Toyota’s guiding principle above, what style of leadership does this principle encourage?

(Bloom’s: comprehension) 3. Since the design of the Toyota Prius was completely new to all members of the design team, how do you think the phenomenon of groupthink affected the process? Why do you think Toyota Prius design team was ultimately successful? (Bloom’s: comprehension, analysis) Answers: 1. The Toyota Prius design team felt the excitement of a truly creative opportunity in the marketplace – a chance to bring to market something that had lingered in design for decades. The two factors of the Herzberg model are hygiene factors, such as a safe working environment, proper pay and benefits, and positive relationships with co-workers – and motivator factors like a sense of responsibility, recognition, promotion, and job growth. The level of high responsibility and open investigation and creativity afforded Prius team members would be examples of motivator factors.

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Toyota’s principle to foster a corporate culture that enhances individual creativity and teamwork value was critical to the success of this team project. It promotes a visionary and affiliative leadership style.

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Groupthink still might occur in a novel and creative project. If one set of hypotheses become the only working model, the entire group begins to judge future suggestions against that one idea.

Groupthink can be avoided depending on how the team is designed and managed. There are many possible interpretations for why the team was successful. They would include the timing of the push for the result, the previous research that the company had in place, the company’s commitment to the project and the willingness to investigate new ideas and production styles.

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SUPPLEMENTAL MATERIAL APPLICATION EXERCISES 1.

Testing 1, 2, 3 . . . Find and complete three online leadership, team roles, and/or personality assessment tools. See http://testyourself.psychtests.com/for examples. How consistent are the results in describing your personality or tendencies? How accurate would you rate the results?

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Great Leaders. Locate information about two Canadian and two American managers who you think also qualify as great leaders. You may find www.hbs.edu/leadership/database/index.html, Great American Leaders a good place to start. Select one leader of your gender, one leader of the same ethnicity, and two additional people profiled from different industries. What similarities and differences do you see in this group of four great leaders?

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Running the Family Business. Locate two Web resources that offer an analysis of the special challenges and rewards of a family-run business. Validate the sites with additional references for statements made.

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Your Emotional IQ. Review your strengths in areas of emotional intelligence by taking an online emotional IQ quiz. What roles in a business would take advantage of your emotional IQ strengths?

Which role on a team would be best fit for you?

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Evaluating Leadership Styles. Using the Internet research a person heading a national business that exhibits three of the six leadership styles presented Table 7.3. What evidence can you locate to decide whether that style is effective in his or her business setting?

Answers: 1. Student responses will vary. Look for responses that add additional facts and research over those merely based on opinion.

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Student responses will vary as their individual selections will vary. Look for responses that offer meaningful personal insight and revelations.

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Sample sites might include familybusinessmagazine.com or some resources from the Small Business Association. Be very wary of the many blogs that are available on this topic. A good answer shows the recognition of a difference between an open, non-validated blog and a professional site.

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Student responses will vary. Look for responses that support statements made with specific examples from the student’s life.

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Responses will vary. The evidence should stay away from opinion and judgments made in media and try to find specific numeric arguments to support a position.

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MYBIZLAB RESOURCES & TEACHING TIPS BIZSKILLS: Team Management Synopsis: In this BizSkill, students play the role of a quality manager at Hurley Bikes, a bike manufacturing company. They’re asked to form a team to tackle quality issues arising at the bike company.

At the end of the BizSkill, students should be able to answer the following questions: 1. What are best practices for setting goals for a team?

2. What should you keep in mind when selecting team members?

3. What kinds of habits make a person a good team leader?

DECISION-MAKING MINI-SIMULATION: Motivation Synopsis: As the new divisional manager for an apparel retailer, students are charged with turning the company’s recent poor performance around and getting this company back on track. The new divisional manager is aware that employee motivation is low and turnover is high. Using the concepts from this chapter is min-simulation helps the student apply concepts of leadership, motivation and teamwork.

DECISION-MAKING MINI-SIMULATION: Leadership Synopsis: As a divisional manager at Swazzi (a national chain of clothing stores), this mini-simulation helps students understand the concepts of effective leadership.

DOCUMENT MAKEOVERS: • Team Meeting Email • Team Performance Memo

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Chapter 7, Related Websites http://www.hci.org/

Human Capital Institute (HCI) is the global association for talent management and new economy leadership, and a clearinghouse for best practices and new ideas.

http://www.towerswatson.com/

Towers Watson is a leading professional services company that helps organizations improve performance through effective people, risk, and financial management.

http://www.eiu.com/public/

Economist Intelligence Unit is the world’s leading resource for economic and business research, forecasting, and analysis.

http://www.haygroup.com/ww/ind ex.aspx

Hay Group is a global management consulting firm that works with leaders to transform strategy into reality.

http://managementhelp.org/grp_skl l/teams/teams.htm

Free Management Library is an online integrated library for personal, professional, and organizational development.

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ENHANCING THE ONLINE COURSE Mindmap: Have your students create a “mindmap” illustrating what motivates them. A mindmap is a graphic illustration that connects several ideas together in a way that shows the relationships between the ideas. Students should use open source graphics for illustrations and link them together on the screen using lines or bars. Ask your students to submit the graphic with a written explanation about why/how each factor motivates them. What types of tasks “get them in the flow?”

Maslow’s Pyramid: Ask your students to develop one slide (PowerPoint) to illustrate Maslow’s Hierarchy of Needs with explanation in the notes feature. Have them explain Maslow’s Hierarchy to a friend or family member using the slide. You can require a short evaluation form or reaction from the friend as “proof” that the assignment has been presented.

Battle of the Theories: Divide your online class into three groups. Assign each group one of the following theories: Maslow’s Hierarchy of Needs, McClelland’s Three Needs, Herzberg’s Motivator/Hygiene.

Require each group to create an online presentation using PowerPoint slides to explain one of the theories. Ask the students to use some audio (PowerPoint has an audio feature) as well as two slides to discuss the background of the theorist. Have the projects presented “live” by requiring all students to be online at a specific time for the presentations.

Motivation Debate: Divide your online class into two groups. Have one group take the side “intrinsic motivators have more impact on job performance” and the other group to take the side “extrinsic motivators have more impact on job performance.” Use PowerPoint slides as tools for the debate with a slide from one group posted and then a response slide posted. Give the group with the most solid arguments (and/or best slides) extra points on the next exam.

Alphabet Essays: Ask your students to write three-page essays on the Theory X, Theory Y, and Theory Z theories of management. Once these have been posted, ask the students for one more essay—their own opinion of which theory is the most relevant. Give the students with most thoughtful responses extra credit on their next project.

Vroom Vroom: Have your students create a graphic to represent Vroom’s Model of Expectancy. Have them create the model, define all the terms (expectancy, instrumentality, and valence) and explain how the model works using examples from their own perspective.

Leadership Styles: Require your students to choose six leaders (preferably leaders who are good people, not just a good leader) who are examples of each of the six categories of leaders in Table 7.3. Ask the students to write a paragraph explaining how each leader matches the characteristics discussed in Table 7.3.

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CHAPTER 7 HUMAN RESOURCE MANAGEMENT CHAPTER OPENER Chapter 7 examines the human resource function of management. Planning, recruiting, training and developing are some of the aspects discussed in this framework. Scheduling, performance and compensation are also presented in terms of effectively managing human resources from an organizational perspective while meeting the needs of employees at the same time. The objectives of unions and the process of collective bargaining are included in this chapter. The chapter concludes with a look at how important demographic changes are affecting the Canadian labour force and some key legislation pertaining to human resource management is introduced.

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

2.

3.

4.

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6.

7.

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9.

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Define human resource management (HRM) and discuss how the functions of HRM support an organization.

Explain how organizations determine and plan for human resource needs.

Describe some of the methods used and issues faced by companies when recruiting, selecting, and hiring employees.

Discuss some of the ways employees are trained and how performance can be evaluated.

Describe how employees can be compensated and some of the different kinds of work schedule arrangements that are used to meet the needs of employees and the company.

Explain how employees transition through a company over time by way of promotions, transfers, retirement, and termination.

Identify the ways in which Canada’s demographics are changing and how this affects the workforce.

Outline the objectives of unions and the process of collective bargaining.

Describe some of the key legislation regulating the hiring, compensating, and managing of employees in today’s workplace.

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KEY TERMS action learning (p. 151) apprentice training (p. 150) arbitration (p. 166) bargaining unit (p. 165) behavioural interviews (p. 148) benefits (p. 154) bona fide job requirement (p. 168) boycott (p. 166) Canada Labour Code (p. 167) coaching/understudy program (p. 151) collective bargaining (p. 165) collective bargaining agreement (p. 165) compensation (p. 153) contingent workers (temporary employees) (p. 158) diversity-friendly organizations (p. 162) employee assistance programs (EAPs) (p. 155) employee information system (EIS) (p. 145) employer–employee relations (p. 164) employment agencies (p. 146) employment standards acts and labour codes (p. 167) exit interviews (p. 160) external recruiting (p. 146)

flexible benefits plans (p. 155) flexible work schedule (p. 156) forecasting (p. 145) games-based learning (serious games) (p. 151) grievance (p. 165) hiring process (p. 149) HRM functions (p. 143) human resource management (HRM) (p. 143) human resource planning (p. 144) human resources (HR) (p. 143) human resources department (p. 143) independent contractors and consultants (p. 158) internal recruiting (p. 145) job analysis (p. 145) job description (p. 145) job interview (p. 148) job rotation (p. 151) job specifications (p. 145) labour union (p. 164) lockout (p. 166) management development training (p. 151) mediation (p. 166) mentoring (p. 150)

mentors (p. 150) Occupational Health and Safety (OHS) acts and regulations (p. 168) off-the-job training and development (p. 150) officers and shop stewards (p. 165) online training (p. 150) on-the-job training (p. 150) orientation program (p. 150) performance appraisal (p. 152) performance management (p. 152) probation (p. 149) promotion (p. 158) recruitment process (p. 145) retirement (p. 160) selection (p. 148) simulation training (p. 150) strike (p. 166) strikebreakers (or scabs) (p. 166) termination (p. 161) transfer (p. 158) turnover rate (p. 160) vestibule training (p. 150) WHMIS (Workplace Hazardous Materials Information System) (p. 168) work–life benefits (p. 155) workplace diversity (p. 162)

DETAILED LECTURE OUTLINE I.

Hiring For Optimal Organizational Performance A. The Importance of Managing Human Resources 1. Why are people considered valuable company resources? a. Human resources (HR) are the people in an organization and need to be managed just as carefully as the material and financial resources of a business.

2. W hat is human resource management?

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a.

3.

4.

Human resource management (HRM) is the organizational function that deals with the people in the business, from the executives and the managers to the front-line production, sales, and administrative staff.

What are the functions of HRM? a. HRM functions encompass every aspect of the “human” in a business, including panning, recruiting, selecting and hiring, training, evaluating, compensating, scheduling, motivating, and transitioning employees.

What is the purpose of an HR department? a. The human resources department, working with other department managers, is responsible for the people in an organization and helps to maximize organizational productivity by optimizing the effectiveness of employees. b. A human resources department: develops hiring plans and recruiting policies, handles compensation and salary administration, handles employee relations, transitions, contracts, performance reviews, benefits, and pension plans develops official documentation, workplace ethics/ codes of conduct, employee handbooks, employee training programs, award/ reward programs, and community connections.

B. Determining and Planning Human Resource Needs 1. Why is it important for a company to plan for its human resource needs? a. Human resource planning is creating a strategy for meeting future human resource needs within an organization. Poor staff planning can be costly.

2. How does a company determine how many employees it needs? a. An employee information system (EIS) creates a workforce profile, in which a company can record and track employee skills and abilities to generate a “personnel inventory.”

3. How do companies identify the skills needed to perform a particular job? a. A job analysis identifies and defines in detail the particular duties and requirements of the tasks and responsibilities an employee is required to perform. b. A job description is a formal statement summarizing what the employee will do in that job role. It includes the job responsibilities, the conditions under which the job will be performed, and the job’s relationship to other functions in the organization. c. Job specifications are the skills, education, experience, and personal attributes that candidates need to possess to successfully fulfill the job role.

C. Recruiting 1. What is the recruitment process? a. T he recruitment process provides the organization with a pool of potentially qualified job candidates from which judicious selection can be made to fill vacancies. b. Internal recruiting is the process of filling job vacancies with existing employees from within the business. c. External recruiting looks outside the business to fill vacancies using various resources and methods. d. Employment agencies (which often specialize in accounting, sales, or clerical services) provide a screened pool of candidates, which reduces the hiring company’s administrative burden of recruitment.

2. What are the challenges in recruiting? a. One of the newer challenges facing recruiting specialists is the use of technology

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D. Selecting and Hiring 1. How do employers select potential job candidates from many job applicants? a. Selection entails gathering information about candidates, evaluating their qualifications, and choosing the ones that best fit the job specifications.

2. What happens when an appropriate candidate is found? a. A job interview is a one-on-one meeting of the company and the job candidate, through which the company is able to gauge the candidate’s personality, clarify information in the candidate’s résumé, and determine whether the candidate is the best match for the position. b. Behavioural interviews are conducted to evaluate a candidate’s experience and behaviours so the employer can determine the applicant’s potential for success in the job.

3. What happens after an applicant has progressed satisfactorily through all the selection steps? a. The hiring process begins with developing the job requirements and ends when a job offer is made. b. Probation is a specific timeframe (typically three to six months) during which the new hire proves their skills and worth on the job.

II. Developing Employees For Optimum Performance A. Training 1. Why is it important to train employees? a. Employee training is important for many reasons, as it often contributes to: i. increased job satisfaction, motivation, and morale among employees ii. greater efficiency in work, resulting in financial gain iii. more effective use of new technologies and methods iv. development of new strategies and products v. lower employee turnover vi. fewer interpersonal conflicts and better communication 2. What kind of training do new employees receive? a. An orientation program is used to introduce the employee to the company’s people, policies, and procedures.

3. What other training is required of new and present employees? a. On-the-job training is when employees learn skills by performing them. b. Mentoring is a form of on-the-job training whereby an experienced employee provides direction and information to the new employee as they learn the job. c. Mentors are experienced individual employees who help a less-experienced person by explaining how to perform specific tasks, creating opportunities to learn new skills, and counselling about the consequences of particular actions and decisions. d. Apprentice training program trains individuals through classroom or formal instruction and on-the-job training. e. Programmed learning is an approach in which the employee is asked to perform step-bystep instructions or to respond to questions. f. Off-the-job training and development techniques require employees to participate in outside seminars, university conducted programs, and corporate universities.

4. What kind of impact has technology had on training? a. Simulation training provides realistic job-task training in a manner that is challenging but does not create the threat of failure. b. Vestibule training is a type of simulation most suitable to airline pilots, astronauts, and surgeons, for whom making mistakes during training is not an option or is too costly.

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c.

5.

Online training, or distance learning, allows employees to take college or university classes on the Internet at their convenience, enabling them to obtain specific job-related education or to pursue a degree. d. Games-based learning (serious games) is a training method whereby employees play virtual reality games that simulate real-life events. e. Electronic performance support systems (EPSSs) automatically provide employees with information, advice, and training when they need it so they can accomplish specific tasks quickly.

How are managers trained? a. Management development training focuses on leadership, communication, teamwork, and relationship-building skills. b. Job rotation is when the employee rotates through different departments to learn firsthand the various aspects of the business. c. Coaching/understudy program is when the employee works directly with senior management in planning and other managerial functions. d. Action learning is another management development training approach, focused on solving real problems on actual work projects.

B. Evaluating 1. How is employee performance evaluated? a. A performance appraisal is an evaluation of an employee’s performance that gives feedback about how well the employee is doing, as well as where changes and improvements are needed.

2. Are performance appraisals effective?

3. Is there an alternative to performance appraisals? a. Performance management is an approach that combines goal setting, performance appraisal, and training and development into a unified and ongoing process.

III. Compensating, Scheduling, and Transitioning Employees A. Compensating 1. What is compensation? a. Compensation (payment for work performed) comes in a variety of forms, including money, bonuses, work/life benefits, health insurance, and retirement plans.

2. Are all employees compensated in the same way? a. There are many ways to pay workers for their time and effort. The most common types of compensation in Canada today are wages and salary. In addition to wages and salary, many companies compensate employees based on performance.

3. In what other ways are employees compensated? a. Benefits come in many forms and provide additional compensation to employees beyond base wages. b. Flexible benefits plans (or cafeteria plans) permit the employee to pick from a “menu” of several choices of taxable and non-taxable forms of compensation. c. Work/ life benefits help an employee achieve a balance between the demands of life both inside and outside the workplace.

4. Do most employers offer medical, pension, and wellness benefits? a. Employee assistance programs (EAPs) are employee benefit programs offered by many employers, typically in conjunction with a health insurance plan.

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b.

EAPs are intended to help employees deal with personal and workplace problems that may adversely affect their work performance.

B. Scheduling 1. What is the traditional workweek schedule? a. The traditional workweek schedule is 9:00 a.m. to 5:00 p.m., Monday to Friday.

2. What alternate work arrangements are there? a. Flextime, permanent part-time, job sharing, compressed workweek, telecommuting.

3. Why does a company hire contingent workers? a. Contingent workers (temporary employees) are individuals who are hired on an asneeded basis; therefore, they lack the status that comes from being a regular, full-time employee. b. Independent contractors and consultants are contingent workers who are generally selfemployed and are hired on a temporary basis to perform specific tasks.

C. Transitioning: Promoting, Transferring, Retiring, and Terminating 1. W hat is meant by transitioning employees? a. Transitioning refers to employee movement between jobs.

2. How can employees increase their level of responsibility in the firm? a. A promotion may be an upward or lateral move into a new position that allows employees to develop and display new skills and to learn more about the company overall.

3. Why do employees transfer within a company? a. A transfer occurs when an employee is appointed to the same or a similar position elsewhere within the organization. Transfers usually refer to a lateral move (a horizontal job assignment).

4. When do employees retire? a. Retirement is the point in a person’s life when he or she stops participating fulltime in his or her career. The average retirement age in Canada is sixty-two. About 6 percent of workers continue to work full-time after the age of sixty-five.

5. Why do employees leave their jobs? a. Exit interviews are often conducted (in person, online, or on the telephone) by an outside contractor or by HR department personnel to gather feedback before employees leave the company. b. The turnover rate tracks the number of employees that leave the company each year.

6. Why do companies terminate employment? a. Termination of employment reduces the number of employees by permanently laying off workers due to poor performance or a discontinued need for their services.

IV. Managing Workplace Diversity A. Demographic Projections 1. What are the demographic changes occurring in the Canadian workforce? a. Workplace diversity encompasses all the ways in which people differ (keep in mind that people are often more similar than they are different). b. Diversity-friendly organizations are very inclusive. They don’t just tolerate those who are different but instead celebrate their members’ differences.

2. What challenges come from hiring a culturally diverse workforce?

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a.

3.

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A more culturally diverse population naturally brings about a wider variety of religious beliefs and practices, with more employees trying to integrate their religious practices into their workday.

What challenges come from hiring a gender-diverse workforce? a. Companies that foster sponsorships of their standout women will gain a competitive advantage in talent markets around the world.

What challenges come from hiring an age-diverse workforce? a. Baby boomers (those born between 1943 and 1960) represent about one-third of the Canadian workforce. Many baby boomers indicate that they would like to, and need to, work beyond the traditional retirement age. b. Compared with younger workers in the same position, older workers often expect higher salaries and better benefits.

B. Diversity-Friendly Organizations 1. How is a diverse workforce beneficial? a. It is now becoming clear that companies should embrace diversity as a strategy and a resource to become more competitive in the global market.

V. Employer-Employee Relations A. Labour Unions 1. What is meant by employer–employee relations? a. Employer–employee relations refer to the communication that takes place between employers and employees.

2. What are the objectives of labour unions? a. Labour unions formed to fight for better working conditions and employee rights.

3. How are labour unions structured? a. A bargaining unit is a group of employees who negotiate with the employer for better working conditions or pay. b. Officers and shop stewards are elected by union members to make decisions for the entire body and represent the members in dealings with management.

B. Collective Bargaining 1. What is the collective bargaining process? a. Collective bargaining is a process in which workers (through a union) negotiate with the employers for better work conditions and terms of employment. b. A collective bargaining agreement is the result of union–employer negotiations and forces the employer to abide by the conditions specified in the agreement.

2. What happens if an agreement cannot be reached through collective bargaining? a. Mediation is a process that involves a neutral third party that assists the two parties both privately and collectively to identify issues and to develop proposals for resolution. The mediator works with both sides to understand their genuine interests and helps each side generate proposals that address those interests. b. Arbitration is a process in which the disputing parties present their case to a third party intermediary (or a panel of arbitrators) who examines all the evidence and then make a decision (usually binding) for the parties.

3. What happens when negotiations break down? a. Union members and those sympathetic to their cause can stage a boycott, in which supporters refuse to buy or handle the company’s products or services. Companies can

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4.

use a lockout in which management refuses to allow union members to enter the work premises. b. A strike occurs when union workers agree to stop work until certain demands are met.

As a last resort, union workers may vote to go on strike and agree to stop working. c. Strikes jeopardize the productivity of the organization, so they are used to force management into making concessions that they may not have made otherwise.

What is the future of unions and employer–labour relations? a. In response to a more globalized working community, unions have begun to build alliances worldwide.

C. Human Rights and Labour Laws 1. How do laws and regulations affect human resource management? a. In Canada, laws related to unionized workplaces (collective labour law) differ from those relating to non-unionized workplaces. (In most countries, however, no such distinction is made.) There is a constitutional division between the federal government and the governments of Canada’s ten provinces and three territories. b. The Canada Labour Code (at the federal level) and the provincial Employment Standards Acts and Labour Codes (at the provincial level) define the rights and obligations of individuals as workers, union members, and employers in the workplace.

2. How does the Canadian Human Rights Act affect recruiting practices? a. Canadian Human Rights Act promotes equal opportunity and prohibits discrimination and a wide variety of practices in recruiting, selecting, promoting, and dismissing employees or prospective employees. An ability genuinely needed to perform a job is called a bona fide job requirement. A person who lacks such a necessary ability can be legitimately denied employment (e.g., a person with a visual impairment will be denied employment as a bus driver).

3. Does employment equity mean that every employee receives the same pay? a. The Employment Equity Act applies to federally regulated industries. The act states that no person shall be denied employment opportunities or benefits for reasons unrelated to ability. It seeks to improve the employment conditions experienced by women, Aboriginal peoples, persons with disabilities, and members of visible minorities.

4. Are employers expected to provide employees with a safe work environment? a. The Occupational Health and Safety (OHS) Acts and Regulations are enabled at the federal, provincial, and territorial levels and are designed to secure workers and self-employed persons from risks to their safety, health, and physical well-being arising out of, or in connection with, activities in their workplaces.

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SUGGESTED SOLUTIONS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Employee Retention (How Can Employers Keep Their Top Performers?)

Discussion Questions: 1. What would make you want to quit your job? (Bloom’s: knowledge, analysis) 2. Besides the cost involved in hiring and training a new employee, what other losses might a company incur when a new employee does not work out and is asked to leave? (Bloom’s: comprehension, application, analysis) 3. What do you think is the biggest motivator for most employees—money, interesting work, recognition on the job (employee of the month), or something else? Which incentives most appeal to you? (Bloom’s: knowledge, comprehension) Answers: 1. Answers will vary. Some considerations are likely to be: offered a better position elsewhere, disagreement with colleagues, discontent with working conditions/environment, burned out or need for career change, limited prospects for development.

2.

Besides the costs of recruiting a replacement, the new employee may steal something, or leave with valuable company secrets that could be taken to a competitor. The employee may be angry with the company and spread negative word-of-mouth. The employee may post negative things online about the company. The company loses the time it takes to recruit a replacement.

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3.

Answers will vary. It varies among people, depending on what they value. The answer will also depend on an individual’s life circumstances and needs or wants at that time in their life.

BIZCHAT: What Is Recruiting 2.0?

Discussion Questions: 1. Do you think it is appropriate for an employer to view your Facebook page before an interview or before they hire you? Why or why not? If an employer viewed your Facebook page, do you think it would affect their decision to hire you? Why or why not? (Bloom’s: knowledge, analysis) 2. Have you established an online “professional” image using a professional networking tool such as LinkedIn? If you don’t have an online image now, do you think you should create one? What will it say about you? What can you do to ensure your online image is portraying you in a positive way to potential employers? (Bloom’s: synthesis) 3. Some people say they don’t care what others think of them. Should you care about what others think of your online image? Why or why not? (Bloom’s: comprehension, synthesis, evaluation) Answers: 1. Answers will vary. Hopefully students will begin to recognize that their online image may impact potential job opportunities if not done professionally. Students need to know that the photos they post today will not disappear. When something is put on the Internet anyone can gain access, copy it and it can show up many years later. There are privacy settings on some social media sites, but students need to be careful they are using the unlisted, unpublished, or private settings correctly.

They also need to know that some of these free social sites, change the settings at will, and/or provide disclaimers that state the company owns any material posted there. Students should review anything they’ve posted online and remove the types of photos, blogs, and videos that will not make a good first impression with a potential employer. Use “pseudo-names” for personal content/friends/family and use your real name when posting professional image enhancing data.

2.

Answers will vary. Students should establish an online presence because in today’s technological world more and more companies are recruiting through online systems and searching for candidates in various social media and networking tools online. It is important to create a brand or image of oneself that aids in attaining future career goals. Students should create an e-portfolio at LinkedIn, JobTac, OptimalResume, or another service site that will show off their skills. They should build links back to their portfolio site so that when searches on their names are done their portfolio site comes up on top and any not-so-positive information about them gets lost at the bottom of the pile.

3.

In business, we have to care about how others perceive us to a certain degree if we wish to get ahead in our careers. An unprofessional image or unethical behaviour may reduce a person’s chances of obtaining employment, remaining employed, or receiving promotions.

BETTER BUSINESS, BETTER WORLD: The Home Depot Canada Foundation Discussion Questions: 1. What advantages might The Home Depot or any other organization gain by engaging in philanthropy (good will, charity)? Are there any disadvantages to doing so? (Bloom’s: analysis)

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2.

3.

With Team Depot, employees volunteer their time and talents to work on community projects. How might this lead to improved employee motivation and job satisfaction? (Bloom’s: synthesis) How do philanthropic initiatives influence the employee-employer relationship? Do you think employees would view such a volunteer program as a positive or negative workplace initiative?

Why? (Bloom’s: synthesis)

Answers: 1. There are many advantages which arise from corporate philanthropy. There is an increased positive public company image which helps to retain existing customers and attract new ones. This can bring in more revenue for the company. Investors are content because higher sales translate into higher dividends for them. As a company brings in additional revenues it has more money to expand, to develop and offer new products and services, and to increase philanthropic activities. The community gains through the good will activities of the company, the investors gain in increased dividends, the employees gain in job stability and possibly wage increases, and consumers gain in a higher quality of life through better and diverse products and services.

2.

Employees may feel they are part of an important team, they are helping others, they feel valued and their self-image rises. Employees feel they work for a company that cares about the community in which the employees live which makes them proud to work for such an employer. The feel their jobs are meaningful and they are making a worthwhile contribution by being part of the company team.

These feelings motivate employees to do a good job and increase satisfaction which helps the company with retention and creating a positive corporate culture.

3.

Answers will vary. Most employees will view company philanthropic initiatives as a positive thing.

When employees think of their employers as having goals beyond simply making profits a new respect for the employer may occur. When employees are part of the philanthropic initiatives they feel listened to, valued as an employee, and that they are on the same team as the boss; all of which improve relationships between employees and employers.

ON TARGET: One Diversity Training Does Not Fit All Discussion Questions: 1. What might happen to companies that don’t diversify their workforce? (Bloom’s: application) 2. Are most people unbiased and unprejudiced by nature or is this something they have to work at?

(Bloom’s: application) 3. Why do you think a combination of approaches to diversity training seems to work best? (Bloom’s: comprehension, analysis) Answers: 1. If companies don’t diversify their workforce they may lose market share to competitors. The will fail to take advantage of key skills and abilities brought to the company talent pool. Consumers may see the company as outdated and perceive them to be diversity adverse; and many of those consumers will come from diverse groups. A diverse workforce brings a wider array of information to help solve problems and can provide insight into how to market products to a wider range of consumers.

2.

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It is the nature of the human race to be cautious in situations of change or where differences are apparent. Human beings often find it difficult to understand or accept differences and may fear

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change or differences. This leads humans to form unsubstantiated, generally incorrect, opinions or biases.

3.

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A variety of diversity training approaches works best because of the complex and diverse nature of the human workforce. Not all approaches are effective for all employee groups; having a variety of approaches generates greater participation, enthusiasm, and acceptance.

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IN-CLASS ACTIVITIES Activity

Description

Time Required

Reference

Bloom’s Taxonomy

Team Time: Seeing Both Sides

Students debate the effectiveness of Walmart’s human resource practices.

30 min

Page 239

Knowledge Comprehension Analysis

Ethics and Responsibility: Ethics of Interviewing

Students discuss whether or not it is ethical to use questions that are technically legal, but that are designed to elicit the same information as illegal questions.

30 min.

Page 239

Knowledge Comprehension Analysis

Supplemental In-Class Activity 1: Mopping the Floor

Students prepare a job description for the job of janitor

30 min.

IM – see below

Knowledge Application

Supplemental In-Class Activity 2: Résumé Workshop

Students prepare a résumé to bring to class. In class, students exchange feedback on their resumes.

20 min.

IM – see below

Knowledge Application Analysis

Supplemental In-Class Activity 3: Organize or Die

Students debate the pros and cons of joining a union.

25 min.

IM – see below

Knowledge Comprehension Analysis Application

Supplemental In-Class Activity 4: Work Romance Supplemental In-Class Activity 5: Disgruntled Employees at Café Olé

Role play

30 min.

IM – see below

Role Play

30 min.

IM – see below

Knowledge Comprehension Application Knowledge Comprehension Application

Learning Catalytics

This activity allows students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

Any level of Bloom’s Taxonomy

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

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SUPPLEMENTAL IN-CLASS ACTIVITY 1: Mopping the Floor Activity Overview: Students prepare a job description for the position of janitor.

Time Limit: 30 minutes What to Do: 1. Divide students into groups of four or five.

2. Refer students back to the definition of job description within the chapter.

3. They are managers, working for a small business, in need of hiring a new janitor. They have been given the responsibility of developing a job description. Have them discuss what information they should include on the job description (15 minutes).

4. Have groups discuss results with class (15 minutes).

Don’t Forget: Students should cover the key job functions and skills required for the position, education and/or training requirements, work hours and work conditions, salary, etc.

Wrap-Up: Have groups discuss their job descriptions and also discuss what they found difficult in completing this assignment.

SUPPLEMENTAL IN-CLASS ACTIVITY 2: Résumé Workshop Activity Overview: Students prepare and give feedback on résumés.

Time Limit: 20 minutes What to Do: 1. Place students into pairs. If you have an odd number of students in your class, a group of three is okay.

2. Students should exchange résumés and provide feedback on the organization and appearance, as well as content of the résumé.

3. Remind students that spelling, grammar, punctuation, and capitalization are particularly important on a résumé.

Don’t Forget: Students will need to prepare a résumé in advance. You can select a job that you think might interest most students. Some instructors clip employment advertisements from the local newspaper.

Wrap-Up: Remind students that employers often decide who to interview based on the content and appearance of their résumé.

SUPPLEMENTAL IN-CLASS ACTIVITY 3: Organize or Die Activity Overview: Debate on the pros and cons of joining a union.

Time Limit: 25 minutes

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What to Do: 1. Divide the class into groups of four or six.

2. Tell the group that the president of the AFL-CIO, John J. Sweeney, repeatedly told his followers that they had to “organize or die.”

3. Have half of the groups discuss the pros of joining a union. Have the remaining groups list the cons of joining a union (10 minutes). Do unions have a place in today’s workplace?

4. Have groups discuss answers with class (15 minutes).

Don’t Forget: Remind students how unions are established and discuss the collective bargaining process and what happens when collective bargaining fails.

Wrap-Up: Discuss the impact unions have had in establishing work place standards. At this point, you may want to mention some of the laws related to union organization.

SUPPLEMENTAL IN-CLASS ACTIVITY 4: Role Play: Work Romance Qi Yu is struggling in her job as receptionist with Crossbow Tri-Star. She feels her manager often speaks to her in an inappropriate way. His tone and facial expressions lead her to believe he is trying to flirt with her. She feels uncomfortable in this situation. She believes it is not a good idea to date someone in your workplace for fear or complications if the relationship ends. She also does not feel attracted romantically to her manager.

What do you think? Should she quit her job? Should she look for another job first, then quit? What would you suggest she do? Should she talk with her manager? Should she file a complaint with HR? Should she file a complaint with the police? Should she do nothing and hope the behaviour stops? Should she flirt back with her manager just a little to avoid hurting his feelings?

Take it a step further: Assume Qi decides to speak with her manager about this situation. Role-play this scenario with another student. What will you (Qi) say? How will you (Qi) say it? What will the manger (other student) say? How will the manager (Other Student) say it?

Take it another step further: Assume that after Qi discusses her thoughts with her manager he becomes cold and somewhat rude. About a month goes by then one day he tells Qi she is no longer needed as his receptionist.

Actions & Reflections: In a group, discuss answers to the following questions. Submit in writing (email or memo) to your professor answers to the following questions or conduct a group discussion in class.\ a) b) c) d) e) f) g)

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Could this situation have been avoided? If so, how?

Can Qi do anything now to keep her job? Should she try?

What legalities should she consider?

What should her manager do? What legalities should he consider?

How could the HR department have helped? Could anyone else have helped?

How do you think Qi feels? How do you think her manager feels?

If you found yourself in a similar situation (either as Qi or as her manager) how would you handle it? What would you do differently?

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SUPPLEMENTAL IN-CLASS ACTIVITY 5: Role Play: Disgruntled Employees at Café Olé Two employees, Leo and John, got into a verbal disagreement today in the café. The disagreement turned physical and they ended up fighting in front of customers. John yelled to the manager, “I quit!” then stomped out of the store. Leo stomped off to the back of the store and into the manager’s office. Neha, the waitress on duty, noticed right away that there was no one left working behind the counter so she moved quickly into John’s position to serve the long line-up of waiting customers.

Take it a step further: Assume Leo has never acted in this manner before and appears very upset by the incident. With another student, role-play the conversation between Leo and his manager. What will the manager say to Leo? What will Leo say? What should the manager do in this case?

Take it another step further: Assume that John has acted unprofessionally before and has already had one verbal warning and one written warning about his behaviour. The manager feels John’s employment must be terminated.

Actions & Reflections: In a group, discuss answers to the following questions. Submit in writing (email or memo) to your professor answers to the following questions or conduct a group discussion in class. a) What should the manager do now? With Leo? With John? Give 3 alternative ways this situation could be handled. What are the pros and cons of each? b) Did this situation negatively impact the business? The customers? The staff? The manager? Leo? John? How do you know? c) What legalities should the manager consider? d) Which plan of action is the best one to follow in this situation? Why? e) How could this situation have been avoided? f) What lesson(s) do you think the manager learned from this incident? g) What might the manager do differently the next time?

LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

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Learning Catalytics 1 Question Type: Multiple Choice Prompt: Which of the following is the last step in the hiring process before making the final decision? a) Conduct background checks b) Conduct initial and follow-up interviews c)

Test for job skills

d) Determine initial pool of applicants

Learning Catalytics 2 Question Type: Confidence Prompt: A survey, which took place between 2008 and 2012 produced the top ten reasons in which people got fired from their jobs. Which of the following is the number one reason for employee termination?

Students may choose one answer if they are confident in it being correct, or they can choose any number of which they think may be the correct answer. a) Drug or alcohol abuse b) Inability to actually do assigned job tasks c)

Talking too much and conducting personal business at work

d) Dishonesty, evasion or lack of integrity on the job

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SUGGESTED SOLUTIONS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS 1.

2.

3.

4.

5.

Discuss how human resource management can help a company achieve or maintain a competitive advantage. How does human resource management help a company maintain a healthy bottom line?

(Bloom’s: application) Discuss the various types of training you have had as an employee or student. What suggestions would you make to improve the training? What parts of the training did you find to be most effective? How important is training employees to a company’s overall goals and strategies? Why not just let employees learn their jobs as they perform them? (Bloom’s: application, synthesis) Describe the “perfect” benefits package that would be most important to you when applying for a job. What kinds of questions could you ask to determine how and when those benefits will be offered to you? How does salary/pay level affect your decision? Would you accept a lower salary/pay level for better benefits? (Bloom’s: synthesis) When Leslie was given the task of finding a new senior account executive, she weighed her options carefully. To fill such a senior position required patience. She hired a recruiter to find outside candidates to interview for the position, and, to keep her options open, she also placed job postings online and in newspapers. (Bloom’s: application) a. What are the benefits of outsourcing the recruitment process? b. What other methods could Leslie have used to fill the position? c. What else is involved in the hiring process?

Look at the following statements and think about what your reaction to the statements tell you about yourself.

• Everyone, including white males, benefits from diversity training.

• Diversity training only includes race and gender.

• Certain ethnic groups are smarter than others.

• Talking about diversity just makes people uncomfortable.

• Some professions are not suited for older people.

Have your feelings on the importance of diversity changed after reading this chapter? What challenges, and benefits, have you encountered or do you anticipate encountering in the workplace?

(Bloom’s: application, analysis)

Answers: 1. Human resource management can help a company achieve or maintain a competitive advantage and a healthy bottom line by ensuring that staffing meets the needs of the organization in a timely and efficient manner. Being overstaffed burdens a company with unnecessary expenses; on the other hand, understaffing can lead to a loss of sales and competitiveness if customer needs are not met on a timely basis.

2.

Answers will vary depending on student experiences with training. Answers should include chapter concepts such as: training helps employees get it right—increased quality, efficiency, and customer service.

3.

Answers will vary depending on the student’s opinions, but when discussing benefits, student answers should mention that “good” benefits include health and disability insurance, vacation and sick pay, and retirement plans. In addition, some students might feel that it is important to address

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work/life benefits such as flexible hours, ability to work from home, on-site child care, etc. As well, what an employee considers to be “good benefits” is based on the needs and wants of that individual.

4.

The main benefit of outsourcing is that no internal resources are required which frees up people, time, resources, and money that can then be assigned to other projects. As well, outsourcing recruitment to a recruiting agency means giving the job to the experts. Agencies are well experienced in this field, have many contacts and methods of recruiting and placing the right people in the right jobs so if a company lacks that type of personnel within the organization then outsourcing is a good choice. Sometimes agencies have a trial period so that if the person they’ve selected is not working out the company can ask for a replacement which takes some responsibility off the company. Once Leslie decided to hire externally she could use many of the methods of recruitment discussed in the chapter, such as: newspaper ads, online ads, online searches at various job sites, referrals from employees, posting the job ad on the company website, HR database of previous applicants, etc. The hiring process, discussed in the chapter, includes not only the search for candidates, but the selection process, interviews, reference checks, making a hiring decision and offer, negotiating wages and benefits, orientation, and training.

5.

Answers will vary. The purpose of this exercise is to have students critical analyze their own reaction, understanding and interpretation about issues involving diversity.

TEAM TIME: Seeing Both Sides Notes: Walmart has had a number of class action lawsuits involving sex and wage discrimination in the last five years. In addition, there have been issues about hiring illegal immigrants, unfair wages paid to overseas workers, lack of employee benefits, unpaid overtime employment, and even locking employees into stores at the end of their shifts. On the other hand, Walmart has also hired hundreds of HR employees to support store workers, and they are implementing technology to improve communication between employees and managers. Employee satisfaction surveys are conducted regularly, and managers work to improve the results.

ETHICS AND RESPONSIBILITY: The Ethics of Interviewing Notes: When students discuss their answers to the questions presented in the case, ask them to consider why an employer might be asking “suspect” questions. For example, many employers ask about children because of the assumption that if someone is a parent, they are likely to miss more workdays than someone who is a non-parent. Asking for the information you really want, in the form of an experiential question, such as “How many days did you miss of work over the past year, and for what reason?” is going to get at the question directly, and provide better interview results as well.

CLOSING CASE: The Toyota T-Ten Program Discussion Questions: 1. Other car companies, such as GM and Ford, have similar training and technical schools. Why is it so important for companies in the automotive industry to generate qualified potential employees?

(Bloom’s: application, analysis)

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2.

3.

The text mentions that apprentice training programs are common for occupations such as electricians, roofers, plumbers, as well as auto mechanics. Why do you think the apprentice style of training is important to individuals in those fields? How can workers in those vocations benefit from both onthe-job training and classroom training? (application) Why is ongoing employee education important to Toyota? Why should it be important to any company in the automotive industry? Does the idea of ongoing education apply to all companies in all industries? Why or why not? (Bloom’s: comprehension, application, analysis)

Answers: 1. If the automotive industry is dependent on service for profits, they have to have employees who are able to provide that service. As cars become more complex and specialized, it is in each company’s best interest to create its own service employees.

2.

Apprentice training is important for electricians, roofers, plumbers, and auto mechanics because these are all hands-on jobs. It is critical for someone who is just learning the position to try out new techniques under the watchful eye of someone who is experienced. That prevents danger to both the worker and the customers. Classroom training is important so that people can understand why taking a particular action makes sense. For example, it is as important for an electrician to understand how current moves through a circuit as it is for him to be able to install a new electrical outlet.

3.

Cars and service techniques change constantly. For example, today’s cars all have computers for running dashboard controls. Diagnostic equipment is increasingly complex and mechanics have to stay on top of new developments. Again, the industry is invested in having people use service from dealerships, because that is where dealers make most of their profits. (It might be fun to illustrate this by collecting a few of the dealer service coupons you receive in the mail over the course of the month and asking students why dealers would invest so much money in that particular form of advertising.)

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SUPPLEMENTAL MATERIAL APPLICATION EXERCISES 1.

Job Description. Create a job description and job specification for a job of your or your professor’s choosing. Start with a job analysis. You’ll probably need to ask your professor some questions.

2.

Staffing Agency. Locate a staffing agency near you and phone them and ask for information about their recruitment and placement services. Enquire about the processes the agency uses to register, interview, test, and place (find a suitable job for) a job applicant. Does it cost money to register for a job with the agency? What skills must you have? What does t he interview process entail? What types of tests do they use? Do you notice similarities between the procedures the agency uses and those discussed in this chapter? Did you notice processes that were different from those discussed in this chapter? Do you think you might be interested in registering with a staffing agency once you graduate? Why or why not?

3.

Wrongful Dismissal. Find a recent case (within the past one to five years) of wrongful dismissal at a company in Canada or the United States. Read about it and gather some details. Determine what went wrong. Where did either the employer or employee make mistakes? Could this situation have been resolved earlier, before the employee was fired? Is the employer or employee right? What did the courts say? Summarize your findings.

4.

Organized Labour. The Canadian Labour Congress represents the interests of more than three million affiliated workers in every imaginable occupation. Explore The Canadian Labour Congress website (www.canadianlabour.ca). What are its current concerns and causes? How does one become involved in this organization? What about its history? Which historical, political, and social forces propelled the organized labour movement?

5.

Legal Matters. Visit the Canadian Civil Liberties Association (http://ccla.org) to find information about current issues concerning employee rights, anti-discrimination laws, or other HR concerns.

What are the circumstances of these cases? What is your opinion on them?

Answers: 1. Answers will vary. Students should include tasks performed by professors, skills and character traits required to be a good teacher. Traits might include: patience, self-starter, self-motivated, self-directed, creativity, innovation, and adaptability. Skills might include: time management, people skills, leadership, problem-solving skills, and project management. Tasks might include: lecturing, developing curriculum, grading assignments, coaching students, advising students, presenting, working in teams, researching, working with diverse student populations, etc.

2.

Answer will vary on whether or not students wish to register with an agency after they graduate, but students might consider this a great way to gain work experience, make industry contacts, gain work references, and as an opportunity to try-out different types of jobs and companies within their field of study before deciding where to work. It should not cost money to register with most staffing agencies. They are seeking individuals to add to their talent pool so they are able to fulfill company (client) orders for personnel. Agencies use the same or similar processes as discussed in the chapter.

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Most agencies have a new recruit register with them, perform skills assessments, complete an interview, and supply references for reference checks.

3.

Answers will vary. Often wrongful dismissal cases occur from lack of understanding between employer and employee. It may be that a company does not have clear policies in place or that the job expectations were not fully explained to the employee (or put in writing). It may also be that the company did not follow the law when dismissing the employee or did not document events and misbehaviour appropriately.

4.

Student answers will be a result of researching the website. The Canadian Labour Congress brings together Canada's national and international unions, the provincial and territorial federations of labour and 130 district labour councils. To get involved you can join the mailing list and attend events; if you wish to do more, you can attend a rally, talk to your MP, or attend an information session. Some of the current issues the CLC is dealing with include: child care, health and safety, labour and migration, trade, chemical hazards and cancer prevention, climate change and energy, green jobs, the manufacturing crisis, threats to democracy, sweatshops, and violence against Trade Unionists.

5.

Answer will vary. Cases revolve around rights to healthcare, police accountability, and duty of fairness in the immigration sponsorship regime.

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MYBIZLAB RESOURCES & TEACHING TIPS BIZSKILLS SIMULATION: Hiring a New Employee Synopsis: In this BizSkill, students play the role of an HR rep at a small medical products company named QueStar, with a staff of 150 and a sales force of 20. They’re asked to hire a new employee to increase sales revenue by 15 percent.

At the end of the BizSkill, students should be able to answer the following questions: 1. How is a job description created?

2. How can I gather resources to locate appropriate candidates?

3. How do I evaluate résumés?

4. How do I conduct a candidate interview?

5. How can the art of negotiation benefit my hiring practices?

DECISION-MAKING MINI-SIMULATION: Human Resources Synopsis: TriState Dairies is a regional dairy products manufacturer that packages and sells dairy products. The company sells and distributes its products to retail and foodservice customers in New York, New Jersey, and Connecticut. Over the past three years, the company has experienced increased customer complaints about its delivery drivers, most relating to their appearance and behaviour. There has been a marked increase in accidents involving company vehicles. Repairs and maintenance expenses have increased sharply.

DOCUMENT MAKEOVERS: • Health Insurance Changes Memo • Letter to Recruiting Department • McBride Letter from HR • Reducing Absenteeism • Resume

CAREER SKILLS: Chapter 8 Online: Finding a Job Virtually all students want to get a job after they finish college – for some, it may be their first job, while others are looking for career advancement. In this chapter, students learn to effectively market themselves, search for jobs, and interview and negotiate with a company so that their future job searches will be successful.

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Chapter 7, Related Websites http://www.cchra.ca

The Canadian Council of Human Resources Associations (CCHRA) is a collaborative effort of human resources associations from across Canada.

http://www.hrpa.ca

The Human Resources Professionals Association (HRPA) is Canada’s largest HR association. In Ontario, HRPA regulates the HR profession and issues the Certified Human Resources Professional (CHRP) designation, the national standard for excellence in human resource management.1 Other provinces also have associations.

http://www.hrreporter.com

The Canadian HR Reporter is a guide to human resource management and contains real-world stories, problems and solutions, expert advice, research and resources and much more.

http://www.shrm.org

The Society for Human Resource Management (SHRM) is the world’s largest association devoted to human resource management. The society serves the needs of HR professionals and advances the interests of the HR profession.

http://laws.justice.gc.ca

Department of Justice, Canada, is the online source of the consolidated Acts and regulations of Canada--Canadian Charter of Rights and Freedoms, Employment Equity Act, Pension Benefits Standards Regulations, Health and Safety Regulations, etc. The consolidations are generally updated on a weekly basis.

http://www.chrc-ccdp.ca

The Canadian Human Rights Commission administers the Canadian Human Rights Act and is responsible for ensuring compliance with the Employment Equity Act and the Charter of Rights and Freedoms. Both laws ensure that the principles of equal opportunity and non-discrimination are followed in all areas of federal jurisdiction. The provinces and territories have similar laws forbidding discrimination in their own jurisdictions.

http://www.esdc.gc.ca/eng/home.shtml

Employment and Social Development Canada is a department of the Government of Canada. The department produces independent and objective research studies in support of its policy development work.

http://www.labour.gc.ca

The federal Ministry of Labour is responsible for ESDC’s Labour Program and thus is responsible for the Canada Labour Code, the Employment Equity Act, the Federal Mediation and

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Conciliation Service as well as the implantation of health and safety legislation. Each province and territory has its own Ministry of Labour. Links to these sites can be found at the Labour site. http://www.ccohs.ca/

Canadian Centre for Occupational Health and Safety is a nonprofit federal department corporation and is governed by a tripartite Council—representing government, employers and labour—to ensure a balanced approach to workplace health and safety issues.

http://www.statcan.gc.ca/

Statistics Canada produces statistics that help businesses, unions and non-profit organizations, as well as individual Canadians make informed decisions.

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ENHANCING THE ONLINE COURSE HR Challenge: Have your students create a graphic illustrating the functions of Human Resources (planning, staffing, recruiting, training, motivating, evaluation, compensation, termination, and repositioning). The graphic can utilize photographs, illustrations, or any other visual technique using open source materials. Have the students define each function and explain the needs of the function in words.

Description vs. Analysis: Require your students to differentiate between a job description and a job analysis. Ask them to provide examples of each; to discuss the differences between the two; and to explain the reasons for using each one. Have the students post this project on the discussion board.

Resources Scavenger Hunt: Ask students to create a list (a resource sheet) of the hiring resources in their location. This should cover all the resources listed in the text, as well as others gleaned from the Internet.

The specific names, addresses, websites, telephone numbers and other associated links should be submitted by the student. This project will be invaluable to the student later on when he/she is looking for employment. Have the students submit this as a graded project to be sure they complete it.

Technology Pros and Cons: Ask your students to elaborate on the Pros and Cons of using technology as a recruiting tool, as discussed in the text. What other alternatives might be more effective? Have your students post their results on the discussion board.

Hiring Hierarchy: Have your students create a model of the six part hiring process; be sure to require that they explain each step fully. Ask them to describe a situation in which they were seeking employment. Did the company representative go through all the steps? Was it a large or small company?

What steps did the company use in hiring? Was the student actually hired? If not, why does the student believe he/she was not hired? Have the students submit this as a project for a grade.

Practice Interview: Have your students search the Internet for a job announcement/ad for which they would like to be hired in the future (their “dream” job). Have them answer (in writing) all the questions listed in the text under interview questions. Ask them submit these to you for a grade.

Hiring Laws: Have your students create a chart reflecting all laws that affect hiring. The column headings should be: Law; Date; Prohibition; Hiring Implication. Have them submit the final chart to you for a grade.

Training Types: Have your students list and define each type of training, including diversity training.

Post the results on the discussion board.

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BONUS: CASE STUDY Created by Kerri Shields The following case permits professors to assign an introductory level, comprehensive, case that delves deeper than simply the basic level of understanding. This case revolves around a staffing problem within a call centre and directs students to conduct research, identify business problems, use analysis tools, identify possible solutions, and make recommendations. The explanation of the case analysis method (below) is a great introduction to cases that should be shared with students.

CASE ANALYSIS: STAFFING A CALL CENTRE CASE ANALYIS METHOD: A business case involves making decisions about how a business should handle a particular challenge or opportunity. Business cases can be brief or extensive and may range from 2 to 30 or more pages in length. Brief cases usually involve less research than comprehensive cases do and usually take less time to complete. Cases can be complicated containing a variety of factors and situations that must be identified and analyzed using deductive reasoning. Learning through the use of cases, students build valuable career skills in researching, analyzing, questioning, reasoning, making judgments and inferences, deducing and proposing solutions, and solving problems.

Case studies can expose learners to a wide variety of businesses and situations.

Professors using case-based teaching strategies may assign a case to students before class to give them time to deliberate, research, and form opinions and alternative solutions to problems. During class students might be asked to present their findings and conclusions. On the other hand, professors might assign a case in class for all students to work on in a collaborative effort, analyzing the problem situations and proposing solutions based on careful consideration of all factors affecting the business situation. There are many strategies and processes used to solve business cases.

To solve this business case follow the instructions provided below unless your professor indicates otherwise. The businesses within this case are fictitious, but mimic real-life businesses functioning within their respective industry. Alternatively, your professor may wish to replace the fictitious company names with real-life company names.

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YOUR TASKS: TASK 1: GET FAMILIAR WITH THE CASE DETAILS Read the case details (UCAN and Staff-4-You) then try to figure out if there is a problem or opportunity occurring. Ask yourself, who is doing what to whom? What seems to be the problem or symptoms of the problem? Note the important details in the business case--time lines (when), where, and how things are occurring. What is the main problem or problems? What are the parameters (characteristics, factors, aspects or elements) of the problem and what constraints (limitations or restrictions) are given or inferred? Record your findings.

UCAN DETAILS: UCAN manufactures, distributes, and markets transportation fuels, heating oils and petrochemicals. With over 700 gas stations in operation across Canada, UCAN recently decided to start a customer rewards program. UCAN-Points is a customer appreciation and rewards program whereby customers accumulate points each time they purchase gas for their automobiles or any other merchandise at any UCAN gas station. The company has begun a promotional campaign and a new UCAN-Points call centre is expected to open in two weeks. The project manager, Kayleigh O’Reilly, has established the location for the new UCAN-Points call centre and the desks are arriving in one week with the call centre equipment arriving soon after that.

UCAN currently has 50 call centre representatives working in its UCAN credit card sales and customer service area. This area offers service to existing customers who own a UCAN credit card. It also promotes the use of its credit card to potential new customers through mail and phone campaigns. This centre is working at maximum capacity; however UCAN has a smaller call centre located in a different province operating at only 75% capacity (not as many customers).

To staff the UCAN-Points call centre, Kayleigh, plans to hire 25 new sales and service representatives. The new call centre representatives will be phoning existing UCAN credit card holders to inform customers that this program is available free of charge and persuade customers to join (sales skills). If customers wish to register, the representative will enter the details into the computer system (technical skills) while the customer is on the phone then confirm with the customer that his or her new rewards card will be arriving in the mail within five business days. Not only will these employees being contacting customers, customers will be contacting them either to ..

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request a points card or to ask questions about the program and use of the card (customer service skills).

UCAN is concerned about successfully recruiting 25 call centre representatives within this tight, two week deadline. UCAN is also concerned about training these new employees on the call centre computer system. The call centre representatives will need customer service skills, sales experience, and will have to learn about the product— UCAN-Points reward card. Learning about the product should be fairly easy since there will be a booklet at each of the workstations explaining the points system.

The Human Resource department at UCAN informs Kayleigh that the online advertisement for call centre representatives, paying minimum wage, was placed and out of the ten applicants that applied two applicants successfully made it through the interview and screening process and have been hired. The applicant database has run dry and they have no other applicants on file who meet the job requirements. The HR manager then asks if the job advertisement should be run again in the newspaper as well as online. Kayleigh is not sure what to do.

Another issue has arisen; the person who was promoted to be the new call centre manager is missing in action. The company has been trying to contact this employee for the past two weeks and has been unsuccessful. The company is not sure whether this employee has quit or some crisis has occurred. Today, the absent employee sent an email to the HR manager. It simply said, “I am out of the country clearing up a personal problem and may be here for a few months.” The HR manager is considering what to do about this employee’s unapproved, abrupt absence. In the meantime UCAN is in need of a call centre manager for at least the next few months and possibly permanently. The call centre manager candidate needs to have people and project management experience, well developed customer service skills, employee management skills, sales experience, and much more. Kayleigh, the project manager, has the skills needed to be the call centre manager, but is very busy with multiple projects at this time.

On top of all that, UCAN operates a credit and collections call centre which is in need of some new members. Three employees just retired from that area, leaving only two representatives to do the work. The UCAN-Points call centre manager (currently missing in action) will also be supervising these employees and operations as well. The credit and collection representative positions are difficult to fill because not too many people have the skills, personality and attitude required. A credit and collections representative must have finesse, patience, problem-solving skills and an ability to represent the company in a professional manner. They must be assertive enough to ..

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speak on the phone with customers who are behind on payments (also known as delinquent accounts) and work with each of these customers to arrange a personal payment plan. Once new employees are hired for this area they require specific training pertaining to handling difficult customers, the policies and procedures of the company (specifically the collections procedures), and how to use the computer call centre equipment. The HR department informs Kayleigh that one representative has been hired thus far to replace one that retired and the department is working hard to recruit two more representatives, but are having difficulty finding candidates that meet the job requirements.

Kayleigh wonders if the UCAN-Points start-up will be successful at all and has considered going to an employment (staffing) agency for help. Kayleigh mentions Staff-4-You, a human resource solutions provider, to the HR manager. The HR manager is skeptical and wonders if an agency can satisfactorily provide enough skilled and qualified employees before the call centre opens for business in two weeks. The one and only time in the past that the HR manager used a staffing agency the candidates did not work out on the job. The HR manager considers whether or not they should give Staff-4-You a try, but thinks they should price compare before entering into a staffing agreement with an agency.

STAFF-4-YOU (CANADA) DETAILS: Staff-4-You Inc. is a world leader in the employment services industry; creating and delivering services that enable its clients to win in the changing world of work. With over 60 years’ experience, the $16 billion company offers employers a range of services for the entire employment and business cycle.

Staff-4-You’s worldwide network of nearly 2,500 offices in 62 countries and territories enables the company to meet the needs of its 300,000 clients per year, including small and medium size enterprises in all industry sectors, as well as the world’s largest multinational corporations.

The focus of Staff-4-You’s work is on raising productivity through improved quality, efficiency and cost-reduction across their total workforce, enabling business clients to concentrate on their core business activities.

Staff-4-You Inc. operates under two brands: Staff-4-You and Staff-4-You Professional and provides the following services: Permanent, temporary and contract recruitment: Finding the right people for all types of jobs and industries at both the staff and professional levels. ..

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Employee assessment and selection: Providing a wide array of assessments to validate candidate skills and ensure a good fit between business client and the employee(s) placed there, which leads to higher employee retention rates.

Training: Offering an extensive choice of training and development solutions that help employees gain valuable skills to succeed in the ever-changing world of work.

Outplacement: Helping business clients better manage the human side of change by providing a positive way for employees who are transitioning out of the company and into the next step of their career.

Outsourcing: Providing outsourcing services to business clients related to human resources functions primarily in the areas of large-scale recruiting and workforce-intensive initiatives.

Consulting: Helping business clients maximize the return on their human capital investments while assisting individuals to achieve their full potential. Helping clients attract and assess top talent; develop and grow leaders; and engage and align people with strategy.

Professional Services: Providing a high-value alternative to public accounting firms and other consulting groups, delivering professional services in the areas of risk advisory, tax, and finance and accounting.

Staff-4-You established its operations in the Canadian marketplace in 1956, and has grown to nearly 100 offices strategically located across the country, with a local presence in every province covering the major metropolitan areas. Staff-4-You Canada’s staffing services include administrative, industrial, skilled trades and contact centre personnel as well as the assignment of contract professionals in information technology and other professional areas.

TASK 2: RESEARCH & ANALYZE Research two competing companies in the same industry as UCAN to determine the variety of products and services each is offering. A few questions to help get you started: • If UCAN does not service customers in a satisfactory manner what might their customers do?

•

If they do not get the Points program up and running does this affect customer retention?

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•

What affect, if any, will not having a manager have call centre operations?

Use Porter’s Competitive Forces model to research, analyze, and report the external forces that affect UCAN’s business strategies.

Research two competing companies in the same industry as Staff-4-You to determine the variety of employment services each is offering. You may wish to phone a staffing agency to ask questions. If Staff-4-You Canada has many competitors they might feel a need to decrease service fees in an attempt to retain and increase their number of customers. If they decrease charges the HR manager at UCAN may not be as concerned about the price of outsourcing employment services. Use Porter’s Competitive Forces model to research, analyze, and report the external forces that affect Staff-4-You Canada’s business strategies.

Let’s examine these five forces in more detail.

1. Threat of new entrants. How easy or difficult is it for new entrants to start competing? Some industries, such as automotive manufacturing, require much investment (capital) and therefore are difficult to enter. Other industries, such as home cleaning or lawn care, require very little capital and therefore are relatively easy to enter.

Government regulations may restrict entrance until certain criteria are met. The threat of entry of new competitors is high when brand names are not well known, capital investment is low, government regulation is not restrictive, and there is little differentiation between products.

2. Threat of substitutes. How easily can a product or service be substituted or made more inexpensively? If there are many substitutes available, the industry is more competitive and the profit potential for the firms in the industry is decreased. To combat the threat of substitutes, companies try to differentiate their products and services in many ways, some of which may include price (Walmart’s lowest-price guarantee), quality ( Maytag says you’ll never need to call the repairman), service (Saturn is known for superior service), or image (the now iconic “hip Mac” versus “stuffy PC” commercials.). The threat of substitutes is high if consumers can easily switch to another comparable product that is

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cheaper, can find a substitute that has better quality or performance, or can switch at a low personal cost.

3. Bargaining power of buyers. How strong is the position of buyers? Can they order large volumes to push the cost down? When there are only a few buyers and many suppliers the buyers have a great deal of bargaining power, but when there are only a few suppliers and many buyers the buyers have little bargaining power. The bargaining power of buyers is high when buyers purchase products in high volume, buyer switching costs are low, and substitutes are available.

4. Bargaining power of suppliers. Do many potential suppliers exist or only a few? If there are many suppliers from which a company can order its supplies, then the suppliers do not have much bargaining power (the company has the power).

When there are only a few suppliers from which a company can order the supplies it needs to do business, then the suppliers have a great deal of bargaining power. The bargaining power of suppliers is high when the product is highly differentiated, or substitutes are unavailable.

5. Rivalry among existing competitors. Does a strong competition between the existing players exist? Is one player very dominant, or are they mostly equal in strength and size? Companies are always trying to increase market share (more sales and more customers). To do this, they must devise creative marketing strategies, cut costs, and improve customer service and product quality. Some companies focus on quality, image, or service (such as BMW), while others focus on lower prices (such as Walmart). The intensity of rivalry is high when there are many competitors, competitors have equal size or market share, there is little differentiation between products, or consumers have no preference for a particular brand.

Perform a SWOT analysis on UCAN and Staff-4-You Canada: From the information given, determine and report on TWO of UCAN’s strengths, weaknesses, opportunities, and threats as they pertain to this case problem. Research the opportunities and threats that exist for UCAN in the external business environment.

Some competitors, as well as threats, will have been identified in the Porter’s analysis above.

Determine and report on TWO of Staff-4-You Canada’s strengths, weaknesses, opportunities and threats as they pertain to this case problem. Research the opportunities and threats that exist for Staff-4-You Canada in the external business ..

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environment. Some competitors, as well as threats, will have been identified in the Porter’s analysis above.

SWOT Analysis Internal Analysis Strengths Potential assets that give a company a competitive advantage, such as: • • • • • • • • • • • • • •

Price, value, quality Patents, strong brand names Quality processes, capabilities, systems Resources, assets, people Experience, knowledge, data Good reputation among customers Financial reserves, likely returns Marketing reach, distribution, expertise Location of your business Management Accreditations, qualifications, certifications IT, communications Cultural, attitudinal, behavioural Philosophy and values

Weaknesses Lack of capability or expertise compared to competition, such as: • •

• •

..

Poor reputation, weak brand name Undifferentiated products or service (i.e., in relation to your competitors) Poor marketing reach, distribution, expertise Poor financials, bad debt or cash-

External Analysis Opportunities Foreseeable changes that could favourably affect a company’s competitive capability, such as: • • • • • • • • • • •

Developing markets (other countries, Internet) Niche target markets Technology development and innovation Competitors’ vulnerabilities Loosening of government regulations Industry or lifestyle trends Global influences, removal of international trade barriers Information and research Local events Partnerships, joint ventures, strategic alliances Seasonal, weather, fashion influences

Threats Conditions that could negatively affect a company’s competitive capability, such as: •

• • • •

Political and legal changes, new regulations, new taxation of your product or service Economy (local and global) Environmental changes IT developments Increase in cost of supplies 7-34

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• • • • • • • •

flow problems Poor processes and systems Lack of competitive strength, size Vulnerabilities Deadlines and pressures Distractions Morale, commitment, leadership Lack of accreditations, certifications IT, innovation, communications

• • • • • • • •

New competitors, emergence of substitute products or services Market demand Bad debt or cash-flow problems Available suppliers Seasonal, weather effects Vital partners and contracts Obstacles faced Limited human resources

TASK 3: LIST POSSIBLE SOLUTIONS AND MAKE RECOMMENDATION(S) Up to this point, you’ve learned about the areas in which the two companies are strong and the areas in which they are weak. You’ve learned about external forces that may affect business choices and operations for both Staff-4-You Canada and UCAN. You’ve identified factors which may impact UCAN’s decision to select Staff-4-You Canada as a service provider.

Ask yourself what UCAN should do? What options do they have? If they don’t hire a staffing agency then what else can they do? If they do hire a staffing agency, which one should they choose? What services does the chosen agency provide? What is the best course of action? Which actions resolve the most issues in the most effective and efficient manner?

You should list at least three possible alternative solutions. These may be readily apparent or you may have to invent possible feasible alternatives. Examine the probable outcomes, and weigh the pros and cons of implementing each of these alternative solutions. Finally, make a recommendation.

Possible Solutions

Pros

Cons

Alternative 1

Alternative 2

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Alternative 3

Recommendation:

TASK 4: FINAL THOUGHTS 1. Was this business situation a problem or opportunity? Why? 2. What did you learn from analyzing this business case (without going in to the specific details of each company)?

3. Why would UCAN or any other business choose to hire a staffing/human resource service provider such as Staff-4-You Canada to recruit employees, rather than do so themselves?

4. What are the advantages and disadvantages a company experiences from outsourcing some (or all) HR processes?

5. Do you think most temporary workers (contingent workers) are content to be temporary workers or would they prefer a full-time, permanent job?

6. What do you think temporary workers who register with Staff-4-You expect from Staff-4-You as their employer? What do you think they expect from the business client (i.e. UCAN) as their temporary employer?

7. Why would an individual choose to register with a staffing/employment agency

such as Staff-4-You? Would this be a good job option for a recent college or university graduate? For you? Why or why not?

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CHAPTER 8 MARKETING AND CONSUMER BEHAVIOUR CHAPTER OPENER Chapter 8 introduces students to the fundamentals of marketing. It covers how organizations develop their marketing strategies and the external forces that influence marketing approaches. Students learn about the development of a target market based on market research and the four elements of a good marketing plan. In conjunction with this, the chapter investigates the basics of consumer behaviour, including the ways in which consumers make their buying decisions.

LEARNING OBJECTIVES After studying this chapter, students you should be able to: 1.

2.

3.

4.

5.

6.

7.

8.

Summarize how marketing has evolved over the production concept era, sales concept era, marketing concept era, and customer relationship era.

Outline the benefits of marketing to various stakeholders and summarize the criticisms of marketing.

Describe the 4 Ps of the marketing mix and explain the five steps of the marketing process to implement a marketing strategy.

Describe how the various f actors in the marketing environment influence a firm’s ability to manipulate its marketing mix.

Identify the five steps of the marketing research process and the four elements of a good marketing plan.

Describe how target markets are determined and how a firm attempts to satisfy a target market.

Describe the purchase decision process and the major influences affecting a consumer’s buying decision.

Compare the buying decisions and marketing processes in business-to-business markets to those in the consumer market.

KEY TERMS 5 Cs of marketing (p. 189) behavioural segmentation (p. 192) business-to-business (B2B) markets (p. 192) consumer behaviour (p. 192) consumer market (p. 192) customer relationship management (CRM) (p. 178) demographic segmentation (p. 191) environmental scanning (p. 185) focus group (p. 187)

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geographic segmentation (p. 191) market research (p. 186) market segment (p. 191) market segmentation (p. 190) marketing (p. 176) marketing concept (p. 177) marketing environment (p. 185) marketing mix (p. 181) marketing objective (p. 188) marketing plan (p. 188) marketing strategy (p. 179)

niche marketing (p. 191) positioning (p. 191) primary data (p. 187) product (p. 176) product differentiation (p. 182) psychographic segmentation (p. 191) secondary data (p. 187) target market (p. 179) utility (p. 179)

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DETAILED LECTURE OUTLINE I.

Marketing Fundamentals A. Evolution of Marketing 1. How does the CMA define marketing? a. “a set of business practices designed to plan for and present an organization’s products or services in ways that build effective customer relationships”.

2. How has marketing evolved over time? a. The marketing concept changed the focus from finding the right customer for a product to producing the right product for a customer and doing it better than the competition (see Figure 11.1). b. Customer relationship management (CRM) is the process of establishing long-term relationships with individual customers to foster loyalty and repeat business.

B. Benefits and Criticisms of Marketing 1. How does marketing benefit stakeholders? a. Utilities (needs): form, task, time, place, 2. What is non-traditional marketing?

3. What are the criticisms of marketing?

C. The Marketing Mix (4 Ps of Marketing) 1. What is marketing strategy? a. The target market is the specific group of consumers, with similar needs and wants, toward which a firm directs its marketing efforts. The marketing mix is the combination of four factors, called the “4 Ps” of marketing, designed to serve the target market: product, price, promotion, and place.

2. Does effective marketing require a blend of the 4 Ps? 3. What are the steps in the marketing process?

4. Is the marketing process easy to implement?

II. The Marketing Environment A. The Competitive Environment 1. Why is analyzing the competition important?

2. How do marketing managers control the competitive environment? a. The marketing environment includes environmental influences outside the firm’s control that constrain the organization’s ability to manipulate its marketing mix. These external environmental influences (see Figure 11.4) include the competitive environment (discussed in Chapter 2) as well as the political, economic, socio-cultural, and technological (PEST) environment (discussed in Chapter 1).

B. Scanning the Environment 1. How do companies stay informed about changes in the external marketing environment? a. Environmental scanning is the process of surveying the market environment to assess external threats and opportunities.

2. How does the competitive environment affect marketing?

3. How does the political environment affect marketing?

4. How does the economic environment affect marketing?

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5.

6.

How does the socio-cultural environment affect marketing?

How does the technological environment affect marketing?

III. Marketing Research and Planning A. The Marketing Research Process 1. What is involved in researching the market? a. Market research is the process of gathering and analyzing market information for making marketing decisions. i. Primary data are raw data collected by the researcher. ii. The data are frequently collected through observation, questionnaires, surveys (via mail, e-mail, or telephone), focus groups, interviews, customer feedback, samples, and controlled experiments. A focus group is typically a group of eight to ten potential customers who are asked for feedback on a good or service, advertisement, idea, or packaging. iii. Secondary data have already been collected and processed. An example of secondary data is census data.

2. How is social media used in market research?

B. The Marketing Plan 1. What is a marketing plan? a. A marketing plan is a written document that specifies marketing activities designed to reach organizational objectives. It is a critical component of a business plan.

2. What are the elements of a good marketing plan?

3. Why is a marketing objective necessary? a. A marketing objective is a clearly stated goal to be achieved through marketing activities.

It should be realistic, quantifiable, and time specific.

4. What is situational analysis? a. Scanning the environment by analyzing the 5 Cs of marketing (company, collaborators, customers, competitors, and climate) is another useful situational analysis framework that can be used alone or in conjunction with a SWOT (see Figure 11.5).

5. What do we mean by internal strengths?

6. How does a company assess its weaknesses?

7. Why look to the external environment?

C. Target Markets 1. How are target markets determined?

2. How do you find a target market? a. Finding a target market begins with market segmentation, the process of separating the broader market into smaller markets (or market segments) that consist of similar groups of customers. b. A market segment is a subgroup of potential customers who share similar characteristics and therefore have similar product needs and preferences. c. Some firms focus so much on one specific market that they undertake niche marketing, or marketing a product to a very narrowly defined set of potential customers.

3. How are consumer markets segmented? a. Geographic segmentation is market segmentation according to geographic characteristics.

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b.

Demographic segmentation is market segmentation according to age, race, religion, gender, ethnic background, and other demographic variables. c. Psychographic segmentation is market segmentation based on lifestyles, personality traits, motives, and values. d. Behavioural segmentation is market segmentation based on certain consumer behaviour characteristics, such as the benefits sought by the consumer, the extent to which the product is consumed, brand loyalty, price sensitivity, and the ways in which the product is used.

IV. Consumer Behaviour A. Consumer Markets 1. Why study consumer behaviour? a. Consumer behaviour refers to the ways individuals or organizations search for, evaluate, purchase, use, and dispose of goods and services. b. In a consumer market, individuals purchase goods and services for personal consumption. But there are also business-to-business markets. c. In business-to-business (B2B) markets, businesses purchase goods and services from other businesses.

2. How does a consumer make a buying decision? a. The consumer buying process involves five steps: i. need recognition ii. information search iii. evaluation of alternatives iv. purchase or no purchase decision v. post-purchase evaluation 3. What influences consumer decision making?

B. Business-to-Business (B2B) Markets 1. What is the difference between consumer markets and business-to-business markets? a. There are several key differences between consumer and B2B markets. The more important characteristics of B2B markets include the following: i. A few buyers that purchase in large quantities ii. Highly trained buyers iii. Group purchasing decision iv. Close customer relationship v. Graphically concentrated buyers vi. Direct purchasing 2. How does a business make a buying decision, and what influences that decision?

3. Is the marketing process different for B2B markets?

NOTE: End the lecture by asking students to write down the muddiest points or main points of the lecture. This will allow you to know what might need to be reviewed during the next lecture.

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SUGGESTED SOLUTIONS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Marketing Buzz (Facebook Turns the “Like” Into Its Newest Ad) Discussion Questions 1. Would you like your posts to be used as ads? Do you think Facebook users will decrease the amount of “likes” they do knowing that their “likes” and other activities may become a Sponsored Story?

Why or why not? (Bloom’s: evaluate) 2. Do you think that Facebook users who do post a Sponsored Story should be paid for it? Why or why not? Do you think Facebook users may turn away from Facebook because they feel “spammed” on?

Why or why not? Do you think businesses will consider that their Sponsored Stories may be viewed

by Facebook users as “spam,” which might in turn create a negative image of the company instead of the intended positive one? Why or why not? (Bloom’s: evaluate) 3. Use the Internet to locate information on why some businesses have failed when trying to implement a social media campaign. Why did they fail? Are these factors present in the Facebook Sponsored Stories strategy? (Bloom’s: application) Answers: 1. Answers will vary. Facebook tested the ad unit for a few months and said it has resulted in brand lift and increased engagement, and heightened ad recall. Further, they discovered that it increased the likeliness with which the ad was recommended to friends for the organizations that tried it.

2.

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Answers will vary. Sponsored Stories has a lot of similarities to Twitter Promoted Tweets. Both are trying to generate advertising dollars from the content within their networks. Facebook users may view this as a type of spam since they cannot turn it off at this time.

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3.

Answers will vary. Social media campaigns that broadcast hype or focus on selling a product, are often quickly disregarded because people will see through it - unless it's really dynamic and attractive. Most of the benefits companies get from social media are likely going to stem from ongoing relationships and conversations. To succeed businesses need to put out a campaign that serves both the company and the audience interacting with it. There is no universal solution to social media advertising and marketing because every company is different. The social media medium should be chosen with thought given to the target audience.

BETTER BUSINESS, BETTER WORLD: Canadian Marketing Association’s (CMA) Code of Ethics and Standards of Practice Discussion Questions 1. Visit the CMA website and review the Code of Ethics and Standards of Practice documentation. Who does the code apply to? How are “must” and “should” used in the code? What do you think of the areas covered in the code? Is this a legal requirement? Will companies abide by the terms? Why or why not? (Bloom’s: application, evaluation) 2. How will a CMA member company ensure that their employees follow the membership guidelines?

Would a company lose membership if an employee were in non-compliance with the Code of Ethics and Standards of Practice? Can you find a case of a company having been in a situation of noncompliance? If so, summarize the situation and outcome. (Bloom’s: application) 3. Compare the CMA’s Code and Standards to those in other countries. Did you find a country that does not seem to have a marketing association? If so, does this country have laws pertaining to marketing strategy and tactics? Do you think other countries should have a similar association? Why or why not? (Bloom’s: application, analysis, evaluation) Answers: 1. Visit the CMA website for most recent Code of Ethics and Standards of Practice information at http://www.the-cma.org/?WCE=C=47|K=225849. The Code applies to all member companies and all employees of those companies, in public and private sectors, profit and non-profit organizations.

Most companies that join CMA will want to do so for a number of reasons, notably because consumers may view businesses as more trustworthy if they are members of CMA, thereby enhancing public image. There are opportunities for networking and access to resources through membership as well. There is also opportunity to lobby for changes on public policy issues – greater force in large numbers.

2.

To remain a member, companies must follow guidelines and renew membership each year. To ensure employees are in compliance with the Code, firms need to conduct training, and ensure all employees are aware of membership in CMA and what that entails. Examples of bad marketing: Recently, the FDA has taken action against illegal marketing of tobacco products with “misleading” unsubstantiated claims. Johnson & Johnson, in 2010, had a plea of guilty to illegal marketing of psychiatric drugs. Gerald Goldstein was the last of 11 people charged who were involved in a deceptive telemarketing operation targeting consumers in Australia and was sentenced by a court in Quebec in 2005 jail and fined $20 000 for his role in the scam. “On May 31, 2002 the Competition Tribunal ruled that a gas-saving device known as the Platinum Vapour Injector (PVI), marketed by PVI International Inc., did not work and the company's claims of saving fuel and reducing emissions were false and unsubstantiated by "adequate and proper tests". PVI International Inc. and its two owners Mr. Michael and Mr. Darren Golka, were ordered to cease making representations with respect to the gas-saving device for a period of 10 years.” (source: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01132.html)

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3.

Answers will vary. CMA’s Code of Ethics and Standards of Practice are available through the web site. The American Marketing Association (AMA) has ethics listed at their site, but it seems more difficult to find the entire code. The AMA is larger and includes an International chapter.

BIZCHAT: Is There A Fifth P? Discussion Questions: 1. Have you ever seen a “purple cow” marketing campaign? If so, what was it that made it a purple cow? (Bloom’s: comprehension, application) 2. Are there other “Ps” you think are missing from the traditional four “Ps” of marketing? (Bloom’s: comprehension, analysis) 3. Seth Godin, author of Purple Cow, has a special term for early adopters who love a product and tell all sorts of people about it: sneezers. Have you ever been a sneezer for a particular product or service? (Bloom’s: knowledge) Answers: 1. Answers will vary. The purpose of this question is to get students thinking and researching organizations to see if they can identify a “purple cow” element.

2.

Answers will vary. Some would include “Personality” meaning the personality of the company and those employees customers interact with. Customers like to buy from those they trust and like.

Another option for a 5th P might be “Participation.” Consumers today expect a relationship with the company; a two-way conversation.

3.

Answers will vary. Some students will recognize that they are “sneezers”, but everyone should be able to recognize who they are and identify some products which fall into this category.

OFF THE MARK: The Tale of Pets.com Discussion Questions: 1. Who was the target market for this company’s products? (Bloom’s: application) 2. What are some of the real and imagined errors this company’s management made? (Bloom’s: analysis)

Answers: 1. The target market was people seeking entertainment through the rental of movies, television shows etc.

2.

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Management overlooked the importance of convenience and the time utility of marketing. It assumed (imagined) there was a need to separate Netflix’s two means of content delivery into two separate brands. The inconvenience and inconsistency angered Netflix users. The result was a resounding rejection by customers, who interpreted the moves as indicators of poor customer service..

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.

IN-CLASS ACTIVITIES Activity

Description

Time Required 30 min.

Reference

Team Time: Tobacco Wars

Students work in groups to debate the pros and cons of advertising cigarettes.

Ethics and Corporate Social Responsibility: Daily Deal Sites: Groupon Settles Class Action Lawsuit

Students consider whether or not selling complex products to people who may not understand them is ethical.

30 min.

Page 322

Knowledge Comprehension Analysis

Supplemental In-Class Activity 1: Case Discussion Khakis to Go, Please

Students apply marketing mix concepts to a case study.

30 min.

IM – see below

Knowledge Comprehension Application

Supplemental In-Class Activity 2: Data Mining

Students consider how marketers might use information that is routinely provided on social networking sites.

20 min.

IM – see below

Knowledge Comprehension Application

Learning Catalytics

This activity allows students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

Any level of Bloom’s Taxonomy

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

Sketch Animations

These animations are meant to explain two difficult concepts: • Primary Data • Influencing Factors of the Purchase Decision

variable

Videos Appendix and MyBizLab

Knowledge Comprehension

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(Includes handout)

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SUPPLEMENTAL IN-CLASS ACTIVITY 1: Case Study Discussion - Khakis to Go, Please Activity Overview: This activity asks students to apply the marketing mix concepts to a case study.

Time Limit: 30 minutes What to Do: 1. In advance, make copies of the Supplemental Handout on the following pages and distribute them to students.

2. Divide students into groups and ask them to read the case and answer the following questions in their small groups. (15 minutes) a. Is Banana Republic offering a product, a service, or both? b. Which elements of the marketing mix does the Banana Republic's temporary store illustrate? c. The employees targeted by the at-work stores are usually those earning annual salaries in the high five or six figures. Why do you think retailers are offering them discounts if they can afford the products?

3. Once students have answered the questions, discuss their answers as a class. As students discuss their answers, make sure they include the following points: (15 minutes) a. Banana Republic is offering both a product (apparel) and services (fashion advice, shipping, and alterations). b. Banana Republic's temporary store illustrates all the elements of the marketing mix: It sells clothes (product); offers discounts (price); extends the discount for a short period of time (promotion); and brings products to customers' offices (place). c. Discounts are a good way of getting customers' attention and inducing them to try something that they have not used before.

Don’t Forget: Be sure to distinguish between a product and a service.

Wrap-Up: A good way to bring this activity to a close is to ask students for other examples of products and services being combined as in the Banana Republic scenario.

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SUPPLEMENTAL HANDOUT: IN-CLASS ACTIVITY 1 - Khakis to Go, Please In a new twist on selling the idea of “dress-down Friday,” retailers are taking their pitch right to the office. On the assumption that businesspeople lack either the time or the expertise to shop—or both—but not the money, Banana Republic, a division of Gap, Inc., introduced a new service called @yourself, in which it temporarily sets up shop where you work. The first firms to take part in the new strategy, the kickoff for which included hors d’oeuvres and drinks, were Scient, HBO, and Credit Suisse First Boston.

Open all day and offering a 20-percent discount, free alterations, free shipping, and appointments with fashion consultants, the temporary shops are expected to convert the merely curious into dedicated repeat buyers. A short extension of the 20-percent discount, applied to online purchases, is another attempt to draw new customers repeatedly to the Banana Republic brand.

“There is a lot of confusion in the workplace as business casual becomes more common in different types of work environments,” according to Christina Gabriel, director of the new service. “Plus, people don’t always have the time to go out shopping, and to spend 10 minutes within their own workplace with someone who is completely skilled makes it really easy and painless.”

For employees confused about the dos and don’ts of the new casual “uniform,” wondering whether a polo shirt is more or less formal than a tee, the service could prove a blessing. “If Banana Republic can provide the answer appropriately and confidently, especially on the male side, then they’re making a friend for life,” comments Richard Jaffe, a Paine Webber retailing analyst.

Other companies are adopting parts of the model. Gap at Work offers discounts to employees of more than 50 companies, including Morgan Stanley Dean Witter, America Online, and American Express. J. Crew has a specialized catalog devoted to sportswear and casual work clothes. Brooks Brothers., Eddie Bauer, and Saks offer discounts to corporate employees as well.

As apparel sales have slowed in the stores, and the cost of getting a new customer has grown (when advertising and catalog expenses are taken into account), Banana Republic and other retailers are clearly hoping to produce some sales gains by introducing their products to new customers in more convenient ways. As one analyst at Credit Suisse First Boston said of the strategy, “It’s a very effective way to do target marketing. You can go right into a C.S.F.B. and advertise to 1,000 employees.”

(Sources: “Banana Republic Storms the Office,” Business Week, September 11, 2000, 14; Abby Ellin, “Going to Work to Sell Business Casual,” New York Times, November 5, 2000, BU 6.)

Discussion Questions 1. Is Banana Republic offering a product, a service, or both?

2. Which elements of the marketing mix does Banana Republic’s temporary store illustrate?

3. The employees targeted by the at-work stores are usually those earning annual salaries in the high five or six figures. Why do you think retailers have begun offering them discounts if they can afford the products?

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SUPPLEMENTAL IN-CLASS ACTIVITY 2: Data Mining Activity Overview: In this activity, students consider how marketers might use the information routinely provided by people who have social networking accounts.

Time Limit: 20 minutes What to Do: 1. Divide students into small groups, and provide each small group with a piece of paper that contains the following list of variables.

First and Last Names Country State Postal Code Date of Birth Gender Interests Friends Blog Website Interests Details Schools Companies 2.

Ask students to review the list above and determine how they could use this information to develop a marketing segment for one of the following products: a new clothing line, a new beverage or food product, or a new type of car. Ask them to combine at least three different groups to try and develop a truly niche market for their particular product. For example, they might decide to market organic dog biscuits to women from 14-22 who are interested in dogs and live in downtown L.A.

3.

Have the class vote on the most interesting and/or innovative marketing strategy.

Don’t Forget: You will need to print out the list of variables or post them on a slide in order for students to do this exercise. The small groups will need a way to present their ideas to the class – you can either use large sheets of chart pad paper and markers or give each group its own bit of blackboard space.

Wrap-Up: Ask students how much of the above information they have freely distributed. (This list comes from the MySpace profile page.) What advertisements have they gotten recently that they think were based on a knowledge of their personal information? What are the benefits and drawbacks of using data mining from a personal and corporate perspective? Ask students if any of them have ever falsified information about themselves on a networking website in order to protect their privacy. How much of an impact do they think this type of action has on the ability of an organization to do data mining?

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SUGGESTED SOLUTIONS TO END-OF-CHAPTER MATERIAL CRITICAL THINKING QUESTIONS 1.

2.

3.

4.

5.

Can you think of an example of how a specific organization (for-profit or non-profit) tried to establish a better customer relationship with you? What did the organization do? Was it effective? Why or why not? What recommendations would you make to these organizations? (Bloom’s: evaluation) Select a product or service you use regularly, such as a cosmetic or toiletry item, a snack food, article of clothing, cell phone, laptop, and so on. Explain how the 4 Ps of the marketing mix (product, price, promotion, and place) relate to this product. Who is the target market for this product? How can this product be changed or the marketing strategy be adjusted to appeal to other market segments?

(Bloom’s: application) You’re interested in starting a limousine service in your community. How might you best segment the market for your services? What is your target market and why? What marketing mix strategies would you employ? How would you nurture customer relationships? (Bloom’s: application, synthesis) Retailers such as Hudson’s Bay Company (HBC) and Canadian Tire Corporation offer loyalty programs. Walmart has a loyalty program now with its own credit card that offers consumers Walmart bucks that can be used toward future purchases. What other such programs can you think of? What are companies trying to do by offering such programs? (Bloom’s: application) Think of the last major purchase you made. Discuss how the socio-cultural, personal, psychological, situational, and marketing mix influenced this purchase. (Bloom’s: application, analysis)

Answers: 1. Answers will vary. However, customer relationship management is becoming increasingly important to nurture new, and generate repeat, business. All organizations need to try to foster better customer relations if they wish to compete.

2.

Answers will vary.

3.

First, visualize your ideal customer. Think about what he or she wants, and use this image to inform your marketing decisions. You would want to segment the larger market for limousine service into smaller market segments and possibly serve only one group or many groups of customers by customizing your services to satisfy these customers. You could use geographic, demographic, psychographic or behavioural segmentation to discover un-served or underserved market segments.

Given the degree of competition that currently exists you may want to focus more narrowly on individuals not currently served by the competition—or are underserved. That is, you may want to undertake niche marketing. You should also try to position your service—find the most appropriate mix of the 4Ps for the group. Once you have found and serve targeted customers then you must undertake an ongoing customer relationship program to reach the highest level of service possible to foster new and repeat business.

4.

Answers will vary. Shoppers Drug Mart has a rewards card whereby the customer builds up points that can be used as dollars toward future purchases. Companies are competing for customer loyalty through offering customers added value perks as a reward for their patronage.

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5.

Answers will vary. The socio-cultural influences include the impacts of culture, subculture, social class, family and peers. The personal influences are often shaped by age, economic status, lifestyle, and personality. The psychological influences include the buyer’s motivation, perception, attitudes, and learning. The situational influences include the physical surroundings, social surroundings and the type of product purchased. The marketing mix (4Ps) influences include the product, price, promotion and place (distribution) aspects of the purchase.

TEAM TIME: Tobacco Wars Notes: This exercise requires that students debate the pros and cons of cigarette advertising. While student approaches to the debate may vary, here is some pertinent background information: In 1999, the New York Times banned cigarette advertising, saying that “We don’t want to expose our readers to advertising that may be dangerous to their health.” (Source: Doreen Carvajal. “The New York Times Bans Cigarette Ads,” New York Times, April 28, 1999.) Tobacco companies are already barred from advertising on TV, radio, and billboards. In the same article, Mark Smith, a spokesperson for a cigarette manufacturer says, “Isn’t it ironic that a publication that trumpets freedom of the press would trample on the freedom of commercial expression?” Encourage students to discuss both the larger picture of this issue (for example, weighing the moral value of protecting the public’s health against the constitutional right to freedom of expression), but also some of the subtleties; for example: • Are certain kinds of advertising better than others?

• Should we consider the target markets for the ads?

• Are there specific places where advertising should be allowed or prohibited?

Extensive reviews of the topic can be found on the following Web sites: http://www.cato.org/pubs/handbook/ hb108/hb108-16.pdf and http://www.asa.org.uk/asa/about/history/Taking+responsibility+raising+standards.htm

ETHICS AND RESPONSIBILITY: Daily Deal Sites: Groupon Settles Class Action Lawsuit Discussion Questions: 1. Do you feel that it is unethical to offer deals with limited expiry dates or dates that are written in fine print and not obvious to the online buyer? Or do you feel that consumers are responsible for apprising themselves of the terms of use when they purchase a voucher?

2. As a business owner offering deals through Groupon, are you responsible for the expiration dates on those deals or do you think that Groupon is responsible and should be making better efforts to be transparent with expiry dates?

3. How does the fact that the customer is purchasing a voucher, not a good or service, impact your thoughts about responsibility in question 2?

4. What consumer protection laws are being violated in the case of expired Groupon deals?

Answers: 1. Answers will depend, in part, on the extent to which one believes companies should take responsibility for consumers’ freely-made decisions (assuming all information was disclosed and understood) and the extent to which consumers should be held responsible for their own actions.

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2.

Answers will vary, but the responsibility to clearly disclose expiration dates ultimately lies in the hands of Groupon as it is the actual “retailer” of the deal and must therefore know, understand and communicate all relevant facts as they are required by the consumer.

3.

Answers will vary, but Groupon’s product, under any categorization, is still its product and thus, must be promoted in a responsible way whereby consumers can clearly access all the pertinent information about their purchase.

4.

Consumer protection laws violated would be in relation to clear and truthful marketing communications offered to consumers and exploitation of consumers’ potential lack of knowledge and experience.

CLOSING CASE: The iPod Started a Love Affair Discussion Questions: 1. What was Apple’s target demographic for the iPod? Why do you think that Apple chose to market specifically to this audience? How would Apple have to change its product if it wanted to appeal to a broader market? (Bloom’s: application, analysis) 2. How did Apple meet the socio-cultural, personal, psychological, and behavioural needs of its target audience? (Bloom’s: application) 3. Consider what you’ve learned about marketing to audiences in this chapter. What methods do you think companies should use to help them establish a target market? (Bloom’s: application) Answers: 1. Apple focused its attention on the needs of a young demographic that had a desire to be creative, valued advanced technology and a sleek design. It allowed the Generation Y individuals already accustomed to getting their music digitally through Web sites like Napster and Lycos to take their music from their computer to the streets. The iPod’s sleek geometric design and durability made it easy to slide in a pocket or toss in a backpack. The iPod also meet the customers need to have creative control over their media outlet. The iPod allowed music files to be organized in a variety of ways, and customers could make play lists of their favorite songs. The true brilliance of this marketing strategy was that Apple didn’t just identify its target audience; it actually predicted what the target audience wanted before it was expressed by these potential customers. Apple knew it could not market to everyone if it wanted to eventually turn some skeptics into customers. Doing so would have resulted in a product that would have likely not satisfied anyone very much.

2. By catering to the young technologically savvy targeted market, Apple met the Apple met the sociocultural needs of its targeted customers. The personal, psychological and behavioural needs of these young people and their lifestyle was satisfied by Apple because these Generation Y individuals, already accustomed to getting their music digitally through Web sites like Napster and Lycos, were able to take their music from their computers to the streets. It also satisfied these customers through the sleek geometric design of the iPod and its durability which made it easy to slide in a pocket or to toss in a backpack. The iPod also meet the customers need to have creative control over their media outlet. The iPod allowed music files to be organized in a variety of ways, and customers could make play lists of their favourite songs. Apple also satisfied their customers’ needs by producing a “coolness factor” associated with iPod ownership.

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3. Companies should use market segmentation strategies to focus their efforts on the most profitable target market and customize their product to meet the needs and wants of these targeted customers.

Sometimes this means anticipating needs and wants before they are known or expressed by customers.

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SUPPLEMENTAL MATERIAL SUPPLEMENTAL IN-CLASS ACTIVITY 1: The 4 Ps Activity Overview: In this activity, students will identify how the 4Ps of a product appeal to the target market.

Time Limit: 20 minutes What to Do: Students should begin by selecting a popular product. The next step is identifying the target market for this product in terms of age, income, wants, needs, or other descriptors. Once they have identified the product and the target market, they should describe the 4 Ps for the product and how they plan to appeal to the target market. For example, the target market for minivans is middle income mothers with children: Strategy: How it appeals to the target market Product: Minivans include seating for 6 to 8 passengers, lots of cup holders, flexible seating, and DVD players. These features all appeal to moms who cart around bickering children.

Price: Often priced in the $20,000–$30,000 range, minivans are within the reach of the middle-income household.

Place: Minivans are sold through dealerships where consumers can test drive the vehicle and get service after purchase.

Promotion: Advertisements usually feature good looking moms on the go with children who are not fighting in the backseat.

Don’t Forget: This activity works best when students have large sheets of paper and markers. It may also be helpful to have Web access so students can visit Web sites for companies that sell their product.

Wrap-Up: It is important that companies always consider the wants and needs of their target market.

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SUPPLEMENTAL IN-CLASS ACTIVITY 2: Purchase Decision Process Activity Overview: In this activity, students will discuss what would influence them personally in the purchase of a new cell phone.

Time Limit: 20 minutes What to Do: Assemble students in small groups (3-4). Ask students to consider the categories and specific types of influences they would feel between steps 3 and 4 of the purchase decision process, when purchasing a new cell phone for their personal use. You may optionally provide students with a matrix similar to the following.

Personal Influences

Psychological Influences

Socio-cultural Influences

Situational Influences

Wrap up: Have each group present their findings with the class, and together analyze to determine trends, which are common among the groups, and individuals within the groups. Discuss how marketers can use this type of knowledge in selling their products.

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APPLICATION EXERCISES 1.

Apple’s Marketing Mix. Go to Apple’s website that focuses on the iPhone: www.apple.com/iphone.

Describe Apple’s marketing mix strategy: product, price, promotion, and place. How does Apple attempt to foster good customer relations? What marketing recommendations would you make to Apple?

2.

SWOT Analysis. Go to www.marketingteacher.com/ SWOT/walmart_swot.htm to see a SWOT analysis for Walmart. What strengths, weaknesses, opportunities, and threats would you add or delete? Why? How could Walmart take advantage of its strengths in terms of its marketing mix?

How do Walmart’s weaknesses affect its marketing mix? What market environmental forces do you think gave rise to its opportunities and its threats? How much control does Walmart have over its market environment? What recommendations would you make for Walmart? Why?

3.

Mission and Values as Marketing Tools. Go to the Phillip Morris website at www.philipmorrisusa.com/ and search for their mission statement. What kind of advertising techniques does this site use? Do you feel that this company is genuine in its concerns about public health?

4.

Freebies: Long-Term Gain or Loss? Go to www.sephora.com. This company gives three free samples with every purchase from its website. Do you think that this strategy will be profitable for the company in the end, or will it cause it to lose money?

5.

The Jeep Experience. The Jeep brand uses a non-traditional marketing approach by offering Jeep owners invitations to special events. Go to www.jeep.com/en and research the events that this company offers to its customers. How effective do you think engaging customers in ongoing events is in getting them to be repeat buyers?

Answers: Answers will vary. The purpose of these application questions is to encourage students to do some research. These questions require students to investigate a variety of websites and investigate the variables of the marketing strategy. Encourage students to spend some time digging. The answers may not be immediately visible, but encourage students to spend some time reading and researching the content of these websites and challenge them to find the direct relation between the theoretical content of this chapter and real world marketing strategies.

LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

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Learning Catalytics 1 Question Type: Matching Prompt: The marketing mix consists of 4 P’s. Assign the list of elements below to the appropriate “P” in the marketing mix column.

Answer/Explanation: Marketing Mix 1. Product 2. Price 3. Place 4. Promotion

B D A C Elements A) Available in grocery stores B) New low-fat baked potato chips C) TV ad featuring famous hockey player D) Penetration price strategy

Learning Catalytics 2 Question Type: Word Cloud Prompt: In the space provided, describe the type of consumer who would purchase the “Low-Fat Baked Potato Chips” described in LC1.

Ask students to consider the 4 dimensions of segmentation, and to type just the first word which comes to their minds when they think of a consumer who would buy the product described.

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MYBIZLAB RESOURCES & TEACHING TIPS BIZSKILLS SIMULATION: Market Research Matters Synopsis: In this BizSkill the student is the vice-president of a thriving medical center. This simulation challenges students to use their knowledge about growth opportunities, given financial resources and competitive forces to successfully expand their organization.

At the end of this exercise, students should be able to answer the following questions: 1. How do businesses use market research data to make decisions?

2. What are the pros and cons of various research methods?

3. Why do marketers scan the external environment, and what do they do with the information once they have it?

DECISION MAKING MINI-SIMULATION: What is Marketing?

Synopsis: Holden Evan, Inc., has long been the premium dog food market leader with its flagship Grand Champion brand. The brand targets breeders, trainers, and owners of purebred dogs willing to pay higher prices for superior nutritional and health benefits. During an economic downturn, the Grand Champion brand has suffered a sharp and prolonged decline in sales. The brand has become unprofitable. The marketing team is concerned that customer needs and wants may have shifted. Your objective as Marketing Manager is to re-evaluate the brand\'s marketing strategy and marketing management orientation to determine if they need revision.

DECISION MAKING MINI-SIMULATION: Segmentation, Targeting and Positioning Synopsis: Holden Evan, Inc. is a large multinational consumer goods company. It has recently acquired Smoothsayer, a beauty cream for women, which offers several health benefits at a significant cost of $300 per jar. Smoothsayer fights skin aging in the short term (by reducing significant wrinkles) and in the long term (by providing UV protection). Product testing has shown that the product can slightly reduce acne as well. As Marketing Manager, your task is to target Smoothsayer to appropriate market segments, and define suitable positioning statements for it.

DECISION MAKING MINI-SIMULATION: Marketing Environment Synopsis: As Marketing Manager at Gerlach Publishing, which exclusively publishes textbooks for Colorado public schools, you are responsible for researching and monitoring the company's macroenvironment and proposing necessary changes in marketing strategy. Key decisions you must make include: which changes in the macro-environment are important to Gerlach's marketing efforts, what are the likely effects of those changes, and how Gerlach should respond to these changes.

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DECISION MAKING MINI-SIMULATION: Marketing Research Synopsis: TriState Dairies is a food processor that packages and sells dairy products. At present their core business is selling 1) pasteurized, skimmed, and plain milk, and 2) yogurts and yogurt drinks. They want to expand their market, particularly for milk. They can easily convert surplus milk production to the production of flavored milks. At the moment the flavored milks sales overall are low and the market small. The bulk of flavored milks are sold to parents who buy them for children. The marketing department thinks that there may be untapped markets for flavored milks in adults. In particular they think that it will be possible to sell milk to health-conscious adults as a healthier alternative to soda and energy drinks. TriState wants to know if this idea could work. Your role is that of a manager within the market research department. You have been tasked with gathering the data.

DECISION MAKING MINI-SIMULATION: Strategic Marketing Synopsis: You are Vice-President of Marketing at Holden Evan, a global corporation that sells beauty products and other consumer goods. In the Beauty unit, several product lines are up for strategic review.

The President has asked you to analyze three current product lines, and then decide if each product should receive more, less, or no investment. Your goal is to increase corporate growth rates and profit margins overall.

DOCUMENT MAKEOVERS: • Competitive Analysis • Dusty Strings Letter • Lektonik Presentation

Chapter 11, Related Websites Shoptoit.ca

Compares brands and models

http://www.the-cma.org/

Canadian Marketing Association

www.marketingpower.com

American Marketing Association marketingpower resource, community, events web site

http://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/home

Office of Consumer Affairs

http://consumerinformation.ca/

Canadian Consumer Information

http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/home

Competition Bureau Canada

http://www.marketingplan.net/target-market/

Marketing Plan.net

http://www.adstandards.com/en/AboutASC/aboutASC.aspx

Advertising Standards Canada

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ENHANCING THE ONLINE COURSE Marketing Timeline: Have your students create a visual timeline representing the eras of marketing by using actual ads from the various time periods to illustrate the differences in business philosophy of each era. Your institution’s online library should have resources from which to glean sample ads. Have students post the final timelines (with visuals) to the course blog or discussion board.

Marketing Benefits: Using their software, have your students create a pie chart to illustrate the different benefits that society gains from marketing. Ask them to comment on each benefit. Before the activity starts, you might ask students’ opinions of marketing and marketers. Do they equate “marketer” with “salesperson”? If so, why? After reading the chapter and doing this assignment, has their opinion changed?

Marketing Problems: Ask your students to list and define all of the problems associated with marketing.

What are the current criticisms? Ask students to search their online resources to see if they can identify any problems not covered in the textbook. Post these on the discussion board and be sure to ask followup questions based on the comments.

4Ps: Identify a Fortune 500 company that produces a tangible product. Choose something with which your students can easily identify. Divide your online class into four groups assigned to one of the parts of the marketing mix: product, price, place, promotion. Have the groups research the part of the marketing mix assigned as developed by the chosen company. After all four reports have been posted, redefine the groups (remix them) and then require that the new groups make recommendations to the company based on the compilation of the reports.

Marketing Process Flow: Ask each student to create a marketing process flow chart that highlights each step of the marketing process: target market needs; research/plan; identification of customs; implementation of the 4Ps; nurturing of relationships. Post the best three charts on the site and give extra credit for them.

Environment Debate: Divide your class into five groups. Assign each group one of the following: competitive environment, economic environment, technological environment, socio-cultural environment; political/legal/regulatory environment. Each group is to take the position that the factor assigned has the most impact on marketing. Have a five-way debate on line by requiring students to log on at one time.

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CHAPTER 9 MARKETING MIX: PRODUCT, PRICE, PROMOTION, AND PLACE CHAPTER OPENER Marketing is one of the most interesting topics to students, perhaps because we see advertisements and other aspects of marketing every day. It is easy to study magazines and newspapers to talk about new products being introduced (and old ones being extended or repositioned), categories of goods and services and pricing strategies. This chapter introduces each of the four elements of the marketing mix: product, price, promotion and place. In terms of products, we look at the total product, product differentiation, and development. The promotional mix is presented and the personal selling process is explained. The major types of sales promotions are presented and the chapter concludes with a discussion of marketing intermediaries and distribution channels.

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

2.

3.

4.

5.

6.

7.

8.

9.

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Define various concepts applied to the term product as they apply to marketing and explain the role of product differentiation in product development.

Outline the steps in new product development, the application of the product life cycle, and describe classifications of consumer products and business-to-business products.

Explain why branding is beneficial to both buyers and sellers and describe some different types of brands.

Describe three major approaches to pricing strategy and outline some pricing tactics used to launch a new product, to adjust prices, and to affect price perceptions.

Define a promotional mix and explain its function in a promotional campaign.

Explain the advantages and disadvantages of the various types of media used for advertising and discuss the role of public relations in a company.

Describe the six steps in the personal selling process.

Describe the two main types of sales promotions and the types of tools commonly used as incentives.

Define marketing intermediaries and distribution channels and explain why these are important elements in marketing.

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KEY TERMS advertising (p. 222) agents/brokers (p. 232) brand (p. 210) brand association (p. 211) brand awareness (p. 211) brand equity (p. 211) brand insistence (p. 211) brand loyalty (p. 211) brand manager (p. 212) break-even analysis (p. 217) bundling (p. 219) business-to-business (B2B) products (p. 208) business-to-business product classifications (p. 209) competition-based pricing (p. 218) consumer product classifications (p. 208) consumer products (p. 208) consumer sales promotions (p. 229) controlled messages (p. 226) cost-based pricing (p. 217) damage control (p. 227) demand-based pricing (p. 217) discounts (p. 219) distribution channel (p. 232)

distributors (p. 232) dynamic pricing (p. 219) effective promotional campaigns (p. 221) everyday low pricing (EDLP) (p. 219) exclusive distribution (p. 236) fixed costs (p. 217) full-service wholesalers (p. 234) infomercials (p. 225) integrated marketing communication (IMC) (p. 221) intensive distribution (p. 235) limited-service wholesalers (p. 234) logos (p. 210) loss leader (p. 220) marketing intermediary (p. 232) new product development (p. 204) penetration pricing (p. 219) personal selling (p. 227) place (p. 231) prestige pricing (p. 219) price (p. 216) price discrimination (p. 218) price skimming (p. 218) pricing strategies (p. 217)

product differentiation (p. 204) product life cycle (p. 205) product line (p. 206) product line length (p. 207) product mix (p. 206) product mix width (p. 208) product placement (p. 225) promotion (p. 220) promotional mix (p. 220) promotional tools (p. 220) psychological pricing (p. 220) publicity (p. 226) public relations (p. 225) rebates (p. 219) reference pricing (p. 220) retailers (p. 232) sales promotions (p. 229) selective distribution (p. 235) semi-controlled messages (p. 226) target costing (p. 218) total product offer (p. 203) trade sales promotions (p. 229) uncontrolled messages (p. 226) variable costs (p. 217) warehousing (p. 237) wholesalers (p. 232)

DETAILED LECTURE OUTLINE I.

The Marketing Mix (4Ps): Product A. The Total Product Offer 1. Which do you prefer: Diet Coke or Coke Zero?

2. What is the total product offer? a. The total product offer (or value package) consists of all the benefits associated with a good, service, or idea that affects a consumer’s purchasing decision. When you buy a car, you’re not just buying a mode of transportation; you’re also buying some intangible benefits, such as style or an image

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B. Product Differentiation 1. How important is product differentiation? a. Product differentiation is the creation of a real or perceived difference in a product designed to attract customers. A company can distinguish a product from its competitors by establishing concrete or intangible differences between similar products.

2. How does consumer input affect product development?

C. New Product Development 1. What are the steps in developing a new product? a. New product development involves five steps: idea generation; idea screening; product analysis; product development and concept testing; and commercialization.

2. What is the product life cycle? a. The product life cycle is a theoretical model describing a product’s sales and profits over the course of its lifetime. It is a general description that traces a product’s sales and profits over time. Stages in the product life cycle include introduction, growth, maturity, and decline.

3. How do marketing decisions affect the product's life cycle?

D. Product Lines and the Product Mix 1. What do we call a group of similar products?

2. How long can a product line be?

3. How do companies decide how many product lines to offer?

E. Consumer and Business-to-Business Products 1. What's the difference between consumer products and business-to-business products?

2. How are consumer products classified? a. Four consumer product classifications emerge from strategic marketing mix plans for consumer products: convenience, shopping, specialty, and unsought goods and services.

3. How are business-to-business products classified? a. Five B2B product (or industrial product) classifications emerge from strategic marketing mix plans for B2B products: equipment; maintenance, repair, and operating (MRO) products; raw and processed materials; component parts; and specialized professional services.

F.

Branding 1. Why do companies use logos?

2. What are the benefits of branding?

G. Brand Loyalty and Brand Equity 1. Does customer satisfaction create loyalty to a brand? a. A brand is a name, term, symbol, or design that distinguishes a company and its products from all others. Branding is one of the most important tools of product differentiation, and it benefits both buyers and sellers.

2. How do companies build equity into their brand?

3. What does a brand manager do?

H. Packaging and Labelling 1. How does packaging affect the product and the brand?

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2.

3.

4.

5.

6.

How does packaging affect the environment Why is convenient packaging so important?

How does packaging help promote the product?

What does the government have to say about product labels?

Why is labelling important to establishing a brand image?

II. The Marketing Mix (4 Ps): Price A. Revenue Generating Component 1. Why is price an important component in the marketing mix?

2. What are some pricing objectives?

B. Pricing Strategies 1. What are the major pricing strategies? a. Cost-based pricing (or cost-plus pricing) is charging a price in relation to the costs of providing the good or service. b. Demand-based pricing (or value-based pricing) is pricing a good or service based on the demand for the product or its perceived value. c. Competition-based pricing is a pricing strategy based on what the competition is charging. Revenues and costs are secondary.

2. What is demand-based pricing?

3. What is competition-based pricing?

4. Are there alternate pricing strategies? a. Price skimming involves charging a high price for a product initially, then lowering the price over time. b. Penetration pricing 5. What are common types of price adjustments? a. Discounts - a deduction from the regular price charged b. Rebates - are partial refunds on what a customer has already paid for a product c. Bundling - when two or more products that usually complement one another are combined and sold at a single price.

6. What are some strategies used to impact price perceptions? a. Prestige pricing - Prestige pricing (or premium pricing) is the practice of charging a high price to invoke perceptions of high quality and privilege. b. Psychological pricing – the practice of charging a price just below a whole number to give the appearance of a significantly lower price. c. Reference pricing - refers to listing an inflated price (the “regular retail price” or “manufacturer’s suggested retail price”) that is then discounted to appear as if it is a good value.

III. The Marketing Mix (4 Ps): Promotion and the Promotional Mix A. Promotion 1. What does it mean to “promote” a product?

2. What are the most popular tools marketers use to promote a product? a. Promotional tools b. F our basic promotional tools are used to promote a good or service: advertising, public relations, personal selling, and sales promotion. c. Promotional mix - The promotional mix is the strategic combination of promotional tools used to reach targeted customers to achieve marketing objectives.

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3.

4.

What are the steps involved in a promotional campaign? a. Identify a target market b. Determine marketing objectives c. Design the message d. Determine the budget e. Implement the promotional mix f. Evaluate and adjust as needed How can companies create consistency across an entire promotional campaign? a. Integrated Marketing Communication (IMC)

B. Promotional Mix: Advertising 1. How do companies persuade consumers to buy their products? a. Advertising is paid, impersonal mass communication from an identified sponsor to persuade or influence a targeted audience.

2. What are the different types of advertising? a. Product advertising promotes a specific products uses, features, and benefits. b. Corporate advertising focuses on creating a positive image toward an organization or industry. c. Comparative advertising compares a brand's characteristics with those of other established brands. d. Retail advertising focuses on attracting customers to a fixed location. e. Business-to-business advertising is directed to other businesses, not consumers. f. Non-profit advertising focuses on promoting not-for-profit organizations. g. Public service advertising communicates a message on behalf of a good cause. h. Advocacy advertising promotes an organization’s position on a public issue. i. Interactive advertising uses interactive media to connect directly with customers. j. Internet advertising uses pop-up and banner ads to direct people to an organization’s Web site.

3. What are the different types of advertising media?

4. What are the advantages and disadvantages of the different types of advertising media?

5. What are some important recent trends in advertising? a. Internet advertising b. Social media c. Mobile marketing d. Product placement and Infomercials e. Global advertising C. Promotional Mix: Public Relations 1. How much control do businesses have over their public image? a. Public relations is the management function that establishes and maintains mutually beneficial relationships between an organization and its stakeholders i. Controlled messages ii. Semi-controlled messages iii. Uncontrolled messages 2. How does a company generate positive publicity?

3. How does a company respond to negative publicity? a. Damage control

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D. Promotional Mix: Personal Selling 1. What is “personal” selling and why is it an important promotional technique?

2. What are the steps in the selling process? a. Six steps emerge from all personal selling: prospecting, approaching the prospect, presenting, overcoming objections, closing the sale, and following up.

E. Promotional Mix: Sales Promotions 1. How can a company generate interest in a product?

2. What are two general types of sales promotions? a. Trade (or business-to-business) sales promotions b. Consumer sales promotions i. Some of the specific trade sales promotion tools include: ii. trade shows and conventions iii. trade allowances (deals and price reductions to wholesalers, dealers, and retailers) iv. co-operative advertising (a manufacturer agrees to pay for some of the advertising costs of the retailer) v. free merchandise vi. sales contests (e.g., a free trip to Hawaii for those who sell the most) vii. dealer listings (advertisements of your product that mention retail outlets where it can be found) viii. catalogues and store demonstrations ix. in-store displays x. quantity discounts xi. training and support programs 3. What are the advantages and disadvantages of the promotional mix?

IV. The Marketing Mix (4Ps): Place (Distribution) A. Marketing Intermediaries and Distribution Channels 1. How do companies get their products into the hands of consumers? a. The pace or distribution component of the marketing mix refers to all methods involved in getting the product into the hands of consumers. i. Marketing intermediary ii. Distribution channel 2. What are the different types of intermediaries? a. Wholesalers b. Agents/Brokers c. Retailers 3. Why are intermediaries needed?

4. What are different types of distribution channels?

B. Wholesalers, Agents, and Brokers 1. What services do wholesalers provide?

2. What are the different types of wholesalers? a. Full-service wholesalers b. Limited-service wholesalers 3. What are some common types of agents? a. Manufacturers agents b. Selling agents

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c.

Purchasing agents

C. Retailers 1. What are three important retail strategies? a. Selective distribution b. Intensive distribution c. Exclusive distribution 2. What are the different types of retailers?

3. What is non-store retailing?

D. Physical Distribution 1. How important are warehousing and inventory control?

2.

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What are the benefits and costs of various transportation methods?

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SUGGESTED SOLUTIONS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Product Promotion (Kraft Is a Champion Marketer) Discussion Questions: 1. You may recall the TV commercial about college students cooking Kraft Dinner on a hot water radiator in their dorm room. Choose a different Kraft advertisement or commercial you can recall and research the specific gains or losses incurred by the company due to this marketing effort. What were they? (Bloom’s: application) 2. Review Kraft’s online annual and sustainability reports. What types of projects, practices, initiatives, or endeavours is Kraft working on that will help build its good reputation and at the same time market its company and brands to potential consumers? (Bloom’s: application) 3. Which Kraft products do you use? Why do you choose Kraft? Are Kraft products more expensive than generic products? Do you prefer the Kraft brand over other brands? Why or why not? (Bloom’s: evaluation) Answers: 1. Answers will vary. Other campaigns include: “Do you like to do it in public or keep it private?” – Dentyne’s Great Kissing Debate: Public or Private? Bullfrog power and Kraft Canada partner to pilot new green natural gas solution; Kraft partners with Chinese Chef to raise awareness of how Kraft products can be used in cultural cooking; Kraft Hockeyville 2011, Maxwell House – “Is your coffee cup half full or half empty?” Maxwell House pours a cup of optimism for Canadians and encourages

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everyone to brew some good. La Food Bites, is a customized campaign cooked up for Kraft by Los Angeles cable interconnect Adlink and the Food Network. This campaign looks for advertising spots following key shows that will lead the topic to Kraft; for instance, right after chef Mario Batali whips up a spicy olive oil recipe, the next commercial is for Kraft Good Seasons salad dressing.

2.

Answers will vary. In 2010 Kraft Report – partnerships that support sustainable agriculture in farming, cut greenhouse emissions and energy use by 18% (greenhouse gases) and 16% (energy use), reduced waste by 42%, cut packaging by nearly 100 000 metric tons, built 100 “Kraft Hope Kitchens” in five rural Chinese provinces in partnership with the China Youth Development Foundation, partnered with Charities Aid Foundation to help families make smarter food choices and become more physically active.

3.

Answers will vary. Kraft Dinner is more expensive than no-name brand macaroni and cheese, but there is difference in the quality of the cheese sauce. The powered Kraft cheese seems to melt faster and without lumps, and tastes better.

BIZCHAT: Creating a Personal Brand?

Discussion Questions: 1. How might personal branding help you establish your career? (Bloom’s: evaluation) 2. Discuss how your personal brand will build brand equity. Can you give an example of the kind of“equity” you might be able to build? ( Bloom’s: application, synthesis) 3. Suppose you have been able to effectively develop a personal brand and are beginning to establish some brand equity. How might an inconsistent message, say between how you market yourself on Facebook and how you appear on Linkedin, affect your image? (Bloom’s: evaluation) Answers: Answers to the above discussion questions will vary.

OFF THE MARK: Q-tips Brand Cotton Swabs Discussion Questions: 1. Can you think of any other brand names now used as generic descriptors? If so, which ones?

(Bloom’s: knowledge) 2. How can having your brand name used as a generic descriptor be a good thing for your company?

(Bloom’s: application) 3. How can a company get their brand known, but not have it become a generic description? (Bloom’s: application, synthesis) Answers: 1. Answers will vary. Other brands this has happened to include: escalator, granola, gunk, heroin, jungle gym, brassiere, corn flakes, kerosene, linoleum, shredded wheat, tabloid, touch-tone, and trampoline. Products that remain registered trademarks at this time, but are sometimes used as generic product descriptors include: AstroTurf, Baggies, Beer Nuts, Jockey Shorts, Kitty Litter, Laundromat, Magic Marker, Ping-Pong, Realtor, Rollerblad, Scrabble, Slim Jim, Styrofoam, Super glue, Technicolor, Vaseline, Velcro, and Walkman.

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2.

The company was successful in getting its brand known and many consumers talk about it, use its name, and purchase it. Some customers will ask for Kleenex or Q-tips for example, when they really just want tissue or cotton swabs and have no preference regarding the brand. This may help increase sales in this respect because if consumers knew that the no-name brand tissues were less costly than Kleenex they might purchase the no-name brand (depending on what value, quality, and satisfaction the customer is looking for in the product). The down side for the company of its brand being used generically is that the name is now confused with the entire category so most consumers do not differentiate the company’s product from any other company’s product. Q-tips may be purchased, but many consumers would not care whether or not the cotton swabs they purchased were actually Q-tip brand.

3.

Answers will vary. Companies need to make sure they advertise their products in a way that makes consumers perceive their brand to be better than other brands in the same category. They want their brands to be well known and sought after, not well known and used as a generic name for any similar item. Where legal issues are concerned, copyright, patents, trademarks, etc. are important for companies to obtain early on. For example, it took 15 years for the courts to reach a settlement in the Polaroid lawsuit against Kodak for infringement on Polaroid’s instant camera patent. Kodak paid $925 million to Polaroid.

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IN-CLASS ACTIVITIES Activity

Description

Time Required

Reference

Bloom’s Taxonomy

Team Time: Developing a Promotional Mix

Students work in groups to develop a promotional campaign.

30 min.

Page 364

Knowledge Comprehension Application

Ethics and Corporate Social Responsibility: The Ethics of Rx

Students discuss the ethical issues associated with prescription pricing.

30 min.

Page 364

Knowledge Comprehension Analysis

Supplemental In-Class Activity 1: Sunday Sales

Students identify branding strategies using the Sunday newspaper sales flyers.

15-20 min.

IM – see below

Knowledge Comprehension

Supplemental In-Class Activity 2: Setting a Reasonable Price

Students practice using cost-based pricing, target costing, and competitive pricing to price a product.

15-30 min.

IM – see below

Knowledge Comprehension Application

Supplemental In-Class Activity 3: Find the Ads

Students find examples of different types of advertising in magazines.

15-20 min.

IM – see below

Knowledge Comprehension

Supplemental In-Class Activity 4: Marketing a Product

This summary exercise gives students a chance to practice skills from Chapters 12.

15-30 min.

IM – see below

Knowledge Comprehension

Learning Catalytics

This activity allows students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

Any level of Bloom’s Taxonomy

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion.

See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

Sketch Animations

This animation is meant to explain one difficult concept: • Price Elasticity

variable

Videos Appendix and MyBizLab

Knowledge Comprehension

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SUPPLEMENTAL IN-CLASS ACTIVITY 1: Sunday Sales Activity Overview: Identify branding strategies using the Sunday newspaper sales flyers.

Time Limit: 15–20 minutes What to Do: Save the Sunday newspaper sales inserts from one or more Sundays depending on the size of your class. Pass the sales flyers out to individual students (or pairs of students) and ask them to make a list of generic, manufacturer’s, private, family, individual, and co-brands’. The students can write them under category titles on the board or call them out for you to write in the categories.

Don’t Forget: Bring in enough sales flyers from department stores to allow each student or pair of students to have one. Flyers from stores like Sears, Shoppers Drug Mart, or Real Canadian Superstore are useful for private brands. Stores like Wal-Mart, Toys R Us, Canadian Tire and Futureshop are good for manufacturer’s brands plus others. Try to find at least one example from each category.

Wrap-Up: This exercise helps to solidify the different types of brands discussed in the text. Students will be able to relate the definitions to specific products and images.

SUPPLEMENTAL IN-CLASS ACTIVITY 2: Setting a Reasonable Price Activity Overview: This activity gives students practice in using cost-based pricing, target costing, and competitive pricing to price a product.

Time Limit: 15 to 30 minutes What to Do: Provide the students with the following information: Your business provides a service to local residents. Your fixed costs are $2,000 per month, and you expect 40 customers per month. The variable cost associated with each service is $35.

1.

2.

3.

4.

5.

Using cost-based pricing and a markup of 20%, what should the price be? Show calculations.

Using breakeven analysis, what should the break-even volume of production be? Show calculations.

Using target costing, a price you think is acceptable to customers ($99) and an acceptable profit margin (20%), what should the price be? Show calculations.

If your nearest competitor charges $95, what should the price be? Explain.

With all this information and the results you calculated for parts 1-4, what do you think your price should be?

Answers: 1. Total cost = $2,000 + (40) ($35) = $3,400 Average total cost per unit = $3,400 / 40 = $85 To achieve a mark-up of 20%, you must charge this much over the average unit cost: $85 x (0.20) = $17 Total price = $85 + $17 = $102 Checking your work: At $102 sales price, the total revenue for 40 units is (40)($102) = $4,080 At 40 units in total, the total cost is $2,000 + (40)($35) = $3,400

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The mark-up is ($4,080 – $3,400) / $3,400 = $680 / $3,400 = .20 or 20% The calculations are verified.

2.

Break-even volume = Total fixed costs / (Price – Average variable cost) This formula needs manipulated algebraically to be able to solve for price: • Multiple both sides of the equation by (price – average variable cost): Break-even volume (Price – average variable cost) = total fixed costs • Multiple out break-even costs times the variables in parentheses: (Break-even volume x price) – (break-even volume x average variable costs) = total fixed costs • Add the second part of the left side of the equation to both sides: (Break-even volume x price) = total fixed costs + (break-even volume x average variable costs) • Divide both sides of the equation by break-even volume: Price = [total fixed costs + (break-even volume x average variable costs)]/break even volume • Now, solve for price using the numbers given: Price = [$2,000 + (40)($35)] / 40 = $3,400 / 40 = $85 per unit • Checking your work: Break-even volume = Total fixed costs / (Price – Average variable cost) 40 = $2,000 / ($85 – $35) > 40 = $2,000 / $50 > 40 = 40 At $85 selling price, revenue for 40 units will equal the total cost (fixed + variable)

3.

Target cost = cost customers are willing to pay – acceptable profit margin to obtain the desired cost $99 – (.20)($99) = $99 – $19.80 = $79.20 Total cost per unit is currently $85 (see part 1) so you must look for ways to reduce your total per unit cost $5.80 ($85 – $79.20)

4.

Answers will vary, but should fall around $95. Students may remember that strong product differentiation will allow a higher price when compared to the competition.

5.

Answers will vary. With values for the selling price at $102, $85, $99, and $95 from the different parts, students should be able to support a price around these using information from the text.

Don’t Forget: You may need to provide the students with the re-arranged formula for Part 2.

Wrap-Up: As the text states, “the pricing component of the marketing mix is one of the most difficult for marketers to grapple with.” This exercise points out some of the different options to review when deciding on a price. And there is always the option of providing discounts or other price adjustments.

SUPPLEMENTAL IN-CLASS ACTIVITY 3: Find the Ads Activity Overview: Students find examples of different types of advertising in magazines.

Time Limit: 15–20 minutes What to Do: Have the students look through magazines for the different types of advertising. See if they can find all the types (except interactive and Internet; if you have a computer in the classroom, students can find these, too). If possible, have them rip the advertisement pages out of the magazines and create a

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display on the whiteboard or wall by taping up the advertisements under headings of each type. Put all the advertisements in a notebook after class for students to review (or to use for a future class).

Don’t Forget: Save up a variety of magazines to have on hand.

Wrap-Up: Discuss the wide variety of advertisements we see and respond to each day—not just in magazines. Re-emphasize the different types as described in the text.

SUPPLEMENTAL IN-CLASS ACTIVITY 4: Marketing a Product Activity Overview: This summary exercise uses student skills from Chapters 11 and 12.

Time Limit: 20 to 30 minutes What to Do: • Before class, determine approximately how many groups you will have for a group activities assuming four students in each group. Find that number of items from around your office and home (plus a few more just in case). The items should fit in a paper lunch bag. Some suggestions include new types of canned beverages, a licensed product, etc.

• For class, have each group pick a bag. Have each group answer the following questions about the item in their bag: 1.

How would your product’s features be impacted by the following environmental factors?

Give one example for each category.

• Political and legal • Social and cultural • Technological • Economic • Competitive

2.

What would be a likely target market for your product? Explain using geographic, demographic, and psychographic variables.

3.

What phase of the product life cycle do you think your product is in? Why did you pick this phase?

4.

Do you think it is a national brand, licensed brand, or private brand product? Why?

5.

Ascertain the price for your product. Why did you choose that price?

6.

What are the two best distribution channels for your product? Explain each one.

7.

What promotional mix will you use to promote your product? (List at least three promotional tools.) How will these tools reach your target market at the right stage of their buying process?

Don’t Forget: The bags may not be necessary depending on your class. They just help create a perception of fairness.

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Wrap-Up: Review the answers in class or look them over between classes and then discuss the responses with the class. Other students will have suggestions, too. This is an excellent good summary tool for the three chapters on marketing topics.

LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

Learning Catalytics 1 Question Type: Ranking Prompt: The five steps in new product development are listed below. Rank them in correct sequence.

Answer/Explanation: Rank Step 4 Product Development and Concept Testing 1 Idea Generation 5 Commercialization 2 Idea Screening 3 Product Analysis

Learning Catalytics 2 Question Type: Ranking Prompt: The six steps in the personal selling process are listed below. Rank them in correct sequence.

Answer/Explanation: Rank Step 2 Approaching 4 Overcoming objections 1 Prospecting 3 Presenting 6 Following Up 5 Closing the sale

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Learning Catalytics 3 Question Type: Highlighting Prompt: Highlight the statement which best explains why pricing is an important component in the marketing mix.

“Pricing is so important to consumers and producers alike that it ranks as one of the 4 Ps in the marketing mix. Prices are sometimes called fees, fares, tolls, rates, charges, or subscriptions. Price is the only revenue-generating component of the marketing mix—product, promotion, and place (distribution) strategies are all cost components. In fact, revenue to a business equals the price multiplied by the number of units sold or services performed.”

Learning Catalytics 4 Question Type: Priority Prompt: Building and maintaining brand equity should be a consideration in all decisions within the marketing mix. If you were marketing manager for Lululemon, an exclusive retailer, and you were given a mandate to increase sales through selective distribution, how would you rank the following types of retailers as potential distribution partners?

Answer/Explanation: Priority Retailer 2 Holt Renfrew 5 Walmart 3 Hudson’s Bay 4 Sears 1 Various selective yoga studios Answers will vary in prioritizing 1 and 2.

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SUGGESTED SOLUTIONS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS 1.

2.

3.

4.

5.

6.

What types of consumer products are sold by a gas station? By an automotive repair shop? By a shoe store? By an orthodontic dentist? How might these goods and services be best differentiated in terms of the “product” and “price” components of the marketing mix? (Bloom’s: application) What are the differences between cost-based pricing, demand-based pricing, and competition-based pricing? (Bloom’s: comprehension, analysis) Describe the conditions when it might be appropriate to use each of the following pricing strategies: discounting, rebates, bundling, dynamic pricing, prestige pricing, psychological pricing, loss leader pricing, and reference pricing. (Bloom’s: application, synthesis) Describe which distribution strategy—intensive, selective, or exclusive—would be most appropriate for each of the following products, and explain why: laundry detergent, cigarettes, Mercedes sports cars, and Snickers candy bars. (Bloom’s: application) Suppose you are the distribution manager for a high-tech producer of big-screen televisions. Which mode of transportation would you select in distributing your products to customers and why?

(Bloom’s: application) How might fresh food packaging be adapted to be more environmentally friendly? Can you think of methods that a consumer electronics manufacturer might use to reduce the degree of nonrecyclable material in their packaging?

Answers: 1. Gas stations sell convenience goods and services. The “product” should emphasize convenience by offering a safe, clean and convenient location, convenient hours of operation, as well the variety of goods available for purchase ranging from commonly consumed grocery items, snacks, drinks, fast food, as well as a range of convenient services like an ATM machine and maybe a mail drop box. Its “price” component of its marketing mix strategy would likely depend on the amount of competition it faces (competition-based pricing). It may charge a relatively low price for its gas to build traffic inside the gas station to sell other items at a much higher mark-up to maximize profits. It may also charge relatively low prices on its gas and items if its’ desire is to achieve greater market share. It may also pursue status quo pricing to simply match competitor’s prices. Perhaps, if it’s the first gas station in a specific locality it may undertake price skimming, or if it is opening its doors amidst lots of competition it may pursue a penetration pricing strategy.

An automotive repair shop could simultaneously sell a variety of consumer services. It may offer convenient service when offering quick oil changes and may charge a competitive price to build traffic (a customer base). It would also likely sell a shopping service when it competes for customers to undertake more sophisticated maintenance and repairs like tune-ups or engine overhauls. It would then compete on the basis of price, quality, and image. It could sell a specialty service if the shop specializes in a specific type of repair like focusing on brakes, or repairs for a particular type of vehicle that caters to the unique needs of say, Corvette owners or owners of an over-the-road diesel tractor-trailer rig. Therefore, it may pursue a high-price strategy to create an image of quality. The automotive repair shop might also simultaneously sell an unsought service to customers who break down nearby and need immediate attention. It could then charge a price to maximize profit.

A shoe store typically sells a shopping good where buyers typically comparison shop and stores compete on the basis of price, quality and brand-name image. The price charged would likely depend on the amount of competition facing the store and the demand for shoes determined by population size in the community.

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An orthodontic dentist sells a specialty service. Orthodontists attempt to differentiate their service based on quality and often price discriminate based on customers’ perceptions of differences in real or perceived quality.

2.

Cost-based pricing is charging a price in relation to the costs of providing the good or service.

Demand-based pricing is pricing a good or service based on the demand for the product or its perceived value. Competition-based pricing is based on what the completion is charging.

3.

Discounting come in many forms. Quantity discounts may be appropriate to stimulate purchases in large quantities. Cash discounts are designed to reduce buying on credit which requires processing.

Seasonal discounts are designed to stimulate sales of products that are out of season. A trade-in allowance (or discount) may be used to sell new goods by offering a trade-in for older units. Rebates are designed to stimulate sales by offering a reduced price on what a customer has already paid for.

For example, mail-in rebates offer money back to customers after the consumer provides proof or purchase. They are most profitable when customers are not expected to go to the trouble of sending in the rebates. Bundling is another type of price adjustment to stimulate sales and profits. It is common in the fast-food industry where products are bundled to make a complete meal. Vacation packages are sometimes bundled as well. Bundling helps to increase sales for complementary products. Dynamic pricing are most appropriate during auctions or in other markets where buyers and sellers interact directly. Prestige pricing is appropriate whenever the seller wishes to invoke perceptions of high quality and privilege. It is an appropriate strategy when real or perceived quality is important to customers. Psychological pricing is the practice of charging a price just below a whole number to give the appearance of a lower price. Gas stations practice this kind of pricing. It is appropriate when customers are priced sensitive. Loss-leader pricing is appropriate to build traffic so that consumers are drawn to the business, then much higher prices can be charged on similar or different products. Reference pricing is the listing of an inflated price that is then discounted to appear as if it is a good value. This type of pricing is most likely when consumers are not familiar with normal prices for the product.

4.

Laundry detergent: Intensive because laundry detergent is a convenience good which needs the widest possible exposure in the market. Cigarettes: Intensive because cigarettes are a convenience good which needs the widest possible exposure in the market. Mercedes sports cars: Exclusive because these sports cars are a specialty product. Specialty products carry a certain degree of prestige. They would require distributors to carry a full line of inventory, offer distinguished service, and meet other exclusive requirements. Snickers candy bars: Intensive because candy bars are a convenience good which needs the widest possible exposure in the market.

5.

There are many benefit and costs associated with the many different modes of transportation as discussed in the chapter. They depend on costs, speed, dependability, flexibility in handling products, frequency of shipments, and accessibility to market. When weighing these factors for hightech big-screen televisions it appears that trucks would provide the best mode of transportation to customers close by, and rail may be most appropriate for longer shipments. Other arguments could be made for the other modes of transportation given certain circumstances.

6.

Given that fresh food typically uses a single serve package, manufacturers could consider biodegradable alternatives. Consumer electronics manufacturer could use some form of repackaging in which packaging materials can be repurposed and reused.

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TEAM TIME: Developing a Promotional Mix Notes: Answers will vary. However, all promotional campaigns begin with an understanding of the targeted market and the marketing objectives. This is followed by designing the message, determining the budget, and then implementing the promotional mix. Evaluate and adjust as needed.

One the key aspects of the advertising campaign will be to focus consumer attention on how your product is different from other health bars. This will incorporate product advertising and comparative advertising. One would also have to weigh the many advantages of each mode of advertising. For FitFoods’ breakfast bar, television, newspaper, magazines and radio media would certainly be considered. The healthy lifestyle associated with the breakfast bars should be stressed as part of its public relations tools and its pitch. Generating a newsworthy story centering on the healthy nature of breakfast bar would be good positive publicity. This might be accomplished by providing free samples to school age children in various local communities. Many sales promotions are possible. These include coupons, rebates, frequent-user incentives, point-of-purchase displays, free samples, contests, sweepstakes, and various other advertising specialties including sponsoring special events, and lotteries.

ETHICS AND RESPONSIBILITY: The Ethics of Rx Discussion Questions: 1. Which team would you recommend the company fund? Why? 2. How do the potential profits of Team B’s drug affect your stance, from both financial/business and medical/ethical perspectives?

3. What about pricing? How might you reconcile the need to keep the drug company profitable with the ethical responsibility to make medications affordable for those in need?

Answers: 1. Answers will vary but should reflect critical thought. As with many ethical issues, any decision depends on balancing the interests of many parties involved.

2.

Answers will vary. However, ethical decisions typically involve a trade-off meeting the desires of interested parties.

3.

Answers will vary. But, a compromise may be possible by charging a price that is high enough on the skin-condition drug to afford the funding of the other drug later.

CLOSING CASE: The iPhone: Revolutionary Product or Rip-off?

Discussion Questions: 1. What do you think might have happened if Apple originally set its price at US$399? Would this have increased or decreased sales of the iPhone in the end? What do you think might have happened if Steve Jobs had not issued the US$100 credit? (Bloom’s: evaluation) 2. Why is brand loyalty so important to a company such as Apple? How does regaining the trust of iPhone customers affect all Apple brands? (Bloom’s: application, analysis)

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3.

Consider what you’ve learned about the different types of product pricing. Do you think it was ethical for Apple to practice price skimming with the iPhone? Do you think price skimming is always unfair to the customer, or is it a legitimate way of doing business? (Bloom’s: application, evaluation)

Answers: 1. If Apple had originally priced its iPhone at US$399 its volume of sales would have likely been much the same because the enthusiasts were very price insensitive, and its profits would have been much lower. This lower price may not have generated as much sales over the long run compared to the decision to lower the price later to capture still more sales. However, because some people were outraged, if Steve Jobs would not have offered the US$100 credit then valuable customers could have been permanently alienated and lost.

2.

Apple prides itself on being different and innovative. Many of its customers prefer the Apple brand for this reason. Some of Apple’s most loyal customers could have been so upset by the iPhone priceskimming they might have refused to buy many of Apples’ other products. Regaining their trust was critical for Apple’s continued success.

3.

Answers will vary over it whether it was ethical or not. Price-skimming might be legitimate for a “luxury” item like the iPhone because people were willing to pay the relatively high price. That is, those who paid the higher price willingly did so because of the value they placed on the item. It must have been worth it to them, or they wouldn’t have paid that price.

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SUPPLEMENTAL MATERIAL ADDITIONAL CRITICAL THINKING QUESTIONS 1. Why is it important for marketers to think of a good or service as a total product offering?

2.

How are brand loyalty, specialty goods and services, and prestige pricing related?

3.

Why might companies need to devote larger advertising expenditures to new products as compared to advertising expenditures on established brands with larger market share?

4.

Discuss how different forms of sales promotions may build or erode brand loyalty.

Answers: 1. A total product offer consists of all the tangible and intangible benefits associated with a good, service, or idea. Marketers know this, and when planning a total product offering, they think about products on three levels: the core product, actual product and augmented product. Each level adds more value. By adding value to customers at each of these three levels then the business can enhance its sales, charge a higher price and increase profits.

2.

The greater the brand loyalty, the more the good or service is viewed by consumers as being a specialty good or service, and the greater the ability of the firm to undertake prestige-pricing. For example, an orthodontist that has successfully differentiated her “superior” service will see customers come to view the orthodontist’s services as a specialty service and become more price insensitive. In fact, orthodontists may undertake prestige-pricing to invoke perceptions of high quality and value.

3.

One of advertising’s goals is to inform the public of the product’s existence; to build mass brand awareness and brand association. A new product, because it is unknown will likely require more advertising than a well-known established product.

4.

Two types of sales promotions emerge from marketing: consumer sales promotions and business-to business (or trade) promotions. Consumer sales promotions consist of the use of coupons, rebates, frequent-user incentives, point-of-purchase displays, free samples, contests, sweepstakes, and advertising specialties. Coupons and rebates can build brand loyalty by introducing new products to customers. Consumers may also like the sense of getting a bargain. They can erode brand loyalty by reducing the perceived value of the product. Frequent-user incentives encourage customer loyalty and repeat business but may alienate some customers because of the effort required to take advantage of them. Point-of-purchase displays, free samples, contests, sweepstakes and advertising specialties may generate buzz for a product but can erode brand loyalty if they make the product appear cheap or of low quality. Business-to-business (or trade) promotions range from trade shows, to trade allowances, to quantity discounts and sales contests. As with consumer sales promotions, they may help foster brand loyalty by raising brand awareness and brand association but they risk customers getting used to the promotions and they risk reducing the prestige associated with the product which can erode brand loyalty.

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APPLICATION EXERCISES 1.

The iPhone as a Product. Go to Apple’s iPhone website: www.apple.com/iphone. Describe Apple’s marketing mix strategy for its product and its price. When would an iPhone be a consumer product, and when would it be a B2B product? What does Apple do to augment its product? What type of branding strategy is Apple pursuing? What stage of the product life cycle is the iPhone experiencing?

Is Apple undertaking the appropriate strategies, given this stage of the product’s life cycle?

2.

Research a Brand. Choose a favourite brand of clothing or food and use the Internet to gather Information about it. What type of brand is it—a manufacturer’s, private, individual, or other? Is it part of a brand extension? Is it associated with a co-brand or a licensing arrangement? How do packaging and labelling affect the image the brand projects? Summarize your findings in a brief report.

3.

The Dynamics of Dynamic Pricing. Visit an online auction website such as www.ebay.com. Choose a few products and compare their prices on the website with their prices at a retail store. What do the higher or lower prices on eBay indicate about supply and demand? How does dynamic pricing differ from fixed pricing? What other factors must buyers take into account when purchasing products from eBay?

4.

Read All about It. Search the websites of a variety of large companies for recent press releases. For example, visit Apple’s press release library (www.apple.com/pr/library) or GE’s updates about ecomagination (www.ge.ecomagination.com). What type of language is used in these press releases?

How does this publicity advance promotional goals? Do you think it is effective? Why or why not?

5.

Tracking a Product. Use the Internet to research the likely distribution path of a product of your choice. Where was it produced? Through which countries and/or states did it travel? Which intermediaries were involved in its distribution? Make a chart or diagram tracing its channel of distribution.

6.

Sweet Success? How might a candy company face some challenges when selling its candy to developing nations? Ensuring ethical behaviour is a constant challenge for all businesses, including international businesses. Visit the Canadian Marketing Association (CMA) and review the CMA’s Statement of Ethics. What recommendations would you make to the candy company as it begins to distribute its candy in developing countries?

Answers: Answers will vary.

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ADDITIONAL TEAM TIME: Developing a Product Divide into teams of three or four. As a team, use what you have learned in this chapter to discuss how you would develop a new product.

Process 1. Begin with Step 1 in the five steps in the new product development process: idea generation.

Work as a group to decide what your new product will be.

2. Proceed through the idea screening, product analysis, product development and testing, and commercialization steps. What do you estimate the consumer demand and production feasibility for this product to be? How much will it cost to produce, and what should be its selling price?

How might you concept-test this product? How will it be marketed? Discuss the answers to these questions as you address their corresponding steps.

3. Prepare a summary of your findings and present them to the class.

Answer: Answers will vary. However, idea generation focuses on unmet customer needs to develop an entirely new product or an improved version of an existing product. Ideas often come to businesses as a result of listening carefully to customers. Idea screening attempts to eliminate unsound concepts. Product analysis estimates costs of production, selling price, sales volume, and profitability. Product development and testing determines if the product idea will ever commercialize. Prototypes are often produced, tested, and evaluated by consumers. Commercialization is the decision to market the product.

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MYBIZLAB RESOURCES & TEACHING TIPS BIZSKILLS SIMULATION: Product Development Synopsis: In this BizSkill, students play the role of a marketer at PowerTech, a company that supplies batteries for all kinds of devices—game systems, cameras, cell phones, digital music players, and more.

They’re asked to decide whether a new battery idea could make it in the marketplace.

At the end of the BizSkill, students should be able to answer the following questions: 1. How is market research important in developing new products?

2. What is involved in consumer decision making?

3. How does business-to-business marketing differ from marketing to consumers?

BIZSKILLS SIMULATION: Pricing Strategies Synopsis: In this BizSkill, students play the role of a consultant who helps businesses price their products competitively. They’re asked to help a number of clients make pricing decisions.

At the end of the BizSkill, students should be able to answer the following questions: 1. What things impact pricing strategies?

2. What pricing strategies are available to marketers?

3. What objectives do companies try to achieve through pricing?

BIZSKILLS SIMULATION: Promoting a Product Synopsis: In this BizSkill, students play the role of a marketer at Sol Shades, Inc., a company that has been developing a new line of sunglasses. They’re asked to create a marketing campaign, weighing the tradeoffs between different promotional strategies and designing the best marketing mix, all while staying within a budget.

At the end of the BizSkill, students should be able to answer the following questions: 1. Why are target markets important?

2. How can you determine an appropriate promotional mix?

3. Why is a unified message across all types of promotion important?

4. What are the different ways to implement a promotional campaign?

5. How do you evaluate the effectiveness of product promotion?

DECISION-MAKING MINI-SIMULATIONS: Pricing Synopsis: Holden Evan, Inc manufactures razors and blades for personal grooming. To grow the business, they are thinking of creating an electric razor as a new product line. The market for electric razors is highly competitive and consumer-driven. As V.P. of Marketing, you meet with the President and agree to a marketing strategy focusing on electric razors for men with mass market appeal. You adopt the slogan

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of "Expecting more but paying less." The President asks you to determine the price to charge for the new product.

DECISION-MAKING MINI-SIMULATIONS: Personal Selling Synopsis: Curtis Precision Manufacturing is a manufacturer of products and equipment for finishing metal parts. They have three new product lines that are ready for introduction to the marketplace. As national sales manager, your task is to develop a specialized sales team to sell one of the Curtis product lines. You will have three different product lines to choose from.

DECISION-MAKING MINI-SIMULATIONS: Retailing/Wholesaleing Synopsis: HentonCast, a small privately-held maker of high-end fly-fishing rods, is known for expensive, hand-made custom rods used by enthusiasts and celebrities. They are about to introduce a line of readymade rods with a somewhat lower, yet still premium price that will be accessible to a wider range of sports enthusiasts. You are the Vice President of Marketing at HentonCast. Your job is to determine an appropriate target market for these new fishing rods and establish appropriate marketing channels to reach those customers, while still providing service to your original customers.

DECISION-MAKING MINI-SIMULATIONS: Product Life Cycle Synopsis: You are the product brand manager at Holden Evan, a global corporation that sells a variety of consumer goods. Holden Evan is creating its own brand of hot sauce, Burnin’ Rock, using exotic peppers sourced through fair trade. As product brand manager, your task is to successfully introduce Burnin' Rock into the marketplace, and manage the brand through its product life cycle. You have significant freedom to make the marketing decisions you think best, but the CFO has directed you to make at least some profit on this brand each year beyond the first.

DECISION-MAKING MINI-SIMULATIONS: Advertising Synopsis: Holden Evan, Inc offers a multitude of consumer goods products to the marketplace. The company has recently acquired a very successful regional energy drink firm.

You are the brand manager for Bee! energy drink. Your task is to develop a major advertising campaign that will introduce Bee! to a national market, differentiate it from already-established competitors, and encourage consumers within targeted segments to try the product.

DECISION-MAKING MINI-SIMULATIONS: New Product Development Synopsis: Swazzi, Inc is a national chain of clothing stores, focusing on high end merchandise for an affluent clientele. All products are designed, produced and marketed by the company under the exclusive Swazzi brand. Swazzi is preparing to make decisions concerning a spring line of premium-priced women's clothing. The line will be designed to have a marketing tie-in with the entertainment media.

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DECISION-MAKING MINI-SIMULATIONS: Marketing Mix Synopsis: Holden Evan's product, Blythe skin cream, is facing declining sales. To fix this problem, the V.P. of Marketing has developed a new overall marketing strategy, including the target market and positioning of the product. As Marketing Manager, you have been asked to revise the marketing mix plan in support of the re-launch of Blythe.

DOCUMENT MAKEOVERS: • Laptops 4 U Letter

Chapter 12, Related Websites http://www.marketingmag.ca/

Marketing magazine

http://www.adcouncil.org/

Ad Council

http://www.adstandards.com/en/

Advertising Standards Canada

https://www.lnnte-dncl.gc.ca/index-eng

Do Not Call list – Canadian Radio-television and Telecommunications Commission

http://www.sse.gov.on.ca/mcs/en/Pages/default.aspx

Ministry of Consumer Services

http://www.the-cma.org/

Canadian Marketing Association

http://www.marketingpower.com/Pages/default.aspx

American Marketing Association

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ENHANCING THE ONLINE COURSE Classy Products: Have your students create one slide for each of the classifications of products, using both definitions and photographs to illustrate the different types. Post them online on the course blog or a special “products” gallery.

Business Products: Have your students create one slide for each of the classifications of business products, using both definitions and photographs to illustrate the different types. Post them online on the course blog or a special “products” gallery.

Brand Scavenger Hunt: Ask your students to list the benefits of using brands and then to link to the Web sites of their 15 favourite brands. (NOTE: They probably cannot copy these graphics because the brands will be protected by trade mark licenses.) Ask them to discuss what distinguishes these brands in their minds.

Branding Chart: Have your students create a chart with the names and definitions of the types of brands.

Include at least two examples of companies that use that type of brand. Post the results on the course blog or another page for viewing.

Cool Packages: Ask your students to take photos of at least five unusual packages to post on the course blog or Web page. Ideas could include cosmetic bottles, promotional items such as t-shirts compressed into shapes, and holiday packaging.

New Product Contest: Divide your online class into four groups. Ask each group to come up with 10 ideas for new products that are (1) not yet on the market; and (2) within the realm of possibility considering current technology. Once each group has submitted their first 10 ideas, ask them to complete each step in the Product Development Process as outlined in your textbook. (For some of the steps, it will be a “pen and paper” exercise—or more precisely, a keyboard and screen exercise—meaning the students will imagine what they would do to go through the new product research process, business analysis, etc.)

Choose the most innovative product and the team with the best application of the development steps to get extra credit.

Pricing Objectives: Ask your students to define the eight types of pricing objectives. Have them to make a list of eight businesses which use these eight different types of pricing objectives. The students might want to take a trip to the nearest mall to get ideas. You may want them to submit their products by posting photographs on the course blog, or you may just ask them to describe the products and the reasons why they think these companies are using the pricing strategies. What pricing objective would they use for their project under New Product Contest?

Pricing Objectives: Ask your students to define the eight types of pricing objectives. Have them to make a list of eight businesses which use these eight different types of pricing objectives. The students might want to take a trip to the nearest mall to get ideas. You may want them to submit their products by posting photographs on the course blog, or you may just ask them to describe the products and the reasons why they think these companies are using the pricing strategies. What pricing objective would they use for their project under New Product Contest?

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Promotion Pie: Ask your students to create a pie-chart representing the four parts of the promotion mix.

Be sure to have them define each of the terms. Use this for discussion credit.

Promo Flow: Have your students create a flow chart with their computer graphics tools to represent the six steps of developing a promotion campaign. Be sure to have them define each step and discuss how the steps relate to each other in a summary at the bottom of the chart.

Integration Sensation: Ask your students to identify an example of at least one company that is currently using an Integrated Marketing Communications Program in the media. Students should find an example of several media and take digital photos to post. Ask the students if they like the campaign. Do they think the campaign is effective? Why or why not?

To Advertise or Not to Advertise: Assign a one-page essay to your students on the topic of the role of advertising in a global economy. Have them discuss the good and bad consequences of advertising. Is advertising bad for society? Good for society? Why or why not? Post the essays on the course blog and be sure to ask follow-up questions on the discussion board.

Advertising Mindmap: Have your students create a mindmap using all 10 types of advertising. Be sure to have them define all the types and post it to an assignments page or course blog.

Media Montage: Have your students create a graphic that shows the advantages and disadvantages of the different media. Ask students to go a step further and add graphics or verbal descriptions of different products for which those media would be good choices.

Advertising Trends: Ask your students to search online for examples of the recent trends in advertising mentioned in the text. Students should create a page of Web site links to accompany a definition of each trend.

PR Interview: have your students choose a Fortune 500 company in their town or city and call them to get information about the company. Students should try to get a contact person’s name and address as well as any materials the company is willing to send, any references to Web pages, blogs, etc. Have the students report on who they talked to and what types of materials were received. Did any students receive all of the categories of PR materials.

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CHAPTER 10 OPERATIONS MANAGEMENT: GOODS AND SERVICES

CHAPTER OPENER Chapter 10 introduces students to the processes an organization uses to manage operations. These processes have a huge impact on the overall quality of the company's products. Students will explore: operations management, the benefits and challenges of mass production, flexible production and customer-driven production as well as how technology influences the production process. Students learn the importance of choosing manufacturing locations based on transportation, human, and physical factors and to develop production plans that include a quality control component.

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

2.

3.

4.

5.

6.

7.

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Explain how operations management produces finished goods that provide utility to consumers, and differentiate between goods and service operations.

Describe mass production, mass customization, flexible manufacturing, and lean production and the benefits and challenges of each, including how technology influences the production process.

Summarize the factors involved in choosing a manufacturing location, a facility layout, and how green manufacturing integrates sustainability into the supply chain.

Explain how a company determines that it requires a supplier, selects a supplier, and strives to manage its supply chain.

Describe what value-stream mapping is, and what its benefits are.

Explain the benefits of just-in-time (JIT) production and enterprise resource planning (ERP).

Describe quality control and how ISO standards help companies produce high-quality goods and services, and the application of sustainability to operations management.

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KEY TERMS assembly line (p. 247) bill of material (p. 256) capacity (p. 255) cellular layout (p. 256) computer-aided design (CAD) (p. 249) computer-aided manufacturing (CAM) (p. 250) computer-integrated manufacturing (CIM) (p. 250) effectiveness (p. 246) efficiency (p. 246) enterprise resource planning (ERP) systems (p. 262) e-procurement (p. 258) facility layout (p. 255) fixed-position layout (p. 256) flexible manufacturing system (FMS) (p. 248) Gantt chart (p. 259) high-contact service processes (p. 246) human factor (p. 254) International Organization for Standardization (ISO) (p. 265)

inventory control (p. 261) ISO 9000 (p. 265) ISO 14000 (p. 266) just-in-time (JIT) inventory control (p. 261) lean production (p. 248) low-contact service processes (p. 247) make-or-buy decision(p. 257) manufacturing resource planning (MRPII) (p. 262) mass customization (p. 248) mass production (p. 247) master production schedule (p. 259) materials requirement planning (MRP) (p. 262) operations management (p. 245) operations managers (p. 246) operations planning (p. 246) process layout (p. 256) product layout (p. 256) production (p. 244)

production plan (p. 246) program evaluation and review technique (PERT) (p. 259) purchasing (p. 257) quality control (p. 262) radio frequency identification (RFID) (p. 261) routing (p. 259) scheduling (p. 259) Six Sigma (p. 265) statistical process control (SPC) (p. 264) statistical quality control (SQC) (p. 264) supply chain (p. 251) supply chain management (p. 258) total quality management (TQM) (p. 263) utility supply (p. 255) value (p. 245) value-stream mapping (p. 259)

DETAILED LECTURE OUTLINE I.

Operations Overview A. Producing Goods and Services 1. Why is the production of goods and services a critical component of any business? a. Production is the process of getting a good or service to the customer; it is a series of related activities, with value being added at each stage.

2. Is there a difference between production and operations? a. Operations management (or production management) refers to the organized direction and control of the processes that transform resources (inputs) into finished goods and services (outputs).

B. Operations Management 1. How do firms manage and control the creation of products and services? a. Operations planning includes four steps: 1) the type of production process, 2) the facility location, 3) the facility layout, and 4) resource planning. b. A production plan that is well developed and efficiently executed ensures a smoothly run operations process and a product that provides utility.

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c.

2.

3.

Operations managers are responsible for managing and supervising all the activities that occur when transforming resources into goods or services, such as setting schedules, making buying decisions, and overseeing quality control.

What is meant by “a company must be effective” to stay in business? a. Efficiency means completing a task or producing a product at the lowest cost. b. Effectiveness means completing tasks and producing products that create the greatest value.

What are the differences between service and manufacturing operations? a. Goods are produced; services are performed. There are three areas where services differ from goods: i.

Services are intangible. Goods are tangible—they have a physical form and can be seen, touched, and handled—while services can only be experienced because they do not have a physical form. ii. Services are unstorable. Goods can be stored in inventory, but services are consumed when they are produced. Trash collection, child care, or mail services cannot be produced ahead of time and then stored for high-demand periods. iii. Services are more customizable than goods. Each person receives service customized for his or her specific needs.

II. Operations Planning A. The Production Process 1. What types of production processes are usually used by businesses? a. The most common types of production processes and techniques include the following: mass production, mass customization, flexible manufacturing and lean production 2. What production process results in large quantities of goods? a. The method of producing large quantities of goods at a low cost is called mass production. This method relies on machines and automated assembly lines to massproduce goods that are identical and adhere to certain standards of quality. b. Mass-produced goods are usually manufactured along an assembly line (or production line), in which partially complete products are moved from one worker to the next on a conveyor belt.

3. Can product customization be done with mass production? a. Mass customization combines the low unit cost of mass production processes with the flexibility of producing goods or services tailored to meet individual customer’s needs.

4. How is mass customization achieved? a. A flexible manufacturing system (FMS) uses one central computer to link together several machines that can process different part types simultaneously.

5. Can mass customization be used in service industries?

6. What type of production strives for efficiency? a. Lean production is a set of principles concerned with reducing waste and improving flow that evolved from the original Toyota Production System (TPS) first used in Japan in the 1980s.

B. Technology in the Production Process 1. What is the role of technology in the production process?

2. What has helped automate the production process?

3. How has technology improved the design process?

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a.

4.

5.

6.

7.

Computer-aided design (CAD) refers to the use of a computer to create two-dimensional or three-dimensional models of physical parts.

How does the CAD information get incorporated into the manufacturing process? a. Once a design is approved, computer-aided manufacturing (CAM) uses the design data to control the machinery used in the manufacturing process. b. The integration of the CAD and CAM systems with the various aspects of a firm’s production process is referred to as simultaneous engineering.

Can an entire facility be automated? a. The entire facility can be automated and computer-integrated manufacturing (CIM) takes it even further by combining design and manufacturing functions with other functions such as order taking, shipment, and billing.

What effect has automation had on the production process?

How has social networking affected production?

C. Facility Location Planning 1. What factors must businesses consider when determining the location of facilities?

2. What are the transportation factors a company must consider? a. A supply chain is the sequence of organizations—their facilities and activities—that are involved in producing (right from the raw materials) and delivering (all the way to the consumer) a good or service. Supply chain facilities include warehouses, factories, processing centres, office, distribution centres, and retail outlets (see Figure 10.2).

3. How can organizations incorporate sustainability into the supply chain?

4. What else affects location selection? a. The human factor refers to how the location decision affects the people in a surrounding community and vice versa.

5. What are the physical factors a company must consider? a. The utility supply refers to the availability of public infrastructure services such as power, water, and communications.

D. Facility Layout and Capacity Planning 1. Why is facility layout important? a. Facility layout is the physical arrangement of resources, the people in the production process, and how they interact.

2. How big should the facility be? a. Capacity is the amount of a product or service that a company can produce under normal working conditions in a given time period. b. Capacity is dependent upon the size of the facility, the number of workers employed, and the technology and processes used.

3. How does facility layout affect production?

4. What are the most common types of facility layouts? a. Different manufacturing processes require different types of facility layouts based on the following four common types: i.

Process layout (or job-shop or functional layout) is a format in which workers who perform similar tasks on similar equipment are grouped together. ii.

Product layout (or flow-shop layout) arranges equipment or work processes according to the progressive steps by which the product is made. It is used mostly when large quantities of a product must be produced.

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iii.

iv.

Fixed-position layouts are ideal for manufacturing large items, such as ships, airplanes, and modular homes. Examples of fixed-position layouts in the services might include house cleaning, landscaping, and interior painting.

Cellular layout (or group technology layout) combines aspects from both product and fixed-position layout: workers are arranged into self-contained, stand-alone production units (or cells of small work teams). Each cell completes all tasks necessary to complete a manufacturing order.

E. Resource Planning 1. How are materials acquired? a. A bill of material lists the items and the number of each required to make that specific product. b. Purchasing (or procurement) is the task of buying the materials and services needed in the production process.

2. What is a make-or-buy decision? a. A make-or-buy decision decides what needs to be manufactured and what needs to be purchased from outside suppliers.

3. How does a company decide which suppliers to use? a. Supply chain management involves the logistics of obtaining all the necessary inputs that go into a production process (inbound logistics), managing the actual production process (materials handling and operations control), and managing the physical distribution (or outbound logistics) of getting the proper quantities of produced products to customers when and where they want them.

III. Operations Control A. Operations Scheduling 1. How does routing shape the production process? a. Routing is the way in which goods are transported, via water, rail, truck, or air. It includes transporting goods to a client, transporting materials from suppliers, or any of the other many combinations.

2. How does scheduling shape the production process? a. Scheduling involves specifying and controlling the time required for each step in the production process as well as making the most efficient use of equipment, facilities, labour, and materials. There are two different types of scheduling: forward and backward. i. With forward scheduling, you start with t he date that materials are available, create the most efficient schedule, and then determine a shipping date based on that schedule. ii. Backward scheduling is the exact opposite, where you are given a shipping or due date and you have to determine the start date and the most efficient schedule based on when everything has to be finished.

3. What is a Gantt chart? a. A Gantt chart, formatted similarly to a horizontal bar graph, is used to lay out each task in a project, the order in which these tasks must be completed, and how long each task should take.

4. What is a PERT chart?

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a.

5.

The program evaluation and review technique (PERT) maps out the various steps involved in a project, differentiating tasks that must be completed in a certain order from tasks that may be completed simultaneously.

Is scheduling for service operations the same as scheduling for production operations?

B. Inventory Control 1. What’s the best way to manage inventory? a. Inventory control includes the receiving, storing, handling, and tracking of everything in a company’s stock, from raw materials to finished products. b. A just-in-time (JIT) inventory control system keeps the smallest amount of inventory on hand as possible, and everything else that is needed is ordered so that it arrives just in time to be used.

2. How is technology used to streamline inventory control? a. A radio frequency identification (RFID) tag allows a computer to keep track of the status and quantity of each item.

3. W hat is materials requirement planning (MRP)? a. Materials requirement planning (MRP) is a type of software system used to schedule and monitor the use of components and other materials in a manufacturing operation.

C. Quality Control 1. Has quality control always been part of the production process? a. Quality control is the use of techniques, activities, and processes to guarantee that a certain good or service meets a specified level of quality.

2. What methods are used to improve quality? a. Deming’s concept of total quality management (TQM) emphasizes the use of quality principles in all aspects of a company’s production and operations. b. Statistical process control (SPC) uses statistical sampling of products at every phase of production and displays the results on a graph to show potential variations that need to be corrected. c. Six Sigma is a method that seeks to eliminate defects by removing variation in outcomes and measuring and analyzing manufacturing processes to see if standards are being met.

3. How does TQM cater to the customer?

4. What is the ISO? a. The International Organization for Standardization (ISO) is an organization dedicated to creating worldwide standards of quality for goods and services. ISO was established in 1947 and is headquartered in Geneva, Switzerland.

5. What is the ISO certification process? a. The ISO 9000 is a set of five technical standards of quality management created by the International Organizations for Standardization to provide a uniform way of determining whether organizations conform to sound quality procedures. b. The ISO 14000, launched after ISO 9000, is designed to promote clean production processes in response to environmental issues such as global warming and water pollution.

NOTE: End the lecture by asking students to write down the muddiest points or main points of the lecture. This will allow you to know what might need to be reviewed during the next lecture.

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SUGGESTED SOLUTIONS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Supply Chain (McDonald’s...From Farm to Front Counter) Discussion Questions 1. Do you think McDonald’s has the power to prompt changes in standards used around the world (technology, environmental, employment, agricultural)? Why or why not? (Bloom’s: evaluate) 2. How do McDonald’s operational methods show evidence of quality control? Is it necessary to have so many steps in the production of fries? Why or why not? (Bloom’s: analysis, evaluate) 3. How do you think McDonald’s attempts to keep input costs low while continuing to supply consumers with quality products and services? (Bloom’s: analysis) 4. In addition to implementing a packaging scorecard, how else might McDonalds incorporate sustainability practices into their global business? (Bloom’s: application, analysis) Answers: 1. McDonald’s is such a large multinational company that it does have the power to invoke huge changes around the world. The company works with many suppliers, partners, distributors, and manufacturers and can influence their actions to a certain degree. The company can work with organizations to improve the environment, reduce corruption, and avoid other wrong doings. It can put pressure on governments to enact laws or enhance standards.

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2.

The many steps in the production cycle help maintain quality. The elaborate process involving the measurement and inspection of the potatoes is evidence of quality control. Having policies in place and enforcing those quality policies with suppliers and other stakeholders will help maintain quality control.

3.

McDonald’s can keep input costs low because the company is so large. They can buy in bulk and form long lasting relationships with suppliers to reduce costs. They also standardize products so that products can be used at any location. They have strict measurements for food portions and procedures for preparing the food to reduce waste and keep costs down. They train their staff and managers so employees are knowledge about corporate policy and procedures and this contributes to lowering costs.

4.

Through its partnership with Conservation international, McDonalds currently works with its potato suppliers to measure energy, water, air and waste impacts. For example “biogas” has been introduced as a more sustainable water treatment method within McCains, one of McDonalds biggest suppliers. This was made possible through joint efforts. Similar research and development could create further advancements in reduction of reliance on non-renewable resources.

BIZCHAT: Technology: It’s Hard to Tell What’s Real and What’s Fake Discussion Questions 1. As a whole, do you think technology plays a positive or negative role in our society? Why? (Bloom’s: evaluation) 2. In what ways does technology make you more productive? Less productive? (Bloom’s: application) 3. How long do you think you could live comfortably without a cell phone? An MP3 player? A laptop/PC? Access to the Internet? (Bloom’s: evaluate) Answers 1. Answers will vary. Most students feel that the role is a positive one – it always for continuous human connection, higher levels of productivity and efficiency and helps create a global economy.

2.

The question asks students to comment on how technology affects them personally. Instructors may want to cast the question against the broader framework of a business. In this instance, it would be within context to discuss that technology used in manufacturing and production helps increase output, helps standardize products, and helps with quality control. Information technology can be an effective way to make a company more productive and profitable - especially when competing with low-wage countries like China and India. It makes companies more productive. If companies do not keep up with technological changes their competitors will gain an advantage. When new technology is introduced in a workplace there is a short-term reduction in productivity while employees learn the new technology. However, once employees are trained and the system is running optimally productivity levels will increase. Generally, technology can replace several human workers and do the job faster, avoiding human errors. Technology does break down and require repairs from time to time. Companies need to determine the advantages of using the technology and whether or not those advantages outweigh the costs of implementation, training, and applying new procedures. Although it sometimes requires a significant investment, the long-term advantages usually far outweigh the initial costs. Evidence shows that technology has made it easier for employees to work faster and connect with fellow workers and therefore over time productivity has increased.

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3.

Answers will vary. Many students will likely comment that they suffer withdraw symptoms immediately.

BETTER BUSINESS, BETTER WORLD: Ethical Standards for Suppliers Discussion Questions: 1. When multinational companies put pressure on developing countries’ governments and businesses to improve workplace conditions and ethical practices are they making a difference? Why or why not? (Bloom’s: evaluation) 2. By creating rules that suppliers must follow are companies possibly chasing away potential low cost suppliers? (Bloom’s: evaluation) 3. What problems might you foresee with this type of ethical procurement? How can companies ensure their suppliers are ethical? (Bloom’s: application) Answers: 1. Companies are concerned about their public image resulting from involvement with unethical suppliers (contracting with suppliers who use forced labour would be an example). In some countries, especially those with corrupt governments, the expectations and regulations placed on business operations are far below those in North America or other developed countries. There have been stories in the news about companies who were using suppliers from other countries that forced children to work. If you search the Web you may find that Nike was accused of using child labour in Pakistan in its production of soccer balls. Gap Inc. was reported to have children working in India making clothes. There are many such examples as these, but the view on child labour is quite different in North America from that in India. Yes, multi-national companies can put pressure on these countries to not use such practices, and this has been the trend for several years since ethics, environmental concerns, and global citizenship have all become of greater importance to our global society. Companies these days are expected to perform in a way that not only makes a profit, but also enhances life for their local and global communities. If companies do not put pressure on suppliers and make sure they are informed of practices within their supplier systems they may run the risk of creating a bad image and damaging their profit potential.

2.

Possibly. If a specific supplier is being sought by several companies, and it is easiest for the supplier to do business with the one that does not impose too many regulations on their processes then they will most likely do business with that buyer. Also, in some countries bribes are not seen as illegal or immoral and are simply part of the way business is done; so, for instance, if a Canadian company was competing for a foreign supplier against a domestic firm also competing for that supplier, the domestic firm may offer bribes and the supplier would expect and accept such bribes, while the Canadian firm my be restricted from doing so due to Canadian business laws and Canadian company policies and therefore may lose the partnership.

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3.

It’s difficult to govern what the suppliers are actually doing, and depending on the local laws business practices, reporting, and ethical standards may be far below those of the purchasing company’s home country or expectations. Other problems may include cost of shipping, lack of infrastructure in developing countries may make it difficult to do business, no technology for eprocurement, natural disasters strike making it difficult to find suppliers (e.g. Japan).

OFF THE MARK: Quality Catastrophes Discussion Questions: 1. How do companies recover their good reputation after such a blunder? How does it make you feel with regard to purchasing from these companies? (Bloom’s: application, evaluation) 2. How much time and money do you estimate companies spend recovering from these types of situations? How do companies stay in business after these types of mistakes? (Bloom’s: analysis) 3. How could such mistakes be avoided? (Bloom’s: synthesis) Answers: 1. Many companies have recovered from such blunders. A company that accepts responsibility for its errors, corrects the errors, is honest with the public, and offers some sort of compensation can usually turn things around and recover their reputation.

2.

It costs a lot of money to correct such errors. First, there is the recall and replacement or repair of products. Lost reputation may cause customers to shop elsewhere. Some companies don’t survive after such mistakes because it costs them everything to correct the issue.

3.

Mistakes like these can be minimized by improving quality control processes, inspecting products before they are released on the market, and improved training for employees.

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IN-CLASS ACTIVITIES Activity

Description

Time Required 25 min.

Reference IM – see below

Bloom’s Taxonomy Knowledge Comprehension Analysis

Supplemental In-Class Activity 1: Ice Breaker: Are You Getting What You Paid For?

This activity is designed to get students to think about the components of service quality.

Team Time: To Outsource or Not to Outsource…That is the Question

Students work in groups to determine whether to make or buy essential business supplies.

30 min.

Page 295

Knowledge Comprehension Application Analysis

Ethics and Corporate Social Responsibility: Environmental Shipping Concerns

Students work in groups to determine the best way to ship a company’s product.

30 min.

Page 296

Knowledge Comprehension Analysis

Supplemental In-Class Activity 2: Creating a Better Design for Subway

Students work in groups to improve the efficiency of a fast-food company’s facility layout.

30 min.

IM

Knowledge Comprehension Application

Supplemental In-Class Activity 3: Using Gantt Charts

Students create a Gantt chart that identifies their path to a college degree.

30 min.

IM

Knowledge Comprehension Analysis

Supplemental In-Class Activity 4: Case Discussion: JIT: Too Much of a Good Thing?

Students read a supplemental case study and discuss how it applies to chapter concepts.

30 min

IM

Knowledge Comprehension Application Analysis

(Includes handout) Learning Catalytics

This activity allows students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

Any level of Bloom’s Taxonomy

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

Sketch Animations

This animation is meant to explain one difficult concept: • Value

variable

Videos Appendix and MyBizLab

Knowledge Comprehension

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SUPPLEMENTAL IN-CLASS ACTIVITY 1: Ice Breaker - Are You Getting What You Paid For? Activity Overview: This activity is designed to get students to think about the components of service quality.

Time Limit: 25 minutes What to Do: 1. Divide the class into groups of two to four members and ask each group to think of three services, such as cell phone service, restaurants, a barber or hair salon, insurance agent, or various repair services. (5 minutes) 2. Ask groups to think of ways in which buyers of those services measure the level of service quality they are getting. (10 minutes) 3. Reassemble the class and have each group reveal what they discussed. (10 minutes) Don’t Forget: Measuring the quality of manufactured goods – often through durability, functionality, sturdiness, and so on – is often easier and provides more consistency than measuring service quality. Not everyone measures service quality in the same way.

Wrap-Up: Remind students that service quality is often measured by the tangible evidence of the service – such as a manicured lawn, a tailored suit, and so on. However service quality can also be measured by examining the characteristics of the service performer. These characteristics might include reliability, assurance, responsiveness, etc.

SUPPLEMENTAL IN-CLASS ACTIVITY 2 - Creating a Better Design for Subway Activity Overview: Students will graphically represent the facility design for a Subway sandwich shop and make recommendations about how to improve it.

Time Limit: 30 minutes What to Do: 1. Break students into small groups. Three to five students are usually ideal.

2. Begin by having students draw the facility design for the local Subway sandwich shop on a piece of flip chart pad paper (approx. 34” x 27”). (If there is not a Subway in your area, have students select a similar fast food restaurant.)

3. After drawing the current design, students should try to improve on the facility layout (not appearance) and draw the new layout on the second sheet of paper.

4. Students should be prepared to share their design with the class and explain how it will help Subway reach its goals.

Don’t Forget: You will need to bring 2-4 flip chart pad sheets of paper and markers for each group, along with tape for posting student work.

Wrap-Up: After each group has shared its new design, have the class vote for the best.

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SUPPLEMENTAL IN-CLASS ACTIVITY 3 - Using Gantt Charts Activity Overview: Students will create a Gantt chart that identifies the path to their college degree.

Time Limit: 30 minutes What to Do: Ask students to create a Gantt chart that will identify the path to their college degree. Across the top of the Gantt chart, students will identify semesters. Along the side, they will list the courses needed to complete their degree. Students should be careful to consider prerequisites associated with courses as well as planning a reasonable course load.

Don’t Forget: Students will need print or online access to degree requirements. It may be helpful to have an advisor or two in attendance to help answer questions.

Wrap-Up: Whether planning how to earn a college degree or produce a product, planning is the key.

SUPPLEMENTAL IN-CLASS ACTIVITY 4: JIT: Too Much of a Good Thing?

Activity Overview: This activity asks students to apply the concepts of lean manufacturing to a case study.

Time Limit: 30 minutes What to Do: 1. In advance, make copies of the Supplemental Case Study below and distribute them to students.

2. Divide students into groups and ask them to read the case and answer the following questions in their small groups. (15 minutes) a) Why do you think some firms have had difficulty keeping up with demand? Do you think it is possible to take lean manufacturing methods too far? Why or why not? b) Why don’t manufacturers experiencing the kinds of problems described in the case build their production capacity back up as a solution? c) What effect do you think running factories and facilities around the clock has on employees?

How does employee response to continued overtime affect the firm?

3. Once students have answered the questions, discuss their answers as a class. As students discuss their answers, make sure they include the following points: (15 minutes) a) Global demand can be especially difficult to predict. Firms have probably underestimated demand, trimmed production capacity too much, or both. It would take an exceptionally nimble production and operations management system to meet the spikes in demand some firms have experienced without difficulty. b) Building capacity back up takes several years and poses a risk that demand will have slowed again by the time it is in place. It is also quite costly. c) Employees burn out and eventually leave; creating high turnover that costs the firm in recruiting and training costs (both time and money). In addition, the firm can experience higher retention costs to keep employees on staff, such as overtime, bonuses, and extra time off.

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Don’t Forget: Remind students to consider the companies in the case when answering the questions; answers could vary if other company or industry examples are used.

Wrap-Up: Bring the discussion to a close by reminding students that certain production systems work more efficiently in some industries than in others. In industries with extremely volatile external environments, businesses tend to be more reactive to change; reacting to sudden changes in demand is an everyday occurrence. (5 minutes)

SUPPLEMENTAL IN-CLASS ACTIVITY 4 HANDOUT: JIT: Too Much of a Good Thing?

The exceptionally strong demand that buoyed the economy through 2000 was a good thing, right?

Ironically, for some firms, strong orders and spikes in demand brought manufacturing and production problems that might have been worsened by the ultra-lean methods they put in place to improve productivity.

In the face of robust competition from abroad, many manufacturers in the 1980s embraced lean operations and just-in-time (JIT) production methods to lower costs and improve productivity.

Big employee layoffs became common, and production controls grew more sophisticated to reduce inventory and costs, allowing firms to produce products more or less on demand.

But as demand continued to surge, the headaches at some firms began.

Intermet, a manufacturer of parts for sport-utility vehicles and light trucks, underestimated demand and now is running 24 hours a day to keep up with orders for its iron and aluminum castings. It can’t shut down for maintenance, breakdowns are occurring, and workers are quitting to escape the stress. Costs for overtime, repairs, and premium-priced delivery are cutting into profits.

Goodyear Tire & Rubber also failed to anticipate demand and posted a 56-percent slump in profits.

Hershey Foods missed out on its normally profitable Halloween and Christmas sales when the software upgrades it counted on to handle record-high orders fell behind schedule. Quite a few firms are finding that they must work in overdrive to fill their orders, but they can’t raise prices because competition is still stiff. They are forced to pay the price of overtime, overnight shipments, breakdowns, and turnover while they struggle with the effects of a 100 percent increase in the Federal Reserve Bank’s new-order index, a measure of manufacturing demand.

“We leaned things out so much, got rid of so many people that you just don’t have the capacity anymore,” according to Bill Swanton, Vice President for Manufacturing Strategies at AMR Research in Massachusetts.

One solution is to line up subcontractors in advance who can supply needed parts and materials.

Boosting pay and offering time off and/or bonuses can help retain workers who are feeling burned out by overtime. Making better estimates of demand is key to avoiding the problem altogether. That, in turn, requires having the necessary hardware and software up and running in time, as Hershey Foods discovered to its regret. The missed Halloween and Christmas orders cut the firm’s third-quarter net income by 20 percent.

(Source: Peter Galuszka with Stephanie Forest Anderson, “Just-in-Time Manufacturing Is Working Overtime,” Business Week, November 9, 1999, 36.)

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Discussion Questions: 1. Why do you think some firms have had difficulty keeping up with demand? Do you think it is possible to take lean manufacturing methods too far? Why or why not?

2. Why don’t manufacturers experiencing the kinds of problems described in the case build their production capacity back up as a solution?

3. What effect do you think running factories and facilities around the clock has on employees?

4. How does employee response to continued overtime affect the firm?

LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

Learning Catalytics 1 Question Type: Word Cloud Prompt: The term “mass customization” is an oxymoron. How can there be mass production and still cater to specific desires of individual customers. While services can more easily be customized than goods, there are plenty of examples of tangible features of a good, which customers can “order” to their desire. Go to one of the big automobile manufacturers’ websites and click the “Build my vehicle” button.

Once there, enter a feature of the vehicle that you can choose to customize it to your tastes.

Notes: Enter word(s) into field provided.

Learning Catalytics 2 Question Type: Composite sketch Prompt: Using your finger (phone or tablet) or mouse (computer) sketch the direction that a delivery truck would have to take to get to your campus’s convenience store from the nearest highway.

Notes: Instructors can show students the nearest highway using Google Maps or similar and projecting it onscreen.

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SUGGESTED ANSWERS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS 1.

2.

3.

4.

5.

What are the advantages and disadvantages of mass production and the mechanized assembly line?

Did this shift to machines and robots eliminate jobs, or did it create new ones? (Bloom’s: comprehension, application) What are the resources (inputs) needed and the finished products (outputs) for each of the following service companies: a child care, a bank, an auto-repair shop? (Bloom’s: application) A sports equipment company is known for a special grip on its tennis rackets that is imported from South America. The cost of shipping these grips has grown steadily more expensive, and the business would like to produce the grips in-house. What factors does the business need to consider before adding another step to the production process? (Bloom’s: application, analysis) How does a business decide what the best method of shipment is for its products? What factors, other than cost, are important in this decision? (Bloom’s: comprehension, application) Give an example of what the process of total quality management (TQM) would involve in the production of automobiles. What steps can manufacturers take to ensure that a high level of quality is maintained consistently in their production processes? (Bloom’s: application)

Answers: 1. Mass production reduced the demand for highly skilled craftsman and artisans who built an item from start to finish. However, mass production and the mechanized assembly line increased the demand for assembly-line workers who specialized in a single aspect of a production process. These types of jobs generally require less-skilled workers who do repetitive work. Because of greater specialization of labour and automation, costs of production fell dramatically. This gave rise to significantly lower prices for consumer products, enabling many more people to afford these products.

2.

Inputs for a child care: children, child care workers, toys, food, and furniture. Outputs for a child care: happy, healthy, safe children. Inputs for a bank: clients, employees, money, and technology (computers). Outputs for a bank: customers with their financial services met. Inputs for an autorepair shop: automobiles, tools, auto parts, and mechanics. Outputs for an auto-repair shop: repaired automobiles.

3.

This make-or-buy decision hinges on cost and quality factors. Because the costs of acquiring the grips from South America has been rising then the fundamental question for the firm is whether it can produce the grips in-house without sacrificing quality and weakening sales. Does the firm have the technical expertise to produce such high-quality grips? If it does, then it must estimate the additional costs to the company of producing the grips themselves. This requires careful planning and meticulous calculations of costs of making the grips in-house while meeting similar quality standards associated with the imported South American grips. These costs would have to be compared with the costs of transporting the imported grips from South America before making a final decision. It is important to stress that quality should not be sacrificed because the company is known for its grips.

Lower quality grips would likely reduce sales and profitability significantly.

4.

Many factors are involved in deciding on the most optimal shipment method of either supplies to the firm or the shipment of finished products to customers. These factors, beyond costs, include the time

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and distance involved with shipping via water, rail, truck or air. It is also very important to not sacrifice quality in favor of lower costs. Damaged goods are not good for anyone. Companies may want to create a routing guide—a thoroughly researched document that provides detailed routing solutions unique to a specific company and to every shipping situation for the company.

5.

Consider the assembly of pistons. If they are too big or too small they won’t fit in the valves of the engine and must be scrapped or reworked. Defects in a production process are expensive and drive production costs up. Moreover, even if they are just a little too large or small in diameter but still “fit” then engine performance is reduced. Ensuring consistency from piston to piston is critical to satisfy all your customers. So, the objective is to ensure that each part meets specifications and consistently meets those standards. This reduces costs of production and provides greater satisfaction to customers. So, ensuring quality does not cost, it saves, money. Moreover, it ensures greater customer satisfaction, enhancing sales and profitability. The key is for management to implement this approach for every process within the firm. It is truly a total quality management approach. Moreover, total quality management involves ongoing improvement of products, services, and processes. This can be accomplished by undertaking a Plan, Do, Check, Act (PDCA) cycle. Using the PDCA, the organization first formulates a plan to reduce potential errors, carry out the plan on a small scale, check the outcome and effectiveness of the change, and then implements the plan on a larger scale while monitoring results continually. One popular tool to check or to measure if quality goals are being met is statistical quality control (SQC), or the continual monitoring of each stage of the entire production process to check to ensure that quality standards are being met at every stage. Statistical process control (SPC) uses statistical sampling of products at every phase of production and displays the results on a graph to show potential variations that need to be corrected. A common SPC tool is six sigma; a method that seeks to eliminate defects by removing variation in outcomes and measuring and analyzing manufacturing processes to see if standards are being met. These are some of the more important steps involved with total quality management.

TEAM TIME: To Outsource or Not to Outsource . . . That Is the Question Notes: The make-or-buy decision hinges on cost and quality factors. Given the information in the scenario it appears that quality will not be sacrificed by making the springs in-house. It is also stated that producing the springs themselves will be lower—at least in the short run. The key is whether the additional costs of producing the springs in-house associated with altering the current production process, adding new machines and new technicians to operate and maintain the machines will drive costs up more than continuing to outsource the springs. Employee morale and relations can be positive or negative depending on the decision to make or buy the springs. Perhaps, adding the springs to the current production process will enhance employee morale and relations by adding new jobs and new challenges for existing workers.

ETHICS AND RESPONSIBILITY: Environmental Shipping Concerns Discussion Questions: 1. What decision would you make in this situation, land or sea?

2. If you were told that you would take a personal pay cut from switching to the more environmentally friendly route, how would that affect your decision?

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3.

What kind of impact do you think one company switching to less environmentally damaging practices could have on the general atmosphere of the shipping world?

Answers: 1. Answers may vary and depend on the delicate balancing act between valuing the environment and valuing profits, and the extent to which profits would fall and the environment is improved. The decision should take into account long-term impacts as well. It may be possible for the company to switch to shipping by sea that could actually drive profits up over time if this environmentallyconscious act is valued by customers that translates into a higher demand for its product.

2.

Answers may vary and depend on the extent to which one values the environment and the extent to which it may cost the individual in lower pay.

3.

This would depend on how large the company is in relation the shipping industry.

CLOSING CASE: Just in Time For Toyota Discussion Questions: 1. What lesson did Sakichi Toyoda learn from observing the Japanese looms? Why is it so important for a problem to be fixed when it happens instead of once it reaches the end of the assembly line?

(Bloom’s: comprehension, application) 2. What are the benefits of just-in-time production? (Bloom’s: knowledge, comprehension) 3. What problems might operators encounter with just-in-time production systems? (Bloom’s: comprehension, application) Answers: 1. Sakichi Toyoda learned that defective production systems result in poor quality products. Problems have to be spotted where they occur. This avoids repeated problems that could jeopardize the quality of finished products.

2.

The benefits of JIT production are lower carrying and therefore production costs, and the detection of problems in a production process. The problems of JIT center on managing such a complicated system and the risks of not having ample parts when and where they are needed.

3.

If inputs do not arrive on time then production would be stalled. Just-in-time operations leaves suppliers and downstream consumers open to supply shocks (a sudden change in prices due to a sudden increase or decrease in supply) and large supply or demand changes.

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SUPPLEMENTAL MATERIAL APPLICATION EXERCISES 1.

Leaders in the Industrial Robot Industry. Search the Internet for several industrial robot production companies. What kinds of functions are robots being used to perform? In what kinds of industries are these robots best suited to perform?

2.

Facility Layout. Think of the cafeteria at your college or university and redesign the layout (make a pencil drawing placing people and materials) so that the facility (employees included) could serve its customers more effectively and efficiently.

3.

Radio Frequency Identification. The use of chips to track goods during the shipping process is becoming more widespread. Use the Internet to research options for radio frequency identification.

What are some of the options for tracking goods? What kind of range can these products cover?

4.

Quality Control. Use the Internet to research one company that has had recent recalls. What went wrong? Does the company not have quality checks/systems in place? How did the company correct the problems? Were there lawsuits? Write a short paragraph considering the situation and discuss how the company might have avoided this mistake and how they might have better handled the corrective measures.

5.

Bill of Material (BOM). Create a manufacturing bill of materials for each of the following products: a baby carriage, chocolate chip cookies, and a pair of leather sneakers. You may research the Internet to learn more about BOM and gather your information. What software might be used to record a BOM and how could this information be used in an ERP system? Report your findings.

Answers: 1. The first company to produce the industrial robot was Unimation in 1956. Some companies for students to investigate on the Internet include: ABB Robotics, KUKA Robotics, FANUC, Automatix, Adept Technology.

2.

Answers will vary. Instructors may wish to advise students to purchase a sheet of Bristol board, or bring chart paper to class, as well as a set of rulers and triangles for students to use. Remind students to include a legend in their diagram.

3.

Answers will vary. Students will discover the range of coverage of RFID is quite large.

4.

Answers will vary. There are many sites on the Internet which investigate product recalls. Auto manufacturer’s recalls are plentiful on the internet. Toyota is just one of the recent examples.

5.

Answers will vary. Student research will reveal that a bill of materials is comparable to a list of ingredients in a recipe – it contains all of the parts used to create a product. This bill of materials must accompany the product as it ships to a buyer.

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MYBIZLAB RESOURCES & TEACHING TIPS BIZSKILLS SIMULATION: Improving Business Operations and Quality Synopsis: Students play the role of someone who has inherited a family-run pizza restaurant and delivery business that is plagued by excessive inventory costs, late deliveries, ordering mistakes, no computerized system, and customer complaints. However they still have a secret family recipe for pizza dough and sauce that customers rave about. Armed with some common sense, pizza genes, and operations management expertise, students need to turn the restaurant around.

At the end of this exercise, students should be able to answer the following questions: 1. How can a company use lean manufacturing concepts to improve its business?

2. In what ways can the layout of a facility affect its operations?

3. How do products offer different forms of utility to customers?

4. How can companies seek to impact the triple bottom line?

DECISION MAKING MINI-SIMULATION: Supply Chain Synopsis: Holden Evan is a multinational company whose products include pharmaceuticals and overthe-counter medications. The suppliers of plastic bottles, caps, and folding card boxes have not been consistently delivering these components to Holden Evan. As a result, Holden Evan has been late in shipping its pharmaceutical products to wholesale customers such as supermarkets and drugstores, and many of its popular product sizes are often unavailable on shelves. This has caused customer satisfaction to suffer. As the Director of Marketing Logistics, you have been asked to evaluate this problem and take actions to resolve it as quickly as possible, with meaningful improvement in results within one or two months.

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Chapter 10, Related Websites http://www.apics.org/default.htm

APICS The Association for Operations Management

http://www.ic.gc.ca/eic/site/cis-sic.nsf/eng/Home

Statistics Canada, Canadian Industry Statistics for goods-producing and service-producing industries

http://www.hc-sc.gc.ca/cps-spc/index-eng.php

Health Canada, Consumer Product Safety lists many product recalls

http://www.manufacturingtalk.com

Manufacturingtalk.com Features On-Line Information for Production Engineers

http://www.jobsinmanufacturing.com

JobsinManufacturing.com Provides Career Opportunities in Manufacturing

http://www.qualitymag.com

Quality Magazine On-Line Offers Information on Quality Manufacturing

http://managementhelp.org/operationsmanagement/

Operations Management Online Library

http://www.poms.org/

Production and Operation Management Society

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ENHANCING THE ONLINE COURSE Production Flow: Divide the online class into three groups. Have each group take one of the three types of production: mass production, flexible production, customer—driven production. Have the groups define their assigned type of production, and then research online to identify a company that utilizes that type of production. Students should submit the report with a flow chart that actually shows the flow of the production (be it a good or service production) from beginning to end. Have the projects posted online, either in the course blog or on the discussion board.

Effects Essay: Have each student write a one-page report on the current effects of technology on production. Ask them to find at least five sources via the online library and to feature as many new technological features as possible. Ask students to post the results on the course blog. Be sure to ask some subsequent questions on the discussion board.

CAD/CAM: Require your students to define CAD/CAM. Ask them to search the Internet for CAD/CAM images that show a three dimensional representation or model of some type of facility or other production image. Have them write a paragraph or two on their reaction to the three dimensional model.

Location Mindmap: Have your students create a mindmap (see chapter write-ups for previous chapters) illustrating the factors to consider when choosing a location for a production facility. Be sure the students define each of the different factors and provide an example (verbal or graphic) of each.

Layout Effects: Ask your students to write a 1-page essay on how the layout of a facility may impact both the production process and the employees. Post the best essays on the course blog and provide extra credit for the most thoughtful essays.

Supplier Mindmap: Have your students create a mindmap representing the different steps in the process for selecting suppliers. Are these steps hierarchical? Why or why not?

Inventory Improvement: Ask your students to list the different ways in which technological advances may help a company to maintain and control its inventory. Be sure to include: just-in-time inventory, radio frequency identification, materials requirement planning, and enterprise resource planning.

Students should list and define each of these topics and include at least one example of how this would be used.

TQM: A History: Have your students write a report on the history of the TQM movement and trace its development from post–World War II to the present. Using the Internet, students should define TQM and discuss how technology has created advances.

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CHAPTER 11 FINANCIAL MANAGEMENT AND ACCOUNTING CHAPTER OPENER Every organization must use accounting to keep track of their financial information and determine how they will use their resources over time. This chapter provides insight into and exposure to: • • • •

the roles of financial managers and accountants key accounting terms and practices financial statements how businesses raise the funding they need to operate

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

2.

3.

4.

5.

6.

7.

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Summarize the implications of financial management and how financial managers fulfill their responsibilities.

Describe how financial managers plan for financial needs.

Describe different short-term financing options available to finance business needs.

Summarize the pros and cons of debt and equity financing and differentiate between different types of long-term financing options.

Describe the functions of corporate accounting, managerial accounting, financial accounting, auditing, tax accounting, and government and nonprofit accounting.

Explain how double-entry bookkeeping is used to maintain the balance of the fundamental accounting equation.

Describe the functions of balance sheets, income statements, and statements of cash flows.

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KEY TERMS accounting (p. 283) accounts payable (p. 290) accounts receivable (p. 289) accrued expenses (p. 291) amortization (p. 290) annual reports (p. 285) assets (p. 287) auditing (p. 285) balance sheet (p. 289) bookkeeping (p. 287) bottom line (p. 293) budget (p. 273) capital budget (p. 273) cash flow (p. 274) certified general accountant (CGA) (p. 284) certified management accountant (CMA) (p. 284) chartered accountant (CA) (p. 284) commercial banks (p. 277) commercial finance company (p. 277) commercial paper (p. 277) convertible bond (p. 280) corporate accounting (p. 285) corporate bond (p. 279) cost of goods sold (COGS) (p. 294) current assets (p. 289) current liabilities (p. 290) current ratio (p. 292) debt financing (p. 278)

debt to equity ratio (p. 292) depreciation (p. 290) dividends (p. 280) double-entry bookkeeping (p. 287) earnings per share (p. 295) equity (p. 280) equity financing (p. 278) expenses (p. 293) factoring (p. 277) financial accounting (p. 285) financial management (p. 272) financial manager (p. 272) financial statements (p. 289) fixed assets (p. 290) forecasts (p. 273) forensic accountant (p. 286) fundamental accounting equation (p. 287) goodwill (p. 290) government and nonprofit accounting (p. 286) gross profit (p. 294) gross profit margin (p. 295) income statement (p. 289) initial public offering (IPO) (p. 280) intangible assets (p. 290) interest (p. 279) inventory (p. 291) investment instruments (p. 282) issuing common stock (p. 280) leverage (p. 282)

liabilities (p. 287) line of credit (p. 277) liquidity (p. 274) loan (p. 278) long-term liabilities (p. 291) managerial accounting (p. 285) net income (or loss) (p. 295) operating (master) budget (p. 273) operating expenses (p. 294) operating income (p. 294) operating profit margin (p. 295) optimal capital structure (p. 282) owners’ equity (p. 287) preferred stock (p. 280) private accountant (p. 283) promissory note (p. 276) public accountant (p. 283) ratio analysis (p. 291) retained earnings (p. 281) revenue (p. 293) secured bonds (p. 279) secured loan (p. 277) shares outstanding (p. 296) short-term financing (p. 276) sinking fund (p. 279) statement of cash flows (p. 289) stock (p. 280) tax accounting (p. 285) trade credit (p. 276) unsecured bonds (p. 279) unsecured loan (p. 277) working capital (p. 291)

DETAILED LECTURE OUTLINE I.

Financial Management A. The Financial Manager 1. What is financial management? a. Financial management involves the strategic planning and budgeting of short- and longterm funds for current and future needs. Tracking past financial transactions, controlling

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2.

current revenues and expenses, and planning for future financial needs of the company are the foundation of financial management.

What is the role of the financial manager? a. A financial manager or chief financial officer (CFO) oversees the financial operations of a company. Generally, a financial manager assumes accounting responsibilities for the company.

B. Planning for Financial Needs 1. How does the financial manager plan for financial needs?

2. What is involved in forecasting financial needs?

3. Forecasts a. Forecasts predict revenue, costs, and expenses for a specific future period. Short-term forecasts would include predictions within the upcoming year, while long-term forecasts would include predictions for a period longer than one year into the future.

4. How does a company know it has enough resources to meet forecasted needs? a. A budget is a financial plan that outlines the company’s planned cash flows, expected operating expenses, and anticipated revenues. b. An operating (master) budget includes all the operating costs for the entire organization, including inventory, sales, purchases, manufacturing, marketing, and operating expenses.

5. How are funds made available for large projects? a. T he capital budget considers the company’s long-range plans and outlines the expected financial needs for significant capital purchases such as real estate, manufacturing equipment, plant expansions, or technology.

C. Addressing the Budget 1. What helps plan for short-term needs? a. Cash flow is the movement of money in and out of a business over a defined period (weekly, monthly, or quarterly).

2. Why is monitoring cash flow important?

3. How does a company know if it's staying on budget?

4. What must a financial manager consider when seeking outside funds?

II. Financial Needs A. Financing Short-Term Business Needs 1. How are the operations of a business financed? a. It may be necessary to obtain short-term financing (p. 486), which is repaid in a year or less, if cash flow gaps are anticipated. b. Suppliers often offer trade credit (p. 486) where payment is deferred for usually 30, 60, or 90 days. c. A promissory note is a written promise to pay a supplier a specific amount of money by an agreed-upon date.

2. How do commercial banks help with financial management? a. Commercial banks are financial institutions that raise funds from businesses and individuals in the form of chequing and savings accounts and use those funds to make loans to businesses and individuals. b. A line of credit is available credit that a manager can access at any time up to an amount agreed upon between the bank and the company.

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c.

3.

4.

A secured loan requires collateral, which is generally the asset that the loan is financing, to guarantee the debt obligation. d. An unsecured loan does not require collateral.

Are there other short-term financing options? a. An alternative source of financing is a commercial finance company, a financial institution that makes short-term loans to borrowers who offer tangible assets as collateral. Commercial finance companies, such as General Electric Credit Corporation, provide businesses with loans but are not considered banks.

Do larger corporations do anything differently for short-term financing?

B. Financing Long-Term Business Needs 1. Why do companies need long-term financing solutions?

2. What are the different types of long term financing? a. Debt financing occurs when a company borrows money that it is legally obligated to repay, with interest, by a specified time. Contrary to debt financing, the funds for equity financing are generated by the owners of the company rather than an outside lender.

3. What kinds of debt financing are available? a. A loan is an arrangement in which a lender gives money to a borrower, under the agreement that the borrower repays the loan amount, usually with interest, at some future point in time. b. A corporate bond is a type of loan issued by a company, not a commercial bank or commercial finance company. It is a formal written agreement to reimburse a loan at a regular interest rate at a given date in time. c. Interest is the payments the bond issuer makes to the bondholder for use of the borrowed money (most interest payments are semi-annual). d. A sinking fund is a type of savings fund in which companies set aside money regularly to help repay a bond issue.

4. What kinds of equity financing are available? a. Equity is money received in exchange for ownership in a business.

5. Why finance with stock (equity)? a. Stock is a unit of ownership in a company sold with the intention of raising capital to finance ongoing or future projects and expansions. b. Issuing common stock by selling common shares of ownership in the company to the general public—in other words, “going public”—can be a great option to generate funds through equity financing. c. An initial public offering (IPO) is the first time a company offers to sell new stock to the public.

6. What are the disadvantages of financing with stock? a. Dividends are a portion of a company’s profits distributed t o shareholders as either cash payments or additional shares of stock. Legally common share dividends and preferred share dividends (discussed next) never have to be paid if the company makes no profit, nor do they ever have to be repurchased by the company.

7. What are preferred stocks? a. Preferred stock is a hybrid investment because it has some of the features of common stock (i.e., it never matures) and some of the features of corporate bonds (i.e., payments on stock are for fixed amounts, such as $5 per share per year).

8. Why finance with venture capital?

9. Why finance with retained earnings?

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a.

Retained earnings represent the profits (money remaining after taxes and other expenses are paid) not paid out in dividends.

10. How do companies decide between debt and equity financing? a. Investment instruments such as bonds (debt) or stock (equity) are used for large capitalintensive projects or general expansion. b. Leverage is the amount of debt used to finance a firm’s assets with the intent that the rate of return on the assets is greater than the cost of the debt. c. Companies aim to achieve an optimal capital structure, which refers to the optimal balance between equity and debt financing. i. The most conservative strategy would be to use all equity financing and no debt because a company has no formal obligations for financial payouts. ii. The riskiest strategy would be to use all debt financing because indebtedness increases the risk that the company will be unable to meet its obligations and will go bankrupt.

III. Accounting Functions A. Accounting Fundamentals 1. What is accounting? a. Accounting is the recording, classifying, summarizing, and interpreting of financial events in order to communicate useful financial information. It involves tracking a business’s income and expenses through a process of recording financial transactions.

2. Is there more than one type of accountant?

B. Types of Accounting 1. What are the types of corporate accounting? a. Corporate accounting is the part of an organization’s finance department that is responsible for gathering and assembling data required for key financial statements.

2. Is auditing considered an area of accounting? a. Auditing is responsible for reviewing and evaluating the accuracy of financial reports.

3. Do businesses hire outside accounting firms to complete their income tax returns?

4. Do government and non-profit organizations report financial activities? a. Government and non-profit organizations must also report their financial activities so taxpayers and donors can see how funds are spent and used.

C. Accounting Standards and Processes 1. Are there specific standards accountants must adhere to?

2. What is the accounting process? a. The process of bookkeeping centers on the fundamental concept that what a company owns (assets) must equal what it owes to its creditors (liabilities) plus what it owes to its owners (owners’ equity). This balance is illustrated in Figure 13.3 and is better described as the fundamental accounting equation: assets = liabilities + owners’ equity.

3. Does the accounting equation always stay in balance? a. Double entry bookkeeping recognizes that for every transaction that affects an asset an equal transaction must also affect either a liability or owners’ equity.

IV. Financial Statements A. The Balance Sheet 1. Are companies required to publish financial information?

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a.

2.

3.

The balance sheet is a snapshot of a business’s financial condition at a specific moment in time. It reflects assets, liabilities, and owners’ equity. b. The income statement reflects the profitability of a company by showing the revenues and expenses. The difference between revenue and expense is profit or loss. The income statement can highlight management’s efficiency at minimizing expenses while maximizing profits. c. Statements of cash flow are like checkbook registers and involve only transactions that have used cash. They reveal important information about a company’s ability to meet its cash obligations, such as salary and accounts payable.

What is the balance sheet used for?

What does a balance sheet reveal? a. Assets, liabilities, and owner’s equity

B. Analyzing a Balance Sheet 1. How do you analyze a balance sheet?

C. Income Statements 1. What does an income statement show? a. An income statement shows how much money a company takes in, and how much it spends, resulting in a statement of profit or loss, commonly known as net income or "the bottom line." b. The primary formula for an income statement is revenues – expenses = profit (or loss).

2. What are the components of an income statement?

D. Analyzing Income Statements 1. How do I analyze an income statement?

2. How can I determine a company’s overall profitability?

3. How much of the company earnings belong to the shareholders?

E. Statement of Cash Flows 1. What is the statement of cash flows? a. The statement of cash flows displays cash transactions in terms of operating activities, investing activities, and financing activities.

2. Why is the statement of cash flows important?

3. How is a statement of cash flow analyzed?

NOTE: End the lecture by asking students to write down the muddiest points or main points of the lecture. This will allow you to know what might need to be reviewed during the next lecture.

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SUGGESTED SOLUTIONS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Planning for Financial Needs Discussion Questions: 1. Since Google is an Internet service company and does not have to worry about the cost of goods sold, why would Page and Brin need to get long-term financial support to start their business? What operating expenses might they encounter during their first year? (Bloom’s: comprehension, application) 2. Why did Google choose to incorporate advertising into its business plan? What do you think Google’s bottom line would look like if it only sold search services? (Bloom’s: analysis) 3. How much of Google’s success can be attributed to strong managerial accounting? Explain. (Bloom’s: application, analysis) Answers: 1. Page and Brin would need long term financial support to pay for equipment and operating expenses.

During their first year, Page and Brin would have to pay sales expenses, rent, salaries, wages, utilities, depreciation, advertising costs, and insurance.

2.

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Google incorporated advertising into their business plan because the market for advertising was virtually unlimited, whereas the market for people who would pay for search services was very limited.

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3.

Strong managerial accounting was key to Google’s success. While individual investors and venture capitalists provided initial financing for the project, Google managers still had to monitor their cash flow to be sure that they had sufficient funds to pay their bills. The venture capitalists who invested in the business would have carefully monitored Google’s balance sheet, income statement, and statement of cash flows to be sure their investments were being managed properly.

OFF THE MARK: Department of Defence Makes Some Big Accounting Errors Discussion Questions: 1. How can such errors go on for years without being noticed? Is this any one person’s fault? (Bloom’s: analysis) 2. How might a company prevent such errors from occurring? Is it important for the company to publicize and correct the errors? Why or why not? (Bloom’s: application) 3. Isn’t this just a small oversight with nothing to be concerned about? After all, it is a government agency. What might be the effect on the Defence Department’s public image? (Bloom’s: application) Answers: 1. There is any number of reasons to explain why errors go unnoticed in any organization’s accounting archives. Being a government agency, the Department of National Defence is a part of a much larger organization (the Government of Canada) with over-arching managerial and financial accounting systems; not to mention its own resourcing challenges. Often times, consistency in practices and procedures is difficult to achieve and thus fails, leaving certain accounting items exposed to error.

And that, human error, is likely the source culprit in this instance, although parlimentarians sitting in seats opposite the government may suggest otherwise. It is unlikely errors this large fall upon any one person.

2.

Errors such as these might be avoided by putting double checks in place – more than one person checks each account. Possibly implementing a system whereby records come to head office in the computer system but then spot-checks are done manually. Ultimately, to have an audit at various points in the accounting trail would be ideal, but this would be costly and labour intensive, so having accuracy checks done by different people at random submissions or such would be helpful in identifying any errors before they become public information and before they become large-amount errors.

It is important for the department to report and correct the errors in order to attempt to restore trust from its constituents – the people of Canada. Transparency in reporting is important and more and more organizations are feeling the pressure to provide accurate, transparent reporting.

3.

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Few people, business analysts or members of the general public, would consider $1.5 billion to be a “small oversight”. It exposed fundamental problems in the Department of National Defense’s bookkeeping practices, and cost Canadian taxpayers from both the losses incurred by the errors themselves, and the costs involved in the audit. The effect of the errors by the department were significant and damaging to an already delicate reputation.

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IN-CLASS ACTIVITIES

Activity

Description

Time Required

Reference

Bloom’s Taxonomy

Team Time: Industry Analysis

Students work in groups to analyze the finances of a company, based on its annual report.

45 min.

Page 398

Knowledge Comprehension Application Analysis

Ethics and Responsibility: Getting to the Bottom of the Sarbanes-Oxley Act.

Students research the SarbanesOxley Act.

45 min

Page 398

Knowledge Comprehension Analysis

Supplemental In-class Activity 1: Do you Use Accounting?

This activity asks students to think about the ways in which they use accounting in their personal lives.

20 min.

IM – see below

Knowledge Comprehension Application

Supplemental In-Class Activity 2: Evaluating Financing Options

This activity compels students to consider a variety of financing methods to help a company grow.

25 minutes

IM – see below

Knowledge Comprehension Application Analysis

Learning Catalytics

This activity allows students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

Any level of Bloom’s Taxonomy

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

Knowledge Comprehension Application Analysis

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SUPPLEMENTAL IN-CLASS ACTIVITY 1: Do You Use Accounting?

Activity Overview: This activity asks students to think about the ways in which they use accounting in their personal lives.

Time Limit: 20 minutes What to Do: 1. Ask students to make a list of the ways in which they use accounting in their personal lives. They might want to consider the following questions when making up their lists (15 minutes): • How do you keep track of what money is coming in?

• How do you keep track of what money is flowing out?

• How do you budget your money?

• How do you plan for unexpected expenditures?

• What types of “tools” do you use to keep track of your financial information?

• At later points in your life, do you think you will account for your money differently? If so, how?

2.

Ask students to share any relevant information that might benefit other students in the class. (5 minutes)

Don’t Forget: Everyone has his or her own unique way of keeping track of their financial situation; some will be more effective than others.

Wrap-Up: Remind students that we are all accountants to a certain degree. Bring the exercise to a close by briefly outlining accounting and previewing the types of accountants discussed in the chapter.

SUPPLEMENTAL IN-CLASS ACTIVITY 2: Evaluating Financing Options Activity Overview: This activity exposes students to the advantages and disadvantages of financing alternatives using a fictitious business case.

Time limit: 25 minutes Case: Tina and Lauren have created a beauty product, which removes facial wrinkles safely and naturally through simple topical application. They have also patented the product. Sales in the past year resulted in $100,000. They have determined a need for $100,000 to take their business to the next level. $50,000 to purchase equipment to allow them to produce their product in higher volumes, and $50,000 to set up a proper office and manufacturing facility in a rental location. They are now trying to determine where to obtain financing.

What to do: 1. Divide class into 2 “teams”: Debt Financing; Equity Financing; Retained Earnings financing. (5 minutes) 2. Have students research and discuss advantages and disadvantages of their respective team’s financing method. (10 minutes)

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3. Instruct student teams to put together a single powerpoint slide identifying the top three reasons why the fictitious company should finance its long term needs through the teams’ respective method. (5 minutes) 4. Have a spokesperson from each group present the slide to the class. (5 minutes) Don’t Forget: Each financing option has pros and cons. Ensure that after each presentation, both sides of the argument are discussed.

Wrap-Up: Remind students that growth costs money and that it is important to consider all options of obtaining said funds, rather than simply reacting to what appears to be available and convenient – in this case, retained earnings.

LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

Learning Catalytics 1 Question Type: Expression Prompt: Students must take numbers from the mini case below and express them in a ratio form in order to answer the question, which follows.

Mini Case: ZooLoo Mountain Bikes makes bikes for the hardcore, outdoor, extreme sports enthusiast. In 2014 ZooLoo recorded the following: -

Sales: $450 000 COGS: $200 000 Operating Expenses: $100 000 Taxes: $50 000 Net Income: $100 000

Instructions: Insert the equation to determine the following: a) Net Income (Profit): 450 000 – 200 000 – 100 000 – 50 000 b) Gross Profit Margin: 250 000 / 450 000 c) Operating Profit Margin: (250 000 – 100 000) / 450 000

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Learning Catalytics 2 Question Type: Numerical Prompt: Students must take numbers from the mini case and apply them to the correct position within the correct ratio to determine the questions which follow.

Minicase: ZooLoo Mountain Bikes makes bikes for the hardcore, outdoor, extreme sports enthusiast. As at year ending Dec 31 2014, ZooLoo’s balance sheet revealed the following entries: -

Current Assets: $120 000 Total Assets: $500 000 Current Liabilities: $22 000 Total Liabilities: $100 000 Total Owners’ Equity: $400 000

Instructions: Use the correct data from the list above, then apply them to the correct ratio, then calculate the following and enter your results in the fields provided.

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Current ratio: 6 Debt to Equity ratio: .25

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SUGGESTED SOLUTIONS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS 1.

2.

3.

4.

5.

Jason worked in a deli for five years before starting his own sandwich delivery store. The business has been quite successful for two years. The quality of the service and the sandwiches has caused an increased demand for his products. Jason now thinks he needs to buy more cars to deliver the sandwiches. He is trying to decide on the most appropriate way of financing the acquisition of two cars. (Bloom’s:application) a. What methods of financing should Jason consider? b. What information will Jason need to have to help make his decision? c. How would the financing decisions change if Jason also decided to open another store at a new location?

What are the key financial statements, and what is the importance of financial statements? What information do they contain? Which statement do shareholders typically find most useful? Why? What about independent contractors considering working with a firm, which statements would be most useful for them? (Bloom’s: comprehension) Discuss the role of independent auditors for a company. Over the past decade, why have independent auditors been under scrutiny by the government? (Bloom’s: application, analysis) Recall Arnold Sawyer from the third section. What advice would you give to him? Why was recording the transactions in QuickBooks not enough? (Bloom’s: synthesis, evaluation) What is the relationship between the balance sheet and the income statement? (Bloom’s: knowledge, comprehension)

Answers 1. This question has three parts: a. Jason should consider several things before purchasing the cars. Cars are depreciating assets – their value declines over time. Using cash from the business to buy cars may not be smart if the business can use the cash for better purposes. Jason can take out a loan for the cars, but in doing so, should evaluate the amount of the cost of the cars that needs to be financed, the cost of the loan and the term of the loan. Lastly (an option which isn’t covered in the chapter, but is in the personal finance mini-chapter) is Jason can consider leasing rather than purchasing the cars, or purchasing used cars rather than new cars.

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b.

Jason should have a good handle on his business cash flow. If he uses cash to purchase the cars, Jason needs to know whether the funds are available, or whether he might be putting meeting other financial obligations at risk. If Jason decides to finance the purchase of the cars with a loan, he needs to investigate the interest rate and term associated with the loan. Other information such as warranty, insurance costs, and projected maintenance costs should also be considered relative to the projected new sales adding these vehicles to the store will bring to ensure that this decision is in the best interest of the business long term.

c.

Opening another store at a new location means increasing overhead costs – rent (or mortgage), increased utility costs, added insurance, additional personnel and equipment, and the like.

Additionally, a new store may decrease the need for additional delivery vehicles.

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2.

This question has three parts: a. Key financial statements are the balance sheet, the income statement and the statement of cash flows. They are important because they are the formal reports of a business’s financial transactions. They represent what has happened in the past and provide management, creditors and investors, with a perspective of what potentially can happen in the future. b.

Shareholders find all the financial statements helpful in determining the financial well-being of a company, but the income statement reports the shareholder’s equity – the amount of equity in the business that is dedicated to the shareholders.

c.

Independent contractors that are considering working with a firm might want to focus on the statement of cash flows that would indicate whether the business generates sufficient funds to pay the contractor’s anticipated fees.

3.

Independent auditors play a critical role in enhancing the reliability of financial information by attesting as to whether the financial statements prepared by management fairly present the financial condition and past performance of the public enterprise in compliance with accepted standards. In recent years there have been many incidents of accounting fraud and there has been a lack of public confidence in the role of auditors. Due to increased scrutiny in the public sector, many government agencies have been working to improve their fiscal responsibility; one way they are doing this is by establishing an audit committee. The government is driving for stronger accountability and transparency.

4.

Arnold was using QuickBooks to record transactions, but to not manage the entire finances of the company. Arnold Sawyer should have been creating and reviewing the three financial statements – especially the statement of cash flows.

5.

The balance sheet shows what the company owns and what it has borrowed and shows the net worth of the business. The income statement shows how much money a company generates from its operations and how much it spends to run the company, as well as what is left over after paying the expenses – the net income. The two statements are linked by net income. The income statement determines the amount of net income, which is then reported in the owner’s equity section of the balance sheet, representing an increase in the owners’ claim against assets.

TEAM TIME: Industry Analysis Notes: Group analyses will vary; however, all groups should include balance sheets, income statements, and cash flows in their assessment of the organization. Based on the information in these financial statements, students will be able to calculate: 2) Working capital 3) Current ratio 4) Debt-to-equity ratio 5) Gross profit margin 6) Operating profit margin Be sure to discuss the students’ answers to the following questions: 1) What is the company’s ability to meet current obligations out of current assets?

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2) Is the company likely to be able to repay debts in future years?

3) What might be the size of the dividend that the firm can pay shareholders?

Don’t Forget: Information needed to calculate the above figures should be present in any financial statement. You may want to bring a supply of annual reports in case students can’t get to them, or make it clear that many companies post annual reports online so students can access the information they need on the Web.

ETHICS AND RESPONSIBILITY: Getting to the Bottom of the Sarbanes-Oxley Act Questions: 1. What specifically are companies asked to do?

2. How might these requirements affect “CEO creativity” and international competitiveness?

3. What are your thoughts as to the need for and effectiveness of this act? Is it effective, or is it causing more harm than good? Why, and what other measures, if any, do you think should be taken to address these issues?

Answers: 1. The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation enacted in response to the highprofile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise. The act requires public companies to set up an audit committee of the board of directors. Senior management cannot control members of such committees. CEOs and CFOs of public companies are required to certify personally the accuracy of various financial reports, with significant criminal penalties for false certifications. Additionally, public companies have stronger disclosure requirements, so that management must disclose in annual and quarterly financial reports all significant off-balance sheet transactions or special purpose entities.

2.

The Sarbanes-Oxley Act may affect CEO creativity if management is distracted by complying with the strict requirements set up by the act, rather than attending to business strategy. However, as time evolves, and companies set routines and systems in place to assist in compliance measures, the distraction of SOX regulations will abate, and should not be a distraction to CEOs nor affect their creativity. The only exception to this may be the smaller public companies, or those small companies wishing to go public. Meeting SOX internal control requirements for financial reporting may be prohibitively expensive for smaller companies and prevent them from entering or remaining in the public market. With regard to international competitiveness, SOX may increase a company’s desire to enter the international market if only to take advantage of the different means of corporate governance required in the global markets.

3.

Note: Responses will differ for the last part of the question—“What are your thoughts as to the need for and effectiveness of this act? Is it effective, or is it causing more harm than good? Why, and what other measures, if any, do you think should be taken to address these issues?”

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CLOSING CASE: 2011 Was a Pivotal Year in Accounting History Discussion Questions: 1. Do you think this move to IFRS is needed? Why or why not? Whom does it benefit? (Bloom’s: evaluation) 2. Do you think IFRS should apply to all business, not only those publicly traded? Why or why not?

(Bloom’s: evaluation) 3. Do you think foreign countries will follow the IFRS? Why or why not? (Bloom’s: evaluation) Answers: 1. Answers will vary. Obviously the International Accounting Standards Board thought a more universal standard was required so maybe it is. It is important as the world becomes more globally connected that investors are able to compare financial statements across countries.

It is also important that multi-national companies can report financial events in a manner that makes comparisons between country locations easier, and compiles all locations financial data consistently.

A global standard may decrease attempts at fraud due to the fact that various governing bodies are familiar with the global standard and expectations so the chances of getting caught increases.

2.

Answers will vary. It might make it easier if everyone is working from the same rule-book. Private companies may wish to adopt IFRS to enhance their trustworthiness with financial lenders, etc.

Government organizations do report to ministries which do share expenditures and other important financial information with the public, so at this time that system seems to be working. Of course, this is not done by every government in every country. Transparency in government is something that occurs in many developed countries but not always in the developing countries – so asking not-forprofit organizations (including government) to move to IFRS would probably be a good thing.

With that said, many countries have different laws and accounting systems in place so there may be a “way out” for these governments to by-pass the IFRS or implement it only minimally. By using IFRS multi-national companies may be more willing to merge with foreign partners or open locations in foreign destinations.

3.

Answers will vary. For the most part, but as mentioned above there are problems with comparability and the degree to which any one country is willing and able to implement and enforce the IFRS.

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SUPPLEMENTAL MATERIAL APPLICATION EXERCISES 1.

Cash Flow Simulation. How well would you be able to manage the cash flow of a company? To find out, go to www.bized.co.uk/learn/business/accounting/cashflow/simulation/index.htm and play the Cash Flow simulation game. Go through the tutorial and then play the simulation. Even though this is based on a company in the United Kingdom, the principle of cash flow is universal. How did you do?

2.

Balancing a Budget. Companies are not the only entities that must create budgets. Cities, provinces, and other governmental agencies must also prepare budgets, but unlike corporations, they can raise or lower taxes to help balance the budget. However, raising taxes is not always politically favourable, and while lowering taxes helps get the votes, it’s not always fiscally prudent. How would you do if you were just hired to close the $3.8 billion budget deficit for New York City? Find out by playing the Budget Game: http://www.gothamgazette.com/budgetgame.

3.

Exploring Career Possibilities. Visit job search sites such as www.monster.ca and find postings for financial managers and accountants. What are the job specifications and requirements? What companies are advertising the openings? Are these careers you are interested in pursuing? Why or why not?

4.

Securing Financing. Go to the website of a local bank and research its options for short-term business financing. What are the terms of its small business loans and lines of credit? Does it offer other commercial financing options, such as factoring? If you were going to open a small business, how would you go about financing it, based on what you learned?

6.

Analyzing Current Ratios. Many trade associations and other specialized organizations publish financial ratios. Industry averages of various types of businesses can be obtained for a fee from organizations such as: Statistics Canada, Dun & Bradstreet Canada, RMA Annual Statement Studies, Standard and Poor's Corporation, etc. You can also find this information online free of charge, visit http://www.bizminer.com/products/analysis/industry/financial-ratios-profiles.php (free sample reports), or http://www.reuters.com/finance/industries/allIndustries, or http://www.creditguru.com/ratios/inr.htm to get started in your search to locate the current ratios for several industries of your choice. How do the ratios compare? What does this number tell you about the industry? What conclusions can you draw based on your findings?

Answers will vary.

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MYBIZLAB RESOURCES & TEACHING TIPS BIZSKILLS SIMULATION: Financial Management Synopsis: Students play the role of a newly hired financial manager for a young company. Students will practice making the right planning and budgeting decisions to guide the company to success.

At the end of this exercise, students should be able to answer the following questions: 1. What are the pros and cons of open book management?

2. What are the three main financial statements?

3. What choices can companies make to affect their cash flow statement?

4. What choices can companies make to affect their income statement?

CAREER SKILLS - Chapter 13 Online Career Skills: Personal Finance If students want to learn to manage a business, they have to learn how to manage their own money first.

This chapter provides an invaluable introduction to managing their finances, including how to create a financial plan, manage personal credit, handle the financing of a car, use insurance and investments to protect assets, and incorporate tax payments into their personal budget.

Chapter 11, Related Websites http://www.cica.ca/

Chartered Accountants of Canada

http://www.ica.bc.ca/

Chartered Accountants of British Columbia

http://www.icao.on.ca/

Chartered Accountants of Ontario

http://www.ifrs.org/Home.htm

IFRS – International Financial Reporting Standards

http://www.apatcinc.com/index.php

The Association of Professional Accounting & Tax Consultants Inc.

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ENHANCING THE ONLINE COURSE CFO Interview: Ask your students to find an interview with a CFO of a major company through the online library at your institution. Have students review the article to determine the trends the CFO believes are important in financial management. Ask students to develop a short abstract that summarizes the key points and post these on the course blog.

Forecasting Chart: Have your students discuss the actions necessary for sound financial management: forecasting future financial needs, developing budgets, and establishing controls. Have the students define and discuss each segment and then create a graphic that illustrates the process step-by-step.

Budget Differentiation: Ask your students to differentiate between a capital budget and a cash flow budget. Why is each necessary? Have your students search the Internet to find examples of each.

Short-Term Resources: Have your students search the Internet for companies which provide short-term financing. Be sure to have the students look for each type of financing discussed in the text. Can any students identify solutions other than those discussed in the text? Which of these options seems good to the students? Why are they good or not good?

Long-Term Resources: Have your students find Web sites of providers of long-term financing options— both debt financing and equity financing. Have students define the difference between the two. Then ask students to post a page of links, but tell them to save a copy for later (in case they become entrepreneurs).

Accounting Chart: Have students create a chart that shows the six different types of accounting—with definitions. How is the overall financial health of the company affected by each one? Have the students post the charts.

Ethics Essay: Ask your students to look up the Sarbanes-Oxley Act (2002) on the Web. Ask them to describe the major events that led to the development of this act and then write a one-page essay on the importance of SOX on businesses today. Give extra points to the student with the most thoughtful essay.

Accounting Equation: Have your students create a graphic illustration of the Fundamental Accounting Equation. Students should define each part of the equation and relate each segment to one of the three major types of financial statements. Post the equations on the course blog.

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CHAPTER 12 GLOBAL BUSINESS CHAPTER OPENER This chapter introduces students to the fundamentals of international business—from the definition of globalization to the economic factors and challenges that impact global trade. Various organizations involved with aiding trade and eliminating barriers are introduced. Students are also introduced to various strategies designed to penetrate the global market. A wide range of factors in the external environment are discussed insofar as they affect and challenge businesses which operate in the global marketplace.

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1.

2.

3.

Understand how the globalization of markets and production has affected business.

Explain why globalization has accelerated so rapidly.

Explain the meaning of comparative advantage and absolute advantage and describe the benefits and costs of international trade.

4. Define free trade and summarize the different types of trade barriers used to protect domestic industries from foreign competition.

5. Describe the organizations that facilitate trade and attempt to eliminate trade barriers.

6. Distinguish among the three basic strategies of international business.

7. Outline the ways international firms can successfully enter foreign markets.

8. Define exchange rates and explain how they affect international business.

9. List the economic factors and challenges that play a role in conducting business on a global scale.

10. Summarize the sociocultural, political, legal, and ethical challenges to conducting business in a global marketplace.

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KEY TERMS absolute advantage (p. 309) administrative trade barriers (p. 311) balance of payments (p. 323) balance of trade (p. 322) capital flight (p. 324) comparative advantage (p. 309) contract manufacturing (p. 320) countertrade (p. 325) cross-cultural awareness (p. 326) culture (p. 325) currency appreciation (p. 322) currency depreciation (p. 322) dumping (p. 312) embargo (p. 311) ethnocentrism (p. 326) European Union (EU) (p. 315) exchange rates (p. 321) exporting (p. 304) flexible (or floating) exchange rate system (p. 323)

franchising (p. 319) free trade (p. 311) free trade areas or agreements (FTA) (p. 315) General Agreement on Tariffs and Trade (GATT) (p. 314) global strategy (p. 318) globalization (p. 305) globalization of markets (p. 305) globalization of production (p. 306) importing (p. 304) International Monetary Fund (IMF) (p. 314) joint ventures (p. 320) licensing (p. 319) local content requirement (p. 311) multidomestic strategy (p. 318)

near-shoring (p. 307) nonconvertible currency (p. 324) North American Free Trade Agreement (NAFTA) (p. 317) offshoring (p. 306) outsourcing (p. 308) quota (p. 311) strategic alliances (p. 320) subsidy (p. 311) tariff (p. 311) trade and investment barriers (p. 306) trade deficit (p. 322) trade surplus (p. 322) transnational strategy (p. 318) turnkey project (p. 319) wholly owned subsidiary (p. 321) World Bank (p. 314) World Trade Organization (WTO) (p. 314)

DETAILED LECTURE OUTLINE I.

Globalization: What’s it all about?

A. International Business 1. How does doing business globally affect you?

2. What is globalization? a. Globalization, the movement toward a more interconnected and interdependent world economy, may be one of the most profound factors affecting people around the globe.

3. How does globalization offer more marketing opportunities to businesses? a. The globalization of markets is the movement away from thinking of the market as being only local or national to including the entire world.

4. How does globalization make it easier to manufacture products? a. The globalization of production, the other facet of globalization, is the trend of individual firms moving production to different locations around the globe to take advantage of lower costs or to enhance quality.

B. Rapid Acceleration of Globalization 1. Why has globalization accelerated so rapidly? a. Two main factors seem to underlie the trend toward greater globalization: technological innovations and the dramatic decline in trade and investment barriers among countries since the end of the Second World War.

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b.

When you consider the dramatic advances in communications, transportation, and information technology, it is easy to see how technological innovations have made it possible to manage the global production and marketing of products.

2. What changes might offshoring bring for Canadian companies and employees?

3. What is the difference between outsourcing and offshoring? a. Outsourcing occurs when a company contracts with an outside firm to handle a specific part of its business activities. b. Outsourcing to a foreign country is often referred to as offshore (outside the country) outsourcing. Some people use the term offshoring to refer distinctly to the relocation of part of a business to a lower-cost location, typically a foreign country, and not simply as contracting work outside the country’s borders.

4. How does the decline in trade and investment barriers accelerate globalization?

C. Global Business Trends: 4 significant trends: 1. Growing role for developing nations 2. Rise in non-US foreign direct investment 3. Rise in multinational enterprises 4. Increasing democratization II. International Trade A. International Competition 1. What is the theory of comparative advantage? a. The theory of comparative advantage states that specialization and trade between countries benefits all who are involved. This is true because countries that participate in international trade experience higher standards of living due to the greater quantity and variety of higher-quality products at lower prices. This should not be confused with an absolute advantage which is the ability to produce more of a good or service than any other country.

2. What can a country do to get ahead in world markets? a. In many nations, governments focus on improving the nation’s resources—natural resources, labour, capital (plant, equipment, and infrastructure), technology, and innovation and entrepreneurialism—to improve competitiveness.

3. What can businesses do to be more competitive? a. Successful firms try to gain access to cheap raw materials, invest in their workers’ training, and purchase state-of-the-art capital (plant and equipment). Successful companies also invest in cutting-edge technology in their research and development (R&D) departments. Finally, they promote innovativeness throughout their organizations.

B. Benefits and Costs of International Trade 1. What are the benefits of international trade? a. Countries participating in international trade will experience higher standards of living because of the greater quantity and variety of higher-quality products offered at lower prices.

2. What are the costs of international trade? a. The costs of international trade are borne by those businesses and their workers whose livelihoods are threatened by foreign competition.

3. Do the benefits of international trade outweigh the costs?

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a.

The answer depends on the timing of the benefits and the costs, and the extent to which they are felt within any given period.

C. Trade Barriers and Protectionism 1. What is free trade?

2. What trade barriers can governments put in place? a. There are three types of trade barriers: 1. tariffs and subsidies, 2. quotas and embargoes, 3. administrative trade barriers.

3. Who benefits and who suffers from protectionist trade barriers? a. Trade barriers benefit domestic producers and their workers, and they hurt domestic consumers.

4. What are common arguments in favour of protectionist trade barriers? a. Four main arguments exist for implementing protectionist trade barriers: 1. National security, 2. Infant industry, 3. Cheap foreign labour, 4. Threat of retaliation.

5. How do economists feel about protectionist trade barriers?

D. International Organizations Promoting Free Trade 1. What are some international organizations that promote free trade? a. The General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO), the World Bank, the International Monetary fund (IMF).

2. What can be done to promote free trade?

E. Regional Free Trade Agreements 1. What is a free trade agreement? a. Free trade areas or agreements (FTA) abolish trade barriers among member countries.

2. What is the largest free trade area in the world? a. The European Union is currently the world's largest single market, and accounts for onethird of the world's total production.

3. Does Canada have a free trade agreement with the EU? a. A tentative agreement known a the Comprehensive Economic and Trade Agreement (CETA) was signed in 2013 4. Does Canada have an existing free trade agreement? a. The North American Free Trade Agreement (NAFTA) eliminates trade barriers between the U.S., Canada, and Mexico.

5. What other free trade areas exist around the world? a. Other Noteworthy Free Trade Areas include MERCOSUR, Association of Southeast Asian Nations, and the Asia-Pacific Economic Cooperation.

III. Conducting Business Across Borders A. Strategies of International Business 1. What are the types of strategies can an international business follow? a. Three basic strategies for international business are global, multi-domestic, and transnational.

2. Can companies compete with low prices? a. A global strategy involves competing primarily based on price while selling a standardized (or homogenous) product.

3. Can companies compete by customizing products?

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a.

4.

A multi-domestic strategy involves competing primarily by customizing or differentiating the product to meet unique local needs, tastes, or preferences.

Are companies able to compete with low prices and still customize products? a. A transnational strategy involves competing by offering a customized product while simultaneously selling at the lowest possible price.

B. Entering Foreign Markets 1. How do international firms enter foreign markets? a. Companies may undertake one of six strategies to enter foreign markets: i.

Export their product. ii.

Implement a turnkey project. iii.

Undertake franchising. iv.

Enter into a licensing agreement, a joint venture, or a strategic alliance. v.

Undertake contract manufacturing. vi.

Establish a wholly-owned subsidiary.

2. Which mode of entering foreign markets is optimal?

IV. International Business: Economic Factors and Challenges A. The Effect of Exchange Rates 1. What are exchange rates? a. Exchange rates are the rates at which currencies are converted into another currency.

2. How do exchange rates affect international business? a. Currency appreciation is an increase in the exchange rate value of a nation’s currency, causes the relative price of imports to fall as the relative price of exports rises. b. Currency depreciation is a decrease in the exchange rate value of a nation’s currency, has the opposite effect on the relative prices of exports and imports. A weak currency causes exports to become cheaper and imports to become more expensive. c. The balance of trade is the difference between the value of a country’s exports and the value of its imports during a specific time. d. A trade deficit, or unfavourable balance of trade, exists when the value of a country’s imports exceeds the value of its exports. e. A trade surplus, or favourable balance of trade, occurs when the value of a country’s exports exceeds the value of its imports. f. The balance of payments is a summary of a country’s international financial transactions. g. A freely floating (or flexible) exchange rate system uses the global supply and demand for currencies to determine exchange rates. h. A nonconvertible currency is a currency that can’t be converted into another currency in the foreign exchange market. i. Capital flight is the transfer of domestic funds into foreign currency held outside the country. j. Countertrade is a form of international barter, the swapping of goods and services for other goods and services.

B. Other Economic Challenges to Conducting International Business 1. What challenges does rapid growth of a nation pose to international businesses?

2. How does government intervention in the markets pose a challenge to international business?

3. How do socio-economic factors affect doing business internationally?

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C. Socio-Cultural, Political, Legal, and Ethical Challenges 1. What is culture? a. Culture is the complex set of values, behaviours, lifestyles, arts, beliefs, and institutions of a population that are passed on from generation to generation.

2. Why is the study of culture important for international business? a. Cross-cultural awareness is an understanding, appreciation, and sensitivity to foreign culture. b. Ethnocentrism, a belief that one’s own culture is superior to all other cultures, is a guaranteed recipe for disaster when undertaking international business.

3. Why do aesthetics matter when it comes to international business? a. Aesthetics is what is considered beautiful or in good taste and includes etiquette, customs, and protocol.

4. How do different attitudes toward time and work affect international business? a. Attitudes toward time vary considerably around the world. Time is paramount to those in the Canada and the United States, where people in general expect promptness and often insist on getting down to business. Some cultures view this as pushy and impersonal—a cultural turnoff.

5. How do different religious beliefs affect international business? a. Religion plays a profound role in shaping a culture.

6. Can inaccurate language translation cost a company money? a. Language, both spoken and unspoken, is also extremely important. Body language is also important.

7. What are the political challenges to conducting international business? a. International businesses look for nations that have a stable government, a well established educational system, and a well-maintained infrastructure. b. Political changes can create disruptive environments that affect business concerns.

8. What are the legal challenges to conducting international business? a. The different laws governing contracts, product safety and liability standards, and property rights are o f particular importance when conducting global business.

9. What are some ethical challenges to conducting international business? a. Bribery is just one of the many ethical dilemmas surrounding global business. But even when something isn’t illegal, it doesn’t mean it isn’t unethical. Unique differences in economic conditions and cultural values give rise to many ethical dilemmas surrounding global business.

NOTE: End the lecture by asking students to write down the muddiest points or main points of the lecture. This will allow you to know what might need to be reviewed during the next lecture.

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SUGGESTED ANSWERS TO DISCUSSION QUESTIONS BLOOM’S TAXONOMY: Discussion Questions have been matched to a level of difficulty within Bloom’s Taxonomy of Learning Domains. Bloom’s Taxonomy Model is in three parts: Cognitive domain (intellectual capability, i.e., knowledge or ‘think’), Affective domain (feelings, emotions and behavior, i.e., attitude or ‘feel’), and the Psychomotor domain (manual and physical skills, i.e., skills or ‘do’).

Bloom’s cognitive domain involves knowledge and the development of intellectual skills. There are six major categories in Bloom’s cognitive domain, starting from simplest behavior to the most complex. The categories can be thought of as levels with each level increasing in degree of difficulty, and the lower levels must normally be mastered before the next level can take place.

Bloom’s Taxonomy Cognitive Domain Model: Level 1) knowledge (recall data), Level 2) comprehension (understand), Level 3) application (use, apply), Level 4) analysis (analyze structure/elements), Level 5) synthesis (create/build), and Level 6) evaluation (assess, judge in relational terms--most difficult level).

For example: A situational questions at the analysis level would indicate that students must know about, understand, and be able to apply the concept before they can analyze a situation. This may require students to research a topic before they can analyze a situation. Some questions may ask students to think at multiple levels and their answers may be focused at the lower levels, rather than the higher levels of Bloom’s Taxonomy; in these cases, the professor may decide to delve deeper or accept the lower level answers.

OPENING DISCUSSION: Global Trade (Japan’s Disaster Affects Imports, Exports, and Productivity Around the Globe) Discussion Questions: 1. How do these events increase business opportunities for the Japanese? How do these events increase business opportunities for foreigners? (Bloom’s: synthesis) 2. How do these events decrease business opportunities for Japan with other countries? How do these events decrease business operations for businesses located in foreign countries? (Bloom’s: synthesis) 3. Do you think foreign countries were justified in banning imported food from Japan was justified?

Why or why not? How does such a ban affect global supply and demand for these food products?

How does such a ban affect the productivity, employment rates, and gross domestic product (GDP) in Japan? Besides banning imported food from Japan, what other measures could foreign countries take? Would you feel safe buying food exported from Japan? Why or why not? (Bloom’s: application, analysis, evaluation) Answers: 1. This disaster has kept many people employed through a variety of organizations which came to Japan’s aid. Many disaster relief organizations and emergency response teams including firefighters, doctors, nurses and the military, etc. were called upon to aid in the crisis in Japan. The world had to increase production of gasoline, food, medicine, etc. to supply Japan with the necessities of life.

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Infrastructure must be rebuilt which will employ many people for many years. Emergency business opportunities for communications, food, medical, and other areas will be setup for months.

Construction, police, fire fighters, ambulance, schools, hospitals, contractors, scientists, food growers, etc. will be very busy trying to clean-up and recover from the disaster. Once Japan’s infrastructure is restored – electricity, roads, and communications, businesses will want to get back to full operating capacity. Foreign businesses, multi-national business, non-profit organizations, and foreign governments have all been busy giving money, time, labour, and resources to Japan. This offer many opportunities for foreign businesses to sell to Japanese consumers and partner with fallen domestic businesses to help them recover and get back into business. Foreign businesses have an opportunity to build a “good corporate citizen” image for themselves not only with the Japanese, but also with potential domestic consumers through offering free products, supplies, and other resources. There will be potential for these businesses to sell to Japanese consumers as the crisis settles. Importing food will likely continue for several months after the disaster as Japan grapples with the magnitude of the disaster and the recovery efforts.

2.

As noted in the discussion, tourism to and from Japan will decrease (less money entering Japan, less money entering other countries, less air traffic), manufacturing will decrease and this will affect manufacturers in other countries who counted on Japan supplies (less production, less workers, less profit, lower GDP), food import and exports will almost cease for a while until people feel the food source is safe which will cause Japan to have a greater demand for food imports causing foreign countries to produce more and export more (more jobs, more GDP, less domestic supply possibly, less shipping).

3.

Students will have personal opinions, but levels of radiation need to be closely screened for safety. If history is a warning, look at Chernobyl (Ukraine’s nuclear disaster in the 80’s which released radioactive contamination into the atmosphere which spread over much of Western Russia and Europe), many people died of cancer from the radiation leak of the nuclear plant. The radiation also plumed over other countries causing fear, panic, and concern over health safety. One alternative to banning food imports from Japan is to test food imports for radiation as they arrive in the country.

This may not be feasible since it would cost the importing country money to setup and operate such a process. Another alternative is to ask Japan to test for radiation, which it is doing now, but foreign countries would be relying on Japan to be honest, work with integrity, use properly trained testers, and use proper equipment. This should not be a problem unless there have been past political or trust issues between Japan and the foreign country. Different countries may have different standards and levels of acceptable radiation which may also cause concern from foreign countries.

OFF THE MARK: How Does China’s Internet Censorship Affect Global Business?

Discussion Questions: 1. How do you feel about censorship? Is it a violation of human rights or does it protect citizens, government, or society? Do you think the Chinese government will be pressured into providing open Internet access for its citizens? Why or why not? (Bloom’s: synthesis, evaluation) 2. Do you think the Chinese government’s censorship is an attempt to control Internet usage in favour of its own domestic Baidu search engine and other domestic social media companies (a form of protectionism)? What if other countries did the same? Could censorship become more prevalent?

(Bloom’s: application, synthesis)

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3.

How does Internet censorship affect global business? As more countries move toward market economies, do you think there will be a decline in Internet censorship by government? Should the Internet be kept “open” for all world citizens? (Bloom’s: analysis, synthesis, evaluation)

Answers: 1. Answers will vary. In some countries such censorship would be considered a violation of human rights. As China moves toward a more market oriented economy there will be pressure from citizens for a more open Internet.

2.

Answers will vary. There have been accusations of protectionism. If countries begin protecting their own domestic businesses it may create a counter-movement to international trade. Most countries will accept some protectionism from foreign countries they trade with for legitimate, justifiable, reasons (for example to foster growth in a domestic industry). The U.S. wanted to save its lumber production industry so it taxed Canada’s lumber imports even though this is in opposition to the NAFTA agreement. There were arguments between Canada and U.S. governments over this strategy until a compromise was agreed to. Of course most countries want to produce goods and services for their domestic markets, but most countries cannot produce all the things a country needs. If a country begins to use protectionism so as to give preference to their domestic businesses they may find that eventually the country’s standard of living is lowered due to a decrease in imports and foreign countries willing to do business with them. Countries may retaliate by doing the same.

3.

Answers will vary. Internet censorship made it very difficult for Google to conduct business in China.

It is hard to see any global advantages – by limiting access to the international community the Chinese government may increase the business transactions kept within China. It also adds chills the climate with global partners, who will be discouraged from trading with China if they do not feel they have a fair opportunity to win customers for their own products in China. If China has certain laws or business practices that go against those in the U.S. it is difficult for a U.S. business to function in China because it would be breaking U.S. laws. Most countries operate in accordance with their own domestic laws as well as foreign laws, but when the two conflict it makes it difficult for companies to function in multiple countries. This is one of the main reasons many multinational corporations do not operate in corrupt countries. As more countries move toward market economies the world will become more open and so will the Internet. There will be a push toward transparency and open-access to information. The Internet should be kept open to all world citizens. In some countries Internet access has become a right to citizens, for instance, Finland is the first country in the world to make broadband Internet access a legal right.

BIZCHAT: Which Is Better—A Strong Dollar or a Weak Dollar?

Discussion Questions: 1. As a person living in Canada, would you prefer a strong Canadian dollar or a weak dollar? Why? (Bloom’s: application, synthesis) 2. If you were an importer in China, would you prefer a strong Canadian dollar or a week one? Why? (Bloom’s: application, synthesis) 3. Use the Internet to find a currency exchange converter and compare the value of the Canadian dollar to: the Chinese yuan, Japanese yen, Indian rupee, Mexican peso, German euro, and U.S. dollar. Based on your findings, which country would you most like to import goods from? How many Canadian dollars would it cost you to buy a Big Mac in each of these countries? (Bloom’s: application, analysis)

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Answers: 1. Answers will vary. A strong dollar means Canada is doing better than some other countries in growth and stability, but it also means that Canada’s exports may decline due to the relatively higher price of Canadian imports. If there is a decline in exports demand has dropped which will cause unemployment in Canada. If the dollar is weak, then Canada’s exports increase, but it costs Canadians more money to buy foreign imports.

2.

An importer in China would prefer Canada to have a weak dollar in relation to the Chinese yuan.

The yuan can buy more goods and services per yuan when it is valued higher than the Canadian dollar and when it is valued lower each yuan buys less.

3.

Answers will vary. Students should wish to import goods from countries with a lower dollar value than Canada. The “Big Mac Index” is a theory based on purchasing-power parity – refer to http://www.economist.com/markets/bigmac/about.cfm.

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IN-CLASS ACTIVITIES Activity

Description

Time Required

Reference

Bloom’s Taxonomy

Supplemental In-Class Activity 1: Ice Breaker: Where's It Made?

Students examine their personal effects to see where they were manufactured.

15 min

IM – see below

Knowledge Comprehension

Team Time: The Devil's Advocate

Students debate various positions with regard to globalization.

25 min.

Page 118

Ethics and Corporate Social Responsibility: Outsourcing

Students debate the pros and cons of outsourcing for a company that manufactures industrial sewing machines.

This activity gives students insight into international marketing.

25 min.

Pages 118-119

10-15 min.

IM – see below

Knowledge Comprehension Analysis Knowledge Comprehension Analysis Application Knowledge Comprehension Application

30 min.

IM – see below

Supplemental In-Class Activity 2: Marketing U.S. Products Abroad Supplemental In-Class Activity 3: How the Chinese Stole the Grinch

This case asks students to look at the effects of piracy on international business.

Knowledge Comprehension Analysis

(Includes handout) Learning Catalytics

This activity allows students to participate on the mobile device of their choice to answer questions that gauge their understanding of chapter topics.

5 min. including discussion

MyBizLab

Business Today Videos

Students can watch a related current events video, followed by instructor’s questions and joint class discussion. See the Syllabus for a full list of videos by chapter.

1 to 10 min. long videos + discussion time

Videos Appendix and MyBizLab

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Any level of Bloom’s Taxonomy

Knowledge Comprehension Application Analysis

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SUPPLEMENTAL IN-CLASS ASSIGNMENT: Ice Breaker - Where's It Made?

Activity Overview: This exercise generates student interest in globalization by “personalizing” the concept.

Ask students to identify where their personal belongings are made.

Time Limit: 20 minutes What to Do: 1. Made in the USA? Not so fast. It’s more likely that your belongings come from all over the world.

Take this personal inventory and decide for yourself.

2.

Check the labels on the following items to determine where they were made.

• Shoes • Shirt • Pants • Purse or backpack • Technological devices such as a cell phone, computer, camera, tablet, etc.

Calculate the number of countries, other than the Canada, that are represented.

If your personal belongings represent . . .

0 countries 1–2 countries 3 or more countries

Your goods…

Are homegrown Have international flair Truly reflect the growing trend of globalization

SUPPLEMENTAL IN-CLASS ASSIGNMENT 1: Marketing U.S. Products Abroad Activity Overview: This activity gives students insight into international marketing.

Time Limit: 10–15 minutes What to Do: Set-up student teams of 3-4 each. Have them identify a product that is made in the U.S. or Canada, but not marketed in a specific country of the team’s choosing. The team should then create a short marketing plan for introducing the product to the country. In creating the marketing plan, be sure to consider: a. b. c. d.

Why Americans or Canadians use the product.

The socio-cultural factors that may make the product unnecessary in another country.

The needs of people in the specific foreign country.

How the product may meet needs in a foreign country which are different from the needs of the domestic customers.

Don’t Forget: Be sure students pick products that are not currently being marketed in their country of choice. Another way to approach this activity, especially if you have a diverse class, is to ask students in the class to talk about what products are available in Canada that are generally not used in their home

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country. For example, in one class, a student from India mentioned that most people in India did not use paper towels. This led to a very interesting discussion about why people did not use the towels, and how paper towels could be marketed in India.

Wrap-Up: Reinforce the concept that marketing internationally may require extra sensitivity to local customs and practices. In some cases, a product that sells well in one country may have to be modified significantly if it is to be sold in a different country.

SUPPLEMENTAL IN-CLASS ASSIGNMENT 3: How the Chinese Stole the Grinch Activity Overview: This activity asks students to look at the effects of piracy on international business.

Time Limit: 30 minutes What to Do: 1. In advance, make copies of the Supplemental Assignment Handout on the next page and distribute them to students.

2.

Divide students into groups and ask them to read the case and answer the questions in their small groups. (15 minutes) a. If you were exporting legitimate copies of U.S. movies to Asian markets, would you target China? Why or why not? b. How do you think the U.S. and other world governments should respond to piracy of videos in China if it continues? How effective do you think these actions would be? c. Pirates can sell films within a couple of days of their U.S. debuts, while legitimate distributors wait up to nine months to release authorized videos. How do you think this contributes to the problem, and what can be done about it?

3.

Once students have answered the questions, discuss their answers as a class. As students discuss their answers, make sure they include the following points: (15 minutes) a. Answers will vary depending on whether students think the size of the Chinese market is worth the difficulties inherent in the widespread pirating of films. b. World governments could consider placing tariffs on Chinese products, which might have limited results and take considerable time to have any impact. They could also request that the Chinese government enforce its intended crackdown; however, this might also have limited results. c. Excess demand for Western products encourages pirates to take the risk of obtaining legitimate copies of the films in the United States rather than wait out the lengthy period in which the U.S. distributors try to make money in theaters. Tighter security might help, but the solution ultimately rests with the Chinese government.

Don’t Forget: Be sure to keep students on the case topic—a controversial issue such as this often invites much discussion.

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Wrap-Up: Bring the discussion to a close by asking students for examples of additional piracy issues not mentioned in the case. Ask students how many of them have heard of Kevin Cogill, a blogger who was convicted of a felony for posting nine songs from an unreleased Guns N’ Roses album on the Internet.

Reemphasize that piracy, like bribery: • may be viewed as just a way of doing business by some.

• may not have the ethical ramifications we think it should.

• is not just applicable to other countries, but occurs here as well.

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SUPPLEMENTAL IN-CLASS ASSIGNMENT 3 HANDOUT: How the Chinese Stole the Grinch “Chinese consumers don’t want to pay 36 yuan for a VCD [video compact disk], see it once or twice and give it away. They would rather pay 6, 8, or 10 yuan to see a pirated copy and then throw it away.” That’s how K. Y. Lai, general manager of Shanghai CAV Thakral Home Entertainment Ltd, China’s largest distributor of Hollywood films on video, sums up the appeal of pirated versions of U.S. films. Such is the demand for stolen movies that Dr. Seuss’ How the Grinch Stole Christmas was on sale on China’s streets for about $1.20 a copy within a week after its release in the United States late in 2000.

Lai’s company did sell 300,000 legitimate copies of Titanic, its biggest hit to date. But between 20 and 25 million pirated copies have also been sold, and pirates outsell legitimate retailers about 35 to 1, even on less popular films, according to Lai. Many young consumers have hundreds of films that they collect and swap, and several Web sites provide information and facilitate the swaps.

China is bound by various trade agreements with the United States to shut down its highly effective copyright pirates, but even as the country prepared to join the World Trade Organization, its own propaganda film Life and Death Choice was widely available in pirated form. Some citizens of Asia’s largest market believe their government’s reluctance to take effective action springs from the fact that state-owned factories produce millions of videodisc players every year.

(Source: Craig S. Smith, “A Tale of Piracy: How the Chinese Stole the Grinch,” New York Times, December 12, 2000, A3.)

Discussion Questions: 1. If you were exporting legitimate copies of hit U.S. movies to Asian markets, would you target China?

Why or why not?

2.

How do you think the U.S. and other world governments should respond to piracy of videos in China if it continues? How effective do you think these actions would be?

3.

Pirates can sell films within a couple of days of their U.S. debuts, while legitimate distributors wait up to nine months to release authorized videos. How do you think this contributes to the problem, and what can be done about it?

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LEARNING CATALYTICS A pedagogy, not just a technology.

Learning Catalytics is a “bring your own device” student engagement, assessment that allows instructors and students to work together to Generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. Accessing Learning Catalytics is easy.

Students bring their devices to class, and then input the login code provided by the instructor. Instructors release questions, and students answer in real time. The results are aggregrated and help direct class discussion and/or assessment. They can also be saved for a more detailed analysis after class.

Below you will find a selection of Learning Catalytics questions that have been correlated to this chapter. You can access the interactive questions by connecting to the Learning Catalytics site through the MyBizLab home page.

Learning Catalytics 1 Question Type: Matching Prompt: Match the following trade barriers with the appropriate definition.

Answer/Explanation: Trade Barriers: Tariffs and Subsidies Quotas and embargos Administrative trade barriers

C A B Definitions: A. Limitation of the amount of an import allowed to enter a country B. Government rules to limit import C. tax imposed on an imported good or service

Learning Catalytics 2 Question Type: Sketch Prompt: Students sketch a graph using mouse or finger.

Instructions: Assume the vertical axis represents the value of the Canadian dollar relative to the US dollar, and the horizontal axis represents volume of Canadian exports to the US. Draw a line showing the slope representing the relationship between volume of Canadian exports and the value of the Canadian dollar.

Answer/Explanation: Students’ sketches should show an downward slope from left to right. As the value of the dollar decreases, the volume of exports increases as the price of Canadian products is lessened to American buyers, as the Canadian dollar’s value slips.

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SUGGESTED ANSWERS TO END-OF-CHAPTER QUESTIONS CRITICAL THINKING QUESTIONS 1.

2.

3.

4.

5.

The text explains that sometimes an international business needs to modify its product to adjust to the specific needs or tastes of the local market. How would a company such as Hewlett-Packard adjust its laptop computers in order to market them to families in developing nations such as India?

(Bloom’s: synthesis) Think about the technological advancements the world has embraced over the last 10 years. The World Wide Web, cell phones, and wireless Internet connections have allowed businesspeople to have mobile offices. How does this technology reduce cultural distance and decrease business costs?

(Bloom’s: application) What are the advantages of increased competition in the global market? What are the disadvantages?

Is foreign competition always good for the consumer? Is foreign competition always bad for the local business? (Bloom’s: comprehension, application) Review the three basic strategies of international business. Discuss the type of companies that would most likely pursue a global strategy, a multi-domestic strategy, and a transnational strategy.

(Bloom’s: application) Imagine you own a furniture store in Canada that specializes in handcrafted dining room tables and chairs. You would like to sell your product to countries in Western Europe. What would be a good mode of entering the foreign market for your company? (Bloom’s: application)

Answers: 1. Developing nations have families will lower incomes. Electricity is also generally less reliable.

Hewlett-Packard would want to market a more inexpensive laptop with a longer-life battery. To keep down costs, Hewlett-Packard would produce a bulkier laptop because larger components are less expensive to produce. In addition, cheaper manufacturing materials should be used to produce the laptops. For example, the casing could be made of a much cheaper, but equally durable plastic material. The screen is also likely to be thicker with lower resolution. Some of the features of the laptop may also need to be eliminated to keep it affordable. Such as eliminating wireless connection capabilities. There are likely fewer places where wireless connection to the Internet is available in India anyway. Hewlett-Packard should look for other ways to reduce costs.

2.

The World Wide Web, smartphones, and wireless Internet connections have made it easier for more people to communicate directly, in real time and to share common experiences. Greater human interaction across cultures breaks down cultural barriers. It brings greater understanding and appreciation of cultural differences that enhances communication and a sense of shared values. It makes the world “smaller.” This technology also reduces business costs by making it much easier to market products globally and to manage globally dispersed production facilities.

3.

Globalization increases competition in local markets as more foreign firms enter the marketplace.

This greater competition keeps local firms on their toes. The general result is a greater quantity and variety of higher quality products at lower prices. These are the typical advantages to consumers.

Generally, the disadvantage of more competition is that it can drive local businesses out of business reducing job opportunities for local workers. However, foreign competition is not always good for consumers if the foreign companies are able to drive local firms out of business and they establish a monopoly. Monopolies often reduce the supply of the product to charge higher prices. Monopolies

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can also produce poorer quality product because they don’t have to compete. Foreign competition is not always bad for local businesses either. It may force local firms to compete more aggressively and they may find a way to beat the foreign competition. Moreover, foreign companies often require the goods and services of other local firms creating more business for these supporting local companies.

4.

Companies pursuing a global strategy are very concerned with keeping their costs down and their prices low. They are much less concerned about customizing their products to satisfy unique local needs, tastes and preferences because sell a standardized product. The types of companies pursuing a global strategy include companies that sell agricultural commodities like wheat, corn, and barley, raw materials like coal, copper, and iron ore, or other bulk processed products like chemicals and fertilizer.

Companies pursuing a multi-domestic strategy are less concerned about keeping their costs down and their prices low. Instead, they are much more focused on customizing their products to meet the unique local needs, tastes and preferences of their global customers. Firms pursuing a multi-domestic strategy focus on selling a differentiated product, a product that is unique in some way to capture the attention of potential customers. International businesses that sell products like food, clothes and cosmetics globally, or sell services like consulting services or restaurant services worldwide focus on customizing their goods and services to satisfy unique local customers.

Companies pursuing a transnational strategy attempt to not only keep their costs and prices low, but also try very hard to customize their products at the same time. This strategy is very difficult to achieve in practice. Airline companies like British Airways and some financial services businesses like American Express are examples of multinational enterprises that pursue a transnational strategy.

5.

There are many advantages and disadvantages associated with each of the entry modes as summarized in Table 4.2. Hence, there is no single, easy, answer to this question. The benefits and costs must be weighed for each entry mode. That said, a few entry modes can be eliminated because they don’t seem to make much sense, like the turnkey project or a wholly-owned subsidiary (unless you were willing to move to Western Europe). Contract manufacturing or franchising would likely not be a good option because you could lose control over quality. Licensing would also not likely make sense unless you believe your expertise could be easily taught. But, even then, you risk creating a competitor. A joint venture or a strategic alliance may not be a good idea either because you could lose your unique expertise and technology to your partner. You would also have to share control over the foreign business. This could sacrifice your unique quality. Therefore, exporting appears to be the best option. But, transportation costs or unforeseen higher trade barriers could push the price of your furniture to the point where your sales could fall significantly. Moreover, having to rely on a local foreign agent to market your furniture could also bring some challenges. Nevertheless, assuming your handcrafted furniture is unique in terms of quality then exporting seems the best option.

TEAM TIME: The Devil’s Advocate Discussion Questions 1. In the recent wave of globalization, developing countries have become the focus for many international businesses. Is this process of globalization the best way to strengthen developing countries and establish a level playing field or does it keep them under the control of wealthy industries and drive income inequality?

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2.

3.

Free trade versus protectionism is a heated debate in today’s fragile economy. Which is better for the health of the Canadian economy over the next ten years: free trade or protectionism?

What types of ethical concerns might a Canadian company be faced with when outsourcing work to foreign countries? What about child labour, fair wages, or safety in food and drugs? Is there need to be concerned? What is being done?

Answers: 1. Students should exercise critical thinking. Some reasonable arguments and some historical evidence point to the exploitation of workers in developing countries as well as significant political influence over local national politics by some international businesses that may amass huge profits. At the same time, other rational arguments and evidence emphasizes the opportunities created for workers in developing countries and the consequent higher standards of living that result from globalization.

What exactly gives rise to these different outcomes is worth exploring.

2.

The answer provided will likely depend on the size and the timing of the benefits and costs of free trade versus protectionism. Nevertheless, economists tell us that the benefits of free trade outweigh the costs over time. But, the economic perspective is not the only perspective. Many other important social and political issues and goals have to be taken into account as well.

3.

Students should exercise critical thinking. One the one hand it could be argued that a country ought to abide by local laws and local ethical standards when abroad. Others argue that is too simplistic and many other important factors need to be considered. For example, the economic benefits which accrue to the family of the child could be significant—it may help to alleviate stark poverty.

Moreover, employing the child may provide long-term opportunities to the child that could result in a much higher standard of living over time than might otherwise be possible.

ETHICS AND RESPONSIBILITY: Outsourcing Discussion Questions 1. As a business owner, what are the costs and benefits of moving half your production overseas?

2. Do the benefits of outsourcing outweigh the costs? Why or why not?

3. Are there any possible alternatives to consider? What other decision could you make so that each side (domestic and international) benefits?

Answers: 1. The costs of moving your production overseas are the economic hardships imposed on the local workers and the local community at large. The benefits would accrue to the foreign workers. The greater demand for their labor would push up their wages and reduce their unsafe working conditions over time as businesses compete for these workers. Benefits may also accrue to the business owner in terms of higher profits.

2.

The answer to this question depends on who you ask. Nevertheless, it’s possible that if the business gains significant market share over time as a result of its cost-cutting efforts then it may cause the business to expand and to even create more jobs over time in the local community than those initially lost. However, this assumes that the business owner would choose to expand production in the local community.

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3.

One alternative is that the local workers could accept a cut in pay or reduced benefits provided by the business. The business owner could also be willing to accept a lower profit margin in order to preserve local community harmony. At the same time, some production could be shifted to the foreign site to experience the lower costs and the lower price for the sewing machines. If that succeeds in generating more market share and profits then that could generate more jobs in both locations.

CLOSING CASE: GE’s Company-to-Country Strategy Discussion Questions: 1. Why does GE feel that investing in emerging markets is a good idea? Do you agree with this approach? What problems could GE face by entering emerging markets? (Bloom’s: comprehension, application, synthesis) 2. What is unique about the company-to-country philosophy? How is it different from just selling GE products to emerging countries? (Bloom’s: analysis) 3. Consider what you’ve learned about market failure in this chapter. Do you think it’s wise for GE to focus on infrastructure in emerging countries as opposed to, say, health care? (Bloom’s: application) Answers: 1. Investing in emerging markets could be very profitable for GE because of the high growth potential of these markets. However, investing in emerging markets has many economic, social and political risks.

2.

The company-to-country philosophy focuses on establishing a close relationship with the government itself as opposed to just appealing to consumers in emerging markets.

3.

GE could risk aligning itself too closely with the government of China. If the government fails to meet the expectations of its people because it falls victim to corrupt or ignorant policy, or policy that succumbs to special interest groups at the expense of promoting the general well-being of society, then GE’s reputation with the Chinese people could suffer. This could hurt GE’s chances at selling their consumer products in China.

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SUPPLEMENTAL MATERIAL APPLICATION EXERCISES 1.

Go Shopping. Select two different luxury cars—one very exclusive and high performance and the other very energy conscious and environmentally friendly. For each car and each manufacturer, investigate where the car is designed, assembled, and where the component parts are manufactured.

Submit a summary of your findings.

2.

Check out Foreign Websites. Go to the website of an international company such as Swedish furniture maker IKEA (www.ikea.com). Under the “select a location” option, choose Canada. Review the site and note the products and the design of the page. Then go back to the home page and choose a different country from Europe, Asia, Caribbean or the Middle East. Look for differences in the appearance of the website and the products offered. Why do you think these sites are different for each county?

3.

Learning More about Foreign Trade. Go to www.wto.org to learn more about foreign trade. Click on “Trade Topics” and choose a topic that interests you. Write a paper about the issues surrounding this topic.

4.

Cultural Guidelines. Knowing how to behave in a variety of countries is critical with increased globalization. Search online to find tips on doing business in other countries. Select two different countries from very different regions of the world, and create a pamphlet for business travellers on the business do’s and don’ts for each country.

5.

You’re the Trader. Imagine you’re in charge of trading goods for a country. Would you focus on building wealth by selling commodities? Or on developing an industry by purchasing raw materials?

Visit <www.imf.org/external/np/exr/center/students/trade/index.htm> and become the trader.

Measure your success on the global economics conditions scale.

Answers: 1. Answers will vary. Students can select luxury cars such as BMW, Audi or Mercedes and compare these to an economical car manufacturer such as the Smart car.

2.

Answers will vary. Students should notice that different cultures require a different approach on the company’s website. Students should determine that language, values, laws, religion, etc. change the way customers communicate and interact with businesses.

3.

Answers will vary. There are a variety of options to choose from and this could be a valuable assignment for in-class discussion.

4.

Answers will vary. Students should understand the acceptable business practices in the countries they review. This would be a good exercise to discuss in class. The ideas around low-context and high-context cultures should be discussed. Other concepts around gender differences, power distance, contracts, business regulations and laws, and differences in business practices should also be discussed through the results of this exercise.

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5.

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Answers will vary. This would be a good exercise to discuss in class. Students might discuss what they learned from trading.

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MYBIZLAB RESOURCES & TEACHING TIPS BIZSKILLS SIMULATION: Going Global Synopsis: In this BizSkill, students play the role of two friends who have discovered an inexpensive way to create power. They wish to bring their discovery to the market and question how to enter various markets, given the risks involved. Domestic and emerging markets are considered.

At the end of this exercise, your students should be able to answer the following questions: 1. What is globalization and how can emerging markets offer opportunities for companies?

2. What various options exist for companies to enter the global marketplace?

3. What factors must businesses take into account when entering the global marketplace?

DECISION-MAKING MINI-SIMULATION: Global Marketing Synopsis: As the VP of global marketing at a beauty products company, Holden-Evans, the student is faced with the task of bringing a new product, ‘Glimmerhead’ shampoo, to a foreign market, with production facilities located in the foreign country.

Chapter 12, Related Websites http://www.un.org/en/

United Nations has four main purposes: to keep peace throughout the world; to develop friendly relations among nations; to help nations work together to improve the lives of poor people, to conquer hunger, disease and illiteracy, and to encourage respect for each other’s rights and freedoms; to be a centre for harmonizing the actions of nations to achieve these goals.

http://www.transparency.org/

Transparency International leads the fight against corruption, brings people together in a powerful worldwide coalition to end the devastating impact of corruption on men, women, and children around the world.

http://www.oecd.org/

Organization for Economic Co-operation and Development (OECD) has a mission to promote policies that will improve the economic and social well-being of people around the world.

http://www.international.gc.ca/controlscontroles/index.aspx

Foreign Affairs and International Trade Canada’s Trade Controls & Technical Barriers Bureau (TID) is responsible for administering the Export and Import Permits Act (EIPA).

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http://www.international.gc.ca/investor s-investisseurs/index.aspx?lang=eng

Invest in Canada is responsible for promoting, attracting, and retaining foreign direct investment in Canada.

http://www.statcan.gc.ca/tradecommerce/data-donnee-eng.htm

Statistics Canada Imports and Exports offers international trade statistics.

ENHANCING THE ONLINE COURSE Globalization Debate: Divide your online class into two groups. Have one group take the side “Globalization is good for lesser developed countries.” Have the other group take the side “Globalization is not good for lesser developed countries.” Give each side time to prepare and then conduct an online debate. You can do the debate via the discussion tool, chat room tool, or you can have the students purchase microphones and actually hear each other debate. It works best if the student groups choose an online leader or debater for their team.

Mindmap: Ask your students to develop slide presentations that would show evidence of “worldwide culture.” Students can use images from any number of online media to illustrate the concept. Ask them to share their information via the discussion tool, chat tool, or assignments board.

Major GDP: Divide your online class into five groups—one group representing Asia, one representing North America, one representing South America, one representing Africa, and one representing Europe.

Have each group research the GDP of the major countries on their continent. Once all groups have reported back on the chat line, have an online discussion regarding the findings. Then, ask the groups to go back to find out what trends might have caused the major differences.

Comparative Advantage Scrapbook: Have students use graphics to show the comparative advantages of at least five countries. Limit explanation in words to only one paragraph. Students can post their scrapbook pages on the discussion board or on a blog.

Trade Debate: Divide your class into two groups. Have one group take the side “The Benefits of International Trade Outweigh the Costs.” Have the second group take the opposite side. Ask each group to create slides for the debate points. Conduct the debate online using a slide from one side and then a slide from the other side, posted in order. (Be sure to let the students know that the slides will need to be posted and that the order in which they need to use them may change as the debate continues.) Choose the winning debating team, but be sure to “debrief” the debate so that both the pros and cons of the issue come out in the lesson.

Trade Barriers: Ask your students to identify the types of trade barriers and to create a table or chart that will be posted on the discussion board, showing both the types of barriers and the problems created by each one. Students can post this on either the discussion board or a blog tool.

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