Better Business, 2E Michael R Solomon Solution Manuals

Type:

Solution Manual

Resource:

Better Business

Edition:

2nd Edition

Author(s):

Michael R. Solomon Mary Anne Poatsy Kendall Martin

CHAPTER 1: BUSINESS BASICS QUICK REFERENCE GUIDE IN-CLASS ACTIVITIES Activity

Description

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

Team Time: The Competitive Edge Ethics and Corporate Social Responsibility: Cultural Awareness: Unwritten Laws

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

20 min.

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

Students research cultural practices, customs and values of different countries and create business scenarios that might be affected by cultural differences.

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

25 min.

P4, P26

25 min.

P10, P27

30 min.

P5, P27

Video Run Time: 12:30 Question Time: 30 min.

10–15 min.

P10, P27

30 min.

P10

Web Case: Focus on GE: The Imagination of a Successful Business Video Case: Liquid Lab

Supplemental In-Class Activity: Structuring Businesses by Industry Business Handout Discussion: The Geography of Jobs

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Students watch and discuss the chapter video.

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

Students read an article about outsourcing and then discuss whether it is a detriment to social responsibility.

Time Limit

AIE Page Reference P3

P19

1-1

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: Are You Savvy to Society?

Answers to the discussion questions in the activity.

Web Exercise: Languages of the Global Marketplace

Students use information from: http://www.census.gov/ to see how demographics might impact a business.

Students use information from: http://www.Babelfish.com/ and http://www.LanguageLine.com/.

Web Exercise: Business Technology On the-Go

Students use information from: http://www.mobilebehavior.com/ to learn about trends in using mobile devices.

Web Exercise: Budget Planning at Your Fingertips

Students use information from a Google search to create both personal and business budget plans.

Web Exercise: Comparing Companies

Students examine two Top 10 companies. After researching state laws, students analyze the legal challenges facing the companies and how difficult state laws made it to establish each company.

Students interview a business owner or senior manager, finding out how demand and supply affect the business.

Supplemental Homework Exercise: Interview a Manager

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At-Home Completion Time 30 minutes

AIE Page Reference

Summarize findings on online resources for automated translation tools.

30 minutes

P10, P27

A brief paper summarizing one new trend appearing in modern advertising campaigns because of the prevalence of mobile devices.

Business and personal budget plans.

1 hour

P11, P27

1 to 3 hours, depending on budget depth

P20, P27

A brief paper summarizing the legal issues that impact companies in different states.

1 hour

P19, P 27

A brief paper detailing the outcome of the interview.

1 to 2 hours

P14

P8, P27

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CHAPTER OPENER 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.

This first chapter dives right into the world of business: • explaining the differences between businesses and non-profit organizations.

• differentiating between goods and services.

• outlining factors of production.

Next, the chapter covers the ways in which competition, social environment, globalization and technological growth challenge and provide opportunities to business owners. The final parts of the chapter introduce students to the different types and formats that businesses can take.

DETAILED LECTURE OUTLINE I.

The Business Landscape A. What is a business?

1. Businesses—entities that offer goods and services to their customers in order to earn a profit.

2. Profits (p. 3) are earned when a company’s revenue (p. 3) exceed its expenses (p. 3). They are the driving force behind business growth.

3. A nonprofit organization (p. 4) is a business that does not pursue profits, but instead seeks to service its community through social, educational, or political means.

B. What are the factors of production?

1. The factors of production (p. 4) are the resources used to create goods and services. These five factors of production include labor (p.4); natural resources (p.4); capital, both real and financial (p. 4); entrepreneurial talent (p.4); and technology (p. 4).

II. Common Business Challenges and Opportunities A. How do competition, social environment, globalization, and technological growth both challenge and provide opportunities to business owners?

1. Competition (p. 5) arises when two or more businesses contend to attract customers and gain an advantage over one another.

2. Social environment (p. 7) encompasses demographic factors such as race, ethnicity, gender, age, income distribution, sexual orientation, and other factors, such as the green movement.

3. Globalization (p. 10) involves the merging of economies around the world as technology, goods and services, labor, and capital move back and forth across international borders.

4. Technology 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.

III. Types of Businesses A. What are the four types of businesses?

1. A local business (p. 14) is usually unique and relies on local consumers to generate business.

2. Regional businesses (p. 14) are companies that serve a wider area than local businesses, but do not serve national or international markets.

3. A national business (p. 15) has several outlets throughout the country, but it does not serve an international market. It provides goods or services to all U.S. residents, no matter where in the country they live.

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4.

Multinational (International) businesses (p. 10) are companies that operate production or serve markets in more than one country. They are businesses that have expanded to provide goods or services to international consumers.

IV. Types of Business Ownership A. How do sole proprietorships, partnerships, corporations, and limited liability companies (LLCs) differ from one another as business formats?

1. A sole proprietorship (p. 17) is a business that is owned by one person; it is not registered with the state, and it is not legally separated from the owner.

2. A partnership (p. 18) is a business owned by two or more people that is not registered with the state as a corporation or a limited liability company (LLC).

3. A corporation (p. 18) is a business that is a legal entity separate from the owner or owners.

4. Limited liability companies (LLCs) (p. 19) are companies in which the owners have limited personal liability for debts and actions of the company, but also provide owners with tax advantages and management flexibility inherent in sole proprietorship and partnerships.

B. Who are the players in business ownership?

1. A stakeholder (p. 19) is someone who is affected by a company’s actions or who has an interest in what the company does. Corporate stakeholders include employees, shareholders, investors, suppliers, and society at large.

V. Taking Business Personally A. How is your life like a business?

1. You are either a sole proprietorship or a partnership (p. 20).

2. You receive funding and have expenses (p. 20).

3. You are affected by the social environment (p. 20).

4. You are impacted by globalization and technology (p. 20).

5. You use e-commerce (p. 21).

6. You have concerns with security (p. 21).

7. You have goals that you want to reach (p. 21).

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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1-4

SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity: 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.

Ask each student to take out a piece of paper and divide it into two columns. In the first column, students should write the most important four or five things they currently know about business, and in the second column, the four or five things they would like to learn. Tell them if they are having difficulty coming up with items to list, take a look at the table of contents of the text. It will give them some clues so that they don’t feel frustrated when completing this task. (5 minutes)

2.

Divide students into groups of three to five people and ask them to share their lists with each other. As they listen, they can delete or add anything that seems relevant. (5 minutes)

3.

Ask them to switch groups so that they are with all new people, and repeat the process of sharing their lists. (5 minutes)

4.

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, and one big idea of what they want to learn. (5 minutes)

Don’t Forget: This activity allows students to get to know each other as well as set expectations for the course. 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 and post them in the room for reference as you move through the course.

Supplemental In-Class Activity 1-1

Structuring Businesses by Industry

Activity Overview: Gives students an understanding about how various legal structures can help more in some businesses than others.

Time Limit: 10-15 minutes What to Do: Set-up student teams of 3-4 each. Have them select an industry not a business that is well-known locally.

Have the team determine which legal structure/or ownership would be best for a company starting out in that industry and explain why.

Don’t Forget: Make sure the industries are varied to allow for different structures that might be the best.

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1-5

Wrap-Up: Ask students what they learned.

3. Supplemental Homework Activity 1-2

Interview a Manager

Homework Assignment: Students are asked to interview a business owner or senior manager, finding out how demand and supply affect the business, what essential factors of production are most important, and the impact of economic indicators on the business.

Deliverable: A brief paper detailing the outcome of the interview. Answers will vary, but students should recognize that demand and supply affect every business in some way. Typical factors of production cited in this answer include capital, labor, physical resources, information resources, and entrepreneurship. Economic indicators affect businesses differently at different times, depending on whether they are manufacturers or retailers. Ultimately, price increases in an industry will affect the buying power of consumers, which will affect how much is produced and purchased.

At-Home Completion Time: 1 to 2 hours.

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1-6

SUPPLEMENTAL HANDOUT: BUSINESS ACCOUNTABILITY 1-3 The Geography of Jobs Businesses are accountable to numerous external constituents. Also, managers sometimes have to optimize their decision making when dealing with conflicting interests. Nowhere is this more visible than in the current debate over the continued outsourcing of jobs to foreign employees.

Outsourcing, of course, is not a recent phenomenon. For years manufacturers have subcontracted their labor to low-cost factories in developing nations. Nike and Reebok, for instance, outsource the production of all their athletic shoes to factories in Southeast Asia. And many other companies have similar practices. In general, though, the jobs that have been outsourced have been relatively low-skill in nature. While labor and other observers have long been aware of this practice, business leaders have been able to argue with some conviction that this practice would lead to more high-quality jobs in the United States.

In recent years, a major change in outsourcing has occurred as one company after another has started to outsource skilled and/or white-collar jobs to other countries. Software programmers, for instance, have been especially hard-hit. Companies like Microsoft find that highly skilled programmers in places like India can perform as well as their U.S. counterparts for about a quarter of the salary costs. Boeing is now having some of its engineering work done abroad. And some experts are beginning to visualize how many other basic services, ranging from income tax preparation to financial analysis to medical records interpretation, can also be exported.

How big is the problem? Experts project that 3.3 million jobs will be exported from the United States by 2015, and that another 14 million jobs have been identified as being “at risk.” Of course, many experts also agree that while outsourcing may be bad for various specific individuals, in the long term it will be good for the country as a whole. And besides, as one CEO argues, “If your competitor is sending jobs overseas, you’re almost forced to do the same.”

That sentiment sums up the debate nicely. On the one hand, if businesses are accountable to their shareholders, they are obligated to keep their costs as low as possible and to remain competitive in their respective marketplaces. From this perspective, then, they should outsource whenever and wherever feasible. On the other hand, to the extent that businesses have a social obligation and an obligation to their current workers, they must take into account the social and human cost of displacing U.S. workers. So which side is right? Clearly, this is a case in which there is no simple answer and what is right or wrong is in the eye of the beholder.

1-4

Discussion Questions

a)

What are the pros and cons of going ahead with outsourcing in order to keep prices down?

b)

What are the pros and cons of reducing dependence on outsourcing in order to better fulfill social obligations toward stakeholders?

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1-7

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. (Opening Vignette, pg. 3) 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. (Profit, pg. 3) 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. (Factors, pgs. 3-4) 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, 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, pgs. 5-13) 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, 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. (Environment, pgs. 513) 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. (Types of Business, pgs. 14-17) 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. (Types of Business, pgs. 17-19)

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BIZSKILL: Adapting to the Economic Environment

Available at: mybizlab.com

At the end of this exercise, your students should be able to answer the following questions: 1.

How can the ups and downs of the business cycle affect a company?

2.

What economic indicators are used to measure the business cycle?

3.

In what ways can fiscal policy decisions affect a business?

4.

In what ways can monetary policy decisions affect a business?

5.

How can companies scan the environment to adapt effectively?

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1-9

ANSWERS TO END OF CHAPTER MATERIALS: Self Test 1-5 Multiple Choice 1. a 2. b 3. d 4. b 5. b 6. d 7. a 8. b 9. a 10. a

1-6 True/False 1. True 2. False 3. True 4. True 5. False

Critical Thinking Questions: Suggested Answers 1.

All of the factors of production are important in the production of any good or service. However, answers will vary as to the relative importance of each in a specific organization. Nevertheless, the key to success for any organization is to invest in the education and training of its workers to enhance productivity, to invest in the latest state-of-the-art real capital (plant and equipment) and technology, and to promote entrepreneurialism and innovativeness throughout the organization to improve customer satisfaction.

2.

The rising concern for the protection of the environment will significantly impact virtually all businesses in a number of ways. For example, the carbon emissions associated with the generation of electricity from goal-burning plants will have to be curtailed. This will require the use of technologies to capture these emissions or shifting to nuclear power or other alternative sources of energy. In addition, many manufactured products will have to meet more stringent environmental standards to minimize toxic by-products and other waste when produced. Moreover, many products will have to be re-packaged using materials that can be recycled or disposed of in an eco-friendly manner. Many of the changes required of businesses may drive their costs up. However, at the same time other cost-cutting measures will likely be discovered as firms find ways to eliminate waste or increase their efficiency. Even if costs rise, then revenues may increase even more than costs contributing to higher profits for those businesses that are viewed as being responsive to environmental concerns. Moreover, many new profitable opportunities will emerge for companies that can provide technologies that help to protect the environment.

Global companies, such as PG&E, S. C. Johnson and Honda advertise their eco-friendly advances, noting that they have gone beyond what the law requires to operate in an environmentally responsible way. Smaller companies might advertise on specific eco-friendly sites, such as Pristine Planet.com.

3.

Answers will vary. However, it is important to keep in mind that although there are many benefits from the use of the most sophisticated technologies, the optimal mix of production and communication technologies adopted is the one with the greatest benefits in relation to its costs. Economically effective technology will streamline businesses, cut costs, and increase productivity, security, and transparency. It will keep a company flexible, organized, and well connected with customers and employees. This may mean more telecommuting on a global scale to find the right employee for the job no matter where they work. In addition, virtually all business will need to become more involved in e-commerce. A sophisticated company website that allows customers to “shop” the business will become more critical overtime, as well as finding ways to communicate more effectively with customers to establish and to nurture good customer relations. Finally, all companies must stay on top of Internet security and privacy concerns.

4.

Answers will vary. Companies such as Home Depot and The Gap have both an online and a physical presence. For those people who like to shop in a store, touch and feel the products, and bring them home right away, the physical store works. Others prefer the convenience of shopping online at any hour and having the product delivered to their

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door. Online stores usually need an appealing website design and easy-to-use features to increase profits, while instore displays can stimulate additional non-essential purchases.

Many small local businesses may not have a presence online. However, e-commerce is becoming much more prevalent. In fact, most businesses will have to start participating in e-commerce or be left behind. Those companies with an expanding e-commerce presence and also effectively address online security and privacy concerns will likely experience the most growth.

5.

A sole proprietorship is simpler to operate and the proprietor makes all the decisions. It is also under less government regulation than other businesses, but there is also more risk involved. If the company is sued, the owner is liable. If the company owes a debt that the business can’t afford to pay, the creditors can legally collect personal assets, such as funds from the owner’s retirement accounts, property, or cars. That is, a sole proprietorship is not protected by limited liability. A sole proprietorships income is also taxed as personal income.

There are two types of partnerships: general and limited. A general partnership is simpler and less expensive to establish and pools the talent of partners, but it carries more risk for all partners because they are all financially liable and are not protected by limited liability. In a general partnership, every partner participates in the daily management tasks of the business and they all have some degree of control over the decisions that are made. In a limited partnership, there is at least one partner who controls business operations and is personally liable. The other partners are limited partners, who don’t have much, if any, control over management tasks and decisions. They contribute financial capital to the business and they are protected by limited liability.

A corporation is a business that is a legal entity separate from the owner or owners. The business owners have limited liability, so they are not personally responsible for debts incurred by the company. Since corporations have limited liability, shareholders’ personal assets are protected. Although incorporating a business protects business owners from personal bankruptcy, it can sometimes make running a business more complicated. First, corporations must keep thorough financial records that detail every transaction the business makes. Second, the corporations might experience conflict between management and stockholders. Third, corporations must report income generated by the business in separate corporate tax returns. If some of the profits are paid to owners (stockholders), then that income to them is taxed again as personal income. So, corporate profits can be taxed twice. It is up to the business owners to decide whether the advantages of incorporating a business are worth the extra work.

A limited liability company (LLC) blends the characteristics of both corporations and sole proprietorships and/or partnerships. Like corporations, LLCs are companies in which the owners have limited personal liability for the debts and actions of the company. They require articles of organization and are separate legal entities. However, LLCs provides the advantage of avoiding double taxation often associated with corporations and the tax forms are much simpler. LLCs are also simpler to maintain than corporations because they are subject to fewer government regulations and reporting requirements. LLCs are a popular choice for many new businesses due to the safety, flexibility, and tax benefits they provide.

See also Table 1.1 in the textbook for more comparisons between these forms of business organization. Which type of business organization is best for any particular business is difficult to determine. However, the advantages and disadvantages of each must be carefully considered.

Team Time The Competitive Edge Answers will vary. However, the point of the exercise is to stress the dynamic nature of competition. Those companies that 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 higher profits. Another key to business success is to foster go

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od customer relations and repeat business by remaining responsive to changing customer demands and anticipating customer desires before they are expressed.

Ethics and Corporate Social Responsibility Cultural Awareness: Unwritten Laws Answers will vary. However, it is important for multinational companies to research the values and customs of a foreign country with whom they intend to conduct business because the best laid business plans can go awry if foreign cultural sensitivities are offended. Some of the important cultural factors include language, educational levels, gender relationships, etiquette, and religious values, as well as attitudes toward cooperation between management and labor and toward work in general.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 1 Web case and exercise, visit www.mybizlab.com.

Focus On GE: The Imagination of a Successful Business Answers to Web Case Discussion Questions 1. Innovation is critical to any company’s success because it keeps the business’ products relevant and on the forefront of satisfying customer needs and wants. The newest idea is not always the best idea because the newest idea may fail to result in a product that people want or need. GE may still be a successful company today if it had focused solely on electrical technologies. However, GE would not be the extremely successful multinational company if it had remained focused solely on electrical technologies. The broader vision and focus on imagination and innovativeness is what distinguishes GE from most other businesses and has allowed it to become so globally successful.

2.

Merging allows for the pooling of unique talents to create a company that can be greater than the sum of its parts.

Without merging, each company may waste resources battling for greater market share that could otherwise be focused on creating ingenious new products. Technology-based companies often find that pooling their talents can create a synergy that results in products that otherwise might not have been possible.

3.

Products are practical if they address a need or a want. Practical products provide utility because they satisfy these customer needs and wants. Most people would agree with Thomas Edison’s statement that “sale is proof of utility, and utility is success” because sales reflect the product’s ability to meet consumer demands. Successful companies satisfy customers and are rewarded with profits.

Video Case Solution To access the Chapter 1 video case and exercise, visit www.mybizlab.com.

Liquid Lab Answers to Video Case Discussion Questions 1.

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When a U.S. company pays more for human resources and other factors of production, its costs are higher than those of competitors operating outside the United States. In turn, higher costs generally lead to higher prices, which could put the U.S. company at a competitive disadvantage in world markets, where non-U.S. companies with lower costs may be able to sell their products for lower prices.

2.

The equilibrium price is likely to differ from country to country, depending on the different market conditions affecting the amount demanded and the amount supplied. Encourage students to discuss the demand and supply situation of a particular product in countries with which they are familiar.

3.

A small U.S. company may have relatively easy access to capital from various sources (including friends and family, venture capital firms, banks, and other sources). It may also have easy access to physical resources such as computers, facilities, and raw materials, depending on the nature of its operations and the goods or services it produces. U.S. companies generally have access to information resources through the Internet and other information technology.

Access to labor is usually fairly easy, although access to specialized labor may vary depending on the company’s location and nature of its business. Finally, access to entrepreneurial talent is relatively easy, given the drive, creativity, and imagination of many people who start or buy small businesses. With regard to the company’s competitive position, cost-savings is always a factor when resources are easily accessible. In addition, proximity to resources provides quicker production times and, thus, quicker delivery to the market.

4.

More competitors are likely to enter a market when demand exceeds supply. This is because the competitors will perceive opportunities to satisfy a market need based on strong demand for a particular product. Prices are likely to be higher when demand exceeds supply, attracting more competitors to the market. On the other hand, if supply exceeded demand, competitors would be competing for a portion of the smaller demand market.

5.

Two arguments in favor of having the tax-supported U.S. Department of Commerce help U.S. companies do business abroad include: (1) companies that generate profits in other countries are likely to buy some inputs such as physical resources in the United States, thereby improving the U.S. economy and creating or keeping jobs in the United States; (2) companies that sell abroad help create or enlarge the market for certain products, raising demand and paving the way for other U.S. companies to enter those markets. Two opposing arguments include (1) U.S. jobs may be lost if the companies move production and/or administrative offices to other countries; (2) the tax money should be used instead to encourage non-U.S. companies to do business in the United States, creating jobs and boosting the domestic economy.

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CHAPTER 2: ECONOMICS AND BANKING QUICK REFERENCE GUIDE

IN-CLASS ACTIVITIES Activity Team Time: The Great Debate Ethics and Corporate Social Responsibility: Economic Inequality Web Case: Focus on GE: The Imagination of a Successful Business Video Case: The U.S. Department of Commerce Supplemental InClass Activity: Comparing Economic Systems Supplemental InClass Activity: Case Study Discussion: Supply and Demand for Pollution Permits

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

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

Time Limit 45 min.

IE Page Reference P48, P58

20 min.

P31, P59

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

30 min.

P37, P59

Students watch and discuss the chapter video.

Video Run Time: 10:33 Question Time: 30 min.

P48, P59

This activity gets students talking about how similar and different the U.S. economic system is to other systems.

30 min.

P31

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

30 min.

P35

2-1 .

HOMEWORK ASSIGNMENTS Activity

Web Exercise: Getting Acquainted with Your Local Federal Reserve Web Exercise: Buying Your Dream Car Web Exercise: Learning More About Supply and Demand Web Exercise: Pro Sports and the Economy

Web Exercise: Monetary Policy: You’re in Control

Description

Deliverable

At-Home Completion Time

IE Page Reference

Students check out the website of their local Federal Reserve and identify its latest policies.

Answers to the discussion questions in the activity.

30 minutes

P50, P59

Students research online loan applications and auto loan calculators.

Answers to the discussion questions in the activity.

30 minutes

P47, P59

Students play the game at www.lemonadestands.com and identify how the game illustrates the effects of supply and demand.

A brief paper summarizing their experience.

1 hour

P34, P59

Students play 'Peanuts and Crackerjacks' at: www.bos.frb.org/peanuts/in dexnosound.htm and relate their experience to basic economic principles.

Students play MoPoS (short for: Monetary Policy Simulation) Game—

A brief paper summarizing their experience.

1 hour

P48, P59

A brief paper summarizing the results.

1 hour

P50, P59

http://www.rbnz.govt.nz/e ducation/readme.pdf

2-2 .

CHAPTER OPENER Chapter 2 covers the fundamentals of economics ― how business decisions are shaped by supply and demand and the degrees of competition.

Students will learn how: • to interpret key economic indicators, such as the gross national product and price indexes.

• the government can step in to control business cycle swings through taxation, spending, and monetary policy.

• to understand the Federal Reserve, and how its actions influence the U.S. money supply.

DETAILED LECTURE OUTLINE I.

The Basics of Economics A. Economics Defined 1. So what is economics?

B. Different Types Of Economic Systems.

1. What are the different types of economic systems?

C. Business and Economics 1. Why do business managers need to be concerned with economics?

II. Determining Price: Supply and Demand A. Supply (p. 34) refers to how much of a product or service is available. The amount supplied will increase as price increases.

1. Supply is affected by technology changes, changes in resource prices, price expectations, price of substitute goods and the number of suppliers.

2. The law of supply (p. 34) says that the amount of a good or service supplied will increase as the price increases - if the price is lower, less of the product is supplied.

3. A supply curve (p. 34) shows the relationship between supply and price.

B. Demand (p. 34) refers to how much people want to buy at any given time. The amount demanded increases as price declines.

1. Demand is affected by changes in income levels, consumer preferences, changes in population, changes in prices of substitute or complementary goods and changes in expectations.

C. Factors That Shift Supply 1. Determinants of supply (p. 35) include technology changes, change in resource prices, price expectations, number of suppliers and price of substitute goods.

2. Factors That Determine Price 3. Prices are set at a point where supply equals demand.

D. Factors That Affect Demand 1. Determinants of demand (p. 37) include changes in income levels, population changes, consumer preferences, complementary goods, and substitute goods.

III. Degrees of Competition A. Monopolies (p. 40) 1. In a monopoly, where only one seller supplies a product or service, supply may be limited.

B. Monopolistic competition (p. 41)

2-3 .

1.

Monopolistic competition allows for many sellers, increasing the supply and choices for consumers.

C. Perfect competition (pp. 41).

1. Perfect competition occurs when there are many buyers and sellers of products that are virtually identical and any seller can easily enter and exit the market increase with an oligopoly, in which a few sellers exist.

IV. Economic Indicators A. The Gross Domestic Product (p. 43) 1. The GDP measures the overall market value of final goods and services produced in a country in a year. When the GDP goes up, the indication is that the economy is moving in a positive direction.

2. The gross national product (p. 43) attributes earnings to the country where the firm was owned, not where the product was manufactured.

B. Consumer and Producer Price Indexes (pp.43-44) 1. The consumer price index (CPI) and producer price index (PPI) (pp. 43-44) are indicators of inflation or deflation (p. 43). They measure purchasing power and determine the rate at which consumer and wholesale prices change.

2. The CPI tracks changes in prices over time by measuring changes in prices of goods in services that represent the average buying pattern of urban households.

3. The PPI tracks the average change in prices of those goods the seller uses to create their products or services such as raw materials, product components that require further processing, and finished goods sold to retailers.

C. The Unemployment Rate (p. 45) 1. Measures the number of workers who are at least 16 years old who are not working and who have been trying to find a job within the past four weeks and still haven't found one.

2. Unemployment is watched as an indicator of how productive the workforce is, and an increasing unemployment rate generally has a corresponding increase in government spending on social policies (such as welfare and unemployment payments).

D. Productivity (p. 46) 1. Productivity measures the quantity of goods and services that human and physical resources can produce in a given time period.

2. Increasing productivity means that the existing resources are producing more, which generates more income and more profitability. Overall productivity is an important economic indicator of the economy’s health.

V. Government and the Economy A. Economic Policies (p. 48) 1. Why does the state of the economy change?

2. How does the government control the swings in the business cycle?

B. Fiscal Policy (p. 48) 1. Why does the government increase taxes to influence the economy?

2. How does government spending help stimulate the economy?

C. Monetary Policy (p. 48) 1. Besides changes to the fiscal policy, what else can be done to control the economy?

2. What is the money supply and why is it important?

D. Open Market Operations (p. 50) 1. What are open market operations?

E. Reserve Requirements (p. 51)

2-4 .

F.

1. What are reserve requirements?

The Discount Rate (p. 51) 1. What is the discount rate?

2. Is the discount rate the same as the Federal Funds rate?

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.

2-5 .

SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity 1 2-1.1

Comparing Economic Systems

Activity Overview: This activity gets students talking about how similar and different the U.S. economic system is 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, “The United States 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 U.S. 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 child-care benefits than do workers in capitalist economies. On the other hand, the federal government does control some basic services in the United States as well as various aspects of the market through agencies, such as The Food and Drug Administration and The Federal Communication Commission.

Supplemental In-Class Activity 2 2-2 Supply and Demand for Pollution Permits NOTE: See handout on page 18 of this Instructor’s Edition.

Activity Overview: This activity asks students to apply chapter concepts to a case study.

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

2-6 .

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, make 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. (b) 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. (c) 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 Homework Activity 2-3 Let’s Go Shopping!

Homework Assignment: Visit a local shopping mall or shopping area. List each store that you see and determine what degree of competition it faces in its immediate environment. For example, if there is only one store in the mall that sells shoes, that store represents a monopoly. Note those businesses with direct competitors (e.g. two jewelry stores) and show how they compete with one another.

Deliverable: A brief paper reporting on degrees of competition and the tactics stores use to compete with each other. Answers will vary, but students should recognize different levels of competition and how stores respond to competition by advertising, reducing prices, etc.

At-Home Completion Time: 1 to 2 hours.

2-7 .

SUPPLEMENTAL HANDOUT: IN-CLASS ACTIVITY 2 2-4 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 alternatives, 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 (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?

2-8 .

ENHANCING THE ONLINE COURSE Online Lecture: Define the terms “microeconomics” and “macroeconomics” and use examples to distinguish between the two disciplines. Video tape 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 do a quiz afterward. (Basics of economics, pgs.

29-32) Economics Model Search: Ask students to search the internet to illustrate each of the boxes in Table 2.1 on page X. 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. (Different types of economic systems, p30) 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.

(Supply and demand, pgs. 32-39) Price Points: Require your students to check the prices of products for 3 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. (Consumer and producer price indexes, pgs. 43-44) Competition: Divide your class into 4 groups. Each group will represent one of the major types of competition (monopoly, oligopoly, monopolistic competition, perfect competition). Have each group prepare a one page summary to be posted online. The summary should include examples from current events over the previous month. Have all groups read all summaries. Determine which group prepared the best summary and provide some extra credit (to enhance the competition!) Post a quiz over all 4 summaries. (Degrees of competition, pg. 39-42) 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 as shown in the text on page 29. Ask them what could account for the difference. Have them post their responses. (GDP, pg 43)

2-9 .

BIZSKILLS: Supply and Demand

Available at: mybizlab.com

Covers material in Chapter 2 At the end of this exercise, your students should be able to answer the following questions: 1.

How do the concepts of supply and demand affect businesses?

2.

How are graphs used to describe changing supply and demand?

3.

What is an equilibrium price?

4.

What factors affect supply?

5.

What factors affect demand?

2-10 .

ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. a 2. c 3. a 4. b 5. b 6. c 7. b 8. d 9. b 10. d

True/False 1. True 2. False 3. False 4. True 5. True

Critical Thinking Questions: Suggested Answers 1.

Technology changes in the printing industry have resulted in lower costs of production and higher levels of productivity. Technology advances have also encouraged more companies to enter the print publishing business. These factors increase the supply of printed material. An increase in supply (shown graphically as a right shift of the supply curve) puts downward pressure on the price of printed materials and increases the quantity bought and sold.

However, at the same time, the Internet and the availability of immediate news via webbased products, such as Kindle and iPad, have decreased the demand for printed materials, such as textbooks. A decrease in demand (reflected graphically as a left shift of the demand curve) puts downward pressure on the price of printed materials and decreases the quantity bought and sold. The combined effects of a simultaneous increase in supply and a decrease in the demand for printed materials unequivocally decreases the price charged for printed materials, as both put downward pressure on the price. However, we are uncertain about the impact on the quantity traded. This would depend on the magnitude of the increase in supply and the decrease in the demand for printed materials as a result of technological advances.

2.

Results will vary, but students should consider that the unemployment rate may be increasing even if we are experiencing an increase in the number of jobs, or people employed.

This can happen because as population grows, more people seek jobs in the labor market.

Many of these new job-seekers may find work, 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 a greater number of people are 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 labor 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 labor force. If this does not happen, 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.

2-11 .

3.

Results will vary depending on the phase of the business cycle currently underway. Although economic indicators are closely watched by many people, the driving force behind changes in these indicators 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 labor force employed translates into a higher overall income level for households. This usually means that more people will be out shopping. 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 production and laying off workers. Then, 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.

Monopolies are situations in which there is basically a single seller of the good or service, with no close substitutes for that product. Without competition, the monopoly supplier can charge a higher price and may be less responsive to consumer needs. The NFL (National Football League) and the MLB (Major League Baseball) can be seen as “unofficial” monopolies; for instance, a jury found for a fledging football league, the USFL, stating that the NFL had violated anti-trust laws and made itself a monopoly. Interestingly, the NFL wants to be protected from antitrust suits because it claims that teams act -- in business -- as a single entity.

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 doesn’t really indicate the well-being of a society or economy. It’s a subtle distinction, but critics point out the GDP includes expenditures that address 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, or treating illnesses associated with smoking. These expenditures increase GDP and we may be better off because of them.

On the other hand, the GDP does not include the economic activity associated with goods produced at home but not sold (i.e., cooking, gardening, crafts), the sale of used goods, or charitable donations and volunteerism. A case in point is Hurricane Katrina in 2005. Oddly enough, if we factor 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 positive impact on the nation’s GDP, even though the well-being of that region has been negatively impacted. In addition, we do not factor in the massive amounts of donations of money, supplies and volunteer time directed to the region. The positive impact of the volunteer efforts, the significant amounts of donations and grants attributed to Hurricane Katrina and other disasters do not show up 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 to be purchased.

Since these variations are difficult to measure domestically, and to compare internationally, the current method of computing GDP is adequate — a solid economic measure.

2-12 .

Team Time The Great Debate Answers will vary. However, the point of the exercise is to help students understand the process of monetary regulation and to discuss who has a right to regulate how money flows in the U.S. economy.

Ethics and Corporate Social Responsibility Economic Inequality Answers will vary. However, be sure to have students consider how the type of economy in which they are currently living (capitalism) 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?

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 2 Web case and exercise, visit www.mybizlab.com.

Focus on GE: Standing the Heat, Staying in the Kitchen Answers to Web Case Discussion Questions 1.

Substitute goods for GE's Monogram series (appliances manufactured by Miele, Bosch, and SubZero) were much more expensive than the GE products, which helped to boost the sales of GE appliances.

2.

Each of the movements listed increased the likelihood that people would want to remodel their home kitchens. Cooking at home enables people to try out the techniques they see on TV, and to eliminate trans fats from their diets at the same time. Because most of GE's modern appliances are energy efficient, consumers can feel good about switching out their old appliances for new ones.

3.

The housing slump hit GE hard, and in May, 2008, the company announced plans to sell off their appliance division.

Video Case Solution To access the Chapter 2 video case and exercise, visit www.mybizlab.com.

The U.S. Department of Commerce: Leveling the Playing Field Answers to Video Case Discussion Questions 1.

In an oligopoly, a market is dominated by a few producers. Because competition is strong and product differentiation is limited in an oligopoly, prices differ only slightly between suppliers.

2-13 .

When a key supplier cuts its prices, its action is usually matched quickly by the competition. If one of the competitors reacts with an even deeper price reduction, another round of price cuts can occur.

2.

GDP is an overall measurement of the overall market value of final goods and services produced in a country in a year. It is the most widely used indicator of economic growth by most countries worldwide. When the GDP goes up, the economy is seen as robust, driven by a rise in the production of goods and services and a growth in business activity. In contrast, a downwardmoving GDP signals an economic slowdown. Here, fewer goods are being produced, fewer services are being sold, and businesses are feeling the pinch, possibly initiating layoffs or even shutting their doors altogether.

3.

Assuming that the food manufacturer passes along some fraction of its higher costs to the consumer in the form of higher prices, then it is likely that demand will drop for the manufacturer’s product.

This is because people tend to buy more of an item at a lower price than at a higher price. In response, consumers may switch from the food manufacturer’s product to a comparable product sold at a cheaper price by another manufacturer, or they might find a substitute product that satisfies the same need.

4.

China is a burgeoning market for imported goods and services. Once a socialist economic system, China has moved closer to a market economy. A U.S. exporter should understand regulatory and trading constraints posed by the Chinese government, such as restrictions on foreign investment, a complicated tax system, and a confusing trading system. Also, the exporter should be sensitive to differences in culture and business customs.

Up for Debate Points Pro: The tax-supported U.S. Department of Commerce should help U.S. companies doing business abroad because companies that generate profits in other countries are likely to buy some inputs, such as physical resources, in the United States. Also, companies that sell abroad help develop markets for new or existing products. Two things can happen here. One, foreign demand for these products increases. Two, the stage is set for other U.S. companies to exploit these markets.

Con: The DOC should not help U.S. companies going outside of the domestic market for two main reasons. First, job losses can happen when U.S. companies move production and sales bases overseas.

Second, the tax money should be used to encourage foreign companies to do business in the United States instead and thus create new jobs and boost the domestic economy. usually fairly easy, although access to specialized labor may vary depending on the company’s location and nature of its business. Finally, access to entrepreneurial talent is relatively easy, given the drive, creativity, and imagination of many people who start or buy small businesses. With regard to the company’s competitive position, cost-savings is always a factor when resources are easily accessible. In addition, proximity to resources provides quicker production times and, thus, quicker delivery to the market.

2-14 .

CHAPTER 3: ETHICS IN BUSINESS QUICK REFERENCE GUIDE IN-CLASS ACTIVITIES Activity

Description

Time Limit

Team Time: One Issue, Three Sides

Students divide into groups to discuss the ethical issues associated with the ownership of genetic material.

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

Students watch and discuss the chapter video.

25 min.

IE Page Reference P70

30 min.

P81, P91

Video Run Time: 10:31 Question Time: 30 min.

35 min.

P73, P91

10 - 15 min.

P66

Web Case: Focus on GE: Ecomagination Video Case: The American Red Cross: Lending a Helping Hand Supplemental In-Class Activity: Finding the Balance Supplemental In-Class Activity: Escorting the Boss

Students role-play and share their views on ethics in a real-world situation.

Students consider an ethical dilemma and learn how assumptions can affect ethical decision making.

P83

3-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

At-Home Completion Time 30 min.

IE Page Reference

Web Exercise: Happiness and That New Lexus

Students watch BBC videos describing the Gross National Happiness measure, and discuss how it could be used in organizational decision-making.

Students identify their strengths using a questionnaire on: www.authentichappiness.sas.upenn.edu/De fault.aspx.

Answers to the discussion questions in the activity.

A brief paper on how students can use their strengths in their current work schedule.

A brief paper discussing their findings.

1 hour

P63, P91

45 min.

P82, P91

Students take a personality test (similar to the MBTI) at: http://www.41q.com/ and report on the results.

A brief paper outlining personality strengths and development areas.

1 hour

P82, P91

Web Exercise: Corporate Social Responsibility with Java

Students visit starbucks.com/responsibility to review three different strategies supported by Starbucks to “have a positive impact on the communities we serve.” Then students should determine if any of these cost Starbucks profits and if these policies attract more customers to the store.

A brief paper summarizing the strategies supported

by Starbucks and possible impacts on the company.

1 hour

P91

Ethics and Corporate Social Responsibility: Personal and Business Ethics Supplemental Homework Activity: Application Exercise: Ethical Dilemmas

Students draft their own set of personal ethics, and then compare them with different professional codes of ethics.

A paragraph summarizing how the two codes compare.

1 to 1.5 hours

P67, P91

Students research Dov Charney, founder of American Apparel, and write a paper discussing the ethical contradictions in his behavior.

A brief paper detailing the outcome of their research.

1 to 2 hours

P80

Web Exercise: Identifying Your Strengths

Web Exercise: Socially Conscious: How Do Your Investments Measure Up? Web Exercise: Determining Your Personality Type

Students find several socially conscious mutual funds and identify the restrictions placed on the companies they include, as well as their average rate of return.

P63, P91

3-2 .

CHAPTER OPENER This chapter examines the expression of personal values and ethics in business settings, and the expression of organizations’ ethical values through corporate social responsibility.

Students will explore: • examples of both ethical and unethical behavior in organizations.

• the role of legal regulations in changing corporate behavior.

• how organizations can nurture ethical behavior.

• the business opportunities created by corporate social responsibility.

• how an organization can recover from unethical behavior.

DETAILED LECTURE OUTLINE I.

Ethics: The Basics A. Introduction: Analyzing Your Ethical System 1. First, determine your base character.

2. Next, make a list of all of the beliefs that influence your decision making.

3. Next, think about how your behavior reflects these beliefs.

4. Now think about where your beliefs and view of your character come from. Why do you hold these beliefs?

B. Ethics Defined 1. What are ethics and different ethical systems?

C. Systems of Ethical Conduct 1. Ethical systems include: 2. Some people behave without regard for ethics: D. Personal Ethics 1. What are personal ethics?

2. How do a person's ethics develop?

3. How can an ethical life get me ahead?

II. Personal Ethics Meets Business Ethics A. You as a Person and as an Employee 1. What role do personal ethics have in a business environment?

B. Identifying a Company's Ethics 1. How do I examine a company's ethics?

2. How can I find out the best and worst aspects of a company's ethical conduct?

III. Corporate Social Responsibility A. The Five Pillars of CSR 1. What is corporate social responsibility?

B. The Conflict of CSR in the Business Environment 1. Can a corporation really be socially responsible?

C. The Benefits of CSR 1. Having a strong and clear ethical policy helps businesses by: D. Measuring CSR 1. Is it possible to measure a company's level of CSR? a. Social Audits (p71) are systemic internal examinations of how well a company is

3-3 .

E. The Challenges of CSR 1. What challenges does CSR pose?

F. The Effects of CSR on Society 1. Environmental Effects 2. Economic Effects 3. Effects on Employee Morale G. The Effects of Individuals on CSR 1. Can I affect how businesses operate ethically?

IV. Dangers of a Weak Ethical Focus A. Legal Regulations and Legal Compliance 1. How is a company regulated legally?

2. Don't companies often break the law and still make money?

B. Recovering from Weak Ethical Conduct 1. What if your company is breaking the law and you want it to stop?

2. Can a company really recover from an ethical lapse?

V. Business Opportunities Created by Ethical Needs A. Creating New Markets with an Ethical Focus 1. How can firms create business by acting ethically?

B. Businesses Going Green 1. Businesses can benefit from taking advantage of ethically-based business opportunities, tax and other benefits from environmentally friendly actions, and increased employee morale linked to socially responsible behavior.

VI. How Businesses can Develop an Ethical Environment A. Ethical Focus from the Start 1. How can a business improve its own culture of ethical and responsible conduct?

B. Ethical Focus Every Day 1. How can a business maintain its policy of ethical conduct in the workplace?

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.

3-4 .

SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity 1 3-1 Finding the Balance Activity Overview: This activity asks students to role-play and share their views on ethics in a real-world situation.

Time Limit: 35 minutes What to Do: 1. Divide students into four-member teams and give them the handout on the following pages. Tell teams to read and follow the instructions for the Exercising Your Ethics: Team Exercise. Students should each choose one of the roles in the exercise. (20 minutes) 2.

Reassemble the class as a whole and discuss what disagreements came up within their groups. How did the role they played affect their perspective? (15 minutes)

Don’t Forget: Remind students that what one individual or group considers unethical may not be considered unethical by another individual or group.

Wrap-Up: Wrap up the activity by reminding students that striking the right ethical balance between an organization and its employees can be difficult—there is much room for ethical ambiguity. When other agents—customers, competitors, stockholders, suppliers, dealers, and unions—come into play, reaching an ethical balance is especially challenging. The right ethical balance involves creating a situation in which all involved parties can benefit in the best way possible.

Supplemental In-Class Activity 2 3-2 Escorting the Boss Activity Overview: Helps students become aware of making assumptions.

Time Limit: 10-15 minutes What to Do: Pose the following situation: 1. Pick a student. Set the scenario. Say your boss calls. Your boss will be in town next week for about 10 days.

2.

The boss has never been to your town and, in addition to visiting your worksite, will have to attend many social occasions on behalf of the company while there.

3-5 .

3.

The boss doesn’t know the town at all and would like someone of the opposite sex to act as an escort around town and attend the social occasions. Therefore, this escort will be representing the company and must put forward a good image.

4.

How does the student respond?

5.

Most students will initially say that the situation is acceptable or doesn’t matter, but will quickly start referring to the boss as “He”.

6.

After a few minutes of discussion, indicate to the students that you never said the boss was male.

They simply assumed it. Watch their reaction, which is very often defensive.

Don’t Forget: Don’t say anything that refers to the boss’s gender.

Wrap-Up: What did the students learn? Answer: Be careful about making assumptions.

Supplemental Homework Activity: Application Exercise 3-3 Ethical Dilemmas Homework Assignment: After displaying the Power Point slide on American Apparel, show the class the following two advertisements for the company: http://americanapparel.net/presscenter/ads/newyorktimes0712.html and http://americanapparel.net/presscenter/ads/goodtimes0711.html Ask students to determine which of the two advertisements would be more likely to entice them to buy American Apparel clothing.

Next, ask students to go online and find out as much as they can about the company, and its founder, Dov Charney. Based on what they learn, would they buy American Apparel products, or not? They should justify their answers based on their personal values statements.

Deliverable: A brief paper detailing their findings and rationale for whether or not to buy the products.

Students who do their research will find that Dov Charney has had a much checkered ethical reputation.

On the one hand, he is well known for his socially responsible factory policies: http://www.npr.org/templates/story/story.php?storyId=5368068 …but on the other, he has been charged with sexual harassment several times, and his advertisements objectify (and some would say, degrade) women. Newsweek published an article recently that outlined the dilemma: http://www.newsweek.com/id/68708. Dateline also produced a segment about Charney, which is available here: http://www.msnbc.msn.com/id/14082498/ In Class Discussion: Once students have written their papers, ask them to discuss their views on the power of "ethical" marketing vs. standard marketing practices. In particular, have them explore the conflicting ethical stances they encounter in their research. To what extent do the benefits of working for higher wages and in a better environment make people close their eyes to other types of unethical

3-6 .

behavior? What should be done with Charney? Do his high moral standards in one area outweigh his less than ethical behavior in another? If sex sells, is it okay to use the most provocatively sexy ads you can? Is there a line that should not be crossed in advertising?

At-Home Completion Time: 1 to 2 hours.

3-7 .

SUPPLEMENTAL HANDOUT: IN-CLASS ACTIVITY 1 3-4

FINDING THE BALANCE

The Situation: Managers often find it necessary to balance the interests of different stakeholders. For instance, paying employees the lowest possible wages can enhance profits, but paying a living wage might better serve the interest of workers. As more businesses outsource production to other countries, these trade-offs become even more complicated.

The Dilemma: The Delta Company currently uses three different suppliers in Southeast Asia for most of its outsourced production. Due to increased demand for its products, it needs to double the amount of business it currently subcontracts to one of these suppliers. (For purposes of this exercise, assume that the company must award the new supplier contract to a single firm, and that it must be one of these three. You can also assume that the quality provided is about the same for all three companies.)

Subcontractor A provides a spartan, but clean, work environment for its workers. Even though the local weather conditions are hot and humid much of the year, the plant is not air conditioned. Delta Company safety experts have verified, though, that the conditions are not dangerous, simply a bit uncomfortable at times. The firm pays its workers the same prevailing wage rate that is paid by its local competitors.

While it has never had a legal issue with its workforce, it does push its employees to meet production quotas and has a very tough policy regarding discipline for tardiness. For instance, an employee who is late gets put on probation; a second infraction within three months results in termination. This supplier provides production to Delta Company at a level such that Delta can attach a 25 percent markup.

Subcontractor B also provides a spartan work environment. It pays its workers about 5 percent above local wage levels and, hence, is an attractive employer. However, because of its higher pay, this firm is actually quite ruthless with some of its policies. For instance, any employee who reports to work more than 15 minutes late without a medical excuse is automatically terminated. This supplier's costs are such that Delta Company can achieve a 20 percent markup.

Subcontractor C runs a much nicer factory; the plant is air conditioned, for instance. It also pays its workers about 10 percent above local wage levels. The company operates an on-site school for the children of its employees, and provides additional training for its workers so they can improve their skills. Due to its higher costs, Delta Company's markup on this firm's products is only around 15 percent.

Team Activity: Assemble a group of four students and assign each group member to one of the following roles: • Delta Company executive • Delta Company employee • Delta Company customer • Delta Company investor Action Steps: Before hearing any of your group's comments on this situation, and from the perspective of your assigned role, which firm do you think should get the additional business? Which firm is your second choice? Write down the reasons for your position.

3-8 .

1.

Before hearing any of your group's comments on this situation, and from the perspective of your assigned role, what are the underlying ethical issues in this situation? Write down the issues.

2.

Gather your group together and reveal, in turn, each member's comments on their choices. Next, reveal the ethical issues listed by each member.

3.

Appoint someone to record main points of agreement and disagreement within the group. How do you explain the results? What accounts for any disagreement?

4.

From an ethical standpoint, what does your group conclude is the most appropriate choice for the company in this situation?

5.

Develop a group response to the following question: Would your decision have been any different if you were able to break up the new contract across different suppliers? Why?

3-9 .

ENHANCING THE ONLINE COURSE State Ethics: Have your students investigate, via the Internet, to see what kind of code of ethics has been adopted by the state in which they live. Does the state have an ethics commission? Can the students find the site for that organization? If so, ask the students to review the website for ethics guidelines and report back to you via email on the topics and discussions covered. (Ethics, pg61) Ethics Essay: “Can living ethically make you happy?” Require your students to post a one page essay on the discussion board on this topic. The topic leads to discussion of “what is happiness”? Does one have to have material things to be happy? If so, is unethical behavior ever justified in order to have those material things? Have an online class meeting to discuss the topic using microphones. (Ethics and happiness, pg64) Corporate Ethics: Ask students to search for at least 3 examples of corporate ethics codes posted online from major companies. (Suggested companies: Disney Corporation, Microsoft, Inc., Exxon Corporation, Krogers, Johnson & Johnson) Ask students to review the codes and compare and contrast the information from all three companies. What are the similarities? Do your students believe the actions of the companies in the marketplace or the business world match the ethical codes? (Corporate ethics, pg68) Most Responsible Corporation: Have your students nominate the corporation which they feel is the most ethical corporation based on information gleaned from the Internet—such as the company web site, current events, and industry journals. Once all the nominations have been posted (with at least a paragraph of support, listing information reviewed), have the students vote on the most responsible corporation via the chat room tool. (Corporate responsibility, pg68) Online Interview: Have your students connect with a CEO of a company via the Internet. You can do some groundwork by identifying several CEOs who are willing to participate, or, you can leave the assignment open and see what CEOs your students are able to get to participate. The CEO can be the head of a small, medium, or large company. Have students interview the CEOs regarding the 5 major areas of corporate responsibility as discussed in the text. Ask students to write the interviews and post them on the discussion board, chat room or assignments tool. (Major areas of corporate responsibility, pg66-71) Personal Code of Ethics: Ask your students to write a one-page “personal code of ethics” using the information on Table 3 – 1. Ask them to use the graphics tools to enhance the code so it will be suitable for framing. Have the students post the codes on the assignments tool, or the blog. (Ethics, pg62-63)

3-10 .

BIZSKILLS: Navigating Murky Ethical Waters Covers material in Chapter 3

Available at: mybizlab.com

At the end of this exercise, your students should be able to answer the following questions: 1.

How can you evaluate ethical challenges in a business setting?

2.

Why is it important to consider implications of lost reputation when making decisions?

3.

What is the impact of the triple bottom line on sustainability and ethics for an organization?

BIZSKILLS: Ethics & Social Responsibility Covers material in Chapter 3

Available at: mybizlab.com

At the end of this exercise, your students should be able to answer the following questions: 1.

How does having clearly defined personal ethics help you in the business world?

2.

What do you do if your professional life comes into conflict with your personal ethics?

3-11 .

ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. b 2. d 3. b 4. b 5. c 6. d 7. b 8. c 9. a 10. b

True/False 1. False 2. False 3. True 4. True 5. False

Critical Thinking Questions: Suggested Answers 1.

A person can clarify their personal ethical code by examining their beliefs on honesty, use of speech to bring people together (instead of dividing them), stealing, and harming others in actions or words.

Forces that shape personal ethics often include family, religion, and cultural heritage.

2.

There are no fixed rules. Some companies try to clarify these boundaries with specific policies. The lines between personal and business ethics continue to blur as technology makes it easier to conduct work outside of the formal workplace.

3.

Each company must balance these interests with their understanding of how to successfully conduct an ethical and meaningful business. Sample areas of possible conflict include: a. Hiring–Hiring underpaid or poorly treated workers may save money in the short term, but lead to instability in the company or country in the long term. b. Relationship with the community–It may appear cheaper in the short term not to become involved with community projects and needs, but in the long term, it may cost the company the good will of the people it is trying to attract as customers. c. Environmental concerns–A company may avoid an expensive treatment of discharge water to increase profits in the short term, but the resulting pollution over time could mean that employees no longer want to live or work in that area.

4.

The five pillars of CSR include human rights and employment standards; ethical sourcing and procurement; marketing and consumer issues; environmental, health and safety concerns; and community rights and “good neighbor’ policies. Corporate social responsibility (CSR) can be defined as a company’s obligation to conduct its activities with the aim of achieving social, environmental, and economic development. All business organizations, regardless of their size, have a corporate responsibility. Individual answers will vary.

5.

Sample answer: There are many solutions, including common workshops on ethical practices and consistent policy making across the organization.

3-12 .

Team Time One Issue, Three Sides Answers will vary. There is no easy solution. Each of the viewpoints presents valid arguments, based on their priorities: the pharmaceutical companies want to introduce innovative products and argue that is for the common good; the diseased patients and families argue that curing their suffering by any means necessary is still a good thing; and the DNA “owners” may argue a sense of ultimate invasion of privacy to have their own genetic material declared as a public resource. Michael Crichton’s novel, Next— especially the appendix of research at the end of the novel—is a good resource here.

Ethics and Corporate Social Responsibility Personal and Business Ethics Answers will vary. Students may wish to use one of the professional ethical codes as a guideline for their own personal statements.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 3 Web case and exercise, visit www.mybizlab.com.

Focus on GE: Ecomagination Answers to Web Case Discussion Questions 1.

By having specific focused commitments, the company can more easily measure outcomes and know if existing policy is sufficient. It would contrast with a media-only campaign, which might speak a lot about support for “green” issues, but would not offer directly measurable results. Student responses to the final question should reflect an understanding of the terms “accountability” and “transparency” in this context.

2.

Student responses will vary. Look for responses that add additional facts and research, as compared to those based merely on opinion.

3.

Student responses will vary. Responses should include an evaluation of factors like the changing public opinion on the importance of global warming, the existing economic conditions at the time, and the quality of the marketing campaign.

Video Case Solution To access the Chapter 3 video case and exercise, visit www.mybizlab.com.

3-13 .

The American Red Cross: Lending a Helping Hand Answers to Video Case Discussion Questions 1.

Organizational social responsibility faces significant challenges today—for both profit and not-forprofit organizations. One key challenge for organizational leaders is to balance their need to respond to investors and produce a profit with their desire to uphold the general welfare of society. In the case of a humanitarian organization, like the Red Cross, it must consistently balance the needs of communities with those of individual victims. To do this, they avoid bypassing the local communities stricken by disaster by providing money to families instead of material goods.

2.

Numerous ethical challenges confront modern organizations nowadays, many of which are unavoidable. Take the Red Cross. Many of its volunteers are drawn from the diverse population it serves. While the organization’s founding principles help it to avoid most conflicts, situations arise in which the Red Cross’ purpose is put to the test. For example, religious or cultural differences in a volunteer’s background may result in a conflict with the organization’s mission, management, and methods. In addition, volunteers may make judgment calls in the field, such as showing preferential treatment toward or discriminating against certain people; this would be in direct conflict with the Red Cross’ code of ethics. The Red Cross has been the focus of several recent accusations of unethical behavior—from its handling of the victims of Hurricane Katrina to the behavior of its CEO, Mark Everson, who was fired from the organization after having an affair with a subordinate.

3.

If an employee becomes aware of a serious ethical or illegal action in the workplace, he or she may choose to blow the whistle. A whistleblower is an employee who reports misconduct, most often to the media or government authorities.

4.

Your company can distinguish itself by using fewer packaging materials, recycling more waste, using renewable energy, eliminating toxic substances, choosing eco-friendly suppliers, and/or developing products that are easier on the environment.

Up for Debate Points Pro: The Red Cross should not have overturned its earlier decision to divert a percentage of funds for the relief effort to ancillary operations. The organization’s long experience with delivering emergency assistance and disaster relief provides the most far-reaching insight into the necessities of communities and cities impacted by catastrophic events. The Red Cross can extrapolate from previous disaster scenarios and anticipate how best to use resources to prepare and execute scrupulous disaster response plans. Donors are not likely to have the broad base of experiences and initiatives from which to draw.

Con: The American Red Cross should have overturned its earlier decision to divert a percentage of funds for the relief effort to ancillary operations. The organization has pledged to use contributions according to donor intent. It should not waver from this policy, as donors trust that their intent will be honored. When the Red Cross reversed its initial decision to divert funds, it was acting in accordance with its own code and thus restoring the trust of its contributors.

3-14 .

CHAPTER 4: BUSINESS IN A GLOBAL ECONOMY QUICK REFERENCE GUIDE

IN-CLASS ACTIVITIES Activity

Description

Time Limit

Supplemental In-Class Activity: Ice Breaker: Where's It Made?

Team Time: The Devil's Advocate

Students examine their personal effects to see where they were manufactured.

Students debate various positions with regard to globalization.

Students debate the pros and cons of outsourcing for a company that manufactures industrial sewing machines.

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

Students watch and discuss the chapter video.

15 min

IE Page Reference IM

25 min.

P118, P123

25 min.

P94, P124

30 min.

P99, P125

Video Run Time: 13:39

P107, P125

Ethics and Corporate Social Responsibility: Outsourcing Web Case: Focus on GE: Company to Country Video Case: Land's End and Yahoo!: Going Global, Acting Local Supplemental In-Class Activity 1: Marketing U.S. Products Abroad Supplemental In-Class Activity 2: How the Chinese Stole the Grinch Supplemental Handout: How the Chinese Stole the Grinch

This activity gives students insight into international marketing.

This case asks students to look at the effects of piracy on international business.

Case related to Supplemental In-Class Activity 2 above.

Question Time: 30 min.

10-15 min.

P107

30 min.

P118

30 min.

IM

4-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: My Ride

Students select two different luxury cars—one very exclusive and high performance and the other very energy conscious and green. For each car and each manufacturer, investigate where the car is designed, where it is assembled, and where the component parts are produced.

Students should go to the Web site of an international company such as Swedish furniture maker IKEA (ikea.com). Under the “select a location” option, choose the United States. 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. Look for differences in the appearance of the Web site and the products offered.

Submit a short paper or presentation showing the results of your research.

Web Exercise: Go State!

Web Exercise: Cultural Guidelines

Web Exercise: Same Company, Different products

Web Exercise: You're the Trader

At-Home Completion Time 30 minutes

IE Page Reference

Answers to the discussion questions in the activity.

30 minutes

P97, P124

At state.gov, under Youth and Education, select the Student Career Programs. What aspects of these careers appeal to you?

Visit the Fulbright Scholar program. What information in the Fulbright Handbook for Living Abroad is new to you?

A brief paper summarizing your response to the careers or Fulbright Scholar program.

1 hour

P102, P124

Students visit www

A brief paper, summarizing cultural practices in other countries.

A brief paper discussing the student's success as a global trader.

1 hour

P116, P125

1 hour

P112, P125

.kwintessential.co.uk/etiquette/doingbusiness-in and create a list of "do's and

don'ts" for three countries.

Students act as traders in a simulation at: http://www.imf.org/external/np/exr/cente r/students/trade/index.htm

P94, P124

4-2 .

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.

Students learn about: • the organizational structures which facilitate international trade.

• the costs and benefits of entering a global marketplace.

• how trade barriers, protectionism, and sociocultural factors influence a company's foreign strategy.

DETAILED LECTURE OUTLINE I.

What is Globalization?

A. The Effects of Globalization 1. How does globalization affect the U.S? 2. How does globalization offer more marketing opportunities to businesses?

3. How does globalization make it easier to manufacture products?

B. Reasons for the Rise in Globalization 1. Why has globalization accelerated so rapidly?

C. Global Business Trends 1. Where will trends in global business take us?

II. International Trade A. International Competition 1. The theory of comparative advantage (p97) 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 (p97) which is the ability to produce more of a good or service than any other country.

B. Fostering Competition 1. What can a country do to have an edge in world markets?

2. What can businesses do to be more competitive?

C. The Benefits and Costs of International Trade 1. What are the benefits and costs of international trade?

2. Do the benefits of international trade outweigh the costs??

III. Free Trade and Protectionism A. Types of Trade Barriers 1. What trade barriers can governments put in place> B. Trade Barriers: Winners and Losers 1. Who benefits and who suffers from protectionist trade barriers?

2. What are common arguments in favor of protectionist trade barriers?

3. How do economists feel about protectionist trade barriers?

C. International Organizations Promoting Free Trade 1. What groups are working to promote Free Trade?

2. Is there more that can be done to promote Free Trade?

D. Regional Free Trade Agreements 1. What are some regional free trade agreements?

2. The European Union is currently the world's largest single market, and accounts for one-third of the world's total production.

4-3 .

3.

The North American Free Trade Agreement (NAFTA) (p104) eliminates trade barriers between the U.S., Canada, and Mexico.

4. Other Noteworthy Free Trade Areas include the Andean Group, MERCOSUR, Association of Southeast Asian Nations, and the Asia-Pacific Economic Cooperation (p106).

IV. Conducting Business Internationally A. The Strategies of International Business 1. What are the types of strategies can an international business follow (p107)?

B. Entering Foreign Markets 1. How do international firms enter foreign markets: 2. Exporting (p.93) 3. Turnkey Projects (p108) 4. Franchising (p108) 5. Licensing (p108) 6. Joint Ventures (p108) 7. Strategic Alliances (p109) 8. Contract Manufacturing (p109) 9. Wholly Owned Subsidiary (p109) 10. The Advantages and Disadvantages of each Entry Mode V. International Business: Economic Factors and Challenges A. The Role of Exchange Rates 1. Export and Import Prices (p111) 2. Trade Deficits and Trade Surpluses(p112) B. Other Economic Challenges to Conducting International Business 1. Economic Growth and Development 2. Government Economic Policies VI. Creating Successful International Businesses A. Sociocultural Challenges B. Political Challenges C. Legal Challenges D. Ethical Challenges

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.

4-4 .

SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity: 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 device (cell phone computer, camera, MP3 player, etc.)

Calculate the number of countries, other than the United States, that are represented.

If your personal belongings represent . . .

Your goods…

0 countries 1–2 countries 3 or more countries

Are homegrown Have international flair Truly reflect the growing trend of globalization

Supplemental In-Class Activity 1 4-1

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., 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.

Why Americans use the product.

The socio-cultural factors that may make the product unnecessary in another country.

4-5 .

c. The needs of people in the specific foreign country. d. How the U.S. product may meet needs in a foreign country which are different from the needs of U.S. 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 the U.S. that are generally not used in their home 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 Activity 2 4-2

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 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 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) Pent-up 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.

4-6 .

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 w ell.

4-7 .

SUPPLEMENTAL HANDOUT: IN-CLASS ACTIVITY 2 4-3

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 a) If you were exporting legitimate copies of hit 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?

4-8 .

ENHANCING THE ONLINE COURSE

Globalization Debate: Divide your online class into 2 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. (Globalization, pg93) Mindmap: Ask your students to develop slide presentations that would show evidence of “world-wide 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. (world-wide culture, pg116) Major GDP: Divide your online class into 5 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.

(Global GDP, pgs95) Comparative Advantage Scrapbook: Have students use graphics to show the comparative advantages of at least 5 countries. Limit explanation in words to only one paragraph. Students can post their scrapbook pages on the discussion board or on a blog. (Comparative Advantage, pgs97) Trade Debate: Divide your class into 2 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. (International Trade, pg 97-99) 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. (Trade Barriers, pgs 100-106)

4-9 .

BIZSKILLS: Going Global Covers material in Chapter 4

Available at: mybizlab.com

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?

4-10 .

ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. b 2. d 3. a 4. d 5. c 6. a 7. d 8. b 9. d 10. d True/False 1. True 2. True 3. False 4. False 5. True

Critical Thinking Questions: Suggested Answers 1.

Bicycles serve different purposes in Ghana, China and England. In addition, the cultural norms of those countries, as well as price points, may necessitate design changes. 90% of people in Ghana see the bicycle is an excellent vehicle for mobility; the design needs to be strong, sturdy and easy to fix. In China, the bicycle’s staying power (over cars) means that most of China's 1.3 billion people have yet to make it into the middle class; price points are critical, yet the bike must be able to carry packages and bags. In England, cycling is popular as both a sport and a means of transportation; and, it goes from city to country. Tires and seats may need to be geared for long rides on different terrains.

2.

Access to Facebook, Xbox Live, and free international calls through Skype have made it easier for 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, thereby making 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 primary disadvantage of increased 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, they can establish a monopoly. Monopolies often reduce the supply of the product in order to charge higher prices. Monopolies can also produce poorer quality products because they do not have competition.

4-11 .

On the other hand, foreign competition is not always bad for local businesses. 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, thereby 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 they 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 the unique needs of local customers.

Companies pursuing a transnational strategy attempt to not only keep their costs and prices low, but—at the same time— try very hard to customize their products. 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.

Organizations, like the European Union, that promote free trade, have had a difficult time creating common currency.

Some European countries do not use the euro because it might mean: • a loss of independent monetary policy.

• inability to depreciate currency in the event of a recession.

• limiting the amount of government borrowing.

Other countries, who are not members of the European Union, still choose to use the euro because it will: • eliminate transaction costs.

• make it easier to compare prices in different European countries.

• eliminate exchange rate uncertainty.

Team Time The Devil's Advocate 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 the exertion of significant political influence over local national politics by international businesses looking to amass huge profits. At the same time, other rational arguments and evidence emphasize the opportunities that globalization can create for workers in developing countries and the consequent higher standards of living. Students should explore the factors that give rise to these different outcomes.

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. Other important social and political issues and goals have to be taken into account as well.

3.

Students should exercise critical thinking. On the one hand, it could be argued that a country ought to abide by local laws and ethical standards when abroad. Others argue that this view is too simplistic; many other important factors

4-12 .

need to be considered. For example, the economic benefits which accrue to the family of the child could be significant—they may help to alleviate stark poverty. Moreover, this employment could provide long-term opportunities to the child, resulting in a much higher standard of living than might otherwise be possible.

Ethics and Corporate Social Responsibility 4-4 Offshore Outsourcing 1.

The costs of moving your production overseas include the economic hardships imposed on 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 perspective. Nevertheless, it is possible that if the business gains significant market share over time as a result of its cost-cutting efforts, then it may expand and create even more jobs in the local community than those initially lost. However, this assumes that the business owner would choose to expand production in the local community.

3.

One alternative is that the local workers can accept a cut in pay or reduced benefits. The business owner might be willing to accept a lower profit margin in order to preserve local community harmony. At the same time, some production can be shifted to the foreign site to take advantage of the lower costs, thereby lowering the price for the sewing machines. If this succeeds in generating increased market share and profits, then it can also increase the need for jobs in both locations.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 4 Web case and exercise, visit www.mybizlab.com.

Focus On GE: Company to Country Answers to Web Case Discussion Questions 1.

Investing in emerging markets could be very profitable for GE because of the high growth potential. However, this investment has many economic, social and political risks.

2.

The “company-to-country” philosophy focuses on establishing a close relationship with the government, 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 of 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 might suffer. This could hurt GE’s chances at selling their consumer products in China.

Video Case Solution To access the Chapter 4 video case and exercise, visit www.mybizlab.com.

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Lands' End and Yahoo!: Going Global, Acting Local Answers to Video Case Discussion Questions 1.

In doing business in the United Kingdom, Lands’ End faced language differences—specifically, the use of American English in its catalog when the British speak Queen’s English. In Japan, Lands’ End had to adapt some marketing practices for the Japanese market, such as modifying its catalog formats, authenticating the Lands’ End “Guaranteed Period,” and adjusting the method of payment.

While Yahoo!’s product met with less cultural resistance than Lands’ End’s, Yahoo! still had to adapt its product to accommodate local preferences. In China, Yahoo! used more neon on the Chinese website, plus it gave more access to downloadable software services. In contrast, because the French are more culture-driven, the French website offered more access to reading materials.

2.

In 1987, Lands’ End eased its way into the global marketplace. In the next several years, the company sustained its international growth, mailing catalogs to more than 175 countries and setting up phone and distribution centers in the United Kingdom and Japan. Yahoo! hoped to dominate the Internet industry by going international, and today, it has expanded into three world regions, with roughly 40 properties in total.

3.

Lands’ End has three strategies of international business from which to choose. First, the company may adopt a global strategy, in which it competes primarily on the basis of price, while selling a standardized product. Second, the company might choose a multi-domestic strategy, whereby it competes mainly by differentiating its product to meet unique local preferences. Third, it might use a transnational strategy in which it offers a customized product while selling at the lowest price.

4.

When doing business in Japan, you should learn as much as possible about the sociocultural differences.

Comparatively speaking, the United States is an individualist society, whereas Japan is a collectivist society. As such, business decisions tend to be made by the group. In addition, the Japanese value relationships, so be prepared to build rapport with Japanese counterparts before formalizing the business. Finally, Japanese business etiquette tends to be more formal. Arriving on time, offering excellent service, and bearing small gifts are some of the ways in which you would earn the trust of Japanese business partners.

Up for Debate Points Pro: You should accept the bribe and thus conform to the business customs in Mexico. Bribes are simply a part of doing business in Mexico. Research shows that export opportunities are abundant in this populous country, and that it is the strongest economy in Latin America. Why pass up on the chance to make robust profit opportunities in this burgeoning export market?

Con: You should not defy ethical and legal codes governing your home nation to develop business in the Mexican market. First, your company may have strict ethical rules on accepting bribes. Second, you may face job termination as well as federal criminal prosecution if you take the bribe. Finally, why would you want to contribute to corruption when most governments, including Mexico’s, are fighting it?

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CHAPTER 5: SMALL BUSINESS AND THE ENTREPRENEUR QUICK REFERENCE GUIDE

IN-CLASS ACTIVITIES Activity

Description

Time Limit

Team Time: Developing a Business Plan Ethics and Corporate Social Responsibility: Social Responsibility: Pepsi Refresh Project Web Case: Focus on Global Warming Solutions, Inc.: Saving the World Video Case: Student Advantage: Paying Less, Getting More

Students work in groups to develop a business plan for a small company.

Students create a list of ideas that might be good opportunities for this project. Vote on the best idea to submit to the Pepsi Refresh Project.

30 min.

IE Page Reference P 153

30 min.

P 153, P 165

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

30 min.

P 139, P 165

Students watch and discuss the chapter video.

P 156, P 165

Supplemental In-Class Activity 1: Finding an Entrepreneurial Niche

30 min.

P 141

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

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

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.

Video Run Time: 8:44 Question Time: 30 min.

30-60 min.

30 min.

P 137

Supplemental Handout: How Big Is Too Big For Small Business?

Case related to Supplemental In-Class Activity 3 above.

30 min.

IM

Supplemental In-Class Activity 2: Today’s Entrepreneurs

P 143

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HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: A Closer Look at Franchising Web Exercise: Micro Financing

Students use the internet to research a franchise opportunity.

Answers to the discussion questions in the activity.

Students go to www.kiva.org and select an entrepreneurial venture they would like to fund.

Web Exercise: Do You Have What It Takes to Be an Entrepreneur?

Web Exercise: Build a Business with a Conscience

Students go to www.forbes.com to read about what it takes to be an entrepreneur, and to complete an entrepreneurial personality quiz.

Web Exercise: Small Business Owners: Where to Go For Help

Students play the game on the New Heroes from PBS to see if you have what it takes. http://www.pbs.org/opb/thenewheroes/ engage/business.html Students find the Small Business Development Center nearest them, using the www.sba.gov website.

At-Home Completion Time 30 minutes

IE Page Reference

A brief report on why the student chose to finance a particular entrepreneurial endeavor.

Answers to the discussion questions in the activity.

1 hour

P 159, P 165

45 minutes

P 145, P 165

Students report on the results of the game.

30 minutes

P 136, P 165

Answers to the discussion questions in the activity.

15 minutes

P 154, P 165

P 147, P 165

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CHAPTER OPENER Chapter 5 introduces students to entrepreneurship and small business ownership through franchising. Starting with a discussion of entrepreneurial traits, the chapter explores: • how entrepreneurs get their business ideas.

• the role of the entrepreneur in today’s economy.

• the pros and cons of purchasing and running a franchise operation.

• the importance of planning when opening a small business.

The conclusion of the chapter provides information about where to get help when opening a business and what sources of funding are available to entrepreneurs.

DETAILED LECTURE OUTLINE I.

Small Business: The Mainstream of the American Economy A. What is the role and structure of the small business within the U.S. economy?

B. Small Business and the Economy 1. What is a small business?

2. Why are small businesses important to the economy?

3. How do small businesses foster innovation?

4. How do small businesses help bigger companies?

5. How do small businesses help consumers?

C. Small Business and the Workforce 1. What kind of workers do small businesses employ?

2. Do small businesses provide opportunities for minorities?

D. The Impact of Technology on Small Businesses 1. How has technology affected new small businesses?

E. Reasons for Starting a Small Business 1. Opportunity Knocks - people find opportunities in offering new products or services.

2. Financial Independence - but remember that it takes three to five years for a new business to become profitable.

3. Control - having your own business allows you to be in control of your business decisions.

4. Flexibility - small businesses have less bureaucracy and more flexibility than larger firms.

5. Unemployment - some people are pushed into opening their own businesses because they have no other employment opportunities F. Small Business Structures 1. What kind of structure should I choose for my small business? (These are discussed in Chapter 6 of the text.)

II. Entrepreneurs and the American Dream A. The Traits of Successful Entrepreneurs 1. The traits of successful entrepreneurs.

2. How are they innovative?

3. How do they take risks?

4. What makes entrepreneurs motivated to succeed?

5. Why do they need to be flexible and self-directed?

6. Why are people skills and leadership skills important?

7. What does it mean for entrepreneurs to be “system” thinkers?

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B. Types of Entrepreneurs 1. Are there different types of entrepreneurs?

2. What are lifestyle entrepreneurs?

3. What are micropreneurs?

4. What are home-based entrepreneurs?

5. What are Internet entrepreneurs?

6. What are growth entrepreneurs?

7. What are intrapreneurs?

8. What are social entrepreneurs and social intrapreneurs?

C. Entrepreneurial Teams 1. How do I know if I’d be a good entrepreneur?

2. What is an entrepreneurial team?

III. Buying Franchises and Existing Businesses A. What are the advantages and disadvantages of franchising within the context of entrepreneurship?

1. Franchising Basics B. Pros and Cons of Franchising 1. What are the advantages of franchising?

2. What are the disadvantages of franchising?

C. Franchising Considerations 1. What are things to watch out for when considering buying a franchise?

D. Buying an Existing Business 1. Are there other ways to start a business besides starting new or buying a franchise?

2. What are the advantages of buying an existing business?

3. What are the disadvantages of buying an existing business?

4. What do I need to check before I buy a business?

IV. The Risks of Small Business and Where to Get Help A. Why is a business plan crucial to small business success, and what factors lead to small business failure?

B. Why So Many Small Businesses Fail 1. What are the risks of owning my own business?

C. Getting Help 1. How do resources, including the Small Business Administration, mentoring sources, business incubators, and advisory boards provide assistance and guidance to small business owners?

2. Where do small business owners go for help?

V. Financing Considerations A. What are the potential benefits and drawbacks of each major source of small business financing?

B. Cash and Credit 1. Where can I get the money to start a business?

2. Can I use credit cards to finance my business?

C. Small Business Loans and Grants 1. What if I need more money than what these sources provide?

D. Venture Capital and Other Forms of Financing 1. What if I don't want to finance my business with loans?

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.

5-4 .

SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity 1 5-1 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: • • • • •

Have students pair up or divide them into small groups.

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

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

Have each group report to the class on their ideas.

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 Activity 2 5-2 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: • • •

Have students volunteer the names of entrepreneurs they admire.

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

After compiling a sizeable list, have students explain what they admire about each name on the board.

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.

5-5 .

•

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.

Supplemental In-Class Activity 3: Case Study Discussion 5-3 How Big Is Too Big For Small Business?

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 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: (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.

Supplemental In-Class Activity 4: Ethics Case Study Discussion 5-4 “Mom, I Need Some Money”: Should You Ask Family and Friends to Finance Your Small Business?

Activity Overview: This activity asks students to assess whether or not it is appropriate to ask family and friends for money for an investment.

5-6 .

Time Limit: 30 minutes What to Do: Christina Domecq had a great idea for a business – opening a New Horizons Computer Learning Center in her hometown of White Plains, New York. New Horizons offers computer training to individuals and businesses nationwide. The only problem was that her $500,000 loan application was turned down by the SBA because Domecq was young and didn’t own her own house. So Domecq turned to her family, asking her aunt, grandmother, and father to invest in the franchise.

1.

What would you say if one of you were Domecq’s aunt or father and she asked you for the money to start this business? Discuss any information you would need before making your decision, and explain the rationale behind the answer you give.

W. David Waters also asked his family for money when he started his new business, the Centaur Zone Cafe in Honolulu, Hawaii. Waters did his research, using skills gained while earning his degrees in international management and finance from Georgetown University. He eventually targeted a location and a market – downtown Honolulu, where the Hawaii Theater and the Hawaii Pacific University offered coffee-hungry customers. He worked with SCORE, other coffee shop owners, and the director of a national coffee organization to create his business plan. After seeing the plan, Waters’ father sent him $20,000. Unfortunately, Waters’ didn’t get the customers he needed, primarily due to Hawaii’s poor economy at the time. Eventually, the business folded.

2.

Knowing that even the best-planned entrepreneurial endeavors can fail, make a list of the information entrepreneurs should have about potential investors before asking for money.

3.

In a group, develop a consensus about what constitutes “ethical” borrowing from family members. Create a list of specific guidelines entrepreneurs could use when considering asking family members for money.

4.

We often hear about entrepreneurial success stories, but we rarely hear about the failures. Data from the U.S. census shows that only 56% of entrepreneurial endeavors are still in business four years after startup, and only 29% of these ventures are still around 10 years after startup. (“Small Business Trends” by Scott Shane, http://www.smallbiztrends.com/2008/04/startup-failure-rates.html/) What is the entrepreneur’s responsibility to family investors if the business fails?

Don’t Forget: Be sure to keep students on the case topic; it is easy to be distracted when comparing support of family and friends and a financial investment.

Wrap-Up: Bring the discussion to a close by asking students if anyone they know had experience with this type of situation. What did they do and why?

Answers to Discussion Questions 1.

There are many factors that will influence student answers to this question. The student’s financial situation, culture and family dynamics play an important role in whether or not loaning money is seen as acceptable.

Potential investors should carefully investigate the risks associated with the business opportunity, the entrepreneur’s preparation and history of success or failure in past endeavors, the business plan and management team associated with the business, etc. Interestingly enough, Domecq’s father was initially hesitant to loan her the money, because she was young and because she didn’t major in business in college. But he relented when he saw that she had a 120 page business plan, and that she had gathered an impressive management team to help her run

5-7 .

her organization. Today, Domecq’s New Horizons Computer Learning Center employs 35 people and projects $2.3 million in sales.

2.

As students explore the answers to this question, it is enlightening to think about the rules the U.S. government has set up for investing in small businesses. Rules 501 (a)(5) and (a)(6) of Regulation D set up the following “accreditation” rules for investors in small businesses: they must have a net worth of $1 million and an individual income in excess of $200,000 for each of the past two years, with the expectation of an income of $200,000 for the upcoming year. However, students might also consider whether or not the family member can afford to lose the money, how long the family member can wait before realizing a profit on the investment, the risk associated with the business venture (franchises are typically less risky than new business ventures, for example), and whether or not the money will be invested as a loan or in exchange for a part of the business.

3.

There are many articles written about how to involve family and friends in raising money for a new business, but few of them \]consider the ethics of using money from friends and family. Some of the rules that students might develop could include: a. b. c. d.

4.

Only borrow from people who can afford to lose the money.

Give people full information about the risks they are assuming when they are making the loan.

Borrow money only when the odds are very good that it can be paid back with interest.

Sign legal documents whenever you get money from others, stipulating the terms of the transaction.

To some extent, the entrepreneur’s responsibility is based on the terms of the agreement. If the entrepreneur has borrowed the money as a loan, he or she would be responsible for repaying the loan, whether or not the business was a success. If the person giving the money invested in the business with the expectation of getting a piece of the business, there would be no expectation of getting the money back if the venture failed. But encourage students to think about the emotional ramifications of the loan, as well as the legal ones. How will the entrepreneur feel if every time there is a family gathering, the topic of the failed business is raised?

Sources: Griffin, C.E. “In the money: True stories of ‘how I got my franchise start-up capital’” Entrepreneur.com, July 2, 2002. http://www.entrepreneur.com/franchises/buyingafranchise/financingoptions/article23534.html Chun, J. “Out of Business” Entrepreneur, August, 1998. http://findarticles.com/p/articles/mi_m0DTI/is_n8_v26/ai_21031141

5-8 .

SUPPLEMENTAL HANDOUT: IN-CLASS ACTIVITY 3 5-12 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-lawpractice. 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?

5-9 .

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 the email with graphics attached to illustrate the unique aspects of the products. (Innovation, pg. 142) Benjamin Franklin 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.) (Risk taking, pg. 142) 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. (Leadership, pg. 143) 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. (Characteristics of entrepreneurs, pgs 141) 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. (Small business, pg. 135) Specifying Structure: Divide the online class into 5 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.

(Structure, pg. 139)

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BIZSKILLS: Conducting a SWOT Analysis Covers material in Chapter 5

Available at: mybizlab.com

At the end of this exercise, your students should be able to answer the following questions: 1.

What factors are involved in conducting a SWOT analysis?

2.

What are some important risks to consider when starting and running a business?

3.

What are some short- and long-term financing options to consider to fund a business?

BIZSKILLS: Getting Your Business off the Ground Covers material in Chapter 5

Available at: mybizlab.com

At the end of this exercise, your students should be able to answer the following questions: 1.

What are some risks of owning your own business?

2.

Where do small business owners go for help?

5-11 .

ANSWERS TO END OF CHAPTER MATERIALS Self Test Multiple Choice 1. d 2. c 3. a 4. b 5. b 6. a 7. c 8. c 9. c 10. c True/False 1. True 2. False 3. False 4. False 5. True

Critical Thinking Questions: Suggested Answers 1.

Sam Walton (Walmart), Debbi Fields (Mrs. Fields Cookies), and Sean Combs (Sean John Clothing) have all demonstrated the tendency to be innovative. They have taken risks and are clearly motivated to succeed. They each are self-directed, but work well with other people; they can lead others into seeing their vision and accomplishing their goals. They all have visions of what they want to accomplish; they see this vision as one big goal, and they can successfully break the goal into smaller, more achievable goals.

2.

Whether a business is started from scratch or as a franchise, it 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 perceive a new, unknown business to be riskier than 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 fact that the business owner might make all the decisions regarding the business on their own, without adequate counsel. A small business might be competing against other businesses with better name recognition, a savvier marketing program, and cost effective purchasing strategies which ultimately affect product costs to the consumer. Risks of buying a franchise include the inability to pay the ongoing franchise fee, or having to stick with corporate policies that might not match your particular customer base.

3.

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 start-up companies share.

These offer the support and advice that many start-ups lack when operating on their own, and create a synergistic environment where companies can act as peer-to-peer mentors, sharing both success and failures. Incubators also lend legitimacy to a beginning company as well as a more professional atmosphere than someone’s home office.

Possible problems might arise if the incubator is underfinanced or not really suited to meet the needs of the group.

5-12 .

Some incubators may be at capacity, or only sponsor businesses based on pre-existing or beneficial relationshsips.

4.

Technology can make starting and running a small business much easier and more cost effective. A modest website facilitates marketing, and e-mail can reach current and potential customers quickly and in a cost-effective manner.

New businesses can also take advantage of online finance, database and research tools, as well as other resources not available prior to the Internet. Finally, technology and the Internet can make a small local business “global” very quickly. On the other hand, there are downsides to having these resources and tools available. Consumers are savvier, and use the internet to compare product and price information. Sometimes, small businesses lose out to larger competitors because of the vast competitive arena provided by the Internet.

5.

There are many sources of funding available for small businesses. Entrepreneurs can start a business with little capital—bootstrap financing. This type of financing, such as using your own money, borrowing funds from friends or family, or trading services or products with vendors or clients, may be the only way a new venture can begin if the business is too small or uncertain for more formal funding options. Credit cards may be used for financing, but you want to be sure to pay these off every month. For larger amounts, new business owners sometimes borrow against their own assets, such as the equity in their house or against their retirement account.

If you’re purchasing an existing business or a franchise, banks and savings and loan institutions often are willing to provide funding. These institutions offer start-up loans and lines of credit (sources of credit that can be drawn upon at the borrower’s discretion) that help businesses make payroll during slower periods as well as capital loans to buy equipment or machinery.

Grants may be available for start-ups. And, businesses can be financed by outside investors such as angel investors, venture capital, or Small Business Investment Companies.

Team Time Developing a Business Plan This exercise requires that students develop a business plan for a convenience store, health club/gym, bookstore, or nail salon/day spa. Each student is likely to have a different approach to the business. As students compare the goals they have developed for the business, ask them to look for differences – different viewpoints can be one of the difficulties entrepreneurs have if they start their business as a partnership or with a group of managers. A more complete business plan assignment can be found in Mini-Chapter 2. Be sure to review the instructor’s notes for that chapter on page XXX of this IE.

Ethics and Corporate Social Responsibility Social Entreprenuership: Pepsi Refresh Project This exercise raises an interesting question: To what extent is social responsibility the concern of organizations? Why did students choose their projects? How do the projects meet the criteria at refresheverything.com? What determined the “best idea”?

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 5 Web case and exercise, visit www.mybizlab.com.

5-13 .

Focus on Global Warming Solutions, Inc.: Saving the World Answers to Web Case Discussion Questions 1.

Vasilenko, Kosynkin, and Kornaraki took advantage of increasing concern for world conservation, which is creating a demand for technologies that might mitigate the impact of global warming. Social entrepreneurship (defined as someone who recognizes a social problem and develops an entrepreneurial venture to address it) is a “hot topic” in business schools today. If students are interested in social entrepreneurship, have them visit the Stanford Library’s website on the topic at: http://www.gsb.stanford.edu/Library/articles/hottopics/social_entrepreneurship.html.

2.

Vasilenko, Kosynkin, and Kornaraki are all innovative, motivated-to-succeed, and self-directed. Their ability to function in both the worlds of academia and business is a testament to their flexibility. Any time an entrepreneur brings a new product to market, there are risks involved; notably, the financial risks inherent in producing products for sale.

3.

The primary benefit of having the three scientists work together is that each scientist has a different area of expertise, so their company can invent, produce, and market a much broader array of products than would otherwise be possible. The drawbacks to having three partners is that there may come a time when the three do not see eye-to-eye on how the business should be run; this could create conflict and problems for the business. Because trios are by nature unstable, power struggles are likely as the true “leader” of the organization emerges.

Video Case Solution To access the Chapter 5 video case and exercise, visit www.mybizlab.com.

Student Advantage: Paying Less, Getting More Answers to Video Case Discussion Questions 1.

Student Advantage serves the needs of college students by furnishing them with a membership program offering substantial discounts on everyday purchases. It also offers students a network of websites featuring content, community, and e-commerce services.

2.

Student Advantage primarily used a growth-by-acquisition strategy. Through the well-planned acquisition of smaller firms, Student Advantage has obtained and retained staff to help grow and service their business. Since its inception, Student Advantage has undergone 11 mergers and acquisitions, which is more change than many companies face in a lifetime.

3.

The Student Advantage Discount Program is a way for businesses to reach the college market. Student Advantage combines the “best-of-breed” companies into different categories of merchandise and retail outlets, offering a “single point-of-access” to stimulate and reward student buying behavior.

4.

You can turn to several sources for help. First, the Small Business Administration, or SBA, offers several assistance programs, including education and training, financial assistance, disaster assistance, and counseling. SBA’s Service Corp of Retired Executives, or SCORE, has nearly 11,000 volunteers who run workshops and who offer counseling to small business at no cost. Second, mentoring sources, such as the Entrepreneurs Organization, or EO, connect business owners with experts in their industry for individual mentoring. Third, business incubators support start-up businesses by offering resources, such as administrative services, technical support, business networking, and sources of financing. Finally, you can form an advisory board—a group of individuals who offer guidance.

5-14 .

Up for Debate Points Pro: The company should give existing employees the opportunity to grow with the business by increasing their responsibilities. Student Advantage takes a humanistic approach to management, in which the employees are regarded as “partners.” It follows, then, that current employees should be given the opportunity for advancement through internal recruiting, management training, mentoring, and developing a reward system for employees interested in joining the managerial ranks. Moreover, there is always the danger of bringing in new managers who may alienate the existing staff.

Con: Student Advantage should not rely on its existing workforce, but instead should bring experienced outside managers into its fold. Such managers will offer a fresh perspective on how the business can grow and operate more efficiently. Using external recruiting to attract new managerial talent and creating an incentive program based on performance results will breathe new life into the company.

5-15 .

CHAPTER 6: FORMS OF BUSINESS OWNERSHIP QUICK REFERENCE GUIDE

IN-CLASS ACTIVITIES Activity

Description

Time Limit

Team Time: What’s the Plan?

Students work in groups to develop a business plan for a small company.

Students will answer the discussion questions.

30 min.

IE Page Reference P 185, P 195

30 min.

P 179, P 196

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

30 min.

P 184, P 197

Students watch and discuss the chapter video.

Video Run Time: 10:55 Question Time: 30 min.

30-60 min.

P 181, P 197

30 min.

P 186

Ethics and Corporate Social Responsibility: Sarbanes-Oxley Web Case: Focus on Global Warming Solutions, Inc.: Restructuring for Success Video Case: Amy’s Ice Creams: Churning Success One Scoop at a Time Supplemental In-Class Activity 1: The Match Game Supplemental In-Class Activity 2: Who’s Next?

Students practice identifying the advantages and disadvantages of each of the business ownership structures.

Students in groups or pairs identify companies that would achieve synergy through either a merger or acquisition.

P 183

6-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: Business Combinations Web Exercise: Don’t Forget the Domain name

Students use the internet to research a business merger, takeover or acquisition.

A brief report on the rationale for the decision.

Students research how to pick a good domain name, and how you can determine whether it’s still available.

Web Exercise: The Perfect Partner

Students go to www.inc.com/guides/leadership_strat/2 3041.html and read the advice for how to pick the perfect business partner.

Students research the main causes of business failures and what kind of exit strategies can be set in place at the beginning to ease the pain if the business needs to close.

Students visit the SCORE Web site at www.score.org/business_quiz.html and take the quizzes there to see if you’re prepared to start your business.

Web Exercise: Plan with the End in Mind

Web Exercise: Preparing for Business

At-Home Completion Time 30 minutes

IE Page Reference

Students should explain their choice and the steps they took to research the name.

Submit list of rules and the reasoning behind them

45 minutes

P 190, P 197

45 minutes

P 172, P 197

A brief report on the exit strategies and how they were developed.

45-60 minutes

P 183, P 197

Review quiz results.

15 minutes

P 171, P 197

P 188, P 197

6-2 .

CHAPTER OPENER Chapter 6 introduces students to entrepreneurship and small business ownership through franchising. Starting with a discussion of entrepreneurial traits, the chapter explores: • how entrepreneurs get their business ideas.

• the role of the entrepreneur in today’s economy.

• the pros and cons of purchasing and running a franchise operation.

• the importance of planning when opening a small business.

The conclusion of the chapter provides information about where to get help when opening a business and what sources of funding are available to entrepreneurs.

DETAILED LECTURE OUTLINE I.

Sole Proprietorships A. What are the strengths and weaknesses of sole proprietorship?

1. Why is sole proprietorship the most common form of business ownership?

B. Starting a Sole Proprietorship 1. How do I start a sole proprietorship?

C. Advantages and Disadvantages 1. Are there advantages of being a sole proprietor?

2. Why wouldn’t I want to begin my business as a sole proprietorship?

II. Partnerships A. What are the advantages and disadvantages of a partnership and a partnership agreement?

B. Advantages and Disadvantages 1. When is it good to bring in another owner?

2. Are there disadvantages to adding partners?

3. As a business form, how does a partnership compare to a sole proprietorship?

C. Elements of a Partnership Agreement 1. What goes into a partnership agreement?

D. Types of Partnerships 1. What are the different types of partnerships?

III. Corporations A. How is a corporation formed, and how does it compare to sole proprietorships and partnerships?

1. What is a corporation?

B. Advantages of Incorporation 1. When does it make sense to form a business as a corporation?

2. Separated Liability 3. Extended Life and Ownership Transfer 4. Raising Capital 5. Corporate Benefits 6. Tax Benefits C. Structure of a Corporation 1. What are the differences between a corporation and partnerships or sole proprietorships?

2. How is a corporation structured?

D. Disadvantages of Incorporation 1. Are there disadvantages of structuring a business as a corporation?

E. What are the major differences among a C corporation, an S corporation, and a limited-liability company?

F. S Corporation

6-3 .

1. What are the advantages of S corporations?

2. Can any business elect to be an S corporation?

G. Limited-Liability Company 1. What is a limit-liability company?

2. What’s the difference between an LLC and an S corporation?

3. What kinds of businesses are best suited as an LLC? IV. Alternative Business Arrangements A. What are the characteristics of not-for-profit corporations and cooperatives?

B. Not-for-Profit Corporations 1. What is a not-for-profit corporation?

2. Do not-for-profit corporations generate any profits?

3. What are the benefits of being tax-exempt?

C. Cooperatives 1. What are cooperatives?

2. How are cooperatives structured?

3. What is the benefit of cooperatives?

V. Mergers and Acquisitions A. Mergers vs Acquisitions 1. What are mergers and acquisitions?

2. Are all mergers and acquisitions mutually desired by both companies?

B. Advantages of Mergers and Acquisitions 1. Why do mergers and acquisitions occur?

2. Is competition a driving force for mergers and acquisitions?

3. Do companies add value to their product line by mergers?

C. Types of Mergers 1. Are there different types of mergers?

D. Disadvantages of Mergers 1. Are there disadvantages with mergers?

E. Social Media: Merger and Acquisition Mania

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.

6-4 .

SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity 1 6-1 The Match Game Activity Overview: This activity allows students to practice identifying the advantages and disadvantages of each of the business ownership structures.

Time Limit: 60 minutes What to Do: • •

• • • •

Create several sets of note cards that list the business ownership structures of Sole Proprietorship, Partnership, Corporation, and LLC. Create several sets of note cards that list the advantages and disadvantages of each of the business ownership structures. (Use Table 6.7 on page 000 of text to create these cards, or go to http://sba.gov/smallbusinessplanner/start/chooseastructure/START_FORMS_OWNERSHIP.html , which gives the SBA view on business structures, listing the advantages and disadvantages.)

For each set, shuffle the note cards, and then place them in an envelope.

Divide students into the same number of groups as the envelopes you have.

Have each group put Sole Proprietorship, Partnership, Corporation, and LLC on top from left to right.

Each group should put every note card under the correct heading of Sole Proprietorship, Partnership, Corporation, or LLC, without referring to their text.

Don’t Forget: This activity might seem as if it would be easy and quick, but students will have to organize the cards and debate where each belongs, so the activity will likely take a full hour.

Wrap-Up: After all groups have finished, show them the solution, so that they may check their note cards and ask questions any were misplaced.

Supplemental In-Class Activity 2 6-28 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: • • •

Divide students into groups or allow them to pair up.

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

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.

6-5 .

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.

6-6 .

ENHANCING THE ONLINE COURSE Internet Definition: Ask students to define “sole proprietorship” using the definition given in the text. Then, expand on that definition graphically, using the website of the business support organizations such as SCORE or SBA Marketing Association. How can activities on the Internet (such as items on the website) be related to the definition? (Sole Proprietorship, pg. 167) Losing Money: Divide your online class into four groups. Have each group create their own example of the effect of a business loss on personal income, using business activities from their own experience. (Sole Proprietorship, pgs. 167) Compare and Contrast: Ask students to compare and contrast a general partnership and limited partnership. They should contrast the pros and cons of each using general business support websites. (Types of Partnership, pg. 174-175) Review Advantages of Incorporation: Have your online students identify and explain all of the benefits of incorporation.

Have each student pick two states. Research various accounting websites to see if the benefits of incorporation vary from state to state. (Advantages of Incorporation, pg. 177) Identify Corporate Structure: Have your students choose 3 major corporations. Use the Internet and corporate web sites to compare the structure of each organization. How are they similar? How do they differ? (Corporate Structure, pgs 177178) Who is what?: Ask students to create a pie chart representing the percentage of companies in the U.S. that fall under each category—sole proprietorship, partnership and corporation. (Forms of business Ownership, pgs. 166-190) Mergers: Ask students to use Figure 6.7 from the textbook to recreate the chart using visuals and information from the Internet to present ideas for companies that they think should merge. Students should explain the reasons for and benefits of the possible merger before posting them on the discussion board. (Mergers, pgs. 186) Debate: Divide your online class into two groups. Assign one group to support the creation of a limited liability corporation; the other to support creating an S corporation. Conduct an online debate, with each group supporting its corporate structure as the only way to go. You can use a chat room, but have each group identify one member as the online debater. (Structure of a Corporation, pgs. 177-178)

6-7 .

BIZSKILLS: Small Business and the Entrepreneur Covers material in Chapter 6

Available at: mybizlab.com

At the end of this exercise, your students should be able to answer the following questions: 1.

What different kinds of entrepreneurs exist?

2.

What are the characteristics of entrepreneurs?

6-8 .

ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. d 2. d 3. c 4. a 5. d 6. c 7. d 8. a 9. b 10. b True/False 1. False 2. False 3. False 4. True 5. True

Critical Thinking Questions: Suggested Answers 1.

Advantages of a C-corporation include 1) separate liability from owners, so only assets of corporation can be used to pay off debts and liabilities of the business, 2) greater ability to seek outside financial funding, especially from the public securities markets, 3) ease of ownership transfer, 4) ability to provide benefits to owners and employees, 5) lower tax rates.

2.

Mergers occur when two companies come together to form one company. In some instances, both companies cease to exist and one new company takes over (such as Sprint and Nextel forming Sprint Nextel). In others, such as Delta and Northwest, the combined company operated as Delta. This merger was “friendly” and agreed on, but others are “unfriendly”; these are called hostile takeovers. An example of this was Microsoft’s attempted takeover of Yahoo in 2008.

3.

The corporation’s organizational structure consists of : • shareholders, who “own” the company and elect a Board of Directors.

• a board of directors, who sets the policy for the corporation and makes the major business and financing decisions. Directors authorize the issuance of stock, approve loans to or from the corporation, and decide on major real estate transactions. They also elect the management team.

• corporate officers, elected by the board of directors, are responsible for the daily operation and management of the company.

4.

Answers will vary depending on the non-profit organization the student selects. A good source of information about non-profit funding is the Smart Givers website at http://www.smartgivers.org. One example might be a local animal shelter. The shelter is in business to protect stray and mistreated animals. The primary source of its income is usually donations, although in many cities, tax dollars also support shelter work. Expenses include staffing, building costs and fundraising costs, in addition to animal care costs.

5.

Answers will vary depending on the merger or acquisition selected by the student.

6-9 .

Team Time What’s the Plan?

This exercise requires that students select a form of business ownership for one of several different business ideas. The ideas are listed below, along with a recommended form of ownership.

1.

2.

3.

4.

5.

Roofing and siding company – This should be a corporation. When participating in a business where there is a good possibility that someone will get hurt on the job, or that a dissatisfied client could sue, it is important for personal and private assets to be protected.

Ice cream parlor – Again, this is likely to be a corporation, although more progressive students might consider developing a cooperative.

Yoga instruction – Depending on the number of instructors, this could either be a limited liability corporation or possibly an S-corporation. Yoga is also an activity where people could get hurt and lawsuits could develop, but a brand-new yoga instructor who trusts her students might have a sole proprietorship to reduce paperwork and costs.

Lawn-mowing company – This is likely to be a sole proprietorship, especially in its early stages.

Clothing donation company – This should be a non-profit company. This is a good place to warn students about companies that look like non-profits, but are actually scams. In the past few years, brightly colored boxes have been springing up on sidewalks in major metropolitan areas. People are asked to donate clothes, but investigators soon discover that the “non-profit” business is actually a front for simply selling the used clothes for a profit. (See “Behind the Green Box” on the KCBS website: http://cbs5.com/30minutes/behind.green.box.2.451581.html .)

Ethics and Corporate Social Responsibility Sarbanes-Oxley 1.

Student responses to this question will vary. However, students should consider the concerns that executive compensation does not reflect the performance of the chief executive. While Sarbanes-Oxley has not specifically set rules for compensation for executives, it does give authority to compensation committees to decide on executive pay that reflects the overall interest of the company.

2.

Student responses to this question will vary; however, it is recognized that this kind of compensation tied to market indices created incentives for fudging the numbers to engineer stock price increases.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 6 Web case and exercise, visit www.mybizlab.com.

Focus On Global Warming Solutions, Inc.: Restructuring for Success Answers to Web Case Discussion Questions 1.

Vasilenko, Kosynkin, and Kornaraki needed capital to start their business, and they were able to get it through their association with Southern Investments, Inc. By working with an established corporation, the three scientists found a way to manage the liabilities associated with their business, extend the life of the business, make it easier to transfer ownership, and reduce the level of taxation on the new company. Problems with being a corporation might include

6-10 .

the difficult and complex paperwork associated with the structure and “double” taxation (because the scientists must pay income tax on their incomes, which come out of the already-taxed corporate profits.)

2.

If the target company had not wanted to be acquired, it could have appealed directly to stakeholders, asking them not to sell stock.

3.

Global Warming Solutions, Inc. was founded with the intention of making a profit for its owners, and it is not, therefore, a non-profit organization, despite the fact that it has not made a profit yet. Organizations such as Global Warming Solutions, which are founded primarily to take advantage of a business opportunity, cannot call themselves non-profits, even though the product they sell is likely to benefit public interests.

Video Case Solution To access the Chapter 6 video case and exercise, visit www.mybizlab.com.

Amy’s Ice Creams: Churning Success One Scoop at a Time Answers to Video Case Discussion Questions 1.

Amy secured a good location, adequate funding, and chose incorporation as a form of business ownership. By incorporating, Amy gave her partners protection against potential business failure. However, she also had to deal with being taxed twice on profits.

2.

Amy’s Ice Creams is a private corporation owned by a small group of people. Its shares are not available to the general public.

3.

Amy’s Ice Creams serves up super premium flavored ice cream in a number of unique flavors like Belgian Chocolate, Dark Chocolate, Sweet Cream, and the wildly popular Mexican Vanilla with crushed strawberries.

Amy’s also creates lively, light-hearted, memorable ice cream experiences by running theme nights, charity drives, ice cream tosses, and other creative interactions between employees and customers.

4.

If you are seeking the corporate advantages of limited liability with the tax advantages inherent in partnerships, a limited-liability company, or LLC, may be the answer.. An LLC has several advantages over a C corporation. In addition to fewer formalities, limited liability provisions, and the treatment of taxes, an LLC is free of many of the annual meeting and reporting requirements imposed on a C corporation, so it is simpler to maintain.

Up for Debate Points Pro: Amy’s should go public for several reasons. One, the company can gain a ready supply of capital and increased liquidity. Two, the company can enjoy enhanced visibility, which in turn can give it a sales boost and help it recruit new talent. Three, the company can gain flexibility to use stock to acquire other companies.

Con: Amy’s should remain a private corporation. First, the company retains all of the advantages of the corporate form of ownership, without disclosure requirements to anyone other than shareholders. Second, owners retain full control over operations and decisions. Third, owners are protected from unwanted takeovers.

6-11 .

CHAPTER 7: BUSINESS MANAGEMENT AND ORGANIZATION QUICK REFERENCE GUIDE IN-CLASS ACTIVITIES Activity

Description

Time Limit

Team Time: On a Mission

Students compare mission statements from several different organizations to determine what makes an effective mission statement. (Note that this in-class activity requires students to prepare at home before coming to class.)

Students discuss how organizations might control their social responsibility efforts.

30 min.

IE Page Reference P 213, P 231

30 min.

P 225, P 232

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

Students watch and discuss the chapter video.

30 min.

P 222, P 233

Video RunTime: 14:46 Question Time: 30 min.

30-60 min.

P 218, 233

30 min.

P 212

Ethics and Corporate Social Responsibility: Assessing Social Responsibility Web Case: Focus on Toyota: The Toyota Way of Management Video Case: Nantucket Nectars: The Juice Guys on Organizing

Supplemental In-Class Activity 1: SWOT-ing Wal-Mart Supplemental In-Class Activity 3: How Do Your Goals Stack Up?

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

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

P 214

7-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: Employees First

Students use the internet to identify a company that has implemented inverted organization by emphasizing “Employees First.”

Students get an organizational chart from the internet, determine the organization’s structure, and critique it.

Answers to the questions in the activity.

Web Exercise: Organizational Charts: The Big Picture Web Exercise: How Well Do You Manage Your Time?

Web Exercise: Predictably Irrational Web Exercise: Get SMARTER

At-Home Completion Time 30 minutes

IE Page Reference

Answers to the discussion questions in the activity.

1 hour

P 218, P 232

Students assess their time management skills using an online quiz.

Answers to the discussion questions in the activity.

45 minutes

P 222, P 232

Students visit the Ted website (ted.com) and find the talk given by Dan Ariely, behavioral economist, titled “Are we in control of our own decisions?”

Students explore the resources at rapidbi.com/created/WriteSMARTobjecti ves.html create two goals for themselves for next semester.

Prepare for class discussion.

30 minutes

P 207, P 232

Document how these are SMARTER goals.

30 minutes

P 215, P 232

P 213, P 232

7-2 .

CHAPTER OPENER Chapter 7 introduces students to the topic of management. Students explore managerial skills, including: • technical skills.

• interpersonal skills.

• decision-making skills.

• conceptual skills.

• time management skills.

The functions of management are broken into two separate sections: 1) planning, strategic management and organizing and 2) leading and controlling.

Key chapter concepts include: • goal setting.

• how to do a SWOT analysis.

• organizational structures.

• leadership traits and styles.

• performance management.

• corporate culture.

DETAILED LECTURE OUTLINE I.

The Foundations of Management A. In what ways do managers apply technical, interpersonal, decision-making, and conceptual skills to business?

B. Business Management 1. What is management?

C. The Skills of Successful Managers 1. What skills should a manager have?

2. Technical Skills 3. Interpersonal Skills 4. Decision-making Skills 5. Conceptual Skills 6. Time-Management Skills II. The Functions of Management: Planning, A. What strategies do managers use to reach the corporate vision and keep the company on task?

B. Strategic Planning 1. Why do managers need to plan?

C. Vision and Mission Statement 1. What defines the direction of a business?

2. What’s the difference between a vision and a mission statement?

3. What makes an effective mission statement?

4. What are some benefits of a well-defined vision and mission statement?

D. SWOT Analysis 1. How does the management team begin to move the company toward achieving the vision for the company?

2. What does the acronym SWOT stand for?

3. What happens after a good SWOT analysis?

E. Tactical and Operational Planning 1. How does management decide how to execute the strategic plan?

7-3 .

2. How is the tactical plan translated into instructions for employees Contingency Planning 1. What if unforeseen events occur?

2. How can planning help companies weather such unexpected events?

III. The Functions of Management: Organizing A. Organizational Structures 1. How do managers put their plans into action?

2. How do companies document the structure of the organization?

3. How is power distributed in an organization?

4. What are the pros and cons of vertical organization?

5. What are the pros and cons of horizontal organization?

B. Changing Structures 1. Does a company’s organizational structure ever change?

C. Alternative Organizational Structures 1. What is matrix organization?

2. What is an inverted organization?

3. What organization works across multiple companies?

IV. The Functions of Management: Controlling A. Controlling to Stay on Course 1. Why does a company need to adapt to stay on course?

B. Control Strategies 1. How is performance in moving toward the corporate vision measured?

2. Are financial measures the only tools for assessing performance?

F.

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.

7-4 .

SUPPLEMENTAL ACTIVITIES

Supplemental In-Class Activity 1 7-1 SWOT-ing Wal-Mart Activity Overview: This activity allows the class to create a SWOT analysis for a company with which everyone is familiar. They can see how top executives begin to develop strategic plans.

Time Limit: 30 minutes What to Do: • •

• •

Divide the class into groups or allow students to pair up.

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, Wal-Mart. (If students are not familiar with Wal-Mart, use another large company such as Nike, or Coca-Cola.)

Ask each group to list and record at least four internal strengths, internal weaknesses, external opportunities, and external threats for the company chosen.

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, try to identify at least one important strength, weakness, opportunity, and threat that should be included in the strategic plan and develop a strategic goal for that item.

Supplemental In-Class Activity 3 7-2 How Do Your Goals Stack Up? Activity Overview: This activity is designed to help students understand the connection between long-term, intermediate, and short-term goals.

Time Limit: 30 minutes What to Do: 1.

Ask student to write down one or two of their long-term goals, focusing on the five-year plus horizon. (10 minutes.)

2.

Ask students to write down one or two of their intermediate goals – focusing on a one- to five-year horizon – that may help them achieve their long-term goals.

3.

Ask students to identify one or two short-term goals – covering a range of less than one year – that may help them to achieve their intermediate goals.

7-5 .

Don’t Forget: Remind students that the achievement of short-term goals can support the achievement of intermediate goals, which can ultimately support long-term goals.

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.

7-6 .

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. (Functions of Management, pgs. 212-217) 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 time management 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. (Managerial Skills, pgs. 210-211) Decision Model: Ask your students to create a graphic to illustrate the 5 stages of decision making, using their computers.

Have them submit the graphic (with detailed explanation) for a grade. (Decision Model, pgs. 210) Time Management PowerPoint: Have your students develop a 10 slide presentation on time management using at least the 4 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, email, and telephone number as “proof” of the successful completion of the presentation. (Time Management, pgs. 210) 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 their 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.) (Strategic Plans, pgs. 212) 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 located 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.

(Tactical/Operational Plans, pgs. 215)

7-7 .

BIZSKILLS: Plan for Success Covers material in Chapter 7

Available at: mybizlab.com

At the end of this exercise, your students should be able to answer the following questions: 1.

Why is a mission statement important to an organization?

2.

What takes place at the various levels of planning?

3.

What is a SMART goal?

4.

How are different planning tools used?

7-8 .

ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. b 2. b 3. b 4. a 5. d 6. d 7. a 8. b 9. b 10. d True/False 1. False 2. True 3. False 4. True 5. False

Critical Thinking Questions: Suggested Answers 1.

Answers will vary, depending on the student’s individual experience. However, they should identify positive traits for a good manager as good communicator, leader, motivator, good technical skills, knowledgeable about the business/industry/product, good decision-maker, and someone who can visualize a problem and understand what’s necessary to solve it. 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 lazy, poor in communication, unable to delegate, lacking in knowledge, or a person who shows favoritism of select employees or who takes credit for other’s work.

2.

Answers will vary depending on each particular school’s facilities, but should include discussion of contingency plans 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 that are seen as most vital to an organization during a crisis.

3.

Answers will vary. Note that of the traits listed, determination, inspiration, honesty, self-confidence and competence are all associated with leadership in the chapter.

4.

Answers will vary depending on the student’s individual skills. When students are answering this question, be sure to refer them back to the skills mentioned in the text: technical skills, interpersonal skills, decision-making skills, conceptual skills, and time-management skills.

5.

As projects become more complex, there are more areas in which things can go wrong. Large software projects can still use Six Sigma, a statistically based, proactive, long-term process designed to examine the overall business process and prevent problems. To achieve the “Six Sigma standard,” a business must not allow more than 3.4 defects per million opportunities. Some tools and techniques that might help include process optimization tools, that are used to help design more efficient workflows, and statistical analysis tools, which help to analyze data more effectively.

7-9 .

Team Time On a Mission 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.

2.

3.

4.

Mission statements need to be short and sweet.

Mission statements should be focused and to the point.

Mission statements need to be about customers.

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.

2.

3.

The mission statement provides a point of difference within the industry. Therefore, it needs to be distinctive.

The stakeholder analysis needs to be focused.

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 Corporate Social Responsibility Assessing Social Responsibility 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 labor, which means that the organization has to conduct independent audits of their suppliers on a regular basis.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 7 Web case and exercise, visit www.mybizlab.com.

7-10 .

Focus On Toyota: The Toyota Way of Management Answers to Web Case Discussion Questions 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 own skills as well as the skills of their employees.

Video Case Solution To access the Chapter 7 video case and exercise, visit www.mybizlab.com.

Nantucket Nectars: The Juice Guys on Organizing Answers to Video Case Discussion Questions 1.

Nantucket Nectars has a flat organizational structure. The company is departmentalized by function. It adopts the team approach to decision-making and encourages internal communications up, down, and across the organization.

Although all employees are encouraged to give their input and feedback, centralization is used for the majority of decisions, and then communicated to people in the field.

2.

Nantucket Nectars started out with only a handful of people doing everything and evolved to a team of specialists with specific jobs. As the company grew, so, too, grew the need for structure. Today, the company has 40 full-time employees, with over 250 sales representatives and distributors covering 50 states and several foreign countries. As a result, a formalized organizational chart now exists.

3.

Management at Nantucket Nectars holds regular Tuesday meetings to keep people informed about the company on a formal level, and also to give employees an opportunity to stay connected with each other on a personal level.

Nantucket Nectars keeps their remote offices in the loop using computers, specifically an Internet system that gives internal information to whomever needs it.

4.

Managers appear to have adopted a democratic leadership style, in which authority is delegated to subordinates and participation is encouraged between managers and employees. The company encourages teamwork and fosters a laid-back organizational culture.

7-11 .

Up for Debate Points Pro: The new manager should be discharged because she has been given ample opportunities to adjust to the work environment, but refuses to do so. The person-organization fit is poor, and it would be best for the manager—and for the company—if she seeks employment elsewhere. Furthermore, since the staff is complaining about her, good employees might leave for other opportunities. Nantucket Nectars’ human resources department should do an exit interview with the manager to determine the source of her difficulties in the workplace, while offering outplacement services to assist her in finding a new job.

Con:

The new manager should not be terminated. Time and money have been spent in training and counseling the manager. A better way of handling the situation is to give her another chance to prove herself, perhaps by transferring her to another department or sending her to a satellite office. The problem might not be isolated to the manager. Instead, resistance by existing employees toward the new manager might be at the root of the conflict. So the work group dynamic might need to be addressed before the manager is discharged.

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CHAPTER 8: MOTIVATION, LEADERSHIP, AND TEAMWORK QUICK REFERENCE GUIDE

IN-CLASS ACTIVITIES Activity

Description

Time Limit

Team Time: Forming a Successful Team Ethics and Corporate Social Responsibility: Ethics in Teamwork Web Case: Focus on Toyota: Teamwork and the Prius Video Case: Kingston Technology: Big Company, Family Environment

Students work as a team to design a new flip-flop sandal.

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?

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

Students watch and discuss the chapter video.

30 min.

IE Page Reference P 253, P 261

30 min.

P 251, P 262

30 min.

P 253, P263 P 242, P 263

Supplemental In-Class 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.

Video Run Time: 13:30 Question Time: 30 min.

30-60 min.

Supplemental In-Class Activity 2: Intrinsic or Extrinsic?

This activity allows students to practice listing motivating factors and classifying them as intrinsic or extrinsic.

This activity asks students to express their opinions about important job criteria and compare these with other students.

30 min.

P 239

30 min.

P 238

Supplemental In-Class Activity 3: What Are You Looking for in a Job?

P 250

8-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: Testing 1, 2, 3

Students go to: http://testyourself.psychtests.com/and take personality tests.

Students go to: http://www.hbs.edu/leadership/database/ index.html and look at similarities and differences among leaders.

Answers to the discussion questions in the activity.

Web Exercise: Great American Leaders

Web Exercise: Drive

Web Exercise: More Motivation

Web Exercise: Evaluating Team Dynamics

At-Home Completion Time 60 minutes

IE Page Reference

A brief report on the similarities and differences among five different leaders.

1 to 2 hours

P 246, P 263

Students visit the RSA.org site and view the talk given by Dan Pink on intrinsic motivation entitled Drive. View an animated version of the talk at youtube.com/watch?v=u6XAPnuFjJc. Students review the set of motivational theories described on changingminds.org/explanations/theori es/a_motivation.htm. Select three theories that were not discussed in the chapter and compare them to the motivational theories presented.

Brief paper describing the presentation in terms of what motivates the student in school and in free time.

Report on how theories are similar and how are they different. Have students explain how using these theories change how employees were treated in a workplace.

1 hour

P 239, P 263

30 minutes

P 243, P 263

Students consider a team that they are part of and complete the Team Dynamics Analysis form at metarasa.biz/tda

Submit the form and examine the report presented. Discuss the questions at the end of the form to examine problems and improve relationships.

60 minutes

P 250, P 263

P 246, P 263

8-2 .

CHAPTER OPENER Chapter 8 covers motivation, teamwork and leadership. Students are given a historical overview of motivation theories and are introduced to new theories under development. Next, the application of motivation theories in the workplace is presented, including how to motivate employees using Vroom’s expectancy and strengthbased management. Then, the chapter turns to the topic of leadership – in particular, exploring the traits and characteristics that make a good leader.

Finally, we review teamwork: • what managers can do to create a good team.

• the challenges teams encounter on a regular basis • how students can be good team members.

DETAILED LECTURE OUTLINE I.

Motivation: The Basics A. How do motivation and work environment encourage “flow?”

B. Personal Motivation 1. What drives you to do your personal best?

2. Flow C. Motivating Employees 1. How does a work environment encourage “flow”?

2. What are the benefits of keeping employees motivated?

D. Theories of Motivation 1. What are the different theories for what motivates people?

2. What is Maslow’s Hierarchy of Needs?

3. What is McClelland’s “Three Needs” Theory?

4. How does Herzberg’s Motivator-Hygiene Theory explain motivation?

E. Applying Motivational Theories 1. Do managers actually use theories of motivation?

2. What can a manager do to enhance employee motivation?

3. What other motivational models exist?

4. What are the Theory X and Theory Y models?

5. How is the Theory Z model different?

6. Do any motivational models describe an individual person’s motivation?

7. What is the approach of strength-based management?

F. Evolution of Motivational Theories in Business 1. Have motivational theories changed?

2. What motivational theories fit the modern workplace?

II. Leadership 1. What styles of leadership exist?

2. What are democratic and autocratic leaders like?

3. What are affiliative leaders?

4. What makes a leader a visionary?

A. Traits of Leadership 1. What are the traits of great leaders?

2. Are there systems for measuring leadership potential?

8-3 .

B. Leadership and Corporate Culture 1. How does the management’s leadership style influence the work environment?

2. How does a leader set the corporate culture?

III. Teamwork A. The Advantages of Teams in the Workplace 1. What is the value of using teams in the workplace?

B. The Challenges of Teams in the Workplace 1. Do teams always improve the development process?

C. Best Practices for Teams 1. What kinds of practices set the stage for the best team performance?

2. How do managers form the best teams?

3. What are cross-functional teams?

4. What effect does technology have on team design?

5. How can social media tools like wikis help modern teams?

6. Is designing a strong virtual team the same as creating a strong face-to-face team?

D. Your Role on the Team 1. How can I be a valued team player?

2. What habits will give me the best chance to contribute to a team?

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.

8-4 .

SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity 1 8-1 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: •

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

• • • •

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).

1- Two 100 pound tanks of oxygen. Oxygen to breathe would be the most pressing need for survival.

8-5 .

2 - 5 gallons of water. Water is essential to all life.

3 - Stellar map (of moon's surface). This would be your primary means of navigation.

4 - Food concentrate. A good source of food and efficient way to carry food is in concentrated form.

5 - Solar-powered FM receiver-transmitter. FM needs short range and line of sight. Needed to talk to mother ship.

6 - 50 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 8-2 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: • •

Ask students to list as many motivating factors as they can in regard to attending college, earning good grades, and earning a degree.

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 class is having problems, ask them if

8-6 .

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.

Supplemental In-Class Activity 3 8-3 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.

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

2.

Divide the class into four-member teams.

3.

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)

4.

Reassemble the class as a whole and have each group share their findings with the class. (10 minutes)

5.

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.

8-7 .

ENHANCING THE ONLINE COURSE Mindmap: Have your students create a “mindmap” illustrating what motives 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?” (Personal Motivation, pg. 235) 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. (Maslow’s Hierarchy, pgs. 237) 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 2 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 Theories, pgs. 237-241) 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. (Intrinsic/Extrinsic motivation, pg. 239) Alphabet Essays: Ask your students to write three ½ 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. (Theories of Management, pgs. 250-253) 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. (Vroom’s Model, pgs. 241) 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 8.3. Ask the students to write a paragraph explaining how each leader matches the characteristics discussed in Table 8. 3 (Leadership Categories, pgs. 247)

8-8 .

BizSkills: Team Management Covers material in Chapter 8

Available at: mybizlab.com

At the end of this exercise, you 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?

8-9 .

ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. d 2. d 3. a 4. b 5. c 6. d 7. a 8. d 9. a 10. c True/False 1. False 2. False 3. True 4. True 5. False

Critical Thinking Questions: Suggested Answers 1.

Answers will vary. Different theories may apply to different situations. A manager can apply an abstract theory to the day to day management tasks using a combination of extrinsic and intrinsic motivators.

Extrinsic motivators include pay, promotion, and verbal praise. Intrinsic motivators are outside the set of factors under a manager’s control because they are internal to each individual employee. These motivating influences are based on a person’s actual interest in his or her work and stem from the sense of purpose or value a person derives from the work being done. But some steps, such as keeping employees engaged in the process, removing distractions so employees can work well, and sparking creativity may be helpful.

2.

There are no fixed rules. Based on our knowledge of human psychology, it is not a strong position to expect leadership to make extreme changes in management style. But a leader who inspires loyalty and credibility can often apply their style to a wide variety of challenges.

3.

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.

4.

This is will an individualized response. Students might consider how they might challenge the process, inspire a shared vision, model the way, exhibit emotional intelligence, and/or enable others to act.

8-10 .

5.

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 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 Corporate Social Responsibility Ethics in Teamwork 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 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.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 8 Web case and exercise, visit www.mybizlab.com.

Focus On Toyota: Teamwork and the Prius Answers to Web Case Discussion Questions 1.

They 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 coworkers; 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.

2.

Toyota’s ability to foster a corporate culture that enhances individual creativity and teamwork value was critical to the success of this team project. It promoted a visionary and affiliative leadership style.

3.

Groupthink still might occur in a novel and creative project. If one set of hypotheses becomes 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

8-11 .

for why the team was successful. They might 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.

Video Case Solution To access the Chapter 8 video case and exercise, visit www.mybizlab.com.

Kingston Technology: Big Company, Family Environment Answers to Video Case Discussion Questions 1.

To enhance motivation, Kingston managers create an atmosphere in which all employees feel valued and trusted. Managers, even at the highest levels, communicate regularly with employees and do not separate themselves from one another based on rank. In addition, the company participates in profitsharing programs with its employees, offering them quarterly bonuses.

2.

Managers at Kingston use a variety of styles of leadership in order to reach all employees. However, the most common styles appear to be “affiliative”, in which leaders promote harmony, are empathetic, and boost morale, and “democratic”, in which leaders are good listeners, team workers, collaborators, and influencers.

3.

By keeping his office in the center of the business and not moving into a corner office, CEO John Tu shows that he does not hold himself above his employees. He is accessible to them, communicates with them, and considers himself one of them, fostering loyalty and trust among Kingston workers.

4.

According to the video, the management of employee motivation and the morale of the workforce helps to determine whether a business succeeds or fails. Motivated employees are more productive employees.

Up for Debate Points Pro: Although providing a work environment that is social and fosters loyalty and trust is ideal, money is enough to keep most people motivated. Profit-sharing programs should attract the cream of the crop employees and motivate them to stay with the company. Bottom line: Anyone can be bought and will to do a good job, if the price is right.

Con: Although money is an important part of motivating employees, it is also critical to create a work environment that is social and fosters loyalty and trust. Employees who have the opportunity to be all they can be and truly feel successful are more motivated than employees who are working only for a paycheck.

Bottom line: Motivation comes from within.

8-12 .

CHAPTER 9: HUMAN RESOURCE MANAGEMENT QUICK REFERENCE GUIDE

IN-CLASS ACTIVITIES Activity

Description

Time Limit

IE Page Reference

Team Time: Seeing Both Sides

Students debate the effectiveness of WalMart’s HR practices.

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.

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

Students watch and discuss the chapter video.

30 min

P 281, P 294

30 min.

P 270, P 294-295

30 min.

P 272, P 295

Video Run Time: 8:44 Question Time: 30 min.

30 min.

P 275, P 295

20 min.

P 269

25 min.

P 288

Ethics and Corporate Social Responsibility: Ethics of Interviewing Web Case: Focus on Toyota: The T-Ten Program Video Case: Park Place Entertainment: Getting Everyone on Board

Supplemental In-Class Activity 1: Mopping the Floor Supplemental In-Class Activity 2: Résumé Workshop Supplemental In-Class Activity 3: Organize or Die

Students prepare a job description for the job of janitor Students prepare a résumé to bring to class.

In class, students exchange feedback on their resumes.

Students debate the pros and cons of joining a union.

P 266

9-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

At-Home Completion Time

Team Time: Seeing Both Sides

Students research both good and bad Human Resource practices at Wal-Mart to prepare for an in-class debate on the effectiveness of WalMart’s practices.

Students use the Internet to compare and contrast the human resource practices of three large companies as reflected in their annual reports.

Students use the Internet to find online training sites for driving a fork lift, using Microsoft Excel, and Project Management.

Debate preparation materials.

30 min.

A brief report answering the questions in the activity.

Prepare for discussion on which types of training would be better done faceto-face.

Answers to the discussion questions in the activity.

A brief report answering the questions in the activity.

60 minutes

P 266, P 295

60 minutes

P 273, P 295

30 minutes

P 286, P 295

30 minutes

P 278, P 295

A report giving the student’s opinion on the issues reported.

60 minutes

P 270, P 295

Web Exercise: Analyzing Annual Reports Web Exercise: Online Training

Web Exercise: Organized Labor

Students explore the AFL-CIO website: http://www.aflcio.org

Web Exercise: Benefits Packages

Students search websites Research companies that use benefits packages as a way to make their employees feel cared for and to retain a high percentage of employees. Consider both small and large businesses.

Students go to the ACLU Action Center website: http://action.aclu.org and get information about current legal issues in HR.

Web Exercise: Legal Matters

IE Page Referenc e P 281, P294

9-2 .

CHAPTER OPENER Human Resource Management is a broad topic, covering subjects such as determination of staffing needs or termination policies and procedures. Topics include: • motivation.

• compensation.

• training.

• performance management.

• job analysis.

• recruitment.

• employee relations.

• diversity.

The chapter also reviews labor-management relations and employment law.

DETAILED LECTURE OUTLINE I.

Human Resource Management A. What processes are involved in human resource management?

1. Human resource management (p. 000) covers every aspect of managing the people resources in a company.

B. Managing Staffing Needs 1. How does planning for staffing needs change over the evolution of a company?

2. How does a company determine whether it needs more employees?

3. How do companies identify the exact jobs they need to staff?

4. Once a job is well defined, how does HR find the best candidates to interview?

5. How do social networking sites impact recruiting?

6. What are some challenges in recruiting?

C. Hiring 1. What happens in the hiring process?

2. What legalities must be considered before hiring?

II. Training and Evaluating Employees A. Training Methods and Requirements 1. What kind of training do new employees receive?

2. What other training is required of new and present employees?

3. What kind of impact has technology had on training?

4. Do managers need training?

B. Performance Appraisals and Alternatives 1. Why are performance appraisals necessary?

2. Are there problems with performance appraisals?

3. What alternatives exist for performance appraisals?

III. Compensation, Scheduling, Promoting and Terminating Employees A. What are the main components of compensating and scheduling employees?

B. Compensation Strategies 1. Are all employees paid in the same way?

2. What types of retirement plans do companies offer employees?

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3. What types of other financial incentives do companies offer employees?

C. Benefits 1. What are non-cash compensation payment structures?

2. What are work/life benefits?

3. What are some trends in employee benefits?

D. Alternative Scheduling Arrangements 1. What work arrangements are possible for those who choose not to work a traditional workweek?

2. What if employees want to work from home?

E. Contingent Workers 1. Why does a company hire temporary workers?

2. Why would someone want to be a temporary worker?

F. Promotions 1.

How can employees increase their level of responsibility in a company?

2. Do promotions always move you into management positions?

G. Terminating Employees 1. Why do companies lay off workers?

H. Retirement 1. Is there a set age when employees retire?

IV. Managing Workplace Diversity A. Benefits and Challenges of Diversity 1. Why has the modern workplace become such a diverse one?

2. How is a diverse workforce beneficial?

3. What issues do companies face while managing diversity?

4. How can employees improve their understanding of each other’s differences?

V. Labor and Union Issues A. What are the objectives, structures, and future of labor unions in the global business environment?

B. Organized Labor 1. What is a labor union?

2. What are the objectives of organized labor?

3. How are labor unions structured?

C. Collective Bargaining 1. What is the collective bargaining process?

2. What happens if an agreement cannot be reached through collective bargaining?

3. What happens when negotiations break down?

D. The State of Labor Unions 1. Are labor unions still effective today?

2. What is the future of unions and labor-management relations?

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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SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity 1 9-1

Mopping the Floor

Activity Overview: Students prepare a job description for the position of janitor.

Time Limit: 30 minutes What to Do: • • •

•

Divide students into groups of four or five.

Refer students back to the definition of job description on page x.

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).

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 Homework/In-Class Activity 2 9-2

Résumé Workshop

Activity Overview: Students prepare and give feedback on résumés.

Time Limit: 20 minutes What to Do: • • •

Place students into dyads of two students each. If you have an odd number of students in your class, a group of three is okay.

Students should exchange resumes and provide feedback on the organization and appearance, as well as content of the resume.

Remind students that spelling, grammar, punctuation, and capitalization are particularly important on a resume.

Don’t Forget: Students will need to prepare a resume in advance. You can select a job that you think might interest most students. Some instructors clip employment advertisements from the local newspaper.

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Wrap-Up: Remind students that employers often decide who to interview (page 000) based on the content and appearance of their resume.

Supplemental In-Class Activity 3 9-3

Organize or Die

Activity Overview: Debate on the pros and cons of joining a union.

Time Limit: 25 minutes What to Do: • • • •

Divide the class into groups of four or six.

Tell the group that the president of the AFL-CIO, John J. Sweeney, repeatedly told his followers that they had to “organize or die”.

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?

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. The National Labor Relations Act (also called the Wagner Act) specifies that unions are legal and created the National Labor Relations Board. The LaborManagement Relations Act (also known as the Taft-Hartley Act) protects management from unfair practices by unions, and allows workers to decertify (dissolve) a union if they choose. Finally, the Labor-Management Reporting and Disclosure Act (or the Landrum-Griffin Act) implemented controls on union dues and required unions to report financial statements, in an effort to eliminate corruption within unions.

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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. Ask students to post their graphics in the HR Gallery―a blog space online. (HR Functions, pg. 265) 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. (Job Description/ Analysis, pgs.

266) 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. (Hiring Resources, pg. 265) 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 Technology, pg. 267) 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. (Hiring Process, pg. 269) 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. (Interview Questions, pgs. 269) 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.

(Hiring Laws, pgs. 270) Training Types: Have your students list and define each type of training, including diversity training. Post the results on the discussion board. (Training, pgs. 271-276)

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BizSkill: Hiring a New Employee Covers material in Chapter 9

Available at: mybizlab.com

At the end of this exercise, you 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 resumes?

4.

How do I conduct a candidate interview?

5.

How can the art of negotiation benefit my hiring practices?

BizSkill: Firing an Employee Covers material in Chapter 9

Available at: mybizlab.com

At the end of this exercise, you should be able to answer the following questions: 1. What is the best approach to delegating for most circumstances?

2.

When an employee do not adequately perform a clearly defined task, what’s the best way to handle this situation?

3.

Difficult conversations, such as those involving an individual’s poor performance or a personal conflict, are best handled in which manner?

4. The “SMART” acronym that describes how to develop goals is an abbreviation for which characteristics?

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ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. b 2. a 3. c 4. a 5. a 6. b 7. b 8. d 9. b 10. d True/False 1. False 2. False 3. True 4. True 5. True

Critical Thinking Questions: Suggested Answers 1.

Good human resource management is useful to all employees; it will ensure that all hiring, training, motivating, evaluating and compensating is done in the best interests of the employee and the organization as a whole. Human resource management is also important in ensuring that diversity issues, work/lifestyle preferences and global business considerations are properly addressed.

2.

Answers will differ depending on student experience with training.

3.

Answers will differ depending on student experience with training.

4.

Answers may vary depending on the student’s opinions, but despite declining numbers, labor unions continue to be influential in many industries, as well as in other countries. Some current issues and considerations might include the fact that when multinational corporations make decisions to move production abroad, there might be a negative impact on local and international workers. Immigration is another issue affecting unions as immigrant workers are crossing borders, threatening to take jobs traditionally supported by labor unions.

5.

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 work/life benefits such as flexible hours, ability to work from home, on-site child care, etc.

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Team Time Seeing Both Sides 1.

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 Corporate Social Responsibility Ethics of Interviewing 1.

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.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 9 Web case and exercise, visit www.mybizlab.com.

Focus On Toyota: The T-Ten Program Answers to Web Case Discussion Questions 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 their own service employees.

2.

Apprentice training is important for electrician, 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 their 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

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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.)

Video Case Solution To access the Chapter 9 video case and exercise, visit www.mybizlab.com.

Park Place Entertainment: Getting Everyone on Board Answers to Video Case Discussion Questions 1.

To attract desirable job candidates, Park Place relies primarily on traditional channels, such as on-site employment centers, advertising, the Internet, and, most importantly, a system of referrals. When labor markets dry up, they turn to their innovative “Adopt a Town” program to help struggling near-by communities.

2.

Like most places, Park Place’s supervisors assess those employees for whom they are directly responsible and provide feedback on the effectiveness of their performance. They also go one step further by giving each employee a say on how they should be managed. The company's 360-degree program turns performance reviews into a full circle process, where employees get the chance to assess their supervisors as well.

3.

For larger companies, the key advantage of a centralized HR organization is that it helps manage recruiting activities more closely. For example, open positions can be advertised and applicants’ résumés screened in an efficient manner, rather than dealing with a selection process scattered across units.

One disadvantage to centralization is that it requires each unit to submit openings to headquarters, and then wait to get résumés back for screening. Another disadvantage is that each unit manager will only see those résumés that have been screened and forwarded to him or her, possibly missing out on other qualified candidates.

4.

To minimize turnover, an HR organization can build employee growth opportunities within the organization. This can be done through recruitment, training, and management programs—for example, by grooming employees for more responsible jobs or placing an emphasis on promotion from within. In addition, HR may look at offering special recognition or incentives to encourage employee retention. Finally, HR might conduct periodic internal surveys to better understand those factors contributing to turnover.

Up for Debate Points Pro: Rehiring retirees on a temporary basis is a good idea. These individuals are already familiar with the organization, its policies and procedures, and its customers, and thus can be productive more quickly than new hires. Also, retirees may be more receptive to doing temporary or contract jobs than new hires.

Con: Retirees may not offer a ready supply of labor on an on-call basis, nor be able to handle the heavy demands of a peak period. Also, retirees may not be as flexible about hours or positions as people who

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are accustomed to holding temporary jobs. Finally, because they might have been out of the workforce for a while, retirees may not be able to adapt to the current way of doing things.

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CHAPTER 10: BUSINESS TECHNOLOGY QUICK REFERENCE GUIDE IN-CLASS ACTIVITIES Activity

Description

Time Limit

Supplemental In-Class Activity Ice Breaker: IT Devices

This activity asks students to come up with a list of

20 min.

IE Page Reference P 297

30 min.

P 316

30 min.

P 309, P 320

30 min.

P 298

Video Run Time: 12:11 Question Time: 30 min.

30 min.

P 307, P 323

30 min.

P 298

1.5 hours

P 306

30 minutes

P 308

Team Time: The Winds of Change

Ethics and Corporate Social Responsibility: Computer Hacking: A High Price to Pay Web Case: Focus on Toyota: A Data Debacle: MIS to the Rescue Video Case: Boeing Satellite Systems: Orbiting the Information Superhighway Supplemental In-Class Activity 1: Ice Breaker: IT Devices

Supplemental In-Class Activity 2: The Art and Science of Point and Click Research Supplemental In-Class Activity 3: Web Site Review

Supplemental In-Class Activity 4: Whose Business is it Anyway?

technological devices that reflect the many ways in which the class as a whole creates, stores, exchanges, and uses information.

Students work in groups to determine what innovation in business technology will have the most impact in the next year, five years, or ten years Students discuss a case about two twenty-one-year olds who were arrested for attempting to hack into a Lowe’s computer database.

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

Students watch and discuss the chapter video.

This activity asks students to come up with a list of

technological devices that reflect the many ways in which the class as a whole creates, stores, exchanges, and uses information.

Students research topics using a variety of search engines to determine the differences among them Students identify merchandising websites that work well and create a list of characteristics for good websites. (This activity can also be done at home on a discussion board.)

Students debate employee privacy issues.

P 297

10-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: WikiLeaks

Students visit the WikiLeaks Web site and select two of the most current leaks posted.

Web Exercise: To Censor or Not to Censor Web Exercise: Global Marketing

Students check the web for information about the Golden Shield of China.

A brief paper evaluating the value of these pieces of information being made public.

Answers to the discussion questions in the activity.

Web Exercise: Data Breach!

Web Exercise: Meeting Online

Students research online language programs and discuss the development of bilingual employees.

Students visit the BMW Web site and select three different countries. Investigate the websites of each.

Students evaluate different remote conferencing websites.

At-Home Completion Time 30 minutes

IE Page Reference

30 minutes

P 315, P 322

Answers to the discussion questions in the activity.

30 minutes

P 314, P 322

Answers to the discussion questions in the activity.

30 minutes

P 309, P 322

Answers to the discussion questions in the activity.

45 minutes

P 314, P 322

P 297, P 322

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CHAPTER OPENER Chapter 10 introduces students to the basics of business technology. Students will explore: • the roles of the Chief Information Officer (CIO) and the Information Technology (IT) departments in organizations.

• how information technology, systems and data are interrelated within a business.

• the major types of hardware, software, and networks used in business.

• the risks and benefits of technology in the workplace for both domestic and international businesses.

DETAILED LECTURE OUTLINE I.

Information Technology Basics A. What are the functions of a company’s chief information officer and information technology department?

B. IT Professionals and the IT Organization 1. Information technology (p. 297) is the design and implementation of computer-based information systems.

2. A company’s chief information officer (p.297) is the executive in charge of information processing, including systems design and development and data center operations. He or she is also responsible for the following: 3. What happens in an IT department? a. The IT department consists of a number of professionals responsible for everything from C. Information Systems 1. How are information technology, information systems, information, and data interrelated within a business?

2. What’s an information system?

3. What is the difference between data and information?

4. How can collecting data help an organization?

5. How can companies make sense of all their data?

II. Computer Systems in Business A. How are major types of hardware, software, and networks used in business?

B. Hardware 1. Is business computing the same as personal computing?

2. What role do mobile devices play in a modern setting?

C. Software 1. What analytical software is common in business?

2. What software applications help manage the details of a business effectively?

3. What communications technology is commonly used in businesses?

D. Networks 1. Why are business networks created?

2. What types of networks are in the workplace?

3. Do networks come in different sizes?

4. Is the Internet (p. 000) just a network?

III. The Benefits and Challenges of Technology A. What are the benefits and risks of technology in the workplace, taking into account safety, creativity, communication, productivity, privacy, and ethics?

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B. Benefits and Challenges for Employees 1. What are the benefits and challenges of IT for employees?

2. Has technology increased productivity?

3. How do intellectual property laws affect knowledge workers?

4. How does technology affect employee privacy?

5. Can technology support ethical conduct?

C. Benefits and Challenges for Management 1. What risks does technology pose for management?

2. Does keeping pace with technology put a financial burden on business?

3. What are the pros and cons of conducting business online?

IV. The Global Impact of Business A. What is the impact of technology on the international business environment based on off-shoring, outsourcing, and alternative methods of communication?

B. Off-Shoring 1. How has technology impacted international business?

2. What is the difference between out-sourcing and off-shoring?

C. The International Business Environment 1. How does technology change marketing in a global marketplace?

2. How can technology redefine boundaries of business cooperation?

3. How is technology affecting the world’s production and design centers?

D. Technology Creates a Global Village 1. Where will the next generation of workers live?

2. What skills will be expected in the global workplace?

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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SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity 1: Ice Breaker 10-1 IT Devices Activity Overview: This activity asks students to create a list of technological devices that reflect the many ways in which the class―as a whole―creates, stores, exchanges, and uses information.

Time Limit: 20 minutes What to Do: 1.

Ask the class as a whole to brainstorm, coming up with a list of technological devices that they use in their personal lives, at work, or at school to create, store, exchange, and use information.

2.

Ask the class to comment on these questions: a. Do students (in the class as a whole) use more or fewer devices than what they expected prior to brainstorming? b. In what way(s) do you see your individual use of these devices changing in the coming year? c. In what way(s) have these devices impacted your personal lives, such as school, at the bank, while shopping, and so on? d. What problems have you encountered when using new technologies for communication purposes?

Don’t Forget: Some people are more technologically savvy than others. Many students will say they take advantage of every gadget possible, while others do not have Internet access at home. One major problem faced by both employers and students is bridging the gap in people’s knowledge of and comfort with technology.

Wrap-Up: Bring the activity to a close by reminding students that new technologies are always looming on the horizon and that no one can accurately predict how much IT will change and how this will affect our lives in the future.

Supplemental Activity 2 10-2 The Art and Science of Point-and-Click Research Activity Overview: Students learn how to use the web to conduct research more effectively.

Time Limit: 1 hour What to Do: •

Have students get together in groups of three and decide on a business-related research topic.

They should choose a topic that interests them, for example: o Business Implications of the War in Iraq

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•

•

•

o Labor Disputes in Professional Sports o Marketing Music Lessons to Parents of Young Children Have students research their topics using the following websites (each group member should use two sites): o Dogpile (www.dogpile.com) o Excite (www.excite.com) o Ask (www.ask.com) o Google (www.google.com) o Yahoo! (www.yahoo.com) o Librarians’ Internet Index (www.lii.org) Working as a group, answer the following questions about your collective searches.

1. Which sites were easiest to use?

2. Which sites offered the most helpful results? What specific factors made these sites better than the others?

3. Which sites offered the least helpful results? What were the problems?

4. Go to http://lib.berkeley.edu/TeachingLib/Guides/Internet/SearchEngines.html. Which search engine was recommended by the librarians at UC Berkeley? How did the librarians’ recommendations compare with your findings?

Compare group results in class.

Wrap-Up: Close the activity with a detailed look at the UC Berkeley website shown above. It offers a good overview of the different search engines, and identifies the difference between a search engine and a subject engine.

Supplemental In-Class Activity 3 10-3 Website Review Activity Overview: In this activity, students will identify merchandising websites that appear to work well; then, they will create a list of characteristics for good websites.

Time Limit: 30 minutes What to Do: • •

• •

Break the class into pairs of students. If there are an odd number of students, use one group of three.

Instruct students to find at least three good merchandising websites. (Remind students that a merchandising site is one that sells products to the general public: www.dell.com or www.ibm.com can be good places to start.)

Have students look through the sites and create a list of characteristics of good merchandising sites.

During the last 10 minutes of the activity, ask each group to identify a spokesperson. Go around the classroom and have students identify the characteristics of a good merchandising website.

10-6 .

Don’t Forget: This activity will need to occur in a computer lab or in a classroom setting with at least one computer for every two students. Alternatively, this activity can easily be adapted to a discussion board format. You can ask students to find two merchandising websites – one that is very good and one that is very bad. Students should provide a link to the site and describe why the site works well or poorly.

Wrap-Up: Remind students that, to some extent, the quality of a website depends on the type of equipment being used to access that website. If someone has a dial-up connection, and is trying to access a website that is graphics-heavy, the experience might be unsatisfactory. For someone with a faster connection, the site could be just fine.

Supplemental In-Class Activity 4 10-4 Whose Business Is It, Anyway?

Activity Overview: In this activity, students debate employee privacy issues.

Time Limit: 30 minutes What to Do: • •

•

Divide the class into six teams of no more than 10 people per team. If you are teaching a large lecture section, have the remaining students choose the “winners” of each debate.

Each team will be responsible for taking one side for one of the three topics below: o Should employers be allowed to use GPS devices to keep track of their employees’ whereabouts during work hours? (Such devices are currently available.) o Should employers routinely screen their employees’ e-mail? o Should an employer routinely record telephone conversations held by employees during work hours?

Have the teams pair off and debate each other, while the other students in the class determine the winners of each debate.

Don’t Forget: Students may not realize that these practices are routine in businesses today.

Wrap-Up: Conversation on these topics should be animated, but you can encourage additional discussion by getting students to talk about their perceptions of the situations that would require monitoring (for example, debt collection calls), and those where monitoring may be inappropriate (for example, a doctor talking with a patient.) Encourage students to think about the types of rules employers might create for each of the areas, and how those rules could be enforced.

10-7 .

ENHANCING THE ONLINE COURSE CIO Article: Ask your students to identify one CIO that has been interviewed recently in the media. (A good source for such interviews would be trade publications in the technology area which can be accessed through your online library.) Have the students review the interview for issues that fall under the different functions of a CIO as discussed in the text. (CIO, pg. 297) CIO Interview: Have your students identify one piece of new technology which could possibly benefit your institution. Have the students conduct online interviews with the CIO of your institution. (Be sure to get his/her permission first.) The students can use the list of questions in the text chapter (Top Ten Questions before Adopting a Technology), and then post the answers on the discussion board. (Top Ten Questions, pg. 304) Information Systems: Have students define: Information Systems; Management Information Systems; Decision Support Systems; Executive Information Systems; Database Management Systems; data mining, data warehousing. Ask students to find examples from organizations’ websites which are used as part of these technology-based systems. (Data systems, pgs. 299) Technology Types: Ask your students to define the roles of hardware, software, mobile devices, and networks in business today. Be sure to have them list all of the different types under each category. Once the lists have been posted to the discussion board, ask students to create a flow chart relating each of the types to each other. Post the results on a course blog – the Technology Gallery. (Technology Types, pgs.

304-305) Benefits vs. Challenges: Divide your online class into two groups. Assign “Benefits of Technology” to one group and “Challenges of Technology” to the other group. Have the groups develop short videos (using images from camera phones, animations, or PowerPoint slides) to be posted on the course blog page. Most office suite programs have the means to create and upload these features. There should be one project per group (a montage). Once all the projects have been posted, create a series of discussion questions. Students can post their answers to the discussion board for a grade. (Benefits of Technology, pgs 307-309) International Effects: Ask your students to identify at least seven implications of technology for business.

Have them use open source information to identify one example for each of the seven implications. Are some of the implications good for international and/or global business? Are some bad for international and/or global business? Have your students analyze the results and report on line. (International Business and Technology, pgs. 311-316)

10-8 .

BizSkill: Technology Direction Covers material in Chapter 10

Available at: mybizlab.com

At the end of this exercise, you should be able to answer the following questions: 1.

What is the role of the IT department in a modern business?

2.

How are corporate networks used and protected?

3.

How are databases and information systems used?

4.

What factors play a role in decisions regarding Internet bandwidth and operating system upgrades?

5.

How do IT managers contend with email privacy issues?

6.

What role does the IT department have in mobile computing?

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ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. d 2. a 3. a 4. a 5. d 6. d 7. d 8. b 9. d 10. a True/False 1. False 2. True 3. True 4. True 5. False

Critical Thinking Questions: Suggested Answers 1.

To span the “Digital Divide”, current projects have emphasized the use of laptops and free open source software. But smartphones (less expensive, more portable, easier to distribute, and more versatile) act as a mini-computer and portable digital device, as well as a phone. To take advantage of this technology, countries would need an infrastructure that supports widespread broadband penetration, as well as provision for necessary wireless security. Future-forward thinking might emphasize “green computing” and smart power management practices.

In addition to smartphones, we can see the use of iPads (and similar products), tablet PCs, subnotebooks and lost-cost WiFi-extending technologies.

2.

Digital natives have always experienced information in its digital form – traditional newspapers, radio stations, and phone books were never the primary way in which they searched for information.

Digital immigrants know how to use technology, but it was not their first experience in finding information. It is useful to check the range of experiences and ages of classmates to find a well supported answer to the rest of the question – merely offering opinion and bias is not a strong answer.

3.

Answers will vary depending upon student’s personal beliefs and feelings. But, universities and colleges always have an IT policy that dictates control and ownership of computer resources on campus. Emails that are sent using the college network are property of the college and can be provided to police or employers. If a web site or blog is established using college resources, yet misrepresents the goals of the institution, the college may find itself in conflict with a student.

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4.

If people perceive there will be no market for their talents, it will certainly impact the level of interest in technology careers in this country. Conversely, it could move less creative work out of country, leaving room for more creative, design-based positions in the United States. The decision of trying to stop such flow is a political one.

Given the ease of working at a distance, it is difficult to imagine the complete end of the process of outsourcing. The benefits include a more diverse workforce, the ability to conduct business throughout a full 24 hour day, and the insights gained about different markets and cultural styles.

5.

A CIO would require the hardware demands of the new upgrade, the specific features promised, and some data on the actual efficiency improvements seen in other companies that have made the transition. She would also want to speak with some customers that have already moved to see what (if any) unexpected interactions with existing software/ hardware have been encountered. Past experience allows the CIO to make a judgment call on the quality and support that will be afforded by the company selling the new upgrade.

Team Time The Winds of Change This exercise requires that students work together in teams to determine what innovation in business technology will have the most impact in the next year, five years, or ten years. Each group is likely to take a different approach to the problem, but it is useful to make clear that the process itself is an exercise in teamwork and to see if the findings of the team lend any insight as to the efficiency and creativity of the group. Teams should feel free to share the resources they used to collect specific data on the questions raised in part 2.

Ethics and Corporate Social Responsibility Computer Hacking: A High Price to Pay 1.

Lowe’s is responsible for maintaining the security of the personal information of their customers, but customers must also take responsibility for guarding their personal information and monitoring their credit on a regular basis. In today’s world, credit card companies also assume some responsibility for the safety of credit card information, since they are the ones who must absorb the cost of goods purchased with stolen credit card numbers.

2.

Consumers have to monitor their own statements and credit reports, but they also rely on notification from stores, credit card companies and/or credit agencies, to see if their card has been misused. When shopping online, customers should check to be sure they are on a secure website, as designated by a lock in the toolbar and a URL starting with https instead of http.

3.

Students will have different responses to this question. You might want to ask if there is anyone in the class who has had their identity stolen, and if there is anyone who hacks on a regular basis.

Ask them to debate this question. Note that there is not enough detail given in the case to determine why each hacker got such a different sentence.

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ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 10 Web case and exercise, visit www.mybizlab.com.

Focus on Toyota: A Data Debacle: MIS to the Rescue Answers to Web Case Discussion Questions 1.

Companies have to fight inertia―doing things the way they were done in the past. Implementing a new system requires expenditure of money and new training for employees. This can be threatening for people who have built careers on their expertise in “the old ways.”

2.

Because it could create usable reports, it highlighted a series of problems and areas for improvement that had been hidden.

3.

If all levels of management are willing to manage by data, information systems management can result in substantive gains. This requires an open mindedness and a willingness to challenge assumptions that the management team has lived with for a long time.

Video Case Solution To access the Chapter 10 video case and exercise, visit www.mybizlab.com.

Boeing Satellite Systems: Orbiting the Information Superhighway Answers to Video Case Discussion Questions 1.

Boeing Satellite Systems effectively uses information systems to keep the company on the cutting edge, save money in daily processes, and link employees and customers around the world. The company can collect, analyze, and disseminate information accurately and rapidly through the use of information systems; this provides a strong edge in its markets. IT also positions the company well to respond and adapt quickly to changes in both the satellite technology and the communications methodology that Boeing uses to develop it.

2.

Boeing uses portable training techniques such as CD-ROMs to save money in its operations. It also streamlines everyday processes to integrate data systems that immediately move the results from one work group directly to the next.

3.

All of the company’s proprietary information is integral to Boeing Satellite System’s ability to improve efficiency and productivity. Implementing technology in every aspect of their business helps enhance the technical skills of Boeing’s employees and allows them faster access to important data, which in turn, results in better performance and higher productivity.

4.

IT presents benefits and challenges for employees. One benefit is freeing people from monotonous or routine jobs, such as many factory jobs, through the use of industrial automation. This results in the

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opportunity to use people’s talents and abilities to more creatively. In addition, IT in the workplace leads to increased output from employees.

However, communications technology also can cause difficulties in the workplace. An overreliance on instant messaging, texting, and emailing over in-person communications can result in communication breakdowns. Also, a blurring between home and work can occur, as employees are using everything from computers to smart phones to gain access to work files.

Up for Debate Points Pro:

Monitoring software should be used to protect the company and prevent the misuse of data and other information resources. Monitoring software enables management to supervise the proper and productive use of employee time and company assets. In addition, to keep the work environment socially safe, the company can use monitoring software to identify and address abuses that could leave the company open to charges of harassment or other legal problems in the event an employee uses a company computer to create or circulate offensive communications.

Con:

Monitoring software should not be instituted, primarily because it is a violation of employee workplace privacy. Also, using monitoring software may foster a climate of distrust between employees and management. Finally, employees who fear surveillance may be reluctant to communicate freely, which in turn, can stifle innovation and creativity in the workplace.

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CHAPTER 11: PRODUCTION AND OPERATIONS MANAGEMENT QUICK REFERENCE GUIDE

IN-CLASS ACTIVITIES Activity

Description

Time Limit

Supplemental In-Class Activity 1: Ice Breaker: Are You Getting

This activity is designed to get students to think about the components of service quality.

25 min.

IE Page Reference P 325

Students work in groups to determine whether to

30 min.

P 329

Students work in groups to determine the best way to ship a company’s product.

30 min.

P 329 , P 348

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

30 min.

P 341, P 351

Students watch and discuss the chapter video.

Video Run Time: 13:52 Question Time: 30 min.

30 min.

P 343, P 351

Students create a Gantt chart that identifies their path to a college degree.

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

30 min.

P 339

30 min

P 341

Case study for In-Class Activity 3.

30 min

IM

What You Paid For? Team Time: To Outsource or Not to Outsource…That is the Question Ethics and Corporate Social Responsibility: Environmental Shipping Concerns Web Case: Focus on Toyota: Eliminating Waste, Just-In-Time Production Video Case: Managing Global Production: Body Glove

Supplemental In-Class Activity 2: Creating a Better Design for Subway Supplemental In-Class Activity 4: Using Gantt Charts Supplemental In-Class Activity 3: Case Discussion: JIT: Too Much of a Good Thing?

Supplemental Handout: JIT: Too Much of a Good Thing?

make or buy essential business supplies.

Students work in groups to improve the efficiency of a fast-food company’s facility layout.

P 330

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HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: Have it your Way Web Exercise: Greening of America

Students use the Internet to research five different companies that use mass customization.

Student research the kinds of environmental technologies that are being manufactured in the United States already.

Students use the Internet to research options in radio frequency identification.

Answers to the discussion questions in the activity.

Web Exercise: Efficiency in Production

Students use the Internet to research the Toyota Production System.

Web Exercise: Quality Control

Students use the Internet to research different methods of quality control.

Web Exercise: Radio Frequency Identification

At-Home Completion Time 30 minutes

IE Page Reference

Answers to the discussion questions in the activity.

30 minutes

P 344, P 351

Answers to the discussion questions in the activity.

30 minutes

P 337, P 351

A short paper describing the Toyota system and answering discussion questions in the activity.

A short paper comparing and contrasting two different quality control systems.

45 minutes

P 342, P351

60 to 90 minutes

P 343, P 351

P 335, P 351

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CHAPTER OPENER Chapter 11 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.

• 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.

DETAILED LECTURE OUTLINE I.

The Production of Goods and Services A. What are mass production, flexible production, and customer-driven production, and what are the benefits and challenges of each?

B. The Importance of Production 1. Why is the production of goods and services a critical component of any business?

2. How important is manufacturing in the United States?

C. Moving to a Service-Based Economy 1. How are services important to the U.S. economy?

D. The Global Production Landscape 1. How is U.S. manufacturing competing globally?

2. How does manufacturing affect the global economy?

II. Operations Management A. Determining Facility Location 1. What factors must businesses consider when determining where to locate their facilities?

2. Why is it important to consider utility supply when determining location?

3. Why is hazardous-waste disposal important?

4. What else impacts location selection?

5. What labor factors must a company consider?

6. How is an organization mindful of impacting living conditions in a community?

7. Does the government have a say in location?

B. Determining Facility Layout 1. Why is facility layout important?

2. How does facility layout affect production?

3. Are there different types of facility layouts?

4. Does facility layout affect employees?

C. Working with Suppliers 1. What is a make-or-buy decision?

2. How does a company decide which suppliers to use?

3. How is an organization mindful of impacting living conditions in a community?

4. Does the government have a say in location?

D. Operations Management for Service Providers 1. Does operations management differ in the service sector?

III. Production Management A. The Production Process 1. What production processes are used by businesses?

2. How do large quantities of goods get produced?

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3. Can product customization be done with mass production?

4. How is mass customization achieved?

5. Can mass customization be used in service industries?

6. What type of production strives for efficiency?

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. What is the advantage of robots?

4. How has technology improved the design process?

5. How is CAD used on bigger projects?

6. How does the CAD information get incorporated into the manufacturing process?

7. Can an entire facility be automated?

8. What effect has automation had on the production process?

9. How has social networking impacted production?

C. Controlling the Production Process 1. How does scheduling shape the production process?

2. What tools are available to help with scheduling?

3. What is a Gantt chart?

4. What is a PERT chart?

D. Purchasing and Inventory Control 1. How are materials used in the production process acquired?

2. How does a company maintain inventory control?

3. What’s the best way to manage inventory?

4. How is technology used to streamline inventory control?

5. What is materials requirement planning (MRP)?

6. What is enterprise resource planning?

IV. Quality Control A. Quality Management 1. Has quality control always been part of the production process?

2. What methods are used to improve quality?

3. How does TQM cater to the customer?

B. ISO Standards 1. What is the ISO? 2. What is the ISO certification process?

3. What are the benefits of ISO certification?

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.

11-4 .

SUPPLEMENTAL ACTIVITIES 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 11-2 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: • •

• •

Break students into small groups. 3-5 students are usually ideal.

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.)

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.

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.

11-5 .

Wrap-Up: After each group has shared their new design, have the class vote for the best.

Supplemental In-Class Activity 3: Case Study Discussion 11-3 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: 4.

In advance, make copies of the Supplemental Case Study on the following pages and distribute them to students.

5.

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?

6.

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.

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 11-4 Using Gantt Charts

11-6 .

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.

11-7 .

SUPPLEMENTAL HANDOUT: IN-CLASS ACTIVITY 3 11-3 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-intime (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.

Discussion Questions (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?

11-8 .

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 on line, either in the course blog, or on the discussion board. (Production processes, pgs. 334) Effects Essay: Have each student write a one page report on the current effects of technology on production. Ask them to find at least 5 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. (Effects of Technology, pgs. 336) 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. (CAD/CAM, pgs. 37-338) 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. (Facility locations, pgs. 330) Layout Effects: Ask your students to write a ½ 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. (Layout, pgs. 330-331) 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? (Supplier Process, pgs. P 332) 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; enterprise resource planning. Students should list and define each of these topics and include at least one example of how this would be used. (Technology and Inventory, pgs. 340) 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. (TQM, pgs. 343)

11-9 .

BizSkills: Improving a Business Covers material in Chapter 11

Available at: mybizlab.com

At the end of this exercise, you 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?

11-10 .

ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. d 2. a 3. c 4. a 5. c 6. d 7. a 8. a 9. a 10. b True/False 1. True 2. True 3. False 4. False 5. False

Critical Thinking Questions: Suggested Answers 1.

Answers will vary regarding the way in which the Stimulus Act has worked. It was intended that both the manufacturing and service industries benefited form passage of this act. Some benefits for manufacturing included: (a) All businesses can claim an immediate 50 percent depreciation deduction for many asset acquisitions. (b) Small businesses have an extended Section 179 deduction of up to $250,000. (c) Small businesses have been given an increased and flexible period for tax loss carrybacks to assist in recovering prior tax payments. (d) Tax credits are enhanced through the expansion of the Work Opportunity Tax Credit (WOTC). (e) There is a provision that allows for the utilization of existing carryforwards of the research and development (R&D) and alternative minimum tax (AMT) credits. (f) Other noteworthy incentives are related to capital gains on small business stock, limitations on S corporation conversion taxes, and debt discharge income.

Source: LarsonAllen, LLP: http://www.larsonallen.com/Manufacturing_and_Distribution/Manufacturing_Business_Incentives_in_2009_ Stimulus_Act.aspx Some benefits for service and non-profit industries included funding opportunities across areas such as education, the arts and humanities, energy, human services, housing, and public service to save or create new jobs by adding new or expanding existing programs.

2.

The location decision for production must weigh many factors, including the transportation, human and physical factors. Keeping costs down while meeting a specified standard of quality is critical. Assuming the furniture requires highly skilled workers to ensure quality production, then Southern California appears to be the optimal location— especially because of the abundance of highways for distribution. However, this location could drive up transportation costs if it is far from the raw materials needed.

11-11 .

On the other hand, if the production process does not require highly skilled workers because it is highly mechanized, then Montana might be the appropriate location—especially if the transportation costs are lowered by locating close to the needed raw materials. Conversely, the transportation costs associated with shipping the finished product from Montana to consumers could prove to be a problem. The location decision is often a balancing act between minimizing costs and ensuring a specified quality in the production process.

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 hurting 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 calculation of costs, meeting similar quality standards associated with the imported South American grips. The 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.

Mass customization is the new trend in production, replacing mass production. It allows companies to customize products quickly to meet the needs of rapidly evolving market segments and specific customers. Advances such as flexible manufacturing assist the manufacturing industry, while service industries might use call centers with “preprogrammed, pre-recorded call flows” to address customer inquiries, or have staff record customer preferences in stores and hotels. Even the Internet helps customers relate their specific needs to providers.

Advantages of mass customization include less inventory and better market share, happier customers, which can result in higher profits. Disadvantages might include the need for better trained staff; better supervision; customer returns that don’t meet the needs of other customers, and are therefore extraneous. In manufacturing, traditional processes—limiting human error and product variation— are more efficient for standard mass-produced products, such as cereal.

5.

Consider the restaurant business. The basic principles for the Total Quality Management (TQM) philosophy of doing business are to satisfy the customer, satisfy the supplier, and continuously improve the business processes.

Restaurants are in the business of serving food to their customers. In other words, they are providing a product (food) and a service (waiting on the customer). The quality of the food and service is defined as meeting or exceeding the expectations of the customer as if promised by the restaurant. The food should be properly prepared and the service should be prompt and courteous. The benefit of quality food and service is that customers will come back and will recommend the restaurant to friends. So, restaurants need to determine what constitutes quality food and quality service and determine the benefits of quality Source: http://www.school-for-champions.com/tqm/restaurant_quality.htm To ensure that a high level of quality is maintained in the food delivery process, restaurants can create an employee manual that explains (1) how to treat customers and (2) the proper way to handle and cook food. They can also provide customer feedback cards, where customers can provide suggestions or note complaints. Any complaints should be addressed immediately.

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Team Time To Outsource or Not to Outsource…That is the Question 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 in cost—at least in the short run. The key is whether the additional costs over time associated with altering the current production process, adding new machines and adding 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 Corporate Social Responsibility Environmental Shipping Concerns 1.

Answers may vary and will 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; this could actually drive profits up over time if this environmentally-conscious act is valued by customers and translates into a higher demand for the 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 to the shipping industry.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 11 Web case and exercise, visit www.mybizlab.com.

Focus On Toyota: Eliminating Waste, Just-In-Time Production Answers to Web Case Discussion Questions 1.

Sakichi Toyoda learned that defective production systems result in poor quality products. Problems have to be identified 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.

Video Case Solution To access the Chapter 11 video case and exercise, visit www.mybizlab.com.

11-13 .

Body Glove: Surfing the Production Tidal Wave Answers to Video Case Discussion Questions 1.

Body Glove founders, the Meistrell brothers, researched any means necessary to build prototypes literally out of garbage. At first, the brothers used rubber gaskets embedded in refrigerator insulation and other rubber products to create a permeable suit that would enable people to stay in the water longer. Eventually, they made wetsuits from neoprene. The neoprene wetsuits offered more comfortable insulation than the rubber wetsuits of the time.

2.

Body Glove moved its production overseas to take advantage of inexpensive labor and readily available materials. They produce their products in Asia, specifically Thailand. The company’s constant drive for higher quality was also a factor in their decision to establish a global production network.

3.

A serious surfer is likely to buy a wetsuit on the bases of quality, insulation, durability, and suitability for different water and climate conditions.

4.

Body Glove managers might consider how well the licensee can respond to potential market demand. They might also try to determine the licensee’s quality planning methods to ensure that the Body Glove brand maintains its quality image.

Up for Debate Points Pro: Body Glove products produced under license should be labeled accordingly. Consumers might feel that they have been deceived if they buy a product that turns out to have been made by an entirely different company than by Body Glove. Also, Body Glove should give full disclosure about licensing arrangements to build trust with their buyers, particularly since the company prides itself in communicating honestly with consumers.

Con: Body Glove does not have a duty to alert consumers about their product’s manufacturing origin. Buyers are only concerned with the actual product and not the business arrangements associated with the production of it. Besides, the Body Glove brand speaks for itself, as it has long been associated with high quality. As long as Body Glove lives up to the expected quality level, consumers need not know about the licensing arrangement.

11-14 .

CHAPTER 12: MARKETING AND CONSUMER BEHAVIOR QUICK REFERENCE GUIDE IN-CLASS ACTIVITIES Activity

Description

Time Limit

Team Time: Tobacco Wars

Students work in groups to debate the pros and cons of advertising cigarettes.

Students consider whether or not selling complex products to people who may not understand them is ethical.

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

Students watch and discuss the chapter video.

30 min.

IE Page Reference P 369, P 393

30 min.

P 369, P 394

30 min.

P 386

Video Run Time: 12:19 Question Time: 30 min.

30 min.

P 371, P 395

20 min.

P 382

30 min.

IM

Ethics and Corporate Social Responsibility: Subprime Mortgage Crisis Web Case: Focus on Apple, Inc.: Apple's Arrow Hits the Target Video Case: Skechers USA: Marketing Cool Products to Cool People Supplemental In-Class Activity 2: Case Discussion: Khakis to Go, Please Supplemental In-Class Activity 3: Data Mining Supplemental Handout: Khakis to Go, Please

.

Students apply marketing mix concepts to a case study.

Students consider how marketers might use information that is routinely provided on social networking sites.

Case related to Supplemental In-Class Activity 2 above.

P 372

12-1

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: Apple's Marketing Mix Web Exercise: Situational Analysis

Students go to: http://www.apple.com/iphone and describe the marketing mix for the iphone.

Students go to: http://www.marketingteacher.com/SWOT/ walmart_swot.htm to see a SWOT analysis for Wal-Mart.

Answers to the discussion questions in the activity.

Web Exercise: Organic Differences Web Exercise: Freebies: LongTerm Gain or Loss?

Web Exercise: The Jeep Experience

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At-Home Completion Time 30 minutes

IE Page Reference

Answers to the discussion questions in the activity.

1 hour

P 381, P 395

Students visit and compare the Web sites of Trader Joes and Whole Foods, two companies in the organic and healthconscious food industries.

Students visit a website for a company that gives free samples for every purchase ((http://sephora.com.)

Answers to the discussion questions in the activity.

20 minutes

P 383

Answers to the discussion questions in the activity.

20 minutes

P 371, P 395

Students explore Jeep's advertising strategy at: http://www.jeep.com/en

Answers to the discussion questions in the activity.

20 minutes

P 387

P 370, P 395

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CHAPTER OPENER Chapter 12 introduces students to the fundamentals of marketing. It covers how organizations develop their marketing strategies and the external forces that influence marketing approaches.

Under the topic Market Analysis, 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 behavior, including the ways in which consumers make their buying decisions.

DETAILED LECTURE OUTLINE I.

Marketing Fundamentals A. Definitions 1. Marketing (p. 363) is defined by the American Marketing Association as "an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders."

2. Marketing departments serve a variety of functions.

B. The Evolution of Marketing 1. How has marketing evolved?

2. What was the marketing philosophy of the early 1900s?

3. What was the sales concept era?

4. What was the marketing concept era?

5. Does marketing also take into consideration what’s best for society?

6. What marketing philosophy encourages customer loyalty?

C. Marketing for Not-for-Profits and Others 1. How do not-for-profit organizations market their products?

2. Is it possible to market a person?

D. Benefits of Marketing 1. How does marketing benefit consumers?

2. What do we mean by “utility”?

3. How is product value measured?

4. How do investors and employees benefit from marketing?

5. How does society benefit from marketing?

6. How do sellers themselves benefit from marketing?

E. Criticisms of Marketing 1. What are the criticisms of marketing?

II. Marketing Tactics A. What are the two basic elements of a marketing strategy and the 4 Ps of the marketing mix?

B. Marketing Strategy: The 4 Ps of Marketing 1. What is marketing strategy?

2. Is there a 5th P? C. The Marketing Process 1. What are the steps in the marketing process?

III. The Marketing Environment A. The Marketing Mix and the Marketing Environment B. The Competitive Environment 1. Why is analyzing the competition important?

C. The Economic Environment

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1. Why is the economy important for marketing?

2. How does the economic environment affect a marketing strategy?

D. The Technological Environment 1. How does technology affect marketing?

E. The Social and Cultural Environment 1. How do cultural and social trends affect marketing?

F. The Political, Legal, and Regulatory Environments 1. How does politics and legislation affect marketing?

G. The Global Environment 1. How does the global environment affect marketing?

IV. Marketing Research and Planning A. What are the five steps of the marketing research process and the four elements of a good marketing plan?

B. The Marketing Research Process 1. What is market research and what are the steps involved in the process?

2. Why is it important to identify the marketing research objective?

3. What kind of data should be collected?

4. How is social media used in market research?

5. How is the data analyzed and interpreted?

6. What happens when the research is completed?

C. The Marketing Plan 1. What is a marketing plan?

2. What are the elements of a good marketing plan?

3. Why is a marketing objective necessary?

4. What is situational analysis?

5. What do we mean by internal strengths?

6. How does a company assess its weaknesses?

7. Why look to the external environment?

8. Are there other ways to do a situational analysis?

D. Target Markets 1. How are target markets determined?

2. How do you determine a target market?

3. How are consumer markets segmented?

4. How are markets defined by location or region?

5. How are markets defined by different population characteristics?

6. Can a market be segmented based on opinions or interests?

7. How can consumer behaviors define a market segment?

V. Consumer Behavior A. The term consumer behavior refers to the ways individuals or organizations search for, evaluate, purchase, use, and dispose of goods and services.

B. Consumer Markets 1. Why study consumer behavior?

2. What influences consumer decision making?

3. How does culture affect a person’s buying behavior?

4. What unique personal influences shape buying behaviors?

5. How do personal attitudes affect buying decisions?

6. Can temporary conditions affect how buyers behave?

7. How does the marketing mix influence purchases?

C. Business-to-Business (B2B) Markets 1. What is the difference between consumer markets and business-to-business markets?

2. What are the characteristics of a B2B market?

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3.

4.

How does a business make a buying decision, and what influences that decision?

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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SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity 2: Case Study Discussion 12-2 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.

Supplemental In-Class Activity 3 12-3 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:

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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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SUPPLEMENTAL HANDOUT: IN-CLASS ACTIVITY 2 12-1

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.

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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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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 Eras, pgs. 373) Marketing Utility: Ask your students to create and post one slide for each of the types of utility, using photographs from open sources to illustrate the concepts. Include the written definitions. Have the students post these on the discussion board. (Utility, pgs . 367) 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? (Benefits, pgs. 367) 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 follow-up questions based on the comments. (Problems, pgs. 368) 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.

(4Ps, pgs. 369) 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. (Marketing Process, pgs. 372) Environment Debate : Divide your class into five groups. Assign each group one of the following: competitive environment, economic environment, technological environment, sociocultural 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. (Environment, pgs. 373)

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BizSkills 12-1: Market Research Matters Covers material in Chapters 12

Available at: mybizlab.com

At the end of this exercise, you 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?

BizSkill 12-2: Product Development Covers material in Chapters 12

Available at: mybizlab.com

At the end of this exercise, you 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?

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ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. b 2. b 3. c 4. d 5. b 6. d 7. c 8. d 9. d 10. a True/False 1. False 2. True 3. True 4. True 5. False

Critical Thinking Questions: Suggested Answers 1.

Answers will vary. However, customer relationship management is becoming increasingly important to nurture new and repeat business. All organizations need to foster better customer relations if they wish to compete.

2.

Yes, ethical business makes good sense—especially over time—even if it temporarily reduces profit. Doing the right thing has its own rewards. Moreover, you may recall from Chapter 3 that trying to recover from ethical lapses can be very expensive for any organization.

Remember, you need to visualize your ideal customer. Think about what he or she wants, and use this image as a “base” for your marketing decisions. So, while answers may vary, students might consider the following samples: i.

iPhone campaign • 74% over the age of 25 (Age) • 78% have income over $25,000 (Income) • 46% have children (Family status) • Half prefer the mobile web (Lifestyle) Source of data: http://blog.admob.com/2009/06/16/new-research-on-the-demographics-andbehavioral-characteristics-of-iphone-and-ipod-touch-users-from-admob-and-comscore/

ii.

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Toyota Prius • Green-oriented (Motives) • Higher income ($100,000) (Income) • Average age closer to 50 (Age)

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•

iii.

3.

Higher level of education (Education) Source of data: http://www.hybridcars.com/hybrid-drivers/profile-of-hybrid-drivers.html

Vacation package to a luxury spa in Arizona • Higher income (Income) • Like to be pampered (Benefit sought) • Concerned with appearance (Values) • Enjoy warm weather (Benefit sought)

The marketing environment represents external forces that can’t be controlled by managers and that impose constraints on the managers’ ability to blend the 4Ps. One of the key responsibilities of managers in any organization is to undertake environmental scanning, the process of surveying the marketing environment to assess external threats and opportunities.

Both a pizza parlor and a floral shop are impacted by the competitive, economic, technological, and sociocultural environments as well as the political, legal, and regulatory environments. But, for instance, more people may choose a pizza parlor for their night out in a poor economy, and less may buy flowers, or may purchase them less often, considering them a very discretionary purchase. And there are more and different legal and regulatory constraints on restaurants than there are on florists.

4.

Answers will vary. The sociocultural 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 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 websites: http://www.cato.org/pubs/regulation/reg20n3d.html and http://www.asa.org.uk/asa/about/history/Taking+responsibility+raising+standards.htm.

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Ethics and Corporate Social Responsibility Subprime Mortgage Crisis This exercise asks students to consider whether or not it is ethical to market a product that will change dramatically over time to someone who may or may not understand those changes. In this case, the product is a sub-prime loan.

Student answers may vary dramatically depending on whether or not they and/or their families were caught up in a sub-prime loan. Answers to individual questions are shown below.

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.

2.

Many bankers thought that sub-mortgage benefits outweighed their risks when they were distributing the loans, but bankers and others are questioning that reasoning now.

3.

Different students will give different answers. Answers may depend on the extent to which information surrounding the loans were fully disclosed and understood by loan recipients and the extent to which deceptive loan practices were exercised.

4.

Answers will vary. Answers may depend on the extent to which information surrounding the loans was fully disclosed and understood by loan recipients and the extent to which deceptive loan practices were exercised. It may also depend on one’s view of the appropriate role of government (a topic on which equally reasonable people can disagree). You will want to discuss student answers to this question in light of whether or not the $700 billion bailout by the Federal Government helped the markets to achieve stability over time.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 12 Web case and exercise, visit www.mybizlab.com.

Focus On Apple, Inc.: Apple's Arrow Hits the Target Answers to Web Case Discussion Questions 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 met the customers’ need to have creative control over their media outlet. It 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 skeptics into customers. Doing so would have probably resulted in a product that didn’t satisfy anyone very much.

2.

By catering to the young technologically savvy targeted market, Apple met the sociocultural needs of its targeted customers. The personal, psychological and behavioral needs of these young people and their

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lifestyles were 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 and the product durability which made it easy to slide in a pocket or to toss in a backpack. The iPod also met the customers’ need to have creative control over their media outlet. It allowed music files to be organized in a variety of ways, and customers could make play lists of their favorite songs. Apple also satisfied the customers’ needs by creating a “coolness factor” associated with iPod ownership.

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 of these customers. Sometimes, this means anticipating needs and wants before they are known or expressed by customers.

Video Case Solution To access the Chapter 12 video case and exercise, visit www.mybizlab.com.

Skechers USA: Marketing Cool Products to Cool People Answers to Video Case Discussion Questions 1.

Skechers appears to place most emphasis on product strategy, as it spends considerable resources on researching customer needs and wants as feedback for product development. By doing this, Skechers is able to meet customers’ needs more fully and respond more quickly than their competition.

2.

Skechers does marketing research to determine what opportunities are available in the shoe market. This research allows Skechers to detect emerging trends, which in turn drives innovation.

3.

Skechers employs focus groups to determine if the products that it has designed are actually interesting and satisfying to its market. By collecting primary data, the company can learn about what customers need and prefer.

4.

Skechers chooses a specific target market in which it employs its limited resources, which helps maximize the return on investment. To accurately separate prospective customers from interested parties, Skechers uses market segmentation, a process by which it divides the total market into smaller markets.

Up for Debate Points Pro: Skechers should drop celebrity advertising and use a product focus for their central selling message. Since Skechers focuses on developing and promoting cutting-edge footwear, the company should make the product the centerpiece of their advertising. Also, a damaged celebrity image could harm the company’s brand image, which in turn could tarnish the corporate image.

Con: Skechers should continue using celebrities in their advertising, as this advertising formula has worked for them successfully in the past. The youth market turns to celebrities as fashion vanguards. Since Skechers projects a hip, edgy brand image and personality, they should pick celebrities whose personas fit this image. Besides, Skechers can always drop a celebrity exposed by scandal and replace them.

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CHAPTER 13: PRODUCT DEVELOPMENT AND PRICING STRATEGIES QUICK REFERENCE GUIDE IN-CLASS ACTIVITIES Activity

Description

Time Limit

Ice-Breaker: You Deserve a Break Today Team Time: Developing a Product Ethics and Corporate Social Responsibility: The Ethics of Rx Web Case: Focus on Apple: The iPhone: Revolutionary Product or Rip-Off? Video Case: MCCI: Developing and Pricing Space-Age Products

Students try to identify products based on their advertising slogans.

Students work in groups to develop a new product.

Students discuss the ethical issues associated with prescription pricing.

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

10 min.

IE Page Reference P 397

30 min.

30 min.

P 411, P 426 P 413, P 426

30 min.

P 419

Students watch and discuss the chapter video.

P 402

Supplemental In-Class Activity 1: Sunday Sales

Students identify branding strategies using the

Video Run Time: 11:25 Question Time: 30 min.

15-20 min.

P 407

15-30 min.

P 417

Supplemental In-Class Activity 2: Setting a Reasonable Price

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Sunday newspaper sales flyers.

Students practice using cost-based pricing, target costing, and competitive pricing to price a product.

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HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: The iPhone as a Product

Students go to: http://www.apple.com/iphone/ to explore the characteristics of the iPhone as a product.

Web Exercise: Organic Coke?

Students go to the Web to research organic beverages and sodas.

Web Exercise: Research a Brand

Students choose a favorite brand of clothing or food and use the Internet to gather information about it.

Web Exercise: Toothpaste Differential

Students go to the Web and look at Walmart’s Web site or a Web site for an online drugstore. List the various manufacturers of toothpaste. Then, under each one, list the various products they make.

Students compare prices at eBay: (www.ebay.com) and in retail stores.

Answers to the discussion questions in the activity.

Answers to the discussion questions in the activity.

Answers to the discussion questions in the activity.

Answers to the discussion questions in the activity.

Web Exercise: Dynamics of Dynamic Pricing

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Answers to the discussion questions in the activity.

At-Home Completion Time 30 minutes

IE Page Reference P 413, P 427

30 minutes

P 399, P 427

45 minutes

P 405, P427

45 minutes

P 399, P 427

30 minutes

P 421, P 427

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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 students to techniques for developing goods and services, creating product brands, developing products, and pricing goods and services.

DETAILED LECTURE OUTLINE I.

Developing Goods and Services A. The Total Product Offer 1. What are the definitions of a product and a total product offer?

2. What is the total product offer?

B. Product Differentiation 1. What is product differentiation and what role does it play in product development?

2. How important is product differentiation?

3. How does consumer input affect product development?

C. Product Lines and the Product Mix 1. What are a product line and a product mix?

D. Consumer and Business-to-Business Products 1. What are the different classifications of consumer products and business-to-business products?

2. What's the difference between consumer products and business-to-business products?

II. Branding A. Why is branding beneficial to both buyers and sellers, and what are some different types of brands?

B. Branding Benefits 1. What are the benefits of branding?

C. Brand Loyalty and Brand Equity 1. What is brand loyalty?

2. What is brand equity?

3. What does a brand manager do?

D. Branding Strategies 1. Generic Brand 2. Manufacturer's Brand 3. Private Brand 4. Family Brand 5. Individual Brand 6. Co-Brand 7. Brand Licensing E. The Packaging 1. How does packaging affect a brand?

F. The Importance of Labels 1. What does the government have to say about product labels?

2. Why is labeling important to establishing a brand image?

III. New Product Development A. What steps take place during new product development, and what is the product life cycle?

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B. New Product Development 1. What are the steps in new product development?

C. Product Life Cycle 1. The product life cycle (p. 413) 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.

2. How do marketing decisions affect the product's life cycle?

IV. Pricing Goods and Services A. What are some pricing objectives, and how do they relate to the marketing mix?

B. Product Pricing and Pricing Objectives 1. Why is price an important component in the marketing mix?

2. What are some pricing objectives?

C. Pricing Strategies and Price Perceptions 1. What are the three major approaches to pricing strategy, and what are some pricing tactics used to launch a new product, to adjust prices, and to impact price perceptions?

2. What are the major pricing strategies?

D. Adjusting Prices 1. What are common types of price adjustments?

2. What are some strategies used to impact price perceptions?

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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SUPPLEMENTAL ACTIVITIES

Supplemental In-Class Activity: Ice Breaker You Deserve a Break Today Activity Overview: A quick test to show students the power of advertising.

Time Limit: 5 minutes What to Do: •

Post the following slogans on the chalkboard, an overhead, or a PowerPoint slide: 1. You deserve a break today 2. Be all that you can be 3. M'm, m'm good 4. That was easy 5. It's the real thing 6. I'm lovin it 7. Cardboard no. Delicious yes.

8. Drive one.

9. Pepper in some fun 10. The computer is personal again 11. Rethink 12. Come as you are 13. It's waaaay better than fast food 14. Talk to Chuck 15. The every pain reliever

•

Ask students to write down the names of the companies associated with the above advertising slogans.

The first student who thinks he or she has all of the names should hold up their paper to be checked. If it is not right, go to the second student, and so on until you have a winner or until five minutes runs out.

Award a prize to the student who gets the most slogans correct.

•

Answers: 1. McDonalds 2. Army 3. Campbell's Soup 4. Staples 5. Coke 6. McDonalds 7. Yoplait Fiber One Yogurt 8. Ford 9. Chili's Restaurant 10. Hewlett Packard

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11. Saturn 12. Chemistry.com 13. Wendy's 14. Charles Schwab 15. Advil Don’t Forget: To bring a prize for the winner of the contest. (Maybe a can of Campbell's Chicken Noodle Soup, or better yet, an Easy Button from Staples!)

Wrap-Up: Ask students which slogans work best for them and why. Then ask the same questions about the slogans that don't work. For a professional's take on this exercise, see

http://goodsloganbadslogan.blogspot.com/. A fun way to conclude the exercise might be to ask students about slogans that work too well. Are there some slogans that the students remember, but find that they can't recall what was being advertised? ("That's a spicy meatball" might be one of those!)

Supplemental In-Class Activity 1 13-1

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, JC Penneys or Kohls are useful for private brands. Stores like Kmart, Wal-Mart, Toys R Us and Target 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 13-2

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:

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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. Using cost-based pricing and a markup of 20%, what should the price be? Show calculations.

2. Using breakeven analysis, what should the break-even volume of production be? Show calculations.

3. 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.

4. If your nearest competitor charges $95, what should the price be? Explain.

5. 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 .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 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

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$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.

5.

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.

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 this 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.

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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. (Products, pgs. 397) 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. (Products, pgs. 397) Brand Scavenger Hunt: Ask your students to list the benefits of using brands and then to link to the websites of their 15 favorite 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.

(Brands, pgs. 403) Branding Chart: Have your students create a chart with the names and definitions of the types of brands.

Include at least 2 examples of companies that use that type of brand. Post the results on the course blog or another page for viewing. (Branding, pgs. 404) Cool Packages: Ask your students to take photos of at least 5 unusual packages to post on the course blog or webpage. Ideas could include cosmetic bottles, promotional items such as t-shirts compressed into shapes, and holiday packaging. (Packaging, pgs. 408) 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. (New Product Development Process, pgs. 411-415) 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, pgs. 415-421)

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BizSkill 13-1: Pricing Strategies and Objectives Covers material in Chapter 13

Available at: mybizlab.com

At the end of this exercise, you 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?

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ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. d 2. c 3. b 4. c 5. b 6. d 7. b 8. a 9. b 10. d True/False 1. True 2. True 3. False 4. True 5. True

Critical Thinking Questions: Suggested 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, the business can enhance its sales, charge a higher price and increase profits.

2.

Student answers may vary a bit, based on perception. Gatorade has been a round for a long time (since 1965) and is most likely in the maturity stage. Red Bull, a popular energy drink, is newer to the market— late 1980’s—and is probably still in the growth stage.

3.

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 her 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.

4.

When Apple introduced the iPad, it came out at a low enough price ($499) to be highly competitive with existing notebooks. This meant more people would be likely to “try” Apple’s iPad, since the price was not prohibitive.

However, all accessories were purchased separately, and there were price differentials for wireless options.

Market research would have assured Apple that the “typical” buyer would be likely to purchase certain accessories, like a cover/sleeve for the iPad. And, of course, paying for wireless options allowed consumers to have “some control”, while enabling Apple to keep the price down by making a deal with—for example-

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-AT&T. So, perhaps one consumer, using just email, might opt for a cheaper wireless package; someone who wants to view movies would need a more expensive option.

5.

Discounting comes 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 a product for which a customer has already paid. For example, mail-in rebates offer money back to customers after the consumer provides proof of 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 fastfood 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 is 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 price 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.

Team Time Developing a Product 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.

Ethics and Corporate Social Responsibility The Ethics of Rx 1.

Answers will vary but should reflect critical thought. As with many ethical issues, any decision depends on balancing the interests of the many parties involved.

2.

Answers will vary. However, ethical decisions typically involve a tradeoff in order to address or meet the needs/desires of interested parties.

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3.

Answers will vary. But, a compromise may be possible by charging a price that is high enough on the skincondition drug to afford the funding of the other drug at a later time.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 13 Web case and exercise, visit www.mybizlab.com.

Focus On Apple: The iPhone: Revolutionary Product or Rip-Off? Answers to Web Case Discussion Questions 1.

If Apple had originally priced its iPhone at $399, the volume of sales would have likely been much the same because the enthusiasts were very price insensitive, but its profits would have been much lower. This lower price may not have generated as many 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 $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 price-skimming, they might have refused to buy other Apple products. Regaining their trust was critical for Apple’s continued success.

3.

Answers will vary over 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.

Video Case Solution To access the Chapter 13 video case and exercise, visit www.mybizlab.com.

MCCI: Developing and Pricing Space-Age Products Answers to Video Case Discussion Questions 1.

MCCI’s design strategy balances the features its customers require with the budget it has available. It develops products on a case-by-case basis, meeting grueling specifications. This requires tremendous flexibility and technical savvy. The goal is to develop the product with the right number of features at the best value price and at the least risk to the customer’s payload.

2.

MCCI caters mostly to telecoms and government agencies seeking highly specialized products, such as custom radio frequency filters.

3.

MCCI differentiates itself by producing high-quality premium components for communications and other satellites. To maintain quality assurance, it insists on a zero failure rate. This is necessary in satellite components, which cannot be repaired once launched.

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4.

By using custom pricing, you can price dynamically, or adjust prices to account for changes or fluctuations in different variables, such as market conditions.

Up for Debate Points Pro: MCCI should give up revenues on the front end in anticipation of making money through future projects on the backend. In military contracts rather than in commercial contracts, a long-term relationship is developed over time and might endure for 10 to 20 years. MCCI should look at the long-term benefits stemming from these relationships. Once it gets involved in these long-term buyer-seller relationships, it can move horizontally within that organization and sell other products.

Con: MCCI should not forego current revenues for unguaranteed profits from future business with customers under contract. MCCI makes a premium product and, thus, it stands to reason that it should use premium pricing uniformly. The company is now established in its industry, and there is little competition. So, it does not need to lowball to keep business any longer.

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CHAPTER 14: PROMOTION AND DISTRIBUTION QUICK REFERENCE GUIDE IN-CLASS ACTIVITIES Activity

Description

Time Limit

Ice-Breaker: Promote Your School

Students try to develop a promotional campaign for the school and have it critiqued by the school's promotions manager.

Students work in groups to develop a promotional campaign.

Students discuss the ethical issues associated with prescription advertising.

45 min.

IE Page Reference P 429

30 min.

P 447 , P 464

30 min.

P 433, P 464

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

Students watch and discuss the chapter video.

30 min.

P 433, P 465

Video RunTime: 12:52 Question Time: 30 min.

15-20 min.

P 435, P 465

15-30 min.

P 450

Team Time: Developing a Promotional Mix Ethics and Corporate Social Responsibility: Just What the Doctor Ordered?

Web Case: Focus on Apple: Mac or PC: Who Would You Rather Be? Video Case: BMW Motorcycles: Going Down the Highway in the Ultimate Riding Machine Supplemental In-Class Activity 1: Find the Ads Supplemental In-Class Activity 2: Marketing a Product

Students find examples of different types of advertising in magazines.

This summary exercise gives students a chance to practice skills from Chapters 12, 13, and 14.

P 433

14-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Web Exercise: The Perks of Internet Advertising Web Exercise: Sweet Success

Students go to: http://www.google.com to examine the benefits of Internet advertising.

Answers to the discussion questions in the activity.

Students visit the American Marketing Association website: www.marketingpower.com for ideas about challenges that might face a candy company selling candy in developing nations.

Using the Internet, students research what job profiles and descriptions, career paths and progressions, and what level of salaries can be earned in supply chain management.

Students go to the Bureau of Labor Statistics: www.bls.gov website to see the pros and cons of a selling career.

Students research the benefits and requirements of working for a multi-level marketing company doing in-home product demonstrations.

Web Exercise: Be a Link in the Chain

Web Exercise: Personal Selling

Web Exercise: Multilevel Marketing

At-Home Completion Time 30 minutes

IE Page Reference

Answers to the discussion questions in the activity.

30 minutes

P 437, P 465

Write a brief paragraph about why or why not you’d be interested in this type of career.

45 minutes

P 448, P 465

Answers to the discussion questions in the activity.

30 minutes

P 440, P 465

Answers to the discussion questions in the activity.

30 minutes

P 455, P 465

P 434, P 465

14-2 .

CHAPTER OPENER This chapter gives students a greater understanding of the last two Ps in the marketing mix – promotion and place (distribution). Starting with the steps in the promotional campaign, the chapter explores a variety of promotional techniques including: • advertising.

• public relations.

• personal selling.

• sales promotions.

The chapter ends with information about distribution – both the types of distribution channels and the methods of distribution.

DETAILED LECTURE OUTLINE I.

Promotion and the Promotional Mix A. What is a promotional mix, and what is its function in a promotional campaign?

B. Promotion 1. What is promotion?

2. What are the most popular tools marketers use to promote a product?

3. What are the steps involved in a promotional campaign?

C. Integrated Marketing Communication 1. How do companies make sure they are consistent across the entire promotional campaign?

II. Promotional Techniques: Advertising and Public Relations A. What are the different categories of advertising, and what role do these categories play in business and society?

B. The Role of Advertising 1. Advertising (p. 432) is paid, impersonal mass communication from an identified sponsor to persuade or influence a targeted audience.

2. What role does advertising play in business and society?

C. Types of Advertising 1. Product advertising (p. 433) promotes a specific products uses, features, and benefits.

2. Corporate advertising (p. 433) focuses on creating a positive image toward an organization or industry.

3. Comparative advertising (p. 433) compares a brand's characteristics with those of other established brands.

4. Retail advertising (p. 433) focuses on attracting customers to a fixed location.

5. B2B advertising (p. 433) is directed to other businesses, not consumers.

6. Nonprofit advertising (p.433) focuses on promoting not-for-profit organizations.

7. Public service advertising (p. 434) communicates a message on behalf of a good cause.

8. Advocacy advertising (p. 434) promotes an organization's position on a public issue.

9. Interactive advertising (p. 434) uses interactive media to connect directly with customers.

10. Internet advertising (p. 434) uses pop-up and banner ads to direct people to an organization's Web site.

D. Types of Advertising Media 1. What are the different types of advertising media?

2. What are the advantages and disadvantages of the different types of advertising media?

E. Advertising Trends 1. What are some important recent trends in advertising?

F. Public Relations 1. What is public relations?

2. What steps are involved in developing public relations plans?

3. What are some common public relations tools?

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4. Publicity III. Promotional Techniques: Personal Selling and Sales Promotion A. What are the six steps in the personal selling process?

B. Personal Selling 1. What is personal selling and why is it important?

C. Sales Promotion 1. What are the advantages and disadvantages of the promotional mix?

IV. Distribution A. Distribution (p. 448) is the process that makes products available to consumers when and where the consumers want them.

B. The Supply Chain and Supply-Chain Management 1. What is the supply chain?

2. Supply-chain management is the whole process of getting products out the door and into the hands of consumers.

C. Distribution Channels and Marketing Intermediaries 1. What is a channel of distribution?

2. What are marketing intermediaries?

3. What are different types of intermediaries?

4. Why are intermediaries necessary?

5. What are the different types of distribution channels?

6. How has the Internet impacted distribution?

D. Wholesale Intermediaries 1. What services do wholesalers provide?

2. What are the different types of wholesalers?

E. Agents/Brokers 1. What distinguishes agents and brokers?

2. What are some common types of agents?

F. Retail Intermediaries 1. What are the different types of retailers?

2. What kinds of in-store retail organizations are there?

3. What is nonstore retailing?

4. Are there other types of nonstore retailing?

5. How has the Internet impacted retailing?

G. Retail Strategies 1. What are the important retail strategies?

H. Distribution Logistics 1. What do we mean by “distribution logistics” I. Benefits and Costs of Transportation Modes 1. What are the benefits and costs of various transportation modes?

2. How does a company decide on the transportation method?

J. Warehousing and Inventory Control 1. How important is warehousing?

2. How is inventory tracked?

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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SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity: Ice Breaker Promote Your School Activity Overview: Students get insight about promoting their college from a professional.

Time Limit: 45 minutes What to Do: •

• •

Ask students to create promotional campaigns for your college or university. In particular, get them to focus on how the school should be advertised, the best public relations strategy for the school, and what, if any, sales promotions should be used to attract new students to the school.

Invite one of the managers in your school's promotions office to come and speak to your class.

Have the manager compare the way the school is really promoted with suggestions from the students.

Don’t Forget: Students can develop their promotional campaigns either in class or outside class.

Wrap-Up: Ask students what surprised them about the school's promotional campaigns. What did they expect, and what was unexpected?

Supplemental In-Class Activity 1 14-1

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 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. Reemphasize the different types as described in the text.

Supplemental In-Class Activity 2 14-2

Marketing a Product

Activity Overview: This summary exercise uses student skills from Chapters 12, 13 and 14.

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Time Limit: 20 to 30 minutes What to Do: •

Before class, determine approximately how many groups you will have for a group activities assuming 4 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. Hand out a sheet with these questions for them to answer 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.

Wrap-Up: Either 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 summary tool for the three chapters on marketing topics.

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ENHANCING THE ONLINE COURSE 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. (Promotion Mix, pgs. 429) 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. (Promotion Campaign, pgs. 429) Integration Sensation: Ask your students to identify an example of at least one company which 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? (Integrated Marketing Communications Programs, pg. 431) 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’s Role, pgs. 432) 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. (Types of Advertising, pgs. 432) Media Montage: Have your students create a graphic that shows the advantages and disadvantages of the different media (such as shown in Table 14. 2 of the textbook). Ask students to go a step further and add graphics or verbal descriptions of different products for which those media would be good choices. (Media Advantages and Disadvantages, pg. 435) 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 website links to accompany a definition of each trend. (Trends, pgs.436) 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 material. (PR pgs. 437-438)

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BizSkill: Promoting a Product Covers material in Chapter 14

Available at: mybizlab.com

At the end of this exercise, you 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?

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ANSWERS TO END OF CHAPTER MATERIALS: Self Test Multiple Choice 1. b 2. c 3. b 4. b 5. c 6. a 7. c 8. a 9. d 10. a True/False 1. True 2. True 3. True 4. False 5. False

Critical Thinking Questions: Suggested Answers 1.

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.

2.

Digital video recorders allow television viewers to record their favorite TV programs and replay them later, and to skip over ads. This reduces the benefits of advertising via television.

3.

Social media has had a large impact on the promotion and advertising processes. This media has become a part of many companies’ integrated marketing communications plan. Using Web sites such as Facebook, Twitter, YouTube, and Foursquare, companies are building customer support and gaining better insight into their customers and competitors. Companies create blogs and tweets to announce new products or corporate developments, post videos such as help tutorials and product demonstrations on YouTube, and create fan pages on Facebook which prompts interactions such as likes, favorites, and wall posts.

Social media offers many advantages. It is relatively inexpensive to set up; results in immediate consumer feedback; provides access to consumer feedback on competition; builds customer relationships

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 need the widest possible exposure in the market. (Students could also make a case for selective distribution of cigarettes, as some stores are not allowed to carry them. San Francisco banned cigarette sales in drugstores, for example.)

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.

14-9 .

Snickers candy bars: Intensive, because candy bars are a convenience good which need the widest possible exposure in the market.

5. Marketing intermediaries, formerly known as middlemen, are businesses or people that move goods and services between producers and consumers (in a B2C environment) or between business users (in a B2B environment).

Intermediaries therefore pass along products from manufacturers to end users. Usually many intermediaries— wholesalers, retailers, and agents/brokers—work to ensure a product reaches consumers.

Although intermediaries dive up prices, they also add efficiency. Someone needs to perform the task of retrieving the product directly from the manufacturer. Intermediaries also help to transport and store goods and are often involved in other parts of marketing such as advertising and relationship building. Some intermediaries even serve as interim bankers, financing inventories or giving credit. Historically, intermediaries have proven that they can perform these functions more efficiently and cost effectively than others. And, while intermediaries do add costs, these costs are offset by the value added.

Team Time Developing a Promotional Mix 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 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 Corporate Social Responsibility Just What the Doctor Ordered?

1.

Answers will vary. They will likely depend on the extent to which consumers are viewed as being rational, educated and reasonably able to determine for themselves what is in their best self-interest, as opposed to being vulnerable and subject to sophisticated marketing campaigns that may misinform or mislead consumers.

2.

Answers will vary. Arguments could go either way. Everyone should be careful not to make snap judgments about another student’s rationale supporting their opinion.

3.

Answers will vary. However, some people have argued that these advertisements promise a quick-fix for conditions that are very complicated, and that these drugs are being hyped and oversold to desperate people who are being taken advantage of. Others argue that the drug companies are empowering people with information so they can make more informed medical decisions for themselves; this allows people to be advocates for their own health.

14-10 .

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 14 Web case and exercise, visit www.mybizlab.com.

Focus On Apple: Mac or PC: Who Would You Rather Be? Answers to Web Case Discussion Questions 1.

The “Get a Mac” campaign increases brand awareness, brand loyalty and sales by positioning itself as the upbeat, cool and rational path to new and innovative computing. This is the advertising role of the promotional mix. The promotional mix also consists of public relations, personal selling and sales promotional tools like coupons and rebates.

2.

Comparative advertising might backfire. Boasting about the greatness of one product may be perceived as arrogant and, in turn, may make the competitor look like the unappreciated “underdog”.

3.

Answers will vary based on the personal preferences of the students. Try to get students to think about exactly what they find appealing or unappealing about the ads. If possible, separate the class into Mac users and PC users; have each group discuss their reactions to the ads separately.

Video Case Solution To access the Chapter 14 video case and exercise, visit www.mybizlab.com.

BMW Motorcycles: Going Down the Highway in the Ultimate Riding Machine Answers to Video Case Discussion Questions 1.

The tone, the type of media, and the specific vehicles are all carefully crafted to make the message more appealing to BMW Motorcycles’ target audience. To convince customers to purchase its premium product, BMW Motorcycles works with their advertising agency to craft an ad campaign that sends a unified personal message to prospective customers. Relative to message execution, BMW Motorcycles develops a brand image by creating a unified look in all media, including washed out color, hand-written text, and real riders as subjects.

2.

The informational goal of BMW Motorcycles’ message is two-pronged. First, the company must make consumers aware and knowledgeable about their products. Second, it must motivate consumers to like and want to purchase BMW bikes.

3.

The majority of customers prefer to have first-hand experience when buying durable products. In the particular case of motorcycles, they are sold in dealer showrooms where customers can order specific product options. So BMW Motorcycles uses the Web for information only and leads sales to live salespersons or recommendations from satisfied customers.

4.

For a local dealership on a tight advertising budget, direct mail has cost advantages relative to advertising media like television. One way to use direct mail is to send a direct mailer to current customers inviting them to bring a friend to the dealership during a special event, such as a seminar on riding safety. These prospects may be converted to adopters, making a sale then or in the future.

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Up for Debate Points Pro: BMW should promote a new motorcycle brand to differentiate itself from rival brands. First, most people do not even know that BMW makes motorcycles, particularly in the United States. The basic marketing problem is low brand awareness and even confusion over the BMW car brand and BMW motorcycle brand. Creating a new brand will likely lift this confusion in consumers’ minds. In addition, promoting an entirely new brand offers the opportunity to create a positioning strategy based on key benefits valued by motorcycle enthusiasts.

Con: BMW should not promote a new brand in the interests of brand differentiation but— instead— stick with its current brand. This is because brand equity has been built over years of promoting the motorcycle brand to its target market. Also, the positioning for BMW vehicles as the Ultimate Driving Machine, a high-performance luxury sports car, reinforces BMW Motorcycles’ positioning as the Ultimate Riding Machine, a high-performance luxury touring motorcycle. Finally, BMW should use the huge popularity and strong reputation of its cars to strengthen the brand image of its motorcycles.

14-12 .

CHAPTER 15: FINANCING AND TRACKING BUSINESS OPERATIONS QUICK REFERENCE GUIDE IN-CLASS ACTIVITIES Activity

Description

Time Limit

Team Time: Industry Analysis

Students work in groups to analyze the finances of a company, based on its annual report.

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

Students watch and discuss the chapter video.

45 min.

IE Page Reference P 502, P 510

30 min.

P 503, P 511

Video Run Time: 12:27 Question Time: 30 min.

30 min.

P 501, P 511

30 min.

IM

Web Case: Focus on Google: A Googol of Dollars for Google Video Case: McDonald's: Accounting for Billions and Billions of Burgers Supplemental In-Class Activity 1: Not Exactly Child's Play

Supplemental Handout: Not Exactly Child's Play

This activity asks students to read a case study and think about the value of an audit and special accounting issues that a firm that conducts international business may face.

Case related to Supplemental In-Class Activity 1 above.

P 492

15-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Ethics and Corporate Social Responsibility: Getting to the Bottom of the Sarbanes-Oxley Act

Students research the Sarbanes-Oxley Act, and answer questions about it.

Web Exercise: Cash Flow Simulation

Students go online to play a cash flow simulation game.

Web Exercise: Balancing a Budget

Students go online to see if they can balance New York City's budget.

A brief paper responding to the questions presented in the exercise.

A brief report on how well the student did on the simulation.

A report on the student's approach to balancing the budget.

Web Exercise: Exploring Career Possibilities

Students visit Web sites such as: http://www.monster.com to explore the jobs of financial managers and accountants.

Web Exercise: Securing Financing

Students go online to find out more about how banks handle short-term business financing.

Students go to: http://www.reuters.com/fina nce/industries/allIndustries and evaluate the current ratios for several industries of their choice.

Web Exercise: Analyzing Current Ratios

At-Home Completion Time 60 minutes

IE Page Reference

1 hour

P 484, P 511

30 minutes

P 482, P 511

Answers to the discussion questions in the activity.

30 minutes

P 482, P 511

Answers to the discussion questions in the activity.

30 minutes

P486, P 511

Answers to the discussion questions in the activity.

30 minutes

P499, P 511

P 493, P 510

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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.

DETAILED LECTURE OUTLINE I.

Financial Management A. What are the implications of financial management, and how do financial managers fulfill their responsibilities?

B. The Financial Manager 1. What is financial management?

2. What is the role of the financial manager?

C. Planning for Financial Needs 1. How does the financial manager plan for financial needs?

2. How does a company know it has enough resources to meet forecasted needs?

3. How are funds made available for large projects?

D. Addressing the Budget 1. What helps plan for short-term needs?

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. How do companies finance their short-term business needs through trade credit, commercial banks, commercial finance companies, and commercial paper?

B. Financing Short-Term Business Needs 1. 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.

2. Suppliers often offer trade credit (p. 486) where payment is deferred for usually 30, 60, or 90 days.

3. How do commercial banks help with financial management?

4. Are there other short-term financing options?

C. Financing Long-Term Business Needs 1. Why do companies need long-term financing solutions?

2. What are the different types of long term financing?

3. What kinds of debt financing are available?

4. What kinds of equity financing are available?

5. How do companies decide between debt and equity financing?

III. Accounting Functions A. What are the functions of corporate accounting, tax accounting, auditing, financial accounting, managerial accounting, and government and not-for-profit accounting?

B. Accounting Fundamentals 1. What is accounting?

C. Types of Accounting 1. Corporate Accounting 2. Auditing 3. Government and Not-for-Profit Accounting 4. Tax Accounting

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D. Accounting Standards and Processes 1. Are there specific standards accountants must adhere to?

2. How is double entry bookkeeping used to maintain the balance of the fundamental accounting equation?

3. What is the accounting process?

4. Does the accounting equation always stay in balance?

IV. Financial Statements A. What is the function of balance sheets, income statements, and statements of cash flow?

B. Financial statements (p. 496) are formal reports of a business's financial transactions that accountants prepare periodically. They include: 1. The balance sheet (p. 496) is a snapshot of a business’s financial condition at a specific moment in time. It reflects assets (p. 497), liabilities (p. 498), and owners’ equity (p. 498).

2. The income statement (p. 496) reflects the profitability of a company by showing the revenues (p. 501) 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.

3. Statements of cash flow (p. 496) 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.

C. The Balance Sheet 1. What is the balance sheet used for?

2. What does a balance sheet track?

D. Analyzing a Balance Sheet 1. How do I analyze a balance sheet?

2. How do I compare data from two companies?

3. Can a company have too much debt?

E. Income Statements 1. 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 (p. 502) or "the bottom line." The primary formula for an income statement is revenues – expenses = profit (or loss).

2. What are the components of an income statement?

F. 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’s profit belong to the shareholders?

G. Statement of Cash Flows 1. 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?

H. Analyzing Statement of Cash Flows 1. 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.

15-4 .

SUPPLEMENTAL ACTIVITIES

Supplemental In-Class Activity 1 15-1

Not Exactly Child's Play

Activity Overview: This activity asks students to read a case study and think about the value of an audit as well as special accounting issues faced by firms that conduct international business.

Time Limit: 30 minutes What to Do: 1.

In advance, make copies of the Supplemental Case Study on the following pages and distribute them to students.

2.

Divide students into groups and ask them to read the case, answering the accompanying questions within their groups. (15 minutes) a. b. c.

3.

What role did the audit play in the investigation of Cinar’s financial irregularities? Why did the auditors resign?

How can shareholders protect their interests in a firm’s financial well-being? What evidence in the case suggests how Cinar’s shareholders are watching the company’s actions now?

What special accounting issues do you think firms face that conduct international operations?

Once students have answered the questions, discuss their answers as a class. Make sure they bring up the following points: (10 minutes) a.

b.

c.

The audit was undertaken to determine whether the company’s financial reporting was accurate. Because the company could not ensure the accuracy of statements with regard to any illegal acts, the auditors could not complete the audit and resigned.

Shareholders can examine company information, such as press releases, quarterly and annual statements, and other data; they can exercise their voting rights; and they can ask relevant questions. Apparently, there is a shareholder rights group for Cinar’s shareholders.

Accounting rules and regulations vary by country, as well as ethical standards.

Don’t Forget: This activity can also be assigned as a debate or as homework.

Wrap-Up: Bring the activity to a close by reviewing the purpose of an audit and describe how shareholders can watch for and protect the interests of the firm’s financial well-being.

15-5 .

SUPPLEMENTAL HANDOUT: IN-CLASS ACTIVITY 1 15-2

Not Exactly Child's Play

When William Mackenzie, Vice President of a concerned shareholder rights group, said of Cinar, “The amount of strange things in this company is beyond anything we’ve seen in a long time,” he wasn’t referring to Arthur, the talking aardvark who’s the hero of a popular children’s television show Cinar produces. He meant the company’s accounting practices, which were the subject of audits on both sides of the United States–Canada border and an investigation by the Royal Canadian Mounted Police.

Founded as a distributor of foreign films in the late 1970s by husband-and-wife team Ronald Weinberg and Micheline Charest, Cinar was earning $102 million in sales by the late 1990s as a producer of children’s television programming. But a protest by Canadian writers that the firm was using U.S. writers drew attention to generous tax credits and other possibly unearned breaks from the federal government and from federally chartered Telefilm Canada. By the spring of 2000, a massive investigation and audit had begun. Trading in the company’s stock was temporarily halted, top executives took “administrative leaves,” and financial data were removed from the company’s Web site.

Today, the firm is still producing Arthur, it has repaid some government funds (including taxes and penalties), and the board of directors has arranged to recover some of the money that had been invested without authorization. Charest and Weinberg were fired, and Cinar is suing them and another official of the firm (also let go) for over $28.6 million the board believes they owe the company.

It took months for Cinar to pull together correct information for its financial statements for 1997, 1998, and 1999, which were finally released in unaudited form in February of 2001. The company had announced in January that “in order to be audited, the financial statements of the Company must be the subject of representations from management related to certain matters, including whether any illegal, fraudulent acts or related party transactions exist and, if so, have been adequately reflected………new management of the company has determined that, at the present time, it cannot provide the required assurances with respect to financial periods prior to its appointment.” The company’s auditors, Ernst & Young LLP, then resigned.

In a letter to shareholders, the firm explained the delay in preparing financial statements as necessary to ensure that the statements “fairly present the Company’s operations in all material respects.” In addition to detailing the repayments noted previously, the letter went on to say that investigations had “revealed hundreds of instances of transactions involving company funds which were processed through accounts maintained on the Company’s books for the three former senior officers of the Company or companies controlled by them. These transactions involve funds both received and disbursed.”

15-3

Discussion Questions

a.

What role did the audit play in the investigation of Cinar’s financial irregularities? Why did the auditors resign?

b.

How can shareholders protect their interests in a firm’s financial well-being? What evidence in the case suggests how Cinar’s shareholders are watching the company’s actions now?

c.

What special accounting issues do you think firms that conduct international operations face?

15-6 .

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.

(CFO, pgs.482) Forecasting Chart: Have your students discuss the actions necessary for sound financial management: forecasting future financial needs; developing budgets; establishing controls. Have the students define and discuss each segment and then create a graphic that illustrates the process step–by–step. (Financial Requirements, pg. 481) 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. (Budgets, pgs. 483) 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?

(Short Term Financing, pgs. 486) Long Term Resources: Have your students find websites 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). (Long Term Resources, pgs. 488) 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. (Accounting Types, pgs. 491) 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. (Ethics, pgs. 493) 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. (Fundamental Accounting Equation, pgs. 494)

15-7 .

BizSkill: OBM and Financial Statements Covers material in Chapter 15

Available at: mybizlab.com

At the end of this exercise, you 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?

15-8 .

ANSWERS TO END OF CHAPTER MATERIALS Self Test Multiple Choice 1. b 2. d 3. a 4. a 5. d 6. b 7. a 8. b 9. b 10. a True/False 1. False 2. True 3. False 4. True 5. False

Critical Thinking Questions: Suggested Answers 1.

Question 1 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 minichapter), Jason can consider leasing rather than purchasing the cars, or purchasing used cars rather than new cars. 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 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.

2.

Question 2 has several 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.

15-9 .

b.

c.

3.

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.

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.

An independent auditor is hired from outside the company to ensure that their financial reports have been prepared accurately and are not biased or manipulated in any way. Companies can avoid devastating budget problems by performing audits.

Over the past decade, these auditors have been under scrutiny by the government. Despite the passage of the Sarbanes-Oxley Act in 2002 which impacted the auditing of financial statements in a variety of ways, recent problems on Wall Street have resulted in increased concern.

4.

Mateo should indeed invest his bonus check. Based on information provided, Google— at over $14 million— has a better gross profit than Yahoo!, at $3.5 million. Google also has a better gross profit margin (62.61% vs 55.54%).

Despite the higher price for Google stock ($400 as compare to $20 for Yahoo!), Google appears to be a stronger company, based on current information. Google revenue increased 31% in 2008 and 9% in 2009; Yahoo!’s revenues increased about 8% in 2008, but decreased about 11% in 2009. And Google’s prospects are good.

For instance, it appears that realtors are using the site for advertisements. And although Gmail isn’t as popular as Yahoo mail, it is growing rapidly.

5.

Sally will have to find adequate short-term financing to order material and supplies. Trade credit might be available, but usually that applies to larger companies with good credit. Commercial banks can issue a line of credit or make a secured loan, but clearly credit has been tight in recent times. If that doesn’t work, a commercial finance company might issue a short-term loan. Finally, another strategy to obtain quick sources of cash is factoring, the process of selling accounts receivable for cash.

Team Time Industry Analysis 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: 1) Working capital 2) Current ratio 3) Debt to equity ratio 4) Gross profit margin 5) 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?

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.

15-10 .

Ethics and Corporate Social Responsibility Getting to the Bottom of the Sarbanes-Oxley Act 1.

The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation enacted in response to the high-profile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise.

The Sarbanes-Oxley 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?”

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 15 Web case and exercise, visit www.mybizlab.com.

Focus On Google: A Googol of Dollars for Google Answers to Web Case Discussion Questions 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.

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.

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.

15-11 .

Video Case Solution To access the Chapter 15 video case and exercise, visit www.mybizlab.com.

McDonald's: Accounting for Billions and Billions of Burgers Answers to Video Case Discussion Questions 1.

McDonald’s collects data from individual restaurants. That information is passed on to that city’s main office, then to one of three regional divisions (across the globe), and, finally, to its U.S. headquarters for final consolidation. The major international regions are Asia/Pacific, Middle East/Africa, Latin America, and Europe.

2.

McDonald’s realizes that foreign exchange rates can change daily. To help express the underlying nature of their performance to investors and analysts, McDonald’s employs what they call “constant currency reporting.” By showing all currency figures using the foreign exchange rate applied to the previous year’s financial statement, the company helps investors and analysts compare year-to-year results on the same basis. Otherwise, investors and analysts would have to adjust the current year’s figures in order to make a fair and accurate comparison of sales and profit trends.

3.

The corporate income tax rates, along with expenses, are deducted from sales revenues to calculate net income in each country.

4.

McDonald’s employs a web-based computer tracking system that automatically takes into account many factors, such as local inflation rates.

Up for Debate Points Pro: The Golden Arches should disclose detailed financial results for each country and region. First, investors and analysts would be better able to evaluate the company’s performance within the context of each area’s business and economic climate. Second, these parties would be able to compare company results on a country-by-country basis over time and during one particular accounting period.

Con: The Golden Arches need not report detailed financial information on a country or regional basis. First, investors and analysts could have difficulty making sense out of the country-by-country results due to the specific laws and regulations governing the accounting and reporting procedures in each nation or region. Second, concentrating on country-by-country results could distort the true overall performance picture of McDonald’s.

15-12 .

CHAPTER 16: SECURITIES AND INVESTMENTS QUICK REFERENCE GUIDE

IN-CLASS ACTIVITIES Activity

Description

Time Limit

Team Time: Take this $50,000 and Invest It! Web Case: Focus on Google: Google's Stock Starts on the Rocks Video Case: The Motley Fool: Investing the Fool's Way

Students work in groups to create an investment portfolio.

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

Students watch and discuss the chapter video.

30 min.

IE Page Reference P535, P541

30 min.

P517, P543 P523, P543

Supplemental In-Class Activity 2: How Much Is That Violin In the Window?

Students discuss a case that describes an

Video Run Time: 16:53 Question Time: 30 min 30 min.

investment opportunity that has nothing to do with stocks or bonds, buts shares features with both.

Case Study to accompany In-Class Activity 2 above.

30 min.

P535

Supplemental Handout: How Much Is That Violin In the Window?

P535

16-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Ethics and Corporate Social Responsibility: Can Investments Be Socially Responsible and Lucrative?

Students investigate socially responsible investment options.

A brief report outlining the returns available with socially responsible investments.

Web Exercise: Tracking an IPO Web Exercise: Ratio Differences

Students research a recent IPO.

Web Exercise: Dollar-Cost Averaging

Students research the investment strategy of dollar cost averaging.

Web Exercise: Municipal Bonds: Paving Roads and Building Schools

Students research municipal bonds issued in their state.

Students research the debt/equity ratios of companies in different industries.

At-Home Completion Time 1 to 2 hours

IE Page Reference

Answers to the discussion questions in the activity.

Prepare for discussion on why certain industries have higher debt ratios than others.

In a paragraph, students describe what this strategy is, why it is used, and the advantages and disadvantages it has over other investment strategies.

30 minutes

P517, P543

30 minutes

P516, P543

45 minutes

P528, P543

Answers to the discussion questions in the activity.

30 minutes

P530, P543

P533, P 542

16-2 .

CHAPTER OPENER This chapter gives students an overview of the ways in which they can invest their money. Together with Mini-Chapter 5, "Personal Finances", this chapter will help students develop a diversified portfolio, including stocks, bonds, mutual funds, and other investments. The chapter also gives an overview of the pros and cons of financing organizations with debt and/or equity.

DETAILED LECTURE OUTLINE I.

Choosing Between Debt and Equity A. Introduction 1. For large, capital-intensive projects or general expansion, owners must choose between financing with securities (p.513) such as stocks or bonds and financing through debt. This decision is made by understanding: B. What are the pros and cons of debt and equity financing?

C. Financing with Bonds 1. Why finance with bonds?

2. What are the advantages of financing with bonds?

3. What must be considered before financing with bonds?

4. How do companies pay back their bond debt?

D. Financing with Stock (Equity) 1. Why finance with stock (equity?)

2. Are there disadvantages to financing with stock?

3. What are the advantages to financing with stock?

4. How does a company choose between debt and equity?

5. Are there guidelines for debt and equity levels?

E. Primary Security Markets 1. How do companies issue bonds and stocks?

2. How do companies issue bonds?

3. Do companies issue stocks in the same way as bonds?

F. Secondary Security markets 1. How are stocks exchanged after they are issued?

II. Investment Fundamentals A. How do risk return relationships, risk tolerance, and asset allocations relate to the fundamentals of investment?

B. The Risks and Rewards of Investing 1. I save my money, isn't that enough?

2. How can I make my money work harder for me?

C. Investment Risk 1. Isn't investing too risky?

2. How do I know my risk tolerance?

3. How do I start investing?

III. Investing in Stocks A. What are the different investment categories of stocks, and how does the stock trade process work?

B. Types of Stocks 1. Are all stocks the same?

2. How do I choose which stocks to invest in?

3. How are stocks bought and sold?

C. Changing Stock Prices 1. What is stock performance, and what are the factors that lead to changes in stock price?

16-3 .

2. What causes stock prices to change?

3. How do you know how well a stock is doing relative to other stocks?

4. How do I make money investing in stocks?

IV. Investing in Bonds A. What are the different types and characteristics of bonds, and how is the safety of bonds evaluated?

B. Different Types of Bonds 1. Corporate Bonds 2. Government Bonds 3. Municipal Bonds C. How can I tell how safe a bond is before investing?

1. Examine the bond's credit risk by looking at how a rating agency such as Moody's has graded it. Junk bonds (p. 531) have the highest rate of return, but also the highest investment risk.

D. What are the characteristics of a bond?

1. Bonds are characterized by their par (face) value (p. 531), which is the money the bondholder will get back once a bond reaches maturity. Most bonds sell at par value. Bonds are also characterized by the coupon (p.

531), or interest rate, and maturity date (p. 531).

2. Bonds are not risk free. The creditworthiness of the issuer is the main factor affecting a bond’s risk.

E. Do I have to hold the bond to maturity?

1. Bonds can be bought and sold on the secondary market, but bond prices move in the opposite direction of interest rates.

V. Investing in Mutual Funds and Other Opportunities A. What is the difference among bond mutual funds, money market funds, and equity funds?

B. Mutual Funds 1. What is a mutual fund?

2. What are bond mutual funds?

3. Money market funds (p. 532) invest in short-term debt obligations. The interest rate for these funds is often nearly double that of “regular” interest-bearing checking or savings accounts. In addition, money market accounts provide check-writing privileges so you have quick access to the money.

4. Are there different types of stock mutual funds?

5. Why are mutual funds so popular?

6. What are the advantages and disadvantages of mutual fund investment?

7. How do I make money investing in mutual funds?

8. What do I need to watch out for when investing in mutual funds?

C. Other Investment Opportunities 1. What is an option or a futures contract?

2. Besides stocks and bonds, what else is there?

3. What are futures?

4. What are ETFs? 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.

16-4 .

SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity 2: Case Study 16-1

How Much Is That Violin In The Window?

Activity Overview: This activity familiarizes students with investments other than securities that share some similar "features".

Time Limit: 30 minutes What to Do: 1.

In advance, make copies of the Supplemental Case Study on the following pages 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 is the 1735 de Ges Partners' investment different from a traditional investment in securities like stocks or bonds? How is it the same? b) How much of a risk do you think the investors are taking? What do you think they hope to get back for their money? c) Can you think of any other applications for this model of investing?

3.

Once students have answered the questions, discuss their answers as a class. As students discuss their answers, make sure they bring up the following points: a) It is different in that it is a partnership; it is an investment in a rare object; and it is also, in part, an investment in the violinist's career, which has intangible returns. It is the same in that it is for a specified time limit and entails both risk and the opportunity for monetary return. b) Students' views of the risk will vary. The investors hope to get back their money and a considerable profit; those who are close to Mr. McDuffie also hope to further his career. c) Answers will vary, but students will mention various investment options that are not included in securities markets.

Don’t Forget: There are many forms of investments whose market values fluctuate based on a variety of factors.

Wrap-Up: Wrap up the activity by mentioning that each student's assessment of the risk inherent in this case will vary, just as investing in market securities.

16-5 .

SUPPLEMENTAL HANDOUT: IN-CLASS ACTIVITY 2 16-2

How Much Is That Violin In The Window?

If a wooden object appreciates in value from $1.2 million to $3.5 million, it must be very special indeed. Robert McDuffie, a rising U.S. violinist, would call it “an extension of my musical personality”—a rare 1735 Guarneri violin that he yearned to own, but knew he would never be able to afford.

Mr. McDuffie finally found a way to play the treasured instrument when he put together a group of 16 investors who call themselves the 1735 del Gesù Partners LP. The 16 partners purchased the violin from its owner, Dietmar Machold, of Machold Rare Violins in New York, as an investment, by pooling shares in the venture of $100,000 each. They are leasing it to Mr. McDuffie, but instead of paying monetary rent, he will play the violin, which enables it to maintain its value and continue to appreciate, and he will also pay for maintenance and insurance, totaling between $15,000 and $20,000 per year. At the end of the 25-year lease, the violin must be returned to the partnership, which will then sell it for a profit. One conservative estimate of the violin’s future value, if it appreciates at a reasonable 5.5 percent per year, is close to $10.3 million.

Mr. Machold holds 3.5 of the shares. “Prices never go down for these instruments,” he said. “They only go up.” While that has been true in the past, not all the investors are in the partnership for the money.

“That really isn’t what it’s about for me,” says John Townsend, another of the partners. “It’s about my friendship with Bobby [Mr. McDuffie] and my interest in his career.”

The financial prospects are certainly bright, however. And the investors have the satisfaction of seeing Mr. McDuffie further his budding musical future, in addition to which they can expect to hear two private concerts a year, receive a newsletter about the musician’s other performances, and attend an annual event at Mr. Machold’s castle in southern Austria. The arrangement is a bit unusual; in Europe, the Middle East, and Japan, musicians who play such venerated instruments are able to borrow them for little or no money from the governments and businesses that own them. But Mr. McDuffie hopes his idea catches on.

Source: Susan Elliott, “Investment Opportunity. Strings Attached,” New York Times, February 6, 2001, E1, E8.

Discussion Questions (a) How is the 1735 del Gesù Partners’ investment different from a traditional investment in securities like stocks or bonds? How is it the same? (b) How much of a risk do you think the investors are taking? What do you think they hope to get back for their money? (c) Can you think of any other applications for this model of investing?

16-6 .

ENHANCING THE ONLINE COURSE Investing Choices: Ask your students to create lists of the advantages and disadvantages of both debt and equity financing. Post the lists on the course blog and follow-up with pertinent discussion questions on the discussion board.

(Debt and Equity Financing, pgs. 515) Financing Guidelines: Ask your students to use the chart on Table 16 as a basis for a short paper on the possible guidelines for choosing between debt financing and equity financing. Have students find information on the Internet from the major financial advisory firms that will help them in making these choices. (Debt and Equity Guidelines, pgs 516) SEC Search: Have your students locate the official SEC site online and report to you on what information they can glean from the site. How will this site be useful to them in their future business careers? What is especially important to the students regarding this site? (SEC. pg. 517) Prospectus Search: Ask your students to search the Internet to find an example of a prospectus from a Fortune 500 company and from a smaller business. In what ways are the two reports different? In what ways are they alike? Have your students do a quick analysis of both reports for content, type of information, persuasive style, financial information, strategic information. (Prospectus, pgs. 517) To Invest or Not to Invest: Using the information on page xx of the text, have your students create PowerPoint slides explaining the pros and cons of investing. Once all the slides are posted, ask students to follow-up with their thoughts on their own future investing. (Investing, pg. 518) Risk Essay: Ask your students to write a one page essay on the personal risks. Do they consider themselves risk adverse or risk tolerant? Why or why not? Post the essays on the discussion board. (Risk Tolerance, pg. 520) Stock Options: Have your students choose five companies in which they might be willing to invest (at some point in the future). Their research should focus on financial media such as online newspapers, magazines, or financial sites. Have the students identify the types of stocks offered based on the information in the media. Then, ask students to create a chart listing the different types of stocks, bonds, etc. offered by these companies. (Stocks, pg. 515) Investment Surfing: Have your students look up sites for NYSC and NASDAQ. What information is listed there? Why are these sites important for investors? Have the responses posted on the discussion board. (NYSE/NASDAQ, pg. 525)

16-7 .

BizSkill: Financial Management Covers material in Chapter 16

Available at: mybizlab.com

At the end of this exercise, you should be able to answer the following questions: 1.

What is the role of a financial manager?

2.

What are common long-term financial needs for a business?

3.

What are common short-term financial needs for a business?

4.

What financing solutions are available for long-term or short-term needs?

5.

What accounting reports help describe the health and challenges of a business?

16-8 .

ANSWERS TO END OF CHAPTER MATERIALS Self Test Multiple Choice 1. a 2. c 3. a 4. b 5. b 6. d 7. b 8. b 9. a 10. b True/False 1. False 2. False 3. True 4. False 5. False

Critical Thinking Questions: Suggested Answers 1. Answers will vary, but students should consider risk tolerance as the amount of risk (“possible loss of money”) they can handle without worrying about it constantly (“losing sleep at night”). Less risk can mean lower returns, but it may make a person more comfortable.

Someone may be motivated to change their risk tolerance by any number of factors — knowledge level and/or financial security among others.

2. Answer will vary for each student, depending on their personal goals. The key information to look for in this answer is the correct relationship between the goals and financial resources anticipated to meet the goals, the student’s risk tolerance and the corresponding securities in which the student is willing to invest. The student may need to make some adjustments to their goals because of imbalance in their risk tolerance level, the amount of money required to meet their goals, and/or the time period in which to accomplish their goals.

3. Answers will vary, depending on the student. However, answers should include companies that have some consistency of solid financial performance – such as Dell, Reebok, Nike, etc. and that are relatively new – perhaps only in existence 10 or 20 years.

4. Answers will vary for each student. In making their choices, be sure that students consider dividends, the company's fundamental data, (earnings, financial statements, and key ratios), current events, the company's history, and the opinions of industry analysts.

5. Answers will vary, but the students’ discussion should include the innate differences between the S&P 500 and the various types of companies that make up many mutual funds. The S&P 500 has a basket of the largest U.S. companies.

The make-up of companies that comprise mutual funds is more flexible; the basic argument is that an actively managed mutual fund can outperform the S&P 500 because the fund manager can pick and choose stocks that will have better

16-9 .

performance. For example, some mutual funds are made up of small and mid-sized companies. Depending on the economy, smaller companies can be more nimble and flexible and may perform better than their larger counterparts.

Some studies have indicated that recently the average stock fund has consistently outperformed the S&P 500. The student can also point out that there are Index Funds that represent the S&P 500. Index Funds are attractive to investors because they are completely automated and have lower costs than mutual funds, and therefore may produce higher returns. But, again, the results will change every year.

Team Time Take this $50,000 and Invest It! Answers will vary. However, teams should be able to come up with a good blend of stocks, bonds and different types of mutual funds. Students may want to visit the SEC website at http://www.sec.gov/investor/pubs/assetallocation.htm to come up with some ideas about asset allocation.

Ethics and Corporate Social Responsibility Can Investments Be Socially Responsible and Lucrative?

Student responses will, of course, vary, depending on which organizations they choose for their reports. There is a fair and balanced overview of the pros and cons of socially responsible investing at the AARP website: http://www.aarp.org/money/financial_planning/sessionsix/socially_responsible_investing.html. When discussing student answers with the class, be sure to discuss the topic of investment fees. These are usually much higher for socially responsible funds than for index funds or even for other types of managed funds.

ANSWERS TO CASE MATERIALS: Web Case Solution To access the Chapter 16 Web case and exercise, visit www.mybizlab.com.

Focus On Google: Google's Stock Starts on the Rocks Answers to Web Case Discussion Questions 1.

Google was different from the typical IPO because of the "buzz" generated by its initial offering. Big investors would hope to buy Google at a lower price on the primary market, with the expectation that the stock price would jump significantly on the secondary market. In this case, the large investors could churn the stock – buy it on the primary market and immediately sell it on the secondary market for a large mark up.

2.

Google chose to conduct the Dutch Auction so that people who might not normally be able to purchase shares on the primary market would be able to participate in the initial offering of the stock. In addition, Google wanted to give early investors the best price for their shares, and to create a situation which encouraged long term stock positions rather than churning.

3.

Yahoo! and Ask Jeeves were Google's closest competitors. If their stock prices fell, it would send a signal that the industry could be faltering; that means that Google's stock would not be worth as much.

Video Case Solution To access the Chapter 16 video case and exercise, visit www.mybizlab.com.

16-10 .

The Motley Fool: Investing the Fool's Way Answers to Video Case Discussion Questions 1.

The Motley Fool teaches its investors the 13 steps to learning about investments and making smart decisions in the markets. To deliver their message, they employ virtually every medium available, from newsletters to radio shows, from to books to their own website.

2.

The Motley Fool recommends that the novice investor first pay off credit card debt before investing, and then focus primarily on low risk index funds. The overall goal is to find and choose investments that will beat inflation and ideally keep up with general market returns.

3.

Bonds are considered less risky than stocks, since they promise to return the face value to the holder at maturity.

Also, bonds pay a fixed interest rate and thus offer stable interest income.

4.

Preferred stock provides first rights to annual dividends, which can be a valuable source of regular income to retirees.

On the other hand, common stock is a riskier source of income because it does not carry first rights to dividends.

Up for Debate Points Pro: Stock rumors should be covered by the First Amendment right guaranteeing freedom of speech. As long as individuals do not misrepresent themselves as experts when circulating rumors, they should be free to express themselves online. Furthermore, people who learn about stock rumors online are responsible for checking any investment tips prior to acting on them.

Con: The First Amendment does not extend to statements that endanger life, such as falsely shouting out “Fire!” in a crowded public place. Therefore, stock rumors, which can damage investors financially, should not be covered under freedom of speech. Moreover, the SEC is the proper agency to regulate statements about individual investments in an effort to uphold investor confidence in securities markets.

16-11 .

Instructor’s Manual for Better Business 2e

The following instructor resources are available to accompany Better Business 2e:

Instructor Resource/Description

Location

BizChat Exercises

www.mybizlab.com

These short exercises ask students to read a paragraph about a chapter-related topic, to explore two related Web sites, and to answer 2–3 questions.

BizSkills

www.mybizlab.com

These scored interactive mini-simulations let students make real business decisions by playing the role of a business professional making choices in an interactive environment. They include a quiz at the end and allow students to send you their BizSkill and quiz scores. See each IM chapter for the corresponding BizSkill.

Business Plan Project

www.mybizlab.com & The Business Plan Project Appendix is available to assign either in parts Instructor’s Resource Center or as a capstone exercise. See Mini Chapter 2 of this IM for the entire (IRC) at www.pearsonhighered.com/ set of Business Plan Project materials. eductor Document Makeovers

www.mybizlab.com

Assign students document makeover assignments to enhance their business communication skills. Document makeover exercises are found in Mini Chapters 3 and 4 of Better Business 2e.

Image Library

www.mybizlab.com & IRC

All images from the text are available for download.

Instructor’s Manual

www.mybizlab.com & IRC

This IM, including Teaching Tips and other helpful notes and assignments, is available for download.

PowerPoint Presentations

www.mybizlab.com & IRC

Find the full text's PowerPoint presentations designed specifically for use with Better Business 2e.

Test Banks (and Test Gen)

www.mybizlab.com & IRC

Test banks are available for every chapter of Better Business 2e.

Versions include Mac, PC, Moodle, BB and WebCT. The Test bank is also available in Word format (Test Item File) on the IRC only.

Videos and Video Guide Every chapter corresponds to a Pearson-owned video clip with multiple-choice exercises available at www.mybizlab.com. The Video Guide provides a brief synopsis of the video, suggested discussion questions and additional multiple-choice questions.

www.mybizlab.com (Videos and Guide) & IRC (Video Guide only)

MINI CHAPTER 1: SPECIAL ISSUES IN ONLINE BUSINESS QUICK REFERENCE GUIDE IN-CLASS ACTIVITIES Activity

Description

Ice-Breaker: Music Sharing

Students discuss the way the Internet and technology has changed the way music is distributed.

Students debate whether or not goods purchased on the

Supplemental In-Class Activity 1: Debate: Internet Taxation Supplemental In-Class Activity 2: What Makes a Great Website?

Supplemental In-Class Activity 3: Privacy, Please

Internet should be taxed.

Students plan a website for an e-business.

Students debate privacy issues associated with Internet

Time Limit 15 min.

IE Page Reference IM

15-20 min.

P128

45 – 60 min.

30 min.

P127 P132

use.

MC1-1 .

CHAPTER OPENER Mini Chapter 1 reviews the impact of online life within the business world, particularly the forms e-commerce takes, its impact on banking, how it has changed business marketing and the challenges it creates.

DETAILED LECTURE OUTLINE I.

Online Business A. The Internet has dramatically changed almost everything about the way we do business, from globalizing sales, to creating new markets to outsourcing. The Internet also changes interactions between businesses and their consumers.

B. Business-to-business (B2B) transactions 1. B2B web sites include: Company web sites, Procurement exchange, Specialized industry portals, Brokering sites, Information sites.

C. Business-to-consumer (B2C) transactions 1. B2C relationships are usually established through Internet marketing.

2. Small companies often have difficulty entering the online market and staying competitive, because online consumers are very price conscious.

3. Some business models that have accelerated B2C e-commerce include: D. Consumer-to-consumer (C2C) transactions 1. Consumers sell goods to other consumers, sometimes with the involvement of a third party, like eBay. E. The Challenges of E-Commerce 1. Taxes 2. Legal Jurisdiction II. Marketing Online A. Online Advertising 1. Online advertising refers to any form of advertising that uses the Internet to market its message to customers.

2. One of the great benefits of online advertising is the ability to see how many people have clicked on a particular ad.

3. Drawbacks to online advertising include" B. Viral Marketing 1. Viral marketing involves using social networks, e-mail, and Web sites to spread the awareness of a particular brand through subtle messages spread by consumers who feel like they have a personal connection to the brand.

III. Banking Online A. Online banking involves using the Internet rather than visiting a brick-and-mortar bank to manage finances.

B. The Challenges of Online Banking 1. Making cash deposits.

2. Banks may charge a fee for online services.

3. Potential for identity theft.

IV. The Future of E-Biz: Growth and Challenges A. Challenges of E-Biz 1. Adding spyware or adware to one's computer, thereby giving hackers access to company networks.

2. Theft of consumer credit card data, through hacking or phishing.

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.

MC1-2 .

SUPPLEMENTAL ACTIVITIES Supplemental Ice-Breaker Activity Music Sharing Activity Overview: Class discussion about purchasing music on the Internet.

Time Limit: 30 minutes What to Do: 1.

Tell students you want to know more about how they purchase their music these days. (If you are older than 35, bring one of your old albums to class and say something like "I know these are obsolete…") Then discuss the following questions with the class. a.

What is your primary source for hearing new music today (i.e., radio, satellite radio, TV, friends, clubs, social networking sites, other)? How has the Internet changed the way people find out about music today? b. How do you get your music? Buying a CD, online, a radio subscription, free downloads? How has the Internet changed the way you get your music today? c. What are the advantages and disadvantages of each of the music formats above for: • the musician.

• the music publisher.

• the music consumer. d. What do you think about the pricing of the music you buy? Is it fair, too high, too low? How has the Internet changed the pricing of music?

Don’t Forget: If you have a very traditional college class (18-22 year-olds), this discussion will not work unless you educate them a bit on how music sourcing and buying used to be handled. Classes with more diverse students can get into an animated conversation about these topics with the students alone.

Wrap-Up: Wrap up the conversation by asking the students to think about the pros and cons of buying music in a brick and mortar store on a CD vs. buying music online. You can also direct students to www.music.net, a website established to control the legal distribution of copyright content.

Supplemental In-Class Activity 1 MC1-1 Debate: Internet Taxation Activity Overview: Debate the reasonableness of Internet taxation.

Time Limit: 15 – 20 minutes, depending on student interest.

What to Do: Divide the class into two groups – those in favor of Internet taxation and those against Internet taxation. The instructor should begin the discussion with a brief overview of the problem and then ask for students to speak up in favor and against the issue. Points made for each side should be outlined on the board so that everyone can keep track of the discussion.

MC1-3 .

Don’t Forget: Break up students into two groups prior to the debate. Make sure students research their side and come prepared to argue their points. You might want to have each student turn in a brief list of points supporting their side to ensure that all students have researched the issue.

Wrap-Up: The discussion should end when time allotted has run out. The instructor should briefly summarize the points made on the board.

Supplemental In-Class Activity 2 MC1-2 What Makes a Great Website?

Activity Overview: Plan an e-commerce business.

Time Limit: 45 min – 1 hour What to Do: This might be best done in groups of 4 or 5 students. Have each group pick a local business or service organization for which they will need to design a website. They do not need to design the website – the output should be a presentation or report on the various components and considerations that go into developing a good website. What kind of customers will the website attract? Will they be current customers, or new customers or both? What kind of information/services will be provided on the website? What will the website look like (a tour, catalog or newsletter?)

What is the website name? What kind of considerations go into picking a good website name? How will you promote the site? What is needed to maintain the site?

Don’t Forget: Many students might not have thought about these types of questions so it may be useful to have them look at several types of websites, providing a brief critique of each in their presentation or paper. They can note which features would be appropriate to have on their website.

Wrap-Up: Each group should present their website ideas to the rest of the class, if time permits.

Supplemental In-Class Activity 3 MC1-3 Privacy, Please Activity Overview: Debate the privacy issues encountered while surfing online (holding on to your privacy online.)

Many search engines, like Google, and most company web sites are able to install cookies and other devices, as well as adware and spyware that gather information on your search terms, where you have been online, your purchases and a host of other information. Company web sites can keep a complete contact log of every click you make within their web site. This data is used to pitch products to you based on the your “clickstream” history. The result is often unsolicited emails, pop-ups and other annoyances. Privacy advocates oppose tracking behavior and unsolicited annoyances as an invasion of privacy. Companies argue they are able to better serve their customers by being able to offer customized products for their enjoyment.

Time Limit: 10-15 minutes What to Do: Break the class into two groups for a 5-7 minute discussion. The first group represents the interests of companies and argues in favor of “tracking.” The other group represents consumers and outlines arguments opposing tracking. They should consider actions that can be taken to address both parties concerns. The two groups can then present their arguments to the class (additional 5-7 minutes). .

MC1-4 .

Don’t Forget: Students within each group should first concentrate on their task of outlining their arguments and then focus on compromises.

Wrap-Up: Bring the activity to a close by emphasizing the importance of protecting privacy and sensitive information of consumers as a huge challenge for all businesses undertaking e-commerce in the future.

MC1-5 .

ENHANCING THE ONLINE COURSE B2B : Have your students search the Internet for examples of a(n) 1) business to business website; 2) procurement exchange site; 3) special industry portal; 4) brokerage site; 5) information site. Ask your students to compare and contrast the information on these sites. (B2B, pg127) B2B vs B2C: Have your students search the Internet for an example of a B2B website and a B2C website. Ask them to compare and contrast the differences between the two types of sites. How do the web designers create the site differently when the consumer is the reader/browser instead of someone in the industry? (B2C, pg127) B2C Search: Ask your students to email back a list of their top 5 retail companies. Once they have emailed their responses to you, then ask them to review the B2C websites of each of their choices. What do they find helpful on each site? What information is not helpful? Are each of the sites appealing? Having seen the sites, are your students more or less likely to go out and purchase products from their top five choices? (B2C, pg127) C2C Search: Ask your students to identify at least three C2C sites. (Hint: One of the best sites and best examples is the Harley Davidson Owners group). Ask your students to identify the kinds of information that are commonly posted on these sites. Ask your students to comment on the usefulness of such communication networks. Are these sites merely places for consumers to complain? Are they sites for consumers to share information about how to use the products? Are the sites really controlled by the company to plant positive ideas about the products in the minds of consumers? (C2C, pg128) Advertising Review: Have your students review the online advertising of at least three different retailers who sell the same products (i.e. three women’s clothing lines, three bathtub manufacturers, three men’s shoe stores). How differently do the three companies approach the advertising? Do your students believe the online advertising is effective? Or is it just a nuisance when people are working online? (Online Advertising, pg129) Viral Marketing: Have your students identify at least one example of “viral marketing”. Is this an acceptable practice?

Do your students think this practice will continue or, are there better, more effective alternatives? (Viral Marketing, pg130

MC1-6 .

BizSkill: E-Commerce Covers material in Mini Chapter 1

Available at: mybizlab.com

At the end of this exercise, your students should be able to answer the following questions: 1.

When is e-commerce the best model for a business?

2.

What are the advantages and disadvantages of e-commerce?

3.

What are the qualities a successful web site requires for e-commerce?

4.

What are the business-to-business opportunities of e-commerce markets?

MC1-7 .

MINI CHAPTER 2: CONSTRUCTING AN EFFECTIVE BUSINESS PLAN QUICK REFERENCE GUIDE

IN-CLASS ACTIVITIES Activity

Description

Time Limit

Supplemental In-Class/ Homework Activity 1: Venture Capitalist PowerPoint Presentation

Students present a business plan overview to the

10 min. per group for presentation

Supplemental In-Class/ Homework Activity 2: Business Plan Review

class. Note that this project also has a homework component.

Students critique business plans that they find on the Internet. Note that this project also has a homework component.

30 min. or more, depending on the number of plans reviewed

IE Page Reference P 199

P 200

MC2-1 .

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Supplemental In-Class/ Homework Activity 1: Venture Capitalist PowerPoint Presentation Supplemental In-Class/ Homework Activity 2: Business Plan Review Supplemental Homework Activity: SCORE!!

The Business Plan Project

Students present a business plan

A set of PowerPoint slides outlining a business plan.

overview to the class. Note that this project also has an in-class component.

Students critique business plans that

they find on the Internet. Note that this project also has an in-class component.

Students visit the SCORE website to get

ideas about how entrepreneurs and small business owners get started.

Students create a business plan for a business of their choice.

At-Home Completion Time 1 to 2 hours

IE Page Reference

Answers to the discussion questions in the activity.

1 hour

P 200

A brief report on how SCORE can help businesses get started.

45 minutes

P 205

A four-part business plan.

20 hours (can be spread over the entire class schedule)

P 205

P 199

MC2-2 .

CHAPTER OPENER Business plans are essential for guiding the work of organizations, acquiring funding, and attracting both employees and investors to the organization. This chapter teaches students how to write a business plan.

DETAILED LECTURE OUTLINE I.

The Purpose of a Plan A. Introduction 1. Business plans tell the story of a business so that all potential stakeholders will know what to expect from the endeavor. Writing the plan solidifies the business owner's intentions and forces him or her to think through all of the aspects of the business in advance.

2. Business plans help owners determine if their ideas are feasible, and to pitch those ideas to others.

3. The U.S. Small Business Association and SCORE can provide a wealth of information to prospective small business owners.

B. Before the Business Plan: Finding the Right Fit 1. Determine your own goals and objectives.

II. Components of a Business Plan A. Cover Sheet and Table of Contents 1. Basic company information 2. Company logo 3. Contact information 4. Month and year business plan was created 5. Names of people preparing the business plan 6. Unique record number for tracking plan distribution.

B. Executive Summary 1. Clear, concise, and abbreviated form of entire business plan.

C. The Company and Management Team 1. Mission Statement 2. Industry Profile 3. Company Profile and Strategy 4. Anticipated Challenges and Planned Responses 5. The Management Team D. Market Analysis 1. Benefits of product or service 2. Market research 3. Assessment of the Competition E. The Product or Service 1. Product description 2. How product will be produced 3. Pricing strategy F. Sales and Promotion 1. Approaches to promoting the product or service G. Financials 1. Income Statement 2. Balance Sheet

MC2-3 .

3.

4.

Cash Flow Statement "Stress Test" – How business will perform under worst case, expected case, and best case scenarios.

H. Appendices 1. Resumes of key managers 2. Pictures of product, facilities, production, etc.

3. Letters of recommendations, professional references 4. Published information 5. Contracts and agreements, copies of patents, copyrights, trademarks 6. Media, articles 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.

MC2-4 .

SUPPLEMENTAL ACTIVITIES Supplemental In-Class/Homework Activity 1 MC2-1 Venture Capitalist PowerPoint Presentation Activity Overview: This exercise gets students to pare down a business plan into just ten slides – an "elevator speech" for venture capitalists, if you will.

Time Limit: 20-30 minutes What to Do: •

Tell students that they are being given the opportunity to spend 10 minutes, and only 10 minutes, with a venture capitalist. In that time, they will have to present a sales pitch for their new business idea. Fortunately, the students will have the equipment they need to give a PowerPoint presentation, but the presentation can be no longer than 10 slides, maximum.

•

Suggest that students construct their presentations as follows: Slide 1: Contact information, such as that found on the cover sheet.

Slide 2: Mission statement.

Slide 3: Team members and key background information.

Slide 4: Describe the nature of the problem you address. Try not to get into how the product solves the problem on this slide. Include how dire a problem this is and solutions introduced currently by competing products.

Slide 5: Introduce the product and benefits.

Slide 6: Elaborate on how the product resolves problems introduced on slide 4, and any relevant technology/methodology used.

Slide 7: Present customer testimonials, product successes, positive media reactions.

Slide 8: Sales strategy. How do you intend on reaching the customer?

Slide 9: Who are your competitors? What is the market size? How do you think competitors will react to your product?

Slide 10: Key financial information (may need to slip in a few extra slides to handle this).

•

Have students present their final plan to the class for review.

Don’t Forget: Constructing a business plan, even this slide outline, is difficult for many introductory business students. Giving lots of guidance or doing this together may be helpful to create a broad understanding of what is required in planning a new business.

Wrap-Up: Have the class critique the business plans as they are presented. Ask them whether or not they would fund the project, and why. Then ask them to discuss how well each team incorporated material from the various chapters of the text into their presentation.

MC2-5 .

Supplemental In-Class/Homework Activity 2 MC2-2 Business Plan Review http://www.businessplans.org/businessplans.html Activity Overview: Students locate an actual business plan and critically review it.

Time Limit: 30 – 45 minutes What to Do: Students can work alone or in groups. As homework, have students go to: http://www.businessplans.org/businessplans.html and look at the business plans that are presented there.

Then, students should assume the role of a venture capitalist. Would they invest their money in this venture? Why or why not? What areas of the business plan help promote the business? What areas of the business plan need further refining?

Don’t Forget: Note that while the business plans presented on this website are the "best of the best", investors may still not want to finance them, due to economic or other considerations. Students should be prepared to discuss the rationale behind their decisions.

Wrap-Up: After providing sufficient time for students to go through the business plan, come together to discuss student’s findings. What areas of the business plan needs improvement and why? What areas of the business plan were really helpful? Why?

Supplemental Homework Activity MC2-3 SCORE!!

Activity Overview: Students explore the SCORE website.

Time Limit: 5-20 minutes What to Do: Ask students to visit the Score Web site: http://www.score.org/index.html, and write a brief report on how SCORE can help entrepreneurs and small business owners get started. Encourage them to click on “About SCORE” and “How Score Can Help You”. Other places of interest include: "How to” articles and “business templates” and “Start-Up Business Plan”, which contains a template for creating a business plan.

Don’t Forget: The idea is to let students know that starting a business is within reach.

Wrap-Up: Anyone who is interested in starting a business can get help from SCORE. There are many Small Business Association offices located near most people. Help can also be found from local colleges and universities, if they have a small business development center, and from local Chambers of Commerce.

MC2-6 .

THE BUSINESS PLAN PROJECT: Instructor Notes Assigning the Business Plan: An Overview The business plan project is a great learning experience for students. Many students will enter your classroom with the dream of owning their own business. This project is often the starting point for making that dream come true. As a result, this project will have a high level of authenticity for these students. The project also serves as an exceptional assessment tool, helping you identify how well students have mastered the course material. More importantly, the business plan project stimulates higher-level thinking that a learner can take into any profession. During this assignment, students will consider the many aspects of the world of business and demonstrate an ability to “connect the dots.”

Assigning Part 1: Introduction Assignment Overview The first section of the business plan requires that the student generate an idea for a new business.

Students will usually fall into one of two categories. The first are those students who may never have thought about starting their own business, and may be terrified at the prospect of creating this type of comprehensive document. These students often need the most help in generating an idea for their starting point. For students who need a helpful nudge, you may wish to suggest starting a business that the student finds familiar. This could be a business in which they are currently employed, for example.

The familiarity will lessen their anxiety about the project, and makes the first step a positive one. The second type of student is the learner who already has a dream of owning a business. This project is especially rewarding for these students, but they still may be concerned about completing a document of this size and therefore may also appreciate some intermittent guidance.

Files to Provide Students Because this is the first part of the business plan, provide students with a copy of the Business Plan Student FAQs. It is located in this Instructor’s Edition as well as on www.mybizlab.com. Give students ample explanation of the project, your expectations for how it should be completed, and due dates.

For this part of the project, students will be asked to complete Part 1: Introduction. A hard copy of this file is located in this Instructor’s Edition. The student Word file template for the entire business plan project is located at www.mybizlab.com.

Estimated At-Home Completion Time Completion time will vary based on what students bring to the class. Students who already have a business idea will have a head start on those who do not. During the early stages of the project, it’s a good idea to devote adequate classroom time for feedback.

Homework Assignment Deliverable from Students Each business plan is a unique document, so some variance in response length is expected. For example, a student who demonstrates higher-level thinking may write 20 to 25 pages during this project, while other students may produce 10 to 15 pages. The length will also be affected by the business chosen. As a result, you may wish to designate a range of pages for this assignment rather than a set minimum length. For Part 1, expect a range of 1 to 3 pages.

MC2-7 .

Assigning Part 2: The Company and Management Team Assignment Overview This section is quite comprehensive and features several challenging tasks that require students to examine internal and external aspects of a business. The first task involves creating a mission statement, which includes establishing the business’s position with respect to ethics and social responsibility. Next, the student is asked to describe the industry and sector in which the company operates and to outline potential opportunities and threats presented by external factors such as macroeconomic matters, technological changes, legislation, and the like. This is often quite challenging for many students because it requires them to think with a broader viewpoint. Be prepared to offer feedback and encouragement.

Then, looking internally, students are asked to define the company profile and business strategy by establishing goals and then evaluating the company’s strengths and weaknesses. Lastly, the student describes the key players in the organization and creates an organizational chart.

Files to Provide Students For this part of the project, students will be asked to complete Part 2: The Company and Management Team. A hard copy of this file is located in this Instructor’s Edition. The Word file template for the entire business plan project is located at www.mybizlab.com.

Estimated At-Home Completion Time If done thoughtfully, this part of the plan will require a minimum of 4 to 6 hours to complete. Students may struggle with completing the industry analysis, especially identifying the external threats and opportunities. You may wish to use class time during each section to respond to questions.

Homework Assignment Deliverable from Students The length of student response in this section will again vary depending on the complexity and size of the proposed business. For Part 2, expect a range of 4 to 6 pages.

Assigning Part 3: Marketing Assignment Overview This part of the project asks students to create a marketing plan, identifying their target market and their competitors, discussing their product, and explaining how they will to attract the target market. Because they use their creativity, students often enjoy completing this part of the business plan.

Files to Provide Students For this part of the project, students will be asked to complete Part 3: Marketing. A hard copy of this file is located in this Instructor’s Edition. The Word file template for the entire business plan project is located at www.mybizlab.com.

Estimated At-Home Completion Time A well-constructed explanation of the Marketing section will require 3 to 5 hours. Instructor feedback will improve the quality of responses so you may wish to use class time during each section.

Homework Assignment Deliverable from Students The length of student response will range from 4 to 6 pages, but could be as many as 8 to 10 pages.

MC2-8 .

Assigning Part 4: The Financials Assignment Overview In this section, students will begin to determine if their business is truly viable. The student’s responses to questions about the costs of doing business will be used as a starting point for the financial reports.

Remind students that all of their submitted values are estimates, and there is no sure-fire method for accurately measuring how a business may perform. Many students will have trouble estimating their costs. Some assistance is shown on the student template, and you may want to create a class list of resources that students would find helpful.

The business plan provides Excel templates for students to use in this section. These Excel spreadsheet templates include built-in formulas so that calculations are automatic based on student input—the student only has to “drop in” his or her numbers. However, if your students are still unable to work with these Excel documents, there are free templates available through SCORE’s website at www.score.org/template_gallery.html.

The section concludes by asking students to evaluate all of the costs that are necessary to get the business off the ground. Once students are aware of those costs, they must determine how to get funding for their business.

Files to Provide Students For this part of the project, students will be asked to complete Part 4: The Financials. A hard copy of this file is located in this Instructor’s Edition. The Word file template for the entire business plan project is located at www.mybizlab.com.

Estimated At-Home Completion Time A well-constructed explanation of this section will require a minimum of 4 to 6 hours. Instructor feedback is absolutely critical in this section, as most students will need some direction in gathering information that will help answer the questions related to costs.

Homework Assignment Deliverable from Students Expect some uniformity of response length in this area, because students will be filling in their templates.

Most students will complete 4 to 5 pages within this section, including the templates.

Assigning Part 5: The Finishing Touches Assignment Overview In this final section, students create an executive summary, summarizing the key aspects of the entire plan, which they then insert in the front of the plan. Encourage students to be concise, as an investor would look at the executive summary before reading the details of the plan. Finally, the student is expected to create a table of contents and cover sheet for the business plan.

Files to Provide Students For this part of the project, students will be asked to complete Part 5: The Finishing Touches. A hard copy of this file is located in this Instructor’s Edition. The Word file template for the entire business plan project is located at www.mybizlab.com.

Estimated At-Home Completion Time

MC2-9 .

Although this section asks students to restate what they have already thought through and written, it can be the most difficult part of the business plan to do right. Most students can complete this section in 1 to 3 hours, depending on their writing skills.

Homework Assignment Deliverable from Students Expect some uniformity, as most of the work will take the form of a 1- to 2-page executive summary and 1 page each for the cover sheet and table of contents. Encourage brevity in the summary, but emphasize that this is what you’ll be reading first—and it must capture your attention to entice you to read further.

MC2-10 .

Business Plan Project Sample Syllabus Overview The business plan project is divided into parts that roughly coordinate with the parts and chapters in the text. Therefore, you can assign the project in parts after students complete each section of the book.

Alternatively, you may wish to assign this project as a capstone project at the end of the semester. While the project is designed to be completed individually, you might also consider grouping students together to provide additional support and to exchange ideas as they complete their projects. If this project is being assigned in an online course, it might be best to have one discussion forum dedicated to students’ questions for this project, so that everyone can ask and respond to each other’s questions.

Part 1: Introduction This part of the business plan asks students to come up with an idea for their business, creating an identity and forming a concrete notion of what the business will do as well as to identify what makes their product or service unique. The first part of the plan also asks students to identify the type of ownership the business will take and briefly describe who the firm’s ideal customers are.

Assign this part of the business plan after completing Chapters 1 through 6.

Suggested 12-week quarter due date: Suggested 16-week semester due date:

End of week four End of week six

Part 2: The Company and Management Team This part of the plan first asks students to create a mission statement and look at how the business will interact with the community and demonstrate social responsibility. Students are also asked to think about goals of their business, to describe the industry in which the business will operate, and determine some internal and external factors affecting the business. Finally, students will examine the organizational structure of the business. As part of the assignment, students will also create an organizational chart to show the framework of the business.

Assign this part of the business plan after completing Chapters 7 through 11.

Suggested 12-week quarter due date: Suggested 16-week semester due date:

End of week seven End of week nine

Part 3: Marketing This part of the business plan asks students to think about marketing’s “Four Ps”—product, price, place (distribution), and promotion—and how they apply to their business. Students will list features and benefits as well as the points of difference for their product or service. After describing the product, students must connect those described features and benefits to a targeted buyer. Once the targeted buyer has been named, students will describe advertising and promotional efforts to get the buyer’s attention.

Assign this part of the business plan after completing Chapters 12 through 14.

Suggested 12-week quarter due date: Suggested 16-week semester due date:

End of week ten End of week eleven

MC2-11 .

Part 4: The Financials This part of the business plan asks students to think about their business in terms of financial needs and costs. Students are asked to decide how much of their product they expect to sell and to identify the costs of doing business. Students will complete a balance sheet and income statement for their businesses.

NOTE: To keep things simple, we have only addressed fees associated with broadband access. (There is a line in the P&L sheet for telephone/internet expense.) Depending on the business the student is planning, they can put in website development and maintenance in the “other” category or add a separate line, if necessary.

Finally, students will need to identify how much funding they will need to start up their business and to identify source(s) of that funding.

Assign this part of the business plan after completing Chapters 15 and 16.

Suggested 12-week quarter due date: Suggested 16-week semester due date:

End of week eleven End of week thirteen

Part 5: The Finishing Touches This part of the business plan asks students to create an executive summary, table of contents, and cover sheet for their plan.

Assign this part of the business plan approximately one week before the due date.

Suggested 12-week quarter due date: Suggested 16-week semester due date:

End of week twelve End of week fifteen

MC2-12 .

Student FAQs for the Business Plan Project 1. Where do I begin?

This project will challenge you to think about all of the parts that are necessary for a business to succeed.

You should start by thinking of a business that you would like to begin. Do not use a product that already exists, such as Coca-Cola, but rather choose a business that is fairly simple in concept such as an ice cream shop or a bookstore. It would be best if you also choose a business that is of interest to you. Learning comes through the process of using your own ideas. Each section of the business plan connects with the information that is discussed in class and in the textbook.

2. What should my business plan look like?

First, you will need the Business Plan Student Template to complete the business plan. It can be found in the Business Plan Project Appendix at the back of the book or online at www.mybizlab.com. Answer the questions that make up the template in the order that they are shown. Note that the template includes hints that will help you answer each question. Once you are done answering the question, you can delete the question and the hint, leaving just the heading and your answer.

Note that the business plan project is also fully explained in the Business Plan Student Instructions file at www.mybizlab.com.

Your instructor may also provide you with a sample business plan for you to use as a guide. Note that your plan does not have to look exactly like the sample, but you need to show good organizational skills.

3. What do I do with my assignment?

Your instructor will give you instructions as to how he or she would like you to submit the plan. You will most likely be given a chance to make improvements to your plan throughout the grading period.

Note that you will be using the same student template Word file to complete the entire plan. Therefore, after completing each part of the plan, you need to save the file on a flash drive or to your hard drive.

4. How will I know if I’m doing the plan correctly?

Your instructor will provide feedback to you about your plan. Students who successfully complete the plan have these two qualities in common: They do not procrastinate. A well-written business plan cannot be written overnight, as they require a good deal of thought and creativity.

They ask a lot of questions. If a term is used in the business plan template that confuses you, check in your textbook or ask your instructor for an explanation.

MC2-13 .

The Business Plan Project: Student Instructions General Instructions The following is intended as a guide to help you instruct your students, step-by-step, in the completion of the Business Plan Project.

To get started, see the Business Plan Project Appendix at the back of the book or download the Business Plan Student Template file at www.mybizlab.com. Your students will need this to complete the project.

They will need to answer the questions that make up each part of the template in the order in which they are shown. Note that the template includes hints that will help students answer each question.

Your may also provide your students with the Sample Business Plan to use as a guide. The sample is included in this Instructor’s Manual following this section, and is also available online in mybizlab.

Use the following instructions to help your students complete each section of the Business Plan Project.

Completing Part 1: Introduction In Chapter 5 and in the Business Plan Mini-Chapter, we discuss how the starting point for virtually every new business is a business plan. Business plans describe the business strategy for any new business and explain how that strategy will be implemented. One important benefit of a business plan is that in the act of preparing it, would-be entrepreneurs must develop their business idea on paper and firm up their thinking about how to launch and run their business before investing precious time and money. In this exercise, you’ll get started on creating your own business plan by completing Part 1 of the Business Plan.

Exercise Background: Part 1 of the Business Plan Before you even begin your business plan, you need to have a “great idea” for a business. This might be a business that you’ve already considered setting up or something you decide on now. What are some businesses that you come into contact with on a regular basis? Restaurants, childcare services, and specialty retail stores are just a few examples to consider. You may also wish to create a business connected to a talent or interest you have, such as cooking or car repair. It’s important that for the purposes of the plan, you create a company from “scratch” rather than using a company that already exists. You’ll learn more if you use your own ideas.

Once you have your business idea, your next step is to create an “identity” for your business. This includes determining a business name and an idea of what your business will do. It also includes identifying the type of ownership your business will take, topics we discuss in Chapters 5 and 6. The first part of the business plan also briefly looks at who your ideal customers are.

After you have completed Part 1, take a quick look through the rest of the business plan project to get a feel for the type of information you will need as you complete the plan.

Your Assignment Step 1 To complete this assignment, go to the Business Plan Project Appendix in the back of your textbook or download the Business Plan Student Template file from www.mybizlab.com. This is a Microsoft Word file you will use to complete the business plan. For this assignment, you will fill in Part 1 of the plan.

MC2-14 .

Step 2 Once you have the Business Plan Student Template file, answer the following questions in Part 1.

Introduction. Note: Once you’ve inserted answers in the template, delete the questions and hints provided and leave just the headings so that your business plan looks more professional. Be sure to save your Word document.

You’ll be answering additional questions in the next part.

Completing Part 2: The Company and Management Team In Part 1 of the Business Plan project, you formulated the story of your business. Part 2 of the Business Plan project asks you to think about goals of your business, some internal and external factors affecting the business, as well as the organizational structure of the business.

Exercise Background: Part 2 of the Business Plan As you learned in Chapter 7, every business sets goals—accomplishments that it hopes and plans to achieve, and objectives – the short-term targets that are designed to achieve these goals. Businesses then make decisions about what actions will help them to achieve these goals. In effect, goals and objectives are the means by which businesses measure their success or failure. In this part of the plan, you’ll define some of the goals for your business. But first, you’ll be asked to articulate your company’s mission statement. A mission statement spells out what you ultimately envision your business to be with respect to growth and sometimes includes a snapshot of your strategy to achieve such growth. In addition, a mission statement reflects the overall values of the company and its owners, and the company’s intended contributions to society.

Part 2 of the Business Plan also asks you to analyze the internal and external factors that affect your business. These external and internal factors are the fundamental parts of a traditional SWOT analysis. As you’ll recall from Chapter 7, a SWOT analysis looks at the business’s strengths, weaknesses, opportunities, and threats.

To begin, you will analyze the industry in which your company will operate, and articulate the external opportunities and threats that face your company. The opportunities and threats are generally external factors that affect the business: Sociocultural forces Economic forces Technological forces Competitive forces Political-legal forces

Will changes in population or culture help your business?

Will changes in the economy help your business, or hurt it?

Will changes in technology help your business, or hurt it?

Does your business face much competition, or very little?

Will changes in laws help your business, or hurt it?

A positive change in one of these forces is considered an opportunity. A change that hurts the business is considered a threat. Each of these forces will affect different businesses in different ways, and some of these may not apply to your business at all. In some situations, an opportunity for one business may be a threat for another.

You will also be asked to look internally, and identify the strengths and weaknesses of your business, including global, quality, and technology issues. The strengths and weaknesses are internal factors— things that the business can control. What does the business do well (what are its strengths)? What may the business NOT do so well (what are its potential weaknesses)?

MC2-15 .

Additionally, you will be asked to outline any challenges you anticipate encountering as well as the ways in which you plan to respond to those challenges. It is important to have a plan in place for those unwanted, but sometimes unavoidable, situations.

Part 2 of the plan also asks you to determine how the business is to be run. Part of this will require you to briefly describe your managers and what contribution they will bring to the organization. In addition, you will create an organizational chart to get you thinking about the different tasks needed for a successful business. You’ll also examine various factors relating to operating your business.

Your Assignment Step 1 Open the saved Business Plan file you began working on in Part 1. You will continue to work from the same file you started working on in Part 1.

Step 2 For the purposes of this assignment, you will answer the questions in Part 2: The Company and Management Team. Note: Once you have answered the questions, be sure to save your Word document. You’ll be answering additional questions in the next part.

Completing Part 3: Marketing So far, your business has an identity, you’ve described the factors that will affect your business, and you’ve examined your management team and how it will be organized. Part 3 of the Business Plan project asks you to consider your marketing plan.

Exercise Background: Part 3 of the Business Plan In Part 1, you briefly described what your business will do and who your ideal customer would be. In this part of the plan, you’ll describe your ideal buyer, or target market, in more detail, listing their income level, educational level, lifestyle, age, and so forth. You’ll also describe your main competitors and your plans to respond to their market presence.

In addition, this part of the plan asks you to describe more fully the product you are planning to sell.

Once you create a clear picture of the product, you’ll describe how it will stand out in the marketplace— that is, how it will differentiate itself. This part of the project also asks you to discuss the price of your product.

Finally, you’ll examine how your business will get the attention and interest of the buyer through its promotional mix—advertising, personal selling, sales promotions, and publicity and public relations.

This part of the business plan encourages you to be creative. Have fun! Provide as many details as you possibly can, as this reflects an understanding of your product and buyer. Marketing is all about finding a need and filling it. Does your product do this?

Your Assignment Step 1 Open the Business Plan file you began working on in Parts 1 and 2.

MC2-16 .

Step 2 For the purposes of this assignment, you will answer the following questions in Part 3: Market Analysis.

Note: Once you have answered the questions, be sure to save your Word document. You’ll be answering additional questions in the next part.

Completing Part 4: The Financials Now that you’ve had fun with your marketing ideas, it’s time to think about the financial needs of your business.

Exercise Background: Part 4 of the Business Plan This part of the business plan asks you to consider the costs of doing business, such as salaries, rent, and utilities. You’ll also complete the following financial statements: •

The Balance Sheet: The balance sheet is a foundation for financial reporting. This report identifies the valued items of the business (its assets) as well as the debts that it owes (its liabilities). This information gives the owner and potential investors a “snapshot” into the health of the business.

•

The Income Statement: This is the focus of the financial plan. This document will show you what it takes to be profitable and successful as a business owner for your first year.

After you have identified the costs of doing business, as well as how much revenue that you expect to earn in one year, you will articulate how much you will need to get the business started, what kind of funding you will be seeking, and how you will use the funds.

Your Assignment Step 1 Open the Business Plan file you began working on in Parts 1–3.

Step 2 For the purposes of this assignment, you will answer the following questions in Part 4: The Financials.

Note: Once you have answered the questions, be sure to save your Word document. You’ll be answering additional questions in the next part.

Completing Part 5: The Finishing Touches It’s now time to add some finishing touches to your plan.

Exercise Background: Part 5 of the Business Plan Before you turn in your plan, you need to create a cover sheet and table of contents for your plan. You’ll then conclude the project by creating an executive summary. The purpose of the executive summary is to give the reader a quick snapshot into your proposed business. If written well, it will encourage the reader to continue to read the rest of the business plan. Although this exercise comes at the end of the project, once you’re done writing it, you’ll place the cover sheet, table of contents, and executive summary at the beginning of your completed business plan.

Your Assignment

MC2-17 .

Step 1 Open the Business Plan file you began working on in Parts 1–4.

Step 2 For the purposes of this assignment, you will answer the following questions, shown in Part 5: The Finishing Touches.

MC2-18 .

Sample Business Plan

By Roger Miller Prepared September 2010

The Vault Grill 135 High Street ❖ Mainland, PA 12345

Steven Samulson, Owner 234 First Street, Bellview, PA 12498 610-484-2323 ssamulson@thevault.com Roger Miller, Owner 7901 Deerfield Blvd. Hillside, PA 12234 610-293-1234 rmiller@thevault.com Joe Mesland, Owner 24 Oak Ave, Lakeside, PA 12377 610-555-1239 jmesland@thevault.com MC2-19 .

[Pick the date]

Table of Contents Executive Summary ................................................................................................................................... 3 Part I: Introduction..................................................................................................................................... 4 Part 2: The Company and Management ................................................................................................. 5 The Mission Statement ...................................................................................................................... 5 Industry Profile .................................................................................................................................. 5 Company Profile and Strategy ......................................................................................................... 6 Anticipated Challenges and Planned Responses .......................................................................... 7 The Management Team..................................................................................................................... 7 Part 3: Marketing ........................................................................................................................................ 9 Market Analysis ................................................................................................................................. 9 The Product or Service ...................................................................................................................... 9 Sales and Promotion ........................................................................................................................ 10 Part 4: The Financials ............................................................................................................................... 11

MC2-20 .

Executive Summary The Vault Grill will be located in the town of Mainland, Pennsylvania, a city of approximately 20,000 people. The restaurant will offer a friendly casual dining atmosphere for people of all ages. We will serve a large variety of meals and desserts, but our specialty will be our grilled of fish, steaks, and burgers.

The mission of The Vault Grill is to provide a quality product at a quality price served by quality people. We will demonstrate our devotion to the community through customer service and community relations.

Our ideal customers are those who are looking for a fun and casual place to have a great and affordable meal. We will be located in the downtown area, in a renovated bank building, so we plan to cater to business men and women during the lunch hour and in the after-work hours. Additionally, since there is a small college nearby, we also expect many of our customers will be students and faculty members.

Customers will visit us for several reasons. First are our grilled entrees. They will be the main appeal for their flavor since Joe Mesland, the grill master, has several special rubs and sauces that offer a unique flavor to any meat or fish entree. Customers can select how they would like their entrée prepared by selecting a dry rub or sauce of varying spiciness. Second, we offer a fun and casual atmosphere that encourages people to relax and enjoy their time spent at the restaurant.

The Vault Grill is also part of the local history. It is located toward the end of town in the former National Bank building. The original bank offers a unique atmosphere with vaulted ceilings, marble floors, and unique windows in the upper areas. We are planning on keeping the original vault and some of the other fittings to preserve the historical nature of the building.

Our business will be a limited liability company. We have structured the business as a LLC for personal protection since we will also be serving liquor.

All partners are well qualified to run this restaurant. Steven Samulson has a degree in Hospitality Management. He has managed several successful restaurants, including Henry’s Meat House and The Funky Kitchen. Roger Miller has a degree in business management, and in addition to a strong background in financial management, was recently a partner in a local steak house franchise. Joe Mesland, our grill master, was the head chef at the Cajun Grill for the last ten years and won the prestigious 2007 Silver Spoon award.

Our business will thrive for a number of reasons. First, the city of Mainland has a stable population, with a number of healthy industries and a neighboring college.

MC2-21 .

Second, the local population is upstream middle class. We believe that this segment of the population will have the desire and income to eat out on a regular basis.

Our skills and knowledge in food service, combined with our connections to the community, will make this business a sound investment.

MC2-22 .

PART 1. INTRODUCTION BUSINESS NAME The Vault Grill

DESCRIPTION OF BUSINESS The Vault Grill will be located in the town of Mainland. The restaurant will offer a friendly casual dining atmosphere for people of all ages. We will serve a large variety of great meals and desserts, but our specialty will be our grilled of fish, steaks, and burgers.

FORM OF BUSINESS OWNERSHIP The business will be a limited liability corporation with three primary partners. Each partner has special skills that they bring to the business.

IDEAL CUSTOMER Our ideal customers are those who are looking for a fun and casual place to have a great and affordable meal. We plan to cater to business men and women during the lunch hour and in the after-work hours as well as to the students and faculty of the nearby college. We will have special promotions focused on each of these two groups that will be discussed later.

COMPANY ADVANTAGES Our grilled entrees will define our customer’s experience and persuade them to choose The Vault Grill over the other restaurant choices in the area. The main appeal of the grilled entrees is the flavor, since Joe Mesland, the grill master, has several special rubs and sauces that offer a unique taste to any meat or fish entree. Customers can select how they would like their entrée prepared by selecting a dry rub or sauce of varying spiciness. Second, we offer a fun and casual atmosphere that encourages people to relax and enjoy their time spent at the restaurant.

The Vault Grill is also part of the local history. It is located toward the end of town in the former National Bank building. The original bank offers a unique atmosphere with vaulted ceilings, marble floors, and unique windows in the upper areas. We are planning to make the original vault a visible part of the decoration and will be restructuring the original teller area as the bar. Finally, we will preserve as many of the other fittings as possible to maintain the historical nature of the building.

MC2-23 .

PART 2. THE COMPANY AND MANAGEMENT TEAM THE MISSION STATEMENT MISSION STATEMENT Our company aims: • to sell delicious and remarkable food and drinks that meet the highest standards of quality, freshness, and seasonality and that combine both modern-creative and traditional grilled styles of cooking, • to consistently provide our customers with impeccable service by demonstrating warmth, graciousness, efficiency, knowledge, professionalism, and integrity in our work, • to have every customer who comes through our doors leave impressed by The Vault Grill and excited to come back again, • to create and maintain a restaurant that is comprehensive and exceptional in its attention to every detail of operation, • to provide all who work with us a friendly, cooperative, and rewarding environment, which encourages long- term, satisfying employment, and • to be a giving member of the Mainland community and to use our restaurant to improve the quality of life in the area.

ETHICAL ISSUES Our integrity means more than profit; service, quality, and sanitation mean more than volume; and honesty is the basis of sales and service. Therefore, our code of ethics is as follows.

We will: • ensure that our food and drink meet the highest standards of quality and freshness before and after they are prepared, • ensure our pricing and performance is done with honesty and integrity, • ensure our business practices meet the highest standards of service, quality, and sanitation, and • ensure our employees are treated fairly at all times.

SOCIAL RESPONSIBILITY The Vault Grill, as an integral part of the Mainland community, will donate any edible and unused foods to the local food bank and will donate meals to needy families throughout the year, especially at holidays. We recognize that our responsibility to society goes beyond food; therefore, we will also have a strong

MC2-24 .

environmental policy and recycle whatever we can, and sponsor events to promote healthy lifestyles.

MC2-25 .

INDUSTRY PROFILE INDUSTRY DESCRIPTION The Restaurant sector is in the Services industry. There are many types of restaurants fighting for the same potential customer base. Fast food giants, smaller take-out places, to more sophisticated high-end restaurants are all part of the Restaurant sector. Additionally, cafes, tearooms, and restaurants with ethnic themes such as Italian, Mexican, Chinese, and Thai are all potential threats to our customer base. The Vault Grill sees itself positioned in the middle—offering quality meals in a sit-down environment at an affordable price. There are very few restaurants in the local region that fall into this type of category.

OPPORTUNITIES AND THREATS Mainland is a vibrant community that has attracted a variety of businesses, and is also the home of Newburg College. While a declining economy may deter some individuals from spending money eating out, since The Vault Grill charges reasonable prices and caters to businesses, the potential negative impact of a bad economy is reduced. The opportunity exists to expand our current customer base beyond the business and college crowd in Mainland.

In addition to economic strains, other possible threats include severe weather in areas that supply the produce, which could affect the availability or price of produce. Similarly, an issue affecting the quality or availability of meat, fish, or poultry (such as mad-cow disease and mercury in fish) is another possible threat.

Non-smoking restrictions have been put in place for all restaurants in the county.

Since this restriction has been made prior to our opening, we do not believe this will have any impact on our business.

COMPANY PROFILE AND STRATEGY BUSINESS GOALS First-year business goals: 1. To break even 2. To build a strong customer base 3. To minimize employee turnover Intermediate to long-term business goals: 1. To begin a carry-out and catering service within three years 2. To earn net profits of $500,000 within five years MC2-26 .

COMPANY STRENGTHS Foremost, we have a highly motivated management team with expertise in the restaurant business from a management and business perspective. In addition, the chef is an award-winning specialist who has been responsible for grilled food preparation for over 15 years. Our business is community-oriented and intends to ensure that we meet the dining and entertainment needs of our customers.

MC2-27 .

RAW MATERIALS AND SUPPLIES The Vault Grill will need the following initial inventory. Prices listed reflect new equipment and furniture. We are looking for used equipment and furniture to help reduce overall costs.

15 Tables @ $350 each .................................................................................................$5,250 60 Chairs @ $100 each ...................................................................................................6,000 15 Barstools @ $150 each...............................................................................................2,250 2 Cash Registers @ $225 each ..........................................................................................450 Squirrel POS System .....................................................................................................1,500 Char-Grill Oven Unit ....................................................................................................1,000 Viking 8-Burner Stove ..................................................................................................3,500 3 Microwave Ovens @ $150 each ...................................................................................450 Deep Fryer ......................................................................................................................2,500 Refrigeration Unit .........................................................................................................2,000 Freezer ............................................................................................................................4,000 Ice Maker ........................................................................................................................1,000 Dishwashing Unit .........................................................................................................2,000 3 Prep-Tables @ $200 each ...............................................................................................600 Table Linens and Napkins ..............................................................................................500 100 Small Glasses @ $1.00 each.......................................................................................100 100 Large Glasses @ $1.25 each ......................................................................................125 60 Wine tumblers @ $2.00 each....................................................................................1,200 100 Sets Plates, Bowls, Mugs @$10.00 each ...............................................................1,000 100 Sets Silverware @ $12 per set ................................................................................1,200 Miscellaneous Kitchen and Bar Supplies...................................................................2,000 Table and Restaurant Decorations..............................................................................1,375 Total ............................................................................................................................$40,000 In addition to the above, we anticipate renovation costs of approximately $200,000 to convert the existing bank to a restaurant and kitchen facility. We will need to stock our bar with liquor, wine, and beer and our pantry with basic cooking staples such as canned products, spices, and condiments. We anticipate initial bar and food stocking costs to be approximately $8,000. Most of our bread and dessert offerings will be made fresh on site. All other food items will be purchased from local

MC2-28 .

distributors on a weekly basis. Local in-season produce will be used as much as possible.

Our inventories will not be significantly affected by change in seasons or holidays.

We plan to be open from 11 a.m. to 10 p.m., Monday through Thursday, 11 a.m. to midnight Friday and Saturday. We will be closed on Sundays, Thanksgiving, Christmas, and New Years.

ANTICIPATED CHALLENGES AND PLANNED RESPONSES ANTICIPATED CHALLENGES We have two major anticipated challenges: 1. We must obtain sufficient funds to start the venture.

2. There is a rumored opening of a steakhouse chain restaurant in a new mall opening up just outside the Mainland border.

PLANNED RESPONSES We plan to respond to these two major anticipated challenges as follows: 1. The three initial partners are planning to personally contribute nearly half the anticipated funds needed to start the venture. In addition, we have made contact with a restaurant that is upgrading its furnishings and equipment. We anticipate that we can purchase many of the furnishings and kitchen equipment that they are replacing, thus driving down the level of our initial funding requirements.

2. While the rumored opening of the steakhouse chain may initially hurt us, we are confident that we can win over customers with our signature grilled-preparation, customer-focused service, reasonably priced menu, and proximity to local businesses and the college.

THE MANAGEMENT TEAM MANAGEMENT There is one level of management in the restaurant, with three different types of managers as follows: • Floor Manager • Grill Manager • Accounting Manager All managers are also co-owners.

MC2-29 .

ORGANIZATIONAL CHART The organizational chart for The Vault Bar and GrillCafé is quite simple given that it contains only one level of management. As the business grows, further levels of management and more employees may need to be added.

Owner/ Floor Manager

Servers Bartenders Hosts

Owner/ Grill Manager

Owner/Business Manager

Cooks Dishwashers Bussers

MC2-30 .

PART 3. MARKETING MARKET ANALYSIS MARKET RESEARCH The Vault Grill will have two markets.

The first target market is the businessmen and women who work in Mainland and surrounding areas. These individuals are college educated, in their 30s, 40s, 50s, and 60s, middle class, and will be looking for quick, reasonably priced lunches in a nice atmosphere in which to entertain business associates and clients. We also anticipate that younger professionals in their 20s and early 30s will be looking for a fun, casual, and reasonable place to meet after work for dinner or a few drinks.

The second target market is the college community. While we do not expect that many of our regular customers will be students, we do anticipate that faculty members, administrators, parents of students, and some students on special occasions will frequent The Vault Grill. The demographics of this second target market vary quite widely but are held together by their connection to the college.

The second target market will be more seasonal in nature, as the college year runs primarily from September through May.

ASSESSMENT OF THE COMPETITION Several competitors exist in the area, ranging from the fast food giants of McDonalds and Burger King to other smaller take-out convenience places to more sophisticated high-end restaurants. There are also a handful of cafes and tearooms, and a few ethnic restaurants. The Vault Grill sees itself positioned in the middle—offering quality meals in a sit-down environment at an affordable price. There are very few restaurants in the local region that fall into this type of category. Specifically, there is the Mainland Diner, Winston’s, and The Country Restaurant.

THE PRODUCT OR SERVICE PRODUCT FEATURES AND BENEFITS The Vault Grill’s featured menu item will be its grilled entrées. Our grill master has several special rubs and sauces that offer a unique flavor to any meat or fish entrée.

Customers can select how they would like their entrée prepared by selecting a dry rub or sauce of varying spiciness. For those who are not fans of grilled meat, poultry, and fish, we will offer other methods of preparation, pasta dishes, and meal-portioned salads. Another signature product will be our warm breads and creamy flavored butters placed at each table after diners are seated. We will strive to MC2-31 .

present a total product offer that includes warm and friendly service, a delicious, reasonably priced meal, and a relaxing ambience.

MC2-32 .

PRODUCT DIFFERENTIATION People have many choices when it comes to dining out. We know that we have to offer a product that stands out from the competition. We will have two major differences from our local competitors. The first is the grilled preparation of our food as well as the fresh, high-quality produce and bakery goods. Diners will place the highest importance on the meal itself, and so will we. However, the food is only part of the dining experience. We will pay close attention to ensure our wait staff is well trained, customer focused, clean, and friendly. The details of customer service from attire and grooming to efficiency and friendliness will constantly be monitored.

Finally, since a significant part of our business will be coming from serving business lunches, we will strive to ensure our customers with time constraints receive extra quick and attentive service.

PRICING Our pricing strategy is fairly simple. We plan to position our menu offerings and their prices to reflect our quality products but not too high to give the impression that we are a higher-end restaurant. Although we will have opening week specials, we will not pursue penetration pricing or price skimming as we do not wish to cause discontent among customers when we inevitably raise our prices to secure a profit later.

SALES AND PROMOTION PLACE (DISTRIBUTION) ISSUES Mainland, with its business and collegiate communities, offers the type of customer base we are seeking. We foresee no distribution issues. In the future, we hope to expand The Vault Grill services to offer catering and take-out.

ADVERTISING Although we have two target markets, we will have primarily one advertising approach to attract both business and collegiate customers initially, but will rely on word of mouth recommendations as our best ongoing advertising strategy.

Initially, we plan to distribute brochures with sample menus to all local businesses and to college faculty and administration. These advertisements will include coupons for discounts on our lunch menu. Coupons will also allow us to track the success of the advertising.

We will also be listed in the local phone book and will have a small site on the Internet.

In opening week, we will run ads in the local newspaper and college newspaper to advertise our presence.

MC2-33 .

These ideas are fairly inexpensive ways to get our message out to our target markets.

MC2-34 .

PROMOTION We will have several opening week and ongoing promotions.

During opening week, we will feature buy one get one free lunches and a free appetizer with purchase of two entrees after 6 pm. These specials will last only opening week and will seek to generate initial foot traffic in the restaurant.

We will also have several ongoing promotions. At lunchtime, when many customers are under pressure to return to their office within an hour, we will guarantee meals will be served within 20 minutes of ordering or customers get their lunch free.

Similarly, to entice those who might stop in for a drink after work to stay for dinner, we will be offering discounts on meals ordered prior to 6:00. Finally, for college students who might need an evening break, we will offer half-priced appetizers after 9 pm on Monday through Thursday nights.

We will also have promotions during the fall, when Mainland has its street festival.

This festival attracts visitors from outside our community. These promotions will build attention (and word of mouth) from those who live in Mainland, as well as nearby towns.

MC2-35 .

PART 4: THE FINANCIALS EXPECTED REVENUE We believe that we can average 100 customers per day, with approximately 65 at the lunch hour and 35 at dinner.

We believe that the average lunch bill will be approximately $8.50 per customer, and that the average dinner bill will be approximately $17.50 per customer.

This will provide our restaurant with revenues of approximately $550 at lunch and $600 at dinner for total average daily revenue of $1,150.

Although The Vault Grill will experience different traffic and therefore revenues for each day of the week, this will lead to yearly food revenues of approximately $345,000.

Additionally, we believe we will average 50 customers a day at the bar, Monday through Thursday, with an average bar bill of approximately $4 per person.

On Fridays and Saturdays, we expect more bar customers who will also stay longer at the bar. Therefore, we expect about 100 bar customers a day on Fridays with an average bar bill of approximately $10 per person, and 75 bar customers a day on Saturdays with an average bar bill of approximately $10 per person.

We anticipate bar revenues of approximately $122,400.

Total bar and food revenue is anticipated to be approximately $467,400 per year.

We plan to be closed on Sundays, Christmas, New Years, and Thanksgiving.

COST OF DOING BUSINESS Expected Monthly Cost

Expected Yearly Cost

Rent

1,500

18,000

Salaries and Wages

10,000

120,000

Supplies

500

6,000

Advertising and Other Promotions

250

3,000

Utilities: Heat, Electricity, etc.

800

9,600

Utilities: Telephone and Internet

100

1,200

Insurance

1,650

7800

Total

14,800

165,600

Expenses

MC2-36 .

STARTUP COSTS We anticipate needing $200,000 for building renovation, $35,000 for decorations, furnishings, and equipment and supplies for the kitchen and bar, and $8,000 for initial stocking costs bringing our startup costs to total $243,000.

FINANCING The three managers will each put a total of $25,000 into the startup of this business. The remaining $168,000 is the amount that we are requesting for bank financing.

MC2-37 .

12-Month Income Statement The Vault Grill

January

February

March

April

May

June

July

August

September

October

November

December

YEARLY

2010

Food Sales

28,750

28,750

28,750

28,750

28,750

28,750

28,750

28,750

28,750

28,750

28,750

28,750

345,000

Bar Sales

10,200

10,200

10,200

10,200

10,200

10,200

10,200

10,200

10,200

10,200

10,200

10,200

122,400

Total Revenue (Sales)

38,950

38,950

38,950

38,950

38,950

38,950

38,950

38,950

38,950

38,950

38,950

38,950

467,400

Food Purchases

8,000

8,000

8,000

8,000

8,000

8,000

8,000

8,000

8,000

8,000

8,000

8,000

96,000

Alcohol Purchases

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

24,000

Total Cost of Goods Sold

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

120,000

Gross Profit

28,950

28,950

28,950

28,950

28,950

28,950

28,950

28,950

28,950

28,950

28,950

28,950

347,400

Rent Expense

1,500

1,500

1,500

1,500

1,500

1,500

1,500

1,500

1,500

1,500

1,500

1,500

18,000

Salary/Wage Expense

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

120,000

Supplies Expense

500

500

500

500

500

500

500

500

500

500

500

500

6,000

Advertising Expense

250

250

250

250

250

250

250

250

250

250

250

250

3,000

Utilities Expense

800

800

800

800

800

800

800

800

800

800

800

800

9,600

Telephone/Internet Expense

100

100

100

100

100

100

100

100

100

100

100

100

1,200

Insurance Expense

1,650

1,650

1,650

1,650

1,650

1,650

1,650

1,650

1,650

1,650

1,650

1,650

19,800

Interest from Loans (if applicable)

1050

1050

1050

1050

1050

1050

1050

1050

1050

1050

1050

1050

12,600

Breakage Replacement

100

100

100

100

100

100

100

100

100

100

100

100

1,200

Total Expenses

15,950

15,950

15,950

15,950

15,950

15,950

15,950

15,950

15,950

15,950

15,950

15,950

191,400

Net Profit

13,000

13,000

13,000

13,000

13,000

13,000

13,000

13,000

13,000

13,000

13,000

13,000

156,000

Revenue (Sales)

Cost of Goods Sold

Operating Expenses

MC2-38 .

Balance Sheet As of June 2010 Assets Current Assets Cash in Bank

$100,000

Inventory

$8,000

Prepaid Expenses (6-mo. insurance)

$8,600

Total Current Assets

$116,600

Fixed Assets Machinery & Equipment

$19,000

Furniture & Fixtures

$21,000

Real Estate / Buildings Total Fixed Assets

$40,000

Total Assets

$156,600

Liabilities & Net Worth Current Liabilities Accounts Payable

$3,000

Taxes Payable

$10,000

Notes Payable (due within 12 months)

$1,000

Total Current Liabilities

$14,000

Long-Term Liabilities Bank Loans Payable (greater than 12 months)

$125,000

Less: Short-Term Portion Total Long-Term Liabilities

$125,000

Total Liabilities

$139,000

Owners' Equity (Net Worth)

$17,600

Total Liabilities & Net Worth

$156,600

MC2-39 .

ENHANCING THE ONLINE COURSE SBA Review: Have your students access the information at the website for the Small Business Administration at www.sba.gov. Ask your students to provide an outline on the discussion board of the major points of information required/recommended by the SBA for a business plan. (SBA, pg. 205) Business Plan Rally: Have your students search the Internet for at least three examples of business plans published online by companies (large, well known companies, if possible). Ask your students to “audit” the business plans by comparing them to the example in the mini-chapter. Do these plans have the comprehensive information outlined in the text? What is missing? (Business Plans, pgs. 203-205) On a Mission: Ask your students to identify examples of Mission Statements of three Fortune 500 companies as posted online. Ask your students to comment on what is unique about the mission statements. Are your students surprised at the overall direction of these companies as stated in the mission statements? Are the stated goals (via the mission statements) commensurate with the public images of the companies? Have your students post their assessments on the discussion board. (Business Plans, pgs. 203) To Market: Have your students examine the business plans of at least three companies as posted online. Ask your students to review the market analyses of the business plans. Do your students think the companies have done a good job in assessing the markets? Are the online postings lacking in detail? Is it possible that the companies have posted shorter versions of the analyses? Do the analyses seem to be comprehensive, with usable data that can be relied on to make decisions? (Business Plans, pgs. 203) Financial Review: Using the same companies that the students have previously identified, have your students review the financial data included in the business plan. Ask them to audit the financial data to determine: 1) the investment the company will need for start up or to continue business; 2) outside sources for the investment; 3) outstanding expenditures or investments (such as capital projects) that are included in the business plan; 4) timeframe in which return on investment is predicted. (Business Plans, pgs. 204-205)

MC2-40 .

BizSkill: Getting Your Business off the Ground Covers material in Mini Chapter 2

Available at: mybizlab.com

At the end of this exercise, your students should be able to answer the following questions: 1. What are some risks of owning your own business?

2. Where do small business owners go for help?

MC2-41 .

MINI CHAPTER 3: BUSINESS COMMUNICATIONS QUICK REFERENCE GUIDE

IN-CLASS ACTIVITIES Activity

Description

Time Limit

Supplemental In-Class Activity 1: PBJ

Students learn about the difficulties inherent in the

Supplemental In-Class Activity 2: Written Instructions Activity

Students "read" written instructions, and follow them.

15 minutes outside of class, 30 minutes during class.

20 minutes

communication process – especially when trying to give instructions.

IE Page Reference P 356

P 356

In this activity, students see how easily people can filter out or ignore important information – even in a written document.

HOMEWORK ASSIGNMENTS Activity

Description

Deliverable

Online Homework Activity: Document Makeovers

Students correct grammar and

A set of PowerPoint slides outlining a business plan.

communication mistakes in business documents.

At-Home Completion Time 1 to 2 hours

IE Page Reference P 354

MC3-1 .

CHAPTER OPENER Communication is one of the most important skills a manager can have, and it is often one of the most overlooked. This chapter provides students with background information on written and oral communication, showing the circumstances under what circumstances each should be used. In addition, the chapter explores the impact of technology on communication in the form of e-mail, instant messaging, texting, video conferencing, wikis, blogs and podcasts.

DETAILED LECTURE OUTLINE I.

Business Communications A. Introduction 1. People in organizations spend at least 75% of their time in interpersonal situations, and communication skills are critical to business success.

II. Improving Your Presentation Skills A. Oral Communication Skills 1. Speak loudly and clearly.

2. Change your voice intonation to add interest.

3. Engage the audience by looking directly at them.

4. Relax and smile.

B. PowerPoint Tips 1. Keep it simple. Limit annotations and special effects.

2. Follow the 6 x 6 x 6 rule. Put only key words on slides. Six words to a bullet point, six bullet points to a slide, and no less than a 24 point font.

3. Use graphics and media to convey ideas.

4. Use color sparingly but effectively. Too much color can be distracting.

5. Edit, edit, and edit.

6. Practice makes perfect.

C. Active Listening Skills 1. Repeat back or summarize points you believe were being made.

2. Avoid becoming distracted by trying to think of what you were going to say next.

3. Keep an open mind to others' ideas and suggestions.

III. Improving Your Writing Skills A. Business Letters B. Memos IV. What Form of Communication to Use A. Oral Communication 1. Advantages: Allows participants to assess the meanings of the speaker’s words and voice intonations; the speaker can assess the receiver’s attentiveness.

2. Disadvantages: Important to offer clear, unbiased language and to avoid clichés and negative metaphors.

B. Written Communication 1. Advantages: Has more permanency than oral communication; can be revised before sending; receiver has more time to analyze the content before responding.

MC3-2 .

2.

Disadvantages: Sender has no control over when the recipient chooses to read the message; sender does not receive immediate feedback; lacks face-to-face communication clues.

C. Email D. IM E. Texting V. Using Collaborative Communication Tools A. Videoconferencing 1. Videoconferencing uses two-way video and audio technology to allow two or more locations to interact simultaneously.

B. Wikis 1. A wiki is a collaborative Web site that allows users to create, add, edit or remove Web content using any Web browser.

2. All versions of documents are saved, so users can refer or revert back at any time.

3. Wikis can be private, which reduces privacy and confidentiality issues.

C. Blogs 1. Blogs are web logs, usually authored by an individual. They can pose problems for organizations when they are negative, but they offer the opportunity to reach a wide audience and elicit feedback through the comments sections.

D. Podcasts 1. Podcasts are audio or video files stored on the Internet that customers can download and listen to whenever they want. Podcasts are unique because they can be automatically downloaded to people who indicate an interest every time they are updated.

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.

MC3-3 .

SUPPLEMENTAL ACTIVITIES Online Homework Activity MC3-1 Document Makeovers Document Makeovers can be found online at www.mybizlab.com. These activities are interactive flash documents that are riddled with errors for students to identify and correct. The students get feedback as they correct the document. Document Makeover titles include: •

Team Performance Memo

•

Team Meeting Email

•

Dusty Strings Letter

•

McBride Department Stores Letter from Human Resources

•

Paradigm Letter

•

Laptops 4U Letter

•

Blog Posting

•

Order Confirmation Email

•

Health Insurance Changes Memo

•

Interview Questions for Owner of a Small, Independent Book Retailer

•

Competitive Analysis Report Summary

•

Recruiting and Hiring Seminar Memo

•

Building Access Procedures Report

•

Executive Summary

•

Outline of CEO’s Speech to Eastland Investment Group

•

Lektronik Presentation

•

Resume

•

Letter to Recruiting Department

Supplemental In-Class Activity 1 MC3-2 PBJ IMPORTANT: MANY STUDENTS TODAY HAVE SEVERE ALLERGIC REACTIONS TO PEANUTS. BEFORE DOING THIS EXERCISE, ASK THE CLASS IF ANYONE IS ALLERGIC TO PEANUTS. IF SO, MODIFY THIS EXERCISE TO USE A DIFFERENT SANDWICH FILLING OR DO NOT DO THE EXERCISE.

MC3-4 .

Activity Overview: This exercise shows students the difficulties that can arise in the communication process.

Time Limit: 45 minutes (15 minutes to write instructions, 15 minutes to complete activity, and 15 minutes to discuss.)

What to Do: •

Show students the tools they will be given to make PBJs. (See list below.)

•

Have students write down step by step instructions for making a peanut butter and jelly (PBJ) sandwich. Ideally, they will do this as a homework assignment.

•

Bring all of the ingredients needed to make PBJ sandwiches to class. This means that you will need to assemble in advance: o o o o o

Disposable containers filled with peanut butter (one for each student in class) Disposable containers filled with jelly (one for each student in the class) Bread (two slices per student in the class) Plastic knives (one per student) Napkins (one or two per student)

If you are a kind and loving teacher, you will also enough milk and disposable glasses so that each student can have a glass of milk with his or her sandwich. If not, it's fun to just watch the students try to eat the PBJs without having anything to drink.

•

Have students exchange the instructions they have written with another student.

Don’t Forget: This exercise requires a considerable amount of pre-planning. Give yourself a couple of days to pull everything together.

Wrap-Up: Have the class critique the instructions they received. What went well? What didn't go so well? You may also want to ask students what role grammar played in making the instructions they received more or less understandable.

Supplemental In-Class Activity 2 MC3-3 Written Instructions Activity Activity Overview: In this activity, students see how easily people can filter out or ignore important information – even in a written document.

Time Limit: 20 minutes

MC3-5 .

What to Do: •

Copy one "Written Instructions Activity" handout for each student. The handout can be found on the following pages.

•

Pass out the document face down to each student– they will all turn them over at the same time at instructor’s direction. Inform the students that they are not to discuss the content of the document at all. The only instruction given is to read the document and proceed as directed in the document.

When students are done, they can turn over their sheet and wait for further instruction.

Don’t Forget: Copy the handout before class so that your students can do the exercise.

Wrap-Up: Discuss the outcome of the exercise – how many students wasted time by not reading the instructions carefully before starting? Acknowledge that this is a simulation, and ask students to share stories where they could have saved themselves time by completely reading instructions first (usually these stories will involve assembling furniture/toys/etc. or using electronic equipment.)

Ask students why they don't read instructions. Answers will probably include already knowing what the instructions say, the fact that most instructions don't give useful information, and saving time. Point out that these concerns are similar to the reasons people give for not listening to others. Learning to read instructions carefully is like learning to be an active listener – it takes time and effort, but it is very profitable in the end.

MC3-6 .

Supplemental In-Class Activity: Handout Written Instructions Activity Follow these directions in order.

1. First, read each item below carefully before starting.

2. Write your name in the top left hand corner of this page.

3. Write your date of birth in the lower right hand corner.

4. Count the number of people in the room.

5. Write the number of people in the room on the back of this sheet.

6. Count to ten quietly to yourself.

7. Write the numbers eight and nine three times here. ____________________________________ 8. Write the name of the person on your right here. _______________________________________ 9. Write the names of your family on the back of this sheet.

10. Write the numbers 2, 4, 8, 10 in the upper right corner of this sheet.

11. Draw four lines on the back of this page on the bottom.

12. Now that you have read all the items, skip items 2-11 and write on the back of this sheet what you think is your biggest problem in communicating well with others.

MC3-7 .

ENHANCING THE ONLINE COURSE PowerPoint Tips: Assign your students a short PowerPoint project in which each student will prepare 5 PowerPoint slides related to a business topic of his/her choice. Ask the students to review the slides according to the PowerPoint tips presented in the chapter. Students can post the slides to the assignments page for a grade. (PowerPoint Tips, pgs. 353) Business Letter: Ask your students to identify one well written business letter that is posted online. Ask the students if they can identify a letter that follows the criteria described in the mini-chapter and has been written and signed electronically. Have the students forward the letters to the discussion board.

(Business Letters, pgs. 354) Business Memo: Have your students write a business memo regarding their projects (any other project you have assigned) and ask them to post it to the assignment board, and to sign it or initial it electronically. Be sure to tell them it must follow the guidelines described in the mini-chapter for completeness, clarity, etc. (Business Memos, pgs. 355) Email Review: After three weeks of class (at minimum), identify at least two emails written by each of your students (preferably emails which DO NOT follow the email guidelines discussed in the minichapter). Send the emails back to the students and have the students review the emails for problems; then, rewrite them. Students can post them to you individually. This exercise will go a long way to help correct problems with emails for your students. (Emails, pgs. 356-357) Email Discussion: Ask your students to read the section in the mini-chapter on tips for controlling the emails. Ask your students to respond by writing a two paragraph essay on why or why not such a system might work for them. Ask your students to describe their “email dilemmas” and to identify parts of the text which might be of help on specific email issues. Have your students post their responses on the discussion board. (Emails, pgs. 356-357) Email Free: Ask your students to read the section in the mini-chapter on email free days. Ask your students to respond by writing a two paragraph essay on why or why not such a tactic might be valuable.

Do your students think that email has created a proliferation of communication that makes it harder (not easier) to be productive? Why or why not? Have your students post their responses on the discussion board. (Email Free Days, pg. 357) Video Style: Have your students buy or check out a video camera for their computer. Request that all students be online at the same time/date so that students can use the video camera equipment. Conduct a short video conference regarding a project you have assigned or simply ask your students to introduce themselves. Ask your students if it is a help to them to have a face to go with a name. Does this help or hinder communication? Ask them to respond during the video conference, not on email. (Video Conference, pgs. 359)

MC3-8 .

BizSkill: Business Communications Covers material in Mini Chapter 3: Business Communications

Available at: mybizlab.com

At the end of this exercise, you should be able to answer the following questions: 1.

What situations call for face-to-face communication instead of an electronic form of communication?

2.

How do the language you use and the facts you reveal influence the outcome of a communication?

3.

What skills do you need to run an effective business meeting?

4.

What tools are available to create business presentations?

MC3-9 .

MINI CHAPTER 4: FINDING A JOB QUICK REFERENCE GUIDE IN-CLASS ACTIVITIES Activity

Description

Supplemental In-Class Activity 1: Prepare to Be Assimilated: Writing a Collective Resume Supplemental In-Class Activity 2: Mock Interviews

Students pool their collective skills and experience to write a group resume.

Supplemental In-Class Activity 3: Create an Interview Cheat Sheet

Students prepare a one page checklist to help them stay focused in an interview.

Students write resumes and take turns interviewing each other for desired jobs.

Time Limit 30 – 45 min.

IE Page Reference P 466

30 min. in class, plus 1 hour of homework 20- 30 min. in class – additional time at home may be needed

P 476

P 477

MC4-1 .

CHAPTER OPENER 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.

DETAILED LECTURE OUTLINE I.

Marketing Yourself A. Developing a Resume 1. A resume (p. 466) is a fact sheet that outlines your work history, experience, and accomplishments.

2. A chronological resume lists jobs in order, beginning with the present. Use it when staying in the same field or just starting a career.

3. A functional resume details work history by pointing out skills and achievements, not titles and companies worked for. Use it when switching fields.

4. Getting Started on a Resume: Strengths and weaknesses; skills; what you are looking for from an employer.

5. Writing a Cover Letter 6. Multimedia Portfolios II. Search Strategies A. Networking 1. Networking (p. 471) is the process of building relationships that can potentially create business opportunities.

2. An elevator pitch (p. 473) is a brief statement that summarizes your skills and what you can offer. You should be able to deliver it in the space of a short elevator ride.

3. Attending networking events B. Internet Research 1. Get as much information about potential employers as you can off the Internet.

2. Use job search engines to check for advertisements in your area.

C. Newspapers 1. Look at classified ads every day.

D. Recruiters 1. Recruiters (p. 474) find qualified employees to work for a company. They will get in touch with you to see if you are a good fit for a company.

E. College Campus Career Resources 1. Most college campuses have career centers that can help you determine your skills and strengths, focus on your goals, explore potential career paths, and find current job openings.

F. Informational Interviews 1. The goal of the informational interview (p. 475) is to gain firsthand knowledge from someone who currently works in the field. The best person to interview is someone who is doing a job similar to the job you want to do.

2. Ask questions that are directly related to the field in which you want to work.

III. Interviewing and Negotiating A. Interview Red Flags 1. It is illegal to task some interview questions. If an interviewer asks you an illegal question such a "Where were you born?" you may want to look elsewhere for employment.

MC4-2 .

B. Preparing for the Interview 1. Go over everything on your resume.

2. Research the company.

3. Practice your answers to standard interview questions like "What's your biggest weakness?"

C. During the Interview 1. Arrive early.

2. When you meet your interviewer, give a firm handshake, smile, and make eye contact.

3. Have questions prepared to ask at the end of the interview.

D. Negotiating Strategies 1. Figure out a reasonable salary for the position in which you're interested.

2. Research the median salary for your profession.

3. Ask for a day to consider the salary offer.

4. Don't forget that you can negotiate factors other than salary.

5. Make it clear that you want the job, make reasonable requests, and have a positive attitude.

6. Sell yourself and defend your goal if you have a specific salary in mind.

7. Get any agreements in writing.

8. If you turn down an offer, let the company know you would be interested in other positions as they arise.

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.

MC4-3 .

SUPPLEMENTAL ACTIVITIES Supplemental In-Class Activity 1 MC4-1 Prepare to Be Assimilated: Writing a Collective Resume Activity Overview: Students pool their collective skills and experience to write a group resume.

Time Limit: 30 – 45 minutes What to Do: • • •

•

Provide each student with the position announcement shown in the handout found on the following pages.

Have each student make up a list of his/her skills and experience relevant to doing the job.

Divide the class into groups of 4-5 students. Have each group create a functional "group resume" for the position, using elements from the resumes of each of the students in the group. For example, if one student has done strategic planning and another has done departmental goal setting, both jobs should be listed on the resume.

When all of the resumes are finished, have each team present their resume to the class. Have the class select the team that should get the job, based on their resumes.

Don’t Forget: Remind students that functional resumes are not date driven – they do not have to list the group's jobs by date, but rather, they should list the relevant skills and accomplishments of the group in order of importance. Also, remind students not to forget non-work activities and accomplishments that may be related to the job of General Manager. For example, a student who organized a community fundraising campaign has valuable organizational and financial management skills.

Wrap-Up: The class will critique each group’s resume and offer suggestions for improvement.

Supplemental In-Class Activity 2 MC4-2 Mock Interviews Activity Overview: Students write resumes and take turns interviewing each other for desired jobs.

Time Limit: 30 minutes in class, plus 1 hour of homework What to Do: Ahead of time, assign students to find a job posting in which they would be interested, and write a resume and cover letter specific to that job. Then, in class, pair the students up. The students should swap resumes and then take turns being the interviewee and interviewer. Each should make notes on where the other could make improvements in both the verbal and non-verbal responses of the interview.

Alternatively, you could have a few volunteers that would be interviewed in front of the class, with you

MC4-4 .

being the interviewer. Afterward, students could critique the responses (and perhaps even some of the interviewer’s questions).

Don’t Forget: Remind students to use the questions found in the "Interview Sample Questions" box in the text during the interview. Also, it may be helpful to teach students how to create situational interview questions. To do this, tell students to look at the job posting, and try to identify two or three key activities of the job. Then, they should ask candidates about what experience they had with those areas, using the following format: "Tell me about a time when you (had to deal with a difficult customer)." Start by giving me a little background on the situation, then tell me about the task you were expected to do, or the responsibility you had in that situation. Tell me about a specific action that you took, and the results of that action. Students will be surprised at how much inform ation they get when they use this type of question.

Wrap-Up: A brief discussion to determine what students found to be common problems in an interview.

Be sure to ask students if they were tempted to ask illegal questions and why – what information did they want to get that would be relevant to the job? Could they have restructured their questions to get the information they wanted in a more legitimate way?

Supplemental In-Class Activity 3 MC4-3 Create an Interview Cheat Sheet (from monster.com) Activity Overview: Students prepare a one page checklist to help them stay focused in an interview.

Time Limit: This can be started in class (20-30 minutes) and finished up for homework since some research may be needed. It might be best to prepare a general cheat sheet together as a class for one agreed-upon position, and then students can complete one specific to their needs at home.

What to Do: Fold a piece of paper in half, vertically, and then again horizontally, so there are four areas.

1.

2.

3.

4.

5.

6.

7.

8.

On the top left list what skills the employer is looking for based upon the job description.

On the top right, make a list of qualities you currently possess that fulfill the job requirements.

On the bottom left, after researching the company, industry and competition, list five reasons why you want to work in the industry and why you think this is the best company to work for in the industry.

On the bottom right, list five questions to ask the interviewer about the job, the company and the industry.

Flip the page over, and on the top right, list five success stories that can be used to answer questions such as, “Tell me about a time when…”.

On the top left, write down a response to the question, “Tell me about yourself.” The response should take no longer than a minute or two to say.

On the bottom right, research salary data to determine your worth. List benefits that you would like to receive, and which might be used to supplement a lower salary (flexible hours, working from home, etc.)

On the bottom left, determine your salary needs based on your living expenses.

MC4-5 .

Don’t Forget: Many students would not know how to determine some of the information in this exercise.

Preparing this ahead of time, or perhaps grouping students together who are interested in similar jobs or industries, might also be helpful in completing this exercise.

Wrap-Up: This exercise reinforces the need for preparation before going into an interview. It goes beyond the resume and online search strategies.

MC4-6 .

SUPPLEMENTAL HANDOUT: IN-CLASS ACTIVITY 1 Prepare to Be Assimilated: Writing a Collective Resume General Manager* JOB PURPOSE: Supports the work of the company's Chief Executive Officer focusing on the establishment and optimization of day-to-day operations in the company.

DUTIES & RESPONSIBILITIES: 1. Advise management team on key planning issues and make recommendations on important business decisions; 2. Provide strategic planning and resource allocation; 3. Establish operational processes/ process improvement; 4. Manage strategy implementation, in particular regarding budgets and timelines; 5. Ensure quality control of all company output; 6. Ensure all department heads are fully informed of operational objectives; 7. Set operational and / or performance goals for each department which are aggressive, achievable and tied to long-term goals; 8. Establish and monitor performance reporting systems; 9. Monitor department performance against performance goals to ensure that progress is being made; 10. Conduct regular meetings with department heads to ensure that priorities are clear and coordination is good; 11. Ensure activities comply with organizational requirements for quality management, legal stipulations, and general duty of care; 12. Facilitate resolution of issues between departments; 13. Take charge in high-priority crises; 14. Any other reasonable tasks and duties assigned by Management and/or any changes in the role due to organizational restructuring and realignment effected from time to time.

JOB REQUIREMENTS: A. Work Experience • At least 10 years of extensive experience and judgment to plan and accomplish goals in a film production company or related industry.

B. Skills/Knowledge • Has ability to lead, plan and manage change; • Has passion, or the willingness to become immersed in work; • Has initiative, ability to set priorities and with strong organizational & time management skills; • Has an excellent negotiation and communication skill; public speaking a plus.

C. Education • Requires a business or management degree or equivalent practical experience combined filmmaking and management. (*Source: http://london.craigslist.co.uk/tfr/872242135.html, downloaded 11/7/08)

ENHANCING THE ONLINE COURSE MC4-7 .

Internet Resume: Have your students search the Internet for “help with resume” sources. Ask them to develop a resume according to one of the sites. They should post the resume and the “help” source on the discussion board. Ask the class to review those resumes posted and compare them with the resumes shown in the text. Which resume formats do your students think will be most effective? What differences are there between a “hard copy” resume and an online resume? Ask your students to post the answers on the course blog. (Resumes, pg. xx) Resume Partners: Put your students into groups as partners online. Have each student create an online resume, using the textbook as a guide. The partners should critique each other’s resume, emailing comments back and forth until each student has a “perfect” workable resume to submit for a grade (or use for the next job opportunity). (Resumes, pgs. 466) Cover Letter Search: Ask your students to identify at least three cover letters from online sources (employment agency websites, online employment service sites, etc.). Have your students choose the best example and write a cover letter to match the online resume you have assigned to them. Have them post the letters on the course blog or turn them in (with the resumes) for a grade. (Cover Letters, pgs.

468) Cover Letter Types: Have your students search the Internet for one example of each of the three types of cover letter: application; prospecting; and networking. Have the students post these to course, so that all students have access to examples of each. (Cover Letter Types, pgs. 469) Multimedia Portfolios: Ask your students to use online sources (open sources), personal photos, projects, etc. to create a 5 minute multimedia portfolio which will highlight their personal accomplishments, work history, projects and professionalism. The students should be able to upload this to your course platform, so that you can grade it. They should also put the information on a CD or a flash drive and have it ready for their next job interview. Be sure to stress the importance of professionalism in this project.

Make it clear to your students that they should use photographs that show them in professional dress; videos in which the students are speaking clearly and professionally (without any slang); and that all photographs and graphics should be about work, be in good taste and emphasize the excellent characteristics of the student as a worker/ professional. Take points off for any responses that appear to be right out of “Facebook” or some other online social tool. (Multimedia portfolios, pgs. 472) Job Network: Have your students use the Internet to identify three possibilities for in-person networking, such as local breakfast networking groups. Also ask them to also identify three online networking groups. Post the results to the course blog, so that all the students will have access to the information.

(Networking, pg. 472-473)

BizSkill: Navigating Career Waters Covers material in Mini Chapter 4: Finding a Job

Available at: mybizlab.com

MC4-8 .

At the end of this exercise, you should be able to answer the following questions: 1.

Why are having a network and engaging in networking important aspects of business success?

2.

How can informational interviews help you build your network and exercises your interviewing skills?

3.

What are some strategies for effectively executing a formal job interview?

What are some strategies for effectively negotiating your salary?

MC4-9 .

MINI-CHAPTER 5: PERSONAL FINANCE QUICK REFERENCE GUIDE IN-CLASS or HOMEWORK ACTIVITY Activity

Description

Time Limit

Supplemental In-Class Activity 1: Keeping a Penny Journal

Students keep track of their expenses for two weeks.

15 minutes

.

IE Page Reference P546

MC5-1

CHAPTER OPENER 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.

DETAILED LECTURE OUTLINE I.

Personal Finance A. Introduction 1. Personal finance (p. 544) involves managing the ways in which monies are budgeted, saved, invested, preserved for future life events, and protected against risks.

2. If you want your money to last throughout your lifetime, you have to have a plan for reducing expenses and increasing income and assets so they begin to work for you.

3. Money management (p. 544) is a key aspect of personal finance. It includes: a. determining what you have b. setting goals for what you want or need c. planning how to achieve your goals II. Creating a Financial Plan A. Step 1: Take a Financial Inventory 1. Calculate net worth by listing your assets and subtracting your liabilities from them.

B. Step 2: Set Financial Goals 1. Set both short term and long term goals.

C. Step 3: Know Where Your Money Goes 1. Create a list of fixed and variable expenses every month, including periodic and unexpected expenses. Don’t forget the "invisible" expenses.

D. Step 4: Create a Budget 1. Pay yourself first.

2. Put savings into an interest-bearing account.

3. Take advantage of compound interest (p. 548).

E. Step 5: Execute the Plan 1. Pay off all unpaid credit card debt.

2. If you have outstanding loans, see if you can reduce the interest rate or consolidate into a more manageable payment.

3. To reduce impulse buying, try using cash only.

F. Step 6: Monitor and Assess Your Plan 1. Look at your budget every month and make adjustments.

III. Managing Personal Credit A. Check the interest rate and annual fee.

B. Don't charge if you can't pay.

C. Establish a credit history in another way.

D. Know your credit score.

IV. Car Considerations A. Getting Wheels

.

MC5-2

1.

Decide whether to buy used or new. Consider a "new used car" which is a car that is only a few years old, has been well maintained, and has low mileage.

2. Consider the pros and cons of buying vs. leasing a car.

V. Insurance and Investments A. Insuring Your Present and Future 1. Health insurance is a must.

2. Disability insurance pays expenses if you cannot earn a living.

3. Car insurance is required by law.

4. Homeowner's and renter's insurance protect you home and contents.

5. Life insurance replaces income lost due to death.

B. Investing Now and for the Future 1. Learn as much as you can about different types of investment opportunities.

C. Investing for Retirement 1. Take advantage of employer-sponsored retirement plans.

2. If your employer doesn't have a retirement plan, set up an IRA, Roth IRA, or 401(k) program for yourself.

VI. Taxes A. Everyone must file an income tax return.

B. The IRS allows taxpayers to either take a standard deduction or to itemize deductions.

C. How much tax are you paying?

1. Tax rates progressively increase as income increases.

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.

.

MC5-3

SUPPLEMENTAL ACTIVITY Supplemental In-Class or Homework Activity 1 MC5-1 Keeping a Penny Journal Activity Overview: In this exercise, students track their spending for two weeks and analyze where they could save money.

Time Limit: 5 minutes per day for 2 weeks, plus 30 minutes to analyze expenses and write paper.

What to Do: •

Ask students to keep a "penny journal" – keeping track of every cent they spend for two weeks.

•

At the end of the two week period, have students write a paper entitled "How I Spend My Money".

The paper should include: o o o o o

An analysis of the amount of money spent on "wants" versus the amount of money spent on "needs".

A prioritization of "wants" – which wants bring the most gratification to the student? Which are impulse purchases that could be avoided?

An analysis of variable expenses, periodic expenses, and unexpected expenses.

An estimate of how much money the student would have to bring in every month to cover expenses.

A discussion of how the student feels about the way he or she is spending money. Is the student comfortable, worried, happy, or sad with their finances as they stand now?

Don’t Forget: During the two-week "penny journal" period, students are likely to need reminders to keep up their journals. Tell students to think of their journals as a checkbook register – if they write down what they've spent as soon as they spend it, they won't forget anything.

Wrap-Up: Finances are deeply personal for many people, so you will want to keep the class discussion of this project general. You can ask questions like "What surprised you the most about the way you spent money?" and "In general, how many of you spent more than you earned over the two week period?"

Then ask students to talk about their strategies for keeping their spending in check. Also, it would be helpful to point out that a budget that doesn't include wants is unrealistic – the goal should be to prioritize those wants and develop a plan for acquiring them that doesn't use credit or require more money than the student has available to spend.

.

MC5-4

ENHANCING THE ONLINE COURSE Financial Plan Graphic: Have your students create a graphic illustrating the steps required to create a Personal Financial Plan. Have them explain all the steps thoroughly and post on the course blog.

(Note: Personal financial information is private and many students will not want to share actual financial information with a professor, even for an assignment that will help the student in the long run. Be sure to give your students assignments that ask for generic information which the students can use as a tool later on. Complete the information in a way that does not end up shared on the course blog, etc.) (Personal Financial Plan, pgs. 544) Financial Plan Template: Ask your students to search online for templates for a Personal Financial Plan.

Many investment companies and other financial counseling companies have templates (fill in the blank financial tools) that can be used to help individuals create an initial financial plan. Ask students to identify these and other resources and post them on the course blog or discussion board. (Financial Plans, pgs. 545) Financial Goals: Ask your students to set 5 financial goals they would like to achieve in the next 5 years.

Have them create a 5 slide PowerPoint and email it to the course site (for your eyes only), using open source graphics to illustrate what they want to achieve and why. Use this as an extra credit project to provide incentives for students to think about their financial situation and goals. (Financial Goals, pgs.

545) Budget Graphics: Ask your students to develop a budget for one week, creating a one page graphic illustrating the budget components. Have the students turn this in as an online assignment. You may also want to discuss each budget privately (online) with the student, especially if the budgets submitted show extraordinary expenditures in some areas. The role of the professor is not to criticize anyone’s spending, but to point out areas that the students may want to review for themselves. (Budgets, pgs. 546) Credit HELP: Ask your students to search online for credit counseling services. They should identify at least three seemingly “legitimate” not-for-profit groups that seek to help individuals with credit problems. What other sources can be identified which do not look appear to be truly legitimate “counselors”? Ask your students about how they would distinguish “real” credit counselors. Have them post their responses to the discussion board. (Credit Card Debt, pg. 549) Develop an Interest: Require your students to report on the interest and annual fees of up to three of their credit cards. Have them search the Internet for interest fee tables. Are their cards in line with the interest rates they are able to pay? What other online websites can they find to help them understand the rates and fees charged? Do the major credit card companies offer any tips? What are they and where are they located on the web? (Credit Card Interest, pgs. 549)

.

MC5-5

BizSkill: Personal Finance Covers material in MC05

Available at: mybizlab.com

At the end of this exercise, you should be able to answer the following questions:

.

1.

How do taxes impact income?

2.

How do benefits impact income?

3.

How do debts and expenses impact income?

MC5-6