Business Essentials, Twelfth Edition
By Ronald J. Ebert and Ricky W. Griffin
Contents:
About the Authors xvii
Preface xix
Acknowledgments xxv
Part 1 The Contemporary Business World
1 The U.S. Business Environment 2
Chapter Opening Case: Doing Business in the Global Marketplace 5
Business, Profit, and the External Environment 7
Business and Profit 7
The External Environments of Business 8
Finding a better way: The B Team 9
Economic Systems 11
Factors of Production 11
Types of Economic Systems 13
Entrepreneurship and new ventures: The Lucrative
Business of App Development 14
The Economics of Market Systems 16
Demand and Supply in a Market Economy 16
Private Enterprise and Competition in a Market Economy 18
Economic Indicators 20
Economic Growth, Aggregate Output, and Standard of Living 21
Economic Stability 25
Managing in turbulent times: Financial Turmoil—Is the Worst Behind Us? 26
Managing the U.S. Economy 27
Developing Skills in Your Career 28
Summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • endnotes
2 Understanding Business Ethics and Social Responsibility 36
Chapter Opening Case: Simply Divine 39
Ethics in the Workplace 40
Individual Ethics 40
The Law and the Real World 40
Individual Values and Morals 41
Business and Managerial Ethics 41
Assessing Ethical Behavior 42
Company Practices and Business Ethics 43
Social Responsibility 46
The Stakeholder Model of Responsibility 47
Entrepreneurship and new ventures: Social Capital Is Making the World a Better Place 47
Contemporary Social Consciousness 48
Areas of Social Responsibility 49
Responsibility Toward the Environment 49
Finding a better way: Mission Zero 50
Responsibility Toward Customers 52
Responsibility Toward Employees 54
Responsibility Toward Investors 55
Implementing Social Responsibility Programs 56
Approaches to Social Responsibility 56
Social Responsibility and the Small Business 57
The Government and Social Responsibility 58
How Governments Influence Business 59
How Business Influences Government 60
Managing Social Responsibility 60
Formal Organizational Dimensions 61
Informal Organizational Dimensions 61
Evaluating Social Responsibility 62
Managing in turbulent times: Shredding the Electronic Paper Trail 63
summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • endnotes
3 Entrepreneurship, New Ventures, and Business Ownership 72
Chapter Opening Case: It All Started With a Late Fee 75
What Is a Small Business? 76
The Importance of Small Business in the U.S. Economy 77
Popular Areas of Small Business Enterprise 78
Finding a better way: The Rise of Services 80
Entrepreneurship 81
Entrepreneurship Goals 81
Entrepreneurial Characteristics 81
Starting and Operating a New Business 82
Understanding Distinctive Competencies 82
Crafting a Business Plan 83
Starting the Small Business 84
Financing the Small Business 85
Trends, Successes, and Failures in New Ventures 87
Trends in Small Business Start-Ups 87
managing in turbulent times: The Wide World of Risk 89
Reasons for Failure 89
Reasons for Success 90
Noncorporate Business Ownership 90
Sole Proprietorships 91
Partnerships 91
Cooperatives 93
Corporations 93
The Corporate Entity 94
Types of Corporations 94
Entrepreneurship and new ventures: More Than Just a Burger and Fries 96
Managing a Corporation 96
Special Issues in Corporate Ownership 97
summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • endnotes
4 Understanding the Global Context of Business 106
Chapter Opening Case: The Door Opens 109
The Contemporary Global Economy 110
The Major World Marketplaces 111
Finding a better way: Too Much of a Good Thing? China’s Success Creates More Jobs in Mexico 113
Trade Agreements and Alliances 113
International Trade 115
Balance of Trade 116
Balance of Payments 118
Exchange Rates 119
Forms of Competitive Advantage 119
Managing in turbulent times: The Ups and Downs of Globalization 120
International Business Management 121
Going International 121
Entrepreneurship and new ventures: A Better Coconut Water 123
Levels of International Involvement 123
International Organization Structures 124
Understanding the Cultural Environment 126
Values, Symbols, Beliefs, and Language 126
Employee Behavior Across Cultures 127
Barriers to International Trade 129
Economic Differences 129
Legal and Political Differences 129
Summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • crafting a business plan • endnotes
Part 2 Managing the Business 5 Managing the Business 140
Chapter Opening Case: Alphabet Soup 143
The Management Process 144
Basic Management Functions 144
The Science and the Art of Management 146
Becoming a Manager 147
Types of Managers 149
Levels of Management 149
Areas of Management 150
Entrepreneurship and new ventures: Innovations in
Management 151
Management Roles and Skills 152
Managerial Roles 152
Basic Management Skills 154
Strategic Management: Setting Goals and Formulating Strategy 156
Setting Business Goals 156
Types of Strategy 158
Finding a better way: Standing Firm on Social Consciousness 159
Formulating Strategy 160
A Hierarchy of Plans 161
Contingency Planning and Crisis Management 162
Contingency Planning 162
Managing in turbulent times: When Disaster Strikes 163
Crisis Management 163
Management and the Corporate Culture 164
Building and Communicating Culture 164
Changing Culture 165
summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • endnotes
6 Organizing the Business 172
Chapter Opening Case: Organizing for Success 175
What Is Organizational Structure? 176
Organization Charts 176
Determinants of Organizational Structure 177
entrepreneurship and new ventures: Organizing for Growth 178
The Building Blocks of Organizational Structure 179
Job Specialization 179
Departmentalization 180
finding a better way: Blending the Old with the New 181
Establishing the Decision-Making Hierarchy 183
Distributing Authority: Centralization and
Decentralization 183
Managing in turbulent times: Keeping the Organizational Tools Sharp 184
The Delegation Process 185
Three Forms of Authority 186
Basic Forms of Organizational Structure 187
Functional Structure 187
Divisional Structure 188
Matrix Structure 189
International Structure 189
New Forms of Organizational Structure 191
Informal Organization 192
Informal Groups 192
Organizational Grapevine 193
Intrapreneuring 194
Summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • endnotes
7 Operations Management and Quality 202
Chapter Opening Case: Dessert Is Always a Great Idea 205
What Does Operations Mean Today? 206
Growth in the Services and Goods Sectors 207
Creating Value Through Operations 208
Differences between Service and Goods Manufacturing Operations 210
Operations Processes 211
Business Strategy as the Driver of
Operations 212
The Many Faces of Production Operations 212
Operations Planning 214
Capacity Planning 214
Location Planning 215
Entrepreneurship and new ventures: Nothing Like a Home-Cooked Meal 215
Layout Planning 216
Quality Planning 217
Methods Planning 218
Operations Scheduling 219
The Master Operations Schedule 219
Detailed Schedules 220
Staff Schedules and Computer-Based Scheduling 221
Project Scheduling 221
Operations Control 222
Materials Management 223
Quality Control 224
Quality Improvement and Total Quality Management 225
The Quality-Productivity Connection 225
managing in turbulent times: Leaner Operations
Restore Balance in the Airline Industry 226
Managing for Quality 226
Tools for Total Quality Management 227
Adding Value Through Supply Chains 229
The Supply Chain Strategy 229
Outsourcing and Global Supply Chains 230
Finding a better way: Too Good to Waste 231 summary of learning objectives • key terms • questions
& exercises • building a business: continuing team exercise • team exercise • exercising your
ethics • cases • crafting a business plan • endnotes
Part 3 People in Organizations
8 Employee Behavior and Motivation 242
Chapter Opening Case: A Living Wage 245
Forms of Employee Behavior 246
Performance Behaviors 246
Organizational Citizenship 247
Counterproductive Behaviors 248
Managing in turbulent times: Not Just on the Playground 248
Individual Differences Among Employees 249
Personality at Work 249
Attitudes at Work 252
Matching People and Jobs 254
Psychological Contracts 254
The Person-Job Fit 256
Basic Motivation Concepts and Theories 256
Classical Theory 256
Early Behavioral Theory 257
entrepreneurship and new ventures: The
Opportunity to Begin Again 260
Contemporary Motivation Theory 261
Strategies and Techniques for Enhancing Motivation 263
Reinforcement/Behavior Modification 263
Using Goals to Motivate Behavior 263
Finding a better way: More Than Just a Paycheck 264
Participative Management and Empowerment 265
Work Teams and Team Structures 265
Job Enrichment and Job Redesign 265
Modified Work Schedules and Alternative Workplaces 266
summary of learning objectives • key terms • questions & exercises • building a business:
continuing team exercise • team exercise • exercising your ethics • cases • endnotes
9 Leadership and Decision Making 276
Chapter Opening Case: Authentic Leadership 279
The Nature of Leadership 280
Leadership and Management 281
Leadership and Power 281
Early Approaches to Leadership 282
Trait Approaches to Leadership 283
Behavioral Approaches to Leadership 283
The Situational Approach to Leadership 284
Leadership Through the Eyes of Followers 285
Transformational Leadership 286
Charismatic Leadership 286
entrepreneurship and new ventures: “Success Unshared Is Failure” 287
Special Issues in Leadership 288
Leadership Substitutes 288
Leadership Neutralizers 289
The Changing Nature of Leadership 289
Leaders as Coaches 289
Gender and Leadership 290
Finding a better way: Women Leading the Way 290
Cross-Cultural Leadership 291
Emerging Issues in Leadership 291
Strategic Leadership 291
Ethical Leadership 291
Virtual Leadership 292
Managing in turbulent times: The Changing Faces of Leadership 292
Leadership, Management, and Decision Making 293
The Nature of Decision Making 293
Rational Decision Making 295
Behavioral Aspects of Decision Making 297
Summary of learning objectives • key terms • questions & exercises • building a business:
continuing team exercise • team exercise • exercising your ethics • cases • endnotes
10 Human Resource Management and Labor Relations 306
Chapter Opening Case: A Unique Partnership Drives Wegmans 309
The Foundations of Human Resource Management 310
The Strategic Importance of HRM 310
HR Planning 311
The Legal Context of HRM 313
Equal Employment Opportunity 313
Compensation and Benefits 314
Labor Relations 315
Health and Safety 315
Other Legal Issues 315
Staffing the Organization 316
Recruiting Employees 317
Selecting Employees 317
Compensation and Benefits 318
Wages and Salaries 318
Incentive Programs 319
Benefits Programs 319
Finding a better way: Holding True at Nucor Steel 320
Developing the Workforce 322
Training and Development 322
Performance Appraisal 323
Entrepreneurship and new ventures: Time to Go 325
New Challenges in the Changing Workplace 326
Managing Workforce Diversity 326
Managing Knowledge Workers 326
Contingent and Temporary Workers 327
managing in turbulent times: The Talent Gap 328
Dealing with Organized Labor 329
Unionism Today 329
Collective Bargaining 330
Summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • crafting a business plan • endnotes
Part 4 Principles of Marketing: Building Relationships with Customers for Competitive Advantage
11 Marketing Processes and Consumer Behavior 342
Chapter Opening Case: Building a Brand With
Social Media 345
What Is Marketing? 346
Delivering Value 346
Goods, Services, and Ideas 347
Relationship Marketing and Customer Relationship Management 348
The Marketing Environment 349
Developing the Marketing Plan 351
managing in turbulent times: An American Icon 352
Marketing Strategy: Planning the Marketing Mix 353
Marketing Strategy: Target Marketing and Market
Segmentation 357
Identifying Market Segments 357
Geographic Segmentation 357
Demographic Segmentation 358
Geo-Demographic Segmentation 358
Psychographic Segmentation 358
Behavioral Segmentation 359
Marketing Research 359
The Research Process 359
Research Methods 361
Finding a better way: The Truth about Your Online Customer Service 362
Understanding Consumer Behavior 363
Influences on Consumer Behavior 363
The Consumer Buying Process 363
Organizational Marketing and Buying Behavior 365
Business Marketing 365
B2B Buying Behavior 365
Social Media and Marketing 366
The International Marketing Mix 367
Entrepreneurship and new ventures: Farming Your Niche 369
Small Business and the Marketing Mix 369
Small-Business Products 369
Small-Business Pricing 370
Small-Business Distribution 370
Small-Business Promotion 370
summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • endnotes
12 Developing and Pricing Products 378
Chapter Opening Case: The Price of Free College 381
What Is a Product? 382
The Value Package 382
finding a better way: Snow Wars 383
Classifying Goods and Services 384
The Product Mix 385
Developing New Products 386
entrepreneurship and new ventures 387
The New Product Development Process 387
Product Mortality Rates 388
The Seven-Step Development Process 388
Variations in the Process for Services 389
Product Life Cycle 390
Stages in the PLC 390
Extending Product Life: An Alternative to New Products 391
Identifying Products 392
Determining Prices 395
Pricing to Meet Business Objectives 395
Price-Setting Tools 396
Pricing Strategies and Tactics 398
Pricing Strategies 398
Managing in turbulent times: Fair or Foul? 400
Pricing Tactics 400
International Pricing 401
Summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • endnotes
13 Distributing and Promoting Products 410
Chapter Opening Case: The Changing Landscape of
Commerce 413
The Distribution Mix 414
Intermediaries and Distribution Channels 414
Distribution Strategies 416
Channel Conflict and Channel Leadership 416
Wholesaling 417
Merchant Wholesalers 417
Agents and Brokers 417
The E-Intermediary 418
entrepreneurship and new ventures: Dispensing Hope 418
Retailing 419
Types of Brick-and-Mortar Retail Outlets 419
Finding a better way: The Evolving Way We Pay 420
Nonstore Retailing 421
Online Retailing 421
Physical Distribution 423
Warehousing Operations 423
Transportation Operations 423
Distribution Through Supply Chains as a Marketing Strategy 424
The Importance of Promotion 425
Promotional Objectives 425
Promotional Strategies 426
The Promotional Mix 426
Advertising 426
Personal Selling 429
Personal Selling Situations 429
Personal Selling Tasks 429
Managing in turbulent times: The Logic Behind Logistics 430
The Personal Selling Process 431
Sales Promotions 431
Direct (or Interactive) Marketing 433
Publicity and Public Relations 433
summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • crafting a business plan • endnotes
Part 5 Managing Information for Better Business Decisions
14 Information Technology (IT) for Business 442
Chapter Opening Case: Think Before You Click 445
Information Technology Impacts: A Driver of Changes for Business 446
Creating Portable Offices: Providing Remote Access to
Instant Information 447
Enabling Better Service by Coordinating Remote
Deliveries 447
Creating Leaner, More Efficient Organizations 448
Enabling Increased Collaboration 448
Enabling Global Exchange 449
Improving Management Processes 449
Providing Flexibility for Customization 449
Providing New Business Opportunities 450
Improving the World and Our Lives 451
IT Building Blocks: Business Resources 452
The Internet and Other Communication Resources 452
Networks: System Architecture 454
Hardware and Software 456
Entrepreneurship and new ventures: Speaking Loud and Clear: The Future of Voice Technology 457
Information Systems: Harnessing the Competitive Power of It 458
Leveraging Information Resources: Data Warehousing and
Data Mining 459
Managing in turbulent times: Better Care, Lower Costs 460
Types of Information Systems 460
IT Risks and Threats 462
Hackers 463
Identity Theft 463
Intellectual Property Theft 464
Computer Viruses, Worms, and Trojan Horses 464
Spyware 464
Spam 464
IT Protection Measures 465
Preventing Unauthorized Access: Firewalls 465
Preventing Identity Theft 465
Preventing Infectious Intrusions: Anti-Virus
Software 466
Protecting Electronic Communications: Encryption Software 466
Avoiding Spam and Spyware 466
Finding a better way: Gleaning Wisdom from the World
Wide Web 467
Summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • endnotes
15 The Role of Accountants and Accounting Information 476
Chapter Opening Case: CSI: Wall Street 479
What Is Accounting, and Who Uses Accounting Information? 480
Financial versus Managerial Accounting 481
Certified Public Accountants 481
Private Accountants and Management Accountants 483
Forensic Accountants 484
Managing in turbulent times: Skimming Off the Top 485
Federal Restrictions on CPA Services and Financial
Reporting: Sarbox 486
The Accounting Equation 486
Assets and Liabilities 487
Owners’ Equity 487
Entrepreneurship and new ventures: Working With the Accounting Equation 488
Financial Statements 489
Balance Sheets 489
Income Statements 490
Statements of Cash Flows 492
The Budget: An Internal Financial Statement 493
Reporting Standards and Practices 494
Revenue Recognition and Activity Timing 494
Full Disclosure 494
Analyzing Financial Statements 495
Solvency Ratios: Borrower’s Ability to Repay Debt 495
Profitability Ratios: Earnings Power for Owners 496
Activity Ratios: How Efficiently Is the Firm Using Its Resources? 496
Bringing Ethics into the Accounting Equation 496
AICPA’s Code of Professional Conduct 497
Violations of Accounting Ethics and GAAP 498
Finding a better way: Analytics and the Future of Auditing 498
Internationalizing Accounting 499
International Accounting Standards Board 499
Why One Set of Global Practices? 499
Summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • crafting a business plan • endnotes
Part 6 The Financial System and Issues in Financial Management
16 Understanding Money and the Role of Banking 510
Chapter Opening Case: Where Did All the Money Go? 513
What Is Money? 514
The Characteristics of Money 514
The Functions of Money 515
M-1: The Spendable Money Supply 516
M-2: M-1 Plus the Convertible Money Supply 517
Credit Cards and Debit Cards: Plastic Money? 517
The U.S. Financial System 517
Financial Institutions 519
The Growth of Financial Services 520
Managing in turbulent times: Getting Serious with Credit Standards 522
How Financial Institutions Create Money and Are Regulated 523
How Money Is Created 523
How Banks Are Regulated 523
The Federal Reserve System 524
Finding a better way: Cultivating a Social Side for
Community Banking 525
The Structure of the Fed 525
The Functions of the Fed 526
The Tools of the Fed 527
The Changing Money and Banking System 528
Government Intervention for Stabilizing the U.S. Financial System 528
Anticrime and Antiterrorism Regulations 529
The Impact of Electronic Technologies 530
Entrepreneurship and new ventures: Risky Business 531
International Banking and Finance 532
Currency Values and Exchange Rates 532
The International Payments Process 534
International Bank Structure 534
Summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • endnotes
17 Managing Business Finances 544
Chapter Opening Case: Fire On the Ground 547
Maximizing Capital Growth 548
The Time Value of Money and Compound Growth 548
Common Stock Investments 550
Investing to Fulfill Financial Objectives 551
Reasons for Investing 551
Most Mutual Funds Don’t Match the Market 552
Exchange-Traded Funds 552
Entrepreneurship and new ventures: Find a Need, Fill a Need 553
The Business of Trading Securities 553
Primary and Secondary Securities Markets 554
Stock Exchanges 554
Nonexchange Trading: Electronic Communication Networks 556
Individual Investor Trading 556
Tracking the Market Using Stock Indexes 557
Finding a better way: Finding a Way to Fund Life After Work 558
The Risk–Return Relationship 560
Investment Dividends (or Interest), Appreciation,
and Total Return 561
Fantasy Stock Markets 562
Managing Risk with Diversification and Asset Allocation 562
Financing the Business Firm 563
Secured Loans for Equipment 564
Working Capital and Unsecured Loans from Banks 564
Angel Investors and Venture Capital 565
Sale of Corporate Bonds 565
Becoming a Public Corporation 567
Going Public Means Selling Part Ownership of the Company 568
Managing in turbulent times: Winners and Losers 568
Stock Valuation 569
Market Capitalization 570
Choosing Equity versus Debt Capital 570
Regulating Securities Markets 572
The Securities and Exchange Commission 572
Regulations Against Insider Trading 572
summary of learning objectives • key terms • questions & exercises • building a business: continuing
team exercise • team exercise • exercising your ethics • cases • crafting a business plan • endnotes
Appendices
Appendix I: Risk Management 585
Coping with Risk 585
Insurance as Risk Management 586
Appendix II: The Legal Context of
Business 589
The U.S. Legal and Judicial Systems 589
Types of Law 589
The U.S. Judicial System 590
Business Law 591
Contract Law 591
Tort Law 591
Property Law 592
Agency Law 593
Commercial Law 593
Bankruptcy Law 593
The International Framework of Business Law 594
Appendix III: Managing Your
Personal Finances 595
Building Your Financial Plan 595
Assessing Your Current Financial Condition 596
Developing Your Financial Goals 597
Making Better Use of the Time Value of Money 598
Planning for the “Golden Years” 598
Time Value as a Financial-Planning Tool 599
Conserving Money by Controlling It 600
Credit Cards: Keys to Satisfaction or Financial Handcuffs? 600
Save Your Money: Lower Interest Rates and Faster Payments 600
Financial Commitments of Home Ownership 601
How Much House Can You Afford? 601
Cashing Out from Tax Avoidance (Legally) 604
The IRA Tax Break 604
Protecting Your Net Worth 604
Why Buy Life Insurance? 605
What Does Life Insurance Do? 605
How Much Should I Buy? 605
Why Consider Term Insurance? 605
How Much Does It Cost? 606
Appendix IV: Unions and Labor Management 607
Why Do Workers Unionize? 607
The Evolution of Unionism in the United States 607
Early Unions 608
The Emergence of the Major Unions 608
Unionism Today 610
Trends in Union Membership 610
Trends in Union-Management Relations 611
Trends in Bargaining Perspectives 611
The Future of Unions 611
Contemporary Union Structure 612
Locals 612
Laws Governing Labor-Management Relations 613
The Major Labor Laws 613
How Unions Are Organized and Certified 616
Collective Bargaining 617
Reaching Agreement on Contract Terms 617
Contract Issues 618
When Bargaining Fails 619
Administering a Labor Agreement 620
Glossary 623
Index 641