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Bovée Professor of Business C. Allen Paul Distinguished Chair Grossmont College John V. Thill Chairman and Chief Executive Officer Global Communication Strategies Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editorial Director: Sally Yagan Cover Designer: RHDG/Tim Heraldo Acquisitions Editor: James Heine Cover Art: Beowulf Sheehan/Getty Images Editorial Project Manager: Karin Williams Manager, Visual Research: Karen Sanatar Editorial Assistant: Ashlee Bradbury Photo Researcher: Bonnie Del Favero Director of Marketing: Patrice Lumumba Jones Manager, Rights and Permissions: Estelle Simpson Senior Marketing Manager: Maggie Moylan Media Director: Lisa Rinaldi Senior Managing Editor: Judy Leale Lead Media Project Manager: Allison Longley Production Project Manager: Jacqueline A. 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HF1008.B685 2012 650—dc23 2011052028 10 9 8 7 6 5 4 3 2 1 ISBN 10: 0-13-282878-2 ISBN 13: 978-0-13-282878-9 This book is dedicated to the hundreds of thousands of students who have used this text and its predecessors Excellence in Business and Business Today. We appreciate the opportunity to contribute to your education, and we wish you great success in your studies and in your career. Courtland L. Bovée John V. Thill Contents in Brief Preface xv Prologue: Using This Course to Help Launch Your Career xxiii PART 1 Setting the Stage: The Business of Business 1 1 Developinga Business Mindset 2 2 UnderstandingBasic Economics 25 3 TheGlobal Marketplace 47 4 BusinessEthics and Corporate Social Responsibility 69 PART 2 Building the Framework: Business Ownership and Entrepreneurship 93 5 Formsof Ownership 94 6 Entrepreneurship and Small-Business Ownership 116 PART 3 Guiding the Enterprise: Leadership, Organization, and Operations 139 7 ManagementRoles, Functions, and Skills 140 8 Organizationand Teamwork 165 9 Production Systems 192 PART 4 Supporting the Workforce: Motivation and Human Resources 217 10 EmployeeMotivation 218 11 HumanResources Management 240 12 LaborRelations 265 PART 5 Satisfying the Customer: Marketing, Sales, and Customer Support 289 13 TheArt and Science of Marketing 290 14 Product and Pricing Strategies 314 15 Distributionand Marketing Logistics 340 16 CustomerCommunication 363 PART 6 Managing the Money: Accounting and Financial Resources 389 17 FinancialInformation and Accounting Concepts 390 18 FinancialManagement 414 19 FinancialMarkets and Investment Strategies 439 20 TheMoney Supply and Banking Systems 462 Appendixes APPENDIXA Business Law A-1 APPENDIXB Risk Management B-1 APPENDIXC Information Technology C-1 APPENDIXD Personal Finance: Getting Set for Life D-1 Glossary G-1 Brand, Organization, Name, and Website Index I-1 Subject Index I-4 vi Contents Preface xv Communicating Effectively 19 Prologue: Using This Course to Help Demonstrating Etiquette 20 Launch Your Career xxiii Making Ethical Decisions 20 Maintaining a Confident, Positive Outlook 20 BEHINDTHE SCENESBUILDA BAND, THEN BUILD PART 1 A BUSINESS 21 Setting the Stage: The Business KEY TERMS 22 TEST YOUR KNOWLEDGE 23 of Business 1 EXPAND YOUR KNOWLEDGE 23 PRACTICE YOUR SKILLS 23 CHAPTER 1 REFERENCES 24 Developing a Business Mindset 2 CHAPTER 2 BEHINDTHE SCENESENTERTHE HAGGIS ENTERS Understanding Basic Economics 25 THE MUSIC BUSINESSON ITS OWN TERMS 2 Introduction 3 BEHINDTHE SCENESWILLTHE SUN KEEP SHINING Understanding What Businesses Do 3 ON SUNTECH POWER? 25 Adding Value: The Business of Business 3 Introduction 26 Competing to Attract and Satisfy Customers 4(cid:1) (cid:116)(cid:1) (cid:34)(cid:68)(cid:68)(cid:70)(cid:81)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1) What Is This Thing Called the Economy? 26 Risks in the Pursuit of Rewards 4 Factors of Production 26 Identifying Major Types of Businesses 4 The Economic Impact of Scarcity 27 Making the Leap from Buyer to Seller 6 Economic Systems 28 Seeing Business from the Inside Out 6 Free-Market Systems 28 Appreciating the Role of Business in Society 7 Planned Systems 29 Using This Course to Jump-Start Your Career 9 Nationalization and Privatization 30 Recognizing the Multiple Environments of Business 9 The Forces of Demand and Supply 31 The Social Environment 10 Understanding Demand 31 The Technological Environment 10 Understanding Supply 32 The Economic Environment 11 Understanding How Demand and Supply Interact 32 The Legal and Regulatory Environment 11 The Macro View: Understanding How an Economy The Market Environment 11 Operates 34 Identifying the Major Functional Areas in a Business Competition in a Free-Market System 34 Enterprise 12 Business Cycles 35 Research and Development 12 Unemployment 36 Manufacturing, Production, and Operations 12 Inflation 36 Marketing, Sales, Distribution, and Customer Support 13 Government’s Role in a Free-Market System 38 Finance and Accounting 13 Protecting Stakeholders 38 Human Resources 14 Fostering Competition 38 Business Services 14 Antitrust Legislation 39(cid:1) (cid:116)(cid:1) (cid:46)(cid:70)(cid:83)(cid:72)(cid:70)(cid:83)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:34)(cid:68)(cid:82)(cid:86)(cid:74)(cid:84)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1) Exploring Careers in Business 15 Approvals 40 Operations Manager 16 Encouraging Innovation and Economic Development 40 Human Resources Specialist 16 Stabilizing and Stimulating the Economy 40 Information Technology Manager 16 Economic Measures and Monitors 41 Marketing Specialist 16 Price Indexes 42 Sales Professional 16 National Economic Output 43 Accountant 17 BEHINDTHE SCENESTHE PUSHFOR GRID PARITY Financial Manager 17 AT SUNTECH POWER 43 Achieving Professionalism 18 Striving to Excel 18 KEY TERMS 44 Being Dependable and Accountable 18 TEST YOUR KNOWLEDGE 45 Being a Team Player 19 vii viii Contents EXPAND YOUR KNOWLEDGE 45 Corporate Social Responsibility 75 PRACTICE YOUR SKILLS 46 The Relationship Between Business and Society 75 REFERENCES 46 Philanthropy Versus Strategic CSR 76 Perspectives on Corporate Social Responsibility 77 Minimalist CSR 78 CHAPTER 3 Defensive CSR 78 The Global Marketplace 47 Cynical CSR 78 BEHINDTHE SCENESMTVNETWORKS AFRICA: Proactive CSR 79 EXTENDINGTHE REACHOF ONEOFTHE WORLD’S Resolving the CSR Dilemma 79 CSR: The Natural Environment 80 BIGGEST MEDIA BRANDS 47 Efforts to Conserve Resources and Reduce Pollution 80 Introduction 48 The Trend Toward Sustainability 82 Fundamentals of International Trade 48 CSR: Consumers 83 WhyNations Trade 49 The Right to Buy Safe Products—And to Buy Them Safely 84 How International Trade Is Measured 49 The Right to Be Informed 85 Foreign Exchange Rates and Currency Valuations 51 The Right to Choose Which Products to Buy 85 Conflicts in International Trade 52 The Right to Be Heard 85 Free Trade 52 CSR: Employees 86 Government Intervention in International Trade 53 The Push for Equality in Employment 86 International Trade Organizations 54 Affirmative Action 86(cid:1) (cid:116)(cid:1) (cid:49)(cid:70)(cid:80)(cid:81)(cid:77)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:37)(cid:74)(cid:84)(cid:66)(cid:67)(cid:74)(cid:77)(cid:74)(cid:85)(cid:74)(cid:70)(cid:84) 87 Organizations Facilitating International Trade 54 Occupational Safety and Health 87 The World Trade Organization (WTO) 54(cid:1) (cid:116)(cid:1) (cid:53)(cid:73)(cid:70)(cid:1)(cid:42)(cid:79)(cid:85)(cid:70)(cid:83)(cid:79)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:66)(cid:77)(cid:1) BEHINDTHE SCENESNIKE BUILDSA SUSTAINABLE (cid:46)(cid:80)(cid:79)(cid:70)(cid:85)(cid:66)(cid:83)(cid:90)(cid:1)(cid:39)(cid:86)(cid:79)(cid:69)(cid:1)(cid:9)(cid:42)(cid:46)(cid:39)(cid:10) 54(cid:1) (cid:116)(cid:1) (cid:53)(cid:73)(cid:70)(cid:1)(cid:56)(cid:80)(cid:83)(cid:77)(cid:69)(cid:1)(cid:35)(cid:66)(cid:79)(cid:76) 55 BUSINESS THROUGH SUSTAINABLE DESIGNAND Trading Blocs 55 MANUFACTURING 88 (cid:47)(cid:80)(cid:83)(cid:85)(cid:73)(cid:1)(cid:34)(cid:78)(cid:70)(cid:83)(cid:74)(cid:68)(cid:66)(cid:79)(cid:1)(cid:39)(cid:83)(cid:70)(cid:70)(cid:1)(cid:53)(cid:83)(cid:66)(cid:69)(cid:70)(cid:1)(cid:34)(cid:72)(cid:83)(cid:70)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:9)(cid:47)(cid:34)(cid:39)(cid:53)(cid:34)(cid:10) 55(cid:1) (cid:116)(cid:1) (cid:53)(cid:73)(cid:70)(cid:1) European Union (EU) 55(cid:1) (cid:116)(cid:1) (cid:53)(cid:73)(cid:70)(cid:1)(cid:34)(cid:84)(cid:74)(cid:66)(cid:14)(cid:49)(cid:66)(cid:68)(cid:74)(cid:71)(cid:74)(cid:68)(cid:1)(cid:38)(cid:68)(cid:80)(cid:79)(cid:80)(cid:78)(cid:74)(cid:68)(cid:1) KEY TERMS 90 Cooperation (APEC) 57 TEST YOUR KNOWLEDGE 90 The Global Business Environment 57 EXPAND YOUR KNOWLEDGE 90 Cultural Differences in the Global Business Environment 57 PRACTICE YOUR SKILLS 91 Legal Differences in the Global Business Environment 58 REFERENCES 91 Forms of International Business Activity 60 PART 2 Importing and Exporting 60 International Licensing 61 Building the Framework: International Franchising 61 Business Ownership International Strategic Alliances and Joint Ventures 62 Foreign Direct Investment 62 and Entrepreneurship 93 Strategic Approaches to International Markets 63 Organizational Strategies for International Expansion 63 CHAPTER 5 Functional Strategies for International Expansion 63 Forms of Ownership 94 BEHINDTHE SCENESADAPTINGAN AMERICAN BEHINDTHE SCENESSCANNINGTHE SKIESFOR HELP CULTURAL ICONTOTHE AFRICAN MARKET 65 AT SIRIUS SATELLITE RADIO 94 KEY TERMS 65 Introduction 95 TEST YOUR KNOWLEDGE 66 Sole Proprietorships 95 EXPAND YOUR KNOWLEDGE 66 PRACTICE YOUR SKILLS 67 Advantages of Sole Proprietorships 96 REFERENCES 67 Disadvantages of Sole Proprietorships 96 Partnerships 97 CHAPTER 4 Advantages of Partnerships 98 Disadvantages of Partnerships 99 Business Ethics and Corporate Social Keeping It Together: The Partnership Agreement 99 Responsibility 69 Corporations 100 BEHINDTHE SCENESNIKE’S GLOBAL PRESENCE Advantages of Corporations 100 PUTS ITONTHE FRONT LINESOF CORPORATE Disadvantages of Corporations 101 Special Types of Corporations 101 SOCIAL RESPONSIBILITY 69 Corporate Governance 103 Introduction 70 Shareholders 104 Ethics in Contemporary Business 70 Board of Directors 104 What Is Ethical Behavior? 71 Corporate Officers 105 Factors Influencing Ethical Behavior 72 Mergers and Acquisitions 106 Cultural Differences 72(cid:1) (cid:116)(cid:1) (cid:44)(cid:79)(cid:80)(cid:88)(cid:77)(cid:70)(cid:69)(cid:72)(cid:70) 72(cid:1) (cid:116)(cid:1) (cid:48)(cid:83)(cid:72)(cid:66)(cid:79)(cid:74)(cid:91)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:66)(cid:77)(cid:1) Advantages of Mergers and Acquisitions 106 (cid:35)(cid:70)(cid:73)(cid:66)(cid:87)(cid:74)(cid:80)(cid:83) 72 Disadvantages of Mergers and Acquisitions 107 Ethical Decision Making 72 Merger and Acquisition Defenses 108