Summary Contemporary Business - Summary of Chapter 1-13 (Chapter 10 is missing) PDF

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Summary of Chapter 1: The Changing Face of Business
- Summary of Chapter 2: Business Ethics and Social Responsibility - Summary of Chapter 3: Economic Challenges Facing Contemporary Business - Summary of Chapter 4: Competing in World Markets - Summary of Chapter 5: Forms of Business Ownershi...

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RSM 1: THE CHANGING FACE OF BUSINESS Business = all profit-seeking activities and enterprises that provide goods and services to an economic system Profits = rewards for businesspeople who take the risks involved to offer goods and services to customers = incentives for people to start companies Not-for-profit organizations Orgs that place public service above profits (Red Cross, Prevention of Cruelty to Animals). Private (museum, library, charity orgs) and public (gov agencies, political parties) sectors. Receive funding from gov and private sources (donations). Managers of these orgs need funding in order to do research and provide services. Emergencies: Medecins Sans Frontiere acted quickly when the earthquake struck Haiti

Factors of Production Definition = four basic inputs for effective operation: natural resources, capital, human resources & entrepreneurship Natural resources = prod inputs that are useful in their natural states (agricultural land, building sites, forests and mineral deposits) Corresponding factor payment = rent Capital = prod inputs consisting of technology, tools, info and physical facilities Equipment like computers, telecoms, inventions designed to improve prod, info, innovation. Technology helps improve products, operate more smoothly, frequently needs to be upgraded in order to remain competitive. Corresponding factor payment = interest Human resources = prod inputs consisting of anyone who works, physical labour & intellectual inputs contributed by workers New ideas, creative thinking, talented and motivated employees increase competitiveness Corresponding factor payment = wages Entrepreneurship = the willingness to take risks to create and operate a business Someone who sees an opportunity for profit and creates a plan to achieve that success (Beyond the Rack) Corresponding factor payment = profit

Private enterprise system Definition = economic system that rewards firms for their ability to identify and serve the needs and demands of customers Minimal gov interference, skillful businesses gain easier access Capitalism = economic system that rewards firms for their ability to perceive and serve the needs and demands of consumers (PES) Adam Smith + invisible hand

Competition differentiation = unique combination of organizational abilities, products and approaches that sets one company apart from its competitors in the minds of customers Must always keep up with the changing marketplace and consumer preferences (Google vs Microsoft with home and office tools gmail google docs)

Basic rights in the PES Private property = basic freedom under the PES, right to own, use, buy, sell and hand down land, buildings, machinery, equipment, patents, individual possessions and various intangible kinds of property Profit = owner is legally and ethically entitled to any income it makes that is greater than its costs Freedom of choice = citizens choose their own employment, investments and purchases. Individual wealth is maximized by providing options in the PES vs other economic systems Competition = public is allowed to set the rules for fair competition. Illegal: price discrimination, fraud in financial markets, deceptive advertising and packaging.

The entrepreneurship alternative Entrepreneur = a person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business Canadian economy depends on small businesses for their growth and strength, they create new jobs and consist of the majority of all businesses. Entrepreneurship leads to innovation, small companies are more flexible than larger, they can change their products and processes quicker. If these businesses don’t have the money to do so, sometimes a small tweak in an existing idea will do the trick (Jean-Baptiste Martinoli adapted Microsoft windows 7 OS into a touchscreen) Some companies will reach out to customers to hear out ideas and entrepreneurs (Apple).

Six eras in the history of business Colonial Period (prior to 1776) Primarily agricultural and rural. Success depended on output of farms and their crops. British investors provided money needed to develop the north American business system.

Industrial Revolution (1760-1850) Mass prod by semiskilled workers aided by machines. Began in England, business turned to factory system that mass-produced items. Much more savings due to use of these machines, cheaper raw materials. Specialization of labour, limits each worker to specific task. Industrialisation = agriculture mechanized, improved transportation of products.

Industrial entrepreneurs (late 1800s) Advances in technology and increased demand for manufactured goods, leading to enormous entrepreneurial opportunities. (Alexander Graham Bell – telephone between office buildings, Eli Whitney – interchangeable parts).

Production era (1920s) Emphasis on producing more goods faster, leading to prod innovations (assembly lines). Focused more on internal decisions and not what consumers wanted, businesses decided on product availability.

Marketing era (since 1950s) Consumer orientation, seeking to understand and satisfy needs and preferences of customers. Great Depression disabled businesses from selling everything they decided to produce. Marketing became more than selling, focused on customer orientation. Customer orientation = business philosophy that focuses first on consumers’ unmet wants and needs and then designs products to meet those needs. Branding = the process of creating in consumers’ minds an identity for a good, service or company; a major marketing tool in contemporary business. Term, sign, symbol, differentiates competitors’ products.

Relationship era (1990s) Benefits derived from deep ongoing links with individual customers, employees, suppliers and other businesses. Transaction management = building and promoting products in the hope that enough customers will buy them to cover costs and earn profits Vs Now in the business era where firms seek to actively promote customer loyalty by carefully managing every interaction. Aka long-term customers = less expenses on advertising to attract new business, bigger advantage in understanding what customers want and competitive differentiation.

Managing relationship through technology Relationship management = the collection of activities that build and maintain ongoing, mutually beneficial ties with customers and others Relationship in 2 steps: gathering knowledge of what customer needs & then applying it Technology = the business application of knowledge based on scientific discoveries, inventions and innovations Blogs: link between customers and companies Example Social Networking: form a network of contacts (young people) but need to also sound professional on all types of social media: make your social profile more work oriented because managers will check that (Facebook, twitter etc) avoid posting opinions on current or past employers Strategic Alliances A partnership formed to create a competitive advantage for the businesses involved: In international business, the strategy of one company partnering with another one in the country where it wants to do business Online businesses have strategies like teaming up with retailers with expertise in distribution The Green Advantage Envmtal concerns influence customers’ decisions when buying a product (environmentally friendly). Businesses are developing strategies to produce these products, increase profits and company image and cut emissions and pollution. Avoiding fossil fuels and creating new environmentally based ones, but this can be costly for firms (Ontario’s Green Energy Act 2009).

Today’s business workforce A first-class workforce (smart, reliable, creative) can be the foundation of a firm’s competitive differentiation and can always provide important advantages

Changes in the workforce Challenges: Aging of the population and a shrinking labour pool Variety of work styles between retired workforce and newcomers from the baby boom generation hitting their career peaks. Technology has made this difficult by upping their hiring skills to more technologically advanced people. Teenagers enter workforce sooner, elderly work longer or seeking new careers after (can either work parttime or more flexible hours).

Increasingly diverse workforce Intl immigration (Asia, India) Diversity = the blending of individuals of different genders, ethnic backgrounds, cultures, religions, ages, and physical and mental abilities to enhance a firm’s chances of success Diverse workforce usually develops more solutions to problems a homogeneous employee group would. Managers understand that having this type of workforce enables them to avoid legal battles and discrimination laws

Outsourcing and changing nature of work Most Canadian employment has shifted to financial management and communications, these changes require that managers hire service workers with technical skills and ability to communicate and creative talent. INTERNET = offers business tool for employment flexibility Outsourcing = using outside vendors to produce goods or fulfill services and functions that were previously handled in-house or in-country - Reduce costs although challenges include diffs in language and culture Offshoring = the relocation of business processes to lower-cost locations overseas Nearshoring = outsourcing of prod or services to locations near a firm’s home base

Flexibility and mobility Employers are hiring more temporary and part-time employees. Technology has made certain tasks easier: productive networking (work from wherever you choose), free flow ideas across geographical time zones Managers of spread-out workforce need to earn and build the trust of their staff, for valued employees and to ensure that all members are acting ethically everyday.

Innovation through collaboration Teamwork = collaboration on knowledge and creative ideas. Companies used to have employees come in at scheduled time, then leave and go home. Nowadays employees shape their own careers and often don’t stay with the same company their whole life which is why they don’t feel like owing loyalty to any of the companies. Managers and firms now recognize the importance of partnering with their employees and encouraging creative thinking and ideas towards innovation.

The 21st century manager Importance of vision The ability to perceive marketplace needs and what an org must do to satisfy them. Example: writer and director James Cameron with an uncanny ability to know what the audience wants produces it. – TITANIC, his endless motivation to create this movie made his financial backers contribute and their funding of the film proved to be an immensely good decision. Importance of critical thinking and creativity Critical thinking = the ability to analyze and assess info to pinpoint probs or opportunities - Determining the authenticity, accuracy and worth the info Creativity = the capacity to develop novel solutions to perceived organizational probs

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Being able to see better and more creative ways of doing business. Managers must give employees opportunities to take risks and try new solutions

Ability to lead change Managers must be able to guide their employees through the changes in today’s fluctuating conditions brought by technology, etc. Factors that require organizational change, external: feedback from customers, developments in the international marketplace, economic trends and the new technologies. Internal: new company goals, emerging employee needs, labour union demands or prod probs

CHAPTER 2

Individuals make a difference Unethical behavior from individuals: act illegally on the job, putting their own interests ahead of the organization, lying, misreporting hours worked, not showing up Technology may be the cause of this. People can steal or manipulate data through a computer, difficult to rebuild trust once a system is breached (especially with credit cards) and is very expensive to repair. Questionable behavior? “everyone else is doing it so I guess I can do it too”. Ethical choices really depend on the individual, some do it under pressure and others simply don’t do it because of their personal morals.

Ethical dilemmas at work Businesses need to encourage employees to have high ethical standards. Employees who are eager to work in the business will always profit the business as well as demonstrate good CSR thus gaining trust from the customers. To ensure this in companies: ethical leaders, code of ethics, ethical training for employees, etc. p.37 many fast-paced company CEOS are accused of wrongdoings but simply claimed that they had no idea crimes or unethical behavior was being committed – this happens often when there are several parties involved in huge businesses. Example: H&M donated destroyed unsold clothing to charities to prevent the clothing from being sold by street vendors or black markets. When they were called out by the New York Times (courtesy of a graduate student) they finally promised to stop destroyed unsold clothing and would donate the garments to charity. 4 of the most common business ethical challenges: conflict of interest, honesty & integrity, whistle-blowing, loyalty vs truth.

Conflict of Interest A situation in which an employee must choose between a business’s welfare and personal gain. Usually lawyers, business consultants and advertising agencies face a conflict of interest if they represent two competing companies (benefit one and harm the other). There are many types of conflict of interests: a person with two similar jobs in diff workplaces, personal interests’ vs company’s interests. Handle them ethically by avoiding and disclosing them. Ex: policies against taking on clients who are competitors.

Honesty & Integrity Integrity = behaving according to one’s deeply felt ethical principles in business situations. Such as accepting responsibility for your mistakes. Integrity and honesty builds trust and employers will always tend more to this type of employee, it creates a long-term relationship with customers, suppliers and the public. Same thing for how employees feel about the company in return. A lack of integrity and honesty can be lying or exaggerating on your resume to obtain a competitive job, karma’s a bitch though (Quami Frederick purchased a fake undergrad degree for law school). The use of internet such as employees going on social media during the job, on cellphones, tablets, etc is harder to spot = internet misuse.

Loyalty vs Truth When the truth about a company doesn’t abide business ethicalness, an individual may find himself choosing between the loyalty to his company and truthfulness in business relationships. Some will choose loyalty at the expense of truth and others will answer truthfully when asked direct questions. Emphasizing truthfulness can often be a better option when the cost of silence is high: operating a malfunctioning aircraft or selling tainted food.

Whistle-blowing Disclosure to company officials, gov authorities or the media of illegal & unethical practices committed by an org. Example: 2004 Myriam Bedard fired from marketing job at Via Rail after urging Canadians to come forward with any info about the company’s sponsorship scandal. When she appeared before Parliamentary committee, she whistle-blew shocking info (Canadian race-driver Jacques Villeneuve secretly paid 12M from sponsorship fund to wear Canadian logo) There are no specific laws but many companies in Canada have policies to protect whistleblowers (Air Canada). 2004 Bill C-25 Act: intended to protect people who exposed probs in gov’s bureaucracy, said to help ensure transparency, accountability and ethical conduct. Some whistle-blowers will be sued by outing their companies and then end up being bribed to stay quiet (Zues Yaghi and casino video slot machines).

Ethical conduct supported by a corporate business on four essential levels Ethical Awareness p.40 Code of conduct can simply ground the rules for acceptable behavior: laws and regulations an employee must obey / formal statement that defines how an org expects its employees to resolve ethical issues. Example of Air Canada’s code of conduct: retirees have travel pass

privileges, treat fellow workers with dignity and respect, leaders should not adopt a tone of pressure, how to report violations to a supervisor, promised confidentiality. Other example: code of conduct in the form of a small card that employees can carry = “mission statements”. (motto or brief code of ethics).

Ethical Education Businesses must provide the tools employees need to evaluate the options and arrive at suitable decisions. Ethic training programs, orgs “Skald Group”, employee-reporting services to anonymous hotlines (SAI Global), online interactive training systems. Training is helpful since employees can learn and practise applying ethical values to sample situations before facing the real deal. Ex: Walter Pavlo is a white-collar convicted criminal who speaks to students to warn them about consequences of cheating, like he did when he hid 6M in offshore accounts when he worked in telecoms MCI.

Ethical Action Firms must provide structures and approaches that allow decisions made by employees to be turned into ethical actions. Ex: Texas Instruments has a reference card with following ethical guidelines (Is the action legal? Does it comply with our values? Will you feel bad? Etc.). Ethical decisions require careful thought which normally do not comply in today’s fast-paced world, when performance goals are set too high for a whole business it can increase to cheating and misdeeds amongst the employees under pressure. Companies support ethical action when employees are faced with dilemmas: employee hotline for anonymous advice or to report unethical behavior.

Ethical Leadership Executives need to show ethical behavior in their actions. After misdeeds that occurred during the recent recession, two Harvard Business School interviewed corporate highly moral leaders who followed a moral code: use clear explicit language, encourage behaviour that generates ethical values & practice moral absolutism even if it’s financially costly. Each employee at every level should be charged with the responsibility of an ethical leader. Businesses who cannot form a solid framework of business ethics suffer from damage of ethical misconduct which can powerfully affect their stakeholders (customers, investors, employees and the public). When the business fails at acting in a certain way, the laws step in to enforce good practice. (see page 42 for different type of law legislations). Businesses need to act responsibly in order to satisfy the society. Many businesses may do so because it is required by the law, it helps their image or because they feel the ethical need to do so.

Example of Starbucks’s Going Green: design new stores and renovate existing stores to reduce envmtal impact (local artisans and materials, recycling). Also allows the customers to participate in this pollution reduction by reducing the price by 10 cents for a customer who brings in their own travel cup. See p.43 for more A business is often judged by it’s contribution to the community through charitable events and community service. Example: PricewaterhouseCoopers Canada with “Term Volunteering” prog, where volunteers work in day-long projects building houses, sorting through bags of clothing. Example 2: Tim Horton Children Foundation that set up Camp Day for children from disadvantaged homes. Each year one day is dedicated for Camp Day where stores in Canada and the US donate the value of all that day’s coffee sales to the foundation. SR in firms can also be measured by social audits = formal procedures that identify and evaluate all company activities that relate to social issues (conservation, employment practices, envmtal protection and philanthropy). Outside groups may do their own outside evaluation of businesses: religious, envmtal, publicinterest groups who...