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Contemporary Business 14th ed.

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Contemporary business

  1. 1. ffirs_SIE.indd ii 01/10/10 3:53 PM
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  4. 4. John Wiley & Sons, Inc. David L. Kurtz Louis E. Boone University of Arkansas University of South Alabama Contemporary BUSINESS 14TH EDITION . . . at the speed of businessffirs_SIE.indd iii 01/10/10 3:53 PM
  5. 5. “The 14th edition of Contemporary Business is dedicated to Joseph S. Heider, who brought me to John Wiley & Sons. Thank you, Joe.” —Dave Vice President & Executive Publisher George Hoffman Acquisitions Editor Franny Kelly Assistant Editor Maria Guarascio Production Manager Dorothy Sinclair Senior Production Editor Valerie A. Vargas Marketing Manager Karolina Zarychta Creative Director Harry Nolan Senior Designer Madelyn Lesure Text Designer 4 Design Group Cover Designer Wendy Lai Production Management Services Elm Street Publishing Services Senior Illustration Editor Anna Melhorn Photo Editor Hilary Newman Photo Researcher Teri Stratford Senior Editorial Assistant Emily McGee Executive Media Editor Allison Morris Media Editor Elena Santa Maria This book was set in Janson TextLTStd-Roman 10/13 by MPS Limited, a Macmillan Company, Chennai, India and printed and bound by R. R. Donnelley & Sons. The cover was printed by R. R. Donnelley & Sons. This book is printed on acid free paper. ∞ Founded in 1807, John Wiley & Sons, Inc. has been a valued source of knowledge and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Our company is built on a foundation of principles that include responsibility to the communities we serve and where we live and work. In 2008, we launched a Corporate Citizenship Initiative, a global effort to address the environmental, social, economic, and ethical challenges we face in our business. Among the issues we are addressing are carbon impact, paper specifications and procurement, ethical conduct within our business and among our vendors, and community and charitable support. For more information, please visit our website: †† Copyright © 2011, 2010 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scan- ning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc. 222 Rosewood Drive, Danvers, MA 01923, website Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, (201)748-6011, fax (201)748-6008, website Evaluation copies are provided to qualified academics and professionals for review purposes only, for use in their courses during the next academic year. †These copies are licensed and may not be sold or transferred to a third party. †Upon completion of the review period, please return the evaluation copy to Wiley. †Return instructions and a free of charge return shipping label are available at Outside of the United States, please contact your local representative. ISBN-13 978-0-470-53129-7 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1ffirs_SIE.indd iv 01/10/10 3:53 PM
  6. 6. About the Author During Dave Kurtz’s high school days, no one in Salisbury, Maryland, would have mistaken him for a scholar. In fact, he was a mediocre student, so bad that his father steered him toward higher education by finding him a succession of backbreaking sum- mer jobs. Thankfully, most of them have been erased from his memory, but a few linger, including picking peaches, loading watermelons on trucks headed for market, and working as a pipefitter’s helper. Unfortunately, these jobs had zero impact on his academic standing. Worse yet for Dave’s ego, he was no better than average as a high school athlete in football and track. But four years at Davis & Elkins College in Elkins, West Virginia, turned him around. Excellent instructors helped get Dave on a sound academic footing. His grade point aver- age soared—enough to get him accepted by the graduate business school at the University of Arkansas, where he met Gene Boone. Gene and Dave became longtime co-authors; together they produced more than 50 books. In addition to writing, Dave and Gene were involved in several entrepreneurial ventures. This long-term partnership ended with Gene’s death in 2005. But, this book will always be Boone & Kurtz’s Contemporary Business. Today, Dave is back teaching at the University of Arkansas, after tours of duty in Ypsilanti, Michigan; Seattle, Washington; and Melbourne, Australia. He is the proud grandfather of six “perfect” kids and a sportsman with a golf handicap too high to men- tion. Dave, his wife, Diane, and four demanding canine companions (Daisy, Lucy, Molly, and Sally) live in Rogers, Arkansas. Dave holds a distinguished professorship at the Sam M. Walton College of Business in nearby Fayetteville, home of the Arkansas Razorbacks. About the Author vffirs_SIE.indd v 01/10/10 3:53 PM
  7. 7. WileyPLUS for Students WileyPLUS builds students’ confidence because it takes the guesswork out of studying by providing a clear roadmap to academic success. WileyPLUS provides an online environment that integrates relevant resources, including the entire digital textbook, in an easy-to-navigate framework that helps you study more effectively. With WileyPLUS, you receive 24/7 access to resources that promote positive learning outcomes. Throughout each study session, you can assess your progress and gain immediate feedback on your strengths and weaknesses so you can be confident you are spending your time wisely. Powered by proven technology and built on a foundation of cognitive research, WileyPLUS has enriched the education of millions of students, in over 20 countries around the world. WileyPLUS is filled with student resources including: Business Weekly Updates Stay up to date on the very latest in business news stories. Each week you will find links to 5 new articles, video clips, business news stories, and so much more. Audio Chapter Review Summaries Available in English and Spanish, these reviews provide a quick overview of the main chapter concepts, so you can review them in the car, on foot, at the gym – anywhere! iPhone Apps You can now review chapter concepts and key terms on the go with our iPhone flashcard and self-study quiz apps. Student Study Guide Review key business concepts and test your knowledge so you’re ready for the next quiz or exam. The Wiley Business Video Series Brand new end-of-chapter video cases include companies like Zipcar, Seventh Generation, New Harvest Coffee Roasters, and Comet Skateboards. vi WileyPLUS for Studentsffirs_SIE.indd vi 01/10/10 3:53 PM
  8. 8. What are Learning Styles? Have you ever repeated something to yourself over and over to help remember it? Or does your best friend ask you to draw a map to someplace where the two of you are planning to meet, rather than just tell her the directions? If so, then you already have an intui- tive sense that people learn in different ways, Researchers in learning theory have developed various categories of learning styles. Some people, for example, learn best by reading or writing. Others learn best by using various senses—seeing, hearing, feeling, tasting, or even smelling. When you understand how you learn best, you can make use of learning strategies that will optimize the time you spend study- ing. To find out what your particular learning style is, and take the learning styles quiz you find there. The quiz will help you determine your primary learning style: Visual Learner Auditory Learner Haptic Learner Olfactory Learner Print Learner Interactive Learner Kinesthetic Learner Then, consult the information below and on the following pages for study tips for each learning style. This information will help you better understand your learning style and how to apply it to the study of business. Study Tips for Visual Learners If you are a Visual Learner, you prefer to work with images and diagrams. It is important that you see information. Visual Learning Visual Reinforcement – Reconstruct images in different ways. • Draw charts/diagrams during lecture. • Make flashcards by drawing tables/charts on – Redraw pages from memory. • Examine textbook figures and graphs. one side and definition or description on the – Replace words with symbols and initials. • Look at images and videos on WileyPLUS other side. – Draw diagrams where appropriate. and other Web sites. • Use art-based worksheets; cover labels on – Practice turning your visuals back into • Pay close attention to charts, drawings, and images in text and then rewrite the labels. words. handouts your instructor uses. • Use colored pencils/markers and colored If visual learning is your weakness: If • Underline; use different colors. paper to organize information into types. you are not a Visual Learner but want to • Use symbols, flowcharts, graphs, different • Convert your lecture notes into “page pic- improve your visual learning, try re-keying arrangements on the page, white spaces. tures.” To do this: tables/charts from the textbook. – Use the visual learning strategies outlined above. Study Tips for Print Learners If you are a Print Learner, reading will be important but writing will be much more important. Print Learning Print Reinforcement • Rewrite ideas and principles into other words. • Write text lecture notes during lecture. • Rewrite your notes from class, and copy class- • Turn charts, diagrams, and other illustrations • Read relevant topics in textbook, especially room handouts in your own handwriting. into statements. textbook tables. • Make your own flashcards. • Practice writing exam answers. • Look at text descriptions in animations and • Write out essays summarizing lecture notes • Practice with multiple choice questions. Web sites. or textbook topics. • Write paragraphs, especially beginnings and • Use lists and headings. • Develop mnemonics. endings. • Use dictionaries, glossaries, and definitions. • Identify word relationships. • Write your lists in outline form. • Read handouts, textbooks, and supplemen- • Create tables with information extracted • Arrange your words into hierarchies and tary library readings. from textbook or lecture notes. points. • Use lecture notes. • Use text based worksheets or crossword If print learning is your weakness: If you Puzzles. are not a Print Learner but want to improve • Write out words again and again. your print learning, try covering labels of figures • Reread notes silently. from the textbook and writing in the labels. Study Tips for Auditory Learners If you are an Auditory Learner, then you prefer listening as a way to learn information. Hearing will be very important, and sound helps you focus. Auditory Learning • Play audio files provided by instructor and- • Discuss topics with students and instructors. • Make audio recordings during lecture. textbook. • Explain new ideas to other people. • Do not skip class; hearing the lecture is • Listen to narration of animations. • Leave spaces in your lecture notes for later essential to understanding. • Attend lecture and tutorials. recall. Learning Styles viiffirs_SIE.indd vii 01/10/10 3:53 PM
  9. 9. Study Tips for Auditory Learners (continued) • Describe overheads, pictures, and visuals to • Use a recorder to create self-tests. • Spend time in quiet places recalling the ideas. somebody who was not in class. • Compose “songs” about information. • Say your answers out loud. • Play music during studying to help focus. Auditory Reinforcement • Expand your notes by talking with other and If auditory teaming is your weakness: • Record yourself reading the notes and listen with information from your textbook. If you are not an Auditory Learner but want to the recording • Read summarized notes out loud. to improve your auditory learning, try writing • Write out transcripts of the audio files. • Explain your notes to another auditory out the scripts from pre-recorded lectures. • Summarize information that you have read, learner. speaking out loud. • Talk with the instructor. Study Tips for Interactive Learners If you are an Interactive Learner, you will want to share your information. A study group will be important. Interactive Learning Interactive Reinforcement If interactive learning is your weak- • Ask a lot of questions during lecture or TA • “Teach” the content to a group of other students. ness: If you are not an Interactive Learner review sessions. • Talking to an empty room may seem odd, but want to improve prove your interac- • Contact other students, via e-mail or discus- but it wiII be effective for you. tive learning, try asking your study partner sion forums, and ask them to explain what questions and then repeating them to the • Discuss information with others, making sure they learned. they learned. instructor. that you both ask and answer questions. • Work in small group discussions, making a verbal and written discussion of what others say. Study Tips for Haptic Learners If you are a Haptic Learner, you prefer to work with your hands. It is important to physically manipulate material. Haptic Learning Haptic Reinforcement • Make sure you have freedom of movement • Take blank paper to lecture to draw charts/ • Trace words and pictures on flashcards. while studying. tables/diagrams. • Perform electronic exercises that involve • Using the textbook, run your fingers along drag-and-drop activities. If haptic learning is your weakness: the figures and graphs to get a “feel” for • Alternate between speaking and writing If you are not a Haptic Learner but want to shapes and relationships. information. improve your haptic learning, try spending • Observe someone performing a task that you more time in class working with graphs would like to learn. and tables while speaking or writing down information. Study Tips for Kinesthetic Learners If you are a Kinesthetic Learner, it will be important that you involve your body during studying. Kinesthetic Learning Kinesthetic Reinforcement • Use pictures and photographs that illustrate • Ask permission to get up and move during • Make flashcards; place them on the an idea. Lecture. floor, and move your body around • Write practice answers. • Participate in role-playing activities in the them. • Role-play the exam situation. classroom. • Move while you are teaching the material • Use all your senses. to others. If kinesthetic learning is your weak- • Go to labs; take field trips. • Put examples in your summaries. ness: If you are not a Kinesthetic Learner • Listen to real-life examples. • Use case studies and applications to help but want to improve your kinesthetic learn- • Pay attention to applications. with principles and abstract concepts. ing, try moving flash cards to reconstruct • Use trial-and-error methods. • Talk about your notes with another graphs and tables, etc. • Use hands-on approaches. Kinesthetic person. Study Tips for Olfactory Learners If you are an Olfactory Learner, you will prefer to use the senses of smell and taste to reinforce learning. This is a rare learning modality. Olfactory Learning • If possible, go back to the computer lab to If olfactory learning is your weak- • During lecture, use different scented markers do your studying. ness: If you are not an Olfactory Learner but to identify different types of information. • Burn aromatic candles while studying. want to improve your olfactory learning, try • Try to associate the material that you’re burning an aromatic candle or incense while Olfactory Reinforcement studying with a pleasant taste or smell. you study, or eating cookies during study • Rewrite notes with scented markers. sessions. viii Learning Stylesffirs_SIE.indd viii 01/10/10 3:53 PM
  10. 10. LEARNING STYLES SURVEY CHART Resources Visual Print Auditory Interactive Haptic Kinesthetic Hit & Miss ✔ ✔ ✔ Launching Your Career ✔ ✔ ✔ Learning Goals ✔ ✔ ✔ They Said It ✔ ✔ BusinessEtiquette ✔ ✔ ✔ Solving an Ethical Controversy ✔ ✔ Assessment Checks ✔ ✔ ✔ Review Questions ✔ ✔ ✔ Cases ✔ ✔ ✔ Project / Teamwork Applications ✔ ✔ ✔ Flashcards ✔ ✔ ✔ ✔ ✔ Business Terms ✔ ✔ ✔ Interactive Quizzes ✔ ✔ ✔ Student PowerPoints ✔ ✔ ✔ ✔ Audio Summary (English / Spanish) ✔ ✔ ✔ ✔ ✔ Animated Figures ✔ ✔ ✔ ✔ ✔ Case Study Animations ✔ ✔ ✔ ✔ ✔ ✔ E-lectures ✔ ✔ ✔ ✔ ✔ Greensburg, KS Continuing Case ✔ ✔ ✔ ✔ ✔ ✔ End-of-Chapter Videos ✔ ✔ ✔ ✔ ✔ ✔ Final Exam Questions ✔ ✔ ✔ Quiz Questions ✔ ✔ ✔ Pre-lecture Questions ✔ ✔ ✔ Post-lecture Questions ✔ ✔ ✔ Video Questions ✔ ✔ ✔ ✔ ✔ Drop-box Questions ✔ ✔ ✔ Learning Styles ixffirs_SIE.indd ix 01/10/10 3:53 PM
  11. 11. Acknowledgements Contemporary Business has long ben- Sal Veas Kathy Lorencz efited from the instructors who have offered Santa Monica College Oakland Community College their time as reviewers. Comprehensive Collette Wolfson Levi Richard reviews of the 14th edition and ancillary Ivy Tech Community College Citrus College materials were provided by the following Lisa Zingaro Jenny C. Rink colleagues: Oakton Community College Community College of Philadelphia Nathaniel R. Calloway Thanks also to all of our colleagues who Susan Roach University of Maryland University College have assisted us in previous editions in our Georgia Southern University Gary Cohen continuing efforts to make the best business Sandra Robertson University of Maryland text even better. The new edition continues Thomas Nelson Community College Kellie Emrich to reflect so many of their recommenda- Barbara Rosenthal Cuyahoga Community College tions. Among the hundreds of reviewers and Miami Dade College, Kendall Campus Gil Feiertag focus group participants who contributed JoDee Salisbury Columbus State Community College to the book during previous editions, we Baker College acknowledge the special contributions of Janice Feldbauer Rieann Spence-Gale the following people: Schoolcraft College Northern Virginia Community College Chuck Foley Brenda Anthony Bob Urell Columbus State Community College Tallahassee Community College Irvine Valley College Karen Halpern Lorraine P. Bassette Ed Becker South Puget Sound Community College Prince George’s Community College Housatonic Community College Tim Hatten Barbara Ching Cathleen Behan Mesa State College Los Angeles City College North Virginia Community College Linda Hefferin Rachna Condos Vicki Bjerke Elgin Community College American River College Northeast Iowa Community College John Hilston Susan J. Cremins Robert Brinkmeyer Brevard Community College Westchester Community College University of Cincinnati Martin Karamian Tamara Davis Ronald Cereola Pierce College Davenport University James Madison University Cynthia Miree-Coppin Colleen Dunn Leo Chiantelli Oakland Unversity Bucks County Community College Shasta College David Oliver Joyce Ezrow John Cicero Edison State College Anne Arundel Community College Shasta College Sally Proffitt Kathleen K. Ghahramani Robert M. Clark Tarrant County College Johnson County Community College Horry-Georgetown Technical College Jayre Reaves Connie Golden Douglas Crowe Rutgers University Lakeland Community College Bradley University David Robinson Susan Greer Charles R. Fenner University of California, Berkeley Horry-Georgetown Technical College State University of New York- Canton Patricia Setlik James V. Isherwood Susan Greer Harper College Community College of Rhode Island Horry-Georgetown Technical College John Striebich Mary Beth Klinger William Harvey Monroe Community College College of Southern Maryland Henry Ford Community College Rodney Thirion Claudia Levi David Hollomon Pikes Peak Community College Edmonds Community College Victor Valley College x Acknowledgementsflast_SIE.indd x 21/09/10 3:50 PM
  12. 12. Clark Lambert Ron Colley John S. Leahy Farmingdale State College South Suburban College Palomar College James R. Lashley Scott Colvin Delores Linton Bowie State University Naugatuck Community College Tarrant County College-Northwest Victor Lipe Peter Dawson Campus Trident Technical College Collin County Community College Stacy Martin Michael Mandel Dr. Richard L. Drury Southwestern Illinois College Housatonic Community College Northern Virginia Community Theresa Mastrianni Gina McConoughey College Kingsborough Community College Illinois Central College John A. Fawcett Bob Matthews Dennis R. Murphy Norwalk Community College Oakton Community College Horry-Georgetown Technical College Dr. Barry Freeman Hugh McCabe John Muzzo Bergen Community College Westchester Community College Harold Washington University Richard Ghidella Tricia McConville Jack Partlow Fullerton College Northeastern University Northern Virginia Community College Ross Gittell Rebecca Miles W.J. Patterson University of New Hampshire Delaware Tech Sullivan University Clark Hallpike Linda Morable Michael Quinn Elgin Community College Richland College James Madison University Carnella Hardin Linda Mosley Rama Ramaswamy Glendale College—Arizona Tarrant County College Minneapolis Community and Britt Hastey Carol Murphy Technical College Los Angeles City College Quinsigamond Community College JoAnn Rawley Dave Hickman Andrew Nelson Reading Area Community College Frederick Community College Montgomery College Donna Scarlett Nathan Himelstein Greg Nesty Iowa Western Community Essex County College Humboldt College College—Clarinda Scott Homan Linda Newell Charles Smith Purdue—West Lafayette Saddleback College Horry-Georgetown Technical College Howard L. Irby, Jr. Emmanuel Nkwenti Michael Thomas Bronx Community College Pennsylvania College of Technology Henry Ford Community College Robert Ironside Paul Okello LaVena Wilkin North Lake College Tarrant County College Sullivan University Charlotte Jacobsen Lynn D. Pape Jamil Ahmad Montgomery College Northern Virginia Community Los Angeles Trade—Technical College Bruce Johnson College—Alexandria Campus Sylvia Allen College of the Desert Charles Pedersen Los Angeles Valley College Judith Jones Quinsigamond Community College Kenneth F. Anderson Norwalk Community College John Pharr Borough of Manhattan Community Marce Kelly Cedar Valley—Dallas County College Santa Monica College Community College District Andrea Bailey Gregory Kishel Jeff Podoshen Moraine Valley Community College Cypress College—Santa Ana College DeVry University Norman E. Burns Patricia Kishel Jude A. Rathburn Bergen Community College Cypress College University of Wisconsin—Milwaukee Diana Carmel Andy Klein Levi Richard Golden West College DeVry University Citrus College Barbara Ching Mary Beth Klinger Joe Ryan Los Angeles City College College of Southern Maryland Valley College Acknowledgements xiflast_SIE.indd xi 21/09/10 3:50 PM
  13. 13. Althea Seaborn David Braun Bob Urell Norwalk Community College Pierce College Irvine Valley College John Seilo David England Richard Warner Orange Coast Community College John A. Logan College Lehigh-Carbon Community College Richard Sherer Barry Freeman David Woolgar Los Angeles Trade—Technical College Bergen Community College Santa Ana College Gerald Silver Eric Glohr Chuck Zellerbach Purdue University—Calumet Lansing Community College Orange Coast College Leon Singleton Karen Hawkins Alison Adderly-Pitman Santa Monica College Miami Dade Community College Brevard Community College Malcolm Skeeter Nate Himelstein David Alexander Norwalk Community College Essex Community College Angelo State University Robert Smolin Kim Hurns Kenneth Anderson Citrus College Washtenaw Community College Mott Community College Darrell Thompson Dmitriy Kalyagin Charles Armstrong Mountain View College Chabot College Kansas City Kansas Community College Sandra Toy Elias Konwufine Donald B. Armstrong Orange Coast College Keiser College Mesa College Phil Vardiman Carl Kovelowski Nathaniel Barber Abilene Christian University Mercer Community College Winthrop University Gina Vega Pierre Laguerre Alan Bardwick Merrimack College Bergen Community College Community College of Aurora Michelle Vybiral Stacy Martin Keith Batman Joliet Junior College Southwestern Illinois College Cayuga Community College Rick Weidmann Duane Miller Robb Bay Prince George’s Community Utah Valley State College Community College of Southern College Ed Mitchell Nevada S. Martin Welc Hillsborough Community Charles Beem Saddleback College College Bucks County Community College Steve Wong Frank Novakowski Carol Bibly Rock Valley College Davenport University Triton College Greg Akins Tom Passero Daniel Biddlecom Lansing Community College Owens Community College Erie Community College—North Ken Anderson Tom Perkins Campus Borough of Manhattan Community Lansing Community College Joseph Billingere College Robert Reck Oxnard College Nancy Bailey Western Michigan University Larry Blenke Middlesex Community College Paul Ricker Sacramento City College Mary Barnum Broward Community College Paula E. Bobrowski Grand Rapids Community College Jenny Rink SUNY Oswego Sherry Bell Community College of Philadelphia Charlane Bomrad Held Ferris State University Susan Roach Onandaga Community College Ellen Benowitz Georgia Southern University Brenda Bradford Mercer Community College Edith Strickland Missouri Baptist College Mike Bento Tallahassee Community College Steven E. Bradley Owens Community College Keith Taylor Austin Community College Pat Bernson Lansing Community College Willie Caldwell County College of Morris Joyce Thompson Houston Community College Trudy Borst Lehigh-Carbon Community Barney Carlson Ferris State University College Yuba College xii Acknowledgementsflast_SIE.indd xii 21/09/10 3:50 PM
  14. 14. Bonnie Chavez William D. Foster Kathy Irwin Santa Barbara City College Fontbonne College Catawba Valley Community College Felipe Chia Blane Franckowiak Gloria M. Jackson Harrisburg Area Community College Tarrant County Community College San Antonio College Rowland Chidomere Edward Friese Ralph Jagodka Winston-Salem State University Okaloosa-Walton Community College Mount San Antonio College Marie Comstock Atlen Gastineau Chris Jelepis Allan Hancock College Valencia Community College—West Drexel University Ronald C. Cooley Campus Steven R. Jennings South Suburban College Milton Glisson Highland Community College Suzanne Counte North Carolina A&T State University Geraldine Jolly Jefferson College Bob Googins Barton College Robert Cox Shasta Community College Dave Jones Salt Lake Community College Robert Gora LaSalle University Pam Crader Catawba Valley Community College Don Kelley Jefferson College Don Gordon Francis Marion University Norman B. Cregger Illinois Central College Bill Kindsfather Central Michigan University Gary Greene Tarrant County Community College Dana D’Angelo Manatee Community College Charles C. Kitzmiller Drexel University Blaine Greenfield Indian River Community College Dean Danielson Bucks County Community College B. J. Kohlin San Joaquin College Stephen W. Griffin Pasadena City College Kathy Daruty Tarrant County Community College Carl Kovelowski Los Angeles Pierce College Maria Carmen Guerrero-Caldero Mercer Community College David DeCook Oxnard College Ken Lafave Arapahoe Community College Annette L. Halpin Mount San Jacinto College Richard L. Drury Beaver College Rex Lambrecht Northern Virginia Area Community Michael Hamberger Northeastern Junior College College—Annandale Northern Virginia Area Community Fay D. Lamphear Linda Durkin College—Annandale San Antonio College Delaware County Community Neal Hannon Bruce Leppine College Bryant College Delta College Lance J. Edwards Douglas Heeter Thomas Lloyd Otero Junior College Ferris State University Westmoreland County Community William Ewald Paul Hegele College Concordia University Elgin Community College Jim Locke Carol Fasso Chuck Henry Northern Virginia Area Community Jamestown Community College Coastline Community College College—Annandale Jodson Faurer Thomas Herbek Paul Londrigan Metropolitan State College at Denver Monroe Community College Mott Community College Jan Feldbauer Tom Heslin Kathleen J. Lorencz Austin Community College Indiana University, Bloomington Oakland County Community College Sandie Ferriter Joseph Ho John Mack Harford Community College College of Alameda Salem State College Steven H. Floyd Alice J. Holt Paul Martin Manatee Community College Benedict College Aims College Nancy M. Fortunato Vince Howe Lori Martynowicz Bryant and Stratton University of North Carolina, Wilmington Bryant and Stratton John G. Foster Jr. Eva M. Hyatt Michael Matukonis Montgomery College—Rockville Appalachian State University SUNY Oneonta Acknowledgements xiiiflast_SIE.indd xiii 21/09/10 3:50 PM
  15. 15. Virginia Mayes Alton J. Purdy Daryl Taylor Montgomery College—Germantown Solano Community College Pasadena City College Joseph E. McAloon Surat P. Puri John H. Teter Fitchburg State College Barber Scottia College St. Petersburg Junior College James McKee Angela Rabatin Gary Thomas Champlain College Prince George’s Community College Anne Arundel Community College Michael McLane Linda Reynolds Michael Thomas University of Texas, San Antonio Sacramento City College Henry Ford Community College Ina Midkiff Brenda Rhodes Frank Titlow Austin Community College Northeastern Junior College St. Petersburg Junior College Rebecca Mihelcic Merle Rhodes Roland Tollefson Howard Community College Morgan Community College Anne Arundel Community College Richard Miller Pollis Robertson Sheb True Harford Community College Kellogg Community College Loyola Marymount University Joseph Mislivec Robert Ross Robert Ulbrich Central Michigan University Drexel University Parkland College Kimberly K. Montney Benjamin Sackmary Ariah Ullman Kellogg Community College Buffalo State College SUNY Binghamton Gail Moran Catherina A. Sanders Sal Veas Harper College San Antonio College Santa Monica College Linda S. Munilla Lewis Schlossinger Steven Wade Georgia Southern University Community College of Aurora Santa Clara University Kenneth R. Nail Gene Schneider Dennis Wahler Pasco-Hernando Community College Austin Community College San Jacinto Evergreen Community Joe Newton Raymond Shea College District Buffalo State College Monroe Community College W. J. Walters Janet Nichols Nora Jo Sherman Central Piedmont Community Northeastern University Houston Community College College Frank Nickels Leon J. Singleton Timothy Weaver Pasco-Hernando Community College Santa Monica College Moorpark College Sharon Nickels Jeff Slater Richard Wertz St. Petersburg Junior College North Shore Community College Concordia University Nnamdi I. Osakwe Candy Smith Darcelle D. White Livingstone College Folsom Lakes College Eastern Michigan University Tibor Osatreicher Solomon A. Solomon Jean G. Wicks Baltimore City Community College Community College of Rhode Island Bornie State University George Otto R. Southall Tom Wiener Truman College Laney College Iowa Central Community College Thomas Paczkowski Martin St. John Dave Wiley Cayuga Community College Westmoreland County Anne Arundel Community College Alton Parish Community College Richard J. Williams Tarrant County Community College E. George Stook Santa Clara University Jack Partlow Anne Arundel Community College Joyce Wood Northern Virginia Area Community James B. Stull Northern Virginia Community College—Annandale San Jose State University College Jeff Penley Bill Syverstein Gregory Worosz Catawba Valley Community College Fresno City College Schoolcraft College Robert Pollero Thomas Szezurek Martha Zennis Anne Arundel Community College Delaware County Community College Jamestown Community College xiv Acknowledgementsflast_SIE.indd xiv 21/09/10 3:50 PM
  16. 16. In Conclusion I would like to thank Sue Nodine, Ingrid Benson, Heather Johnson, and the staff at Elm Street Publishing Services. Their unending efforts on behalf of Contemporary Business were truly extraordinary. I would also like to thank Tim Hatten at Mesa State College for his valuable feedback. Let me conclude by noting that this new edition would never have become a reality without the outstanding efforts of the Wiley editorial, production, and marketing teams. Special thanks to George Hoffman, Lisé Johnson, Karolina Zarychta, Franny Kelly, and Maria Guarascio. Acknowledgements xvflast_SIE.indd xv 21/09/10 3:50 PM
  17. 17. flast_SIE.indd xvi 21/09/10 3:50 PM
  18. 18. Brief Contents PART 1 Business in a Global Environment 1 Chapter 1 The Changing Face of Business 2 Chapter 2 Business Ethics and Social Responsibility 34 Chapter 3 Economic Challenges Facing Contemporary Business 70 Chapter 4 Competing in World Markets 104 PART 2 Starting and Growing Your Business 143 Chapter 5 Forms of Business Ownership and Organization 144 Chapter 6 Starting Your Own Business: The Entrepreneurship Alternative 182 PART 3 Management: Empowering People to Achieve Business 215 Chapter 7 Management, Leadership, and the Internal Organization 216 Chapter 8 Human Resource Management: From Recruitment to Labor Relations 252 Chapter 9 Top Performance through Empowerment, Teamwork, and Communication 284 Chapter 10 Production and Operations Management 314 PART 4 Marketing Management 349 Chapter 11 Customer-Driven Marketing 350 Chapter 12 Product and Distribution Strategies 386 Chapter 13 Promotion and Pricing Strategies 426 PART 5 Managing Technology and Information 465 Chapter 14 Using Technology to Manage Information 466 PART 6 Managing Financial Resources 497 Chapter 15 Understanding Accounting and Financial Statements 498 Chapter 16 The Financial System 532 Chapter 17 Financial Management 566 Appendix A Business Law A-1 Appendix B Insurance and Risk Management A-18 Appendix C Personal Financial Planning A-31 Appendix D Developing a Business Plan A-43 Appendix E Careers in Contemporary Business A-53 Brief Contents xviiTOC_SIE.indd xvii 23/09/10 6:59 PM
  19. 19. Contents PART 1 Business in a Global Environment 1 Chapter 1 The Changing Face of Business 2 Opening Vignette What Is Business? 5 Snuggie: The Break-out Not-for-Profit Organizations 5 Blanket Hit Factors of Production 7 Hit & Miss Microsoft and Google Square The Private Enterprise System 9 Off on the Web Basic Rights in the Private Enterprise System 10, The Entrepreneurship Alternative 11 BusinessEtiquette Social Networking Six Eras in the History of Business 13 Hit & Miss The Colonial Period 13, The Industrial Revolution 13, The Age of Industrial Google Buzz a Bust? Entrepreneurs 14, The Production Era 14, The Marketing Era 15, The Relationship Era 15, Going Green Managing Relationships through Technology 16, Strategic Alliances 16, Exelon Bets on Nuclear The Green Advantage 17 Solving an Ethical Controversy Today’s Business Workforce 20 SEC Lax on Oversight? Changes in the Workforce 20 The 21st-Century Manager 23 Importance of Vision 23, Importance of Critical Thinking and Creativity 23, Ability to Lead Change 24 What Makes a Company Admired? 25 What’s Ahead 25 Summary of Learning Objectives 27, Business Terms You Need to Know 28, Review Questions 28, Projects and Teamwork Applications 29, Web Assignments 29 Case 1.1 SAS Is Still a Great Place to Work 30 Case 1.2 31 Video Case 1.3 New Harvest Coffee Roasters Brews Up Fresh Business 32 Chapter 2 Business Ethics and Social Responsibility 34 Concern for Ethical and Societal Issues 36 Opening Vignette Larry’s Beans Roasts a The Contemporary Ethical Environment 38 Greener Cup of Coffee Individuals Make a Difference 40, Development of Individual Ethics 40, BusinessEtiquette On-the-Job Ethical Dilemmas 41 How to Handle Ethical Dilemmas at Work How Organizations Shape Ethical Conduct 44 Ethical Awareness 45, Ethical Education 45, Ethical Action 46, Ethical Leadership 47 xviii ContentsTOC_SIE.indd xviii 23/09/10 6:59 PM
  20. 20. Going Green Acting Responsibly to Satisfy Society 47 Starbucks Introduces a New Store-Design Strategy Responsibilities to the General Public 49, Responsibilities to Customers 55, Responsibilities to Employees 57, Responsibilities to Investors and the Financial Community 63 Solving an Ethical Controversy What’s Ahead 64 Are Prescription Drug Advertisements Helpful or Summary of Learning Goals 64, Business Terms You Need to Know 65, Harmful to Consumers? Review Questions 65, Projects and Teamwork Applications 66, Web Assignments 66 Hit & Miss Pacific Biodiesel Recycles Oil Case 2.1 Cause-Related Marketing—Give a Day, Get a Disney Day 67 from French Fries to Fuel Case 2.2 Greener Shipping—At Sea and in Port 68 Hit & Miss Balancing Life and Work with Video Case 2.3 Seventh Generation: Beyond Paper and Plastic 69 a Cup of Tea Chapter 3 Economic Challenges Facing Contemporary Business 70 Opening Vignette Microeconomics: The Forces of Demand and Supply 73 Samsung’s Remarkable Factors Driving Demand 73, Factors Driving Supply 76, Recovery How Demand and Supply Interact 77 Hit & Miss Five Guys Burgers and Fries: A Macroeconomics: Issues for the Entire Economy 78 Simple Recipe for Success Capitalism: The Private Enterprise System and Competition 79, Planned Economies: Solving an Ethical Socialism and Communism 82, Mixed Market Economies 83 Controversy Should Alternative Energy Evaluating Economic Performance 83 Development Be Relied on to Create New Jobs? Flattening the Business Cycle 84, Productivity and the Nation’s Gross Hit & Miss Domestic Product 86, Price-Level Changes 88 Microloans Aid Women’s Businesses Managing the Economy’s Performance 91 Monetary Policy 91, Fiscal Policy 92 Going Green Tax Credits for an Energy Star Global Economic Challenges of the 21st Century 94 BusinessEtiquette Tips for International Travel What’s Ahead 96 Summary of Learning Objectives 96, Business Terms You Need to Know 98, Review Questions 98, Projects and Teamwork Applications 99, Web Assignments 100 Case 3.1 Nuclear Energy: Making a Comeback? 100 Case 3.2 Smart Phones: Recession Proof and Growing 101 Video Case 3.3 Secret Acres: Selling Comics Is Serious Business 102 Chapter 4 Competing in World Markets 104 Opening Vignette Why Nations Trade 107 Guayaki’s Energized Fans Help International Sources of Factors of Production 107, Size of the International Restore the Rainforest Marketplace 107, Absolute and Comparative Advantage 109 BusinessEtiquette Tips for Understanding Measuring Trade between Nations 110 Japanese Culture Major U.S. Exports and Imports 110, Exchange Rates 111 Hit & Miss The Tiny Nano—A Potential Hit Barriers to International Trade 113 for Tata Motors Social and Cultural Differences 113, Economic Differences 115, Political and Legal Differences 116, Types of Trade Restrictions 120 Contents xixTOC_SIE.indd xix 23/09/10 6:59 PM
  21. 21. Solving an Ethical Reducing Barriers to International Trade 121 Controversy How Fair Is Fair Trade? Organizations Promoting International Trade 122, International Economic Communities 123, NAFTA 123, CAFTA-DR 124, European Union 125 Going Green IBM Helps Keep Water Going Global 125 Flowing Levels of Involvement 126, From Multinational Corporation to Global Business 131 Hit & Miss Toyota’s Recall Woes Developing a Strategy for International Business 131 Global Business Strategies 132, Multidomestic Business Strategies 132 What’s Ahead 133 Summary of Learning Objectives 133, Business Terms You Need to Know 135, Review Questions 135, Projects and Teamwork Applications 136, Web Assignments 136 Case 4.1 Google and Facebook Face Off in India’s Social Networking Wars 137 Case 4.2 TOMS Shoes Takes One Step at a Time 137 Video Case 4.3 Smart Design: Life Is In the Details 138 Part 1 Greensburg, KS: New Ways to Be a Better Town 140 Part 1: Launching Your Global Business and Economics Career 141 PART 2 Starting and Growing Your Business 143 Chapter 5 Forms of Business Ownership and Organization 144 Most Businesses Are Small Businesses 146 Opening Vignette S.C. Johnson: A Large What Is a Small Business? 147, Typical Small-Business Ventures 147 Company with Small Beginnings Contributions of Small Business to the Economy 149 Going Green Creating New Jobs 150, Creating New Industries 150, Innovation 151 Green Mama: Small Business with a Big Message Why Small Businesses Fail 152 BusinessEtiquette Management Shortcomings 153, Inadequate Financing 153, How to Use Social Networking Government Regulation 154 in Your Job Search The Business Plan: A Foundation for Success 155 Solving an Ethical Controversy Good Karma or Bad Karma? Assistance for Small Businesses 157 Small Business Administration 157, Local Assistance for Small Hit & Miss Turning Technologies Creates Businesses 159, Private Investors 160, Small-Business Opportunities High-Tech Jobs for Women and Minorities 160 Hit & Miss One Small Franchise Produces Franchising 162 One Big Idea The Franchising Sector 163, Franchising Agreements 163, Benefits and Problems of Franchising 164 xx ContentsTOC_SIE.indd xx 23/09/10 6:59 PM
  22. 22. Forms of Private Business Ownership 166 Sole Proprietorships 166, Partnerships 167, Corporations 168, Employee-Owned Corporations 169, Family-Owned Businesses 169, Not-for-Profit Corporations 170 Public and Collective Ownership of Business 171 Public (Government) Ownership 171, Collective (Cooperative) Ownership 171 Organizing a Corporation 172 Types of Corporations 172, Where and How Businesses Incorporate 172, Corporate Management 173 When Businesses Join Forces 174 Mergers and Acquisitions (M&A) 174, Joint Ventures: Specialized Partnerships 175 What’s Ahead 175 Summary of Learning Objectives 176, Key Terms 178, Review Questions 178, Projects and Teamwork Applications 178, Web Assignments 179 Case 5.1 Leslie Blodgett: The Bare Escentuals of Business 179 Case 5.2 Small Meets Big: Patagonia and Walmart Join Forces for the Environment 180 Video Case 5.3 Seventh Generation Cleans Up with Consumer Products 181 Chapter 6 Starting Your Own Business: The Entrepreneurship Alternative 182 Opening Vignette Craig Bramscher: Changing What Is an Entrepreneur? 184 the Way the World Rides to Work Categories of Entrepreneurs 185 BusinessEtiquette Communicating By Email, Text Reasons to Choose Entrepreneurship as a Career Path 186 Message, or You Don’t Have Being Your Own Boss 187, Financial Success 188, Job Security 188, Quality of Life 189 to Be All Thumbs Hit & Miss The Environment for Entrepreneurs 189 Amos Miller Runs His Farm Globalization 190, Education 192, Information Technology 192, Just Like His Life Demographic and Economic Trends 193 Hit & Miss Businesses Based at Home Are Characteristics of Entrepreneurs 194 Booming Vision 194, High Energy Level 195, Need to Achieve 195, Solving an Ethical Self-Confidence and Optimism 195, Tolerance for Failure 196, Controversy Creativity 196, Tolerance for Ambiguity 198, Internal Locus of Control 198 Entrepreneurs and Ethics: It’s Good Business Starting a New Venture 199 Going Green Selecting a Business Idea 199, Creating a Business Plan 202, Finding Adam Lowry and Eric Ryan: There’s a Method to Their Financing 203, Government Support for New Ventures 205 Madness Intrapreneurship 205 What’s Ahead 206 Summary of Learning Objectives 206, Business Terms You Need to Know 208, Review Questions 208, Projects and Teamwork Applications 208, Web Assignments 209 Contents xxiTOC_SIE.indd xxi 23/09/10 6:59 PM
  23. 23. Case 6.1 Marco Giannini’s Dogswell: A Healthy Company after All 209 Case 6.2 Small Businesses Are Big into Social Networking 210 Video Case 6.3 Comet Skateboards: It’s a Smooth Ride 210 Part 2 Greensburg, KS: Greensburg: A Great Place to Start 212 Part 2: Launching Your Entrepreneurial Career 213 PART 3 Management: Empowering People to Achieve Business 215 Chapter 7 Management, Leadership, and the Internal Organization 216 What Is Management? 218 Opening Vignette Indra Nooyi: PepsiCo’s Top The Management Hierarchy 218, Skills Needed for Managerial Success 220, Executive Managerial Functions 221 Solving an Ethical Controversy Setting a Vision and Ethical Standards for the Firm 222 Google Stands Alone: When Ethics and Business Don’t Mix Importance of Planning 224 Types of Planning 225, Planning at Different Organizational Levels 226 Going Green Johnson & Johnson: Caring for the World The Strategic Planning Process 227 Defining the Organization’s Mission 227, Assessing Your Competitive Hit & Miss Jeff Immelt Tries to Lead GE in Position 228, Setting Objectives for the Organization 230, Creating Strategies a New Direction for Competitive Differentiation 230, Implementing the Strategy 231, Monitoring Hit & Miss and Adapting Strategic Plans 231 Southwest Airlines: “We Love Your Bags” Managers as Decision Makers 231 BusinessEtiquette Programmed and Nonprogrammed Decisions 231, How Managers Make Decisions 232 Managing a Multigenerational Workforce Managers as Leaders 233 Leadership Styles 234, Which Leadership Style Is Best? 235 Corporate Culture 235 Organizational Structures 236 Departmentalization 238, Delegating Work Assignments 240, Types of Organization Structures 241 What’s Ahead 244 Summary of Learning Objectives 244, Business Terms You Need to Know 246, Review Questions 246, Projects and Teamwork Applications 247, Web Assignments 247 xxii ContentsTOC_SIE.indd xxii 23/09/10 6:59 PM
  24. 24. Case 7.1 Ford Drives Out of the Financial Mud 248 Case 7.2 Military Leaders in Business 249 Video Case 7.3 Dan Formosa: At the Forefront of Smart Design 250 Chapter 8 Human Resource Management: From Recruitment to Labor Relations 252 Opening Vignette CClc: Motivating Workers Is Human Resources: The People Behind the People 254 Child’s Play Recruitment and Selection 255 Hit & Miss Finding Qualified Candidates 255, Selecting and Hiring Employees 256 The Good, Bad, and Ugly of Executive Pay Orientation, Training, and Evaluation 257 Solving an Ethical Training Programs 257, Performance Appraisals 259 Controversy Should Paid Sick Leave Be Compensation 260 Required by Law? Employee Benefits 261, Flexible Benefits 263, Flexible Work 264 BusinessEtiquette How to Ask for a Raise Employee Separation 265 Hit & Miss Voluntary and Involuntary Turnover 265, Downsizing 265, Outsourcing 267 AOL Employees Don’t Exit Voluntarily Motivating Employees 268 Going Green Maslow’s Hierarchy of Needs Theory 268, Herzberg’s Two-Factor Model of Labor Unions and Green Motivation 269, Expectancy Theory and Equity Theory 270, Goal-Setting Construction Theory and Management by Objectives 270, Job Design and Motivation 272, Managers’ Attitudes and Motivation 272 Labor–Management Relations 273 Development of Labor Unions 273, Labor Legislation 274, The Collective Bargaining Process 274, Settling Labor–Management Disputes 274, Competitive Tactics of Unions and Management 275, The Future of Labor Unions 276 What’s Ahead 277 Summary of Learning Objectives 278, Business Terms You Need to Know 279, Review Questions 280, Projects and Teamwork Applications 280, Web Assignments 280 Case 8.1 The Coca-Cola Company: Training for the Future Right Now 281 Case 8.2 Strikes: Who Wins, Who Loses? 282 Video Case 8.3 Seventh Generation Promotes Company Ownership 282 Contents xxiiiTOC_SIE.indd xxiii 23/09/10 6:59 PM