Chapter 8 Structuring Organizations for Today’s Challenges ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom.  No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. 1 Learning Objectives LO 8-1 Outline the basic principles of organizational management. LO 8-2 Compare the organizational theories of Fayol and Weber. LO 8-3 Evaluate the choices managers make in structuring organizations. LO 8-4 Contrast the various organizational models. LO 8-5 Identify the benefits of interfirm cooperation and coordination. LO 8-6 Explain how organizational culture can help businesses adapt to change. ©McGraw-Hill Education. 2 Organizing for Success LO 8-1 Building an Organization from the Bottom Up Create a division of labor. Divide tasks through job specialization. Set up teams or departments (departmentalization). Allocate resources. Assign specific tasks. Establish procedures. Develop an organization chart. Adjust to new realities. ©McGraw-Hill Education. The Changing Organization 1 of 5 LO 8-2 Often change in organizations is due to evolving business environments: More global competition, declining economy, faster technological change’ and pressure to protect the environment Customer expectations have also changed Consumers today want high-quality products with fast, friendly service, and all at low cost. The Development of Organizational Design Economies of scale — Companies can reduce their production costs by purchasing raw materials in bulk. The average cost of goods decreases as production levels rise. Mass production of goods led to complexities in organizing businesses. ©McGraw-Hill Education. 4 The Changing Organization 2 of 5 LO 8-2 Fayol’s Principles of Organization Unity of command Hierarchy of authority Division of labor Subordination of individual interests to the general interest Authority Degree of centralization Clear communication channels Order Equity Esprit de corps Characteristics of organizations based on the principles Organizations in which employees have no more than one boss; lines of authority are clear. Rigid organizations that often don’t respond to customers quickly. ©McGraw-Hill Education. 5 The Changing Organization 3 of 5 LO 8-2 Max Weber and Organizational Theory Employees just need to do what they’re told. In addition to Fayol’s principles, Weber emphasized: Job descriptions Written rules, decision guidelines, and detailed records Consistent procedures, regulations, and policies Staffing and promotion based on qualifications ©McGraw-Hill Education. 6 The Changing Organization 4 of 5 LO 8-2 Turning Principles into Organizational Design When following Fayol and Weber, managers control workers. Hierarchy A system in which one person is at the top of an organization and there is a ranked or sequential ordering from the top down. Chain of command The line of aut ...

1. Chapter 8
Structuring Organizations for Today’s Challenges
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
1
Learning Objectives
LO 8-1 Outline the basic principles of organizational
management.
LO 8-2 Compare the organizational theories of Fayol and
Weber.
LO 8-3 Evaluate the choices managers make in structuring
organizations.
LO 8-4 Contrast the various organizational models.
LO 8-5 Identify the benefits of interfirm cooperation and
coordination.
LO 8-6 Explain how organizational culture can help businesses
adapt to change.
©McGraw-Hill Education.

2. 2
Organizing for Success
LO 8-1
Building an Organization from the Bottom Up
Create a division of labor.
Divide tasks through job specialization.
Set up teams or departments (departmentalization).
Allocate resources.
Assign specific tasks.
Establish procedures.
Develop an organization chart.
Adjust to new realities.
©McGraw-Hill Education.
The Changing Organization 1 of 5
LO 8-2
Often change in organizations is due to evolving business
environments:
More global competition, declining economy, faster
technological change’ and pressure to protect the environment
Customer expectations have also changed

3. Consumers today want high-quality products with fast, friendly
service, and all at low cost.
The Development of Organizational Design
Economies of scale — Companies can reduce their production
costs by purchasing raw materials in bulk.
The average cost of goods decreases as production levels rise.
Mass production of goods led to complexities in organizing
businesses.
©McGraw-Hill Education.
4
The Changing Organization 2 of 5
LO 8-2
Fayol’s Principles of Organization
Unity of command
Hierarchy of authority
Division of labor
Subordination of individual interests to the general interest
Authority
Degree of centralization
Clear communication channels
Order
Equity
Esprit de corps
Characteristics of organizations based on the principles

4. Organizations in which employees have no more than one boss;
lines of authority are clear.
Rigid organizations that often don’t respond to customers
quickly.
©McGraw-Hill Education.
5
The Changing Organization 3 of 5
LO 8-2
Max Weber and Organizational Theory
Employees just need to do what they’re told.
In addition to Fayol’s principles, Weber emphasized:
Job descriptions
Written rules, decision guidelines, and detailed records
Consistent procedures, regulations, and policies
Staffing and promotion based on qualifications
©McGraw-Hill Education.

5. 6
The Changing Organization 4 of 5
LO 8-2
Turning Principles into Organizational Design
When following Fayol and Weber, managers control workers.
Hierarchy
A system in which one person is at the top of an organization
and there is a ranked or sequential ordering from the top down.
Chain of command
The line of authority that moves from the top of the hierarchy to
the lowest level.
Organization chart
A visual device that shows relationships among people and
divides the organization’s work; it shows who reports to whom.
©McGraw-Hill Education.
7
Figure 8.1 Typical Organization Chart
LO 8-2
Jump to long description in appendix

6. ©McGraw-Hill Education.
The Changing Organization 5 of 5
LO 8-2
Bureaucratic Organizations
Bureaucracy — An organization with many layers of managers
who set rules and regulations and oversee all decisions.
It can take weeks or months to have information passed down to
lower-level employees.
Bureaucracies can annoy customers.
©McGraw-Hill Education.
9
Decisions to Make in Structuring Organizations 1 of 5
LO 8-3
Choosing Centralized or Decentralized Authority
Centralized authority
When decision-making authority is maintained at the top level
of management at the company’s headquarters.

7. Decentralized authority
When decision-making authority is delegated to lower-level
managers more familiar with local conditions than headquarters
management could be.
©McGraw-Hill Education.
10
Figure 8.2 Advantages and Disadvantages of Centralized versus
Decentralized Authority
LO 8-3
Jump to long description in appendix
©McGraw-Hill Education.
11
Decisions to Make in Structuring Organizations 2 of 5
LO 8-3

8. Choosing the Appropriate Span of Control
Span of control — The optimum number of subordinates a
manager supervises or should supervise.
When work is standardized, broad spans of control are possible.
The appropriate span narrows at higher levels of the
organization.
The trend today is to reduce middle managers and hire better
low-level employees.
©McGraw-Hill Education.
Decisions to Make in Structuring Organizations 3 of 5
LO 8-3
Choosing between Tall and Flat Organizational Structures
Tall organization structure — An organizational structure in
which the pyramidal organization chart would be quite tall
because of the various levels of management.
Flat organization structure — An organizational structure that
has few layers of management and a broad span of control.
©McGraw-Hill Education.

9. Figure 8.3 A Flat Organizational Structure
LO 8-3
©McGraw-Hill Education.
Figure 8.4 Advantages and Disadvantages of a Narrow versus a
Broad Span of Control
LO 8-3
Jump to long description in appendix
©McGraw-Hill Education.
Decisions to Make in Structuring Organizations 4 of 5

10. LO 8-3
Weighing the Advantages and Disadvantages of
Departmentalization
Departmentalization — The dividing of organizational functions
into separate units.
Workers are grouped by skills and expertise to specialize their
skills.
©McGraw-Hill Education.
16
Decisions to Make in Structuring Organizations 5 of 5
LO 8-3
Advantages:
Employees develop skills and progress within a department as
they master skills.
The company can achieve economies of scale.
Employees can coordinate work within the function, and top
management can easily direct activities.
Disadvantages:
Departments may not communicate well.
Employees may identify with their department’s goals rather
than the organization’s.
The company’s response to external changes may be slow.
People may not be trained to take different managerial
responsibilities; instead they become specialists.
Department members may engage in groupthink and may need

11. outside input.
©McGraw-Hill Education.
17
Figure 8.5 Ways to Departmentalize 1 of 5
LO 8-3
©McGraw-Hill Education.
Figure 8.5 Ways to Departmentalize 2 of 5
LO 8-3

12. ©McGraw-Hill Education.
Figure 8.5 Ways to Departmentalize 3 of 5
LO 8-3
©McGraw-Hill Education.
Figure 8.5 Ways to Departmentalize 4 of 5
LO 8-3
Jump to long description in appendix
©McGraw-Hill Education.

13. Figure 8.5 Ways to Departmentalize 5 of 5
LO 8-3
©McGraw-Hill Education.
Organizational Models 1 of 5
LO 8-4
Line Organizations
Line organization
Has direct two-way lines of responsibility, authority, and
communication running from the top to the bottom, with all
people reporting to only one supervisor.
There are no specialists or legal, accounting, human resource,
or information technology departments.
Line managers issue orders, enforce discipline, and adjust the
organization to changes.
©McGraw-Hill Education.

14. Organizational Models 2 of 5
LO 8-4
Line-and-Staff Organizations
Line personnel
Employees who are part of the chain of command that is
responsible for achieving organizational goals.
Line personnel have authority to make policy decisions.
Staff personnel
Employees who advise and assist line personnel in meeting their
goals.
Staff personnel includes marketing research, legal advising, IT,
and human resource management.
©McGraw-Hill Education.
Figure 8.6 A Sample Line-and-Staff Organization
LO 8-4
Jump to long description in appendix

15. ©McGraw-Hill Education.
Organizational Models 3 of 5
LO 8-4
Matrix-Style Organizations
Matrix organization — Specialists from different parts of the
organization are brought together to work on specific projects
but still remain part of a line-and-staff structure. Emphasis is on
product development, creativity, special projects, rapid
communication, and interdepartmental teamwork.
Advantages
Managers have flexibility in assigning people to projects.
Interorganizational cooperation and teamwork is encouraged.
Creative solutions to product development problems are
produced.
Organizational resources are used efficiently.
Disadvantages
It’s costly and complex.
Employees may be confused where their loyalty belongs.
Good interpersonal skills and cooperative employees are a must.
It may only be a temporary solution to a long-term problem.
©McGraw-Hill Education.

16. Figure 8.7 A Matrix Organization
LO 8-4
Jump to long description in appendix
©McGraw-Hill Education.
Organizational Models 4 of 5
LO 8-4
Cross-Functional Self-Managed Teams
Cross-functional self-managed teams — Groups of employees
from different departments who work together on a long-term
basis.
A way to fix the problem of matrix-style teams is to establish
long-lived teams.
Teams are empowered to make decisions without management
approval.
©McGraw-Hill Education.

17. Organizational Models 5 of 5
LO 8-4
Going Beyond Organizational Boundaries
Cross-functional teams work best when the voice of the
customer is heard.
Teams that include customers, suppliers, and distributors go
beyond organizational boundaries.
Government coordinators may assist in sharing market
information across national boundaries.
©McGraw-Hill Education.
Managing the Interactions among Firms 1 of 2
LO 8-5
Networking — Using communications technology and other
means to link organizations and allow them to work together on
common objectives.
Transparency and Virtual Organizations
Real time — The present moment or actual time in which
something takes place.
Most companies are no longer self-sufficient; they’re part of a
global business network.

18. ©McGraw-Hill Education.
Managing the Interactions among Firms 2 of 2
LO 8-5
Transparency and Virtual Organizations continue d
Transparency occurs when a company is so open to other
companies that electronic information is shared as if the
companies were one.
Virtual corporation
A temporary networked organization made up of replaceable
firms that join and leave as needed.
Benchmarking
Compares an organization’s practices, processes, and products
against the world’s best.
If a company can’t do as well as the best, they can try to
outsource the function.
Core competencies —Functions that the organization can do as
well as or better than any other organization in the world.
©McGraw-Hill Education.

19. Figure 8.8 A Virtual Corporation
LO 8-5
Jump to long description in appendix
©McGraw-Hill Education.
Adapting to Change 1 of 4
LO 8-5
Change
Change isn’t easy; employees like to do things the way they
always have.
Get rid of old, inefficient facilities and equipment.
Use the Internet to get to know your customers and sell directly
to them.
Digital natives — Young people who have grown up using the
Internet and social networking.
©McGraw-Hill Education.

20. Adapting to Change 2 of 4
LO 8-5
Restructuring for Empowerment
Restructuring
Redesigning an organization so that it can more effectively and
efficiently serve its customers.
Inverted organization
An organization that has contact people at the top and the CEO
at the bottom of the organization chart.
The manager’s job is to assist and support frontline people, not
boss them around.
©McGraw-Hill Education.
Figure 8.9 Comparison of an Inverted Organizational Structure
and a Traditional Organizational Structure
LO 8-5
Jump to long description in appendix

21. ©McGraw-Hill Education.
Adapting to Change 3 of 4
LO 8-6
Creating a Change-Oriented Organizational Culture
Organizational or corporate culture
Widely shared values within an organization that provide unity
and cooperation to achieve common goals.
Culture is shown in stories, traditions and myths.
Some of the best organizational cultures emphasize service.
Managing the Informal Organization
Formal organization
Details lines of responsibility, authority, and position.
The formal system is often slow and bureaucratic, but it helps
guide the lines of authority.
No organization can be effective without formal and informal
organization.
©McGraw-Hill Education.
36

22. Adapting to Change 4 of 4
LO 8-6
Managing the Informal Organization continued
Informal organization
The system that develops spontaneously as employees meet and
form cliques, relationships, and lines of authority outside the
formal organization.
The informal organization helps foster camaraderie and
teamwork among employees.
The informal system is too unstructured and emotional on its
own.
The informal organization may also be powerful in resisting
management directives.
©McGraw-Hill Education.
37
Appendix of Long Image Descriptions
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

23. 38
Appendix 1 Figure 8.1 Typical Organization Chart
The chart has four levels. At the bottom level are the employees
who report to the first-line supervisors. The first-line
supervisors report to a specific manager such as a production
manager, a marketing manager, or a finance manager. These
managers, in turn, report to the president, who is the top level
of the organization.
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
39
Appendix 2 Figure 8.2 Advantages and Disadvantages of
Centralized versus Decentralized Authority
Advantages of centralized authority:
Greater top-management control
More efficiency
Simpler distribution system
Stronger brand/corporate image
Disadvantages of centralized authority:
Less responsiveness to customers
Less empowerment
Interorganizational conflict
Lower morale away from headquarters
Advantages of decentralized authority:
Better adaptation to customer wants

24. More empowerment of workers
Faster decision making
Higher morale
Disadvantages of decentralized authority:
Less efficiency
Complex distribution system
Less top-management control
Weakened corporate image
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
40
Appendix 3 Figure 8.4 Advantages and Disadvantages of a
Narrow versus a Broad Span of Control
Advantages of a broad span of control:
Reduced costs
More responsiveness to customers
Faster decision making
More empowerment
Disadvantages of a broad span of control:
Fewer chances for advancement
Overworked managers
Loss of control
Less management expertise
Advantages of a narrow span of control:
More control by top management
More chances for advancement

25. Greater specialization
Closer supervision
Disadvantages of a narrow span of control:
Less empowerment
Higher costs
Delayed decision making
Less responsiveness to customers
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
41
Appendix 4 Figure 8.5 Ways to Departmentalize 4 of 5
A vice president of international operations oversees the
Canadian division, the Japanese division, the European division,
and the Korean division.
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
42

26. Appendix 5 Figure 8.6 A Sample Line-and-Staff Organization
The chief executive officer is at the top. Directly reporting to
the CEO is the plant manager. Three supervisors report directly
to the plant manager, and each of the three supervisors have
assembly line workers reporting to them. All of these employees
are considered line personnel. Three staff personnel
departments (human resources, legal, and marketing research)
are shown on the chart between the CEO and plant manager but
without directly reporting to any one individual.
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
43
Appendix 6 Figure 8.7 A Matrix Organization
The president is at the top. Directly reporting to the president
are the vice presidents of project management, manufacturing,
marketing, finance, and engineering.
Each vice president has employees that report directly to them
in a line structure. Three project managers report directly to the
vice president of project management but are also shown as
staff personnel to the other departments.
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.

27. 44
Appendix 7 Figure 8.8 A Virtual Corporation
In the center is the core firm. Surrounding the core firm are the
production firm, distribution firm, advertising agency, design
firm, legal firm, and accounting firm.
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
45
Appendix 8 Figure 8.9 Comparison of an Inverted
Organizational Structure and a Traditional Organizational
Structure
The organization chart in a traditional organization is shown as
a pyramid sectioned from top to bottom in the following order:
Top management
Middle management
Supervisory management
Frontline workers
The organization chart in an inverted organization chart is
shown as an upside-down pyramid sectioned from top to bottom

28. in the following order:
Empowered frontline workers (often in teams)
Support personnel
Top management
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
46
Running head: AMAZON COMPANY OUTLINE1
AMAZON COMPANY OUTLINE 2
Strategic Profile and Case Analysis purpose (INPUTS and
OUTPUTS: Chapters 1-3)
Amazon's strategy is built on reaching many consumers and
ensuring that they give the best satisfaction using the internet
and technology as their primary platform. Amazon assesses the
costs, risks present, and also the benefits to be accrued
(Martínez-Sánchez et al.,2021). From this, it can achieve its
mission of being the best company in giving its customers the
best services at a low cost.'
Situation Analysis (INPUTS and OUTPUTS: Chapters 1-3)
a. General environmental analysis (This involves demographic
information)
Amazon uses the PESTLE model in analyzing external factors
affecting it.

29. 1. Political factors- The political stability of developed
countries like the USA significantly impacts the company.
Support from the government is an opportunity to enable
expansion in other markets (Martínez-Sánchez et al.,2021).
However, the support can also be a threat from other
competitors rising. Government fight in cyber crimes improves
business for Amazon;
2. Economic factors- economic stability helps reduce economic
issues in the macro-environment reducing risks to the expansion
of Amazon to those areas. The economic decline of China
threatens Amazon as it is one of the biggest markets it wants to
get into.
3. Social factors- increase in consumption in developing
countries is an opportunity for Amazon to increase the market
for Amazon products.
4. Technological factors- cyber crimes have become a
significant issue in most countries, and this is a threat to
Amazon as it is majorly based on the internet. Improvement of
new technologies is an opportunity for Amazon as it helps
improve its performance.
5. Environmental- increase in reduction of greenhouse gases is
an opportunity for Amazon as it can show its image as the top in
the e-commerce industry (Martínez-Sánchez et al.,2021).
Business sustainability improves environmental standards and
strengthens the image of e-commerce.
6. Legal factors- the change in the laws of imports and exports
is an opportunity for Amazon as it has a chance of exploiting
the sellers who can access supplies from outside.
7. Demographic factors- aging of the population presents an
opportunity for Amazon as it gets a new market by ensuring that
health care services reach those who are aging.
8. b. Industry analysis (Remember the Five Forces Model)
Amazon uses Porter’s model to analyze the external factors that
affect the industry environment in the online retail market.
1. Competition- availability of substitutes is a strong force for
Amazon because it is the substitute for its competitors like

30. Walmart. Competition is an excellent strategy in ensuring that
the company stays in business for long.
2. Power of customers- low cost of customers transferring from
one firm to another is a strong force for Amazon as customers
may transfer to other firms (Martínez-Sánchez et al.,2021).
Access to information to the customers about Amazon
significantly impacts the company as the customers can find
information about other firms and make them the alternatives.
3. Power of suppliers- fewer suppliers have a significant force
on Amazon; if the small group of suppliers changes prices for
their supplies, that directly affects Amazon.
4. The threat of substitutes- the low cost of replacement
significantly impacts Amazon as customers will tend to buy the
less expensive products.
5. New entry- the high cost of developing a brand has a weak
impact on Amazon as it would take a lot of time before
establishing a brand that can compete with it.
c. Competitor analysis
1. Identifying the strengths and weaknesses- Amazon identifies
its strengths and sees what advantage it has in the market
(Martínez-Sánchez et al.,2021). Analyzing the weaknesses also
helps in knowing the sectors that require improvement.
2. Understanding the market- in identifying its competitors,
Amazon needs to look at the market because there might be a
company it does not know or consider, yet it is a competitor.
3. Industry trend- Amazon learns the industry trends to know
how the competition is fairing and to see the industry's
direction.
4. Setting benchmarks- Amazon identifies the larger and smaller
companies than it, which helps it establish a good model
considering even the rising companies (Martínez-Sánchez et
al.,2021). All this is to ensure that it continues to exist in the
industry.
5. III. (SWOT Analysis): Identification of Environmental
Opportunities and Threats (External)
6. and Firm Strengths and Weaknesses (Internal). What

31. economic and market
7. indicators could impact your organization's ability to
compete? In addition, provide
8. the following financial ratios: (1) return on total assets, (2)
operating profit margin
9. (or return on sales), (3) net profit margin (or net return on
sales), and (4) current
10. ratio. Describe what these mean to your organization.
1. Strengths- Amazon is the leading g online retailer globally;
thus, most people know about it, which gives it new markets
worldwide.
2. Weaknesses- Amazon has a strategy of offering free shipping
to its customers, which puts it in the danger of losing margins
making it unable to optimize cost.
3. Opportunities- Amazon has an option of improving its
margins through the increase in online shopping, and consumers
have that in mind in terms of privacy and security.
4. Threats- Cyberbullying is a significant threat to Amazon as
the hacking may expose its customer's data.
Amazon's return on an asset in the year 2021 was 24.2%, and its
operating profit margin was 5.30%. The net profit margin was
7.1%. It also has a current ratio of 1.14. This means that
Amazon's growth rate is increasing.
IV. Strategy Formulation (Remember Chapters 4-9)
a. Current Strategy—Business-Level and Corporate-Level
Strategies, M&A,
Alliances
1. Corporate level- this tends to show the firm's areas set to
operate. It shows the path for the business to achieve its vision
(Bin, 2020). It also indicates if a firm needs to continue
competing or exit.
2. Business level- it outlines specific strategies of the business
it gives an outline of where the company stands with its
competitors.
3. M&A Alliances- this shows whether firms need to work
together on mergers and acquisitions.

32. b. Strategic alternatives to the strategies in (a) above
1. Market penetration is a strategic alternative to the corporate-
level system where the company aims to increase its current
sales (Bin, 2020). Here, it aims at increasing the market share
for its consumers outside the regular business areas.
2. Market development- this is an alternative to the business
level. Here, the company aims at stealing consumers from other
manufacturers. This will automatically affect its relationship
with the competitors.
3. Diversification- this is an alternative strategy to M&A
alliances. In this strategy, the company enlarges its range of
business.
c. Alternative evaluation (different from what is currently being
used by the
organization, if applicable)
Evaluating alternatives enables the business to make the best
decisions on which options to allocate in the plan (Bin, 2020).
It helps in knowing what to do in case of a particular n risk or
what to do if a new opportunity that was not accounted for
presents itself. The names alternatives need to be compared
against each other, looking at the advantages and disadvantages
of each. It is also essential for a business to consider each
alternative's impact on the market and the industry at large.
d. choice (if applicable)(In this section, you will identify the
strategies discussed in class: business level and corporate level
strategies, cooperative strategies, merger and acquisition
strategies, and international strategies).
1. Cost leadership: The leading market company sets the price
of a product, and the competitors have to match that price. This
is applicable at both the business and corporate levels.
2. Differentiation; a firm decides to take a factor or two that
consumers perceive as essential and implement it, making itself
unique compared to other firms (Bin, 2020). The business and
corporate levels both have this strategy.
3. Horizontal integration- in this strategy, a firm acquires
another similar to it for expansion. This can be significantly

33. seen at the corporate level, mergers and acquisitions, and
international design.
4. Vertical integration- here, there is a supply chain formed
from manufacturing to distribution. It can also be described as a
supply line of a product.
V. Strategic Current and Alternative Implementation Strategy
(Remember Chapters 10-
13)--governance policies, current organizational structure and
controls, leadership
style.
a. Action items
Who- this helps identify the person to be dealing with the
specified task, and this helps to ensure that the specific person
is selected.
This part helps the person know the kind of task they are
expected to perform in implementing the strategies.
When- this is the set time or deadline as to when the specified
task must have been performed.
b. Action plan
(Here, you will identify implementation strategies discussed in
class in addition to
identified strategies discussed in class that included: corporate
governance,
organizational structures and controls: strategic and financial
management, what kind
of leadership is being used, and corporate entrepreneurship,
innovation, and
strategic competitiveness as part of the Action items and Action
plans).
Resources- this list outlines where all the required resources are
at. It also explains what every member needs to do for effective
implementation.
Potential barriers- all the risks likely to occur in the business
for the chosen strategies. The selected alternative methods are
to be used hereafter. They have all been evaluated, and the
perfect one has been picked.

34. References
Bin, S. (2020). K-means stock clustering analysis based on
historical price movements and financial ratios.
Martínez-Sánchez, M. E., Nicolas-Sans, R., & Díaz, J. B.
(2021). Analysis of the social media strategy of audio-visual
OTTs in Spain: The case study of Netflix, HBO and Amazon
Prime during the implementation of Disney+. Technological
Forecasting and Social Change, 173, 121178.
Selvi, S. Mergers and Acquisitions-A Major Prospect for
Business Sustainability.
Chapter 14
Developing and Pricing Goods and Services
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
1
Learning Objectives
LO 14-1 Describe a total product offer.

35. LO 14-2 Identify the various kinds of consumer and industrial
goods.
LO 14-3 Summarize the functions of packaging.
LO 14-4 Contrast brand, brand name, and trademark, and show
the value of brand equity.
LO 14-5 Explain the steps in the new-product development
process.
LO 14-6 Describe the product life cycle.
LO 14-7 Identify various pricing objectives and strategies.
©McGraw-Hill Education.
2
Product Development and the Total Product Offer 1 of 5
LO 14-1
Developing Value
According to the American Marketing Association, value is a
foundation of marketing.
Value — Good quality at a fair price.
Adapting products to new markets is an ongoing challenge.
Product development is a key activity in any modern business.
©McGraw-Hill Education.

36. 3
Product Development and the Total Product Offer 2 of 5
LO 14-1
Distributed Product Development
Distributed product development — Handing off of various
parts of your innovation process—often to companies overseas.
The increase in outsourcing has resulted in using multiple
organizations separated by cultural, geographic, and legal
boundaries.
©McGraw-Hill Education.
Product Development and the Total Product Offer 3 of 5
LO 14-1
Distributed Product Development continued
Developing a total product offer
Total product offer — Everything that consumers evaluate when
deciding whether to buy something.
Products are evaluated on many different dimensions, both
tangible and intangible.
Marketers must think like and talk to consumers to find out

37. what’s important.
©McGraw-Hill Education.
Figure 14.1 Potential Components of a Total Product Offer
LO 14-1
Jump to long description in appendix
©McGraw-Hill Education.
Product Development and the Total Product Offer 4 of 5
LO 14-1
Product Lines and the Product Mix
Product line — A group of products that are physically similar
or intended for a similar market.
Product lines often include competing brands like:
Coca-Cola
Diet Coke

38. Coke Zero
Cherry Coke
©McGraw-Hill Education.
Product Development and the Total Product Offer 5 of 5
LO 14-1
Product Lines and the Product Mix continued
Product mix — The combination of product lines offered by a
manufacturer.
Product mixes like Procter & Gamble’s can be extensive:
Toothpaste
Cosmetics
Diapers
Batteries
Bar soap
©McGraw-Hill Education.

39. Product Differentiation 1 of 5
LO 14-2
Product differentiation — The creation of real or perceived
product differences.
Marketers use a mix of branding, pricing, advertising, and
packaging to create different images.
©McGraw-Hill Education.
Product Differentiation 2 of 5
LO 14-2
Marketing Different Classes of Consumer Goods and Services
Convenience goods and services — Products that the consumer
wants to purchase frequently and with a minimum of effort.
These include:
Candy and snacks
Gas
Milk
Shopping goods and services — Those products that the
consumer buys only after comparing value, quality, price, and
style from a variety of sellers.
©McGraw-Hill Education.

40. 10
Product Differentiation 3 of 5
LO 14-2
Marketing Different Classes of Consumer Goods and Services
continued
Specialty goods and services — Consumer products with unique
characteristics and brand identity. Because these products are
perceived as having no reasonable substitute, the consumer puts
forth a special effort to purchase them.
These include:
Fine watches
Expensive wine
Designer clothes
Jewelry
Services provided by medical specialists
©McGraw-Hill Education.
Product Differentiation 4 of 5
LO 14-2

41. Marketing Different Classes of Consumer Goods and Services
continued
Unsought goods and services — Products that consumers are
unaware of, haven’t necessarily thought of buying, or find that
they need to solve an unexpected problem.
These include:
Car-towing services
Burial services
Insurance
©McGraw-Hill Education.
12
Product Differentiation 5 of 5
LO 14-2
Marketing Industrial Goods and Services
Industrial goods — Products used in the production of other
products; sometimes called B2B goods.
Industrial goods include:
Installations
Capital items
Accessory equipment
©McGraw-Hill Education.

42. Figure 14.2 Various Categories of Consumer and Industrial
Goods and Services
LO 14-2
Jump to long description in appendix
©McGraw-Hill Education.
Packaging Changes the Product 1 of 3
LO 14-3
Companies often use packaging to change and improve their
basic product.
Examples include:
Squeezable ketchup bottles
Square paint cans with screw tops
Single-use spice packets
Good packaging can also make a product more attractive to
retailers.

43. ©McGraw-Hill Education.
15
Packaging Changes the Product 2 of 3
LO 14-3
Key Functions of Packaging
Attract buyers’ attention
Protect the goods inside and be tamperproof
Be easy to open
Describe and give information about the product
Explain the product’s benefits
Provide warranty information and warnings
Give an indication of price, value, and uses
©McGraw-Hill Education.
Packaging Changes the Product 3 of 3
LO 14-3
The Growing Importance of Packaging
Bundling — Grouping two or more products together and

44. pricing them as a unit.
IcelandAir bundled layover tours with an IcelandAir employee
“stopover buddy.”
Financial institutions bundle advice with purchases.
©McGraw-Hill Education.
17
Branding and Brand Equity 1 of 4
LO 14-4
Brand — A name, symbol, or design that identifies the goods or
services of one seller or group of sellers and distinguishes them
from the goods and services of competitors.
Trademark — A brand that has exclusive legal protection for
both its brand name and its design.
©McGraw-Hill Education.
18

45. Branding and Brand Equity 2 of 4
LO 14-4
Brand Categories
Manufacturers’ brands — The brand names of manufacturers
that distribute products nationally.
Dealer (private-label) brands — Products that don’t carry the
manufacturer’s name but carry a distributor’s or retailer’s name
instead.
Generic goods — Nonbranded products that usually sell at a
sizable discount compared to national or private-label brands.
Knockoff brands — Illegal copies of national brand-name
goods.
©McGraw-Hill Education.
19
Branding and Brand Equity 3 of 4
LO 14-4
Generating Brand Equity and Loyalty
Brand equity — The value of the brand name and associated
symbols.
Brand loyalty — The degree to which customers are satisfied,
like the brand, and are committed to further purchases.
Brand awareness — How quickly or easily a given brand name
comes to mind when a product category is mentioned.
Consumers reach a point of brand preference when they prefer

46. one brand over another.
When consumers reach brand insistence, they will not accept
substitute brands.
©McGraw-Hill Education.
20
Branding and Brand Equity 4 of 4
LO 14-4
Creating Brand Associations
Brand association — The linking a brand to other favorable
images.
Brand Management
Brand manager — A manager who has direct responsibility for
one brand or one product line.
The brand manager handles all the elements of the brand’s
marketing mix.
©McGraw-Hill Education.

47. 21
The New-Product Development Process 1 of 2
LO 14-5
Product screening — A process designed to reduce the number
of new-product ideas being worked on at any one time.
Product analysis — Making cost estimates and sales forecasts to
get a feeling for profitability of new-product ideas.
©McGraw-Hill Education.
22
Figure 14.3 The New-Product Development Process
LO 14-5
Jump to long description in appendix
©McGraw-Hill Education.

48. 23
The New-Product Development Process 2 of 2
LO 14-5
Product Development and Testing
Concept testing takes a product idea to consumers to test
reactions.
Crowdsourcing platforms allow the public to give their opinions
of potential products.
Commercialization
Commercialization — Promoting a product to distributors and
retailers to get wide distribution, and developing strong
advertising and sales campaigns to generate and maintain
interest in the product among distributors and consumers.
©McGraw-Hill Education.
24
The Product Life Cycle
LO 14-6
Product Life Cycle — A theoretical model of what happens to
sales and profits for a product class over time.
Product Life Cycle Stages:
Introduction
Growth
Maturity
Decline

49. ©McGraw-Hill Education.
25
Figure 14.4 Sales and Profits during the Product Life Cycle
LO 14-6
Jump to long description in appendix
©McGraw-Hill Education.
26
Figure 14.5 Sample Strategies Followed during the Product Life
Cycle
LO 14-6
Jump to long description in appendix

50. ©McGraw-Hill Education.
27
Figure 14.6 How Sales, Profits, and Competition Vary over the
Product Life Cycle
LO 14-6
Jump to long description in appendix
©McGraw-Hill Education.
28
Competitive Pricing 1 of 5
LO 14-7
Pricing Objectives
Achieving a target return on investment or profit
Building traffic
Achieving greater market share
Creating an image
Furthering social objectives, both short-run and long-run

51. ©McGraw-Hill Education.
29
Competitive Pricing 2 of 5
LO 14-7
Cost-Based Pricing
Cost-based pricing measures cost of producing a product
including materials, labor, and overhead.
Demand-Based Pricing
Target costing — Designing a product so that it satisfies
customers and meets the profit margins desired by the firm.
Competition-Based Pricing
Competition-based pricing — A pricing strategy based on what
all the other competitors are doing.
Price leadership — The strategy by which one or more dominant
firms set the pricing practices that all competitors in an industry
follow.
©McGraw-Hill Education.

52. 30
Competitive Pricing 3 of 5
LO 14-7
Break-Even Analysis
Break-even analysis — The process used to determine
profitability at various levels of sales.
The break-even point is where revenues equals cost.
Total fixed costs — All the expenses that remain the same no
matter how many products are made or sold.
Variable costs — Costs that change according to the level of
production.
©McGraw-Hill Education.
31
Competitive Pricing 4 of 5
LO 14-7
Break-Even Analysis continued
If you have a fixed cost of $200,000, a variable cost of $2 per
item, and you sell your product for $4 each, what would be your
BEP?

53. ©McGraw-Hill Education.
32
Competitive Pricing 5 of 5
LO 14-7
Other Pricing Strategies
Skimming price strategy — Strategy in which a new product is
priced high to make optimum profit while there’s little
competition.
Penetration strategy — Strategy in which a product is priced
low to attract many customers and discourage competition.
Everyday low pricing (EDLP) — Setting prices lower than
competitors and then not having any special sales.
High–low pricing strategy — Setting prices that are higher than
EDLP stores, but having many special sales where the prices are
lower than competitors.
Psychological pricing — Pricing goods and services at price
points that make the product appear less expensive than it is.
©McGraw-Hill Education.

54. 33
Nonprice Competition
LO 14-7
Competition on Attributes Other than Price
Product images
Comfort
Style
Convenience
Durability
Accompanying services
©McGraw-Hill Education.
34
Appendix of Long Image Descriptions
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
35
Appendix 1 Figure 14.1 Potential Components of a Total

55. Product Offer
The outermost level: brand name, convenience, package, and
price
The middle level: service, internet access, buyer’s past
experience, and store surroundings
The innermost level: speed of delivery, image created by
advertising, reputation of producer, and guarantee
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
36
Appendix 2 Figure 14.2 Various Categories of Consumer and
Industrial Goods and Services
Goods and services are of two types: consumer goods and
services and industrial goods and services.
Consumer goods and services consist of the following types:
convenience, shopping, specialty, and unsought.
Industrial goods and services consist of production goods and
support goods.
Production goods are made up of raw materials, component
parts (engines), and production materials (nuts and bolts)
Support goods are made up of installations (buildings,
equipment, and capital rentals), accessory equipment (tools and
office equipment), supplies (paper clips, stationery, and other
office supplies), and service (maintenance and repair).
Return to original slide

56. ©McGraw-Hill Education.
©McGraw-Hill Education.
37
Appendix 3 Figure 14.3 The New-Product Development Process
Stage 1: Idea generation (based on consumer wants and needs)
Stage 2: Product screening
Stage 3: Product analysis
Stage 4: Development (including building prototypes)
Stage 5: Testing
Stage 6: Commercialization (bringing the product to market)
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
38
Appendix 4 Figure 14.4 Sales and Profits during the Product
Life Cycle
The horizontal axis illustrates the four stages of the product life
cycle: introduction, growth, maturity, and decline. The vertical
axis represents sales. The sales line illustrates that all-electric

57. cars are in the introduction stage of the product life cycle,
hybrid cars are in the growth stage of the product life cycle,
smartphones are in the maturity stage, and videocassette
recorders are in the decline stage of the product life cycle.
During the introduction stage, sales and profit are increasing
and closely correlated. During the growth stage, the profit is
still on the rise, but its distance from the sales line begins to
increase. Sales are still increasing during the maturity stage, but
profits are decreasing. At the beginning of the decline stage,
both sales and profits are decreasing, and the profit line is no
longer closely correlated with the sales line.
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
39
Appendix 5 Figure 14.5 Sample Strategies Followed during the
Product Life Cycle
Introduction Stage:
Product characteristics: offer market tested product; keep mix
small
Price characteristics: go after innovators with high introductory
price (skimming strategy) or use penetration pricing
Place characteristics: use wholesalers, selective distribution
Promotion characteristics: Dealer promotion and heavy
investment in primary demand advertising and sales promotion
to get stores to carry the product and consumers to try it
Growth Stage:

58. Product characteristics: improve product; keep product mix
limited
Price characteristics: adjust price to meet competition
Place characteristics: increase distribution
Promotion characteristics: heavy competitive advertising
Maturity Stage:
Product characteristics: differentiate product to satisfy different
market segments
Price characteristics: further reduce price
Place characteristics: take over wholesaling function and
intensify distribution
Promotion characteristics: emphasize brand name as well as
product benefits and differences
Decline Stage:
Product characteristics: cut product mix; develop new product
ideas
Price characteristics: consider price increase
Place characteristics: consolidate distribution; drop some
outlets
Promotion characteristics: reduce advertising to only loyal
customers
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
40
Appendix 6 Figure 14.6 How Sales, Profits, and Competiti on
Vary over the Product Life Cycle

59. Introduction Stage:
Low sales
Losses may occur
Few competitors
Growth Stage:
Rapidly rising sales
Very high profits
Growing number of competitors
Maturity Stage:
Sales reach maturity
Declining profits
Competitors reach a stable number then begin to decline
Decline Stage:
Falling sales
Profits may fall to become losses
Declining number of competitors
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
41
Chapter 15
Distributing Products

60. ©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
1
Learning Objectives
LO 15-1 Explain the concept of marketing channels and their
value.
LO 15-2 Demonstrate how intermediaries perform the six
marketing utilities.
LO 15-3 Identify the types of wholesale intermediaries in the
distribution system.
LO 15-4 Compare the distribution strategies retailers use.
LO 15-5 Explain the various kinds of nonstore retailing.
LO 15-6 Explain the various ways to build cooperation in
channel systems.
LO 15-7 Describe logistics and outline how intermediaries
manage the transportation and storage of goods.
©McGraw-Hill Education.
2
The Emergence of Marketing Intermediaries 1 of 3
LO 15-1
Marketing intermediaries — Organizations that assist in moving

61. goods and services from producers to businesses (B2B) and
from businesses to consumers (B2C).
They are called intermediaries because they’re in the middle of
a series of firms that distribute goods.
Channel of distribution — A whole set of marketing
intermediaries that join together to transport and store goods in
their path from producers to consumers.
©McGraw-Hill Education.
3
The Emergence of Marketing Intermediaries 2 of 3
LO 15-1
Types of Marketing Intermediaries
Agents and brokers — Marketing intermediaries who bring
buyers and sellers together and assist in negotiating an
exchange but do not take title to the goods.
Wholesaler — A marketing intermediary that sells to other
organizations.
Retailer — An organization that sells to ultimate consumers.
Why Marketing Needs Intermediaries
Intermediaries perform marketing tasks faster and cheaper than
most manufacturers could provide them.
Intermediaries make the exchange process easier and more
efficient and profitable.

62. ©McGraw-Hill Education.
4
Figure 15.1 Selected Channels of Distribution
LO 15-1
Jump to long description in appendix
©McGraw-Hill Education.
Figure 15.2 How Intermediaries Create Exchange Efficiency
LO 15-1
©McGraw-Hill Education.

63. The Emergence of Marketing Intermediaries 3 of 3
LO 15-1
The Value versus the Cost of Intermediaries
Three key facts about marketing intermediaries
Marketing intermediaries can be eliminated but their activities
cannot.
Intermediaries perform marketing functions faster and cheaper
than other organizations can.
Marketing intermediaries add costs to products, but these costs
are generally offset by the values they provide.
©McGraw-Hill Education.
Figure 15.3 Distribution’s Effect on Your Food Dollar
LO 15-1
Jump to long description in appendix
Source: USDA Economic Research Service, ers.usda.gov,
accessed October 2017.
©McGraw-Hill Education.

64. The Utilities Created by Intermediaries 1 of 4
LO 15-2
Utility — The want-satisfying ability, or value, that
organizations add to goods and services when the products are
made more useful or accessible to consumers than they were
before.
Six types of utilities:
Form
Time
Place
Possession
Information
Service
©McGraw-Hill Education.
The Utilities Created by Intermediaries 2 of 4
LO 15-2
Form Utility
Producers provide form utility by changing raw materials into

65. useful products.
Example: Starbucks makes coffee the way the customers want
it.
Time Utility
Time utility — Adding value to products by making them
available when they’re needed.
Example: Some grocery stores are open 24 hours.
©McGraw-Hill Education.
The Utilities Created by Intermediaries 3 of 4
LO 15-2
Place Utility
Place utility — Adding value to products by having them where
people want them.
Example: 7-Eleven stores are found in easy-to-reach locations.
Possession Utility
Possession utility — Doing whatever is necessary to transfer
ownership from one party to another, including providing
credit, delivery, installation, guarantees, and follow -up service.
Example: A real estate broker and a savings and loan office
provide possession utility.
©McGraw-Hill Education.

66. The Utilities Created by Intermediaries 4 of 4
LO 15-2
Information Utility
Information utility — Adding value to products by opening two-
way flows of information between marketing participants.
Example: Newspapers, salespeople, libraries, and websites all
act as intermediaries.
Service Utility
Service utility — Adding value by providing fast, friendly
service during and after the sale and by teaching customers how
to best use products over time.
Example: The Apple Genius Bar helps during and after a
purchase.
©McGraw-Hill Education.
Wholesale Intermediaries 1 of 4
LO 15-3
Wholesalers normally make B2B sales; however, stores like
Staples and Costco also have retail functions.

67. Retail sales are sales of goods and services to consumers for
their own use.
Wholesale sales are sales of goods and services to other
businesses for use in the business or resale.
Consumers are more familiar with retailers than wholesalers.
©McGraw-Hill Education.
13
Wholesale Intermediaries 2 of 4
LO 15-3
Merchant Wholesalers
Merchant wholesalers — Independently owned firms that take
title to the goods they handle.
There are two types:
Full-service wholesalers perform all distribution functions.
Limited-function wholesalers perform only selected distribution
functions.
©McGraw-Hill Education.

68. Wholesale Intermediaries 3 of 4
LO 15-3
Merchant Wholesalers continued
Types of limited-function wholesalers:
Rack jobbers — Furnish racks or shelves full of merchandise to
retailers, display products, and sell on consignment.
Cash-and-carry wholesalers — Serve mostly smaller retailers
with a limited assortment of products.
Drop shippers — Solicit orders from retailers and other
wholesalers and have the merchandise shipped directly from a
producer to a buyer.
©McGraw-Hill Education.
Wholesale Intermediaries 4 of 4
LO 15-3
Agents and Brokers
Agents generally maintain long-term relationships with the
clients they represent.
Manufacturer’s agents represent several manufacturers in a
specific territory.
Sales agents represent a single client in a larger territory.
Brokers usually represent clients on a temporary basis.

69. ©McGraw-Hill Education.
Retail Intermediaries
LO 15-4
Retailing in the United States
Retailers in the U.S. employ about 42 million people and
operate under many different structures.
There are over 3.7 million retail stores in the U.S.
Retail Distribution Strategy
Intensive distribution — Puts products into as many retail
outlets as possible.
Selective distribution — Sends products only to a preferred
group of retailers in an area.
Exclusive distribution — Sends products to only one retail
outlet in a given geographic area.
©McGraw-Hill Education.

70. Figure 15.4 Types of Retail Stores
LO 15-4TypeExampleDepartment storeSears, JC Penney,
NordstromDiscount storeWal-Mart, TargetSupermarketSafeway,
Kroger, AlbertsonsWarehouse clubCostco, Sam’s
ClubConvenience store7-ElevenCategory killerBass Pro Shops,
Office Depot/Office MaxOutlet storeNordstrom Rack, Liz
Claiborne, Nike, TJ MaxxSpecialty storeJewelry stores, shoe
stores, bicycle shops
©McGraw-Hill Education.
Online Retailing and Other Nonstore Retailing 1 of 3
LO 15-5
Online Retailing
Online retailing — Selling goods and services to ultimate
customers over the Internet.
Social commerce — A form of electronic commerce that
involves using social media, online media that supports social
interaction, and user contributions to assist in the online buying
and selling of products and services.
Telemarketing
Telemarketing — The sale of goods and services by telephone.
©McGraw-Hill Education.

71. 19
Figure 15.5 Types of Social Commerce
LO 15-5
Peer-to-peer sales platforms
Social network shops and shopping apps
Group buyings and daily deals
Peer recommendations
User-curated shopping
Crowdfunding/crowdsourcing
Social shopping
©McGraw-Hill Education.
20
Online Retailing and Other Nonstore Retailing 2 of 3
LO 15-5
Vending Machine, Kiosks, Carts, and Pop-Ups
Vending machines dispense convenience goods when consumers
deposit sufficient money.
Carts and kiosks have lower overhead than stores, so they can

72. offer lower prices on items.
Pop-ups are temporary outlets that remain open for a short
amount of time in small spaces.
©McGraw-Hill Education.
21
Online Retailing and Other Nonstore Retailing 3 of 3
LO 15-5
Direct Selling
Direct selling — Selling to consumers in their homes or where
they work.
Multilevel Marketing
Multilevel marketing uses salespeople who work as independent
contractors.
Direct Marketing
Direct marketing — Any activity that directly links
manufacturers or intermediaries with the ultimate consumer.
©McGraw-Hill Education.

73. 22
Building Cooperation in Channel Systems 1 of 5
LO 15-6
The Four Systems of Channel Relationships
Corporate distribution systems
Contractual distribution systems
Administered distribution systems
Supply chains
©McGraw-Hill Education.
23
Building Cooperation in Channel Systems 2 of 5
LO 15-6
Corporate Distribution Systems
Corporate distribution system — A distribution system in which
all of the organizations in a channel of distribution are owned
by one firm.
Example: Sherwin Williams
©McGraw-Hill Education.

74. 24
Building Cooperation in Channel Systems 3 of 5
LO 15-6
Contractual Distribution Systems
Contractual distribution system — A distribution system in
which members are bound to cooperate through contractual
agreements.
Forms of contractual systems:
Franchise systems: McDonald’s, Baskin-Robbins
Wholesale-sponsored chains: IGA, Ace Hardware
Retail cooperatives: Associated Grocers
©McGraw-Hill Education.
25
Building Cooperation in Channel Systems 4 of 5
LO 15-6
Administered Distribution Systems
Administered distribution system — A distribution system in
which producers manage all of the marketing functions at the

75. retail level.
Examples:
Kraft
Scotts
©McGraw-Hill Education.
26
Building Cooperation in Channel Systems 5 of 5
LO 15-6
Supply Chains
Supply chain — The sequence of linked activities that must be
performed by various organizations to move goods from the
sources of raw materials to ultimate consumers.
Supply-chain management — The process of managing the
movement of raw materials, parts, work in progress, finished
goods, and related information through all the organizations
involved in the supply chain; managing the return of such
goods, if necessary; and recycling materials when appropriate.
©McGraw-Hill Education.

76. 27
Figure 15.6 The Supply Chain
LO 15-6
Jump to long description in appendix
©McGraw-Hill Education.
28
Logistics: Getting Goods to Consumers Efficiently 1 of 3
LO 15-7
Logistics — The marketing activity that involves planning,
implementing, and controlling the physical flow of materials,
final goods, and related information from points of origin to
points of consumption to meet customer requirements at a
profit.
©McGraw-Hill Education.

77. 29
Logistics: Getting Goods to Consumers Efficiently 2 of 3
LO 15-7
Logistics Applications
Inbound logistics — The area of logistics that involves bringing
raw materials, packaging, other goods and services, and
information from suppliers to producers.
Materials handling — The movement of goods within a
warehouse, from warehouses to the factory floor, and from the
factory floor to various workstations.
Outbound logistics — The area of logistics that involves
managing the flow of finished products and information to
business buyers and consumers.
Reverse logistics — The area of logistics that involves bringing
goods back to the manufacturer because of defects or for
recycling materials.
©McGraw-Hill Education.
30
Figure 15.7 Comparing Transportation Modes
LO 15-7ModeCostSpeedOn-time
DependabilityProductsShipmentsReach

78. RailroadsMediumSlowMediumHighLowHighTrucksHighFastHig
hMediumHighHighestPipelinesLowMediumHighestLowestHighe
stLowestShips
(water)LowestSlowestLowestHighestLowestLowAirplanesHighe
stFastestLowLowMediumMedium
©McGraw-Hill Education.
31
Logistics: Getting Goods to Consumers Efficiently 3 of 3
LO 15-7
Logistics Specialists
Freight forwarder — An organization that puts many small
shipments together to create a single large shipment that can be
transported cost-effectively to the final destination.
Intermodal shipping — The use of multiple modes of
transportation to complete a single long-distance movement of
freight.
Tracking Goods
Storage warehouses hold products for a relatively long period of
time.
Distribution warehouses are used to gather and redistribute
products such as package deliveries.

79. ©McGraw-Hill Education.
32
Appendix of Long Image Descriptions
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
33
Appendix 1 Figure 15.1 Selected Channels of Distribution
There are six channels of distribution for consumer goods.
Channel 1: The manufacturer sells directly to consumers. This
channel is used by craftspeople and small farmers.
Channel 2: The manufacturer sells to a retailer who then sells to
consumers. This channel is used for cars, furniture, and
clothing.
Channel 3: The manufacturer sells to a wholesaler, who then
sells to a retailer, who then sells to consumers. This channel is
the most common channel for consumer goods such as
groceries, drugs, and cosmetics.
Channel 4: A farmer sells to a broker who then sells to a
wholesaler, who then sells to a retailer, who then sells to
consumers. This is a common channel for food items such as
produce.
Channel 5: A service organization sells to a broker who then

80. sells to consumers. This is a common channel for consumer
services such as real estate, stocks and bonds, insurance, and
nonprofit theater groups.
Channel 6: A nonprofit organization sells to a store who then
sells to consumers. This is a common channel for nonprofit
organizations that want to raise funds. Included are museums,
government services, and zoos.
There are two channels of distribution for industrial goods.
Channel 1: The manufacturer sells directly to industrial users.
This is the common channel for industrial products such as
glass, tires, and paint for automobiles.
Channel 2: The manufacturer sells to a wholesaler who then
sells to industrial users. This is the way that lower-cost items
such as supplies are distributed. The wholesaler is called an
industrial distributor.
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
34
Appendix 2 Figure 15.3 Distribution’s Effect on Your Food
Dollar
From lowest to highest cost:
Packaging: 2.5 cents
Finance and insurance: 3.1 cents
Transportation: 3.2 cents
Other: 3.2 cents
Energy: 5.1 cents

81. Wholesale trade: 9.1 cents
Farm production: 10.4 cents
Retail trade: 12.9 cents
Food processing: 15.3 cents
Food services: 32.7 cents
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
35
Appendix 3 Figure 15.6 The Supply Chain
The supply chain sequence is as follows:
Suppliers’ plants
Manufacturers
Wholesalers
Retailers
Consumers
The channel of distribution begins with manufacturers and goes
to consumers.
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.

82. 36
Chapter 13
Marketing: Helping Buyers Buy
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
1
Learning Objectives
LO 13-1 Define marketing, and apply the marketing concept to
both for-profit and nonprofit organizations.
LO 13-2 Describe the four Ps of marketing.
LO 13-3 Summarize the marketing research process.
LO 13-4 Show how marketers use environmental scanning to
learn about the changing marketing environment.
LO 13-5 Explain how marketers apply the tools of market
segmentation, relationship marketing, and the study of
consumer behavior.
LO 13-6 Compare the business-to-business market and the
consumer market.
©McGraw-Hill Education.

83. 2
What Is Marketing? 1 of 7
LO 13-1
Marketing — The activity, set of institutions and processes for
creating, communicating, delivering, and exchanging offerings
with value for customers, clients, partners, and society at large.
Marketing today involves helping the buyer buy through:
Websites that help buyers find the best price, identify product
features, and question sellers.
Blogs and social networking sites that cultivate consumer
relationships.
©McGraw-Hill Education.
3
What Is Marketing? 2 of 7
LO 13-1
The Evolution of Marketing
Four eras:
Production Era

84. Selling Era
Marketing Concept Era
Customer Relationship Era
©McGraw-Hill Education.
Figure 13.1 Marketing Eras
LO 13-1
Jump to long description in appendix
©McGraw-Hill Education.
5
What Is Marketing? 3 of 7
LO 13-1
The Evolution of Marketing continued
The Production Era
The general philosophy was “Produce as much as you can,

85. because there is a limitless market for it.”
The Selling Era
Most companies emphasized selling and advertising in an effort
to persuade consumers to buy existing products.
©McGraw-Hill Education.
What Is Marketing? 4 of 7
LO 13-1
The Evolution of Marketing continued
The Marketing Concept Era
After WWII, a consumer spending boom developed.
Businesses knew they needed to be responsive to consumers if
they wanted their business.
Marketing concept — A three-part business philosophy.
Customer orientation
Service orientation
Profit orientation
©McGraw-Hill Education.

86. What Is Marketing? 5 of 7
LO 13-1
The Evolution of Marketing continued
The Customer Relationship Era
Customer relationship management (CRM) — Learning as much
as possible about customers and doing everything you can to
satisfy or exceed their expectations.
Organizations seek to stimulate long-term customer loyalty.
Social networks, online communities, and blogs are used in
relationship building.
©McGraw-Hill Education.
What Is Marketing? 6 of 7
LO 13-1
The Evolution of Marketing continued
The Emerging Mobile/On-Demand Marketing Era
As digital technology continues to grow, consumer demands are
expected to rise in:
Now: Consumers want to interact anywhere, anytime.
Can I?: They want to use information in new ways that create
value for them.
For me: Consumers expect personalized experiences.
Simple: Consumers expect all interactions to be easy.

87. ©McGraw-Hill Education.
What Is Marketing? 7 of 7
LO 13-1
Nonprofit Organizations and Marketing
Nonprofit marketing tactics include:
Fundraising
Obtaining resources
Promotion of ecologically safe technologies
Attracting new members
Creation of awareness for social issues
©McGraw-Hill Education.
The Marketing Mix 1 of 4
LO 13-2
Marketing mix — The ingredients that go into a marketing

88. program; also known as the four Ps.
Product
Price
Place
Promotion
©McGraw-Hill Education.
11
Figure 13.2 Marketing Managers and the Marketing Mix
LO 13-2
©McGraw-Hill Education.
The Marketing Mix 2 of 4
LO 13-2
Designing a Product to Meet Consumer Needs

89. Product — Any physical good, service, or idea that satisfies a
want or need plus anything that would enhance the product in
the eyes of consumers.
Test marketing — Testing products among potential users.
Brand name — A word, letter, or group of words or letters that
differentiates one seller’s goods and services from those of
competitors.
©McGraw-Hill Education.
The Marketing Mix 3 of 4
LO 13-2
Setting an Appropriate Price
Pricing products depends on many factors:
Competitors’ prices
Production costs
Distribution
Promotion
Getting the Product to the Right Place
Intermediaries are important because getting a product to
consumers when and where they want is critical.
©McGraw-Hill Education.

90. The Marketing Mix 4 of 4
LO 13-2
Developing an Effective Promotional Strategy
Promotion — All the techniques sellers use to inform people
about and motivate them to buy their products or services.
Promotion includes:
Advertising
Personal selling
Public relations
Publicity
Word of mouth
Sales promotions
©McGraw-Hill Education.
Providing Marketers with Information 1 of 6
LO 13-3
Marketing research — The analysis of markets to determine
opportunities and challenges, and to find the information needed
to make good decisions.
Research is used to identify products consumers have used in

91. the past and what they want in the future.
Research uncovers business trends, the ecological impact of
decisions, global trends, and more.
©McGraw-Hill Education.
Providing Marketers with Information 2 of 6
LO 13-3
The Marketing Research Process
Defining the problem or opportunity and determining the
present situation.
Collecting research data.
Analyzing the data.
Choosing the best solution and implementing it.
©McGraw-Hill Education.
Providing Marketers with Information 3 of 6

92. LO 13-3
The Marketing Research Process continued
Defining the Question and Determining the Present Situation
What’s the present situation?
What are the problems or opportunities?
What are the alternatives?
What information is needed?
How should the information be gathered?
©McGraw-Hill Education.
Providing Marketers with Information 4 of 6
LO 13-3
The Marketing Research Process continued
Collecting Data
Secondary data — Information that has already been compiled
by others and published in journals and books or made avai lable
online.
Secondary data incurs no expense and is usually easily
accessible.
Secondary data doesn’t always provide all the needed
information for marketers.
©McGraw-Hill Education.

93. Providing Marketers with Information 5 of 6
LO 13-3
The Marketing Research Process continued
Collecting Data continued
Primary data — Data that you gather yourself (not from
secondary sources).
Telephone, online and mail surveys, personal interviews, and
focus groups are ways to collect primary data.
Focus group — A small group of people who meet under the
direction of a discussion leader to communicate opinions.
©McGraw-Hill Education.
Providing Marketers with Information 6 of 6
LO 13-3
The Marketing Research Process continued
Analyzing the Research Data
Marketers must turn data into useful information through
careful, honest interpretation.
Choosing the Best

94. Solution
and Implementing It
Marketers use their analysis to plan strategies and make
recommendations.
Finally, marketers must evaluate their actions and determine if
further research is needed.
©McGraw-Hill Education.
The Marketing Environment
LO 13-4
Environmental scanning — The process of identifying factors
that can affect marketing success.

95. Influences involved in the environmental scan include:
Global factors
Technological factors
Sociocultural factors
Competitive factors
Economic factors
©McGraw-Hill Education.
Figure 13.5 The Marketing Environment
LO 13-4
Jump to long description in appendix

96. ©McGraw-Hill Education.
Two Different Markets: Consumer and Business-to-Business
(B2B)
LO 13-4
Consumer market — All the individuals or households that want
goods and services for personal consumption or use.
Business-to-business (B2B) market — All the individuals and
organizations that want goods and services to use in producing
other goods and services or to sell, rent, or supply goods to
others.
©McGraw-Hill Education.

97. 24
The Consumer Market 1 of 5
LO 13-5
The size and diversity of the consumer market forces marketers
to decide which groups they want to serve.
Market segmentation — Dividing the total market into groups
whose members have similar characteristics.
Target marketing — Marketing directed toward those groups an
organization decides it can serve profitably.
©McGraw-Hill Education.
25

98. The Consumer Market 2 of 5
LO 13-5
Segmenting the Consumer Market
Geographic segmentation — Dividing the market by cities,
counties, states, or regions.
Demographic segmentation — Dividing the market by age,
income, and education level.
Psychographic segmentation — Dividing the market using the
group’s values, attitudes, and interests.
Benefit segmentation — Dividing the market by determining
which benefits of the product to talk about.
Volume or usage segmentation — Dividing the market usage
(volume of use).
©McGraw-Hill Education.

99. 26
The Consumer Market 3 of 5
LO 13-5
Reaching Smaller Market Segments
Niche marketing — Finding small but profitable market
segments and designing or finding products for them.
One-to-one marketing — Developing a unique mix of goods and
services for each individual consumer.
Building Marketing Relationships
Mass marketing — Developing products and promotions to
please large groups of people.
Relationship marketing — Keeping individual customers over
time by offering them products that exactly meet their
requirements.
©McGraw-Hill Education.

100. 27
The Consumer Market 4 of 5
LO 13-5
The Consumer Decision-Making Process
Problem recognition
Information search
Evaluate alternatives
Purchase decision
Postpurchase evaluation
©McGraw-Hill Education.
28
The Consumer Market 5 of 5

101. LO 13-5
The Consumer Decision-Making Process continued
Factors that affect consumer behavior:
Learning
Reference group
Culture
Subculture
Cognitive dissonance
©McGraw-Hill Education.
29
The Business-to-Business Market
LO 13-6
B2B marketers include:
Manufacturers

102. Retailers
Hospitals, schools, and nonprofits
Government
Products are often sold and resold several times before reaching
final consumers.
©McGraw-Hill Education.
30
Figure 13.7 Comparing Business-to-Business and Consumer
Buying Behavior
LO 13-6
Jump to long description in appendix

103. ©McGraw-Hill Education.
31
Your Prospects in Marketing
LO 13-6
There is a wider variety of careers in marketing than in most
business disciplines.
Retail store manager
Marketing research
Product management
Selling
Advertising
Sales promotion
Public relations
Web design

104. ©McGraw-Hill Education.
32
Appendix of Long Image Descriptions
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
33
Appendix 1 Figure 13.1 Marketing Eras
Production is through approximately 1930.
Selling is from 1920 to approximately 1970.
Marketing concept is from approximately 1950 to 1995.

105. Customer relationship is from approximately 1990 and beyond.
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
34
Appendix 2 Figure 13.5 The Marketing Environment
The consumer is the center of the circle, surrounded by another
circle divided into four, equal sections: product, price, place,
and promotion. The five factors of the marketing environment
comprise the outermost circle are:
Competitive includes speed, service, price, and selection
Economic includes GDP, disposable income, competition, and
unemployment
Global includes trade agreements, competition, trends,
opportunities, and Internet
Technological includes computers, telecommunications, bar

106. codes, data interchange, and Internet changes
Sociocultural includes population shifts, values, attitudes, and
trends
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
Appendix 3 Figure 13.7 Comparing Business-to-Business and
Consumer Buying Behavior
Market structure characteristics of the business-to-business
market:
Relatively few potential customers
Larger purchases
Geographically concentrated
Market structure characteristics of the consumer market:
Many potential customers
Smaller purchases

107. Geographically dispersed
Product characteristics of the business-to-business market:
Require technical, complex products
Frequently require customization
Frequently require technical advice, delivery, and after-sale
service
Buyers are trained
Product characteristics of the consumer market:
Require less technical products
Sometimes require customization
Sometimes require technical advice, delivery, and after-sale
service
No special training
Buying procedure characteristics of the business-to-business
market:
Negotiate details of most purchases
Follow objective standards
Formal process involving specific employees
Closer relationships between marketers and buyers
Often buy from multiple sources
Buying procedure characteristics of the consumer market:
Accept standard terms for most purchases
Use personal judgement
Informal process involving household members
Impersonal relationships between marketers and consumers

108. Rarely buy from multiple sources
Return to original slide
©McGraw-Hill Education.
©McGraw-Hill Education.
Chapter 11
Human Resource Management: Finding and Keeping the Best
Employees
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

109. 1
Learning Objectives 1 of 2
LO 11-1Explain the importance of human resource management,
and describe current issues in managing human resources.
LO 11-2Illustrate the effects of legislation on human resource
management.
LO 11-3Summarize the five steps in human resource planning.
LO 11-4Describe methods that companies use to recruit new
employees, and explain some of the issues that make
recruitment challenging.
LO 11-5Outline the six steps in selecting employees.
©McGraw-Hill Education.

110. 2
Learning Objectives 2 of 2
LO 11-6Illustrate employee training and development methods.
LO 11-7Trace the six steps in appraising employee
performance.
LO 11-8Summarize the objectives of employee compensation
programs, and evaluate pay systems and fringe benefits.
LO 11-9Demonstrate how managers use scheduling plans to
adapt to workers’ needs.
LO 11-10Describe how employees can move through a
company: promotion, reassignment, termination, and retirement.
©McGraw-Hill Education.
3

111. Working with People Is Just the Beginning 1 of 2
LO 11-1
Human resource management (HRM)
Determining human resource needs
Recruiting, selecting, developing, motivating, evaluating,
compensating, and scheduling employees
HRM’s role has grown because of:
Increased recognition of employees as a resource
Changes in law that rewrote old workplace practices
©McGraw-Hill Education.
Figure 11.1 Human Resource Management
LO 11-1
Jump to long description in appendix

112. ©McGraw-Hill Education.
Working with People Is Just the Beginning 2 of 2
LO 11-1
The Human Resource Challenge
Multigenerational workforce
Shortages of trained workers in growth areas
Worker shortage in skilled trades
Increasing number of single-parent and two-income families
Expanding global markets with low-wage workers
Increasing benefit demands and benefit costs
A decreased sense of employee loyalty

113. ©McGraw-Hill Education.
Laws Affecting Human Resource Management 1 of 5
LO 11-2
Civil Rights Act of 1964
Title VII prohibits discrimination in hiring, firing,
compensation, apprenticeships, training, terms, conditions, or
privileges of employment based on:
Race
Religion
Creed
Sex
National Origin
Age
©McGraw-Hill Education.

114. Laws Affecting Human Resource Management 2 of 5
LO 11-2
1972 Equal Employment Opportunity Act (EEOA)
The EEOA strengthened the Equal Employment Opportunity
Commission (EEOC), giving the EEOC the right to issue
workplace guidelines for acceptable employer conduct.
EEOC could mandate specific recordkeeping procedures and
was vested with the power of enforcement.
Controversial Procedures of the EEOC
Affirmative action — Employment activities designed to “right
past wrongs” by increasing opportunities for minorities and
women.
Reverse discrimination — Discrimination against whites or
males in hiring or promotion.

115. ©McGraw-Hill Education.
Laws Affecting Human Resource Management 3 of 5
LO 11-2
Civil Rights Act of 1991
Amended Title VII and gave victims of discrimination the right
to a jury trial and possible damages
Office of Federal Contract Compliance Programs (OFCCP)
Ensures that employers doing business with the federal
government comply with the nondiscrimination and affirmative
action laws
©McGraw-Hill Education.

116. 9
Laws Affecting Human Resource Management 4 of 5
LO 11-2
Laws Protecting Employees with Disabilities and Older
Employees
Americans with Disabilities Act of 1990 (ADA)
Requires employers to give applicants with physical or mental
disabilities the same consideration for employment as people
without disabilities.
Passage in 2008 of Americans with Disabilities Amendments
Act expanded protection.
2011 saw regulations that widen the range of disabilities
covered by the ADA and shift the burden of proof of disability
from employees to employers.
©McGraw-Hill Education.

117. Laws Affecting Human Resource Management 5 of 6
LO 11-2
Laws Protecting Employees with Disabilities and Older
Employees continued
Age Discrimination in Employment Act (ADEA)
Protects workers 40 and over from employment and workplace
discrimination in hiring, firing, promotion, layoff,
compensation, benefits, job assignments, and training.
©McGraw-Hill Education.

118. Determining a Firm’s Human Resource Need 1 of 2
LO 11-3
Human Resource Planning Process
Preparing a human resource inventory of employees
Preparing a job analysis
Assessing future human resource demand
Assessing future labor supply
Establishing a strategic plan
©McGraw-Hill Education.
Determining a Firm’s Human Resource Need 2 of 2
LO 11-3
What’s a Job Analysis?
Job analysis — A study of what is done by employees who hold

119. various job titles.
Job description — A summary of the objectives of a job, the
type of work to be done, the responsibilities and duties, the
working conditions, and the relationship of the job to other
functions.
Job specifications — A written summary of the minimum
qualifications required of workers to do a particular job.
©McGraw-Hill Education.
Recruiting Employees from a Diverse Population
LO 11-4
Recruitment — The set of activities used to obtain a sufficient
number of the right people at the right time.
Human resource managers use both internal and external
sources to recruit employees.

120. Small businesses often make use of web sources like GlassDoor,
Indeed, and LinkedIn to recruit employees.
©McGraw-Hill Education.
Figure 11.4 Employee Sources
LO 11-4
Jump to long description in appendix
©McGraw-Hill Education.

121. Selecting Employees Who Will Be Productive 1 of 3
LO 11-5
Selection — The process of gathering information and deciding
who should be hired, under legal guidelines, for the best
interests of the individual and the organization.
Steps in the Selection Process
Obtaining complete application forms
Conducting initial and follow-up interviews
Giving employment tests
Conducting background investigations
Obtaining results from physical exams
Establishing trial (probationary) periods
©McGraw-Hill Education.

122. Selecting Employees Who Will Be Productive 2 of 3
LO 11-5
Hiring Contingent Workers
Contingent workers — Workers who do not have the expectation
of regular, full-time employment.
There are about 5.7 million contingent workers in the U.S.
The majority of contingent workers are under 25.
Companies hire contingent workers:
When full-time workers are on leave
During periods of peak demand
In uncertain economic times
To save on employee benefits
To screen candidates for future employment
©McGraw-Hill Education.

123. Selecting Employees Who Will Be Productive 3 of 3
LO 11-5
Hiring Contingent Workers continued
Students and the contingent workforce
With temporary staffing agencies, companies have easier access
to screened workers.
Worker information is entered into their databases.
When students come back to town, they can call the agency and
ask them to put their names into the system for work.
©McGraw-Hill Education.
Training and Developing Employees for Optimum Performance

124. 1 of 5
LO 11-6
Training and Development — All attempts to improve
productivity by increasing an employee’s ability to perform.
Training focuses on short-term skills.
Development focuses on long-term abilities.
Three Steps of Training and Development
Assessing organization needs and employee skills to determine
training needs
Designing training activities to meet identified needs
Evaluating the training’s effectiveness
©McGraw-Hill Education.
Training and Developing Employees for Optimum Performance
2 of 5

125. LO 11-6
Most Commonly Used Training and Development Activities
Orientation
On-the-job training
Apprenticeships
Off-the-job training
Online training
Vestibule training
Job simulation
©McGraw-Hill Education.
Training and Developing Employees for Optimum Performance
3 of 5
LO 11-6
Management Development

126. Management development — The process of training and
educating employees to become good managers and then
monitoring the progress of their managerial skills over time.
Management training includes:
On-the-job coaching
Understudy positions
Job rotation
Off-the-job courses and training
©McGraw-Hill Education.
Training and Developing Employees for Optimum Performance
4 of 5
LO 11-6
Networking
Networking — The process of establishing and maintaining

127. contacts with key managers in one’s own organization and other
organizations and using those contacts to weave strong
relationships that serve as informal development systems.
Mentors — An experienced employee who supervises, coaches,
and guides lower-level employees by introducing them to the
right people and generally being their organizational sponsor.
Networking and mentoring go beyond the work environment.
©McGraw-Hill Education.
Training and Developing Employees for Optimum Performance
5 of 5
LO 11-6
Diversity in Management Development
Reasons to develop female and minority managers
It isn’t about legality, morality, or morale but rather about

128. bringing more talent in the door.
The best women and minorities will become harder to attract, so
companies that commit to development have an edge.
Having more women and minorities at all levels lets businesses
serve their women and minority customers better.
©McGraw-Hill Education.
23
Appraising Employee Performance to Get Optimum Results 1 of
2
LO 11-7
Performance appraisal — An evaluation that measures employee
performance against established standards in order to make
decisions about promotions, compensation, training, or
termination.

129. A 360-degree review gives managers opinions from people at
different levels to get a more accurate idea of the worker’s
abilities.
©McGraw-Hill Education.
Appraising Employee Performance to Get Optimum Results 2 of
2
LO 11-7
Six Steps of Performance Appraisals
Establishing performance standards that are understandable,
measurable, and reasonable.
Clearly communicating those standards.
Evaluating performance against the standards.
Discussing the results with employees.
Taking corrective action.

130. Using the results to make decisions.
©McGraw-Hill Education.
Compensating Employees: Attracting and Keeping the Best 1 of
4
LO 11-8
A managed and competitive compensation program helps:
Attract the kinds of employees the business needs
Build employee incentive to work efficiently and productively
Keep valued employees from going to competitors or starting
their own firm
Maintain a competitive market position by keeping costs low
due to high productivity from a satisfied workforce
Provide employee financial security through wages and fringe
benefits

131. ©McGraw-Hill Education.
Figure 11.5 Pay Systems 1 of 3
LO 11-8
Jump to long description in appendix
©McGraw-Hill Education.

132. Figure 11.5 Pay Systems 2 of 3
LO 11-8
Jump to long description in appendix
©McGraw-Hill Education.
Figure 11.5 Pay Systems 3 of 3
LO 11-8
Jump to long description in appendix

133. ©McGraw-Hill Education.
Compensating Employees: Attracting and Keeping the Best 2 of
4
LO 11-8
Compensating Teams
Team-based pay programs are more challenging than individual
pay systems.
The two most common methods for teams involve:
Skill-based: Pay is increased as team members learn and apply
new skills. (Eastman Chemical uses this system.)
Gain-sharing: Pay is increased as performance increases
compared to previous performance. (Nucor Steel uses this
system.)
©McGraw-Hill Education.

134. 30
Compensating Employees: Attracting and Keeping the Best 3 of
4
LO 11-8
Fringe Benefits
Fringe benefits —sick-leave pay, vacation pay, pension plans,
and health plans that represent additional compensation to
employees beyond base wages.
Fringe benefits include incentives like:
Company cars
Country club memberships
Discounted massages
Special home-mortgage rates
Paid and unpaid sabbaticals
Day care and elder care services
Executive dining rooms
Dental, eye, and mental health care
Student loan debt payment

135. ©McGraw-Hill Education.
31
Compensating Employees: Attracting and Keeping the Best 4 of
4
LO 11-8
Fringe Benefits continued
Cafeteria-style fringe benefits — Fringe benefit plan that allows
employees to choose the benefits they want up to a certain
dollar amount.
Soft benefits include:
On-site haircuts and shoe repair
Concierge services
Free meals at work

136. Free car washes
Paid paternal leave
©McGraw-Hill Education.
32
Scheduling Employees to Meet Organizational and Employee
Needs 1 of 3
LO 11-9
Flextime plan — Work schedule that gives employees some
freedom to choose when to work, as long as they work the
required number of hours.
Compressed workweek — Work schedule that allows employees
to work a full number of hours per week but in fewer days.
Job sharing — An arrangement whereby two part-time
employees share one full-time job.

137. ©McGraw-Hill Education.
33
Scheduling Employees to Meet Organizational and Employee
Needs 2 of 3
LO 11-9
Flextime Plans
Most flextime plans require core time — The period when all
employees are expected to be at their job stations.
Flextime is difficult to incorporate into shift work, and
managers have to work longer hours.
Communication among employees can also be difficult under
flextime, and managers have to be alert to any system abuses.
Compressed workweeks
Employees enjoy long weekends after working long days.

138. Productivity is a concern.
Nurses often work compressed workweeks.
©McGraw-Hill Education.
34
Figure 11.6 A Flextime Chart
LO 11-9
Jump to long description in appendix
©McGraw-Hill Education.

139. 35
Scheduling Employees to Meet Organizational and Employee
Needs 3 of 3
LO 11-9
Home-Based Work
24 percent of Americans work from home at least once per
week.
68 percent of Americans expect to work remotely in the future.
Job-Sharing Plans
Benefits:
Provide employment opportunities for many people who cannot
work full-time.
Workers tend to be enthusiastic and productive.
Absenteeism and tardiness are reduced.
Employers can schedule part-time workers in peak demand
periods.
Experienced employees who might otherwise have retired are
retained.

140. ©McGraw-Hill Education.
36
Figure 11.7 Benefits and Challenges of Home-Based Work 1 of
3
LO 11-9BlankBenefitsChallengesTo OrganizationIncreases
productivity due to fewer sick days, fewer absences, higher job
satisfaction, and higher work performance ratings
Broadens available talent pool
Reduces costs of providing on-site office spaceMakes it more
difficult to appraise job performance
Can negatively affect the social network of the workplace and
can make it difficult to promote team cohesiveness
Complicates distribution of tasks (should office files, contact
lists, and such be allowed to leave the office?)

141. ©McGraw-Hill Education.
37
Figure 11.7 Benefits and Challenges of Home-Based Work 2 of
3
LO 11-9BlankBenefitsChallengesTo IndividualMake s more time
available for work and family by reducing or eliminating
commute time
Reduces expenses of buying and maintaining office clothes
Avoids office politics
Helps balance work and family
Expands employment opportunities for individuals with
disabilitiesCan cause feeling of isolation from social network
Can raise concerns regarding promotions and other rewards due
to being out of sight, out of mind
May diminish individual’s influence within company due to

142. limited opportunity to learn the corporate culture
©McGraw-Hill Education.
38
Figure 11.7 Benefits and Challenges of Home-Based Work 3 of
3
LO 11-9BlankBenefitsChallengesTo SocietyDecreases traffic
congestion
Discourages community crime that might otherwise occur in
bedroom communities
Increases time available to build community tiesIncreases need
to resolve zoning regulations forbidding business deliveries in
residential neighborhoods
May reduce ability to interact with other people in a personal,
intimate manner

143. ©McGraw-Hill Education.
39
Moving Employees Up, Over, and Out
LO 11-10
Employees are promoted or reassigned; are terminated due to
performance or economic situations; or retire.
Terminating Employees
As the economic crisis grew, more and more employers have
had to lay off employees.
Even when the economy is booming, employers are hesitant to
hire full-time workers because of the cost of termination.
Firing employees is more difficult for employers because of
laws preventing termination for certain acts.

144. ©McGraw-Hill Education.
40
Figure 11.8 How to Avoid Wrongful Discharge Lawsuits
LO 11-10
Prepare before hiring by requiring recruits to sign a statement
that retains management’s freedom to terminate at will.
Don’t make unintentional promises by using such terms as
permanent employment.
Document reasons before firing and make sure you have an
unquestionable business reason for the firing.
Fire the worst first and be consistent in discipline.
Buy out bad risk by offering severance pay in exchange for a
signed release from any claims.
Be sure to give employees the true reasons they are being fired.
If you do not, you cannot reveal it to a recruiter asking for a

145. reference without risking a defamation lawsuit.
Disclose the reasons for an employee’s dismissal to that
person’s potential new employers.
©McGraw-Hill Education.
41
Appendix of Long Image Descriptions
©McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.

146. 42
Appendix 1 Figure 11.1 Human Resource Management
Organizational goals
Human resource management
Recruitment
Selection
Training and development
Motivation (chapter 10)
Evaluation
Compensation and benefits
Scheduling
Employee–union relations (chapter 12)
Career management
All of this occurs within the legal environment.
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Appendix 2 Figure 11.4 Employee Sources
External sources used to find qualified candidates include
private employment agencies, public employment agencies,
personal applications, management consultants, new graduates,
former employees, part-time applicants, competing
organizations, union organizations, advertisements, temporary
help services, union halls, trade schools, college placement
offices, newspaper ads, trade associations, business associates,
college professors, online, job fairs, cooperative education
internships, and social media.
Internal sources used to find qualified candidates include
transfers, promotions, employee recommendations, retrained
employees, and department reorganizations.
After the human resource department has pulled qualified
candidates from external or internal sources, the candidates
follow the sequence of the hiring process: selection, hiring, and
orientation and training.
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148. 44
Appendix 3 Figure 11.5 Pay Systems 1 of 3
Salary: Fixed compensation computed on weekly, biweekly, or
monthly pay periods (e.g., $1,600 per month or $400 per week).
Salaried employees do not receive additional pay for any extra
hours worked.
Hourly wage or daywork: Wage based on number of hours or
days worked, used for most blue-collar and clerical workers.
Often employees must punch a time clock when they arrive at
work and when they leave. Hourly wages vary greatly. The
federal minimum wage is $7.25, and top wages go as high as
$40 per hour or more for skilled craftspeople. This does not
include benefits such as retirement systems, which may add 30
percent or more to the total package.
Piecework system: Wage based on the number of items
produced rather than by the hour or day. This type of system
creates powerful incentives to work efficiently and
productively.

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45
Appendix 4 Figure 11.5 Pay Systems 2 of 3
Commission plans: Pay based on some percentage of sales.
Often used to compensate salespeople, commission plans
resemble piecework systems.
Bonus plans: Extra pay for accomplishing or surpassing certain
objectives. There are two types of bonuses: monetary and
cashless. Money is always a welcome bonus. Cashless rewards
include written thank-you notes, appreciation notes sent to the
employee’s family, movie tickets, flowers, time off, gift
certificates, shopping sprees, and other types of recognition.
Profit-sharing plans: Annual bonuses paid to employees based
on the company’s profits. The amount paid to each employee is

150. based on a predetermined percentage. Profit sharing is one of
the most common forms of performance-based pay.
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Appendix 5 Figure 11.5 Pay Systems 3 of 3
Gain-sharing plans: Annual bonuses paid to employees based on
achieving specific goals such as quality measures, customer
satisfaction measures, and production targets.
Stock options: Right to purchase stock in the company at a
specific price over a specific period. Often this gives employees
the right to buy stock cheaply despite huge increases in the
price of the stock. For example, if over the course of his
employment a worker received options to buy 10,000 shares of
the company stock at 10 dollars each and the price of the stock

151. eventually grows to 100 dollars, he can use those options to buy
the 10,000 shares (now worth 1 million dollars) for 100,000
dollars.
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Appendix 6 Figure 11.6 A Flextime Chart
Flexible hours can be scheduled between 6:30 a.m. and 6:30
p.m. The core work times are 9:30 to 11:00 a.m. and 2:00 to
3:00 p.m. The lunch period is between 11:00 a.m. and 2:00 p.m.
Sarah’s work schedule is outlined on the chart. She starts work
at 7:00 a.m., eats lunch from 11:00 to 11:30 a.m., and leaves
work for the day at 3:30 p.m.
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48
Chapter 10
Motivating Employees
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for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
1

153. Learning Objectives
LO 10-1 Explain Taylor’s theory of scientific management.
LO 10-2 Describe the Hawthorne studies and their significance
to management.
LO 10-3 Identify the levels of Maslow’s hierarchy of needs and
apply them to employee motivation.
LO 10-4 Distinguish between the motivators and hygiene factors
identified by Herzberg.
LO 10-5 Differentiate among Theory X, Theory Y, and Theory
Z.
LO 10-6 Explain the key principles of goal-setting, expectancy,
reinforcement, and equity theories.
LO 10-7 Show how managers put motivation theories into
action through such strategies as job enrichment, open
communication, and job recognition.
LO 10-8 Show how managers personalize motivation strategies
to appeal to employees across the globe and across generations.
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154. 2
The Value of Motivation 1 of 5
Intrinsic rewards — The personal satisfaction you feel when
you perform well and complete goals.
Examples of intrinsic rewards:
Pride in your performance
Sense of achievement
Extrinsic rewards — Something given to you by someone else
as recognition of good work.
Kinds of extrinsic rewards:
Pay raises
Praise
Promotions
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155. The Value of Motivation 2 of 5
LO 10-1
Frederick Taylor: The “Father” of Scientific Management
Scientific management
Studying workers to find the most efficient ways of doing
things and then teaching people those techniques.
Three key elements to increase productivity
Time
Methods of work
Rules of work
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156. The Value of Motivation 3 of 5
LO 10-1
Frederick Taylor: The Father of Scientific Management
continued
Time-motion studies — Studies of which tasks must be
performed to complete a job and the time needed to do each
task.
Led to the development of the Principle of Motion Economy —
Theory developed by Frank and Lillian Gilbreth that every job
can be broken down into a series of elementary motions.
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The Value of Motivation 4 of 5
LO 10-1

157. Frederick Taylor: The Father of Scientific Management
continued
Taylor and UPS
UPS drivers work under strict rules and work requirements.
How to get out of their trucks:
Right foot first
How fast to walk:
3 ft per second
How many packages to deliver a day
125 to 175 in off-peak seasons
How to hold their keys:
Teeth up, third finger
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The Value of Motivation 5 of 5