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Introduction to Business

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Introduction to Business ­MGT 211
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LESSON 8
ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS
All businesses, regardless of their size, location, or mission, operate within a larger external
environment.
External environment--Everything outside an organization's boundaries that might affect it.
a.  Organizational Boundaries--That which separates the organization from its
environment. Today boundaries are becoming increasingly complicated and hard to
pin down.
b.  Multiple Environments include economic conditions, technology, political-legal
considerations, social issues, the global environment, issues of ethical and social
responsibility, the business environment itself, and numerous other emerging
challenges and opportunities.
1.
THE ECONOMIC ENVIRONMENT
Economic environment--Conditions of the economic system in which an organization
operates
a. Economic Growth
i. Aggregate Output and Standard of Living
1. Business  cycle--Pattern  of  short-term  ups  and  downs
(expansions and contractions) in an economy
2. Aggregate output--Total quantity of goods and services produced
by an economic system during a given period
3. Standard of living--Total quantity and quality of goods and
services that a country's citizens can purchase with the currency
used in their economic system
4.
ii. Gross domestic product (GDP)--Total value of all goods and services
produced within a given period by a national economy through domestic
factors of production
Gross national product (GNP)--Total value of all goods and services
produced by a national economy within a given period regardless of
where the factors of production are located
1. Real Growth Rate--the growth rate of GDP adjusted for inflation
and changes in the value of the country's currency
2. GDP per Capita--GDP per person and reflects the standard of
living.
3. Real GDP--GDP calculated to account for changes in currency
values and price changes versus Nominal GDP, GDP measured
in current dollars or with all components valued at current prices.
4. Purchasing Power Parity--Principle that exchange rates are set
so that the prices of similar products in different countries are about
the same.
iii. Productivity--Measure of economic growth that compares how much a
system produces with the resources needed to produce it.
There are a number of factors which can inhibit the growth of an
economic system including:
1. Balance of Trade--the economic value of all the products that a
country exports minus the economic value of imported products.
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Introduction to Business ­MGT 211
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a. Trade Deficit--A positive balance of trade results when
a country exports (sells to other countries) more than it
imports (buys from other countries).
b. Trade Surplus--A negative balance of trade results
when a country imports more than it exports.
2. National Debt--Amount of money that a government owes its
creditors. The U.S. national debt is over $6 trillion.
b. Economic Stability
Condition in an economic system in which the amount of money available and
the quantity of goods and services produced are growing at about the same
rate.
Factors which threaten stability include:
i. Inflation--Occurrence of widespread price increases throughout an
economic system
1. Measuring Inflation: The CPI--Measure of the prices of typical
products purchased by consumers living in urban areas
ii. Unemployment--Level of joblessness among people actively seeking
work in an economic system. Unemployment may be a symptom of
economic downturns.
1. Recessions
and
Depressions
Recession--Period during which aggregate output, as measured
by real GDP, declines
2. Depression--Particularly severe and long-lasting recession
c. Managing the U.S. Economy
i. Fiscal policies--Government economic policies that determine how the
government collects and spends its revenues
ii. Monetary policies--Government economic policies that determine the
size of a nation's monetary supply
iii. Stabilization policy--Government policy, embracing both fiscal and
monetary policies, whose goal is to smooth out fluctuations in output
and unemployment and to stabilize prices
d. The Global Economy in the Twenty-first Century
The decade of the 1990s saw a sustained period of expansion and growth that
served to increase business profits, boost individual wealth, and fuel optimism.
During the latter part of 2001 and into 2002, however, economic growth began
to stall.
i. Three Major Forces
1. The information revolution will continue to enhance productivity
across all sectors of the economy, most notably in such
information-dependent industries as finance, media, and wholesale
and retail trade.
2. New technological breakthroughs in areas such as biotechnology
will create entirely new industries.
3. Increasing globalization will create much larger markets while also
fostering tougher competition among global businesses; as a
result, companies will need to focus even more on innovation and
cost cutting.
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Introduction to Business ­MGT 211
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ii. Projected Trends and Patterns--There are a number of projections for
the near future. Sudden changes in environmental factors, such as war,
can alter these projections.
2.
THE TECHNOLOGICAL ENVIRONMENT
Technology has a variety of meanings, but as applied to the environment of business, it
generally includes all the ways by which firms create value for their constituents.
a. Product and Service Technologies--the technologies employed for creating
products (both physical goods and services) for customers. Although many
people associate technology with manufacturing, it is also a significant force in
the service sector.
b. Business Process Technologies--are used not so much to create products
as to improve a firm's performance of internal operations (such as accounting,
managing information flows, creating activity reports, and so forth). They also
help create better relationships with external constituents, such as suppliers
and customers.
i. Enterprise Resource Planning--Large-scale information system for
organizing and managing a firm's processes across product lines,
departments, and geographic locations
3. THE POLITICAL-LEGAL ENVIRONMENT
Conditions reflecting the relationship between business and government, usually in the
form of government regulation. Pro- or anti-business sentiment in government can
further influence business activity. Political stability is also an important consideration,
especially for international firms.
4. THE SOCIOCULTURAL ENVIRONMENT
Conditions including the customs, mores, values, and demographic characteristics of
the society in which an organization functions
a. Customer Preferences and Tastes--Customer preferences and tastes vary
both across and within national boundaries. Similarly, consumer preferences
can also vary widely within the same country.  Consumer preferences and
tastes also change over time. Finally, socio cultural factors influence the way
workers in a society feel about their jobs and organizations.
b. Ethical Compliance and Responsible Business Behavior
5. THE BUSINESS ENVIRONMENT
a. Redrawing Corporate Boundaries--To stay competitive, companies are
removing traditional corporate boundaries. For example building partnerships
or temporary alliances with other companies or competitors.
i. Core competency--Skills and resources with which an organization
competes best and creates the most value for owners
b. Emerging Challenges and Opportunities in the Environment of Business
i. Outsourcing--Strategy of paying suppliers and distributors to perform
certain business processes or to provide needed materials or resources
ii. Outsourcing
versus
Vertical
Integration
Outsourcing is why vertical integration is no longer as popular as it once
was.
1. Vertical integration--Strategy of owning the means by which an
organization produces goods or services.
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iii. Disadvantages of Outsourcing--The expected benefits of outsourcing
are sometimes not realized.  For example, suppliers often don't
understand what they are supposed to do, charge too much, and
provide poor service.
c. Viral Marketing--Strategy of using the Internet and word-of-mouth marketing
to spread product information. Using various formats--games, contests, chat
rooms, and bulletin boards--marketers encourage potential customers to try
out products and tell other people about them.
d. Business Process Management
i. Process--Any activity that adds value to some input by transforming it
into an output for a customer (whether internal or external)
ii. Business process management--Approach by which firms move
away from department-oriented organization and toward process-
oriented team structures that cut across old departmental boundaries
e. The Aftermath of 9/11--The flexibility and strength inherent in the U.S. political
and economic systems became just as obvious as their flaws. Most people kept
their jobs, and most businesses kept going. Even as some economic sectors
declined, others continued to expand. Exports continue to flow into other
countries,
as
did
foreign
direct
investment.
On the other hand, American business now faces major changes. A specific
effect that businesses themselves are already addressing involves workplace
security.
1. ETHICS IN THE WORKPLACE
Ethics--beliefs about what is right and wrong or good and bad in actions that affect
others.
Ethical Behavior--behavior conforming to generally accepted social norms
concerning beneficial and harmful actions.
Unethical Behavior--behavior that does not conform to generally accepted social
norms concerning beneficial and harmful actions.
Business Ethics--ethical or unethical behaviors by a manager or employer of an
organization.
a. The Problem with Ambiguity--because ethics are based on both individual
beliefs and social concepts, they vary from person to person, from situation to
situation, and from culture to culture. Social standards tend to be broad enough
to support certain differences in beliefs so that, without violating these general
standards, an individual may develop personal codes of ethics that reflect a
wide range of attitudes and beliefs.
b. Individual Values and Codes begin when we are children and are further
developed throughout our life.
c. Business and Managerial Ethics--Standards of behavior that guide individual
managers in their work
i. Behavior toward Employees--this category covers such matters as
hiring and firing, wages and working conditions, and privacy and
respect.
ii. Behavior toward the Organization--Ethical issues also arise from
employee behavior toward employers, especially in such areas as
conflict of interest, confidentiality, and honesty.
1. A conflict of interest occurs when an activity may benefit the
individual to the detriment of his or her employer.
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iii. Behavior toward Other Economic Agents--Ethics also comes into
play in the relationship between the firm and its employees with so-
called primary agents of interest--mainly customers, competitors,
stockholders, suppliers, dealers, and unions.
d. Assessing Ethical Behavior--To reduce subjectivity in distinguishing ethical
from unethical behavior, a firm should establish a process for applying ethical
judgments to situations that may arise during the course of business activities.
i. Three-step model for applying ethical judgments to situations:
1. gather relevant factual information
2. determine the most appropriate moral values
3. make an ethical judgment based on the rightness or wrongness
of the proposed activity or policy
ii. Four ethical norms:
1. Utility--does a particular act optimize what is best for those who
are affected by it?
2. Rights--does it respect the rights of the individual involved?
3. Justice--is it consistent with what we regard as fair?
4. Caring--is it consistent with people's responsibilities to each
other?
e. Company Practices and Business Ethics
Perhaps the single most effective step a company can take is to demonstrate
top management support. Actions by senior managers, whether commendable
or otherwise, often set the tone in the organization.
i. Adopting Written Codes--Many companies have adopted written
codes of ethics that formally acknowledge their intent to do business in
an ethical manner.
ii. Instituting Ethics Programs--The question arises whether business
ethics can be "taught." Most analysts agree that companies must take
the chief responsibility for educating employees. Some firms have major
training programs or ethical "hot line" numbers employees can call to
discuss troubling situations or report unethical behavior of others.
2. SOCIAL RESPONSIBILITY
3. Social Responsibility--the attempt of a business to balance its commitments to
groups and individuals in its environment, including customers, other businesses,
employees, and investors.
Organizational Stakeholders--those groups, individuals, and organizations which are
directly affected by the practices of an organization and which therefore have a stake in
its performance.
a. The Stakeholder Model of Responsibility
Most companies that strive to be responsible to their stakeholders concentrate
on five main groups: customers, employees, investors, suppliers, and local
communities.
b. Contemporary Social Consciousness
Social consciousness and views continue to evolve, seemingly to today's
enlightened view stressing the need for a greater social role for business. For
instance, Sears and Target stores refuse to sell handguns and other weapons,
and toy retailers like KayBee and Toys R Us won't sell toy guns that look
realistic.
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4. AREAS OF SOCIAL RESPONSIBILITY
a. Responsibility toward the Environment
Pollution--the injection of harmful substances into the environment.
i. Air Pollution--Much of the damage to forests and streams in the
eastern United States and Canada has been attributed to acid rain
(which occurs when sulfur is pumped into the atmosphere, mixes with
moisture, and falls to the ground as rain).
ii. Water Pollution--Water quality in many areas of the United States is
improving thanks to new legislation (such as laws forbidding phosphates
in New York and Florida).
iii. Land Pollution--The two key issues in land pollution are restoring land
that has already been damaged and preventing future contamination.
1. Toxic waste disposal--Toxic wastes are dangerous chemical
or radioactive byproducts of manufacturing processes.
2. Recycling--the re-conversion of waste materials into useful
products--has become an issue not only for municipal and state
governments but also for many companies engaged in high-
waste activities.
b. Responsibility toward Customers
The Federal Trace Commission (FTC) regulates advertising and pricing
practices, and the Food and Drug Administration (FDA) enforces guidelines for
labeling food products.
i. Consumer Rights
Consumerism--form of social activism dedicated to protecting the
rights of consumers in their dealings with businesses.
1. President John F. Kennedy's Consumer Bill of Rights
a. Consumers have a right to safe products.
b. Consumers have a right to be informed about all relevant
aspects of a product.
c. Consumers have a right to be heard.
d. Consumers have a right to choose what they buy.
ii. Unfair Pricing
1. Collusion--illegal agreement between two or more companies
to commit such wrongful acts as price fixing.
iii. Ethics in Advertising--Misleading, deceptive, or morally objectionable
advertising have been criticized by consumers.
c. Responsibility toward Employees
i. Legal and Social Commitments
Legally, businesses cannot practice illegal discrimination against people
in any aspect of the employment relationship. A firm should strive to
ensure that the workplace is physically and socially safe.
1. Whistleblower--employee who detects and tries to put an end
to a company's unethical, illegal, or socially irresponsible actions
by publicizing them. Whistleblowers are sometimes demoted or
fired when their accusations are made public. The law offers
them some recourse in the form of a civil suit for damages.
d. Responsibility toward Investors
i. Improper Financial Management--Improper Financial Management-
Occasionally organizations or their managers may be guilty of blatant
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financial mismanagement-offenses that are unethical but not necessarily
illegal.
1. Check Kiting--illegal practice of writing checks against money
that has not yet been credited at the bank on which the checks
are drawn.
2. Insider Trading--occurs when someone uses confidential
information to gain from the purchase or sale of stocks.
3. Misrepresentation of Finances--A firm's failure to conform to
generally accepted accounting practices (GAAP) when reporting
its financial status is illegal.
5. IMPLEMENTING SOCIAL RESPONSIBILITY PROGRAMS
a. Approaches to Social Responsibility
i. Obstructionist Stance--approach to social responsibility that involves
doing as little as possible and may involve attempts to deny or cover up
violations.
ii. Defensive Stance--approach to social responsibility by which a
company meets only minimum legal requirements in its commitments to
groups and individuals in its social environment.
iii. Accommodative Stance--approach to social responsibility by which a
company exceeds legal minimums in its commitments to groups and
individuals in its social environment.
iv. Proactive Stance--approach to social responsibility by which a
company actively seeks opportunities to contribute to the well-being of
groups and individuals in its social environment.
MANAGING SOCIAL RESPONSIBILITY PROGRAMS
Managers must take steps to foster a companywide sense of social responsibility.
i. Social Audit--systematic analysis of a firm's success in using funds
earmarked for meeting its social responsibility goals.
b. Social  Responsibility  and  the  Small  Business--Ethics  and  social
responsibility are decisions faced by all managers in all organizations,
regardless of rank or size.
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Table of Contents:
  1. INTRODUCTION:CONCEPT OF BUSINESS, KINDS OF INDSTRY, TYPES OF TRADE
  2. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:THE ECONOMIC ENVIRONMENT
  3. BUSINESS ORGANIZATION:Sole Proprietorship, Joint Stock Company, Combination
  4. SOLE PROPRIETORSHIP AND ITS CHARACTERISTICS:ADVANTAGES OF SOLE PROPRIETORSHIP
  5. PARTNERSHIP AND ITS CHARACTERISTICS:ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP
  6. PARTNERSHIP (Continued):KINDS OF PARTNERS, PARTNERSHIP AT WILL
  7. PARTNERSHIP (Continued):PARTNESHIP AGREEMENT, CONCLUSION, DUTIES OF PARTNERS
  8. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:ETHICS IN THE WORKPLACE, SOCIAL RESPONSIBILITY
  9. JOINT STOCK COMPANY:PRIVATE COMPANY, PROMOTION STAGE, INCORPORATION STAGE
  10. LEGAL DOCUMENTS ISSUED BY A COMPANY:MEMORANDUM OF ASSOCIATION, CONTENTS OF ARTICLES
  11. WINDING UP OF COMPANY:VOLUNTARY WIDNIGN UP, KINDS OF SHARE CAPITAL
  12. COOPERATIVE SOCIETY:ADVANTAGES OF COOPERATIVE SOCIETY
  13. WHO ARE MANAGERS?:THE MANAGEMENT PROCESS, BASIC MANAGEMENT SKILLS
  14. HUMAN RESOURCE MANAGEMENT:Human Resource Planning
  15. STAFFING:STAFFING THE ORGANIZATION
  16. STAFF TRAINING & DEVELOPMENT:Typical Topics of Employee Training, Training Methods
  17. BUSINESS MANAGERíS RESPONSIBILITY PROFILE:Accountability, Specific responsibilities
  18. COMPENSATION AND BENEFITS:THE LEGAL CONTEXT OF HR MANAGEMENT, DEALING WITH ORGANIZED LABOR
  19. COMPENSATION AND BENEFITS (Continued):MOTIVATION IN THE WORKPLACE
  20. STRATEGIES FOR ENHANCING JOB SATISFACTION AND MORALE
  21. MANAGERIAL STYLES AND LEADERSHIP:Changing Patterns of Leadership
  22. MARKETING:What Is Marketing?, Marketing: Providing Value and Satisfaction
  23. THE MARKETING ENVIRONMENT:THE MARKETING MIX, Product differentiation
  24. MARKET RESEARCH:Market information, Market Segmentation, Market Trends
  25. MARKET RESEARCH PROCESS:Select the research design, Collecting and analyzing data
  26. MARKETING RESEARCH:Data Warehousing and Data Mining
  27. LEARNING EXPERIENCES OF STUDENTS EARNING LOWER LEVEL CREDIT:Discussion Topics, Market Segmentation
  28. UNDERSTANDING CONSUMER BEHAVIOR:The Consumer Buying Process
  29. THE DISTRIBUTION MIX:Intermediaries and Distribution Channels, Distribution of Business Products
  30. PHYSICAL DISTRIBUTION:Transportation Operations, Distribution as a Marketing Strategy
  31. PROMOTION:Information and Exchange Values, Promotional Strategies
  32. ADVERTISING PROMOTION:Advertising Strategies, Advertising Media
  33. PERSONAL SELLING:Personal Selling Situations, The Personal Selling Process
  34. SALES PROMOTIONS:Publicity and Public Relations, Promotional Practices in Small Business
  35. THE PRODUCTIVITY:Responding to the Productivity Challenge, Domestic Productivity
  36. THE PLANNING PROCESS:Strengths, Weaknesses, Threats
  37. TOTAL QUALITY MANAGEMENT:Planning for Quality, Controlling for Quality
  38. TOTAL QUALITY MANAGEMENT (continued):Tools for Total Quality Management
  39. TOTAL QUALITY MANAGEMENT (continued):Process Re-engineering, Emphasizing Quality of Work Life
  40. BUSINESS IN DIGITAL AGE:Types of Information Systems, Telecommunications and Networks
  41. NON-VERBAL COMMUNICATION MODES:Body Movement, Facial Expressions
  42. BUSINESS ORGANIZATIONS:Organization as a System
  43. ACCOUNTING:Accounting Information System, Financial versus Managerial Accounting
  44. TOOLS OF THE ACCOUNTING TRADE:Double-Entry Accounting, Assets
  45. FINANCIAL MANAGEMENT:The Role of the Financial Manager, Short-Term (Operating) Expenditures