Foundations of business 2e pride hughes and kapoor

Preparing for Success with
Foundations of Business,
2e’s New Features!

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Foundations of Business, 2e does much more than prepare you for success in future
business courses. It equips you with a solid foundation for success in life—wherever your
career may lead you. Known for its thorough yet succinct coverage, Foundations of
Business, 2e delivers a survey of the major functional areas of business—management,
marketing, accounting,finance, information technology—as well as covers such core topics as
ethics and social responsibility, forms of ownership, small business, and international business.

Entertainment Giants Tune Into Hulu
Move over, YouTube: Hulu is here, and it’s changing the world of online video. NBC
Universal and News Corp. started Hulu as a joint venture to build a new website for
streaming videos, with brief ads embedded, over the Internet. Both companies have
a library of hit television shows and movies, NBC through its ownership of the NBC
network and Universal Studios and News Corp. through its ownership of the Fox
network and 20th Century Fox Studios.
The two equity partners envisioned Hulu as an online destination for viewing
professionally-produced entertainment, distinct from the free videos—many created
by consumers—on the wildly popular YouTube site. From the start, Hulu negotiated
to include movies and television episodes from other networks and studios and
offered advertising deals to companies seeking a large online audience.
Hulu was organized as a limited-liability company to give the partners more flexibility in managing the joint venture. As it turned out, this worked well because new
equity partners have joined the venture over the years. Soon after Hulu was formed,
Providence Equity Partners invested $100 million to become a part-owner. Hulu later
attracted another key partner, Walt Disney, which invested millions in Hulu and added
its ABC television programs to the site’s fast-growing lineup of video offerings.

Today, Hulu offers premium entertainment content from many sources beyond
its joint-venture partners, including MTV, PBS, Sony Pictures, Comedy Central,
MGM, National Geographic, and Warner Brothers. Among the advertisers that air
commercials during Hulu videos and display banner ads on the Hulu site are Best
Buy, McDonald’s, Visa, Nissan, Cisco, Johnson & Johnson, and Procter & Gamble.
Hulu’s rapid rise in viewership demonstrates that people are willing to sit through
brief ads to watch their favorite shows streamed online, on demand. Can Hulu
pass YouTube to become the most-viewed video site on the Internet? Can
Hulu earn enough profit to reward the firms that own this joint venture?
Tune in tomorrow.1

about real business organizations
drive home the relevance of the
chapter concepts.

DID YOU
KNOW?
Hulu is a joint-venture
online entertainment
destination where
visitors view more
than 300 million
videos every month.

Many people dream of opening a business, and one of the first decisions they
must make is what form of ownership to choose. We begin this chapter by
describing the three common forms of business ownership: sole proprietorships,
partnerships, and corporations. We discuss how these types of businesses are
formed and note the advantages and disadvantages of each. Next, we consider
several types of business ownership usually chosen for special purposes, including

S-corporations, limited-liability companies, not-for-profit corporations, cooperatives, joint ventures, and syndicates. We conclude the chapter with a discussion
of how businesses can grow through internal expansion or through mergers with
other companies.

Sole Proprietorships
A sole proprietorship is a business that is owned (and usually operated) by one
person. Although a few sole proprietorships are large and have many employees,
most are small. Sole proprietorship is the simplest form of business ownership and
the easiest to start. Some of today’s largest corporations, including Ford Motor
Company, H.J. Heinz Company, and Procter & Gamble Company, started out as
tiny—and in many cases, struggling—sole proprietorships.
As you can see in Figure 4.1, there are more than 21.5 million sole proprietorships in the United States. They account for 72 percent of the country’s busi-

Inside Business Cases
New! All-new opening cases

LEARNING
1 OBJECTIVE
Describe the advantages
and disadvantages of sole
proprietorships.

sole proprietorship a
business that is owned (and


1. What happens when a
firm makes a decision to
grow from within?
2. What is a hostile

takeover? How is it related
to a tender offer and a
proxy fight?
3. Explain the three types of
mergers.
4. Describe current merger
trends and how they
affect the businesses
involved and their
stockholders.

e s to devote va uab e t e to de e d g t e co pa es o ta eove , t us obb g
time from new-product development and other vital business activities. This, they
believe, is why U.S. companies may be less competitive with companies in such countries as Japan, Germany, and South Korea, where takeovers occur only rarely. Finally,
the opposition argues that the only people who benefit from take-overs are investment bankers, brokerage firms, and takeover “artists,” who receive financial rewards
by manipulating U.S. corporations rather than by producing tangible products or
services.
Most experts now predict that mergers and acquisitions during the first part
of the twenty-first century will be the result of cash-rich companies looking to
acquire businesses that will enhance their position in the marketplace. Analysts also
anticipate more mergers that involve companies or investors from other countries.
Regardless of the companies involved or where the companies are from, future
mergers and acquisitions will be driven by solid business logic and the desire to
compete in the international marketplace.
Finally, experts predict more leveraged buyouts in the future. A leveraged
buyout (LBO) is a purchase arrangement that allows a firm’s managers and employees or a group of investors to purchase the company. (LBO activity is sometimes
referred to as taking a firm private.) To gain control of a company, LBOs usually
rely on borrowed money to purchase stock from existing stockholders. The borrowed money is later repaid through the company’s earnings, sale of assets, or
money obtained from selling more stock.

major topic test your understanding of the
major issues discussed.

Part 2: Business Ownership and Entrepreneurship

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@ www.cengage.com/introbusiness/
pride

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120

Concept Checks
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and employees or a group
of investors to purchase the
company

▲

PREPARING FOR SUCCESS WITH FOUNDATIONS OF BUSINESS, 2E’S NEW FEATURES!

Test Yourself
Matching Questions

of each chapter help you prepare for exams
and gauge your mastery of key concepts
and terminology.

j. partnership
k. sole proprietorship
l. unlimited liability

1.

It is an association of two or more business
owners.

2.

A distribution of earnings to the stockholders of
a corporation.

3.

This type of ownership is the easiest type of
business to start.

4.

A person who invests only capital in a
partnership.

12. T F Preferred stockholders elect the board of
directors that manage the day-to-day business

activities of a corporation.

5.

The concept of being personally responsible for
all debts of a business.

13. T F Cooperatives are owned by their members.

6.

A business entity or artificial being with most of
the legal rights of a person.

14. T F A limited partner is responsible for any debts
of the partnership, regardless of whether he or
she was directly involved in the transaction that
t d th d bt

Test Yourself Quizzes
New! Test Yourself quizzes at the end

True False Questions

▲

11. T F Unlimited liability is an advantage of a sole
proprietorship.

APPENDIX A

Understanding Personal
Finances and Investments
As the saying goes, “I’ve been rich and I’ve been poor, but believe me, rich is better.” And yet, just dreaming of being rich doesn’t make it happen. In order to be
successful, you must be willing to invest the time and effort required to become a
good money manager and a good investor. And don’t underestimate how important
you are when it comes to managing your money. No one is going to make you manage your money. No one is going to make you save the money you need to fund an
investment program. These are your decisions—important decisions that literally
can change your life.
Many people ask the question: Why begin an investment program now? At the
time of publication, this is a very important question given the recent economic cri-

APPENDIX B
Careers in Business

Careers in Business
Words such as excited, challenged, scared, and frustrated have been used to describe
someone involved in a job search. The reality, however, is that everyone who is employed
must have looked for a job at one time or another, and survived. Although first-time
employees often think that they will work for the same company for their entire career,
most people change jobs and even careers during their lifetime. In fact, according to
the Bureau of Labor Statistics, today’s job applicants will change jobs over ten times.
Therefore, the employment information that follows will be of lasting value. Let’s begin
our discussion with a look at the factors affecting an individual’s career choices.

Two New Appendices!
New! Appendix A on Understanding
Personal Finances and Investments is an
especially helpful learning aid for you in
these uncertain economic times.

New! Appendix B on Careers in Business
provides valuable information on choosing
and planning a career.


Foundations of Business
2nd Edition


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Foundations of Business
2nd Edition

William M. Pride
Texas A&M University

Robert J. Hughes
Richland College, Dallas County
Community Colleges

Jack R. Kapoor
College of DuPage


Foundations of Business, 2e
William M. Pride, Robert J. Hughes, and
Jack R. Kapoor
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Printed in the United States of America
1 2 3 4 5 6 7 14 13 12 11 10


To the Prides: Jim and Yvonne, Garrett and Kathy,
Melinda, Jonathan, and Carrie
To my mother, Barbara Y. Hughes; and my wife, Peggy,
and in memory of Pat Thomas
To my father, Ram Kapoor, and in memory of my mother, Sheela;
my wife, Theresa; and my children Karen, Kathryn, and Dave


BRIEF
CONTENTS
CONTENTS

Part 1: The Environment of Business

1

1. Exploring the World of Business and Economics 1
2. Being Ethical and Socially Responsible 33
3. Exploring Global Business 66

Part 2: Business Ownership and Entrepreneurship

100

4. Choosing a Form of Business Ownership 100

5. Small Business, Entrepreneurship, and Franchises 127

Part 3: Management and Organization 158
6. Understanding the Management Process 158
7. Creating a Flexible Organization 180
8. Producing Quality Goods and Services 204

Part 4: Human Resources

232

9. Attracting and Retaining the Best Employees 232
10. Motivating and Satisfying Employees and Teams 260

Part 5: Marketing

289

11. Building Customer Relationships through Effective Marketing 289
12. Creating and Pricing Products That Satisfy Customers 314
13. Distributing and Promoting Products 346

Part 6: Managing Information, Accounting, and Financing

385

14. Understanding Information and e-Business 385
15. Using Accounting Information 415
16. Mastering Financial Management 444
Appendix A: Understanding Personal Finances and Investments A-1

Appendix B: Careers in Business B-1
Appendix C: Enhancing Union-Management Relations (on companion Website) C-1
Appendix D: Risk Management and Insurance (on companion Website) D-1
Appendix E: Business Law, Regulation, and Taxation (on companion Website) E-1
Notes

N-1

Answers

TY-1

Glossary

G-1

Name Index NI-1
©Lidija Tomic

Subject Index SI-1

vi


CONTENTS
CONTENTS

Part 1: The Environment
of Business 1

Business Ethics Defined 35
Ethical Issues 35

Chapter 1: Exploring the World of
Business and Economics

1

Inside Business: IBM Reinvents Its Future 2

Individual Factors Affecting Ethics 38 • Social
Factors Affecting Ethics 38 • “Opportunity”
as a Factor Affecting Ethics 38

Why Study Business? 4

Managing Your Career: Interviewing the Interviewer 5
Special Note to Students 6

• Satisfying

Global Economic Challenges: How the Economy
Affects Social Responsibility 44

Capitalism 11 • Capitalism in the United
States 12 • Command Economies 14

The Evolution of Social Responsibility in
Business 47

Measuring Economic Performance 15
The Importance of Productivity in the Global
Marketplace 15 • Important Economic Indicators
That Measure a Nation’s Economy 16

Historical Evolution of Business Social
Responsibility 47

Two Views of Social Responsibility 48

Global Economic Challenges: Cycling through the
Business Cycle 18

The Economic Model 48 • The Socioeconomic
Model 49 • The Pros and Cons of Social
Responsibility 49

The Business Cycle 18
Types of Competition 20

Consumerism 51

Perfect Competition 20 • Monopolistic
Competition 22 • Oligopoly 22 • Monopoly 22

The Six Basic Rights of Consumers 51
Consumerism Forces 52

American Business Today 23

Affirmative Action Programs 54 • Training
Programs for the Hard-Core Unemployed 55

Concern for the Environment 56
Effects of Environmental Legislation 56 • Who
Should Pay for a Clean Environment? 59

Summary 28
Key Terms 29
Discussion Questions 29
Test Yourself 30
Video Case: Peet’s Coffee & Tea: Building a
Community 31
Building Skills for Career Success 32

©Grant Dougal

• Major

Employment Practices 54

Early Business Development 23 • The
Twentieth Century 24 • A New Century:
2000 and Beyond 25 • The Current Business
Environment 26 • The Challenges Ahead 27

Contents

•

Social Responsibility 42

Types of Economic Systems 10

Inside Business: FedEx Delivers Corporate
Citizenship 34

Encouraging Ethical Behavior 39
Government’s Role in Encouraging Ethics 39
Trade Associations’ Role in Encouraging
Ethics 39 • Individual Companies’ Role in
Encouraging Ethics 39

Business: A Definition 8

Chapter 2: Being Ethical and
Socially Responsible

Is It Ethical?: Who Says? 37
Factors Affecting Ethical Behavior 37

Your Future in the Changing World of Business 3

The Organized Effort of Individuals 8
Needs 8 • Business Profit 9

Fairness and Honesty 35 • Organizational
Relationships 36 • Conflict of Interest 36 •
Communications 37

Implementing a Program of Social Responsibility 59
Developing a Program of Social
Responsibility 59 • Funding the Program 60

33

Summary 61
Key Terms 62
Discussion Questions 62
Test Yourself 62
Video Case: At New Belgium Brewing, Greater
Efficiency Is Blowing in the Wind 64
Building Skills for Career Success 64
vii


Chapter 3: Exploring Global
Business

Partnerships 104

66

Inside Business: Global Growth Tops the
McDonald’s Menu 67

Corporations 109

The Basis for International Business 68
Absolute and Comparative Advantage 68

Exporting and Importing 69

Corporate Ownership 109 • Forming a
Corporation 110 • Corporate Structure 112 •
Advantages of Corporations 113 • Disadvantages
of Corporations 114

•

Restrictions to International Business 71
Types of Trade Restrictions 71 • Reasons for
Trade Restrictions 73 • Reasons against Trade
Restrictions 74

Special Types of Business Ownership 115
S-Corporations 115 • Limited-Liability
Companies 115 • Not-for-Profit Corporations 116

The Extent of International Business 74

Cooperatives, Joint Ventures, and Syndicates 117

The World Economic Outlook for Trade 75

Cooperatives 117
Syndicates 117

Is It Ethical?: WHO vs. Tobacco 76
International Trade Agreements 78

117

•

Is It Ethical?: Yogurt Responsibility 118
Growth from Within 118 • Growth through
Mergers and Acquisitions 118 • Current Merger
Trends 119

Methods of Entering International Business 82
Licensing 82 • Exporting 82 • Joint
Ventures 83 • Totally Owned Facilities 84 •
Strategic Alliances 84 • Trading Companies 85
Countertrade 85 • Multinational Firms 85

Global Economic Challenges: The Economics of
Multinational Mergers 121

•

Summary 121
Key Terms 122
Discussion Questions 123
Test Yourself 123
Video Case: Having Fun Is Serious Business at
Jordan’s Furniture 125
Building Skills for Career Success 125

Sources of Export Assistance 87
Financing International Business 87

The Entrepreneurial Sprit: Building a Business
Around Expatriates 88
The Export-Import Bank of the United States 88
Multilateral Development Banks 88 • The
International Monetary Fund 89

•

Chapter 5: Small Business,
Entrepreneurship, and Franchises

Summary 90
Key Terms 90
Discussion Questions 91
Test Yourself 91
Video Case: Fossil: Keeping Watch on a Global
Business 92
Building Skills for Career Success 93

Small Business: A Profile 128
The Small-Business Sector 129
Attract Small Businesses 130

Inside Business: Entertainment Giants Tune Into
Hulu 101

• Industries That

Going Green: Local Businesses Build on Slow
Food 131

The People in Small Businesses: The Entrepreneurs 132
Characteristics of Entrepreneurs 132 • Other
Personal Factors 132 • Motivation 132 • Women
as Small-Business Owners 133 • Teenagers
as Small-Business Owners 133 • Why Some
Entrepreneurs and Small Businesses Fail 134

Part 2: Business Ownership
and Entrepreneurship 100
Chapter 4: Choosing a Form of
Business Ownership

127

Inside Business: Calling All App Entrepreneurs 128

Running a Business Part 1: The Rise of
Finagle A Bagel 95
Building a Business Plan 97

The Importance of Small Businesses in Our
Economy 135

100

Providing Technical Innovation 135 • Providing
Employment 136 • Providing Competition 136 •
Filling Needs of Society and Other Businesses 136

The Pros and Cons of Smallness 136

The Entrepreneurial Sprit: Artsy Etsy 137
Advantages of Small Business 137 •
Disadvantages of Small Business 138

Sole Proprietorships 101
Advantages of Sole Proprietorships 102 •
Disadvantages of Sole Proprietorships 103
Beyond the Sole Proprietorship 104

• Joint Ventures

Corporate Growth 117

The General Agreement on Tariffs and Trade and
the World Trade Organization 78 • International
Economic Organizations Working to Foster
Trade 79

viii

Types of Partners 105 • The Partnership
Agreement 107 • Advantages of
Partnerships 107 • Disadvantages of
Partnerships 108 • Beyond the Partnership 109

•

Developing a Business Plan 139
Components of a Business Plan 140

Contents


The Small Business Administration 141

A Day in the Life of a Manager 173 • Skills
Required for Success 173 • The Importance of
Education and Experience 174

SBA Management Assistance 141 • Help for
Minority-Owned Small Businesses 142 • SBA
Financial Assistance 143

Summary 174
Key Terms 175
Discussion Questions 175
Test Yourself 176
Video Case: The Leadership Advantage at Student
Advantage 177
Building Skills for Career Success 178

Franchising 144
What Is Franchising? 144 • Types of
Franchising 145 • The Growth of Franchising 146 •
Are Franchises Successful? 147 • Advantages of
Franchising 148 • Disadvantages of Franchising 148

Global Perspectives in Small Business 149
Summary 150
Key Terms 151

Discussion Questions 151
Test Yourself 151
Video Case: No Funny Business at Newbury
Comics 153
Building Skills for Career Success 154

Chapter 7: Creating a Flexible
Organization

180

Inside Business: Creating the Future at
Hewlett-Packard 181
What Is an Organization? 181

Running a Business Part 2: Finagle A Bagel: A
Fast Growing Small Business 155
Building a Business Plan 157

Developing Organization Charts 182
for Organizing a Business 184

• Five Steps

Job Design 184
Job Specialization 184 • The Rationale for
Specialization 184 • Alternatives to Job
Specialization 185

Part 3: Management

and Organization 158

Departmentalization 185
By Function 185 • By Product 185 • By
Location 185 • By Customer 186 • Combinations
of Bases 186

Chapter 6: Understanding the
Management Process

158

Inside Business: Xerox: Managing for the Future 159

Delegation, Decentralization, and Centralization 186
Delegation of Authority 186
Authority 187

• Decentralization of

What Is Management? 159

Is It Ethical?: Is an Employee Just a Number? 187

Basic Management Functions 161

The Span of Management 188

Planning 161 • Organizing the Enterprise 163
Leading and Motivating 163 • Controlling

Ongoing Activities 164

•

Kinds of Managers 165
Levels of Management 165 • Areas of
Management Specialization 166

Going Green: Ford’s Green Future 166
Managing Your Career: Moving Into First-Line
Management 167
What Makes Effective Managers? 167
Key Management Skills 168
Roles 168

• Managerial

Leadership 169
Formal and Informal Leadership 169 • Styles of
Leadership 170 • Which Managerial Leadership
Style Is Best? 170

Managerial Decision Making 170
Identifying the Problem or Opportunity 171 •
Generating Alternatives 171 • Selecting an
Alternative 171 • Implementing and Evaluating
the Solution 172

Managing Total Quality 172
What It Takes to Become a Successful Manager

Today 173
Contents

•

Wide and Narrow Spans of Control 189
Organizational Height 189

Chain of Command: Line and Staff Management 190
Line and Staff Positions Compared 190
Line-Staff Conflict 190

•

Forms of Organizational Structure 191
The Bureaucratic Structure 191 • The Matrix
Structure 192 • The Cluster Structure 193 • The
Network Structure 194

Additional Factors That Influence an
Organization 194
Corporate Culture 194
Committees 196

• Intrapreneurship

196

•

The Entrepreneurial Sprit: Intrapreneurship: An
Inside Job 196
Coordination Techniques 197
Organization 197

• The Informal

Summary 198
Key Terms 199
Discussion Questions 199
Test Yourself 200
Video Case: Organizing for Success at Green
Mountain Coffee Roasters 201
Building Skills for Career Success 202
ix


Chapter 8: Producing Quality
Goods and Services

Recruiting, Selection, and Orientation 239

204

The Entrepreneurial Sprit: How Small Businesses
Attract Top Talent 240

Inside Business: Award-Winning Quality at Cargill
Corn Milling 205

Selection 241

What Is Production? 205
Competition in the Global Marketplace 206
Careers in Operations Management 207

243

Compensation Decisions 243 • Comparable
Worth 244 • Types of Compensation 244 •
Employee Benefits 245

Manufacturing Using a Conversion Process 208
Operations Management in the Service
Industry 208

•

Training and Development 247

Where Do New Products and Services Come From? 210

• Product

Analysis of Training Needs 247 • Training and
Development Methods 247 • Evaluation of
Training and Development 248

Performance Appraisal 248
Managing Your Career: Off to a Fast Start 249

Going Green: Peterbilt Trucks Go Green 211

Common Evaluation Techniques 249
Performance Feedback 250

How Do Managers Plan Production? 211
Design Planning 212 • Site Selection
and Facilities Planning 213 • Operational
Planning 215

•

The Legal Environment of HRM 252

Operations Control 216
Purchasing 216 • Inventory Control 217
Scheduling 218 • Quality Control 219

• Orientation

Compensation and Benefits 243

•

The Conversion Process 207

Research and Development 210
Extension and Refinement 210

Recruiting 239

•

Is It Ethical?: Keeping Buyers Free from Influence 219
Management of Productivity and Technology 220
Productivity Trends 220 • Improving Productivity
Growth Rates 221 • The Impact of Computers
and Robotics on Production 221

National Labor Relations Act and LaborManagement Relations Act 252 • Fair Labor
Standards Act 252 • Equal Pay Act 252 •
Civil Rights Acts 252 • Age Discrimination in
Employment Act 253 • Occupational Safety and
Health Act 254 • Employee Retirement Income
Security Act 254 • Affirmative Action 254 •
Americans with Disabilities Act 254

Summary 255
Key Terms 256
Discussion Questions 256
Test Yourself 256
Video Case: The New England Aquarium Casts a
Wide Recruitment Net 258
Building Skills for Career Success 259

Summary 223
Key Terms 224
Discussion Questions 225
Test Yourself 225

Video Case: Washburn Guitars: Signature Model
Quality 226
Building Skills for Career Success 227
Running a Business Part 3: Finagle A Bagel’s
Management, Organization, and Production
Finesse 229
Building a Business Plan 231

Chapter 10: Motivating and
Satisfying Employees and Teams

260

Inside Business: SAS Zigs When Competitors Zag 261
What Is Motivation? 261
Historical Perspectives on Motivation 262

Part 4: Human Resources 232
Chapter 9: Attracting and
Retaining the Best Employees

232

Inside Business: How Google Grows 233
Human Resources Management: An Overview 233
HRM Activities 234

• Responsibility for HRM

234

Human Resources Planning 235
Forecasting Human Resources Demand 235 •
Forecasting Human Resources Supply 235 •
Matching Supply with Demand 236

Cultural Diversity in Human Resources 236
Job Analysis 238
x

Scientific Management 262 • The Hawthorne
Studies 263 • Maslow’s Hierarchy of Needs 264
Herzberg’s Motivation-Hygiene Theory 265 •
Theory X and Theory Y 267 • Theory Z 268 •
Reinforcement Theory 268

•

Contemporary Views on Motivation 269
Equity Theory 269 • Expectancy Theory 270
Goal-Setting Theory 271

•

Key Motivation Techniques 271
Management by Objectives 271 • Job
Enrichment 272 • Behavior Modification 273 •
Flextime 273 • Part-Time Work and Job
Sharing 275 • Telecommuting 275 • Employee
Empowerment 276

Managing Your Career: Do You Have What It Takes
to Telecommute? 277
Contents


Employee Ownership 277

Teams and Teamwork 277
Is It Ethical?: The Dark Side of Virtual Teamwork 278
What Is a Team? 278 • Types of Teams 278 •
Developing and Using Effective Teams 279 •
Roles within a Team 280 • Team
Cohesiveness 280 • Team Conflict and How
to Resolve It 281 • Benefits and Limitations of
Teams 281

Discussion Questions 310
Test Yourself 310
Video Case: Harley-Davidson: More Than Just a
Motorcycle 312
Building Skills for Career Success 313

Chapter 12: Creating and Pricing
Products That Satisfy Customers

314

Inside Business: How Goya Cooks up Growth 315
Summary 282

Key Terms 283
Discussion Questions 283
Test Yourself 283
Video Case: American Flatbread Fires up
Employees 285
Building Skills for Career Success 286

Classification of Products 316
Consumer Product Classifications 316
Product Classifications 316

The Product Life Cycle 317
Stages of the Product Life Cycle 318
Product Life Cycle 320

Running a Business Part 4: Inside the People
Business at Finagle A Bagel 287
Building a Business Plan 288

Managing the Product Mix 320

Part 5: Marketing 289

Inside Business: How Kimberly-Clark Builds
Customer Loyalty 290
Managing Customer Relationships 291
Utility: The Value Added by Marketing 292
The Marketing Concept 293
Evolution of the Marketing Concept 293 •
Implementing the Marketing Concept 294

Markets and Their Classification 295
Developing Marketing Strategies 296
Target Market Selection and Evaluation 296 •
Creating a Marketing Mix 299 • Marketing
Strategy and the Marketing Environment 301

Developing a Marketing Plan 301

• Using the

Product Line and Product Mix 320
Managing Existing Products 321
Products 321

Chapter 11: Building Customer
Relationships through Effective
Marketing

• Business

• Deleting

The Entrepreneurial Sprit: Big Innovations from
Small Business Partners 322
Developing New Products 322

Branding, Packaging, and Labeling 325

289

What Is a Brand? 325 • Types of Brands 325
Benefits of Branding 325 • Choosing
and Protecting a Brand 327 • Branding
Strategies 327 • Brand Extensions 328 •
Packaging 328 • Labeling 329

•

Pricing Products 330
The Meaning and Use of Price 330 • Supply and
Demand Affect Price 330 • Price and Nonprice
Competition 331 • Buyers’ Perceptions of Price 332

Pricing Objectives 332
Survival 332 • Profit Maximization 333 • Target
Return on Investment 333 • Market-Share
Goals 333 • Status-Quo Pricing 333

Pricing Methods 333
Cost-Based Pricing 333 • Demand-Based
Pricing 334 • Competition-Based Pricing 335

Market Measurement and Sales Forecasting 302

Pricing Strategies 335

Marketing Information 303

Is It Ethical?: Inside the Rent-to-Own Business 336

Marketing Information Systems 303
Research 303

• Marketing

Is It Ethical?: Does Highly-Targeted Marketing
Invade Your Privacy? 304
Using Technology to Gather and Analyze
Marketing Information 304

Types of Buying Behavior 306
Consumer Buying Behavior 306
Buying Behavior 307

• Business

Global Economic Challenges: Can Coca-Cola Win
Big in China? 308
Summary 308
Key Terms 310
Contents

New Product Pricing 336 • Differential
Pricing 336 • Psychological Pricing 337
Product-Line Pricing 339 • Promotional
Pricing 339

•

Pricing Business Products 340
Geographic Pricing 340
Discounting 340

• Transfer Pricing

340

•

Summary 341
Key Terms 342
Discussion Questions 342
Test Yourself 343
Video Case: The Smart Car: Tiny with a Price Tag to
Match 344
Building Skills for Career Success 345
xi


Chapter 13: Distributing and
Promoting Products

346

Inside Business: Best Buy’s Burst of Retailing
Speed 347
Distribution Channels and Market Coverage 347
Commonly Used Distribution Channels 348

The Entrepreneurial Sprit: Are You Ready to Own a
Store? 349
Level of Market Coverage 349

Partnering through Supply-Chain Management 350
Marketing Intermediaries: Wholesalers 351
Wholesalers Provide Services to Retailers and
Manufacturers 351 • Types of Wholesalers 351

Marketing Intermediaries: Retailers 352
Types of Retail Stores 353

• Types of

Physical Distribution 359
Inventory Management 359 • Order
Processing 360 • Warehousing 360 • Materials
Handling 361 • Transportation 361

What Is Integrated Marketing
Communications? 363

385

Inside Business: Facebook Faces Privacy Issues 386
How Can Information Reduce Risk When Making a
Decision? 387
Information and Risk 387 • Information Rules 388 •
The Difference between Data and Information 388

What Is a Management Information System? 389
Managers’ Information Requirements 389
and Complexity of the System 390

• Size

Advertising 364
Types of Advertising by Purpose 364 •
Major Steps in Developing an Advertising
Campaign 365 • Advertising Agencies 368
Social and Legal Considerations in
Advertising 368

Collecting Data 391 • Storing Data 392 •
Updating Data 392 • Processing Data 392
Presenting Information 393

•

Improving Productivity with the Help of Computers
and Technology 395
Making Smart Decisions 395 • Helping Employees
Communicate 396 • Assisting the Firm’s Sales
Force 397 • Recruiting and Training Employees 397 •
Business Applications Software 397

The Internet, the Intranet, and Networks 398
Accessing the Internet 399

•

Personal Selling 369
Kinds of Salespersons 369 • The Personal-Selling
Process 370 • Major Sales Management
Tasks 371

Sales Promotion 371
Sales Promotion Objectives 371 • Sales
Promotion Methods 372 • Selection of Sales
Promotion Methods 372

Public Relations 374
Types of Public-Relations Tools 374
Public Relations 375

How Do Employees Use an Information System? 391

Using Computers and the Internet to Obtain
Information 398

The Promotion Mix: An Overview 363

• Uses of

Summary 375
Key Terms 377
Discussion Questions 377
Test Yourself 378
Video Case: Netflix Uses Distribution to
Compete 380

Building Skills for Career Success 380
Running a Business Part 5: Finagle A Bagel’s
Approach to Marketing 382
Building a Business Plan 384

xii

Chapter 14: Understanding
Information and e-Business

Going Green: The Future of the Paperless Office 391

Global Economic Challenges: Wrapping the World
in Wal-Marts? 355
Types of Nonstore Selling 356
Shopping Centers 358

Part 6: Managing
Information, Accounting,
and Financing 385

•

Managing Your Career: Your Digital Rep 399
Creating Web Pages 400

Defining e-Business 401
Organizing e-Business Resources 401 • Satisfying
Needs Online 402 • Creating e-Business Profit 403

Fundamental Models of e-Business 404
Business-to-Business (B2B) Model 404 •
Business-to-Consumer (B2C) Model 405

The Future of e-Business: Growth, Opportunities,
and Challenges 407
Internet Growth Potential 407 • Environmental
Forces Affecting e-Business 408

Summary 409
Key Terms 410
Discussion Questions 410
Test Yourself 411
Video Case: Manifest Digital Helps Clients Upgrade
the Customer Experience 412
Building Skills for Career Success 413

Chapter 15: Using Accounting
Information

415

Inside Business: PricewaterhouseCoopers Peeks
behind the Numbers 416

Contents


Why Accounting Information Is Important 417

Global Economic Challenges: Microfinance Goes
Global 456

Recent Accounting Problems for Corporations
and Their Auditors 417 • Why Audited Financial
Statements Are Important 418 • Reform: The
Sarbanes-Oxley Act of 2002 419

Sources of Short-Term Debt Financing 456
Sources of Unsecured Short-Term
Financing 457 • Sources of Secured ShortTerm Financing 458 • Factoring Accounts
Receivable 459 • Cost Comparisons 459

Who Uses Accounting Information 419
The People Who Use Accounting
Information 420 • Different Types of
Accounting 421 • Careers in Accounting 421

Sources of Equity Financing 460
Selling Stock 460

The Accounting Process 422
The Accounting Equation 422
Cycle 423

Is It Ethical?: AIG Pays out after the Bailout 461

• The Accounting

Retained Earnings 462 • Venture Capital and

Private Placements 462

The Balance Sheet 424
Assets 426

• Liabilities and Owners’ Equity

Sources of Long-Term Debt Financing 463
427

Long-Term Loans 464 • Corporate Bonds 465
Cost Comparisons 466

The Entrepreneurial Sprit: Why Startups Need
CPAs 427

•

Summary 467
Key Terms 468
Discussion Questions 468
Test Yourself 468
Video Case: Pizzeria Uno 470
Building Skills for Career Success 471

The Income Statement 428
Revenues 429 • Cost of Goods Sold 430 •
Operating Expenses 431 • Net Income 431

The Statement of Cash Flows 431

Evaluating Financial Statements 432

Running a Business Part 6: Finagle A Bagel
Counts on Accounting and Finance 472
Building a Business Plan 474

Going Green: Annual Reports Go Green 433
Using Annual Reports to Compare Data for
Different Accounting Periods 433 • Comparing
Data with Other Firms’ Data 434 • Profitability
Ratios 435 • Short-Term Financial Ratios 435 •
Activity Ratios 436 • Debt-to-Owners’-Equity
Ratio 437 • Northeast’s Financial Ratios: A
Summary 437

Appendix A

A-1

Understanding Personal Finances and Investments A-1
Preparing for an Investment Program A-1

Summary 438
Key Terms 439
Discussion Questions 440
Test Yourself 440
Video Case: The Ethics of “Making the Numbers” 442
Building Skills for Career Success 443

Managing Your Personal Finances A-1 •

Investment Goals A-2 •A Personal Investment
Program A-2 • Important Factors in Personal
Investment A-3 •Surviving a Financial Crisis A-4

How Securities Are Bought and Sold A-5
The Role of an Account Executive A-5
Regulation of Securities Trading A-7

•

Traditional Investment Alternatives A-8

Chapter 16: Mastering Financial
Management
Inside Business: SCORE, “Counselors to
America’s Small Business” 445
What Is Financial Management? 446
The Need for Financing 446 • The Need
for Financial Management 448 • Careers in
Finance 449

Planning—The Basis of Sound Financial
Management 450
Developing the Financial Plan 450 • Monitoring
and Evaluating Financial Performance 453

Financial Services Provided by Banks and Other
Financial Institutions 453
Traditional Banking Services for Business
Clients 453 • Why Has the Use of Credit

Transactions Increased? 454 • Electronic Banking
Services 455 • International Banking Services 455

Contents

444

Portfolio Management A-8 • Asset Allocation,
the Time Factor, and Your Age A-8 • Bank
Accounts A-9 • Corporate and Government
Bonds A-9 • Common Stock A-10 •
Preferred Stock A-12 • Mutual Funds A-12 •
Real Estate A-14 • High-Risk Investment
Alternatives A-14

Sources of Financial Information A-14
The Internet A-14 • Other Sources of Financial
Information A-15 • A Final Note A-16

Summary A-16

Appendix B

B-1

Careers in Business B-1
The Importance of Career Choices B-1
Personal Factors Influencing Career Choices B-1
Trends in Employment B-2

•

Occupational Search Activities B-3

xiii


Planning and Preparation B-4

Property and Casualty Insurance D-6

Letter and Résumé B-6 • Job Application
Forms B-7 • The Job Interview B-9 • Accepting
an Offer B-12

Fire Insurance D-6 • Burglary, Robbery, and Theft
Insurance D-7 • Motor Vehicle Insurance D-8 •
Business Liability Insurance D-9 • Marine
(Transportation) Insurance D-10 • Business
Interruption Insurance D-10

A Final Note about Careers B-12
Summary B-13

Public and Employer-Sponsored Insurance for
Individuals D-10

Appendix C (on the companion
Website)

C-1

Life Insurance D-12

Enhancing Union-Management Relations C-1

Term Life Insurance D-12 • Whole Life
Insurance D-12 • Endowment Life Insurance D-12
Universal Life Insurance D-13

The Historical Development of Unions C-1
Early History C-1 • Evolution of Contemporary
Labor Organizations C-3

Organized Labor Today C-3

Summary D-13

Union Membership C-3 • Membership Trends C-4 •
Union-Management Partnerships C-4

Appendix E (on the companion
Website)

Labor-Management Legislation C-5
Norris-LaGuardia Act C-5 • National Labor
Relations Act C-6 • Fair Labor Standards
Act C-6 • Labor-Management Relations Act C-6
Landrum-Griffin Act C-7

Laws and the Courts E-1

•

Sources of Laws E-1 • Public Law and Private
Law: Crimes and Torts E-2 • The Court
System E-3

Why Some Employees Join Unions C-7 • Steps in
Forming a Union C-7 • The Role of the NLRB C-9

Contract Law E-4
Requirements for a Valid Contract E-4 •
Performance and Nonperformance E-5 • Sales
Agreements E-6

Collective Bargaining C-9

• Later Contracts

E-1

Business Law, Regulation, and Taxation E-1

The Unionization Process C-7

The First Contract C-9

Public Insurance D-10 • Workers’
Compensation D-11 • Health Care Insurance D-11

C-10

Union-Management Contract Issues C-10

Other Laws That Affect Business E-6

Employee Pay C-10 • Working Hours C-11 •
Security C-12 • Management Rights C-12 •
Grievance Procedures C-12

Property Law E-6 • Laws Relating to Negotiable
Instruments E-8 • Agency Law E-9 • Bankruptcy
Law E-9

Union and Management Negotiating Tools C-14

Government Regulation of Business E-10

Strikes C-14 • Slowdowns and Boycotts C-14 •
Lockouts and Strikebreakers C-15 • Mediation
and Arbitration C-15

Federal Regulations to Encourage
Competition E-10 • Other Areas of
Regulation E-13

The Deregulation Movement E-13

Summary C-16

Government Taxation E-14

Appendix D (on the companion
Website)
Risk Management and Insurance D-1
The Element of Risk D-1
Risk Management D-1
Risk Avoidance D-2 • Risk Reduction D-2
Assumption D-2 • Shifting Risks D-3

• Risk

Insurance and Insurance Companies D-3

Federal Taxes E-14

D-1

• State and Local Taxes

E-16

Summary E-17
Notes N-1
Answers TY-1
Glossary G-1
Name Index NI-1
Subject Index SI-1

Basic Insurance Concepts D-4 • Ownership
of Insurance Companies D-5 • Careers in
Insurance D-6

xiv

Contents


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Acknowledgments
We would like to thank Marian Wood and Elisa Adams for their help
on this edition, as well as Larry Flick of Three Rivers Community College
for his work on the Instructor Manual, PowerPoints, and eLecture
program. Our great thanks also go out to Theresa Kapoor, Dave Kapoor,
Kathryn Thumme, Karen Tucker, Saleha Amin, Courtney Bohannon, and
Vasuda Singh.
The quality of this book and its supplements program has been helped
immensely by the insightful and rich comments of a special set of
instructors. Their thoughtful and helpful comments had real impact
in shaping the final product. In particular, we wish to thank:

John Adams, San Diego Mesa College
Harvey Bronstein, Oakland Community College - Orchard Ridge
Laura Bulas, Central Community College - Hastings
Mary Cooke, Surry Community College
Dean Danielson, San Joaquin Delta College
Gary Donnelly, Casper College

Karen Edwards, Chemeketa Community College
Karen Gore, Ivy Tech Community College - Evansville
Carol Gottuso, Metropolitan Community College - Fort Omaha
Eileen Kearney, Montgomery Community College
Robert Lupton, Central Washington University
John Mago, Anoka Ramsey Community College
Myke McMullen, Long Beach City College
Carol Miller, Community College of Denver
Jadeip Motwani, Grand Valley State
Mark Nagel, Normandale Community College
Dwight Riley, Richland College
Gail South, Montgomery College - Germantown
Leo Trudel, University of Maine - Fort Kent
Randy Waterman, Richland College
Leslie Wiletzky, Pierce College - Ft.Steilacoom
Anne Williams, Gateway Community College

Many talented professionals
at Cengage Learning have
contributed to the development
of Foundations of Business,
Second Edition. We are
especially grateful to

Jack Calhoun,
Melissa Acuña,
Erin Joyner,
Joanne Dauksewicz,
Colleen Farmer,
Sarah Greber,

Kristen Meere,
Renee Yocum,
Jana Lewis,
Shanna Shelton,
and Kayti Purkiss.
Their inspiration, patience, support, and
friendship are invaluable.


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1

PART 1

Exploring the World of
Business and Economics
WHY THIS CHAPTER
MATTERS. Studying

©Spencer Grant/PhotoEdit

business will help
you to choose a
career, become a
successful employee,
perhaps start your
own business, and
become a betterinformed consumer

and investor.

LEARNING OBJECTIVES

1
2
3
4

Discuss your future in
the world of business.
Define business and identify
potential risks and rewards.
Define economics and describe the two types of
economic systems: capitalism and command economy.
Identify the ways to measure
economic performance.

5
6
7

Examine the four different phases
in the typical business cycle.
Outline the four types
of competition.
Summarize the factors that affect the business
environment and the challenges American
businesses will encounter in the future.

Get Flash Cards, Quizzes,
Games, Crosswords and more
@ www.cengage.com/introbusiness/
pride


IBM Reinvents Its Future

DID YOU
KNOW?
With $103 billion in
annual revenue, IBM
has $14 billion in
cash for acquiring
businesses, paying
for research, and
building facilities.

International Business Machines (IBM) knows how to change with the times and
technology. Founded in 1911 as the Computing-Tabulating-Recording Company, it
originally made mechanical time-clocks and adding machines for U.S. and Canadian
businesses. Today, IBM employs more than 400,000 worldwide, rings up $103 billion
in annual revenue, and offers a wide range of information technology products and
services for consumers and business customers.
The company has been reinventing itself year after year for nearly a century,
entering new markets, filing new patents, and finding new paths to profit. IBM
expanded into Europe, Latin America, and Asia during the 1920s. It introduced automated computing equipment in the 1940s and by the 1950s, it was manufacturing
giant computers bundled with programs for billing, payroll, and inventory control.
In 1960, IBM began tailoring computer and software packages to the needs of individual business customers, a move that launched the company into the lucrative
market for technology services.

During the 1980s, IBM revolutionized business computing when it introduced
the desktop personal computer. As the Internet Age dawned during the 1990s, the
firm expanded into network servers and electronic commerce services. In 2005, it
sold its PC business to Lenovo so it could focus on technology products and services
for businesses of all sizes. Despite intense competition from Hewlett-Packard and
other rivals, IBM has continued to prosper in the past decade by deemphasizing
equipment in favor of more profitable software and services.
Whether the global economy expands or contracts, IBM is ready for all kinds
of challenges and opportunities. It has $14 billion in cash to acquire compatible
businesses, pay for advanced research, and construct new facilities. More than 70
percent of its skilled workforce is now located outside the United States, in nations
where costs are low and growth is brisk. Every year, IBM files more than 4,000
patents and commercializes hundreds of scientific discoveries. In short, it’s a
century-old company that’s always on the cutting edge.1

Economic Crisis! Just two words, but these same two words will change the way
that the world does business in the future. While the United States along with other
countries around the globe were experiencing an economic meltdown that rivals the
“Great Depression,” businesses and individuals were also suffering. Virtually, every
person was affected in some way by the economic crisis that began in late 2007.
Just for a moment, think about the economic problems below and how they affect
not only businesses, but also individuals.
•
•
•
•
•
•
•

Unemployment rates approaching 10 percent
Reduced consumer spending
A slowdown in the homebuilding industry
Automobile manufacturers file for bankruptcy
A large number of troubled banks, savings and loan associations, and financial
institutions on the verge of financial collapse
An increasing number of business failures
Depressed stock values that reduced the value of investment and retirement
accounts for most individuals

In spite of the efforts of the federal government to provide the economic stimulus needed to stabilize the economy, the nation was still in the midst of recession
when this text was published. Hopefully, by the time you read this material, the
nation’s economy will be improving. Still, it is important to remember the old adage,
“History is a great teacher.” Both the nation and individuals should take a look at
2

Part 1: The Environment of Business


what went wrong to avoid making the same mistakes in the future. Also, it helps
to keep one factor in mind. Despite all of the problems described above, make no
mistake about it, our economic system will survive. In fact, our economy continues
to adapt and change to meet the challenges of an ever-changing world.
Our economic system provides an amazing amount of freedom that allows
businesses that range in size from the small corner grocer to ExxonMobil to adapt
to changing business environments. Within certain limits, imposed mainly to ensure
public safety, the owners of a business can produce any legal good or service they
choose and attempt to sell it at the price they set. This system of business, in which
individuals decide what to produce, how to produce it, and at what price to sell
it, is called free enterprise. Our free-enterprise system ensures, for example, that

Dell Computer can buy parts from Intel and software from Microsoft and manufacture its own computers. Our system gives Dell’s owners the right to make a
profit from the company’s success. It gives Dell’s management the right to compete
with Hewlett-Packard, Sony, and IBM. And it gives computer buyers the right to
choose.
In this chapter, we look briefly at what business is and how it got that way.
First, we discuss your future in business and explore some important reasons for
studying business. Then we define business, noting how business organizations
satisfy needs and earn profits. Next, we examine how capitalism and command
economies answer four basic economic questions. Then our focus shifts to how the
nations of the world measure economic performance and the four phases in a typical
business cycle. We also outline different types of competition. Next, we look at the
events that helped shape today’s business system, the current business environment,
and the challenges that businesses face.

Your Future in the Changing World of Business
The key word in this heading is changing. When faced with both economic problems
and increasing competition not only from firms in the United States but also from
international firms located in other parts of the world, employees and managers
now began to ask the question: What do we do now? Although this is a fair question, it is difficult to answer. Certainly, for a college student taking business courses
or an employee just starting a career, or an unemployed worker looking for work,
the question is even more difficult to answer. And yet there are still opportunities
out there for people who are willing to work hard, continue to learn, and possess
the ability to adapt to change. Let’s begin our discussion in this section with three
basic concepts.
•
•
•

LEARNING
1 OBJECTIVE

Discuss your future in the
world of business.

What do you want?
Why do you want it?
Write it down!

During a segment on the Oprah Winfrey television show, Joe Dudley, one of the
world’s most successful black business owners, gave the preceding advice to anyone
who wants to succeed in business. And his advice is an excellent way to begin our
discussion of what free enterprise is all about. What is so amazing about Dudley’s
success is that he started a manufacturing business in his own kitchen, with his wife
and children serving as the new firm’s only employees. He went on to develop his
own line of hair-care products and to open a chain of beauty schools and beauty supply stores. Today, Mr. Dudley has built a multimillion-dollar empire and is president
of Dudley Products, Inc. Not only a successful business owner, he is also a winner
of the Horatio Alger Award—an award given to outstanding individuals who have
succeeded in the face of adversity.2 While many people would say that Joe Dudley
was just lucky or happened to be in the right place at the right time, the truth is that
he became a success because he had a dream and worked hard to turn his dream into
a reality. Today, Dudley’s vision is to see people succeed—to realize “The American
Dream.” He would be the first to tell you that you have the same opportunities that
Chapter 1: Exploring the World of Business and Economics

free enterprise the system of
business in which individuals are
free to decide what to produce,
how to produce it, and at what
price to sell it

3

Who Makes the Most Money?
$100,000
$75,861

$49,691

he had. According to Mr. Dudley, “Success is a journey, not just a destination.”3
Whether you want to obtain part-time employment to pay college and living expenses, begin your
career as a full-time employee, or start a business,
you must bring something to the table that makes
you different from the next person. Ask yourself:
What can I do that will make employers want to pay
me a salary? What skills do I have that employers
need? With these two questions in mind, we begin
the next section with another basic question: Why
study business?

Why Study Business?

$39,426

The potential benefits of a college education are
enormous. To begin with, there are economic benefits. Over their lifetimes, college graduates on average earn much more than high school graduates. And
High school
Some college,
Bachelor’s
Professional
while lifetime earnings are substantially higher for

graduate
no degree
degree
degree
college graduates, so are annual income amounts—
Source: 2009 Statistical Abstract of the United States, p. 443.
see the Spotlight feature to the left.
The nice feature of education and knowledge is that
once you have it, no one can take it away. It is yours to use
for a lifetime. In this section, we explore what you may expect to get out of this
business course and text. You will find at least four quite compelling reasons for
studying business.

For Help in Choosing a Career What do you want to do with the rest
of your life? Someplace, sometime, someone probably has asked you this same
question. And like many people, you may find it a difficult question to answer. This
business course will introduce you to a wide array of employment opportunities. In
private enterprise, these range from small, local businesses owned by one individual
to large companies such as American Express and Marriott International. There are
also employment opportunities with federal, state, county, and local governments
and with not-for-profit organizations such as the Red Cross and Save the Children.
For help in deciding what career might be right for you, read Appendix B: Careers
in Business, which appears at the end of this text.
In addition to career information in Appendix B, a number of additional websites provide information about career development. For more information, visit the
following sites:
•
•
•
•

Career Builder at www.careerbuilder.com
Career One Stop at www.careeronestop.org
Monster at www.monster.com
Yahoo! Hot Jobs at

One thing to remember as you think about what your ideal career might be
is that a person’s choice of a career ultimately is just a reflection of what he or
she values and holds most important. What will give one individual personal
satisfaction may not satisfy another. For example, one person may dream of a
career as a corporate executive and becoming a millionaire before the age of
thirty. Another may choose a career that has more modest monetary rewards
but that provides the opportunity to help others. One person may be willing
to work long hours and seek additional responsibility in order to get promotions and pay raises. Someone else may prefer a less demanding job with little
stress and more free time. What you choose to do with your life will be based
on what you feel is most important. And the you is a very important part of
that decision.

4

Part 1: The Environment of Business


•

Interviewing the Interviewer
Part of getting ready for a job interview is practicing
answers to questions such as “What are your strengths
and weaknesses?” Being prepared with questions to
ask the interviewer is just as important. If you have
no questions, the interviewer may think you don’t

care about the job or haven’t given much thought to
the interview. Here are a few questions to keep the
conversation flowing and help you make up your mind
about a particular position:

•
•
•

•

Why is this job open at this time? (Learn whether the
last person in this job was promoted, transferred, or
let go.)
How will you measure success in this job?
(Understand how job performance will be assessed.)

One final question to ask, tactfully: “When do you
expect to make a decision about hiring for this position?”
Sources: “Ask and Ye May Receive . . . That Job You Want,” Associated Press,
April 24, 2009, Maureen Moriarty,
“Workplace Coach: What Not to Do During the Job Interview,” Seattle PostIntelligencer, August 10, 2008, />workcoach11.html; Marshall Krantz, “Nine Things to Ask Your Future Boss, the
CEO,” CFO.com, September 4, 2008, www.cfo.com.

What are the main challenges I can expect to face in
this job? (Learn as much as you can about potential
problems upfront.)
What skills and training are especially critical to
success in this job? (See whether your qualifications
fit the job.)

What are the company’s goals and how would an
effective employee in this job help achieve those
goals? (Find out where the company is headed and
how this job contributes to its success.)

To Be a Successful Employee Deciding on
the type of career you want is only a first step. To get
a job in your chosen field and to be successful at it, you will have to develop a
plan, or road map, that ensures that you have the skills and knowledge the job
requires. You will be expected to have both the technical skills needed to accomplish a specific task and the ability to work well with many types of people in
a culturally diverse workforce. Cultural (or workplace) diversity refers to the
differences among people in a workforce owing to race, ethnicity, and gender.
These skills, together with a working knowledge of the American business system, can give you an inside edge when you are interviewing with a prospective
employer.
This course, your instructor, and all the resources available at your college or
university can help you to acquire the skills and knowledge you will need for a successful career. But don’t underestimate your part in making your dream a reality.
It will take hard work, dedication, perseverance, and time management to achieve
your goals. Communication skills are also important. Today, most employers are
looking for employees who can compose a business letter and get it in mailable
form. They also want employees who can talk with customers and use e-mail to
communicate with people within and outside the organization. Employers also
will be interested in any work experience you may have had in cooperative work/
school programs, during summer vacations, or in part-time jobs during the school
year. These things can make a difference when it is time to apply for the job you
really want.

©Corbis RF

To Start Your Own Business Some people prefer to work for themselves, and they open their own businesses. To be successful, business owners must
possess many of the same skills that successful employees have. And they must be

willing to work hard and put in long hours.

Chapter 1: Exploring the World of Business and Economics

cultural (or workplace)
diversity differences among
people in a workforce owing to
race, ethnicity, and gender

5