Final Flashcards

Question

What are the disadvantages of corporations

Answer 1

``` Double taxation on profits. The corporation pays tax on profits, and the shareholders pay tax when they receive money from the corporation as a dividend. Although some income tax laws mitigate this problem • More expensive and time consuming to setup and form a corporation • More government restrictions • Publicly listed companies incur significant annual expenses due to audit fees and required reporting ```

Answer 2

When you eat a Sunkist orange or buy a jacket at Mountain Equipment Co-op (MEC), you are purchasing from a cooperative. A cooperative is a legal entity with several corporate features, such as limited liability, and unlimited life span, an elected board of directors, and an administrative staff. Member- owners pay fees to the cooperative and share in the profits, which can be distributed to members in proportion to their contributions. Because they do not retain any profits, cooperatives are not subject to taxes, in Canada cooperatives can retain the profit until a member chooses to cash their share in.

Answer 3

In a joint venture, two or more companies form an alliance to pursue a specific project, usually for a specified time period. There are many reasons for joint ventures. The project may be too large for one company to handle on its own, and joint ventures also afford companies access to new markets, products, or technology. Both large and small companies can benefit from joint ventures.

Answer 4

``` • Recognized name, product and concept reduces risk • Ability to expand using proven model and format • Management and training assistance to help with franchise success • Easier to setup, as product development, supply chain and design are provided • Financial assistance can be easier to obtain if linked to a well known brand ```

Answer 5

Must pay a royalty to franchisor, usually as a % of sales and/or profit • Cost of investing in (buying) a franchise can be expensive • Restricted in how you can operate and promote your business under the franchise agreement • May be required to purchase materials from franchisor at high price • Can lose franchise rights if policies are not followed

Answer 6

Planning/organizing/controlling/leading

Answer 7

Scarcity/durability/portability/divisibilité Function of money: - uniform system - medium of exchange - standard of value - store of value

Answer 8

``` Set new product goals Develop new ideas Screen ideas and concepts Develop the market Test market Introduce the product ```

Answer 9

A product manager develops and implements a complete strategy and marketing program for a specific product or brand of product. Some companies may have numerous brands of the same type of product, such as many versions of laundry soap, each with different target markets, brand names, and attributes. Product management first appeared at Procter & Gamble in 1929.

Answer 10

Intro Growth Maturity Decline

Answer 11

``` Product will face many obstacles and focus is on developing a market for the product (if a new market) or gaining market share if entering an existing market. ``` Competition may be light, the introductory stage usually features frequent product modifications, limited distribution, and heavy promotion of the idea, not necessarily the brand. The failure rate is high. The Internet of Things (IOT) and associated devices is just starting to find a market but has not yet gained widespread consumer acceptance. ``` Usually operating at breakeven or a loss while market is being created. Production & marketing costs are high due to low volume ```

Answer 12

``` If a product survives the first stage sales will begin to grow, profits are healthy, and many competitors enter the market. Large companies may start to acquire small pioneering firms that have reached this stage. ``` Typically see aggressive brand advertising and communicating the differences between brands. Distribution becomes a major key to success and manufacturers scramble to find dealers and distributors. Without adequate distribution, it is impossible to establish a strong market position. Smartphones are starting to approach the peak of the growth phase. ``` Sales are growing at an increasing rate, profits are growing. Price reductions may result from increased competition and costs are reduced due to economies of scale. Product development costs have likely been recovered. ```

Answer 13

``` After the growth stage, sales continue to mount—but at a decreasing rate. Most products that have been on the market for a long time are in this stage. ``` Most marketing strategies are designed for mature products. One such strategy is to bring out several variations of a basic product (line extension). Kool-Aid, for instance, was originally offered in six flavors. Today there are more than 50. Sales growth slowing, profits have peaked or show signs of decline.

Answer 14

``` The rate of decline is governed by two factors: the rate of change in consumer tastes and the rate at which new products enter the market. ``` Sometimes companies can improve a product by implementing changes to the product, such as new ingredients or new services. If the changes are accepted by customers, it can lead to a product moving out of the decline stage and back into the introduction stage. Sales and profits declining

Answer 15

Marketing is the process of getting the right goods or services or ideas to the right people at the right place, time, and price, using the right promotion techniques and utilizing the appropriate people to provide the customer service associated with those goods, services, or ideas: Focusing on the needs and wants of the customers so the organization can distinguish its product(s) from competitors’ offerings. Products can be goods, services, or ideas. • Integrating all of the organization’s activities, including production and promotion, to satisfy these wants and needs. • Achieving long-term goals for the organization by satisfying customer wants and needs legally and responsibly. Key components: - customer value - customer satisfaction - Building relationships

Answer 16

Customer value is the ratio of benefits for the customer (organization or consumer) to the sacrifice necessary to obtain those benefits. The customer determines the value of both the benefits and the sacrifices. Creating customer value is a core business strategy of many successful firms. Customer value is rooted in the belief that price is not the only thing that matters.

Answer 17

Customer satisfaction is a theme stressed throughout this text. Customer satisfaction is the customer’s feeling that a product has met or exceeded expectations. Expectations are often the result of communication, especially promotion. Utilizing marketing research to identify specific expectations and then crafting marketing strategy to meet or exceed those expectations is a major contributor to success for an organization

Answer 18

Relationship marketing is a strategy that focuses on forging long-term partnerships with customers. Companies build relationships with customers by offering value and providing customer satisfaction. Once relationships are built with customers, customers tend to continue to purchase from the same company, even if the prices of the competitors are less or if the competition offers sales promotions or incentives. Customers (both organizations and consumers) tend to buy products from suppliers whom they trust and feel a kinship with, regardless of offerings of unknown competitors. Companies benefit from repeat sales and referrals that lead to increases in sales, market share, and profits. Costs fall because it is less expensive to serve existing customers than to attract new ones

Answer 19

Distribution is efficiently managing the acquisition of raw materials by the factory and the movement of products from the producer or manufacturer to business-to-business (B2B) users and consumers.

Answer 20

Agents and bookers- bring buyers and sellers together (hired on commission and does not deal with product) Industrial distributors- independent wholesalers that sell to industrial users (usually have sales force and make deliveries) Wholesalers- buys from manufacturer or other wholesaler for resale (resells finished good to retailers and takes possession of product) Retailers-buys from manufacturer or wholesaler for resale (sells goods to end consumers and industrial users)

Answer 21

Internet or mail order… can also provide another avenue for large firms

Answer 22

Focus on what they are good at. A factory is bad at selling and a store is bad at making (traditionally)

Answer 23

Packs products into more manageable order sizes for customers. 2. Allows customers to purchase products in one place. 3. Removes need for the producer to source individual customers. 4. Provides a storage location for goods until customers are ready to purchase.

Answer 24

Accordingly, supply-chain managers are responsible for making channel strategy decisions, coordinating the sourcing and procurement of raw materials, scheduling production, processing orders, managing inventory, transporting and storing supplies and finished goods, and coordinating customer-service activities. Supply-chain managers are also responsible for the management of information that flows through the supply chain

Answer 25

Natural resources/ raw materials/Human Resources/capital

Answer 26

Products and services

Answer 27

1. Production planning. The first decisions facing operations managers come at the planning stage. At this stage, managers decide where, when, and how production will occur. They determine site locations and obtain the necessary resources. 2. Production control. At this stage, the decision-making process focuses on controlling quality and costs, scheduling, and the actual day-to-day operations of running a factory or service facility. 3. Improving production and operations. The final stage of operations management focuses on developing more efficient methods of producing the firm’s goods or services.

Answer 28

One for all: mass production- Mass production, manufacturing many identical goods at once, was a product of the Industrial Revolution. Henry Ford’s Model-T automobile is a good example of early mass production. Each car turned out by Ford’s factory was identical, right down to its color. If you wanted a car in any color except black, you were out of luck. Canned goods, over-the-counter drugs, and household appliances are other examples of goods that are mass-produced. The emphasis in mass production is on keeping manufacturing costs low by producing uniform products using repetitive and standardized processes. As products became more complicated to produce, mass production also became more complex. Just for You: Customizing Goods In mass customization, goods are produced using mass-production techniques, but only up to a point. At that point, the product or service is custom-tailored to the needs or desires of individual customers. For example, American Leather, a Dallas-based furniture manufacturer, uses mass customization to produce couches and chairs to customer specifications within 30 days. The basic frames in the furniture are the same, but automated cutting machinery precuts the color and type of leather ordered by each customer. Using mass-production techniques, they are then added to each frame.

Answer 29

A second consideration in choosing a production process is timing. A continuous process uses long production runs that may last days, weeks, or months without equipment shutdowns. This is best for high- volume, low-variety products with standardized parts, such as nails, glass, and paper. Some services also use a continuous process. Your local electric company is an example. Per-unit costs are low, and production is easy to schedule.

Answer 30

Financing (1st Stage): involves how an organization obtains money from investors (equity) or borrows money (debt). The investors and lenders are rewarded in the form of dividends and debt payments. Investing (2nd Stage): is when the organization takes the money from stage 1 and acquires the different factors of production it needs to operate. This often includes land, buildings, equipment and inventory. Operating (3rd Stage): is the day-to-day operation of the business. This involves selling the product (generating revenue) and paying bills (expenses). Profit is what is left over after the expenses are paid.

Answer 31

Financial planning and monitoring Investment -spending money Financing -raising money GOAL: maximize the value of the firm to it’s owners

Answer 32

``` Term loan (secured or unsecured) Bonds (secured or unsecured) Common shares (unsecured) Preferred shared (semi secured) Venture (unsecured) ```

Answer 33

``` Bank loan (unsecured) Other loan (secured) Factoring (unsecured) Trade credit (unsecured) Commercial paper (unsecured) ```

Answer 34

``` Availability of product inputs Marketing factors Manufacturing environment Local incentives International location considerations ```

Answer 35

Forces layout Product layout Fixed position layout Cellular manufacturing

Answer 36

Stage 1 financing Stage 2 investing Stage 3 operating

Answer 37

Inventory Revenues Short term expenses

Answer 38

Demand is the quantity of a good or service that people are willing to buy at various prices. The higher the price, the lower the quantity demanded (QDemanded), and vice versa. A graph of this relationship is called a demand curve.

Answer 39

Demand alone is not enough to explain how the market sets prices. We must also look at supply, the quantity of a good or service that businesses will make available at various prices (QSupplied). The higher the price, the greater the number of jackets a supplier will supply, and vice versa. A graph of the relationship between various prices and the quantities a business will supply is a supply curve.

Answer 40

A number of things can increase or decrease demand. For example, if snowboarders’ incomes go up, they may decide to buy a second jacket. If incomes fall, a snowboarder who was planning to purchase a Demandjacket may wear an old one instead. Changes in fashion or tastes can also influence demand. If snowboarding were suddenly to go out of fashion, demand for jackets would decrease quickly. A change in the price of related products can also influence demand: if the average price of a snowboard rises to $1,000, people will quit snowboarding, and jacket demand will fall.

Answer 41

Other factors influence the supply side of the picture. New technology typically lowers the cost of production. For example, North Face, a ski and snowboard jacket supplier, purchased laser-guided pattern-cutting equipment and computer-aided pattern-making equipment. As each jacket was cheaper to produce, the profit per unit increased, which incentivized them to supply more jackets at every price. If the price of resources like labour or fabric goes up, North Face will earn a smaller profit on each unit, and the amount supplied will decrease at every price. The reverse is also true. Changes in the prices of other goods can also affect supply. Table 1 denotes various factors that can shift supply and demand.

Answer 42

``` Buyer income (high-more demand/low means less demand) Buyer preference Number of buyers Change in tech Change in resource prices Number of suppliers ```

Answer 43

Perfect Comp Pure monopoly Monopolistic competition Oligopoly

Answer 44

``` Many firms No ability to control price Few to no barriers to entry Very little product differentiation Examples: wheat and corn ```

Answer 45

``` One firms High ability to control price Gov regulated barriers to entry No direct comp Examples: utilities such as gas and water ```

Answer 46

``` Fewer firms than perfect comp Some ability to control price Few barriers to entry Some perceived product differentiation Examples: clothing ```

Answer 47

``` Few firms Some to control price Many barriers to entry Some product differentiation Examples: cable/mobile phones/ banks ```

Answer 48

``` The 5 forces model, developed by Michael Porter, is used to assess five competitive forces that impact a given target market. This model helps the analyst determine the strengths, weaknesses, opportunities, and threats (SWOT) faced within a market, so they can develop a strategy to compete effectively. It can be helpful to think back to the types of competition to help assess aspects of this model ``` Threat of New Entry This force evaluates how easy or difficult it is for a new competitor to enter the existing market. If the market is easy to enter, competition will likely be fierce, which can make the market unattractive. Whereas, if the market has some barriers to entry, but your organization already has or can acquire the relevant resources, then the market might be very attractive to enter, as it will be more difficult for others to enter. Factors to consider when evaluating this force include, time and cost of entry, specialist knowledge, economies of scale, cost advantage and a technology advantage. If the organization can develop an advantage in any or all of these factors, it is possible that the market is attractive to enter. Threat of Substitute This force evaluates how easy or hard it is for an end user to switch to an alternative product. In this force it is very important to clearly define what market you are analyzing. For example, if a company is examining the local carbonated beverage market for their new cola, a substitute product could be orange juice, coffee or tea (non-carbonated beverages). Other colas, like Coke and Pepsi, would be considered under competitive rivalry. Factors to consider include what it would cost to change to a different product and how close the substitute’s performance is to the existing product. Remember, this would be like comparing stairs vs. elevator in the vertical lift market, elevators might be faster and require less energy, but if someone is only going up 1 level and there is a wait, the stairs might be a great substitute, if it was 60 floors, the stairs might not be a very good substitute. Buyer Power Buyers are the consumers of the product that is being sold. It is important to consider factors such as the number of buyers, as a few large buyers will have more power than many small individual buyers. Order size and frequency may make certain buyers more important than others and the cost of substitutes or a buyer’s sensitivity to changes in price might give them more or less power. Continuing with the example of a local carbonated beverage company, it is unlikely they will have a significant amount of power against the supermarket retailers that might buy their product, because there are many well-known competitors and substitutes that are able to offer a product at the same or lower price. A single beverage is unlikely to be a major portion of the business of any supermarket, which means they can choose not to stock it. In the food industry, many producers actually pay retailers a fee to have their product carried in the store. Supplier Power Suppliers are the ones that supply the goods to make a product, the amount of power they have is largely a function of how much they control the market. If there are few suppliers, that are quite large, where changing supplier is difficult and expensive, suppliers will have significant power. Where if it is easy to change products, there are many suppliers and the cost is low, suppliers will have very low power. Competitive Rivalry The competitive rivalry assesses the direct competitors for the market that is being analyzed. The key factors to consider are the number of competitors, differences in what they are offering, the cost of switching between competitors and how loyal customers are. The restaurant industry is a good example of a highly competitive market, it is easy to switch to a different restaurant, quality varies and restaurants actively cultivate customer loyalty through service, promotions and/or other rewards.

Answer 49

Price is important in determining how much a firm earns. The prices charged customers times the number of units sold equals the gross revenue for the firm. Revenue is what pays for every activity of the company (production, finance, sales, distribution, and so forth). The money that is left over (if any) after expenses are accounted for, is profit. Managers strive to charge a price that will allow the firm to earn a fair return on its investment and will often seek to maximize return on investment. In some other cases, in order to establish their product, the firm will focus on gaining market share, the % of total market in terms of volume or revenue. The chosen price must be neither too high nor too low, and the price must equal the perceived value to target consumers.

Answer 50

``` Price skimming Penetration pricing Leader pricing Pricing of services Bundling Physcological pricing Prestige pricing ```

Answer 51

The practice of introducing a new product on the market with a high price and then lowering the price over time is called price skimming. As the product moves through its life cycle, the price usually is lowered because competitors are entering the market. As the price falls, more and more consumers can buy the product. A recent example is LED flat-screen televisions, at one time these were priced at over $1,000, but have since sunk to under $400.

Answer 52

Price skimming has four important advantages. First, a high initial price can be a way to find out what buyers are willing to pay. Second, if consumers find the introductory price too high, it can be lowered. Third, a high introductory price can create an image of quality and prestige. Fourth, when the price is lowered later, consumers may think they are getting a bargain. The disadvantage is that high prices attract competition.

Answer 53

A company that doesn’t use price skimming will probably use penetration pricing. With this strategy, the company offers new products at low prices in the hope of achieving a large sales volume. Procter & Gamble did this with its SpinBrush toothbrush. Penetration pricing requires more extensive planning than skimming does because the company must gear up for mass production and marketing. When Texas Instruments entered the digital-watch market, its facilities in Lubbock, Texas, could produce 6 million watches a year, enough to meet the entire world demand for low-priced watches. If the company had been wrong about demand, its losses would have been huge. In 2012, the first of Tesla’s Model S started at around $60,000 USD, and this low price helped them develop market share; they are now priced starting around $75,000.

Answer 54

Penetration pricing has two advantages. First, the low initial price may induce consumers to switch brands or companies. Using penetration pricing on its jug wines, Gallo has lured customers away from Taylor California Cellars and Inglenook. Second, penetration pricing may discourage competitors from entering the market. Their costs would tend to be higher, so they would need to sell more at the same price to break even.

Answer 55

Pricing products below the normal markup, or even below cost, to attract customers to a store where they wouldn’t otherwise shop, is leader pricing. A product priced below cost is referred to as a loss leader. Retailers hope that this type of pricing will increase their overall sales volume and thus their profit.

Answer 56

Pricing of services tends to be more complex than pricing of products that are goods. Services may be priced as standard services, such as the price a hair stylist might charge for a haircut, or pricing may be based on tailored services designed for a specific buyer, such as the prices charged for the design of a new building by an architect.

Answer 57

Bundling means grouping two or more related products together and pricing them as a single product. Marriott’s special weekend rates often include the room, breakfast, and free Wi-Fi. Department stores may offer a washer and dryer together for a price lower than if the units were bought separately.

Answer 58

Psychology often plays a big role in how consumers view prices and what prices they will pay. Odd-even pricing (or psychological pricing) is the strategy of setting a price at an odd number to connote a bargain and at an even number to imply quality. For years, many retailers have priced their products in odd numbers—for example, $99.95 or $49.95—to make consumers feel that they are paying a lower price for the product.

Answer 59

The strategy of raising the price of a product so consumers will perceive it as being of higher quality, status, or value is called prestige pricing. This type of pricing is common where high prices indicate high status. In the specialty shops on Rodeo Drive in Beverly Hills, which cater to the super-rich of Hollywood, shirts that would sell for $65 elsewhere sell for at least $150. If the price were lower, customers would perceive them as being of low quality. Prestige pricing is also very prevalent in services because services providers with reputations for excellent service are more in demand, often with a waiting list. This is due to the fact that services are tied directly to the people who provide them and those people have only so much time in a week in which to provide services. Once the calendar fills up, the demand goes up, and the prices become prestige prices.

Answer 60

``` Department (the bay) Specialty (best buy) Convenience (7-11) Discount (Walmart) Supermarket (Safeway) Factory outlet (coach) Vending (candy) Direct selling (essential oils) Online (Amazon) ```

Answer 61

``` Taking things that dont belong to you Saying things you know aren’t true Giving or allowing false impressions Buying influence Hiding or divulging information Taking unfair advantage Committing inproper personal behavior Abusing power and mistreating individuals Permitting organizational abuse Violating rules ```

Answer 62

Seeking best for majority

Answer 63

``` Lead by example Offer ethics training programs An ethical dilemma used for training Establish formal code of ethics Making the right decision The feelings test Newspaper or social media test ```

Answer 64

Acting in an ethical manner is one of the four components of the pyramid of corporate social responsibility (CSR), which is the concern of businesses for the welfare of society. It consists of obligations beyond those required by law or union contract. This definition makes two important points. First, CSR is voluntary. Beneficial action required by law, such as cleaning up factories that are polluting air and water, is not voluntary. Second, the obligations of corporate social responsibility are broad. They extend beyond investors in the company to include workers, suppliers, consumers, communities, and society at large.

Answer 65

Economic-illegal and irresponsible Legal-legal but irresponsible Ethical-Legal and responsible Philanthropic- addressing issues before they are even problems (above and beyond)

Answer 66

Capitalism, communism, socialism mixed economy

Answer 67

Business are privately owned with minimal gov interference Complete freedom of trade, little or no gov control Strong incentive to work and innovate because profits are retained by owners Each enterprise is manages by owners or professional managers with little gov interference Ex: USA

Answer 68

Gov owns all or most enterprises Complete gov control of markets No incentive to work hard or produce quality products Centralized management by gov bureaucracy. Little or no flexibility in decision making at factory level EX: Cuba/ North Korea

Answer 69

``` Basic industries such as railroads and utilities are owned by government. High taxation as government redistributes income from successful private businesses and entrepreneurs. ``` ``` Some markets are controlled, and some are free. Significant central-government planning. State enterprises are managed by bureaucrats. These enterprises are rarely profitable. ``` ``` Private-sector incentives are the same as capitalism, and public-sector incentives are the same as in a planned economy. ``` Significant government planning and regulation. Bureaucrats run government enterprises. Example: Finland India Israel

Answer 70

``` Private ownership of land and businesses but government control of some enterprises. The private sector is typically large. ``` ``` Some markets, such as nuclear energy and the post office, are controlled or highly regulated. ``` ``` Private-sector incentives are the same as capitalism. Limited incentives in the public sector. ``` ``` Private-sector management similar to capitalism. Public sector similar to socialism. ``` Example: GB, France, Sweden, Canada

Answer 71

Perhaps the most important way to judge a nation’s economic health is to look at its production of goods and services. The more the nation produces, the higher its standard of living. An increase in a nation’s output of goods and services is economic growth. The most basic measure of economic growth is the gross domestic product (GDP). GDP is the total market value of all final goods and services produced within a nation’s borders each year. Government statistic bureaus publish quarterly GDP figures that can be used to compare trends in national output. When GDP rises, the economy is growing. The level of economic activity is constantly changing. These upward and downward changes are called business cycles, as seen in Figure 1. Business cycles vary in length, in how high or low the economy moves, and in how much the economy is affected. While the laws of supply and demand govern consumer buying behavior, the general business environment is not static. When the economy grows over a period of time, it is in an expansion period, and the peak is the very top of the expansion cycle. At some point the economy will begin to contract, if it continues to decline for two consecutive quarters it will be called a recession and if it is severe enough it becomes a depression. The economy will move through these ups and downs, which are frequently marked by major events, such as the Dot Com bubble of the early 2000’s, the financial crisis in 2008 or Covid-19 in 2020. As the economy grows consumers tend to purchase more and when it slows they purchase less.

Answer 72

Striving for economic growth, Unemployment, Keep prices steady

Answer 73

Another macroeconomic goal is full employment, or having jobs for all who want to and can work. The level of unemployment can impact the wage employers pay and how difficult it is to attract employees. When unemployment is low organizations must compete for employees and will frequently have to pay higher wages or accept lower skilled workers. When unemployment is high, employers can pay less because there is more competition for jobs and have more flexibility in who they hire.

Answer 74

The third macroeconomic goal is to keep overall prices for goods and services fairly steady. The situation in which the average of all prices of goods and services is rising is called inflation. Inflation’s higher prices reduce purchasing power, the value of what money can buy. Purchasing power is a function of two things: inflation and income. If incomes rise at the same rate as inflation, there is no change in purchasing power. If prices go up but income doesn’t rise or rises at a slower rate, a given amount of income buys less, and purchasing power falls. Most government have a target for inflation and adjust their policies to keep it within a target range. Inflation affects both personal and business decisions. When prices are rising, people tend to spend more—before their purchasing power declines further. Businesses that expect inflation often increase their supplies, and people often speed up planned purchases of cars and major appliances.

Answer 75

The rate of inflation is most commonly measured by looking at changes in the consumer price index (CPI), an index of the prices of a “market basket” of goods and services purchased by typical urban consumers. Major components of the CPI, which are weighted by importance, are food and beverages, clothing, transportation, housing, medical care, recreation, and education. There are special indexes for food and energy.

Answer 76

Inflation has several negative effects on people and businesses. For one thing, inflation penalizes people who live on fixed incomes. Let’s say that a couple receives $2,000 a month retirement income beginning in 2018. If inflation is 10 percent in 2019, then the couple can buy only about 91 percent (100 ÷ 110) of what they could purchase in 2018. Similarly, inflation hurts savers. As prices rise, the real value, or purchasing power, of a nest egg of savings deteriorates.

Answer 77

Monetary and fiscal policy

Answer 78

Monetary policy refers to a government’s programs for controlling the amount of money circulating in the economy and interest rates. Changes in the money supply affect both the level of economic activity and the rate of inflation. When the Bank of Canada (BOC) increases or decreases the amount of money in circulation, it affects interest rates (the cost of borrowing money and the reward for lending it). The BOC can change the interest rate on money it lends to banks to signal to the banking system and financial markets that it has changed its monetary policy. These changes have a ripple effect. Banks, in turn, may pass along this change to consumers and businesses that receive loans from the banks. If the cost of borrowing increases, the economy slows because interest rates affect consumer and business decisions to spend or invest. The housing industry, business, and investments react most to changes in interest rates.

Answer 79

The other economic tool used by the government is fiscal policy, its program of taxation and spending. By cutting taxes or by increasing spending, the government can stimulate the economy. The more government buys from businesses, the greater the business revenues and output. Likewise, if a tax cut permits consumers or businesses to pay less in taxes, they will have more income to spend for goods and services. Tax policies in Canada affect other business decisions. High corporate taxes can make it harder to compete with companies in countries with lower taxes. As a result, companies may choose to locate facilities overseas to reduce their tax burden.

Answer 80

No one business is large or powerful enough to create major changes in the external environment. Thus, managers are primarily adapters to, rather than agents of, change. Global competition is basically an uncontrollable element in the external environment. In some situations, however, a firm can influence external events through its strategies. For example, major U.S. pharmaceutical companies have been successful in getting the Food and Drug Administration (FDA) to speed up the approval process for new drugs. In recent years, the five largest companies in the S&P Index—Google, Facebook, Amazon, Microsoft, and Apple—have spent close to $50 million on lobbying activities in the US capital, in an effort to help policy makers understand the tech industry and the importance of innovation and an “open” internet. Political Influences The political climate of a country is another critical factor for managers to consider in day-to-day business operations. The amount of government activity, the types of laws it passes, and the general political stability of a government are three components of political climate. Regional and local governments also exert control over businesses—imposing taxes, issuing corporate charters and business licenses, setting zoning ordinances, and similar regulations Economic Influences This category is one of the most important external influences on businesses. Fluctuations in the level of economic activity create business cycles that affect businesses and individuals in many ways. When the economy is growing, for example, unemployment rates are low, and income levels rise. Inflation and interest rates are other areas that change according to economic activity. Through the policies it sets, such as taxes and interest rate levels, a government attempts to stimulate or curtail the level of economic activity. In addition, the forces of supply and demand determine how prices and quantities of goods and services behave in a free market. Social Factors Social factors—our attitudes, values, ethics, and lifestyles—influence what, how, where, and when people purchase products or services. They are difficult to predict, define, and measure because they can be very subjective. They also change as people move through different life stages. People of all ages have a broad range of interests, defying traditional consumer profiles. They also experience a “poverty of time” and seek ways to gain more control over their time. Changing roles have brought more women into the workforce. This development is increasing family incomes, heightening demand for time-saving goods and services, changing family shopping patterns, and impacting individuals’ ability to achieve a work-life balance. In addition, a renewed emphasis on ethical behavior within organizations at all levels of the company has managers and employees alike searching for the right approach when it comes to gender inequality, sexual harassment, and other social behaviors that impact a business’s continued success. Technology Technology is the application of science and engineering skills to solve production and organizational problems. Equipment and software that improve productivity and reduce costs can be among a company’s most valuable assets. When looking at the technological environment it is important to consider not only the availability of technology, but the threat of it being copied or stolen by competitors. Businesses should consider what level of access their target market and consumers have, so they weigh the benefits and risks of operating in the given environment. Environmental Influences The environmental factors an organization must consider are geographical location, amount of raw material available, pollution, greenhouse gas emissions and associated legislation. Each of these elements can have a major impact on a company’s operation or ability to enter the market. Resource development projects are frequently delayed or cancelled because they fail to meet the regulatory requirements or fail to properly manage stakeholders. Legal Influences The legal framework in the business environment is vitally important for an organization to understand. Labour laws, product labeling and safety standards, consumer rights, advertising standards, health & safety regulations, laws around business operations and future legislation can have a positive or negative effect on an organization. Organizations will frequently hire legal counsel and consultants to help them navigate new environments, due to the complexity and depth of knowledge required.

Answer 81

The developed nations (those with mature communication, financial, educational, and distribution systems) are the major players in international trade. They account for about 70 percent of the world’s exports and imports. Exports are goods and services made in one country and sold to others. Imports are goods and services that are bought from other countries. The United States is both the largest exporter and the largest importer in the world.

Answer 82

The difference between the value of a country’s exports and the value of its imports during a specific time period is the country’s balance of trade. A country that exports more than it imports is said to have a favorable balance of trade, called a trade surplus. A country that imports more than it exports is said to have an unfavorable balance of trade, or a trade deficit. When imports exceed exports, more money from trade flows out of the country than flows into it.

Answer 83

Another measure of international trade is called the balance of payments, which is a summary of a country’s international financial transactions showing the difference between the country’s total payments to and its total receipts from other countries. The balance of payments includes imports and exports (balance of trade), long-term investments in overseas plants and equipment, government loans to and from other countries, gifts and foreign aid, military expenditures made in other countries, and money transfers in and out of foreign banks.

Answer 84

One might argue that the best way to protect workers and the domestic economy is to stop trade with other nations. Then the whole circular flow of inputs and outputs would stay within our borders. But if we decided to do that, how would we get resources like cobalt and coffee beans? The United States simply can’t produce some things, and it can’t manufacture some products, such as steel and most clothing, at the low costs we’re used to. The fact is that nations—like people—are good at producing different things: you may be better at balancing a ledger than repairing a car. In that case you benefit by “exporting” your bookkeeping services and “importing” the car repairs you need from a good mechanic. Economists refer to specialization like this as advantage.

Answer 85

A country has an absolute advantage when it can produce and sell a product at a lower cost than any other country or when it is the only country that can provide a product. Suppose that the Canada has an absolute advantage in air traffic control systems for busy airports and that Brazil has an absolute advantage in coffee. Canada does not have the proper climate for growing coffee, and Brazil lacks the technology to develop air traffic control systems. Both countries would gain by exchanging air traffic control systems for coffee.

Answer 86

Even if the Canada had an absolute advantage in both coffee and air traffic control systems, it should still specialize and engage in trade. Why? The reason is the principle of comparative advantage, which says that each country should specialize in the products that it can produce most readily and cheaply and trade those products for goods that foreign countries can produce most readily and cheaply. This specialization ensures greater product availability and lower prices.

Answer 87

• Jobs lost due to imports or production shifting abroad. Many workers can find new jobs, but often those jobs pay less • Fear of losing your job, especially at companies operating under competitive pressure • Employers often threaten to export jobs if workers do not accept pay cuts • Service and white-collar jobs are increasingly vulnerable to operations moving offshore

Answer 88

A closer look reveals that globalization has been the engine that creates jobs and wealth. Productivity grows more quickly when countries produce goods and services in which they have a comparative advantage. Living standards can increase faster. One problem is that big G20 countries have added more than 1,200 restrictive export and import measures since 2008. Global competition and cheap imports keep prices down, so inflation is less likely to stop economic growth. However, in some cases this is not working because countries manipulate their currency to get a price advantage. An open economy spurs innovation with fresh ideas from abroad, through the infusion of foreign capital and technology, global trade provides poor countries with the chance to develop economically by spreading prosperity.

Answer 89

Natural/ non tariff/ political/ cultural/ economic environment

Answer 90

Natural barriers to trade can be either physical or cultural. For instance, even though raising beef in the relative warmth of Argentina may cost less than raising beef in the bitter cold of Siberia, the cost of shipping the beef from South America to Siberia might drive the price too high. Distance is thus one of the natural barriers to international trade. Language is another natural trade barrier. People who can’t communicate effectively may not be able to negotiate trade agreements or may ship the wrong goods

Answer 91

A tariff is a tax imposed by a nation on imported goods. It may be a charge per unit, such as per barrel of oil or per new car; it may be a percentage of the value of the goods, such as 5 percent of a $500,000 shipment of shoes; or it may be a combination. No matter how it is assessed, any tariff makes imported goods more costly, so they are less able to compete with domestic products. Protective tariffs make imported products less attractive to buyers than domestic products. In the last few years, countries are becoming increasingly protective and increasing trade barriers.

Answer 92

Governments also use other tools besides tariffs to restrict trade. One type of nontariff barrier is the import quota, or limits on the quantity of a certain good that can be imported. The goal of setting quotas is to limit imports to the specific amount of a given product. A complete ban against importing or exporting a product is an embargo.

Answer 93

The political structure of a country may also jeopardize a foreign producer’s success in international trade. Intense nationalism, for example, can lead to difficulties. Nationalism is the sense of national consciousness that boosts the culture and interests of one country over those of all other countries. Strongly nationalistic countries, such as Iran and New Guinea, often discourage investment by foreign companies. In other, less radical forms of nationalism, the government may take actions to hinder foreign operations. France, for example, requires pop music stations to play at least 40 percent of their songs in French. This law was enacted because the French love American rock and roll. In recent years the United States has been claiming “National Security” exemptions to raise tariffs on all kinds of products including Canadian steel and aluminum. One of President Joe Biden’s campaign promises was “Buy American”.

Answer 94

Central to any society is the common set of values shared by its citizens that determine what is socially acceptable. Culture underlies the family, educational system, religion, and social class system. The network of social organizations generates overlapping roles and status positions. These values and roles have a tremendous effect on people’s preferences and thus on marketers’ options. For example, in China Walmart holds live fishing contests on the premises, and in South Korea the company hosts a food competition with variations on a popular Korean dish, kimchee.

Answer 95

The level of economic development varies considerably, ranging from countries where everyday survival is a struggle, such as Sudan and Eritrea, to countries that are highly developed, such as Switzerland and Japan. In general, complex, sophisticated industries are found in developed countries, and more basic industries are found in less developed nations. Average family incomes are higher in the more developed countries than in the least-developed markets. Larger incomes mean greater purchasing power and demand, not only for consumer goods and services but also for the machinery and workers required to produce consumer goods.

Answer 96

The financial marketplace spans the globe, with money routinely flowing across international borders. Banks play an important role in global business by providing loans to foreign governments and businesses. Multinational corporations need many special banking services, such as foreign-currency exchange and funding for overseas investments. Banks also offer trade-related services, such as global cash management, that help firms manage their cash flows, improve their payment efficiency, and reduce their exposure to operational risks. Sometimes consumers in other nations have a need for banking services that banks in their own countries don’t provide. Therefore, large banks often look beyond their national borders for profitable banking opportunities Many banks have expanded into overseas markets by opening offices around the world. They often provide better customer service than local banks and have access to more sources of funding. Some governments also protect their banks against foreign competition. For example, the Chinese government imposes high fees and limits the amount of deposits that foreign banks can accept from customers. It also controls foreign-bank deposit and loan interest rates, limiting the ability of foreign banks to compete with government-owned Chinese banks. Despite the banking restrictions for foreign banks in China, many large international banking institutions continue to do business there.

Answer 97

USMCA Central America free trade agreement European Union

Answer 98

``` Exporting Licensing and franchising Contract manufacturing Joint ventures Direct foreign investment Counter trade ```

Answer 99

When a company decides to enter the global market, usually the least complicated and least risky alternative is exporting, which means selling domestically produced products to buyers in another country. A company, for example, can sell directly to foreign importers or buyers. Exporting is not limited to huge corporations such as General Motors or Apple. Indeed, small companies typically enter the global marketplace by exporting. China is the world’s largest exporter, followed by the United States. Many small businesses claim that they lack the money, time, or knowledge of foreign markets that exporting requires.

Answer 100

Another effective way for a firm to move into the global arena with relatively little risk is to sell a license to manufacture its product to a firm in a foreign country. Licensing is the legal process whereby a firm (the licensor) agrees to let another firm (the licensee) use a manufacturing process, trademark, patent, trade secret, or other proprietary knowledge. The licensee, in turn, agrees to pay the licensor a royalty or fee agreed on by both parties.

Answer 101

In contract manufacturing, a foreign firm manufactures private-label goods under a domestic firm’s brand. Marketing may be handled by either the domestic company or the foreign manufacturer. Levi Strauss, for instance, entered into an agreement with the French fashion house of Cacharel to produce a new Levi’s line, Something New, for distribution in Germany. The advantage of contract manufacturing is that it lets a company test the water in a foreign country. By allowing the foreign firm to produce a certain volume of products to specification and put the domestic firm’s brand name on the goods, the domestic firm can broaden its global marketing base without investing in overseas plants and equipment. After establishing a solid base, the domestic firm may switch to a joint venture or direct investment, explained below.

Answer 102

In a joint venture, the domestic firm buys part of a foreign company or joins with a foreign company to create a new entity. A joint venture is a quick and relatively inexpensive way to enter the global market. It can also be very risky. Many joint ventures fail. Others fall victim to a takeover, in which one partner buys out the other. Sometimes countries required local partners in order to establish a business in their country. Until recently, China, for example, had this requirement in a number of industries. Thus, a joint venture was the only way to enter the market. Joint ventures help reduce risks by sharing costs and technology.

Answer 103

Active ownership of a foreign company or of overseas manufacturing or marketing facilities is direct foreign investment. Direct investors have either a controlling interest or a large minority interest in the firm. Thus, they stand to receive the greatest potential reward but also face the greatest potential risk. A firm may make a direct foreign investment by acquiring an interest in an existing company or by building new facilities. It might do so because it has trouble transferring some resources to a foreign operation or obtaining that resource locally. One important resource is personnel, especially managers. If the local labour market is tight, the firm may buy an entire foreign firm and retain all its employees instead of paying higher salaries than competitors.

Answer 104

International trade does not always involve cash. Today, countertrade is a fast-growing way to conduct international business. In countertrade, part or all of the payment for goods or services is in the form of other goods or services. Countertrade is a form of barter (swapping goods for goods), an age-old practice whose origins have been traced back to cave dwellers. The U.S. Commerce Department says that roughly 30 percent of all international trade involves countertrade. Each year, about 300,000 U.S. firms engage in some form of countertrade. U.S. companies, including General Electric, Pepsi, General Motors, and Boeing, barter billions of goods and services every year. Recently, the Malaysian government bought 20 diesel-powered locomotives from China and paid for them with palm oil.

Answer 105

Although entrepreneurs may be small-business owners, not all small-business owners are entrepreneurs. Small-business owners are managers or people with technical expertise who started a business or bought an existing business and made a conscious decision to stay small. For example, the proprietor of your local independent bookstore is a small-business owner. Jeff Bezos, founder of Amazon.com, also sells books. But Bezos is an entrepreneur: He developed a new model—web-based book retailing—that revolutionized the bookselling world and then moved on to change retailing in general. Entrepreneurs are less likely to accept the status quo, and they generally take a longer-term view than the small-business owner.

Answer 106

Classic entrepreneurs, multiprenuers and intrapreneurs

Answer 107

Classic entrepreneurs are risk-takers who start their own companies based on innovative ideas. Some classic entrepreneurs are micropreneurs who start small and plan to stay small. They often start businesses just for personal satisfaction and the lifestyle. Miho Inagi is a good example of a micropreneur. On a visit to New York with college friends in 1998, Inagi fell in love with the city’s bagels. “I just didn’t think anything like a bagel could taste so good,” she said. Her passion for bagels led the young office assistant to quit her job and pursue her dream of one day opening her own bagel shop in Tokyo. Although her parents tried to talk her out of it, and bagels were virtually unknown in Japan, nothing deterred her. Other trips to New York followed, including an unpaid six-month apprenticeship at Ess-a-Bagel, where Inagi took orders, cleared trays, and swept floors. On weekends, owner Florence Wilpon let her make dough.

Answer 108

Then there are multipreneurs, entrepreneurs who start a series of companies. They thrive on the challenge of building a business and watching it grow. In fact, over half of the chief executives at Inc. 500 companies say they would start another company if they sold their current one. Brothers Jeff and Rich Sloan are a good example of multipreneurs, having turned numerous improbable ideas into successful companies. Over the past 20-plus years, they have renovated houses, owned a horse breeding and marketing business, invented a device to prevent car batteries from dying, and so on. Their latest venture, a multimedia company called StartupNation, helps individuals realize their entrepreneurial dreams. And the brothers know what company they want to start next: yours.

Answer 109

Some entrepreneurs don’t own their own companies but apply their creativity, vision, and risk-taking within a large corporation. Called intrapreneurs, these employees enjoy the freedom to nurture their ideas and develop new products, while their employers provide regular salaries and financial backing. Intrapreneurs have a high degree of autonomy to run their own minicompanies within the larger enterprise. They share many of the same personality traits as classic entrepreneurs, but they take less personal risk. According to Gifford Pinchot, who coined the term intrapreneur in his book of the same name, large companies provide seed funds that finance in-house entrepreneurial efforts. These include Intel, IBM, Texas Instruments (a pioneering intrapreneurial company), Salesforce.com, and Xerox.

Answer 110

``` Ambitious Indépendant Self confident Risk takers Visionary Creative Energetic Passionate Committed ```

Answer 111

``` Key partners Key activities Key resources Value propositions Customer relationships Chanel’s Customer segments Cost structure Revenue streams ```

Answer 112

``` Erxecutive summary Vision and mission statement Company overview Product and or service plan Marketing plan Management plan Operating plan Finnancial plan Appendix ```

Answer 113

Economic factors- downturn in business cycle Finnancial causes- inadequate capital, low cash balances and high expenses Lack of expirience- inadequate knowledge Personal reason- close business and move on

Answer 114

A competitive advantage, also called a differential advantage, is a set of unique features of a company and its products that are perceived by the target market(s) as significant and superior to those of the competition. Competitive advantage is the factor that causes customers to patronize a specific firm and not the competition. When analyzing an idea, it is important to identify and determine how to build this advantage, as that is what will allow it grow and prosper.

Answer 115

Cost, product, service and niche

Answer 116

A firm that has a cost competitive advantage can produce a product or service at a lower cost than all its competitors while maintaining satisfactory profit margins. Firms become cost leaders by obtaining inexpensive raw materials, making plant operations more efficient, designing products for ease of manufacture, controlling overhead costs, and avoiding marginal customers.

Answer 117

Because cost competitive advantages are subject to continual erosion, other types of competitive advantage tend to provide a longer-lasting competitive advantage. The durability of a differential competitive advantage can be more successful for the long-term viability of the company. Common differential advantages are brand names (Tide detergent), a strong dealer network (Caterpillar for construction equipment), product reliability (Lexus vehicles), image (Nordstrom in retailing), and service (Federal Express). Brand names such as Chanel, BMW, and Cartier stand for quality the world over. Through continual product and marketing innovations and attention to quality and value, marketers at these organizations have created enduring competitive advantages.

Answer 118

In today’s world of instant connection and social media, services are crucial for both tangible and nontangible products. Almost every day, the media report the consequences of poor service that went “viral” on social media because the service interaction was videotaped and uploaded to the internet. Customers now demand a higher level of service for all kinds of products, and if the service level does not meet customer expectations, it is likely that the customer will post negative comments on a review site or upload the interaction to various social media platforms. Some small companies have had to close their doors based on a poor service interaction that went viral. Service levels that delight customers are even more important for intangible products such as engineering and accounting. The ability to create the service product, continually refine the service process, and interact with customers (co-creators of the service) is crucial. Higher-level services require more planning, better execution, and constant evolution through relationships with the customers. The use of service differentiation as a competitive advantage can be one of the most enduring and viable types of advantage.

Answer 119

A company with a niche competitive advantage targets and effectively serves a single segment of the market. For small companies with limited resources that potentially face giant competitors, utilizing a niche competitive advantage may be the only viable option. A market segment that has good growth potential, but which is not crucial to the success of major competitors, is a good candidate for a niche strategy. Once a potential segment has been identified, the firm needs to make certain it can defend against challengers through its superior ability to serve buyers in the segment.

Answer 120

Market Penetration: Increase sales in current markets—for example adding more locations or trying to gain market share from competitors. Geographic Expansion: Expand into new locations, either foreign or domestic—for example Chick-fil-a opening new restaurants in Canada. Product Development: Develop improved products—for example Apple developing new models of the iPhone. Diversification: Enter a new business line or expand your product line into other areas. For example, for a company making pianos, introducing a line of electric pianos is called related diversification. Conglomerate diversification is a situation where a company has unrelated product lines such as motorbikes, boat engines and audio equipment.

Answer 121

In a horizontal merger, companies at the same stage in the same industry merge to reduce costs, expand product offerings, or reduce competition. Many of the largest mergers are horizontal mergers to achieve economies of scale. The UPS $1.25 billion acquisition of trucking company Overnite allowed UPS, the world’s largest shipping carrier, to step up expansion of its heavy freight–delivery business, thus expanding its product offerings.

Answer 122

In a vertical merger, a company buys a firm in its same industry, often involved in an earlier or later stage of the production or sales process. Buying a supplier of raw materials, a distribution company, or a customer gives the acquiring firm more control. A good example of this is Google’s acquisition of Urchin Software Corp., a San Diego–based company that sells web analytics software and services that help companies track the effectiveness of their websites and online advertising. The move enables Google to bolster the software tools it provides to its advertisers.

Answer 123

A conglomerate merger brings together companies in unrelated businesses to reduce risk. Combining companies whose products have different seasonal patterns or respond differently to business cycles can result in more stable sales. The Philip Morris Company, now called Altria Group, started out in the tobacco industry but diversified as early as the 1960s with the acquisition of Miller Brewing Company. It diversified into the food industry with its subsequent purchase of General Foods, Kraft Foods, and Nabisco, among others. Later spinning off many businesses, current product categories include cigarettes, smokeless tobacco such as Copenhagen and Skoal, cigars, e-vapor products such as MarkTen, and wines.

Answer 124

A specialized, financially motivated type of merger, the leveraged buyout (LBO) became popular in the 1980s but is less common today. LBOs are corporate takeovers financed by large amounts of borrowed money—as much as 90 percent of the purchase price. LBOs can be started by outside investors or the corporation’s management. For example, the private equity firm Apollo Global Management LLC agreed to buy U.S. security company ADT Corp. in the largest leveraged buyout (LBO) of 2016.

Answer 125

Continuing to operate the business as is and collect dividends • Selling all or part of the business to someone else • Taking the company public

Answer 126

Dividends are payments from the organization to the shareholders who own shares. An organization’s capital structure can be quite complex, with multiple different types of shares; the idea is that shareholders can receive cashflow based on their ownership stake in the company. For example, if the company paid $1.00 per share and the shareholder owned 10,000 shares, they would receive $10,000.

Answer 127

Sometimes it is beneficial to bring in additional investor(s) to either add more capital, bring in expertise or take money out of the company and return it to existing shareholders. For example, if Susan founded a small coffee shop and was looking to expand to another location, but lacked the capital to do so, she could bring in another investor to provide the required resources by issuing new shares to the new investor. Or, if she was looking to take money out of the business, she could sell some of her existing shares to another investor and take the money for personal use.

Answer 128

Once a business reaches a certain size it can be advantageous to sell shares of the company on the stock market. The initial listing is called an IPO (Initial Public Offering) and once complete, shares of the company will be bought and sold by any investor at the market price. Imagine Susan’s coffee shop is now a chain of 150 locations, she may wish to use the IPO to either take money out of the company by selling her shares or use the funds raised in the IPO to further expand operations.

Answer 129

Primary is IPO or previously private | Secondary is already bought and sold stock

Answer 130

Determining work activities and dividing up tasks (division of labour) • Grouping jobs and employees (departmentalization) • Assigning authority and responsibilities (delegation)

Answer 131

Departmentalizations and matrix

Answer 132

• Reporting structure is clear. Relationships and job responsibilities may be clear and defined. • Power struggles may be less frequent. Fewer battles within the department, as all everyone should be aligned with a common purpose • Higher performance. Employees working in focused groups may experience increased feelings of ownership, commitment, and motivation.

Answer 133

Power struggles. Managers in different departments may have different goals, management styles and needs, resulting in a battle for power, resources and influence in the direction of the overall company. Teamwork. By separating the skills and abilities of various specialists, the company can decrease creativity and innovation. • Lacks Flexibility. The structure can be less flexible because each department is siloed off from the others, making it harder to collaborate with other departments. Lack of cohesiveness. Team members from different departments may have difficulty communicating effectively and working together as a team.

Answer 134

Teamwork. By pooling the skills and abilities of various specialists, the company can increase creativity and innovation and tackle more complex tasks. • Efficient use of resources. Project managers use only the specialized staff they need to get the job done, instead of building large groups of underused personnel. • Flexibility. The project structure is flexible and can adapt quickly to changes in the environment; the group can be disbanded quickly when it is no longer needed. • Ability to balance conflicting objectives. The customer wants a quality product and predictable costs. The organization wants high profits and the development of technical capability for the future. These competing goals serve as a focal point for directing activities and overcoming conflict. The marketing representative can represent the customer, the finance representative can advocate high profits, and the engineers can push for technical capabilities. • Higher performance. Employees working on special project teams may experience increased feelings of ownership, commitment, and motivation. • Opportunities for personal and professional development. The project structure gives individuals the opportunity to develop and strengthen technical and interpersonal skills.

Answer 135

Power struggles. Functional and product managers may have different goals and management styles. • Confusion among team members. Reporting relationships and job responsibilities may be unclear. • Lack of cohesiveness. Team members from different functional areas may have difficulty communicating effectively and working together as a team.

Answer 136

To improve organizational performance and achieve long-term objectives, some organizations seek to reengineer their business processes or adopt new technologies that open up a variety of organizational design options, such as virtual corporations and virtual teams. Other trends that have strong footholds in today’s organizations include outsourcing and managing global businesses.

Answer 137

One of the biggest challenges for companies today is adapting to the technological changes that are affecting all industries. Organizations are struggling to find new organizational structures that will help them transform information technology into a competitive advantage. One alternative that is becoming increasingly prevalent is the virtual corporation, which is a network of independent companies (suppliers, customers, even competitors) linked by information technology to share skills, costs, and access to one another’s markets. This network structure allows companies to come together quickly to exploit rapidly changing opportunities

Answer 138

Technology. Information technology helps geographically distant companies form alliances and work together. • Excellence. Each partner brings its core competencies to the alliance, so it is possible to create an organization with higher quality in every functional area and increase competitive advantage. • Trust. The network structure makes companies more reliant on each other and forces them to strengthen relationships with partners. • No borders. This structure expands the traditional boundaries of an organization. Opportunism. Alliances are less permanent, less formal, and more opportunistic than in traditional partnerships.

Answer 139

Technology is also enabling corporations to create virtual work teams. Geography is no longer a limitation when employees are considered for a work team. Virtual teams mean reduced travel time and costs, reduced relocation expenses, and utilization of specialized talent regardless of an employee’s location.

Answer 140

Another organizational trend that continues to influence today’s managers is outsourcing. For decades, companies have outsourced various functions. For example, payroll functions such as recording hours, managing benefits and wage rates, and issuing paycheques have been handled for years by third-party providers. Today, however, outsourcing includes a much wider array of business functions: customer service, production, engineering, information technology, sales and marketing, and more.

Answer 141

Cost reduction and labour needs although that is expanding

Answer 142

Form of outsourcing… people are hired to perform one task then leave, they are not official company employees

Answer 143

• Identify a specific business problem. • Consider all possible solutions. • Decide whether outsourcing the work is the appropriate answer to the problem. • Develop a strategic outsourcing partnership with vendors and a solid framework that promotes seamless collaboration and communication. • Engage with outsourcing partners on a regular basis to instill trust between the two entities. • Remain flexible when it comes to working with outsourcing providers in terms of accommodating requests or adjusting when necessary, in an effort to build a long-term strategic partnership beneficial to both parties.

Answer 144

``` Gather information to identify alternative solutions or actions. 2. Choose the best decision process to make sure it fits the problem that is being addressed. 3. Develop alternative solutions by evaluating the business environment (external, competitive, internal) 4. Select one or more alternatives after evaluating the strengths and weaknesses of each possibility. 5. Implement the decision according to the plan developed during step 3. 6. Gather information to obtain feedback on the effectiveness of the chosen plan. ```

Answer 145

Technical, human relations, and conceptual

Answer 146

Specialized areas of knowledge and expertise and the ability to apply that knowledge make up a manager’s technical skills. Preparing a financial statement, programming a computer, designing an office building, and analyzing market research are all examples of technical skills. These types of skills are especially important for supervisory managers because they work closely with employees who are producing the goods and/or services of the firm.

Answer 147

``` Human relations skills are the interpersonal skills managers use to accomplish goals through the use of human resources. This set of skills includes the ability to understand human behaviour, to communicate effectively with others, and to motivate individuals to accomplish their objectives. Giving positive feedback to employees, being sensitive to their individual needs, and showing a willingness to empower subordinates are all examples of good human relations skills. Identifying and promoting managers with human relations skills are important for companies. A manager with little or no people skills can end up using an authoritarian leadership style and alienating employees. ```

Answer 148

Conceptual skills include the ability to view the organization as a whole, understand how the various parts are interdependent, and assess how the organization relates to its external environment. These skills allow managers to evaluate situations and develop alternative courses of action. Good conceptual skills are especially necessary for managers at the top of the management pyramid, where strategic planning takes place.

Answer 149

• Legitimate power, which is derived from an individual’s position in an organization • Reward power, which is derived from an individual’s control over rewards • Coercive power, which is derived from an individual’s ability to threaten negative outcomes • Expert power, which is derived from an individual’s extensive knowledge in one or more areas • Referent power, which is derived from an individual’s personal charisma and the respect and/or admiration the individual inspires

Answer 150

Autocratic, participative and free reign

Answer 151

``` Manager makes most decisions and acts in authoritative manner. • Manager is usually unconcerned about subordinates’ attitudes toward decisions. • Emphasis is on getting task accomplished. • Approach is used mostly by military officers and some production line supervisors. ```

Answer 152

``` Manager shares decision-making with group members and encourages teamwork. • Manager encourages discussion of issues and alternatives. • Manager is concerned about subordinates’ ideas and attitudes. • Manager coaches subordinates and helps coordinate efforts. • Approach is found in many successful organizations. ```

Answer 153

``` Manager turns over virtually all authority and control to group. • Members of group are presented with task and given freedom to accomplish it. • Approach works well with highly motivated, experienced, educated personnel. • Approach is found in high-tech firms, labs, and colleges. ```

Answer 154

We have already noted that teams are a special type of organizational group, but we also need to differentiate between work groups and work teams. Work groups share resources and coordinate efforts to help members better perform their individual duties and responsibilities. The performance of the group can be evaluated by adding up the contributions of the individual group members. Work teams require not only coordination but also collaboration, the pooling of knowledge, skills, abilities, and resources in a collective effort to attain a common goal. A work team creates synergy, causing the performance of the team as a whole to be greater than the sum of team members’ individual contributions. Simply assigning employees to groups and labeling them a team does not guarantee a positive outcome. Managers and team members must be committed to creating, developing, and maintaining high-performance work teams.

Answer 155

``` Groups bring more information and knowledge to the decision-making process. • Groups offer a diversity of perspectives and, therefore, generate a greater number of disagreements. • Group decision-making results in a higher- quality decision than does individual decision-making. • Participation of group members increases the likelihood that a decision will be accepted. ```

Answer 156

Groups typically take a longer time to reach a solution than an individual takes. • Group members may pressure others to conform, reducing the likelihood of alternatives. • The process may be dominated by one or a small number of participants. • Groups lack accountability, because it is difficult to assign responsibility for outcomes to any one individual.

Answer 157

Diverse skills Good communication Collaboration Feedback

Answer 158

According to expectancy theory, the probability of an individual acting in a particular way depends on the strength of that individual’s belief that the act will have a particular outcome and on whether the individual values that outcome. The degree to which an employee is motivated depends on three important relationships. 1. The link between effort and performance, or the strength of the individual’s expectation that a certain amount of effort will lead to a certain level of performance 2. The link between performance and outcome, or the strength of the expectation that a certain level of performance will lead to a particular outcome 3. The link between outcomes and individual needs, or the degree to which the individual expects the anticipated outcome to satisfy personal needs. Some outcomes have more valence, or value, for individuals than others do.

Answer 159

Equity means justice or fairness, and in the workplace it refers to employees’ perceived fairness of the way they are treated and the rewards they earn According to equity theory, if employees perceive that an inequity exists, they will make one of the following choices: • Change their work habits (exert less effort on the job) • Change their job benefits and income (ask for a raise, steal from the employer) • Distort their perception of themselves (“I always thought I was smart, but now I realize I’m a lot smarter than my coworkers.”) Look at the situation from a different perspective (“I don’t make as much as the other department heads, but I make a lot more than most graphic artists.”) • Leave the situation (quit the job) Distort their perceptions of others (“Joe’s position is really much less flexible than mine.”)

Answer 160

The theory has three main components: (1) specific goals lead to a higher level of performance than do more generalized goals (“do your best”); (2) more difficult goals lead to better performance than do easy goals (provided the individual accepts the goal); and (3) feedback on progress toward the goal enhances performance. Feedback is particularly important because it helps the individual identify the gap between the real (the actual performance) and the ideal (the desired outcome defined by the goal). Given the trend toward employee empowerment in the workplace, more and more employees are participating in the goal- setting process.

Answer 161

The theory has three main components: (1) specific goals lead to a higher level of performance than do more generalized goals (“do your best”); (2) more difficult goals lead to better performance than do easy goals (provided the individual accepts the goal); and (3) feedback on progress toward the goal enhances performance. Feedback is particularly important because it helps the individual identify the gap between the real (the actual performance) and the ideal (the desired outcome defined by the goal). Given the trend toward employee empowerment in the workplace, more and more employees are participating in the goal- setting process.

Answer 162

Product price place and promotion

Answer 163

Something offered in exchange and for which marketing actions are taken and marketing decisions made. Products can be goods or services or ideas. All products have both tangible and intangible aspects.

Answer 164

Something given in exchange for a product. Price may be monetary or nonmonetary. Price has many names, such as rent, fees, charges, and others.

Answer 165

Some method of getting the product from the creator of the product to the customer. Place includes a myriad of important tasks: transportation, location, supply chain management, online presence, inventory, and atmospherics.

Answer 166

Methods for informing and influencing customers to buy the product. Promotion is often mistaken for marketing because it is the most visible part of marketing; however, marketing encompasses much more than just promotion.

Answer 167

Cultural/social forces: Includes such factors as the buying behaviours of specific cultures and subcultures, the values of potential customers, the changing roles of families, and other societal trends such as employees working from home and flexible work hours Demographic forces: Includes such factors as changes in the ages of potential customers (e.g., baby boomers, millennials), birth and death rates, and locations of various groups of people Economic forces: Includes such factors as changing incomes, unemployment levels, inflation, and recession Technological forces: Includes such factors as advances in telecommunications and computer technology Political and legal forces: Includes such factors as changes in laws, regulatory agency activities, and political movements Competitive forces: Includes such factors as new and shifting competition from domestic and foreign- based firms

Answer 168

An organization that wants to be successful must consider buyer behaviour when developing the marketing mix. Buyer behaviour is the actions people take with regard to buying and using products. Marketers must understand buyer behaviour, such as how raising or lowering a price will affect the buyer’s perception of the product and therefore create a fluctuation in sales, or how a specific review on social media can create an entirely new direction for the marketing mix based on the comments (buyer behaviour/input) of the target market.

Answer 169

Culture Social factors Individual Influences Psychological influences

Answer 170

Purchase roles within the family are influenced by culture. Culture is the set of values, ideas, attitudes, and symbols created to shape human behavior. Culture is the part of customs and traditions of a group of people that is transformed into its art, food, costumes/clothing, architecture, and language, as well as other unique manifestations of a specific group of related individuals. Culture is environmentally oriented. For example, the nomads of Finland have developed a culture for Arctic survival. Similarly, the natives of the Brazilian jungle have created a culture suitable for jungle living.

Answer 171

Most consumers are likely to seek out the opinions of others to reduce their search and evaluation effort or uncertainty, especially as the perceived risk of the decision increases. Consumers may also seek out others’ opinions for guidance on new products or services, products with image-related attributes, or products where attribute information is lacking or uninformative. Specifically, consumers interact socially with reference groups, opinion leaders, and family members to obtain product information and decision approval. All the formal and informal groups that influence the buying behavior of an individual are considered that person’s reference groups. Consumers may use products or brands to identify with or become a member of a group. They learn from observing how members of their reference groups consume, and they use the same criteria to make their own consumer decisions. A reference group might be a fraternity or sorority, a group you work with, or a club to which you belong.

Answer 172

A person’s buying decisions are also influenced by personal characteristics unique to each individual, such as gender and personality. Individual characteristics are generally stable over the course of one’s life. For instance, the act of changing personality requires a complete reorientation of one’s life.

Answer 173

An individual’s buying decisions are further influenced by psychological factors such as perception, beliefs, and attitudes. These factors are what consumers use to interact with their world. They are the tools consumers use to recognize their feelings, gather and analyze information, formulate thoughts and opinions, and act. Unlike the other three influences on consumer behaviour, psychological influences can be affected by a person’s environment because they are applied on specific occasions. For example, individuals will perceive different stimuli and process these stimuli in different ways depending on whether the individual is sitting in class concentrating on an instructor’s lecture, sitting outside of class talking to friends, or sitting at home watching television.

Answer 174

``` Need recognition Info search Evaluation of alternatives Purchase Post purchase behaviour ```

Answer 175

Purchase volume: Business customers buy in much larger quantities than consumers. Mars must purchase many truckloads of sugar to make one day’s output of M&Ms. Home Depot buys thousands of batteries each day for resale to consumers. The federal government must use (and purchase) millions of pens each year. Number of customers: Business marketers usually have far fewer customers than consumer marketers. As a result, it is much easier to identify prospective buyers and monitor current needs. For example, there are far fewer customers for airplanes or industrial crane companies than there are for consumer goods companies since there are more than 12.4 million consumer households in Canada. Location of buyers: Business customers tend to be much more geographically concentrated than consumers. The computer industry is concentrated in Silicon Valley and a few other areas. Aircraft manufacturing is found in Seattle, Washington; St. Louis, Missouri; and Dallas/Fort Worth, Texas. Suppliers to these manufacturers often locate close to the manufacturers to lower distribution costs and facilitate communication. Direct distribution: Business sales tend to be made directly to the buyer because such sales frequently involve large quantities or custom-made items such as heavy machinery. Consumer goods are more likely to be sold through intermediaries such as wholesalers and retailers.

Answer 176

``` Demographic Geographic Pshycheatric Benefit Volume ```

Answer 177

Demographic segmentation uses categories such as age, education, gender, income, and household size to differentiate among markets. This form of market segmentation is the most common because demographic information is easy to obtain. Statistics Canada provides a great deal of demographic data, especially about metropolitan areas. For example, marketing researchers can use census data to find areas within cities that contain high concentrations of high-income consumers, singles, blue-collar workers, and so forth. However, even though demographic information is easier to obtain than other types of information, it may not always be the best approach to segmentation because it is limited on what it can reveal about consumers.

Answer 178

Geographic segmentation means segmenting markets by region of the country, city or county size, market density, or climate. Market density is the number of people or businesses within a certain area. Many companies segment their markets geographically to meet regional preferences and buying habits. The McLobster is a product unique to the Maritimes in Canada and targeted to local tastes.

Answer 179

Race, income, occupation, and other demographic variables help in developing strategies but often do not paint the entire picture of consumer needs. Demographics provide basic data that can be observed about individuals, but psychographics provide vital information that is often much more useful in crafting the marketing message. Demographics provide the skeleton, but psychographics add meat to the bones. Psychographic segmentation is market segmentation by personality or lifestyle. People with common activities, interests, and opinions are grouped together and given a “lifestyle name.” For example, someone who is interested in environmental sustainability could be targeted by a company producing bio-degradable to-go containers, instead of plastic or containers that require recycling.

Answer 180

Benefit segmentation is based on what a product will do rather than on consumer characteristics. For years Crest toothpaste was targeted toward consumers concerned with preventing cavities. Recently, Crest subdivided its market. It now offers regular Crest, Crest Tartar Control for people who want to prevent cavities and tartar buildup, Crest for kids with sparkles that taste like bubble gum, and another Crest that prevents gum disease. Another toothpaste, Topol, targets people who want whiter teeth—teeth without coffee, tea, or tobacco stains. Sensodyne toothpaste is aimed at people with highly sensitive teeth.

Answer 181

The fifth main type of segmentation is volume segmentation, which is based on the amount of the product purchased. Just about every product has heavy, moderate, and light users, as well as nonusers. Heavy users often account for a very large portion of a product’s sales. Thus, a firm might want to target its marketing mix to the heavy-user segment. For example, in the fast-food industry, the heavy user (a young, single male) accounts for only one in five fast-food patrons. Yet this heavy user makes over 60 percent of all visits to fast-food restaurants.

Answer 182

Observation research is research that monitors respondents’ actions without direct interaction. In the fastest-growing form of observation research, researchers use cash registers with scanners that read tags with bar codes to identify the item being purchased. Technological advances are rapidly expanding the future of observation research. Arbitron research has developed a portable people meter (PPM) about the size of a cell phone that research participants clip to their belts or any article of clothing. They agree to wear it during all waking hours. Before the study participants go to sleep, they put the PPM in a cradle that automatically sends data back to Arbitron (now Nielsen Audio). The PPM will tell the marketing research company exactly which television programs the person watched and for how long. It also records radio programs listened to, any web streaming, supermarket piped-in music, or any other electronic media that the research participant encountered during the day.

Answer 183

Creating awareness: All too often, firms go out of business because people don’t know they exist or what they do. Small restaurants often have this problem. Simply putting up a sign and opening the door is rarely enough. Promotion through ads on social media platforms and local radio or television, coupons in local papers, flyers, and so forth can create awareness of a new business or product. Getting consumers to try products: Promotion is almost always used to get people to try a new product or to get nonusers to try an existing product. Sometimes free samples are given away. Lever, for instance, mailed over two million free samples of its Lever 2000 soap to targeted households. Coupons and trial-size containers of products are also common tactics used to tempt people to try a product. Celebrities are also used to get people to try products. Oprah Winfrey, for example, recently partnered with Kraft Heinz to launch a new line of refrigerated soups and side dishes made with no artificial flavors or dyes. Kate Murphy, director of strategic partnerships at the social marketing platform Crowdtap, weighed in on the strategy. “Celebrity endorsements can provide immense value to a product/brand when done right,” Murphy said. “If a celebrity aligns with a product, they bring a level of trust and familiarity to the table.” Providing information: Informative promotion is more common in the early stages of the product life cycle. An informative promotion may explain what ingredients (for example, fiber) will do for a consumer’s health, describe why the product is better (for example, high-definition television versus regular television), inform the customer of a new low price, or explain where the item may be purchased. Keeping loyal customers: Promotion is also used to keep people from switching brands. Slogans such as Campbell’s soups are “M’m! M’m! Good!” and “Intel Inside” remind consumers about the brand. Marketers also remind users that the brand is better than the competition. For years, Pepsi has claimed it has the cola taste that consumers prefer. Southwest Airlines brags that customers’ bags fly free. Such advertising reminds customers about the quality of the product or service. Increasing the amount and frequency of use: Promotion is often used to get people to use more of a product and to use it more often. The National Cattlemen’s Beef Association reminds Americans to “Eat More Beef.” In the 1990s the “Got Milk?” ads, with the iconic milk mustache intended to increase consumption of milk, ran nationally for the Milk Processor Education Program. The most popular promotion to increase the use of a product may be frequent-flyer or -user programs. The Marriott Rewards program awards points for each dollar spent at a Marriott property. At the Platinum level, members receive a guaranteed room, an upgrade to the property’s finest available accommodations, access to the concierge lounge, a free breakfast, free local phone calls, and a variety of other goodies. Identifying target customers: Promotion helps find customers. One way to do this is to list a website as part of the promotion. For instance, promotions in The Wall Street Journal and Bloomberg Businessweek regularly include web addresses for more information on computer systems, corporate jets, color copiers, and other types of business equipment to help target those who are truly interested. These websites typically will ask for your e-mail address when you seek additional information. Teaching the customer: For service products, it is often imperative to teach the potential client the reasons for certain parts of a service. In services, the service providers work with customers to perform the service. This is called “co-creation.” For example, an engineer will need to spend extensive time with team members from a client company and actually teach the team members what the design process will be, how the interaction of getting information for the design will work, and at what points each part of the service will be delivered so that ongoing changes can be made to the design. For services products, this is more involved than just providing information—it is actually teaching the client.

Answer 184

Sales promotion: Marketing activities (other than personal selling, traditional advertising, public relations, social media, and e-commerce) that stimulate consumer buying, including coupons and samples, displays, shows and exhibitions, demonstrations, and other types of selling efforts. Traditional advertising: Any paid form of nonpersonal promotion by an identified sponsor that is delivered through traditional media channels. Social media: The use of social media platforms such as Facebook, Twitter, Pinterest, Instagram, and various blogs to generate “buzz” about a product or company. The skills and knowledge needed to generate information as well as to defend the company against problems (such as incriminating videos “going viral”) are separate skills from those related to traditional advertising. Even promotional strategies such as paying celebrities to wear a specific line of clothing and posting these images on Twitter or Instagram (a form of advertising) requires different types of planning and expertise than traditional advertising. A posting on Facebook for Somersby Cider links to their profile page where you are invited to like, follow and/or comment. Personal selling: Personal selling is a face-to- face sales presentation to a prospective customer. Sales jobs range from salesclerks at clothing stores to engineers with MBAs who design large, complex systems for manufacturers. Personal selling provides a detailed explanation or demonstration of the product. This capability is especially desirable for complex or new goods and services. Public relations: The linking of organizational goals with key aspects of the public interest and the development of programs designed to earn public understanding and acceptance. Public relations can include lobbying, publicity, special events, internal publications, and media such as a company’s internal television channel. E-commerce: The use of a company’s website to generate sales through online ordering, information, interactive components such as games, and other elements of the website. Website development is mandatory is today’s business world. Understanding how to develop and utilize a website to generate sales is imperative for any marketer.

Answer 185

``` Loyalty marketing programs, such as frequent-buyer cards and frequent- shopper clubs. Bonus packs that give loyal consumers an incentive to stock up or premiums offered in return for proof of purchase. ```

Answer 186

Sweepstakes, contests, or premiums | that create interest in the product.

Answer 187

Sampling to introduce your product’s superior qualities compared to their brand.

Answer 188

``` Trade deals that help make the product more readily available than competing products. Coupons, cents-off packages, refunds, or trade deals that reduce the price of the brand to match that of the brand that would have been purchased. ```

Answer 189

``` Press relations Product publicity Corporate communications Public affairs Lobbying Employee and investor relations Crisis management ```

Answer 190

The firm must decide whether to make its own production materials or buy them from outside sources. This is the make-or-buy decision. The quantity of items needed is one consideration. If a part is used in only one of many products, buying the part may be more cost-effective than making it. Buying standard items, such as screws, bolts, rivets, and nails, is usually cheaper and easier than producing them internally. Purchasing larger components from another manufacturer can be cost-effective as well. When items are purchased from an outside source instead of being made internally, it is called outsourcing. Harley-Davidson, for example, purchases its tires, brake systems, and other motorcycle components from manufacturers that make them to Harley’s specifications. However, if a product has special design features that need to be kept secret to protect a competitive advantage, a firm may decide to produce all parts internally.

Answer 191

Materials management involves deciding how much of each type of inventory to keep on hand and the ordering, transportation, receiving, storing, tracking and vendor selection. The goal of materials management is to keep down the costs of ordering and holding inventories while maintaining enough on hand for production and sales. Good management enhances product quality, makes operations more efficient, and increases profits. Poor inventory management can result in dissatisfied customers, financial difficulties, and even bankruptcy.

Answer 192

Putting Quality First Successful businesses recognize that quality and productivity must go hand in hand. Quality goods and services meet customer expectations by providing reliable performance. Defective products waste materials and time, increasing costs. Worse, poor quality causes customer dissatisfaction, which usually results in lost sales. Various quality standards and their characteristics are listed in Table 1. Competing in today’s business world is challenging. To compete effectively, firms must keep production costs down. At the same time, however, it’s becoming increasingly complex to produce and deliver the high-quality goods and services customers demand. Methods to help meet these challenges include quality-management techniques, lean manufacturing, and technology and automation.

Answer 193

``` Total Quality Management (TQM) Focuses on continuous improvement by looking for ways to increase efficiency and quality ``` ``` Six Sigma Measures failure rates trying to get close to “zero defects”. Relies heavily on technical specifications and monitoring. ``` ``` International Standards Organization (ISO) International group that sets standards across and within industries. ISO 9000 covers quality procedures and 14000 covers environmental measures. https://www.iso.org/ ``` ``` Lean Manufacturing Focuses on eliminating steps in the process that don’t add value to the customer. Toyota was an early pioneer of this process. ``` ``` Just in Time (JIT) Works with Lean Manufacturing: based on the idea that materials should arrive only when needed. ```

Answer 194

Computer aided design Robotics Adaptable factories Artificial intelligence

Answer 195

In CAD, computers are used to design, test, and modify products before a physical prototype is made. 3D software and layering allow the product to be manipulated and viewed from different angles. CAM automates the production process and helps eliminate human error For example, car parts and computer chips

Answer 196

Robots are increasingly being used to displace human workers in business. They can be quicker more efficient, stronger, work longer hours, are more reliable and improve product quality. Example Robotic surgery, assembly, warehouse automation, cooking, packaging and product delivery.

Answer 197

Are flexible manufacturing systems (FMS) which blend technologies into an integrated system. Example: Tesla’s assembly plant in Freemont, CA is an example that blends technologies.

Answer 198

Is a system that simulates human intelligence and can perform task autonomously. AI systems, can learn, problem solve and provide solutions without human intervention. Example: Robot advisors, help desks, and self-driving cars.

Answer 199

• A consistent, simple user interface across the company • Integration of disparate systems and multiple sets of data and information • A single source for accurate and timely information that integrates internal and external information • A shorter time to perform tasks and processes • Cost savings through the elimination of information intermediaries • Improved communications within the company and with customers, suppliers, dealers, and distributors

Answer 200

One such intranet is the enterprise portal, an internal website that provides proprietary corporate information to a defined user group. Portals can take one of three forms: business to employee (B2E), business to business (B2B), and business to consumer (B2C). Unlike a standard intranet, enterprise portals allow individuals or user groups to customize the portal home page to gather just the information they need for their particular job situations and deliver it through a single web page. Because of their complexity, enterprise portals are typically the result of a collaborative project that brings together designs developed and perfected through the effort of HR, corporate communications, and information technology departments.

Answer 201

Transaction Processing System (TPS) A TPS system receives raw data from internal and external sources and prepares it for storage in a database. The database management system allows the user to query the database for the required information. Transaction records, purchase history, employee information Management Support System (MSS) The MSS uses data collected by the TPS to perform high level analyses that help managers make better decisions. Payroll, labour cost reports, Accounts receivable, customer data Decision Support System (DSS) DSSs use data from internal databases to create models of specific problems or questions the organization is facing. They will use “what if” analysis to model changes and assumptions to determine potential outcomes. ``` Budget forecasting, sales projections, customer retention, allocate budgets, hiring decisions, inventory management ``` Expert System Expert systems give advice that is similar to a human consultant or assist in making decisions. They can be expensive to create and information capture can be time consuming. Controlling processes, monitoring systems, reviewing mortgage applications, assessing risk

Answer 202

The database can be updated in two ways: batch processing, where data are collected over some time period and processed together, and online, or real-time, processing, which processes data as they become available. Batch processing uses computer resources very efficiently and is well-suited to applications such as payroll processing that require periodic rather than continuous processing. Online processing keeps the company’s data current. When you make an airline reservation, the information is entered into the airline’s information system, and you quickly receive confirmation, typically through an e-mail. Online processing is more expensive than batch processing, so companies must weigh the cost versus the benefit. For example, a factory that operates around the clock may use real-time processing for inventory and other time-sensitive requirements but process accounting data in batches overnight. A data warehouse combines many databases across the whole company into one central database that supports management decision-making. With a data warehouse, managers can easily access and share data across the enterprise to get a broad overview rather than just isolated segments of information.

Answer 203

Unauthorized Access and Security Breaches Where an employee or other party enter a system which they are not authorized to access. This can include copying confidential business and/or personal information or interfering with operations. Viruses, worms and Trojan horses These can destroy files, corrupt hard drives, steal information and/or take control of systems. May stay dormant in a system until a specified time. Deliberate damage to equipment or information Where someone purposely deletes files, damages or destroys equipment. Can be hard to prevent if user is authorized to have access. Spam, Denial of Service and Spoofing Spam can slow down and clog communication systems. Denial of Service attacks can overwhelm systems and make them inaccessible. Spoofing is where someone impersonates another. Software and media piracy The unauthorized use of copyrighted material, typically without payment to the content rights holder.

Answer 204

Develop a comprehensive plan and policies that include portable as well as fixed equipment. • Protect the equipment itself with stringent physical security measures to the premises. • Protect data using special encryption technology to encode confidential information so only the recipient can decipher it. • Stop unwanted access from inside or outside with special authorization systems. These can be as simple as a password or as sophisticated as fingerprint or voice identification. • Install firewalls, hardware or software designed to prevent unauthorized access to or from a private network. • Monitor network activity with intrusion-detection systems that signal possible unauthorized access, and document suspicious events. • Conduct periodic IT audits to catalog all attached storage devices as well as computers. • Use technology that monitors ports for unauthorized attached devices and turn off those that are not approved for business use. • Train employees to troubleshoot problems in advance, rather than just react to them. • Hold frequent staff-training sessions to teach correct security procedures, such as logging out of networks when they go to lunch and changing passwords often. • Make sure employees choose sensible passwords, at least six and ideally eight characters long, containing numbers, letters, and punctuation marks. Avoid dictionary words and personal information. • Establish a database of useful information and FAQ (frequently asked questions) for employees so they can solve problems themselves. • Develop a healthy communications atmosphere.

Answer 205

Digital evidence taken from an individual’s computer or corporate network—web pages, pictures, documents, and e-mails are part of a relatively new science called digital forensics. Digital-forensics software safeguards electronic evidence used in investigations by creating a duplicate of a hard drive that an investigator can search by keyword, file type, or access date. Over 75 members of the Fortune 500 now use technology that allows them to search hard drives remotely over their corporate networks. Digital forensics makes it possible to track down those who steal corporate data and intellectual property. Broadcom, a semiconductor chip designer, used computer forensics to investigate and apprehend former employees who were attempting to steal trade secrets. In the process, Broadcom gathered incriminating e-mails, including deleted documents, that gave it solid evidence to use the 2013 Federal Computer Fraud and Abuse Act to stop the former employees from starting up a rival firm. However, there is a downside to having these advanced capabilities. If this kind of software falls into the wrong hands, sophisticated hackers could access corporate networks and individual computers as easily as taking candy from a baby—and the victims would not even know it was happening.

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