Final

Question 1

Rule of reason

Answer 1

Define the term: The rule of reason is a legal doctrine used to interpret the Sherman Antitrust Act passed in 1890

The rule, stated and applied in the case of Standard Oil company, is that only combinations and contracts unreasonably restraining trade are subject to actions under the antitrust laws.

b) Significance in History: At the time, possession of monopoly power was not in itself illegal/ not structure monopoly but they abused monopoly power (unreasonable way)

Question 2

1917 FTC investigation of the meatpacking industry

Answer 2

a) Define the term:
1917-18 Meatpacking industry - highly concentrated in the hand of the Big 5 firms because of barriers of entry, economies of scale and vertical integration (ownership of stockyards
refrigerated warehouses, railroad cars, RR terminals and Branch houses).
Although the FTC found that monopoly existed in interstate trade (not local trade), it found no evidence of that the big 5 were abusing their monopoly power or colluding with the public sector.

b) Significance in History:
1920: the companies agreed to divest some assets, but allowed to continue operating its large-scale warehouses, refrigerated cars, etc., had to promise not to enter non-meat food categories.
Business attitudes - How did people view toward big businesses? Historical impact on firm and market structure - Monopolistic / oligopolistic market structure?

Question 3

Key elements of Sloan’s strategy for dealing with GM crisis

Answer 3


a) Define the term:
- management accounting system to better allocate financial resources to divisions that were well performing

• increased subdivision communication and collaboration by creating interdivisional committees who would advise the executives
- more organized and centralized management structure so people knew who to report
• specified target market for each price range of product
b)

Significance in History:
- GM crisis came out of the merger movement in attempt to both horizontally and vertically merge companies; but management had no knowledge of the new divisions and did not use them well
- the era of managerial capitalism rose with emphasis on efficient management in addition to technology and people
- essential to adopt this organizational structure for the success of multidivisional corporations in handling horizontal/vertical integration

Question 4

Multidivisional corporate organizational structure efficient FORD company.

Answer 4

Define the term: one of Sloan’s plans to fix GM’s crisis. Made divisions based on product lines. Each division has its own organizational structure based on management functions (finance, sales, operations…) Line and staff hierarchy. Defined the key to success of the modern company is vertical and horizontal intergration b)

Significance in History: GM was one of the first big successful American companies. Sloan was a great manager, and he demonstrated the importance of devising an effective organizational structure for how a company should be run. This was significant because it set the parameters for what a successful business of such

scale should look like going forwards, and it also was very necessary for GM to improve its structure in order to compete with the extraordinarily successful and

Question 5

Chandler’s 1977 masterwork titled The Visible Hand:

Answer 5

The managerial Revolution in American Business, outlines the shift that occurred between pre-1850 market economy (one characterized by perfect competition) and post- 1850 managerial capitalistic economy. Prior to 1850, owner-operated small business operations in commerce and production (ex slave plantations) flourished. After 1850, the emergence of large scale companies (ex railroad industry) stressed innovation in technology, accounting, finance, and more, affecting the world as a whole. The Visible Hand focuses on mass innovation in mass production in the railroad industry while noting the enormous emergence of massive industrial corporations by 1900. Management for Chandler was much more than the CEO, but was the entire system of techniques that included middle management as well as corporate structure. The Visible Hand dives into the corporate structure of some of the biggest firms (Standard Oil, General Electric, US Steel, and DuPont) to argue
that ,pderm ;large-scale firms arose to take advantage of the national markets and productive techniques available after the railroad network was in place. He found that many of these companies prospered because they had higher
productivity, lower costs, and higher profits. These new post-1850 firms created the managerial class in America because they needed to coordinate the increasingly complex and interdependent system that they created.

Question 6

GM Acceptance Corp

Answer 6

) Define the term: the General Motors Acceptance Corporation (GMAC) was set up in March 1919 and was a provider of financing to automotive customers. Since then, the business has expanded to include insurance, online banking, mortgage operations, and commercial finance. The formation of GMAC began the boom period in automobile finance. It raise the number of sales.
b) Significance in History: GM held fewer grudges against the credit mechanism demanded by industrial capitalism. They thought selling cars on installment plan would increase company sales and stabilize factory production. In addition, it would enable GM to compete with Ford in the low-priced automobile market. The low monthly payments of an installment plan would help dealers convince middle-income customers to substitute the greater comfort, power and style of Chevrolet. The combined these companies lent a total almost $4 billion. No companies specialized in wholesale credit only.

Question 7

Uneeda Biscuit

Answer 7

Define the term: 1898, Nabisco cracker with a distinctive shape and packaging, advertisements, unsurpassed everyone in advertising campaign and first company to appropriate 1 million dollars in advertising. (remember picture from lecture slide..boy carrying his crackers in the rain.. because packaging would not allow them to get wet)


b) Significance in History: Made way for distinct ways of packaging products to differentiate from competitors in the same industry

Question 8

Piggly Wiggly

Answer 8

) Define the term: grocery store created in the 1916., first true self- service grocery store.founded in memphis, tennessee,

b) Significance in History: The success of Piggly Wiggly was phenomenal, so much so that other independent and chain grocery stores changed to self-service in the 1920s and 1930s distribution was changed in the 20th century. there was a spread of department stores into smaller communities. chain stores were created and brought in more products and brand to consumers. more variety and more choices. piggly wiggly was a grocery store, it was first created in 1916, and later led to 2,660 self service design patented and franchised. there were full shelves in the store- focused on self service.

Question 9

John Elliott Tappan

Answer 9

Define the term: entrepreneur that focused “untapped market”

• –He created new investment instruments such as the “face amount certificate,” installment purchasing programs for investors, new mortgage loan programs, diversified portfolios, and a nationwide agent system that created a paternalistic marketing message.
  b) Significance in History: Tappan’s focus was on what the saving needs were for the average person instead of the needs of larger companies and corporations.
• — His innovations were important in setting a standard for savings and investment plans for everyday Americans and his innovations can be seen in investment and savings systems today.

Question 10

Investment trusts

Answer 10

a) Define the term: Basically mutual funds of the pre-Crash era, they pooled money for investing from smaller investors… which ultimately were false investments…
b) Significance in History:
The development of investment trusts helped divorce outstanding shares from actual assets, and is one of the factors contributing to the over-leveraging that caused the 1929 crash, particularly when they began investing in stocks of other trusts.

Question 11

National Business Survey Conference

Answer 11

\a) Define the term:
The National Business Survey Conference was a task force of 400 leading businessmen designated to enforce the voluntary agreements of maintaining wage rates and pledging not to demand for higher wages etc . In December of 1929, President Hoover’s friend Julius Barnes of the U.S. Chamber of Commerce presided over the first meeting of the National Business Survey Conference.
NBSC Investment and Construction Promises-
Railroads- $1B Capital Investment Public Utilities- $1.8 B Investment State Governments- $3.3 B Investment
b) Significance in History:

It was President Hoover’s most significant attempt to stimulate the economy after the crash in 1929 (great depression). Hoover and most other business leaders believed in this recovery plan, and it was highly praised at the time. This was the first time that businessmen and the government tried to stop a depression together.

Question 12

National Recovery Administration

Answer 12

a) Define the term: The National Recovery Administration, also known as the NRA, was established by President Roosevelt during the Great Depression, in 1933. Its premise was to “stimulate business recovery through fair-practice codes” [Encyclopedia Britannica].
“The agency ultimately established 557 basic codes and 208 supplementary codes that affected about 22 million workers. Companies that subscribed to the NRA codes were allowed to display a Blue Eagle emblem, symbolic of cooperation with the NRA. Although the codes were hastily drawn and overly complicated and reflected the interests of big business at the expense of the consumer and small businessman, they nevertheless did improve labour conditions in some industries and also aided the unionization movement. The NRA ended when it was invalidated by the Supreme Court in 1935, but many of its provisions were included in subsequent legislation.”) Significance in History:

Question 13

It was significant because it Corporate financial reporting, 1900 – 1932 


Answer 13

a) Define the term: Corporate financial reporting was really poor and looked down upon by corporate heads during this time cause they didn’t feel it needed to be publicly announced. Many of these executives did not want their competitors to have access to this information, so they were really secretive about what they put into their financial statements. Many companies were not accustomed to it either. Accounting practices were not yet developed either.
b) Significance in History: Becasue of this, people based their investments off popular investments at the time. Led to stocks becoming overpriced because everyone invested in companies they thought were good based on these financial statements – which led to a bubble. Showed the need for an accounting standard.

Question 14

New Deal regulation of securities industries

Answer 14

a) Define the term:
The federal securities laws were largely created as part of the New Deal. There are 5 particularly prominent federal securities laws. The regulation required that all sales of securities be registered with the government unless there was a specific exemption to the contrary. The process of registration included the submission of a prospectus, a disclosure document that states all material facts relating to the securities and the company issuing them. The acts provided remedies for investors who are misled regarding the securities, or who purchase securities that should be registered but are not. The act also included civil and criminal penalties for violating its provisions.
b) Significance in History:
The key operative provision of the act required that no securities be sold in interstate commerce without an effective registration statement in effect for the securities. There are exemptions provided for securities transactions that are not a public offering; certain specified small offerings; intrastate offerings; and transactions by other than the issuing company or under-writer. These exemptions, potentially very complicated in application, meant that ordinary transactions over a stock exchange were not covered by the Securities Act of 1933. The act was instead intended to regulate companies seeking to raise capital through a public offering.

Question 15

New Deal industry regulation:

National Industrial Recovery Act

Answer 15

a) Define the term:
National Industrial Recovery Act (1933) It was enacted by President Roosevelt in the 1930’s. The national recovery administration was given the power to regulate industry. It created jobs stimulating the demand side. The NRA authorized business to collude to fix prices, set production quotas, divide markets. In 1st phase, firms and consumers signed pledges. Signers were rewarded with NRA blue eagle. In the second phase all businesses had to join an industry trade association which drew up industry codes including agreements on prices, production quotas and wage rates. Businesses that did not sign the to associate with trade associations were not given license to do business. This was supposed to ensure fair prices, respect consumer and labor. However there were lots of controversies and problems: paper work blizzard, ideological opposition, public backlash etc.
b) Significance in History:
Irony: supporters originally thought NRA would be successful. Think about what this tell us about business culture at hte time. Wanted more regulation on industry to ensure fair prices, reespect consumer and labor. This is put in contrast to culture during Industrial revolution. Other regulations were more successful.

Question 16

World War II war mobilization

Answer 16


a) Define the term:
When the second world war broke loose, the demand side in the economy experienced a great shock of stimulus to cover the needs for war materiel. It was under the lead of FDR (and his business council) that government, labor and business came together for the joint cause of supplying the troops. This event ended the depression that had been hurting the country since early thirties when companies formed contracts with the government stating the terms under which production capacity would be expanded. On the other hand, theproductivity boost did not come for free. It was financed with foreign capital and this made the US national debt skyrocket.
b) Significance in History:
The way that the government came to agreements with the businesses on how to supply the military went hand in hand with the ongoing regulations in many areas of business under the “New Deal”. That regulation and demand stimulus ultimately came to take the country out of depression talks for the notion of active economic politics somehow is needed in the time of crisis, rather than the laissez-faire type of mentality that Hoover tried to praise, seeing the american culture as a basis for an economy self-propelling and being self-regulatory.

Question 17

Peter Drucker’s analysis of GM’s management

Answer 17

a) In his book, “Concept of the Organization”, Peter Drucker analyzed the inner workings of Gm’s management. He argued that the key to success for GM was the multidivisional structure that the company employed. This decentralized management structure was divided into different divisions; finance, development etc. They were each important parts of the structure, and it was a strategy for Gm to maximize efficiency. This multidivisional structure was beneficial for GM, because each division was specialized in their own field of expertise and they really understood their own division and the workings and products in that division. The coordination of this structure worked, since every manager in each division ultimately wanted money and therefore they wanted their division to be as successful as possible.
b) The GM concept of the corporation and its principles of organization later became models for organizations worldwide. Not only businesses, but also government agencies, research laboratories, hospitals, and universities have found in Concept of the Corporation a basis for effective organization and management.

Question 18

Sloan meetings

Answer 18


a) Define the term:
(Probably) The interdepartmental / interdivisional meetings Alfred Sloan encouraged as a part of the managerial revolution at GM he spearheaded.
b)

Significance in History:
This was a big part of business during the Organization Man era of the 1950s and (early) 1960s. Emphasized communication, cooperation, and consensus.

Question 19

“Organization man” ethos

Answer 19

a) Define the term:
- People are now willing to forgo their personal goals and ideas to conform and belong to a larger entity. Belonging is an emotional need that has to be satisfied.
- Being an individual and having self-reliance in one’s career success is no longer valued as people recognize the power of groups. Sum of the whole is bigger than its parts and people work more efficiently in collaborative situation.

b) Significance in History:
- the emergence of scientific management techniques to develop better teamwork and cohesive community
- backlash against managerial capitalism of the 50s
- even today lots of emphasis on fitting in with company culture
- problems include having lack of responsibility on the part of the individual and complicated bureaucracy in corporate management

Question 20

Pricing strategies of auto companies in 1950s

Answer 20

a) Define the term: Competition within the auto industry at the time was not simply about what car was the cheapest and most notably GM was one to recognize this. Quality also mattered and if GM could provide a car that was priced slightly higher than competitors (like Ford) but was of higher quality, then they could attract more customers. Additionally, GM was working to create several different models that would range in quality (and price) so they could have something to offer all types of customers and better meet their specific needs.
b) Significance in History: This was significant for GM and the automobile industry because it was a way for them to remain competitive and this concept began to change the notion of the automobile industry that the cheapest car is the best value.

Question 21

Welfare capitalism (Andrew Fung andrewfung07@gmail.com)

Answer 21

a) Define the term
:
b) Significance in History: Non-unionized companies developed internal welfare system for employees to provide benefits such as pensions, cafeterias, and health care to increase worker productivity and loyalty. This weakened unions.

Question 22

Wagner Act

Answer 22

Define the term: Passed in 1935, Also known as the National Labor Relations Act. Guarantees workers in private sector many basic rights, such as organizing in trade unions, engage in collective bargaining, going on strike, and more. National labor relations board in charge of holding elections for union leaders.

b) Significance in History: Shows the shift in history from companies being not so oriented toward unions (with the use of yellow dog contracts and banning of unions) to a period where unions were widely accepted. Allowance of strikes led to both sides breaking rules – management not complying with labor strikes and unions with sit- down strikes(trespassing).

Question 23

Union achievements in 1950s and 60s

Answer 23

a) Define the term: union strength and optimism grew with increased visibility, unity and bargaining success. There were huge benefits to economy, workers, and businesses.
Benefits included shorter hours, fair pay, cost of living allowance, holidays, pensions and a guaranteed safe work environment workers now had access to middle class life which increased consumption and demand and therefore increasing production.
b) Significance in History: Made way for minimum wage laws and stricter safety standards of todays time. Helped to encourage unions to make further gains for workers

Question 24

1962 Consumer Bill of Rights

Answer 24

Define the term: A consumers right to know what a product contains: “warning of products”
shows congress/people’s concern of safety caused by prior bad self regulation system of industries themselves. Industries could not be trusted to release this type of information to the public on their own, thus consumers needed to be protected
b) Significance in History: Has made way for the various warning labels, nutrition info, ingredients, calories, etc on a lot of the products that we consume today

Question 25

Rachel Carson

Answer 25

Define the term: Author who wrote silent spring.

Significance in History: Environmentalist who wrote about how pesticides were not only harming animals, but also humans. big SHIFT to social regulation by knowledge and industrial drivers; understandings popularized by her book Silent Spring; Industry responded by attacking Carson and marshaled own experts; shows growing distrust in business

Question 26

“Competitiveness crisis”

Answer 26

Define the term: The competitiveness crisis was the startling end to the “golden age” of American manufacturing. There were: organizational, financial, design, quality, inventory, and marketing flaws in American business. We lacked competitiveness with foreign products, mainly Japanese and European products. They were producing better quality products more efficiently and for cheaper. Crisis can be attributed to lack of domestic and international competition prior to the international rebound and managerial mistakes.

b) Significance in History: Was the end of the “golden age”. Led to a recession and inflation (stagflation). Coincided with political, structural, economic, and energy problems, all of which were correlated to some degree. Drastic measures needed to fix crisis: restructuring ofbusinesses, bailout packages from govt, downsizing of industry in all facets, and economic deregulation which led to more competition between management

Question 27

US balance of trade with Japan in 1970s

Answer 27

a) Define the term: in 1965, Japan began to export more to the US than it imported, raising American trade fears during the 70’s, 80’s. By 1971, Japanese exports to the US had almost tripled, to $7.3 billion, while US exports to Japan merely doubled, to $4.1 billion. At this peak, imports from Japan accounted for 16 percent of all imports in the US. The 1973 oil crisis, made fuel vastly more expensive and exacerbated US-Japanese trade friction. Fuel-efficient Japanese cars became a hit in the US, taking market shares from US automakers. The Japanese competition was strong, more efficient producers and consumers than the US
b) Significance in History: The trade imbalance with Japan fueled the competitiveness crisis. It highlighted the inefficiencies of American businesses, which eventually led to the restructing and reform of American business.

Question 28

OPEC oil embargo

Answer 28

Define the term: Organization of the Petroleum Exporting Countries in 1973, there was a whole supply side change—OPEC stopped selling oil this contributed to the energy crisis… This had immediate consequences as the price of oil immediately shot up.. we had to learn to live with scarcity
IMPACT—huge recession and inflation (stagflation) and unemployment, huge shortages of oil worldwide
-This brought about problems for managers, cost structure, material flows… consumers, workers

b) Significance in History: Although this oil embargo only lasted a year, it had a lasting effect on American society as people began to purchase smaller more fuel efficient cars.

Question 29

Chrysler’s problems in late 1978

Answer 29


a) Define the term:
When Mr. Iacocca took over Chrysler he found many problems in the company such as discipline, bad communication between functions, despondent workers, low customer loyalty, bad product quality, large inventory leading to fire sales and a management team that was making too many mistakes. Especially the last one of these was in focus by Mr. Iacocca. He wanted to install a new management team to work with him as soon as possible because in his mind all business derive from the three words people, product and profits where the first was crucial for success with the other two.
b) Significance in History:
This is an early example of the competitiveness crisis. US manufacturers were increasingly lacking the ability to compete internationally as they were faced with new competitors from all over the world and the inefficiency had grown with the complacency of the managers rooted in times of the golden age of managerial capitalism. Seen as especially efficient (and thereby competitive) were the japanese manufacturers of autos, such as Toyota who had been gaining ground much due to their principles in lean manufacturing.

Question 30

Drivers behind globalization of US business in 1970s, 80s and 90s

Answer 30

Define the term: The drivers behind globalization of US business in the 1970s, 80s, and 90s include competitive pressures wherein costs were minimized and US markets were saturated, obtaining benefits of host country incentives, trade agreements, fluctuating exchange rates, and access to raw materials.
b) Significance in History: There was a lot of criticism concerning the emergence of multinational corporations, including questions as to why wealth was not increasing, the negative impacts it had on local culture, lack of promoting transfer of technology, the worsening plight of the poor, and harmful effects on public health and welfare. It also had impacts on policy, including local ownership laws and co- production agreements.

Question 31

1960s - early 70’s backlash against the multinational corporation

Answer 31

a) Define the term:
The globalization post WWII and through the sixties were driven by the US companies wanting to expand into new markets and to gain access to foreign raw materials. Barnett and Muller points to the negative external impacts that this globalization has had on the societies where the companies have expanded. A picture that is totally contradictory to the image that the companies of the golden age of managerial capitalism were giving on how they were contributing to the development of their new markets. According to B&M the needs ofthe globalizing companies, and the poor countries hosting them, are conflicting. Instead of exporting capital, technology and jobs to the countries in need, the corporations are taking financial powers out of there, growing the problem of hunger and influencing their ideologies to be aligned with the american culture - a culture for which the daily struggles are not eased but rather strengthened.
b) Significance in History:
In comparison to the later, 70-80s backlash against globalization this was a movement against the US companies investing abroad and not against foreign direct investments in the US. Also, this came before most of the competitiveness crisis was realized, a related area but not the same!

Question 32

Outsourcing

Answer 32

a) Define the term:
Outsourcing is the contracting out of an internal business process to a third-party organization. The term “outsourcing” became popular in the United States near the turn of the 21st century. Outsourcing sometimes involves transferring employees and assets from one firm to another, but not always. The definition of outsourcing includes both foreign and domestic contracting, and sometimes includes offshoring, which means relocating a business function to another country.
b) Significance in History:
Outsourcing plays a crucial role in determining competitive power in markets nowadays. If a company outsources labor-intensive jobs to a place which has a lower wage rate than what is prevalent in the original market, it gives that company a huge competitive edge over others in the market.

Question 33

Supply chain business model

Answer 33

Define the term: A supply chain business model is an important new way of doing business wherein businesses work with independent suppliers outside of their firm.
b) Significance in History: Using the supply chain business model resulted in reversing the 19th century trend of vertical integration. There was a fundamental change in business organization and business strategy. Through hiring manufacturing supercontractors, firms are able to focus more on research and development (for innovation) and marketing rather than on capital intensive production. Firms are also able to increase efficiency by slashing inventory and distribution costs while also being able to market and be more competitive. In addition, barriers to entry were diminishing since startups can get their products to global markets without having to build their own factories.

Question 34

Businessweek’s “Hollow Corporation”

Answer 34

Define the term: “Hollow Corporation” is a term used to describe companies that have bolstered profits by abandoning manufacturing and outsourcing production to plants in low-wage countries.
b) Significance in History: As more corporations began to replace manufacturing in the US with outsourcing production in other countries, Americans who worked in the manufacturing sector were losing their jobs. In addition, there were negative multiplier effects wherein US suppliers of steel, parts, machine tools, and chemicals lost business. Businessweek addressed concerns about how this trend would ultimately hurt the economy and that even the rise of a strong service economy is not likely to offset the decline of manufacturing.

Question 35

Management by stress

Answer 35

Define the term:
“management by stress” is a term coined by Parker and Slaughter to describe the force that drives and regulates total production system called synchronous manufacturing (where inventory is controlled, technology designed to minimize indirect labor and outside contracting is used extensively). In “management by stress” to identify both weak and strong points, the system operates in a state of permanent stress, ”including increasing line speed, cutting number of people or machines, giving workers more asks etc. Thus, weak points will break down, indicating where additional resources are needed. In this system, andon is a visual display of the status of each work station. When a worker falls behind he or she will pull a cord to switch a light on. When the light is kept up for a set period of time, the line stops. Management by stress reveals the weakpoints so that management can work on redesigning them. Management by stress means that fewer upper and middle managers are needed to monitor production. If a worker does not do his job efficiently or something is wrong the problem is obvious and thus top management only need to make a few key decisions; the system will automatically produce a desired output as efficiently and cheaply as possible/

b) Significance in History: Management by stress was undertook by Japanese automobile companies. Companies in the US felt increasingly threatened–> looked at strategies of Japanesecompanies. US falling behind- before US had the highest technology and management skills.

Question 36

“Just in Time” management system

Answer 36

a) Define the term: businesses could eliminate costs of warehousing products by making exactly the right amount of products needed. there was no extra parts on hand. this also eliminated the risk of having parts be damaged

Question 37

Robert Reich’s description of “Paper entrepreneurialism” in the 1980s

Answer 37

Define the term:
Creative accounting…tax/legal loopholes that allow for reporting more profits/gains than the actual.
An offshoot of the more profit/performance-focused approach to running business in the 1980s, companies began innovating “on paper” to reduce their tax liability, and to shift short-term losses to taxpayers, shareholders, and so on.
Source: Tax laws, Accounting rules, Mergers & acquisitions, Litigation
Key Drivers: SEC laws that require companies to make quarterly reports, Computer spreadsheet programs (80s), Financial deregulation, Emergence of new generation of Wall Street financiers
Significance:
Can be considered one of the more negative results of the increased tie between performance and compensation in the 1980s.

Question 38

Ivan Boesky

Answer 38

a) Define the term:
Ivan Frederick Boesky (born March 6, 1937) is an American stock trader who is notable for his prominent role in a Wall Street insider trading scandal that occurred in the United States in the mid-1980s.
b) Significance in History:
Laws regarding insider trading were barely enforced before Boesky was persecuted. He cooperated with the authorities and informed them about other such cases as a part of his bargain plea.

Question 39

Valhalla Oil trading fraud

Answer 39

)
a) Define the term:

b) Significance in History:1987 represented paper entrepreneurship problems with bonus system, employee performance review system. Enron left Valhalla alone and they manipulated the books by creating an offshore shell company that created fake transactions and profits. They received massive bonuses. Enron did not fire them because they wanted to keep the profits to fund their massive debt and protect their stocks.

Question 40

Accounting frauds of 1990s

Answer 40

a) Define the term: Paper entreprenurialism, Enron
b) Significance in History: As more and more laws are placed on corporations, it is difficult to measure the ethics in the workplace. Corporations display what they want, but it wasn’t until the SEC made a move to put Enron down, a company that was inflating their revenue and profit quantities. Now companies and their financial reports are more regulated.

Question 41

“tyranny” of quarterly reports

Answer 41

Define the term: Consensus explanation mid 2000s for dot.com bust tyrany of quarterly results to public. It’s all about own ambition and self deception. Tyranny of quarterly results caused from misplace faith in free market and excessive capitalist greed. By manipulating the quarterly reports, they were trying to look good on their reports.
b) Significance in History: False reports gives false information to shareholders/ unreliable information -> lose the credit of firm and market => imperfect market information to consumer and shareholders.

Question 42

Dennis Kozlowski

Answer 42

Define the term:
Dennis Kozlowski was the former CEO of Tyco International. In 2005, he was convicted of major fraud, which included huge sums of money in the form of unauthorized bonuses for himself and some associates (over $100 million).
b) Significance in History:
Exposing his frauds to the public opened their eyes to a new age of corporate crime. This breach of trust and faith has really drastic negative effects on the economy the most severe off which could lead to downturns and depressions.

Question 43

Paper entrepreneurialism in the 2000s

Answer 43


a) Define the term: Introduced by (UC Berkeley professor) Robert Reich, paper entrepreneurialism was a term he invented in contrast to product entrepreneuralists, to describe an intangible brand of strategists who created structure rather than concrete product: [Excerpt from his article] “Paper entrepreneurs — trained in law, finance, accountancy — manipulate complex systems of rules and numbers. They innovate by using the systems in novel ways: establishing joint ventures, consortiums, holding companies, mutual funds; finding companies to acquire, “white knights” to be acquired by
commodity futures to invest in, tax shelters to hide in; engaging in proxy fights, tender offers, antitrust suits, stock splits, spinoffs, divestitures; buying and selling notes, bonds, convertible debentures, sinking-fund debentures; obtaining government subsidies, loan guarantees, tax breaks, contracts, licenses, quotas, price supports, bailouts; going private, going public, going bankrupt.”

b) Significance in History: PE shifted the balance from creation of product to creation of ways to redistribute result. “Yet paper entrepreneurialism is on the rise. It dominates the leadership of our largest corporations. It guides government departments, legislatures, agencies, public utilities. It stimulates platoons of lawyers and financiers… When paper entrepreneurs look for solutions to America’s declining productivity and international competitiveness, they come up with paper remedies to stimulate large-scale capital investment: accelerated depreciation, tax credits, government subsidies, relaxation of antitrust laws.
Product entrepreneurs focus on techniques for improving output: better quality controls, improved labor-management relations, more effective incentives for managers and employees, more aggressive marketing and sales.”

Question 44

“Upscaling problem”

Answer 44

a) Define the term: In 20th century, people started making relationship of their identity as their spending. This trend of spending led Materialism. Materialism made people to pursue an upscale material life style. People took more and more to feel material success. People “needs” were growing.
b) Significance in History: This upscaling lifestyle causes over consumption and debt. Since people start purchasing the items what they can’t afford, people get loan from the bank. Furthermore, this connects to credit issue, because people cannot pay back to bank.

Question 45

Cisco in the 1990s:

Answer 45

Outsourced 70% of its products. Made use of the supply chain model to manage acquisitions, customer service, and personal growth and innovation. The Supply chain model created fundamental shifts in the business strategy by vertical disintegration/outsourcing of functions, employees, and whole operations. This gave way to relationships with independent suppliers. Cisco acquired companies for their talent and still remained high levels of autonomy between employees by retraining them and allowing them the space to be innovative.

Question 46

Supply Chain Business Model:

Answer 46

A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer.
Fundamental shifts: business organization and business strategy.
Divisions, subsidiaries spun off: vertical disintegration and de-conglomeration.
Corporate control gave way to relationships with independent supplier
Short term- arms length contracts
Long term relationship: long term contracts, joint ventures, strategic alliances, licensing agreements

Question 47

Businessweek’s “Hollow Corporation”:

Answer 47

In 1986, When brand is everything, when a company makes nothing and outsourcing everything. Hollowing out, deindustrialization, post industrial. “The new kind of company is evolving in the US manufacturing companies that do little manufacturing. Instead they import components or products from low wage countries and put their own names on the products and sell them in America. There are claims that this will hurt the economy- retarding productivity and innovation- will offset decline of manfacturing. Negativity multiplier effects: U.S supplier of steel, parts, machine tools, chemical lose business. Worry that outsourcing will hurt the economy, productivity, innovation, and standard of living.

Question 48

Impact of Internet on business in 1990s

Answer 48

New way to structure buyer and seller relationships by using supply chain method. Auction markets, speed of transactions, efficiency, commodification. Information flow was quicker and network relations expanded rapidly. Brought convenience and speed but also privacy issues, threat to copyrights, and impersonal relationships.

Question 49

Management by Stress-

Answer 49

a) Management by Stress was a term coined by Mike Parker and Jane Slaughter to describe the “team-concept” approach, which was a management technique used to methodically locate and remove protections against breakdowns and glitches in an industry’s production line. Stressing the System can be accomplished by increasing the line speed, cutting the number of workers or machines, or giving workers more tasks. Stress the system to reveal the weak points until light signals inefficiency. Wanted Kaizen: continuous improvement, forces lower level management to solve problems.
b) The management by stress system is significant because it goes against the traditional American manufacturing business model. The “team-concept” originated in Japan and was first used in the United States at the NUMMI plant, which became the most efficient GM plant.(1989)

Question 50

Just-in-time” management strategy-

Answer 50

a) Just-in-time (JIT) is a “demand-pull” approach: parts are only made when the next operation needs them. JIT saves interest costs on capital tied up in inventory and reduces expenses of warehousing. However, to maintain production and protect the investment in equipment a plant must deal quickly with any trouble that surfaces through JIT. JIT management strategy reinforces Management by stress, by causing workers to deal with issues that arise quickly and efficiently.
b) In the NUMMI plant, the JIT strategy was adopted, which fueled the new standard of workplace efficiency.

Question 51

Paper Entrepreneurialism-

Answer 51

a) Paper Entrepreneurialism is exploitation of tax laws, accounting rules, earning management, and exchange rate speculation. Paper Entrepreneurialism became much more widespread in American business in the 80s and 90s when the market was becoming increasingly deregulated and SEC laws required companies to make quarterly reports on financial deregulation. Created pressure to produce good quality reports so reform incentives to exaggerate revenues.
b) During the 1980-90 markets were becoming increasingly deregulated, which resulted in companies searching for accountants who could take advantage of the laws or even go as far as to cook the books. Enron epitomized the problems of this era. Salter expained how Enron used several deceptive accounting techniques to manipulate the numbers/annual earnings. Salter saw this as a flaw in the business management model with employee performance reviews, flawed bonus system, weak risk management, and recruiting/training.

Question 52

Enron’s culture of deceit-

Answer 52

a) Enron’s culture of deceit was made possible by the success of deceptive accounting techniques which included failure to disclose off balance sheet partnerships, contingent liabilities, misrepresentations of debt. The most powerful tool which Enron was using to cook the books was the “mark-to market” system. This allowed for Enron to declare money that they projected they would earn as profits. Furthermore, Enron also lied about the amount of debt they were accumulating, but the ‘mark-to market” system ensured that the company would always stay in the black. Enron put itself in a situation where it had to lie to stay afloat.

Question 53

Valhalla Oil Trading Fraud-

Answer 53

a) In 1985 Houston Natural Gas with InterNorth created Enron. Part of this merger included Enron’s acquisition of a small business in Valhalla, New York. In 1987, The Valhalla business was the first in Enron’s history to commit any financial fraud. The revenue of Valhalla went from 3.1 million in 1985 to 9.4 million in 1986.
b) The Valhalla Oil Trading Fraud defined the direction of where Enron was headed. After the scandal was brought to light, none of the perpetrators were brought to justice. Louis Borget and Thomas Mastroeni were the two main perpetrators in Valhalla, and both embezzled millions. Soon after Ken Lay decided to keep both men on the payroll, insisting that they did their jobs to the best of their ability.

Question 54

Anderson Accounting in 1990s and early 2000s-

Answer 54

a) Arthur-Anderson LLP was one of the largest corporate accounting firms in the country. Enron attempted to systematically keep their business afloat through accounting fraud, while Anderson’s job was to audit all of Enron’s profits and expenditures. Anderson was a highly compromised outside auditor, and failed to bring the issues of Enron’s accounting forward. When Enron collapsed, Anderson was brought up on obstruction of justice charges. Arthur Andersen Collapsed shortly after.
b) The Anderson indictment put spotlight on other large companies, most notably WorldCom. Soon after WorldCom passed up Enron on the record for the biggest bankruptcy of all time. Anderson’s dealings with Enron were the first of many dominos that began to fall.

Question 55

“Tyranny” of quarterly reports-

Answer 55

Created a massive deceptive accounting techniques which companies such as Enron used to make their earnings reports acceptable. This created huge financial problems that many large corporations took charge in fraud.

Question 56

Executive pay reforms of the 1990s

Answer 56

Pay based on performance gave incentive to lie or exaggerate about company numbers and performance

57.

Question 57

Dennis Kozlowski

Answer 57

a) Dennis Kozolowski is the former CEO of Tyco international. In 2005 he was convicted on embezzlement charges, taking more than 81 million dollars in bonuses.

Question 58

Costs and benefits of robotization and other forms of digital innovation in industry (and services)

Answer 58

Replacing clerical and service and unskilled jobs. Providing new job growth as well.

Question 59

64. Adcult

Answer 59

New culture of advertising- advertising and culture are enmeshed
Advertising is ubiquitous, anonymous, syncretic, symbiotic, profane, and magical

Question 60

65. “Upscaling problem”

Answer 60

People feel the need to upscale their lives. Need better, bigger, nicer stuff, status symbols going upscale. The American dream is evolving and people aspire to live like celebrities, we compare ourselves to the top 1%. Sprung a new competitive culture that’s tough and costly.

Question 61

***Interstate Commerce Act

Answer 61

• established in 1887
• designed to regulate the railroad industry
• wanted to regulate it’s monopolistic practices and power
• required that the rates be “reasonable” and “just” but didn’t enforce the gov to fix the rates
• required that the railroads advertise shipping rates and prohibited fare discrimination
• this act created a federal regulatory agency known as the Interstate Commerce Commission which monitored railroads to ensure that they complied with new regulations

Question 62

Sherman Ant-trust Act*****

Answer 62

• established in 1890
• — it prohibits certain business activities that federal government regulators deem to be anti-competitive, and requires the federal government to investigate and pursue trusts.

-The first view, Progressive School (Robber Baron)
-Triumph of common man
-seen as an act against greedy capitalists
-Roosevelt was the reason for such reform b/c his ability to break the monopolies
-Second View, Revisionism (1950s)
-aka ‘age of reform’
-middle class focus
-wanted to gain wealth as fast as the rich, but were’nt
-Third View, Radical Revisionism
-Kolko critiqued Teddy Roosevelt and did not see him a hero
-not enough regulation
-saw the act as favoring the rich
-Fourth View, New Revision/New School/Chandlerian
-McCraw said businesses were driven by economic forces
-strategies formed around the flow of the market
-saw a free market as the best market
-Bradeis was the progressive icon in the courtroom, dislike big businesses
-Overview
-created to prohibit certain business activities that government regulators think to be anti-competitive
-required the government to investigate and pursue trusts (large business owned by one person, which entrusts its property to a second party. The property is then used to benefit the first party)
-ultimately wanted to protect the market from monopolies and keep the competition balanced within the marketplaces, and also to make sure that their were no market failures in big industries

Question 63

National Recovery Administration (NRA)**

Answer 63

• established in 1933 by FDR
• ultimate goal was to eliminate cutthroat competition
• officials (industry leaders, laborers, and government) worked to set prices, new production quotas, and divide market
• created by the National Industrial Recovery Act (NIRA)
• stimulated job creation and set up supply side regulation
• made banks create a minimum wage for workers, maximum hours worked per week, and security within the worksite (benefitting laborers and businesses)
• businesses were forced to join industry trade association to agree on prices, production quotas, and also wage rates
• tried to control the balance and competition of the market yet it failed