Tagged: Book summary
December 5, 2018 at 7:08 am #1087
Fundamentals of Business by Stephen J. Skripak
Pamplin College of Business and Virginia Tech Libraries
Virginia Tech Blacksburg, Virginia
(Full book is at the end of page)
This book is dedicated to reducing the cost of education in business. – S. Skripak
Teamwork in Business
1) Define a team and describe its key characteristics.
2) Explain why organizations use teams, and describe different
types of teams.
3) Explain why teams may be effective or ineffective.
4) Identify factors that contribute to team cohesiveness.
5) Understand the importance of learning to participate in teambased
6) Identify the skills needed by team members and the roles
that members of a team might play.
7) Learn how to survive team projects in college (and actually
8) Explain the skills and behaviors that foster effective team
Some Key Characteristics of Teams
To put teams in perspective, let’s identify five key characteristics. Teams:5
1) Share accountability for achieving specific common goals
2) Function interdependently
3) Require stability
4) Hold authority and decision-making power
5) Operate in a social context
Why Organizations Build Teams
Why do major organizations now rely so much on teams to improve operations?
Executives at Xerox have reported that team-based operations are 30 percent more productive than conventional operations. General Mills says that factories organized around team activities are 40 percent more productive than traditionally organized factories. FedEx says that teams reduced service errors (lost packages, incorrect bills) by 13 percent in the first year
Today it seems obvious that teams can address a variety of challenges in the world of corporate activity. Before we go any further, however, we should remind ourselves that the data we’ve just cited aren’t necessarily definitive. For one thing, they may not be objective — companies are more likely to report successes than failures. As a matter of fact, teams don’t always work. According to one study, team-based projects fail 50 to 70 percent of the time.
The Effect of Teams on Performance
Research shows that companies build and support teams because of their effect on overall workplace performance, both organizational and individual. If we examine the impact of team-based operations according to a wide range of relevant criteria, we find that overall organizational performance generally improves. Figure P.3 lists several areas in which we can analyze workplace performance and indicates the percentage of companies that have reported improvements in each area.
Types of Teams
Teams, then, can improve company and individual performance in a number of areas.
Not all teams, however, are formed to achieve the same goals or charged with the same responsibilities. Nor are they organized in the same way. Some, for instance, are more autonomous than others—less accountable to those higher up in the organization. Some depend on a team leader who’s responsible for defining the team’s goals and making sure that
its activities are performed effectively. Others are more or less self- governing: though a leader lays out overall goals and strategies, the team itself chooses and manages the methods by which it pursues its goals and implements its strategies. Teams also vary according to their
membership. Let’s look at several categories of teams.
Motivation and Frustration
Remember that teams are composed of people, and whatever the roles they happen to be playing at a given time, people are subject to psychological ups and downs.
As members of workplace teams, they need motivation, and when motivation is low, so are effectiveness and productivity. The difficulty of maintaining a high level of motivation is the chief cause of frustration among members of teams. As such, it’s also a chief cause of ineffective teamwork, and that’s one reason why more employers now look for the ability to develop and sustain motivation when they’re hiring new managers.
Will You Make a Good Team Member?
What if your instructor decides to divide the class into teams and assigns each team to develop a new product plus a business plan to get it on the market? What teamwork skills could you bring to the table, and what teamwork skills do you need to improve? Do you possess qualities that might make you a good team leader?
What Skills Does the Team Need?
Sometimes we hear about a sports team made up of mostly average players who win a championship because of coaching genius, flawless teamwork, and superhuman determination. But not terribly often. In fact, we usually hear about such teams simply because they’re newsworthy—exceptions to the rule. Typically a team performs well because its members possess some level of talent. Members’ talents must also be managed in a collective effort to achieve a common goal.
The Foundations of Business
1) Describe the concept of stakeholders and identify the stakeholder groups relevant to an organization
2) Discuss and be able to apply the macro-businessenvironment model to an industry or emerging technology
3) Explain other key terms related to this chapter including: entrepreneur; profit; revenue.
Why Is Apple Successful?
In 1976 Steve Jobs and Steve Wozniak created their first computer, the Apple I. They invested a mere $1,300 and set up business in Jobs’ garage. Three decades later, their business—Apple Inc.—has become one of the world’s most influential and successful companies. Jobs and Wozniak were successful entrepreneurs: those who take the risks and reap the rewards associated with starting a new business enterprise. Did you ever wonder why Apple flourished while so many other young companies failed? How did it grow from a garage start-up to a company generating over $233 billion in sales in 2015?
How was it able to transform itself from a nearly bankrupt firm to a multinational corporation with locations all around the world? You might conclude that it was the company’s products, such as the Apple I and II, the Macintosh, or more recently its wildly popular iPod, iPhone, and iPad. Or, you could decide that it was its dedicated employees, management’s wiliness to take calculated risks, or just plain luck – that Apple simply was in the right place at the right time.
Steve Jobs was definitely not known for humility, but he was a visionary and had a right to be proud of his accomplishments. Some have commented that “Apple’s most successful days occurred with Steve Jobs at the helm.”
Jobs did what many successful CEOs and managers do: he learned, adjusted, and improvised. Perhaps the most important statement that can be made about him is this: he never gave up on the company that once turned its back on him. So now you have the facts.
Here’s a multiple-choice question that you’ll likely get right: Apple’s success is due to
(a) its products,
(b) its customers,
(d) its willingness to take risks,
(e) Steve Jobs, or (f) some combination of these options
Functional Areas of Business
The activities needed to operate a business can be divided into a number of functional areas. Examples include: management, operations, marketing, accounting, and finance. Let’s briefly explore each of these areas.
Managers are responsible for the work performance of other people. Management involves planning for, organizing, leading, and controlling a company’s resources so that it can achieve its goals. Managers plan by setting goals and developing strategies for achieving them. They organize activities and resources to ensure that company goals are met and staff the organization with qualified employees and managers lead them to accomplish organizational goals. Finally, managers design controls for assessing the success of plans and decisions and take corrective action when needed.
All companies must convert resources (labor, materials, money, information, and so forth) into goods or services. Some companies, such as Apple, convert resources into tangible products—Macs, iPhones, etc. Others, such as hospitals, convert resources into intangible products — e.g., health care. The person who designs and oversees the transformation of resources into goods or services is called an operations manager. This individual is also responsible for ensuring that products are of high quality.
Marketing consists of everything that a company does to identify customers’ needs (i.e. market research) and design products to meet those needs. Marketers develop the benefits and features of products, including price and quality. They also decide on the best method of delivering products and the best means of promoting them to attract and keep customers. They manage relationships with customers and make them aware of the organization’s desire and ability to satisfy their needs.
Managers need accurate, relevant and timely financial information, which is provided by accountants. Accountants measure, summarize, and communicate financial and managerial information and advise other managers on financial matters. There are two fields of accounting. Financial accountants prepare financial statements to help users, both inside and
outside the organization, assess the financial strength of the company. Managerial accountants prepare information, such as reports on the cost of materials used in the production process, for internal use only.
Finance involves planning for, obtaining, and managing a company’s funds. Financial managers address such questions as the following: How much money does the company need? How and where will it get the necessary money? How and when will it pay the money back? What investments should be made in plant and equipment? How much should be spent
on research and development? Good financial management is particularly important when a company is first formed, because new business owners usually need to borrow money to get started.
External Forces that Influence Business Activities
1)The main participants in a business are its owners, employees, and
2) Every business must consider its stakeholders, and their sometimes
conflicting interests, when making decisions.
3) The activities needed to run a business can be divided into functional
areas. The business functions correspond fairly closely to many
majors found within a typical college of business.
4) Businesses are influenced by such external factors as the economy,
government, and other forces external to the business.
Chapter 2. Economics and Business
1) Describe the foundational philosophies of capitalism and
2) Discuss private property rights and why they are key to
3) Discuss the concept of GDP (gross domestic product).
4) Explain the difference between fiscal and monetary policy.
5) Discuss the concept of the unemployment rate
6) Discuss the concepts of inflation and deflation.
7) Explain other key terms related to this chapter including:
supply; demand; equilibrium price; monopoly; recession;
Measuring the Health of the Economy
Every day, we are bombarded with economic news (at least if you watch the business news stations). We’re told about things like unemployment, home prices, and consumer confidence trends. As a student learning about business, and later as a business manager, you need to understand the nature of the U.S. economy and the terminology that we use to describe it. You need to have some idea of where the economy is heading, and you need to know something about the government’s role in influencing its direction.
The world’s economies share three main goals:
- High employment
- Price stability
Government’s Role in Managing the Economy
- Monetary Policy
- Fiscal Policy
- The National Debt
1) Economics is the study of the production, distribution, and consumption of goods and services.
2) Economists address these three questions: (1) What goods and services
should be produced to meet consumer needs? (2) How should they be
produced, and who should produce them? (3) Who should receive goods
3) The answers to these questions depend on a country’s economic system.
The primary economic systems that exist today are planned and free
4) In a planned system, such as communism and socialism, the government
exerts control over the production and distribution of all or some goods and
5) In a free market system, also known as capitalism, business is conducted
with only limited government involvement. Competition determines what
goods and services are produced, how they are produced, and for whom.
6) In a free market system, buyers and sellers interact in a market to set
7) When the market is characterized by perfect competition, many small
companies sell identical products. The price is determined by supply and
8) Supply is the quantity of a product that sellers are willing to sell at various
prices. Price also influences the quantity of a product that producers are
willing to supply: they’ll sell more of a product when prices are high and less
when they’re low.
9) Demand is the quantity of a product that buyers are willing to purchase at
various prices. The quantity of a product that people will buy depends on its
price: they’ll buy more when the price is low and less when it’s high.
10) In a competitive market, the decisions of buyers and sellers interact until the
market reaches an equilibrium price—the price at which buyers are willing
to buy the same amount that sellers are willing to sell.
11) There are four types of competition in a free market system: perfect
competition, monopolistic competition, oligopoly, and monopoly.
12) Under perfect competition, many sellers offer differentiated products—
products that differ slightly but serve similar purposes. By making
consumers aware of product differences, sellers exert some control over
13) In an oligopoly, a few sellers supply a sizable portion of products in the
market. They exert some control over price, but because their products are
similar, when one company lowers prices, the others follow.
14) In a monopoly, there is only one seller in the market. The market could be
a geographical area, such as a city or a regional area, and does not
necessarily have to be an entire country. The single seller is able to control
15) Most monopolies fall into one of two categories: natural and legal.
16) Natural monopolies include public utilities, such as electricity and gas
suppliers. They inhibit competition, but they’re legal because they’re
important to society.
17) A legal monopoly arises when a company receives a patent giving it
exclusive use of an invented product or process for a limited time, generally
18) All economies share three goals: growth, high employment, and price
19) Growth. An economy provides people with goods and services, and
economists measure its performance by studying the gross domestic
product (GDP)—the market value of all goods and services produced by the
economy in a given year. If the GDP goes up, the economy is growing; if it
goes down, the economy is contracting.
20) High employment. Because most people earn their money by working, a
goal of all economies is making jobs available to everyone who wants one.
The U.S. government reports an unemployment rate—the percentage of the
labor force that’s unemployed and actively seeking work. The
unemployment rate goes up during recessionary periods and down when
the economy is expanding.
21) Price stability. When the average prices of products either don’t change or
change very little, price stability occurs. When overall prices go up, we have
inflation; when they go down, we have deflation. The consumer price index
(CPI) measures inflation by determining the change in prices of a
hypothetical basket of goods bought by a typical household.
22) To get a sense of where the economy is headed in the future, we use
statistics called economic indicators. Indicators that, like average length
of unemployment, report the status of the economy a few months in the
past are lagging economic indicators. Those, like new claims for
unemployment insurance, that predict the status of the economy three to
twelve months in the future are leading economic indicators.
Ethics and Social Responsibility
1) Define business ethics and explain what it means to act
ethically in business.
2) Explain why we study business ethics.
3) Identify ethical issues that you might face in business, such as insider trading, conflicts of interest, and bribery, and explain rationalizations for unethical behavior.
4) Identify steps you can take to maintain your honesty and integrity in a business environment.
5) Define corporate social responsibility and explain how organizations are responsible to their stakeholders, including owners, employees, customers, and the community
6) Discuss how you can identify an ethical organization, and
how organizations can prevent behavior like sexual
7) Learn how to avoid an ethical lapse, and why you should not
rationalize when making decisions.
What is Business Ethics?
The Idea of Business Ethics
It’s in the best interest of a company to operate ethically. Trustworthy companies are better at attracting and keeping customers, talented employees, and capital. Those tainted by questionable ethics suffer from dwindling customer bases, employee turnover, and investor
Let’s begin this section by addressing this question: What can individuals,
organizations, and government agencies do to foster an environment of ethical behavior in business? First, of course, we need to define the term.
What Is Ethics?
You probably already know what it means to be ethical: to know right from wrong and to know when you’re practicing one instead of the other. We can say that business ethics is the application of ethical behavior in a business context. Acting ethically in business means more than simply obeying applicable laws and regulations: It also means being honest, doing
no harm to others, competing fairly, and declining to put your own interests above those of your company, its owners, and its workers. If you’re in business you obviously need a strong sense of what’s right and wrong. You need the personal conviction to do what’s right, even if it means doing something that’s difficult or personally disadvantageous.
Identifying Ethical Issues and Dilemmas
Ethical issues are the difficult social questions that involve some level of controversy over what is the right thing to do. Environmental protection is an example of a commonly discussed ethical issue, because there can be tradeoffs between environmental and economic factors.
Ethical dilemmas are situations in which it is difficult for an individual to make decisions either because the right course of action is unclear or carries some potential negative consequences for the person or people involved.
Make no mistake about it: when you enter the business world, you’ll find yourself in situations in which you’ll have to choose the appropriate behavior. How, for example, would you answer questions like the following?
1) Is it OK to accept a pair of sports tickets from a supplier?
2) Can I buy office supplies from my brother-in-law?
3) Is it appropriate to donate company funds to a local charity?
4) If I find out that a friend is about to be fired, can I warn her?
Obviously, the types of situations are numerous and varied. Fortunately, we can break them down into a few basic categories: issues of honesty and integrity, conflicts of interest and loyalty, bribes versus gifts, and whistle-blowing.
Let’s look a little more closely at each of these categories.
Corporate Social Responsibility
Corporate social responsibility refers to the approach that an organization takes in balancing its responsibilities toward different stakeholders when making legal, economic, ethical, and social decisions. Remember that we previously defined stakeholders as those with a legitimate interest in the success or failure of the business and the policies it adopts.
The term social responsibility refers to the approach that an organization takes in balancing its responsibilities toward their various stakeholders.
What motivates companies to be “socially responsible”? We hope it’s because they want to do the right thing, and for many companies, “doing the right thing” is a key motivator.
The fact is, it’s often hard to figure out what the “right thing” is: what’s “right” for one group of stakeholders isn’t necessarily just as “right” for another. One thing, however, is certain: companies today are held to higher standards than ever before. Consumers and other groups consider not only the quality and price of a company’s products but also its character. If too
many groups see a company as a poor corporate citizen, it will have a harder time attracting qualified employees, finding investors, and selling its products. Good corporate citizens, by contrast, are more successful in all these areas.
Managers have what is known as a fiduciary responsibility to owners: they’re responsible for safeguarding the company’s assets and handling its funds in a trustworthy manner. Yet managers experience what is called the agency problem; a situation in which their best interests do not align with those of the owners who employ them. To enforce managers’ fiduciary responsibilities for a firm’s financial statements and accounting records, the
Sarbanes-Oxley Act of 2002 requires CEOs and CFOs to attest to their accuracy. The law also imposes penalties on corporate officers, auditors, board members, and any others who commit fraud. You’ll learn more about this law in your accounting and business law courses
How Can You Recognize an Ethical Organization?
One goal of anyone engaged in business should be to foster ethical behavior in the organizational environment. How do we know when an organization is behaving ethically?
Most lists of ethical organizational activities include the following criteria:
- Treating employees, customers, investors, and the public fairly
- Holding every member personally accountable for his or her action
- Communicating core values and principles to all members
- Demanding and rewarding integrity from all members in all situations
Employees at companies that consistently make Business Ethics magazine’s list of the “100 Best Corporate Citizens” regard the items on the previous list as business as usual in the workplace. Companies at the top of the 2016 list include Microsoft, Hasbro, Ecolab, BristolMyers-Squibb, and Lockheed Martin.
By contrast, employees with the following attitudes tend to suspect that their employers
aren’t as ethical as they should be:
- They consistently feel uneasy about the work they do.
- They object to the way they’re treated.
- They’re uncomfortable about the way coworkers are treated.
- They question the appropriateness of management directives and policies.
The Individual Approach to Ethics
- Addressing Ethical Dilemmas
- Making Ethical Decisions
- Refusing to Rationalize
1) Business ethics is the application of ethical behavior in a business context. Ethical (trustworthy) companies are better able to attract and keep customers, talented employees, and capital.
2) Acting ethically in business means more than just obeying laws and regulations. It also means being honest, doing no harm to others, competing fairly, and declining to put your own interests above those of your employer and coworkers.
3) In the business world, you’ll encounter conflicts of interest: situations in which you’ll have to choose between taking action that promotes your personal interest and action that favors the interest of others.
4) Corporate social responsibility refers to the approach that an organization takes in balancing its responsibilities toward different stakeholders (owners, employees, customers, and the communities in which they conduct business) when making legal, economic, ethical, and social decisions.
5) Managers have several responsibilities: to increase the value of owners’ investments through profitable operations, to provide owners and other stakeholders with accurate, reliable financial information, and to safeguard the company’s assets and handle its funds in a trustworthy manner.
6) Companies have a responsibility to pay appropriate wages and
benefits, treat all workers fairly, and provide equal opportunities for all
employees. In addition, the must guard workers’ safety and health and
to provide them with a work environment that’s free from sexual
7) Consumers have certain legal rights: to use safe products, to be
informed about products, to choose what to buy, and to be heard.
Sellers must comply with these requirements.
8) Businesspeople face two types of ethical challenges: ethical dilemmas
and ethical decisions.
9) An ethical dilemma is a morally problematic situation in which you
must choose competing and often conflicting options which do not
satisfy all stakeholders.
10) An ethical decision is one in which there’s a right (ethical) choice and
a wrong (unethical or downright illegal) choice.
Business in a Global Environment
1) Explain why nations and companies participate in international trade.
2) Describe the concepts of absolute and comparative advantage.
3) Explain how trade between nations is measured.
4) Define importing and exporting.
5) Explain how companies enter the international market through licensing
agreements or franchises.
6) Describe how companies reduce costs through contract manufacturing and outsourcing.
7) Explain the purpose of international strategic alliances and joint ventures.
8) Understand how U.S. companies expand their businesses through foreign direct investments and international subsidiaries.
9) Appreciate how cultural, economic, legal, and political differences between countries create challenges to successful business dealings.
10) Describe the ways in which governments and international bodies promote and regulate global trade.
11) Discuss the various initiatives designed to reduce international trade barriers and promote free trade.
Do you wear Nike shoes or Timberland boots? Buy groceries at Giant Stores or Stop & Shop? Listen to Beyoncé, Pitbull, Twenty One Pilots, or The Neighbourhood on Spotify? If you answered yes to any of these questions, you’re a global business customer. Both Nike and Timberland manufacture most of their products overseas. The Dutch firm Royal Ahold owns all three supermarket chains. And Spotify is a Swedish enterprise
The Globalization of Business
The globalization of business is bound to affect you. Not only will you buy products manufactured overseas, but it’s highly likely that you’ll meet and work with individuals from various countries and cultures as customers, suppliers, colleagues, employees, or employers.
The bottom line is that the globalization of world commerce has an impact on all of us. Therefore, it makes sense to learn more about how globalization works.
Absolute and Comparative Advantage
To understand why certain countries import or export certain products, you need to realize that every country (or region) can’t produce the same products. The cost of labor, the availability of natural resources, and the level of know-how vary greatly around the world. Most economists use the concepts of absolute advantage and comparative advantage to explain
why countries import some products and export others.
A nation has an absolute advantage if (1) it’s the only source of a particular product or (2) it can make more of a product using fewer resources than other countries. Because of climate and soil conditions, for example, France had an absolute advantage in wine making until its dominance of worldwide wine production was challenged by the growing wine industries in Italy, Spain, and the United States. Unless an absolute advantage is based on
some limited natural resource, it seldom lasts. That’s why there are few, if any, examples of absolute advantage in the world today
How can we predict, for any given country, which products will be made and sold at home, which will be imported, and which will be exported? This question can be answered by looking at the concept of comparative advantage, which exists when a country can produce a product at a lower opportunity cost compared to another nation. But what’s an opportunity
cost? Opportunity costs are the products that a country must forego making in order to produce something else. When a country decides to specialize in a particular product, it must sacrifice the production of another product. Countries benefit from specialization – focusing on what they do best, and trading the output to other countries for what those countries do best.
The United States, for instance, is increasingly an exporter of knowledge-based products, such as software, movies, music, and professional services (management consulting, financial services, and so forth). America’s colleges and universities, therefore, are a source of comparative advantage, and students from all over the world come to the United States for the
world’s best higher-education system.
France and Italy are centers for fashion and luxury goods and are leading exporters of wine, perfume, and designer clothing. Japan’s engineering expertise has given it an edge in such fields as automobiles and consumer electronics. And with large numbers of highly skilled graduates in technology, India has become the world’s leader in low- cost, computer-software engineering.
Reducing International Trade Barriers
General Agreement on Tariffs and Trade
World Trade Organization
Financial Support for Emerging Economies: The IMF and the World Bank
The International Monetary Fund
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