Evaluate the advantages and disadvantages of franchising.

Evaluate the advantages and disadvantages of franchising.

Advantages of franchising:

-Less risk.
-Training and support.
-Brand recognition.
-Easier access to funding.

Disadvantages of franchising:

-Costs.
-Lack of control.
-Negative halo effect.
-Growth challenges.
-Restrictions on sale.
-Poor execution.

Explain why limited liability companies are becoming an increasingly popular form of business ownership.

Explain why limited liability companies are becoming an increasingly popular form of business ownership.

- There is limited liability.

- There is tax pass-through. Earnings "pass through" the company and are taxed only as income of the owners. This eliminates the double taxation of profits that is endemic to general corporations.

- There is simplicity and flexibility in management and operation.

- There is flexible ownership.

Explain why corporations have become the dominant form of business ownership.

Explain why corporations have become the dominant form of business ownership.

Corporation have become the dominant form of business ownership because they are legal entities that stand apart from the owners

Evaluate the pros and cons of the partnership as a form of business ownership.

Evaluate the pros and cons of the partnership as a form of business ownership.

Pros of the partnership as a form of business ownership:

- Ability to pool financial resources: With more owners investing in the company, a partnership is likely to have a stronger financial base than a sole proprietorship.

- Ability to share responsibilities and capitalize on complementary skills: Partners can share the burden of running the business, which can ease the workload.

- Ease of formation: Forming a partnership is easy.

- Possible tax advantages: The earnings of a partnership are untouched by the IRS and are taxed only as the partners' personal income.

Cons of the partnership as a form of business ownership:

- Unlimited liability: As a general partner, you're not only liable for your own mistakes, but also for those of your partner's.

- Potential for disagreements: If general partners can't agree on how to run the business, the conflict can complicate and delay decision making.

- Lack of community: If a current partner withdraws from the partnership, the relationships among the participants will clearly change, potentially ending the partnership.

Discuss the advantages and disadvantages of sole proprietorship.

Discuss the advantages and disadvantages of sole proprietorship.

Advantages of sole proprietorship:

- Ease of formation: The paperwork and costs involved in forming a sole proprietorship are minimal.

- Retention of control: Ability to manage your business the way you want.

- Pride of ownership: The feeling of pride and satisfaction gained from owning and running a business.

- Retention of profits: If you business is successful, all the profits go to you.

- Possible tax advantage: No taxes are levied directly on the earnings of sole proprietorships as a business. Instead, the earnings are taxed only as income of the proprietor.

Disadvantages of sole proprietorship:

- Limited financial resources: With only one owner for a sole proprietorship's debts, banks and other financial institutions are often reluctant to lend it money.

- Unlimited liability: Because the law views a sole proprietorship as an extension of its owner, the debts of the firm become the owner's personal debts. If someone sues your business and wins, the court can seize your personal possessions and sell them to pay the damages.

- Limited ability to attract and maintain talented employees: Most sole proprietors are unable to pay the high salaries and substantial perks that highly qualified, experienced employees get when they work for big, well-established companies.

- Heavy workload and responsibilities: Very long hours and a lot of stress.

- Lack of permanence: If the owner dies, retires, or withdraws from the business, the company legally ceases to exist.

Describe the characteristics of the four basic forms of business ownership.

The characteristics of the four basic forms of business ownership are described below :

1. A sole proprietorship is a business that is owned, and usually managed by a single individual.


2. A partnership is a voluntary agreement under which two or more people act as co-owners of a business for profit. In its most basic form, known as a general partnership, each partner has the right to participate in the company's management and share in profits- but also has unlimited liability for any debts the company incurs.


3. A corporation is a business entity created by filling a form(known in most states as the articles of incorporation) with the appropriate state agency, paying the state's incorporation fees, and meeting other requirements.

A corporation is considered to be a legal entity that is separate and distinct from its owners. Because of a corporation's status as a separate legal entity, the owners of a corporation have limited liability- meaning they aren't personally responsible for the debts and obligations of their company.


4. A limited liability company(LLC) is a hybrid form of business ownership that is similar in some respects to a corporation while having other characteristics that are similar to a partnership.

Like a corporation, a limited liability company is considered a legal entity separate from its owners. Also like a corporation, an LLC offers its owners limited liability for the debts of their business.

What are the impact of computers and robotics on productivity ?

The impact of computers and robotics on productivity :

1. Automation

The total or near total use of machines to do work

2. Robotics

- The use of programmable machines to perform a variety of tasks by manipulating materials and tools

- Robots work quickly, accurately, and steadily

- Robots are effective in tedious, repetitious, and hazardous tasks

3. Computer manufacturing systems

Computer-aided design (CAD)

Computer-aided manufacturing (CAM)

Computer-integrated manufacturing (CIM)

4. Continuous Process.

A manufacturing process in which a firm produces the same product(s) over a long period of time

5. Flexible manufacturing systems (FMS) 

A single production system that combines electronic machines and computer-integrated manufacturing.

6. Intermittent process

A manufacturing process in which a firm's manufacturing machines and equipment are changed to produce different products

7. Technological displacement

Automation cuts manufacturing time, reduces error, and simplifies retooling procedures

-Many robots work with humans to make jobs safer and easier

-Automation will bring change to many jobs; many workers will have to retrain or seek jobs in other sectors of the economy

Summarize how technology can make American firms more productive and competitive in the global marketplace.

Summarize how technology can make American firms more productive and competitive in the global marketplace.

Productivity is the average level of output per worker per hour. From 1979 to 2011, U.S. productivity growth averaged a 4.2% increase. More specifically, productivity in 2011 increased 2%. Although a 2% increase was lower when compared to our average productivity growth over the 1979 to 2011 time period, 11 other nations that the U.S. Bureau of Labor Statistics tracks each year had larger growth in productivity than the United States.

Several factors must be considered if U.S. firms are going to increase productivity and their ability to compete in the global marketplace.

Automation, the total or near-total use of machines to do work, has for some years been changing the way work is done in factories. A growing number of industries are using programmable machines called robots. Computer-aided design, computer-aided manufacturing, and computer-integrated manufacturing use computers to help design and manufacture products.

A flexible manufacturing system (FMS) combines electronic machines and CIM to produce smaller batches of products more efficiently than on the traditional assembly line. Instead of having to spend vast amounts of time and effort to retool the traditional mechanical equipment on an assembly line for each new product, an FMS is rearranged simply by reprogramming electronic machines.

An FMS is sometimes referred to as an intermittent process.

Explain how purchasing, inventory control, scheduling, and quality control affect production.

Explain how purchasing, inventory control, scheduling, and quality control affect production.

The major areas of operations control are purchasing, inventory control, scheduling, and quality control.

Purchasing involves selecting suppliers. The choice of suppliers should result from careful analysis of a number of factors, including price, quality, reliability, credit terms, and shipping costs.

Inventory control is the management of stocks of raw materials, work-in-process, and finished goods to minimize the total inventory cost.

Scheduling ensures that materials and other resources are at the right place at the right time.

Quality control guarantees that products and services are produced in accordance with design specifications. The major objective of quality control is to see that the organization lives up to the standards it has set for itself on quality. A number of different activities including quality circles, inspection, total quality management, and six sigma can be used to encourage employee participation and to improve quality.

Discuss the components involved in planning the production process.

Discuss the components involved in planning the production process.

Planning for production involves three major phases:

• design planning, 
• site selection and facilities planning, and 
• operational planning. 

First, design planning is undertaken to address questions related to the product line, required production capacity, and the use of technology.

Then production facilities, human resources, and plant layout must be considered. Operational planning focuses on the use of production facilities and resources.

The steps for operational planning include

1. selecting a planning horizon,
2. estimating market demand,
3. comparing market demand with capacity, and
4. adjusting production of products or services to meet demand.

Describe how research and development leads to new products and services.

Describe how research and development leads to new products and services.

Operations management often begins with product research and development and often referred to as R&D. The results of R&D may be entirely new products or services or extensions and refinements of existing products or services.

R&D activities are classified as basic research (aimed at uncovering new knowledge), applied research (discovering new knowledge with some potential use), and development and implementation (using new or existing knowledge to produce goods and services).

If a firm sells only one product or provides only one service, when customers quit buying the product or service, the firm will die. To stay in business, the firm must, at the very least, find ways to refine or extend the want-satisfying capability of its product or service.

Understand the importance of service businesses to consumers, other business firms, and the nation's economy.

Understand the importance of service businesses to consumers, other business firms, and the nation's economy.

The application of the basic principles of operations management to the production of services has coincided with the growth and importance of service businesses in the United States. Today of American workers are employed in the service industry. In fact, the American economy is now characterized as a service economy.

For a service firm, planning often begins with determining who the customer is and what needs the customer has. After customer needs are identified the next step is to develop a plan that will enable the firm to deliver the services that their customers want or need.


Although it is often more difficult to measure customer satisfaction, today's successful service firms work hard at providing the services customers want. For example, compared with manufacturers, service firms often listen more carefully to customers and respond more quickly to the market's changing needs.

Outline how the conversion process transforms raw materials, labor, and other resources into finished goods or services.

Outline how the conversion process transforms raw materials, labor, and other resources into finished goods or services.

A business transforms resources into goods and services in order to provide utility to customers. Utility is the ability of a good or service to satisfy a human need. Form utility is created by people converting raw materials, finances, and information into finished products.

Conversion processes vary in terms of the major resources used to produce goods and services (focus), the degree to which resources are changed (magnitude of change), and the number of production processes that a business uses.

Explain the nature of production.

Explain the nature of production.

Operations management consists of all the activities that managers engage in to create goods and services.

Operations are as relevant to service organizations as to manufacturing firms.

Today, U.S. companies are forced to compete in an ever-smaller world to meet the needs of more-demanding customers. As a result, U.S. manufacturers have used innovation to improve productivity.

Because of innovation, fewer workers are needed, but those workers who are needed possess the skills to use automation and technology.

In an attempt to regain a competitive edge, manufacturers have taken another look at the importance of improving quality and meeting the needs of their customers. They also have used new techniques to motivate employees, reduced costs, used computer-aided and flexible manufacturing systems, improved control procedures, and used green manufacturing.

Competing in the global economy is not only profitable but also an essential activity that requires the cooperation of everyone within an organization.

A number of career options are available for employees in operations management.

Explain the functions of the informal organization and the grapevine in a business.

Explain the functions of the informal organization and the grapevine in a business.

Informal groups are created by group members to accomplish goals that may or may not be relevant to the organization, and they can be very powerful forces.

The grapevine—the informal communications network within an organization—can be used to transmit information (important or gossip) through an organization much faster than through the formal communication network.

Information transmitted through the grapevine can go in any direction across the organizational structure, skipping up or down levels of management and even across departments.

Understand how committees and task forces are used.

Understand how committees and task forces are used.

Committees and task forces are used to develop organizational structure within an organization.

An ad-hoc committee is created for a specific short-term purpose, whereas a standing committee is relatively permanent.

A task force is created to investigate a major problem or pending decision.

Describe the effects of corporate culture.

Describe the effects of corporate culture.

Corporate culture has both internal and external effects on an organization. An organization's culture can influence the way employees think and act, and it can also determine the public's perception of the organization.

Corporate culture can affect a firm's performance over time, either negatively or positively. Creating a culture of trust, for example, can lead to increased growth, profits, productivity, and job satisfaction, while retaining the best employees, inspiring customer loyalty, developing new markets, and increasing creativity.

In addition, when two or more companies undergo the integration process, their different or similar corporate cultures can affect the success of a merger or acquisition.

Describe the four basic forms of organizational structure.

Describe the four basic forms of organizational structure.

There are four basic forms of organizational structure.

1. The line structure is the oldest and simplest structure, in which the chain of command moves in a straight line from person to person down through the levels of management.

2. The line-and-staff structure is similar to the line structure, but adds specialists called staff managers to assist the line managers in decision making.

3. The line structure works most efficiently for smaller organizations, whereas the line-and-staff structure is used by medium- and large-sized organizations.

4. The matrix structure may be depicted as product departmentalization superimposed on functional departmentalization. With the matrix structure, an employee on a cross-functional team reports to both the project manager and the individual's supervisor in a functional department.

In an organization with a network structure, the primary function performed internally is administration, and other functions are contracted out to other firms.

Understand how the span of management describes an organization.

Understand how the span of management describes an organization.

The span of management is the number of workers who report directly to a manager. Spans generally are characterized as wide (many workers per manager) or narrow (few workers per manager).

Wide spans generally result in flat organizations (few layers of management); narrow spans generally result in tall organizations (many layers of management).

Explain how decentralization follows from delegation.

Explain how decentralization follows from delegation.

Delegation is giving part of a manager's work to other workers.


It involves the following three steps:
(1) assigning responsibility,
(2) granting authority, and
(3) creating accountability.


A decentralized firm is one that delegates as much power as possible to people in the lower management levels. In a centralized firm, on the other hand, power is retained at the upper levels.

Identify the various bases for departmentalization.

Identify the various bases for departmentalization.

Departmentalization is the grouping of jobs into manageable units. Typical bases for departmentalization are by function, product, location, or customer.

Because each of these bases provides particular advantages, most firms—especially larger ones—use a combination of different bases to address different organizational situations.

Explain why job specialization is important.

Explain why job specialization is important.

Job specialization is the separation of all the activities within an organization into smaller components and the assignment of those different components to different people.

Several factors combine to make specialization a useful technique for designing jobs, but high levels of specialization may cause employee dissatisfaction and boredom. One technique for overcoming these problems is job rotation.

Understand what an organization is and identify its characteristics.

Understand what an organization is and identify its characteristics.

An organization is a group of two or more people working together to achieve a common set of goals.
The relationships among positions within an organization can be illustrated by means of an organization chart.

Five elements—

1. job design, 
2. departmentalization, 
3. delegation, 
4. span of management, and 
5. chain of command—help to determine what an organization chart and the organization itself look like.

Describe how organizations benefit from total quality management.

Describe how organizations benefit from total quality management.

Total quality management (TQM) is the coordination of efforts directed at improving customer satisfaction, increasing employee participation, strengthening supplier partnerships, and facilitating an organizational atmosphere of continuous quality improvement.

Another tool used for TQM is benchmarking, which involves comparing and evaluating the products, processes, or management practices of another organization that is superior in some way in order to improve quality.

The five basic steps in benchmarking are identifying objectives, forming a benchmarking team, collecting data, analyzing data, and acting on the results. To have an effective TQM program, top management must make a strong, sustained commitment to the effort and must be able to coordinate all the program's elements so that they work in harmony.


Benefits of TQM include lower operating costs, higher return on sales and on investment, and an improved ability to use premium pricing rather than competitive pricing.

Discuss the steps in the managerial decision-making process.

Discuss the steps in the managerial decision-making process.

Decision making, an integral part of a manager's work, is the process of developing a set of possible alternative solutions to a problem and choosing one alternative from among the set.

Managerial decision making involves four steps: 

1. Managers must accurately identify problems, 
2. generate several possible solutions, 
3. choose the solution that will be most effective under the circumstances, and 
4. implement and evaluate the chosen course of action.

Explain the different types of leadership.

Explain the different types of leadership.

Managers' effectiveness often depends on their styles of leadership—that is, their ability to influence others, either formally or informally. Autocratic leaders are very task oriented; they tell their employees exactly what is expected from them and give them specific instructions on how to do their assigned tasks.


Participative leaders consult their employees before making decisions and can be classified into three groups: consultative, consensus, and democratic.


Entrepreneurial leaders are different depending on their personalities, but they are generally enthusiastic and passionate about their work and tend to take the initiative.

Identify the key management skills of successful managers.

Identify the key management skills of successful managers.

Managers need a variety of skills in order to run a successful and efficient business. Conceptual skills are used to think in abstract terms or see the "big picture." Analytic skills are used to identify problems correctly, generate reasonable alternatives, and select the "best" alternatives to solve problems. Interpersonal skills are used to deal effectively with other people, both inside and outside an organization.


Technical skills are needed to accomplish a specialized activity, whether they are used to actually do the task or to train and assist employees. Communication skills are used to speak, listen, and write effectively.

Distinguish among the various kinds of managers in terms of both level and area of management.

Distinguish among the various kinds of managers in terms of both level and area of management.

Managers—or management positions—may be classified from two different perspectives. From the perspective of level within the organization, there are top managers, who control the organization as a whole, middle managers, who implement strategies and major policies, and first-line managers, who supervise the activities of operating employees.


From the viewpoint of area of management, managers most often deal with the areas of finance, operations, marketing, human resources, and administration.

Describe the four basic management functions: Planning, organizing, leading and motivating, and controlling.

Describe the four basic management functions: Planning, organizing, leading and motivating, and controlling.

Managers perform four basic functions, which do not occur according to a rigid, preset timetable. At any time, managers may engage in a number of functions simultaneously. However, each function tends to lead naturally to the next.

Managers engage in planning—determining where the firm should be going and how best to get there. One method of planning that can be used is SWOT analysis, which identifies and evaluates a firm's strengths, weaknesses, opportunities, and threats.
Three types of plans, from the broadest to the most specific, are strategic, tactical, and operational.

Managers also organize resources and activities to accomplish results in an efficient and effective manner, and they lead and motivate others to work in the best interests of the organization.

In addition, managers control ongoing activities to keep the organization on course.

There are three steps in the control function: setting standards, measuring actual performance, and taking corrective action.

Define what management is.

Define what management is.

Management is the process of coordinating people and other resources to achieve an organization's goals. Managers are concerned with four types of resources—material, human, financial, and informational.

Analyze the growth of franchising and its advantages and disadvantages ?

Analyze the growth of franchising and its advantages and disadvantages ?

Franchising has grown tremendously since the mid-1970s. The franchisor's major advantage in franchising is fast and well-controlled distribution of products with minimal capital outlay. In return, the franchisee has the opportunity to open a business with limited capital, to make use of the business experience of others, and to sell to an existing clientele.


For this, the franchisee usually must pay both an initial franchise fee and a continuing royalty based on sales. He or she also must follow the dictates of the franchise with regard to operation of the business.

Worldwide business opportunities are expanding for small businesses. The SBA assists small-business owners in penetrating foreign markets. The next century will present unique challenges and opportunities for small-business owners.

Explain the concept and types of franchising.

Explain the concept and types of franchising.

A franchise is a license to operate an individually owned business as though it were part of a chain. The franchisor provides a known business name, management skills, a method of doing business, and the training and required materials.


The franchisee contributes labor and capital, operates the franchised business, and agrees to abide by the provisions of the franchise agreement. There are three major categories of franchise agreements.

Explain how the Small Business Administration helps small businesses.

Explain how the Small Business Administration helps small businesses.

The Small Business Administration (SBA) was created in 1953 to assist and counsel the nation's millions of small-business owners. The SBA offers management courses and workshops; managerial help, including one-to-one counseling through SCORE; various publications; and financial assistance through guaranteed loans and SBICs.


It places special emphasis on aid to minority-owned businesses, including those owned by women.

Describe the advantages and disadvantages of operating a small business.

Describe the advantages and disadvantages of operating a small business.

The advantages of smallness in business include the opportunity to establish personal relationships with customers and employees, the ability to adapt to changes quickly, independence, and simplified record keeping.


The major disadvantages are the high risk of failure, the limited potential for growth, and the limited ability to raise capital.

Assess the contributions of small businesses to our economy.

Assess the contributions of small businesses to our economy.

Small businesses have been responsible for a wide variety of inventions and innovations, some of which have given rise to new industries. Historically, small businesses have created the bulk of the nation's new jobs. Further, they have mounted effective competition to larger firms.


They provide things that society needs, act as suppliers to larger firms, and serve as customers of other businesses, both large and small.

Identify the people who start small businesses and the reasons why some succeed and many fail.

Identify the people who start small businesses and the reasons why some succeed and many fail.

Such personal characteristics as independence, desire to create a new enterprise, and willingness to accept a challenge may encourage individuals to start small businesses.


Various external circumstances, such as special expertise or even the loss of a job, also can supply the motivation to strike out on one's own. Poor planning and lack of capital and management experience are the major causes of small-business failures.

Define what a small business is and recognize the fields in which small businesses are concentrated.

Define what a small business is and recognize the fields in which small businesses are concentrated.

A small business is one that is independently owned and operated for profit and is not dominant in its field.

There are about 27.9 million businesses in this country, and 99.7% of them are small businesses.

Small businesses employ more than half the nation's workforce.

About 69% of small businesses survive at least two years and about 50% survive at least five years.

More than half of all small businesses are in retailing and services.

Evaluate the advantages and disadvantages of long-term debt financing.

Evaluate the advantages and disadvantages of long-term debt financing.

For a small business, debt financing is generally limited to loans. Large corporations have the additional option of issuing corporate bonds. Regardless of whether the business is small or large, it can take advantage of financial leverage. Financial leverage is the use of borrowed funds to increase the return on owners' equity.


The rate of interest for long-term loans usually depends on the financial status of the borrower, the reason for borrowing, and the kind of collateral pledged to back up the loan. Long-term business loans are normally repaid in 3 to 7 years but can be as long as 15 to 20 years. Money realized from the sale of corporate bonds must be repaid when the bonds mature. In addition, the corporation must pay interest on that money from the time the bonds are sold until maturity.


The interest rate the corporation must pay often depends on the financial health of the firm issuing bonds. Maturity dates for bonds generally range from 10 to 30 years after the date of issue.


Three types of bonds—debentures, mortgage bonds, and convertible bonds—are sold to raise debt capital. When comparing the cost of long-term financing, the ongoing costs of using stock (equity) to finance a business are low. The most expensive is a long-term loan (debt).

Evaluate the advantages and disadvantages of equity financing.

Evaluate the advantages and disadvantages of equity financing.

The first time a corporation sells stock to the general public is referred to as an initial public offering (IPO). With an IPO, the stock is sold in the primary market.


Once sold in the primary market, investors buy and sell stock in the secondary market. Usually, secondary market transactions are completed through a securities exchange or the over-the-counter market. Common stock is voting stock; holders of common stock elect the corporation's directors and often must approve changes to the corporate charter.


Holders of preferred stock must be paid dividends before holders of common stock are paid any dividends. Another source of equity funding is retained earnings, which is the portion of a business's profits not distributed to stockholders. Venture capital—money invested in small (and sometimes struggling) firms that have the potential to become very successful—is yet another source of equity funding. Finally, a private placement can be used to sell stocks and other corporate securities.

Describe the advantages and disadvantages of different methods of short-term debt financing.

Describe the advantages and disadvantages of different methods of short-term debt financing.

Most short-term financing is unsecured; that is, no collateral is required. Sources of unsecured short-term financing include trade credit, promissory notes issued to suppliers, unsecured bank loans, and commercial paper. Sources of secured short-term financing include loans secured by inventory and accounts receivable.


A firm may also sell its receivables to factors. Trade credit is the least-expensive source of short-term financing. The cost of financing through other sources generally depends on the source and on the credit rating of the firm that requires the financing. Factoring is generally the most expensive approach.

Identify the services provided by banks and financial institutions for their business customers.

Identify the services provided by banks and financial institutions for their business customers.

Banks and other financial institutions offer today's business customers a tempting array of services. Among the most important and attractive banking services are savings accounts and certificates of deposit, checking accounts, short- and long-term loans, and credit-card and debit-card processing. Increased use of electronic funds transfer systems (automated teller machines, automated clearinghouse systems, point-of-sale terminals, and electronic check conversion) also will change the way that business firms bank and conduct typical business transactions.


For firms in the global marketplace, a bank can provide letters of credit and banker's acceptances that will reduce the risk of nonpayment for sellers. Banks and financial institutions also can provide currency exchange to reduce payment problems for import or export transactions.

Summarize the process of planning for financial management.

Summarize the process of planning for financial management.

A financial plan begins with an organization's goals and objectives. Next, a firm's goals and objectives are "translated" into departmental budgets that detail expected income and expenses. From these budgets, which may be combined into an overall cash budget, the financial manager determines what funding will be needed and where it may be obtained.

Whereas departmental and cash budgets emphasize short-term financing needs, a capital budget can be used to estimate a firm's expenditures for major assets and its long-term financing needs.


The four principal sources of financing are sales revenues, equity capital, debt capital, and proceeds from the sale of assets. Once the needed funds have been obtained, the financial manager is responsible for monitoring and evaluating the firm's financial activities.

Identify a firm's short- and long-term financial needs.

Identify a firm's short- and long-term financial needs.

Short-term financing is money that will be used for one year or less.

There are many short-term needs, but cash flow, speculative production, and inventory are three for which financing is often required.

Long-term financing is money that will be used for more than one year.

Such financing may be required for a business start-up, for a merger or an acquisition, for new product development, for long-term marketing activities, for replacement of equipment, or for expansion of facilities.

According to financial experts, business firms will find it more difficult to raise both short- and long-term financing in the future because of increased regulations and more cautious lenders.

Financial managers must also consider the risk-return ratio when making financial decisions. The risk-return ratio is based on the principle that a high-risk decision should generate higher financial returns for a business.

More conservative decisions generate lesser returns.

Understand why financial management is important in today's uncertain economy.

Understand why financial management is important in today's uncertain economy.

Financial management consists of all activities concerned with obtaining money and using it effectively. Financial management can be viewed as a two-sided problem. On one side, the uses of funds often dictate the type or types of financing needed by a business. On the other side, the activities a business can undertake are determined by the types of financing available. Financial managers must ensure that funds are available when needed, that they are obtained at the lowest possible cost, and that they are used as efficiently as possible. In the wake of the economic crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law. And today, there is an ongoing debate if more regulations are needed. Still, there are a number of rewarding jobs in finance for qualified job applicants.

In 1987, what did the SEC and FASB require from all publicly traded companies to include in their annual report?

In 1987, what did the SEC and FASB require from all publicly traded companies to include in their annual report?

The SEC and the FASB required all publicly traded companies to include a statement of cash flows, along with their balance sheet and income statement, in their annual report.

Who are the people who use information?

Who are the people who use information?

Although the primary users of information are a firm's managers and employees, parties outside the organization—lenders, suppliers, stockholders, and government agencies—are also interested in the firm's information. In fact, both managers and employees and outside groups often examine a firm's annual report to determine the financial health of a firm.

How Much Should Businesses Know About Internet Users?

How Much Should Businesses Know About Internet Users?

When you click to conduct an online search or to download a digital coupon, businesses can follow your electronic movements. When you click to conduct an online search or to download a digital coupon, businesses can follow your electronic movements.

Privacy advocates worry about the potential for identity theft and the possibility that data may be shared without consent. They also express concern that businesses might restrict access to some products based on what consumers do or say online.

Businesses point out the benefits of collecting data to personalize website functionality based on each user's preferences and previous visits. They also look at behavioral data when planning new products and services.

How do Employees Use a Management information system?

How do Employees Use a Management information system?

To provide information, an MIS must perform five specific functions. It must

1. collect data,
2. store the data
3. update the data
4. process the data into information
5. present the information to users

What happens if a business has a management information system that is too small?

What happens if a business has a management information system that is too small?

In some firms, a tendency to save on initial costs may result in a system that is too small or overly simple. Such a system generally ends up serving only one or two management levels or a single department. Managers in other departments "give up" on the system as soon as they find that it cannot process their data.

What happens if a business has a management information system that is too large?

What happens if a business has a management information system that is too large?

Answer: Unused capacity and complexity do nothing but increase the cost of owning and operating the system. In addition, a system that is difficult to use probably will not be used at all.

Summarize how managers evaluate the financial health of a business.

Summarize how managers evaluate the financial health of a business.

The firm's financial statements and its accounting information become more meaningful when compared with information for competitors, for the industry in which the firm operates, and corresponding information for previous years.

Such comparisons permit managers, employees, lenders, investors, and other interested people to pick out trends in growth, borrowing, income, and other business variables and to determine whether the firm is on the way to accomplishing its long-term goals.

A number of financial ratios can be computed from the information in a firm's financial statements. These ratios provide a picture of a firm's profitability, its ability to pay its debts, and how often it sells its inventory.


Like the information on the firm's financial statements, these ratios can and should be compared with information for competitors, for the industry in which the firm operates, and corresponding information for previous years.

Describe business activities that affect a firm's cash flow.

Describe business activities that affect a firm's cash flow.

Since 1987, the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) have required all publicly traded companies to include a statement of cash flows in their annual reports. This statement illustrates how the company's operating, investing, and financing activities affect cash during an accounting period. Together, the cash flow statement, balance sheet, and income statement illustrate the results of past decisions and the business's ability to pay debts and dividends as well as to finance new growth

Explain why accurate accounting information and audited financial statements are important.

Explain why accurate accounting information and audited financial statements are important.

Accounting is the process of systematically collecting, analyzing, and reporting financial information. It can be used to answer questions about what has happened in the past; it also can be used to help make decisions about the future.

The purpose of an audit is to make sure that a firm's financial statements have been prepared in accordance with generally accepted accounting principles.

To help ensure that corporate financial information is accurate and in response to the accounting scandals that surfaced in the last few years, the Sarbanes-Oxley Act was signed into law. This law contains a number of provisions designed to restore public confidence in the accounting industry. Although many people think all accountants do the same thing, typical areas of expertise include managerial, financial, cost, tax, government, and not-for-profit.

A private accountant is employed by a private firm. A public accountant performs accounting work for various individuals or firms on a fee basis. Most accounting firms include on their staffs at least one CPA.

Outline the five functions of an information system.

Outline the five functions of an information system.

The five functions performed by an MIS system are

1. Collecting data, 
2. Storing data, 
3. Updating data, 
4. Processing data into information, and 
5. Presenting information. 

Data may be collected from internal sources and external sources. An MIS must be able to store data until they are needed and to update them regularly to ensure that the information presented to managers and employees is accurate, complete, and timely. 

Data processing is the MIS function that transforms stored data into a form useful for a specific purpose. Finally, the processed data (which now can be called information) must be presented for use. Verbal information generally is presented in the form of a report. 

Numerical information most often is displayed in graphs, charts, or tables. 

In addition to the five basic functions performed by an MIS, managers and employees can use a decision-support system (DSS), an executive information system (EIS), expert system, and business application software to make decisions and to report data and information.

Discuss management's information requirements.

Discuss management's information requirements.

A management information system (MIS) is a means of providing managers with the information they need to perform their jobs as effectively as possible. The purpose of an MIS (sometimes referred to as an information technology system or simply IT system) is to distribute timely and useful information from both internal and external sources to the decision makers who need it.

The specific types of information managers need depend on their area of management and level within the firm. The size and complexity of an MIS must be tailored to the information needs of the organization it serves.

Examine how information can reduce risk when making a decision.

Examine how information can reduce risk when making a decision.

The more information a manager has, the less risk there is that a decision will be incorrect. Information produces knowledge and empowers managers and employees to make better decisions. Because of the volume of information they receive each day and their need to make decisions on a daily basis, business people use information rules to shorten the time spent analyzing choices.

Information rules emerge when business research confirms the same results each time it studies the same or a similar set of circumstances. Although many people use the terms data and information interchangeably, there is a difference.

Data are numerical or verbal descriptions that usually result from some sort of measurement. Information is data presented in a form that is useful for a specific purpose.

A database is a single collection of data and information stored in one place that can be used by people throughout an organization to make decisions. Although databases are important, the way the data and information are used is even more important. As a result, management information experts now use the term knowledge management (KM) to describe a firm's procedures for generating, using, and sharing the data and information.

The 5 Most Important Benefits for a Business that Uses Social Media

The 5 Most Important Benefits for a Business that Uses Social Media

1. Increased exposure for my business - 85%
2. Increased traffic - 69%
3. Provided marketplace insight - 65%
4. Generated ideas - 58%
5. Developed loyal fans - 58%

SocialMediaExaminer.com - 2012 Social Media Marketing Industry Report.

Identify the factors that will affect the future of the Internet, social media, and e-business.

Identify the factors that will affect the future of the Internet, social media, and e-business.

Since the beginning of commercial activity on the Internet, developments in computer technology, social media, and e-business have been rapid and formidable.

Although a number of technology companies struggled or even failed during the economic crisis, most firms involved in computer technology, social media, and e-business today use a more intelligent approach to development.

The long-term view held by the vast majority of analysts is that use of the Internet will continue to expand along with related technologies. Because approximately of Americans now have access to the Internet, potential growth is limited in the United States. On the other hand, only of the people in the world use the Web.

Clearly, the number of Internet users in the world's developing countries is expected to increase dramatically.

The future of computer technology and the Internet will be influenced by advances in technology, the increasing popularity of social media, and the increasing use of e-business.

Other factors including ethics, social responsibility, and Internet crime will all impact the way that businesses and consumers use computer technology and the Internet.

Although the environmental forces at work are complex, it is useful to think of them as either internal or external forces that affect how businesses use computer technology. Internal environmental forces are those that are closely associated with the actions and decisions taking place within a firm.

In contrast, external environmental forces are those factors affecting an e-business originating outside an organization.

Explain the meaning of e-business and its fundamental models.

Explain the meaning of e-business.

e-Business, or electronic business, can be defined as the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society's needs through the facilities available on the Internet.

The human, material, information, and financial resources that any business requires are highly specialized for e-business. In an effort to reduce the cost of e-business resources, many firms have turned to outsourcing.

Using e-business activities, it is possible to satisfy new customer needs created by the Internet as well as traditional ones in unique ways.

Meeting customer needs is especially important when an e-business is trying to earn profits by increasing sales and reducing expenses.

Each source of revenue flowing into the firm is referred to as a revenue stream.

The fundamental models of e-business:

e-Business models focus attention on the identity of a firm's customers. Firms that use the Internet mainly to conduct business with other businesses generally are referred to as having a business-to-business, or B2B, model. When examining B2B firms, two clear types emerge. 

In the first type of B2B, the focus is simply on facilitating sales transactions between businesses. A second, more complex type of the B2B model involves a company and its suppliers. In contrast to the focus of the B2B model, firms such as Amazon or eBay clearly are focused on individual buyers and are thus referred to as having a business-to-consumer, or B2C, model. In a B2C situation, understanding how consumers behave online is critical to the firm's success. 

Successful B2C firms often make a special effort to build long-term relationships with their customers. While B2B and B2C models are the most popular e-business models, there are other models that perform specialized e-business activities to generate revenues.

Describe how businesses develop a social media plan.

Describe how businesses develop a social media plan.

Before developing a plan to use social media, it is important to determine how social media can improve the organization's overall performance and how it "fits" with a company's objectives and other promotional activities.

Once it is determined how social media links to the company's other activities, the first step is to listen to what customers like and don't like about a company's products or services. Typically, the second step is to establish social media objectives that are specific, measurable, achievable, realistic, and time oriented.

After listening and establishing objectives, the third step is to identify the customer or market segment a business is trying to reach with a social media promotion. The fourth step is to select the social media tool that will be used to reach customers.

While it is not necessary (or even advisable) to use all of the available tools, a company can use social media communities, blogs, photos, videos, podcasts, or games to reach potential or existing customers. Once social media tools have been identified, a company can implement and integrate the social media plan.

Both quantitative and qualitative measurements can be used to determine the effectiveness of a social media plan. Quantitative social media measurement consists of using numerical measurements. Key performance indicators (KPIs), for example, are quantitative measurements.

Qualitative measurement is the process of accessing the opinions and beliefs about a brand and primarily uses sentiment analysis to categorize what is being said about a company.

Because social media costs both time and money, it is important to maintain, update, and measure the success of a social media plan and make adjustments and changes if needed.

Explain the business objectives for using social media.

Explain the business objectives for using social media.

Although its popularity is a recent phenomenon, many businesses are already using social media to achieve important goals and objectives. In fact, there are many ways for businesses to use social media to take advantage of business opportunities to build connections with other businesses and consumers.

For example, businesses can use social media to build a community. Social media communities are social networks based on the relationships among people. Today, there are social communities for every interest, ethnic group, and lifestyle.

Different types of communities include both forums and wikis. Other reasons for using social media include crisis and reputation management, listening to stakeholders, targeting customers, social media marketing, generating new product ideas, and recruiting employees.

For a business, social media marketing is especially important because it can not only develop customer awareness, but also obtain sales leads and increase actual sales.

Discuss how businesses use social media tools.

Discuss how businesses use social media tools.

Companies use social media to connect with customers, listen to stakeholders, provide customer service, provide information to customers, and engage customers in product development. To share social content (information about products and services), companies can use blogs, photos, videos, and podcasts.


In addition, social media also enables shoppers to access opinions, recommendations, and referrals from others within and outside their own social circle. Rating and review sites are based on the idea that people trust the opinions of others when it comes to purchasing products and services. Social games are another area of growth in social media.

A social game (like Angry Birds or FarmVille) is a multiplayer, competitive, goal-oriented activity with defined rules of engagement and online connectivity among a community of players. While some businesses elect to create their own game, others choose to place advertising into a game.

Examine why it is important for a business to use social media.

Examine why it is important for a business to use social media.

Millions of people of all ages use social media to interact with people and share ideas, personal information, and information about products and services.

Today of U.S. adults use some sort of social media platform like Facebook, LinkedIn, Google+, Twitter, or Pinterest according to a recent Pew Internet Research Study.

The primary reason for using social media is to stay in touch with family and friends. Other reasons include reconnecting with friends and posting messages about what's in their lives. Early on, companies saw the potential in the sheer numbers of people using social media.

Even though companies have used social media to share information about their products and services and improve customer service, many are still uncomfortable with this new method of communicating with customers because they do not have much control over what is said about their products or services.

10 Aspects of Business that May Require Legal Help.

10 Aspects of Business that May Require Legal Help.

1. Choosing either the sole proprietorship, partnership, corporate or some special form of ownership.
2. Constructing a partnership agreement.
3. Incorporating a business
4. Registering a corporation's stock
5. Obtaining a trademark, patent, or copyright
6. Filling for licenses or permits at the local, state, and federal levels.
7. Purchasing an existing business or real estate
8. Creating valid contracts
9. Hiring employees and independent contractors
10. Extending credit and collecting debts.

Describe the advantages and disadvantages of partnerships.

Describe the advantages and disadvantages of partnerships.

Advantages -
1. Ease of start-up
2. Availability of capital and credit
3. Personal interest
4. Combined business skills and knowledge
5. Retention of profits
6. No special taxes

Disadvantages -
1. Unlimited liability
2. Management disagreements
3. Lack of continuity
4. Frozen investment

Identify the institutions that help firms and nations finance international business.

Identify the institutions that help firms and nations finance international business.

The financing of international trade is more complex than that of domestic trade. Institutions such as the Ex-Im Bank and the International Monetary Fund have been established to provide financing and ultimately to increase world trade for American and international firms.

Describe the various sources of export assistance.

Describe the various sources of export assistance.

Many government and international agencies provide export assistance to U.S. and foreign firms. Sources of export assistance include U.S. Export Assistance Centers, the International Trade Administration, U.S. and Foreign Commercial Services, Export Legal Assistance Network, Advocacy Center, National Trade Data Bank, and other government and international agencies.

Define the methods by which a firm can organize for and enter into international markets.

Define the methods by which a firm can organize for and enter into international markets.

A firm can enter international markets in several ways. It may license a foreign firm to produce and market its products. It may export its products and sell them through foreign intermediaries or its own sales organization abroad, or it may sell its exports outright to an export-import merchant. It may enter into a joint venture with a foreign firm. It may establish its own foreign subsidiaries, or it may develop into a multinational enterprise.

Generally, each of these methods represents an increasingly deeper level of involvement in international business, with licensing being the simplest and the development of a multinational corporation the most involved.

Discuss international trade agreements and international economic organizations working to foster trade.

Discuss international trade agreements and international economic organizations working to foster trade.

The General Agreement on Tariffs and Trade (GATT) was formed to dismantle trade barriers and provide an environment in which international business can grow. Today, the World Trade Organization (WTO) and various economic communities carry on this mission. These world economic communities include the European Union, the NAFTA, the CAFTA, the Association of Southeast Asian Nations, the Pacific Rim, the Commonwealth of Independent States, the Caribbean Basin Initiative, the Common Market of the Southern Cone, the Organization of Petroleum Exporting Countries, and the Organization for Economic Cooperation and Development.

Outline the extent of international business and the world economic outlook for trade.

Outline the extent of international business and the world economic outlook for trade.

World trade is generally increasing. Trade between the United States and other nations is increasing in dollar value but decreasing in terms of our share of the world market. Exports as a percentage of U.S. GDP have increased steadily since 1985, except in the 2001 and 2008 recessions.

Discuss the restrictions nations place on international trade, the objectives of these restrictions, and their results.

Discuss the restrictions nations place on international trade, the objectives of these restrictions, and their results.

Despite the benefits of world trade, nations tend to use tariffs and non-tariff barriers (import quotas, embargoes, and other restrictions) to limit trade. These restrictions typically are justified as being needed to protect a nation's economy, industries, citizens, or security. They can result in the loss of jobs, higher prices, fewer choices in the marketplace, and the misallocation of resources.

Explain the economic basis for international business.

Explain the economic basis for international business.

International business encompasses all business activities that involve exchanges across national boundaries. International trade is based on specialization, whereby each country produces the goods and services that it can produce more efficiently than any other goods and services. A nation is said to have a comparative advantage relative to these goods. International trade develops when each nation trades its surplus products for those in short supply.

A nation's balance of trade is the difference between the value of its exports and the value of its imports. Its balance of payments is the difference between the flow of money into and out of the nation. Generally, a negative balance of trade is considered unfavorable.

Major Environmental Laws

Major Environmental Laws

1. National Environmental Policy Act (1970)
2. Clean Air Amendment (1970)
3. Water Quality Improvement Act (1970)
4. Resource Recovery Act (1970)
5. Water Pollution Control Act Amendment (1972)
6. Noise Control Act (1972)
7. Clean Air Act Amendment (1977)
8. Resource Conservation and Recovery Act (1984)
9. Clean Air Act Amendment (1987)
10. Oil Pollution Act (1990)
11. Clean Air Act Amendments (1990)
12. Food Quality Protection Act (1996)
13. American Recovery and Reinvestment Act (2009)

Arguments against social responsibility

Arguments against social responsibility

1-Business managers are responsible primarily to stockholders, so management must be concerned with providing a return on owners' investments.
2-Corporate time, money, and talent should be used to maximize profits, not to solve society's problems.
3-Social problems affect society in general, so individual businesses should not be expected to solve these problems.
4-Social issues are the responsibility of government officials who are elected for that purpose and who are accountable to the voters for their decisions.

Arguments for increased social responsibility

Arguments for increased social responsibility

1-Because business is a part of our society, it cannot ignore social issues.

2-Business has the technical, financial, and managerial resources needed to tackle today's complex social issues.

3-By helping resolve social issues, business can create a more stable environment for long-term profitability.

4-Socially responsible decision making by firms can prevent increased government intervention, which would force businesses to do what they fail to do voluntarily.

Identify the steps a business must take to implement a program of social responsibility.

Identify the steps a business must take to implement a program of social responsibility.

1-A program to implement social responsibility in a business begins with total commitment by top management.
2-The program should be planned carefully, and a capable director should be appointed to implement it.
3-Social audits should be prepared periodically as a means of evaluating and revising the program.
4-Programs may be funded through price increases, reduction of profit, or federal incentives.

1. Commitment of Top Executives
2. Planning
3. Appointment of a Director
4. The Social Audit

Describe the major types of pollution, their causes, and their cures.

Describe the major types of pollution, their causes, and their cures.

Water, Air, Land and Noise

Industry has contributed to noise pollution and pollution of our land and water through the dumping of wastes, and to air pollution through vehicle and smokestack emissions.

This contamination can be cleaned up and controlled, but the big question is: Who will pay? Present cleanup efforts are funded partly by government tax revenues, partly by business, and in the long run by consumers.

Analyze how present employment practices are being used to counteract past abuses.

Analyze how present employment practices are being used to counteract past abuses.

Legislation and public demand have prompted some businesses to correct past abuses in employment practices—mainly with regard to minority groups.

Affirmative action and training of the hard-core unemployed are two types of programs that have been used successfully.

Six Basic Rights to Consumers

Six Basic Rights to Consumers

1. Right to Safety
2. Right to be Informed
3. Right to Choose
4. Right to Be Heard
5. Right to Consumer Education
6. Right to Courteous Service

Discuss the factors that led to the consumer movement and list some of its results.

Discuss the factors that led to the consumer movement and list some of its results.

1. Environmental Protection
2. Product Performance
3. Safety

Guidelines for Making Ethical Decisions

Guidelines for Making Ethical Decisions

1. Listen and learn
2. Identify the ethical issues.
3. Create and analyze options
4. Identify the best option from your point of view.
5. Explain your decision and resolve any differences that arise.

Describe how our current views on the social responsibility of business have evolved.

Describe how our current views on the social responsibility of business have evolved.

In a socially responsible business, management realizes that its activities have an impact on society and considers that impact in the decision-making process.

Before the 1930s, workers, consumers, and government had very little influence on business activities; as a result, business leaders gave little thought to social responsibility.
All this changed with the Great Depression.

Government regulations, employee demands, and consumer awareness combined to create a demand that businesses act in socially responsible ways.

Explain how ethical decision making can be encouraged.

Explain how ethical decision making can be encouraged.

Governments, trade associations, and individual firms can establish guidelines for defining ethical behavior.

1- Governments can pass stricter regulations.

2- Trade associations provide ethical guidelines for their members.

3-Companies provide codes of ethics—written guides to acceptable and ethical behavior as defined by an organization—and create an atmosphere in which ethical behavior is encouraged. 4-An ethical employee working in an unethical environment may resort to whistle-blowing to bring a questionable practice to light.

Discuss the factors that affect the level of ethical behavior in organizations.

Discuss the factors that affect the level of ethical behavior in organizations.

Individual, social, and opportunity factors all affect the level of ethical behavior in an organization.

1-Individual factors include knowledge level, moral values and attitudes, and personal goals.

2-Social factors include cultural norms and the actions and values of co-workers and significant others.

3-Opportunity factors refer to the amount of leeway that exists in an organization for employees to behave unethically if they choose to do so.

Identify the types of ethical concerns that arise in the business world.

The types of ethical concerns that arise in the business world :

Ethical issues arise often in business situations out of relationships with investors, customers, employees, creditors, or competitors. Businesspeople should make every effort to be fair, to consider the welfare of customers and others within the firm, to avoid conflicts of interest, and to communicate honestly.

1. Fairness & Honesty
2. Organizational Relationships
3. Conflict of Interests
4. Communications

What is Circuit City Stores v. Adams ?

Circuit City Stores v. Adams :

Case in which Supreme Court ruled that a pre-hire employment application requiring that all employment disputes be settled by arbitration was enforceable under the Federal Arbitration Act.

What is Salting ?

Salting :

Process of using paid union organizers to infiltrate an organization and organize its workers.

What is Organizational feedback ?

Organizational feedback  :

Presentation of data to stimulate discussion of problem areas, generate potential solutions, and stimulate motivation for change.

What is Project team ?

Project team :

Group of people who come together for a specific project.

What is Job sharing ?

Job sharing :

Results when two part-time employees share one full-time job.

What is Authorization cards ?

Authorization cards :

Cards signed by employees to indicate that they want union representation.

What is Implied contract ?

Implied contract :

Exists when an agreement is implied from circumstances even though there is no express agreement between employer and employee.

What is Focus Group ?

Focus Group :

Small group (normally six to twelve) invited to actively participate in a structured discussion with a facilitator.

What is the lowest level of production and sales at which a company can break even on a particular product?

Cost-volume-profit (CVP) formula:

px = vx + FC + Profit

p is the price per unit,
x is the number of units,
v is variable cost per unit and
FC is total fixed cost.

Describe three major types of pricing associated with business products.

Describe three major types of pricing associated with business products.

Setting prices for business products is different from setting prices for consumer products because of several factors, including the size of purchases, transportation considerations, and geographic issues.

The three types of pricing associated with business products are geographic pricing, transfer pricing, and discounting.

Explain the different strategies available to companies for setting prices.

Explain the different strategies available to companies for setting prices.

Pricing strategies fall into five categories: new-product pricing, differential pricing, psychological pricing, product-line pricing, and promotional pricing.

Price skimming and penetration pricing are two strategies used for pricing new products.

Differential pricing can be accomplished through negotiated pricing, secondary-market pricing, periodic discounting, and random discounting.

Types of psychological pricing strategies are odd-number pricing, multiple-unit pricing, reference pricing, bundle pricing, everyday low prices, and customary pricing.

Product-line pricing can be achieved through captive pricing, premium pricing, and price lining.

The major types of promotional pricing are price-leader pricing, special-event pricing, and comparison discounting.

Examine the three major pricing methods that firms employ.

Examine the three major pricing methods that firms employ.

The three major pricing methods are cost-based pricing, demand-based pricing, and competition-based pricing.

When cost-based pricing is employed, a proportion of the cost is added to the total cost to determine the selling price.

When demand-based pricing is used, the price will be higher when demand is higher, and the price will be lower when demand is lower.

A firm that uses competition-based pricing may choose to price below competitors' prices, at the same level as competitors' prices, or slightly above competitors' prices.

Identify the major pricing objectives used by businesses.

Identify the major pricing objectives used by businesses.

Objectives of pricing include survival, profit maximization, target return on investment, achieving market goals, and maintaining the status quo.

Firms sometimes have to price products to survive, which usually requires cutting prices to attract customers.

The return on investment (ROI) is the amount earned as a result of the investment in developing and marketing the product. Some firms set an annual percentage ROI as the pricing goal. Other firms use pricing to maintain or increase their market share.

In industries in which price stability is important, firms often price their products by charging about the same as competitors.

Describe the economic basis of pricing and the means by which sellers can control prices and buyers' perceptions of prices.

Describe the economic basis of pricing and the means by which sellers can control prices and buyers' perceptions of prices.

A product is a set of attributes and benefits that has been designed to satisfy its market while earning a profit for its seller.

Each product has at price at which it balances consumers desires and expectations with a firm's need to make a profit.

The price of a product is the amount of money a seller is willing to accept in exchange for the product at a given time and under given circumstances.

Price thus serves the function of allocator. It allocates goods and services among those who are willing and able to buy them. It allocates financial resources among producers according to how well they satisfy customers' needs.

Price also helps customers to allocate their own financial resources among products.

Price competition occurs when a seller emphasizes a product's low price and sets a price that equals or beats competitors' prices. To use this approach most effectively, a seller must have the flexibility to change prices often.

Price competition allows a marketer to set prices based on demand. The Internet has made it more difficult than ever for sellers to compete on price.

Non-price competition is based on factors other than price. It is used most effectively when a seller can make its product stand out from the competition by differentiating product quality, customer service, promotion, packaging, or other features.

Buyers must be able to perceive these distinguishing characteristics and consider them desirable.

Buyers' perceptions of prices are affected by the importance of the product to them, the range of prices they consider acceptable, their perceptions of competing products, and their association of quality with price.

Explain the uses and importance of branding, packaging, and labeling.

Explain the uses and importance of branding, packaging, and labeling.

A brand is a name, term, symbol, design, or any combination of these that identifies a seller's products as distinct from those of other sellers.

Brands can be classified as manufacturer brands, store brands, or generic brands.

A firm can choose between two branding strategies—individual or family branding, which are used to associate (or not associate) particular products with existing products, producers, or intermediaries.

Packaging protects goods, increases consumer convenience, and enhances marketing efforts by communicating product features, uses, benefits, and image.

Labeling provides customers with product information, some of which is required by law.

Identify the methods available for changing a product mix.

Identify the methods available for changing a product mix.

Customer satisfaction and organizational objectives require marketers to develop, adjust, and maintain an effective product mix.

Marketers may improve a product mix by changing existing products, deleting products, and developing new products.

New products are developed through a series of seven steps.

The first step, idea generation, involves developing a pool of product ideas.

Screening, the second step, removes from consideration those product ideas that do not match organizational goals or resources.

Concept testing, the third step, is a phase in which a sample of potential buyers is exposed to a proposed product through a written or oral description in order to determine their initial reactions and buying intentions.

The fourth step, business analysis, generates information about potential sales, costs, and profits.

During the development step, the product idea is transformed into mock-ups and prototypes to determine if product production is technically feasible and can be produced at reasonable costs.

Test marketing is an actual launch of the product in selected cities chosen for their representative-ness of target markets.

Finally, during commercialization, plans for full-scale production and marketing are refined and implemented.

Most product failures result from inadequate product planning and development.

Define product line and product mix and distinguish between the two.

Define product line and product mix and distinguish between the two.

A product line is a group of similar products marketed by a firm.

They are related to each other in the way they are produced, marketed, and consumed.

The firm's product mix includes all the products it offers for sale.

The width of a mix is the number of product lines it contains.

The depth of the mix is the average number of individual products within each line.

Discuss the product life-cycle and how it leads to new-product development.

Discuss the product life-cycle and how it leads to new-product development.

Every product moves through a series of four stages—introduction, growth, maturity, and decline—which together form the product life-cycle.

As the product progresses through these stages, its sales and profitability increase, peak, and decline.

Marketers keep track of the life-cycle stage of products in order to estimate when a new product should be introduced to replace a declining one.

Explain what a product is and how products are classified.

Explain what a product is and how products are classified.

A product is everything one receives in an exchange, including all attributes and expected benefits. The product may be a manufactured item, a service, an idea, or a combination.

Products are classified according to their ultimate use.
Classification affects a product's distribution, promotion, and pricing. Consumer goods, which include convenience, shopping, and specialty products, are purchased to satisfy personal and family needs.

Business products are purchased for resale, in making other products, or for use in a firm's operations. Business products can be classified as raw materials, major equipment, accessory equipment, component parts, process materials, supplies, and services.

Identify the major steps in the consumer buying decision process and the sets of factors that may influence this process.

Identify the major steps in the consumer buying decision process and the sets of factors that may influence this process.

Buying behavior consists of the decisions and actions of people involved in buying and using products.

Consumer buying behavior refers to the purchase of products for personal or household use.

Organizational buying behavior is the purchase of products by producers, re sellers, governments, and institutions.

Understanding buying behavior helps marketers predict how buyers will respond to marketing strategies.

The consumer buying decision process consists of five steps: recognizing the problem, searching for information, evaluating alternatives, purchasing, and post-purchase evaluation.

Factors affecting the consumer buying decision process fall into three categories: situation influences, psychological influences, and social influences.

Distinguish between a marketing information system and marketing research.

Distinguish between a marketing information system and marketing research.

Strategies are monitored and evaluated through marketing research and marketing information systems, which store and process internal and external data and produce reports in a form that aids marketing decision making.

A marketing information system manages marketing information that is gathered continually from internal and external sources.

Marketing research is the process of systematically gathering, recording, and analyzing data concerning a particular marketing problem.

Technology is making information for marketing decisions more accessible. Electronic communication tools can be very useful for accumulating accurate and affordable information. Information technologies that are changing the way marketers obtain and use information are databases, online information services, and the Internet.

Many companies are using social media to obtain research data and feedback from customers.

Describe how market measurement and sales forecasting are used.

Describe how market measurement and sales forecasting are used.

Market measurement and sales forecasting are used to estimate sales potential and predict product sales in specific market segments.

Understand the major components of a marketing plan.

Understand the major components of a marketing plan.

A marketing plan is a written document that specifies an organization's resources, objectives, strategy, and implementation and control efforts to be used in marketing a specific product or product group.

The marketing plan describes a firm's current position, establishes marketing objectives, and specifies the methods the organization will use to achieve these objectives. Marketing plans can be short-range for one year or less, medium-range for two to five years, or long-range for periods of more than five years.

Explain how the marketing environment affects strategic market planning.

Explain how the marketing environment affects strategic market planning.

To achieve a firm's marketing objectives, marketing-mix strategies must begin with an assessment of the marketing environment, which, in turn, influences decisions about marketing-mix ingredients. Marketing activities are affected by the external forces that make up the marketing environment.


These forces include economic, socio-cultural, political, competitive, legal and regulatory, and technological forces.


Economic forces affect customers' ability and willingness to buy. Socio-cultural forces are societal and cultural factors, such as attitudes, beliefs, and lifestyles, that affect customers' buying choices. Political forces and legal and regulatory forces influence marketing planning through laws that protect consumers and regulate competition.

Competitive forces involve the actions of competitors. Technological forces can create new marketing opportunities or cause a product to become obsolete.

Understand the two major components of a marketing strategy—target market and marketing mix.

Understand the two major components of a marketing strategy—target market and marketing mix.

A marketing strategy is a plan for the best use of an organization's resources to meet its objectives. Developing a marketing strategy involves selecting and analyzing a target market and creating and maintaining a marketing mix that will satisfy the target market.

A target market is chosen through the undifferentiated or the market segmentation approach. A market segment is a group of individuals or organizations within a market that have similar characteristics and needs. Businesses that use an undifferentiated approach design a single marketing mix and direct it at the entire market for a particular product. The market segmentation approach directs a marketing mix at a segment of a market.

The four elements of a firm's marketing mix are

1. Product, 
2. Price, 
3. Distribution, and 
4. Promotion. 

The product ingredient includes decisions about

1. The product's design, 
2. Brand name, 
3. Packaging, and 
4. Warranties. 

The pricing ingredient is concerned with base prices and various types of discounts. Distribution involves not only transportation and storage but also the selection of intermediaries. Promotion focuses on providing information to target markets. The elements of the marketing mix can be varied to suit broad organizational goals, marketing objectives, and target markets.

Understand what markets are and how they are classified.

Understand what markets are and how they are classified.

A market consists of people with a need, the ability to buy, and the desire and authority to purchase. Markets are classified as consumer and business-to-business or industrial, which includes producer, reseller, governmental, and institutional markets.

Trace the development of the marketing concept and understand how it is implemented.

Trace the development of the marketing concept and understand how it is implemented.

From the Industrial Revolution until the early 20th century, business people focused on the production of goods. From the 1920s to the 1950s, the emphasis moved to the selling of goods. During the 1950s, business people recognized that their enterprises involved not only producing and selling products, but also satisfying customers' needs.

They began to implement the marketing concept, a business philosophy that involves the entire organization in the dual processes of meeting the customers' needs and achieving the organization's goals.

Implementation of the marketing concept begins and ends with customers—first to determine what customers' needs are and then to evaluate how well the firm is meeting these needs.

Explain how marketing adds value by creating several forms of utility.

Explain how marketing adds value by creating several forms of utility.

Marketing adds value in the form of utility, or the power of a product or service to satisfy a need. It creates place utility by making products available where customers want them, time utility by making products available when customers want them, and possession utility by transferring the ownership of products to buyers.

Understand the meaning of marketing and the importance of management of customer relationships.

Understand the meaning of marketing and the importance of management of customer relationships.

Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Maintaining positive relationships with customers is crucial.

Relationship marketing is establishing long-term, mutually satisfying buyer-seller relationships.

Customer relationship management uses information about customers to create marketing strategies that develop and sustain desirable customer relationships.

Managing customer relationships requires identifying patterns of buying behavior and focusing on the most profitable customers.

Customer lifetime value (CLV) is a combination of purchase frequency, average value of purchases, and brand-switching patterns over the entire span of a customer's relationship with the company.

Contemporary Views on Motivation

1. Contemporary Views on Motivation: Equity Theory
2. Contemporary Views on Motivation: Expectancy Theory (Victor Vroom)
3. Contemporary Views on Motivation: Goal-Setting Theory

Contemporary Views on Motivation: Goal-Setting Theory

Contemporary Views on Motivation: Goal-Setting Theory

Employees are motivated to achieve goals they and their managers establish together.

Goals should be very specific, moderately difficult, and ones that the employee will be committed to achieve.

Rewards should be tied directly to goals achievement.

1. Contemporary Views on Motivation: Equity Theory
2. Contemporary Views on Motivation: Expectancy Theory (Victor Vroom)