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Chapter 1—The Changing Face of Business
MATCHING
Complete the following using these terms.
a. outsourcing
b. Diversity
c. entrepreneur
d. Competitive differentiation
e. strategic alliance
f. Capital
g. vision
h. factors of production
i. brand
j. Relationship management
k. Not-for-profit
organizations
l. Business ethics
1. _____ involves blending individuals of different genders, ethnic backgrounds, cultures, religions, ages, and physical and mental abilities in order to enhance a firm’s
chances of success.
2. _____ refers to technology, tools, information, and physical facilities.
3. _____ is the unique combination of organizational abilities, products, and approaches that sets a company apart from competitors in the minds of consumers.
4. A partnership formed to create a competitive advantage for the businesses involved is known as a(n) _____.
5. A(n) _____ is a name, term, sign, symbol, design, or combination that identifies the products of one firm.
6. The ability to perceive future marketplace needs and what an organization can do to satisfy them is referred to as _____.
7. A person who sees a profitable opportunity and then devises a plan to achieve that profit is called a(n) _____.
8. _____ is the collection of activities that build and maintain ongoing, mutually beneficial ties between a business and its customers and other parties.
9. To operate effectively, certain inputs called _____ are required for all economic systems.
10. _____ are businesslike establishments that have primary objectives other than returning profits to their owners.
11. _____ refers to the standards of conduct and moral values involving decisions made in the work environment.
12. A company that contracts with another business to perform functions previously handled by internal staff is participating in _____.
1. ANS: b DIF: MEDIUM LO: 1.5 Section: Explain current workforce trends in business. AACSB: Analytical
thinking BT: K
2. ANS: f DIF: MEDIUM LO: 1.2 Section: Identify and describe the factors of production. AACSB:
Analytical thinking BT: K
3. ANS: d DIF: MEDIUM LO: 1.3 Section: Describe the private enterprise system AACSB: Analytical
thinking BT: K
4. ANS: e DIF: MEDIUM LO: 1.4 Section: Identify the seven eras in the history of business.
AACSB: Analytical thinking BT: K
5. ANS: i DIF: MEDIUM LO: 1.4 Section: Identify the seven eras in the history of business.
AACSB: Analytical thinking BT: K
6. ANS: g DIF: MEDIUM LO: 1.6 Section: Identify the skills and attributes needed for today’s manager.
AACSB: Analytical thinking BT: K
7. ANS: c DIF: MEDIUM LO: 1.2 Section: Identify and describe the factors of production.
AACSB: Analytical thinking BT: K
8. ANS: j DIF: MEDIUM LO: 1.4 Section: Identify the seven eras in the history of business.
AACSB: Analytical thinking BT: K
9. ANS: h DIF: MEDIUM LO: 1.2 Section: Identify and describe the factors of production. AACSB:
Analytical thinking BT: K
10. ANS: k DIF: MEDIUM LO: 1.1 Section: Define business. AACSB: Analytical
thinking BT: K
11. ANS: l DIF: MEDIUM LO: 1.7 Section: Outline the characteristics that make a company admired.
AACSB: Ethical understanding and reasoning BT: K
12. ANS: a DIF: MEDIUM LO: 1.5 Section: Explain current workforce trends in business.
AACSB: Analytical thinking BT: K
ESSAY
13. What is profit? Do you agree with the statement, “The success of a business is measured only by the profit it earns”? Explain your answer.
ANS:
Profit is the financial reward received by successful businesspeople who take the risks involved in blending people, technology, and information to create and market want- satisfying goods and services. In order to be successful in a private enterprise system, a business must earn a satisfactory profit; otherwise, the owners and investors will turn to
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more attractive opportunities. However, businesses today are expected to do more than earn a satisfactory profit—they also have social and ethical responsibilities. In other
words, businesses must behave responsibly in their dealings with employees, customers, suppliers, investors, creditors, government, the general public, and even with their
competitors.
DIF: HARD LO: 1.1 Section: Define business. AACSB: Analytical thinking BT: C
14. Describe technology as a capital source.
ANS:
Technology is a broad term that refers to such machinery and equipment as computers and software, telecommunications, and inventions designed to improve production.
Information, frequently improved by technological innovations, is another critical factor because both managers and operating employees require accurate, timely information
for effective performance of their assigned tasks. Technology plays an important role in the success of many businesses. Bill Gates is quoted as saying: “Information
technology and business are becoming inextricably interwoven. I don’t think anyone can talk meaningfully about one without talking about the other.” Sometimes technology
results in a new product such as the Google self-driving car, which is able to navigate without human input.
DIF: MEDIUM LO: 1.2 Section: Identify and describe the factors of production. AACSB: Analytical
thinking BT: C
15. Explain why competition is important according to Adam Smith?
ANS:
Adam Smith, the author of the book The Wealth of Nations, identified that competition among firms would lead to consumers’ receiving the best possible products and prices
because less efficient producers would gradually be driven from the marketplace.
DIF: HARD LO: 1.3 Section: Describe the private enterprise system. AACSB: Analytical thinking
BT: C
16. List and describe the four basic rights in the private enterprise system.
ANS:
The right to private property guarantees every participant the right to own, use, buy, sell, and bequeath most forms of property. The right to profits ensures business owners the
right to all profits (after taxes) they earn through their activities. Freedom of choice means that a private enterprise system relies on the potential for citizens to choose their
own employment, purchases, and investments. Finally, the private enterprise system permits fair competition by allowing the public to set rules for competitive activity,
including laws that prohibit “cutthroat” competition.
DIF: HARD LO: 1.3 Section: Describe the private enterprise system . AACSB: Analytical
thinking BT: C
17. What did Nordstrom do differently to achieve a considerable increase in its annual sales?
ANS:
Initially, with a dozen IT professionals, Nordstrom set up a tech lab aimed at coming up
with innovative ideas to deal with the changing ways that customers shop. To continue its fanatic approach to creating a great service experience for customers, the IT
professionals developed new products, new business models, and new ways of dealing with its many retail competitors. For example, using TextStyle, a messaging app
developed by the company, a Nordstrom salesperson can use technology to further cultivate a relationship by texting, chatting, and sharing product images with customers,
who must opt in to the service. As part of its strategy to create new and innovative service experiences for customers, the company recently moved some of its IT technologists
directly into its business groups. The integration has been effective because there is a broader range of new ideas coming from both the business and technology teams. The
result: more immediate customer input to quickly spot gaps in service by involving sales associates in idea generation.
DIF: MEDIUM LO: 1.3 Section: Describe the private enterprise system . AACSB: Analytical
thinking BT: C
18. List the seven eras of business history. Name and describe the era used by businesses today.
ANS:
The seven eras are the Colonial period, the Industrial Revolution, the age of industrial entrepreneurs, the production era, the marketing era, the relationship era, and the social
era. Today’s era, the social era, can be described as a new approach to the way businesses and individuals interact, connect, communicate, share, and exchange information
with each other in virtual communities
and networks around the world.
DIF: MEDIUM LO: 1.4 Section: Identify the seven eras in the history of business. AACSB: Analytical
thinking BT: C
19. Explain the business approach used in the relationship era.
ANS:
In the relationship era, businesses are taking a different, longer-term approach in interacting with and creating authentic customer relationships. Companies now seek ways to
actively nurture customer loyalty by carefully managing every interaction. They earn enormous paybacks for their efforts. A company that retains customers over the long haul
reduces its advertising and sales costs. Because customer spending tends to accelerate over time, revenues also grow. Companies with long-term customers often can avoid
costly reliance on price discounts to attract new business, and they find that many new buyers come from loyal customer referrals. Because it is much less expensive to serve
existing customers than to find new ones, businesses that develop long-term customer relationships can reduce their overall costs. Long-term relationships with customers
enable businesses to improve their understanding of what customers want and prefer from the company. As a result, businesses enhance their chances of sustaining real
advantages through competitive differentiation.
DIF: HARD LO: 1.4 Section: Identify the seven eras in the history of business. AACSB: Analytical thinking
BT: C
20. Explain the difference between transaction management and relationship management.
ANS:
Transaction management is an approach that focuses on building, promoting, and selling enough products to cover costs and earn profits. In relationship management,
businesses seek ways to actively nurture customer loyalty by carefully managing every interaction. It includes activities that build and maintain ongoing, mutually beneficial
ties with customers and other parties.
DIF: MEDIUM LO: 1.4 Section: Identify the seven eras in the history of business. AACSB: Analytical thinking
BT: C
21. Briefly describe the Industrial Revolution and its contribution to the evolution of business.
ANS:
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The Industrial Revolution began in England around 1750. It moved business operations from an emphasis on independent, skilled workers who specialized in building
products one by one to a factory system that mass-produced items by bringing together large numbers of semiskilled workers. The factories profited from the savings created
by large-scale production, bolstered by increasing support from machines over time. As businesses grew, they could often purchase raw materials more cheaply in larger lots
than before. Specialization of labor, limiting each worker to a few specific tasks in the production process, also improved production efficiency. Influenced by these events in
England, business in the United States began a time of rapid industrialization. Agriculture became mechanized, and factories sprang up in cities. During the mid-1800s, the
pace of the revolution was increased as newly built railroad systems provided fast, economical transportation. In California, for example, the combination of railroad
construction and the gold rush fueled a tremendous demand for construction.
DIF: MEDIUM LO: 1.4 Section: Identify the seven eras in the history of business. AACSB: Analytical thinking
BT: C
22. Explain strategic alliance with an example.
ANS:
Strategic alliance is a partnership formed to create a competitive advantage for the businesses involved. In international business, it refers to a business strategy in which a
company finds a partner in the country where it wants to do business. Havaianas is a Brazilian-owned manufacturing company known for its bright and colorful flip-flops. The
company recently announced a strategic alliance with The Walt Disney Company, which will provide Disney fans the opportunity to purchase flip-flops imprinted with Disney
characters and themes. They will be available at Disney resorts, theme parks, and vacation clubs. In addition, Havaianas will be the official sponsor of the runDisney marathon
events.
DIF: MEDIUM LO: 1.4 Section: Identify the seven eras in the history of business. AACSB: Information
technology BT: C
23. Describe how the aging populations in the United States and abroad directly affect changes in the workforce.
ANS:
Employers must deal with issues such as retirement, disability programs, retraining, and insurance benefits. Additionally, teenagers are entering the workforce sooner, and
some seniors are staying longer or seeking new careers after retiring from their primary careers.
DIF: MEDIUM LO: 1.5 Section: Explain current workforce trends in business. AACSB: Analytical
thinking BT: C
24. What are the advantages of a diverse workforce?
ANS:
Studies show that diverse employee teams and workforces tend to perform tasks more effectively and develop better solutions to business problems than homogeneous
employee groups. Also, a diverse workforce may improve management’s understanding of customer needs and relationships with consumer groups.
DIF: MEDIUM LO: 1.5 Section: Explain current workforce trends in business. AACSB: Diverse and multicultural work environments BT: C
25. Describe offshoring and its related trends.
ANS:
Offshoring is the relocation of business processes to lower-cost locations overseas. This can include both production and services. In recent years, China has emerged as a
dominant location for production offshoring for many firms, while India has become the key player in offshoring services. Some U.S. companies are now structured so that
entire divisions or functions are developed and staffed overseas—the jobs were never in the United States to start with.
DIF: MEDIUM LO: 1.5 Section: Explain current workforce trends in business. AACSB: Analytical
thinking BT: C
26. What is outsourcing? Explain the utility of outsourcing in the United States.
ANS:
Outsourcing involves the use of outside vendors—contracting work out to another party—for the production of goods or fulfillment of services and functions previously
performed in house. Manufacturing used to account for most of the U.S.’s annual output, but the balance has now shifted to services such as hospitality, retail, health care,
human services, information technology, financial services, and education. This means that product firms, for example, with a higher service component, must rely on well- trained workers who have the knowledge, problem-solving and technical skills, and ability to communicate and deal with people as part of their daily work. Oftentimes, market pressures drive a firm to reduce costs by outsourcing in order to focus its resources on other components of its business.
DIF: MEDIUM LO: 1.5 Section: Explain current workforce trends in business. AACSB: Analytical thinking
BT: C
27. Define the term vision. Explain with an example why it is an important managerial quality.
ANS:
Vision is the ability to perceive marketplace needs and what an organization must do to satisfy them. Shake Shack’s owner, restaurateur Danny Meyers, is an example of a
leader with a definite vision who has reaped significant rewards operating within the private enterprise system. By successfully identifying and serving the needs and demands
of customers who think nothing of standing in long lines to experience all-natural menu items and great customer service, Meyer has created somewhat of a cult following for
his Shake Shack dining experience. Also coveted for its frozen custard, Shake Shack’s core philosophy is based on the simple mantra of “enlightened hospitality,” which
translates to a warmer, friendlier, and more engaging customer service experience for its burger-loving clientele. Known affectionately as the “Shack Team,” employees are
expected to embody the “5 tenets of enlightened hospitality”: taking care of each other, our guests, our community, our suppliers, and our stockholders. With its recent IPO, the
Shack Team has more than just a few stockholders to consider and has expanded beyond the Big Apple to locations including Miami, Chicago, Atlanta, and Austin.
DIF: EASY LO: 1.6 Section: Identify the skills and attributes needed for today’s manager. AACSB: Analytical
thinking BT: K
28. Describe critical thinking and creativity and explain why they are important qualities for today’s manager.
ANS:
Critical thinking is the ability to analyze and assess information to pinpoint problems or opportunities. The critical-thinking process includes activities such as determining the
authenticity, accuracy, and worth of data, information, knowledge, and arguments. It involves looking beneath the surface for deeper meaning and connections that can help
identify critical issues and solutions. Although most people think of it in relation to writers, artists, musicians, and inventors, that is a very limited definition. In business,
creativity refers to the ability to see better and different ways of doing business. A computer engineer who solves a glitch in a software program is executing a creative act.
DIF: MEDIUM LO: 1.6 Section: Identify the skills and attributes needed for today’s manager. AACSB: Analytical
thinking BT: C
29. What are some examples of external and internal forces that would require a manager to lead organizational change?