Business Management
(1) Characteristics, Ethics and Social Responsibility
CHARACTERISTICS:
3 Major Activities of a Business
Produ
ction
1. Manufac
turing (mfg.)
2. Servi
Market
Fin
ce
ing
ance
Types of Business
Industrial – produce goods t
make thin
hat are used by other company’s to
gs
Commercial
Commercial
Credit card business .................................... ______
Crushed stone mill ....................................... ______
Sporting goods shop ..................................... ______
Home building firm ..................................... ______
Health care center ........................................ ______
Industrial
______
______
______
______
______
Changing Nature of Business
Think then list 5 items not available 25 years ago
1.
2.
3.
4.
5.
Effective and Efficient
If a student was the fastest to finish and exam but received the
lowest grade, would you say the student was
(a) effective and efficient
(c) ineffective but efficient
(b) effective but inefficient
(d) ineffective and inefficient?
Effectiveness: making the right decisions about what products/services to
offer and how to produc
e/deliver them
 Research preference
 Customer Service/
es of consumers .
follow-up .
 TQM (Total Quality Mgmt): commitment to excellence
accomplished by teamwork and continual improvement.
Requires great deal of training .
Efficiency: producing needed goo
quickly and at lo
ds/services
w cost.
 Productivity: producing the largest quantity in the least amount of
tim
e
a) Achieved by:
(1) Specialization of effort: improves quality and speed .
Ex. Auto Shop worker focuses strictly on transmissions
(2) Better Technology and innovation .
(3) Reorganization .
Downsizing and Empowerment (letting workers decide how
to perform their tasks and offer ideas)
Assuming you own a landscape company
check the appropriate box
Lower your operating costs by buying gas
in quantity at lower prices
Sharpen blades more often to improve
appearance of grass
Research the type of grass seed/flowers that
customers prefer
EFFECTIVENESS EFFICIENCY
ETHICAL ISSUES
The Supervisor’s Secret
Tyler Eastman picked up the file folder and walked to his supervisor’s
office. He had finally save enough money for the down payment and closing
costs for a small stone house on the lake that he had long wanted. He now needed
his supervisor’s signature on several documents that the bank required in order to
approve the loan money.
The Quest Co., where Tyler worked, was the main employer in this small
Ohio town. Because the firm paid high wages, the town had nice stores and good
restaurants. Taxes paid by the company supported the local police and fire
departments, the public school and the recreation center.
Recently, however, Quest had fallen on hard times. Sales declined and
unsold goods piled up. Some employees were let go. To survive, Quest had to
cut costs. Rather than continue operations in Ohio. Quest decided to relocate to
Georgia, where costs for taxes, wages, utilities, and raw materials were lower.
Only yesterday, Tyler’s supervisor, Rayshawn Clark, had been informed
that the town’s factory would shut down over the next 12 months. He was being
promoted but would move to the new Georgia plant. Many workers, like Tyler,
would lose their jobs.
Therefore, when Tyler excitedly asked Rayshawn to sign the bank papers
for his new home, Rayshawn was disturbed. Should he sign the loan papers when
he knew Tyler’s job would barely last a year? If he didn’t sign, everyone would
soon find out why. Morale among employees would drop, and they would look
for jobs elsewhere. It was important to keep the plant closure decision a secret as
long as possible. The town would be devastated when it learned that its main
employer would be relocating. Rayshawn pondered the dilemma he was in.
What are the consequences of signing?
What are the consequences of not signing?
Which is right?
Ethics: Laws provide a minimum standard of behavior for companies
therefore; ethics (moral conduct set for themselves on what is
right/wrong) beco
me a guide.
Ethical dilemmas are tough decisions that usually have no clear-cut answers
Ethical Dilemmas
1. Everyone should read the following scenarios
2. Your group will then be assigned a specific scenario and a position taken by the
group. Brainstorm 4-5 points to support your position.
3. A spokesperson for the group will represent the group’s position
4. Each group that was assigned an opposing position will present
5. Groups assigned to other scenarios will comment on the positions that have been
taken.
Scenario 1
You are an executive with hire/fire authority. There are two applicants for a new job
opening both of whom meet at least the minimum requirements for the job:
Homer has been with the company for about eight years. His skill level is very high and
he successfully completes projects and is always eager to do more for the company. In
addition, to his own job duties, he is the kind of employee that always steps to the plate
for those oddball tasks that don’t seem to fit anyone’s job description.
Although Moe does not possess the same skill level as Homer, he is more than
sufficiently skilled to do the job. You’ve known Moe since grammar school and on two
occasions he saved your life. When you need someone at 3:00 AM, Moe is the one to
call.
Choices:
A - Hire Homer
B - Hire Moe
Scenario 2
One of your family members needs a very expensive drug and you cannot afford it and
you do not have insurance. You become aware that a local drugstore has an insufficient
security system and you can easily steal the drug without fear of being caught
Choices:
A - Steal the drug
B - Don’t steal the drug
Scenario 3
You are in charge of purchasing. A vendor offers a personal gift (how about a large
screen HDTV?), delivered to your home, if you purchase more than designated amount
of a product. Your company uses the product anyway and the vendor’s product meets
all the required specifications; further, the vendor’s price is in line with the market
prices offered by other vendors (maybe even a bit lower).
Choices:
A - Order the product from this vendor and take the HDTV
B - Don’t order the product from this vendor
C - Order the product from this vendor but decline the HDTV
Scenario 4
You have been traveling on company business for a while, all expenses of which have
been paid by the company, including the cost of airline tickets. As a member of an
airline “miles” program, you have accumulated sufficient points for a roundtrip are
anywhere. Company policy is silent as to whom such benefits belong.
Choices:
A - Use the points for a business trip
B - Use the points for a personal trip
Scenario 5
Should a fledgling lumber company with many employees cut down a rain forest that is
home to an endangered species of bird in order to obtain product demanded by the
economy and improve it s financial position?
Choices:
A - Cut down the rain forest
B - Do not cut down the rain forest
BUSINESS ETHICS
 What is the responsibility of your business to society?
 What is important to you?
 A behavior or action may be illegal and unethical such as stealing or it may be
legal yet you feel it is unethical such as selling tobacco products. At the most
basic level, your business should be legal, it should not hurt others, and it
should not spread negative messages or ideas. To start creating your own code
of ethics, consider the following:
1. What is the primary purpose of your business?
2. What is most important to you and to the success of your business?
3. What results would make you proud to be the owner of that business?
4. What kind of atmosphere and culture do you want the business to have?
5. What type of behavior will you demand from yourself and your
employees (honesty, loyalty, respect, courtesy, fairness, accountability,
dependability)?
6. What will you do to maintain those standards of behavior?
7. How do you want your community to view your business?
8. What positive effects do you hope your business will have on the
community?
9. How will you handle ethical and legal dilemmas that may arise?
SOCIAL RESPONSIBILTIY
Why do local companies sponsor little league baseball/softball and soccer
teams?
A duty of a business to contribute to the well being of society and stak
eholder s (individuals or groups that are affected by the firm’s actions)
 Charit
ies .
 Schola
 Community ex
 Spon
rships .
hibitions .
sorships .
Good deeds = good publicity = more sales/profits
Boundary
Breaking
Purpose: To help us discover what we have in common and to become
more accepting and understanding of our differences.
Rules:
Each person is to answer all questions
You may pass while you think, but we will come back to you
“I don’t know” is not an answer
We are here to listen
We are not here to debate
We are not here to disagree
You may not comment on the answers of others or ask for explanations until the end (key word:
listen, listen, listen)
Don’t repeat the answers of others unless it is truly what you wished to say
You may give any answer you wish, but answers must be honest, truthful, appropriate for
school. I request your sincere thoughts and feelings.
Who is one of your heroes or role models? Explain your answer.
If someone gave you $1,000, how would you spend it?
If you could have one special power, what would it be and why?
If you could go anywhere in the world, where would you go and why?
What is the best program on television?
Describe one thing that makes you happy.
What TV commercial bothers you the most?
If you could build one thing, what would you build?
SYNTHESIS SET:
What answer (yours or others) surprised you the most?
The 3 Activities of Business Project
(Production, Marketing, Finance)
Materials: sticks, glue
Requirements: Efficiently and effectively build a tower 10” tall with at least a
3”x3”top platform. A quality control inspection will be conducted to assure your
tower can withstand 6lbs of pressure (6lb weight will be placed on top platform).
Sticks may not be cut or broken. Each stick cost $1,000. Keep costs down by
using least amount of sticks. A deduction per stick may be charged for use of
more than 100 sticks.
Objectives:
 Team that builds the tower to requirements at the lowest cost wins.
 A pre-building plan must be submitted that includes a sketch and written
estimate of costs
 In the event of a tie, the tower that is closet in design and cost to the original plan
wins.
3 members per team. Play to your strengths and assign each member a role in your
organization and report those roles to the teacher. Roles are:
1. Production: ____________________________________________________
The engineer and builder of the tower. Hands on and in charge of construction. Held
accountable to time constraints.
2. Marketing: ____________________________________________________
The promoter and advertiser of the tower. Publicly speaks to introduce the tower and sells the
new office/residential dwelling to potential customers. Oversees the aesthetics of the tower as
an eye appealing design is easier to sell.
3. Finance: _______________________________________________________
Controls cost. Remember each stick costs a $1,000. The more sticks used the higher the
production costs and smaller the profit. Consumers may be turned away when they could set
up their office or residence in a much cheaper but, equally appealing and structurally sound
building.
CASES:
DELL
Companies can satisfy customers in many ways. Most buyers want a high-quality product at the
lowest possible price and a great deal of help, when trouble occurs with a product. Successful firms in
recent have introduced innovative ways to meet customer expectations. Domino’s Pizza, for example,
delivers to your door quickly, as does Lands End. United Parcel Services and Federal Express also
come to your door to deliver or pick up packages.
Dell Computer Corporation, however, was the first to do what everyone said would surely fail
–sell computers using a toll-free phone number. Michael Dell, the founder of the firm, was told that
people want to see, touch and try highly technical products before they buy. They were wrong.
Michael Dell, who had always looked for easier and faster ways to get things done, got an idea
while in college that he believed would serve the computer customer well. He would provide
customers with a catalog of computers and computer parts. When they knew what they wanted, they
could call his toll-free number, place the order with a credit card, and expect to have the computer
shipped directly to their homes or offices within a brief period. Because he didn’t incur the expense of
maintaining a physical store, Dell was able to keep prices low. He kept no inventory, preferring to
make and mail the customer’s tailor-made machine soon after receiving the order.
To further make customers happy, he provided a guarantee, and later extended repair contract
offering local service if anything went wrong. The idea worked beyond anyone’s imagination. Within
a few years his business was profitable and growing rapidly. Dell products are among the highestrated machines, and satisfied customers spread the good news. Dell is now one of America’s largest
firms with computers sold around the world using the same ideas that he created in 1983, when the
business was launched.
Many other computer firms have copied his low cost, fast service, and customer satisfaction
guarantee. Gateway 2000, Compaq, and Micron imitated Dell in selling directly to customers. Dell
and its competitors now sell their products over the internet as well as through toll-free phone calls.
Many other firms in different businesses soon adopted to Michael Dell’s ideas to gain the effectiveness
and efficiency that leads to satisfied customers.
1. Why do you think buyers like to purchase from Dell Computer Corp.?
2. What specific actions did Dell take to make his company effective?
3. What specific actions did Dell take to make his company efficient?
KIRK BICYCLES
The Kirk family came to this country early in the 20th century and made a bicycle that soon
became know for its quality. Through much of the century, Kirk was the “Cadillac” of American
bicycles. In the 1960’s , it ran circles around the numerous competitors; one in four bikes was a Kirk.
Throughout this time, the Kirk family managed the company.
The success of Kirk’s line of bicycles gave the company great confidence—perhaps too much
confidence. During the last three years sales dropped, slipping form one million bikes sold yearly to
500,000 the next year and 250,000 last year. Three major competitors with nifty lower-priced bikes
who sold to K-Mart, Sears and other large stores were stealing customers. When mountain bikes
became popular, Kirk management ridiculed this new fad.
In the meantime, the quality of Kirk bikes faded. To cut costs, employees were let go and
lower-quality parts were bought from foreign firms and installed. Kirk managers made no attempt to
talk to biking customers. Neither did the managers listen to the hundreds of dealers who sold Kirk
bicycles in specialty shops. Loyal dealers starting adding competitors’ products to survive. Bike
deliveries were running late. The changes made to cut costs did not correct the situation. For the last
three years, Kirk operated at a loss. Something drastic had to occur.
Recently, Kirk was purchased by another company. Headquarters for the new company was set
up in Colorado, where biking is popular. Kirk’s new managers talked to customers and dealers. As a
result, new products rolled off the assembly line that were satisfying loyal dealers and older bikers who
recalled the excellent quality of the Kirk two-wheelers. But can the new Kirk adequately rebuild itself
to compete in a tough market? Quality Kirk bicycles sold only to specialty shops cost $250 to
$2,500, which is far more than most bikes purchased at discount stores. Plenty of persuading will be
needed to convert the price-conscious casual bikers or the more serious riders who put on 25 to 100
miles a week.
Signs of success appear on the horizon. A small profit is expected this year for the struggling
firm. Whether the new managers can reestablish Kirk’s earlier lead in the marketplace is yet to be
determined.
1. What was the main reason the old Kirk company failed?
2. What should new managers do to help improve Kirk’s effectiveness?
3. What might the company do to improve its efficiency?
4. Who is the “real” Kirk ?
NIKE
Nike, Inc. based in Beaverton, Oregon is one of the most famous names in sports shoes. Sports
shoes of all kinds carrying the famous swoosh logo are sold throughout the world, often at prices above
$100. But how much does it cost to make these shoes?
Nike does not manufacture any of its shoes. Instead, it has them made by private contractors I
countries such as Indonesia and Vietnam. Nike provides design and quality specifications and places
orders for millions of pairs of shoes. Indonesia and Vietnam are poor countries where there are lots of
unemployed people, and government laws and regulations are weak and unenforced.
Various non-government organizations have alleged Nike’s shoes are made under unacceptable
working conditions. Workers as young as 14 working over 60 hours a week receive wages of about $1
day. Safety and health standards are minimal. The cost of labor was estimated at less than 4 percent of
the price that the consumer paid for a pair of shoes. Thus, shoes sold for $100 have a labor cost of less
than $4. Even after paying the manufacturers and the distributors, Nike makes a profit of $15 on the
pair.
Nike argued that its profits are comparable to those made by Reebok, Adidas and others in the
industry. It also claimed that the company had little control over the manufacturers, though Nike tried
to ensure that these companies followed employment laws of the respective countries with regard to
minimum wages, hours of work, and the like.
Labor unions and human rights groups in the U.S. began a campaign to draw attention to the
harsh conditions I which Nike’s shoes were made. Pressure mounted on Nike’s shareholders to force
Nike to make changes in the working conditions at the foreign factories.
Nike reacted to the demand for change by establishing an office to monitor working conditions
in the foreign factories. The critics demanded that independent monitoring groups in which they
would be represented must be allowed to visit and inspect the factories abroad.
All this negative publicity lead to sharp declines in sales and profits. Nike argued that it was
incorrect to compare working conditions in the U.S. with those in less prosperous countries. The
company pointed out that not too long ago, working conditions in the U.S. were also harsh, and only
economic growth had led to the enlightened work conditions prevalent today.
1. Does Nike actually make their shoes?
2. What were the working conditions like in the factories that make Nike sneakers?
3. Was Nike’s practice effective?
4. Was Nike’s practice efficient?
5. Is/Was Nike being socially responsible?
6. What was Nike response/resolution to the problem?
BUSINESS PLAN: N/A
PROJECTS: N/A
QUESTIONS:
1. What 3 activities to all business perform?
2. How does an industrial firm differ from a commercial firm?
3. Why should businesses pay attention to changing environments?
4. What is TQM?
5. Name three techniques that American businesses can use to improve efficiency and productivity?
6. Which is more important effectiveness or efficiency?
7. When workers are empowered, what happens in an organization?
8. In your own words…define “ethics”
9. On prom night at your school, your town’s Taxicab Association announced that it would provide
free drop-off and pick-up services to all students participating in the event. Give three reasons why
the Taxicab Assoc. is providing this service?
10. Give two reasons why businesses should be socially responsible?