BUS EXAM 3

Management by Objective

A goal-setting technique introduced by Peter Drucker Allows managers to focus on attainable goals and to achieve the best results based on the organization's resources Aligns individual's objectives with the goals of the organization, increasing overall organizational performance. Outlines tasks, goals, and contributions. A collaborative process between managers and employees

Leadership Styles

Autocratic Leadership: Make decisions on own without consulting employees Democratic Leadership: Involve employees in decisions, delegate assignments, and ask employees for suggestions Free-Rein Leadership: Leave most decisions to employees An important trend in leadership is empowerment, a practice in which managers lead employees by sharing power, responsibility, and decision making with them.

Stocks

Common Stock Basic form of corporate ownership Purchasers are owners of a corporation Voting rights on major company policies Owners hope for price appreciation or a cash dividend Preferred Stock Stockholders who receive preference in the payment of dividends Convertible Securities Stockholder has the right to exchange the bond or preferred stock for a fixed number of shares of common stock. Stocks are a basic form of corporate ownership. Investors expect stocks, with little or no cash dividend, to appreciate. Preferred stockholders rarely have voting rights, although they do have claim on the firm's assets ahead of the claim of common stock holders. Investors are willing to accept lower interest rates because they value the potential for additional gains if the price of the firm's stock increases. Common stock holder exercise voting rights on major company policies, while preferred stockholders receive preference in the payment of dividends (with no voting rights).

ECNs and the Future of Stock Markets

Electronic Communication Network refers to the direct trading of exchange-listed stocks off the floor of the exchange (NYSE) or outside of networks (NASDAQ) The fourth stock market Buyers and sellers meet in a virtual stock market, and trade directly with one another Open to smaller, individual investors through markets called ECNs Trades take place through INET and Archipelago Trading outside the NYSE or NASDAQ system was limited to large institutions buying blocks of stocks. This 4th market has begun to open up to more individuals and is being touted as the future of stock markets. Buyers and sellers meet in a virtual market and trade with one another directly. It is open to smaller, individual investors. Trades take place through INET and Archipelago, rather than through NASDAQ. To access an ECN, an investor must sign up with a broker that is partnered up with at least one of them.

Managers' Attitudes & Motivation

Managers make two assumptions about employees: Theory X - assumes that employees dislike work and try to avoid it whenever possible, so management must coerce them to do their jobs. Theory Y - assumes that the typical person actually likes work and will seek and accept greater responsibility. William Ouchi's Theory Z worker involvement is key to increased productivity for the company and improved quality of work life for employees. The attitudes that managers display toward employees also influence worker motivation. Douglas McGregor, a student of Maslow and psychologist, studied motivation from the perspective of managers. Two contrasting models, Theory X and Theory Y, focus on the assumptions of managers. Theory Z was proposed by Ouchi who incorporated Japanese management techniques.

Forms of Departmentalization

Many companies combine the different forms of departmentalization to build their structure. There can be more than a single form of departmentalization within an organization. see pg. 208

Maslow's Hierarchy of Needs Theory

Maslow's Hierarchy of Needs is a very common motivation theory that managers can use to think about how employees are motivated. The focus of the theory is how a person's human needs are met. Employers must help employees satisfy unmet needs. There are five basic needs, including: Physiological needs Safety needs Social (belongingness needs) Esteem needs Self-actualization needs Maslow's Hierarchy of Needs: people have five levels of needs that they seek to satisfy. A satisfied need is not a motivator; only needs that remain unsatisfied can influence behavior. People's needs are arranged in a hierarchy of importance; once they satisfy one need, at least partially, another emerges and demands satisfaction.

Electronic Banking

Increasingly, funds are moved through electronic transfer systems (ETFs) ETFs are computerized systems for conducting financial transactions electronically Businesses and individuals pay bills and receive payments electronically The Automated Teller Machine, or ATM, an original form of electronic banking, continues to proliferate ATM users can access accounts worldwide Online banking - internet only banking and brick and mortar banks with online banking sites. In addition to the traditional features of ATMs, many banks offer customers debit cards also called check cards. Today, most consumers do some of their banking online. Although many consumers bank with their traditional bank online, Internet-only banks are becoming a popular alternative. An increasing amount of funds move through electronic funds transfers (EFTs). Millions of businesses and consumers now pay bills and receive payments electronically. Most employers directly deposit employee paychecks. Social Security and other federal payments are made each year electronically. Most banks now offer customers debit cards More than 3/5 of American households use some online banking.

Nondepository Institutions

Insurance companies - accept risk in exchange for premium payments, which they invest Pension funds - set up by employers, they provide retirement benefits to workers. Invest heavily in assets Finance companies - consumer and commercial companies offer short term loans to borrowers who pledge tangible assets Mutual Funds - intermediaries that raise money from investors by selling shares

What is Management?

Management is the process of achieving organizational objectives through people and other resources. A firm's management typically consists of three levels: top, middle, and supervisory. Being a manager today involves many different skill sets. Top: Chief Executive Officer, Chief Financial Officer, Governor/Mayor Middle: Regional Manager, Division Head, Director Supervisory/first-line: Supervisor, Shift Manager, Program Manager

Production & Operations Management

Production: Use of resources, such as workers and machinery, to convert materials into finished goods and services. Production and Operations Management: Oversee the production process by managing people and machinery in converting materials and resources into finished goods and services. People often use the terms production and manufacturing interchangeably, and production spans both manufacturing and nonmanufacturing industries. Inputs - resources and raw materials Conversion process - add value Outputs - goods and services (on pg. 274)

Defining the Organization's Mission

The first step in strategic planning is to translate the firm's vision into a mission statement A mission statement is a written explanation of an organization's business intentions and aims A statement of a firm's purpose Highlighting scope of operations, markets served and differentiators Guides actions of employees Publicizes company's reason for existence

Employee Separation

The loss of an employee for any reason Voluntary turnover is when an employee resigns - many times, to take another job Exit interview - provides valuable information Involuntary turnover is when an employee is terminated due to poor job performance, unethical behavior, downsizing, or outsourcing Occurs when firms are forced to eliminate jobs A cost-cutting measure

Job Design & Motivation

Three ways jobs can be restructured to be more motivating: Job enlargement: job design that expands an employee's responsibilities by increasing the number and variety of tasks assigned to the worker Job enrichment: involves an expansion of job duties that empowers an employee to make decisions and learn new skills leading toward career growth Job rotation: involves systematically moving employees from one job to another. The strategies improve employee productivity and morale.

Assessing Competitive Position

To determine the firm's current or potential position in the marketplace, a SWOT analysis is conducted. By systematically evaluating: Strengths Weaknesses Opportunities Threats, a company can develop the best strategies for gaining a competitive advantage To evaluate a firm's strengths and weaknesses, each functional area (marketing, finance, human resources, etc.) should be evaluated. In addition, office, plants and retail locations should be evaluated. The analysis continues with an attempt to define the major opportunities and threats a company is likely to face. Threats may include the economy or change in federal regulations. Opportunities include new markets, technologies, and strategic alliances. A SWOT analysis is constantly changing because strengths and weaknesses, similar to opportunities and threats, can shift over time.

Forms of Incentive Compensation

Today, a growing percentage of compensation for salaried workers is some form of variable pay. There are four forms of incentive compensation. Companies try to motivate employees to excel by offering incentive compensation in addition to wages and salaries, including: Profit sharing - bonuses are awarded based upon company profitability Gain sharing - companies share the financial value of productivity gains, cost savings, or quality improvements with workers Lump-sum bonuses and stock options - a one-time cash payment and the right to purchase stock in the company based on performance Pay for knowledge -distributes wage or salary increases as employees learn new job tasks

The Location Decision

Transportation: proximity to markets & raw materials, availability of transportation alternatives. Physical variables: water supply, available energy, options for disposing of hazardous wastes. Human factors: labor supply, local regulations, taxes, living conditions. see pg. 280

Breakdown of M1 and M2

Two common measures of money supply: M1 - currency in circulation and balances in bank checking accounts M2 - M1 plus some balances in some savings accounts and money market mutual funds M1: $4.7 trillion M2: $8.38 trillion see pg. 478

Bond Ratings

Two factors determine the price of a bond: Risk Interest rate Bond rating is used by investors to evaluate the riskiness of a bond Several firms rate bonds Standard & Poors (S&P), Moody's, and Fitch Bonds with low risk levels are AAA Bonds with ratings of BBB and above are classified as investment-grade bonds. Bonds with ratings of BB and below are classified as speculative or junk bonds. Investors like to invest in junk bonds as they provide a high return. see pg. 465

Chapter 2: Business Ethics and Social Responsibility

1. Explain the concern for ethical and societal issues 2. Describe the contemporary ethical environment 3. Discuss how organizations shape ethical conduct 4. Describe how businesses can act responsibly to satisfy society 5. Explain the ethical responsibilities of businesses to investor and the financial community

Chapter 4: Competing in World Markets

1. Explain why nations trade. 2. Describe how trade is measured between nations. 3. Identify the barriers to international trade. 4. Discuss reducing barriers to international trade. 5. Explain the decisions to go global.

Chapter 16: The Financial System

1. Understand the financial system. 2. List the various types of securities. 3. Discuss financial markets. 4. Understand the stock markets. 5. Evaluate financial institutions. 6. Explain the role of the Federal Reserve System. 7. Describe the regulation of the financial system.

Ethical Education

A code of conduct provides only a framework Business must provide tools to evaluate options Many firms have instituted ethics training programs Some question whether ethics can be taught Training gives employees the chances to apply ethical values to hypothetical situations Codes of conduct cannot control ethical action alone. Many organizations have initiated training programs or hired outsiders to do so. Though it is questioned whether ethics can be taught, the training allows employees to practice the application of ethics to different scenarios.

Absolute and Comparative Advantage

Absolute Advantage: country can maintain a monopoly or produce at a lower cost than any competitor. Example: China's domination of silk production for centuries. Comparative Advantage: Country can supply a product more efficiently and at lower cost than it can supply other goods, compared with other countries Example: India's combination of a highly educated workforce and low wage scale in software development Few countries can produce all the goods and services needed by its people. Trading has been the way that countries have met demand. A country should focus on what it produces best, so that it can export surplus domestic output and buy foreign products it cannot produce as efficiently The sale of a particular item overseas depends largely on whether the country has an absolute or comparative advantage

Size of International Marketplace

As developing nations expand into the global marketplace, opportunities grow Many developing countries have posted high growth rates of annual GDP United States China India Companies are attracted to international markets by the sheer size of the global marketplace. Only one in six of the world's more than 7 billion people live in a well-developed marketplace. Developing nations continue to expand their involvement in global business, so the potential to reach new customers increases

Why Nations Trade

As domestic markets mature, so does economic growth As sales slow, companies can expand their markets in other nations Companies can seek growth opportunities in other nations More efficient production systems Less reliance on the economies of home nations Exports: Domestically produced goods and services sold in other countries Imports: Foreign-made products and services purchased by domestic consumers International trade is beneficial for the economy and individual businesses because it boosts economic growth and provides expansion opportunities in other nations. It also creates less reliance on the economies of a home market while spreading risk. Importing and exporting are the most common ways in which businesses act globally, but there are other investments that businesses can make globally that will be discussed later in the lecture.

Product Layout

Assembly line Product layout sets up production equipment along a product-flow line, and the work in process moves along this line past workstations. Efficiently produces large numbers of similar items

Committee Organizations

Authority and responsibility are in the hands of a group of individuals. Often part of a line-and-staff structure. Often develop new products. Tend to act slowly and conservatively. Often make decisions by compromising conflicting interests rather than choosing best alternative. A committee structure empowers all of the members instead of a single manager. Some committees act slowly and conservatively. Some committees include a diverse group of employees from across the company with different skills and expertise.

Ethical Awareness

Awareness is the foundation of an ethical climate Ethical dilemmas will occur Help employees identify ethical problems Give employees guidance to respond A code of conduct is a way to provide support A formal statement Defines how the organization expects employees to resolve ethical questions Ethical awareness helps employees identify ethical problems when they occur and gives them guidance to respond. A code of conduct is a formal statement which defines how an organization expects employees to resolve ethical questions

Flexible Benefits

Benefits plans must be tailored to the needs of a diverse employee base Employees can choose from a wide range of options for medical, dental, vision, life, disability, etc. Flexible benefit plans are also known as cafeteria plans Each employee receives a set allowance (flex dollars or credits) to pay for benefits to match needs. Many companies have flexible time-off policies such as PTO or Paid-time-off Because the workplace has become more diverse, human resource managers are developing creative ways to tailor their benefits to the varying needs of employees. With a set allowance, employees can choose benefits to match their needs. Employees can choose from a wide variety range of options for medical, dental, vision, life, disability, and so on. Another way of increasing the flexibility of benefits at work is through PTO or paid time off. This includes a bank of paid time off which employees can use from their PTO account.

Flexible Work

Benefits that allow employees to adjust their working hours or place of work Flextime Compressed workweek Job-sharing Home-based work (telecommuting) Results is reduced turnover and absenteeism Critical in attracting and retaining talent Flextime - work hours within certain parameters Compressed workweek - employees work longer hours on fewer days Job-sharing program - two or more employees divide the tasks of one job Telecommuters - connected to an employer via the Internet, voice and mobile-devices (working from home)

Bonds

Bondholders are creditors of a corporation. By selling bonds, a firm obtains long-term debt capital. Bondholders are creditors; they have a claim on the firm's assets. Bonds are issued in various denominations, or face values, usually between $1,000 and $25,000. Government bonds - Bonds sold by the U.S. Department of the Treasury Municipal bonds - Bonds issued by state or local government (Revenue bonds are used toward a project that will produce revenue, General obligation bond proceeds pay for a project that will not produce any revenue) Corporate Bonds - A diverse group which varies based upon collateral, and can be secured with collateral or unsecured (no collateral)

Concern for Ethical and Societal Issues

Business Ethics The standards of conduct and moral values governing work actions and decisions Social Responsibility How a business decision impacts the environment, employees, and customers Enhancement of society's welfare through philosophies, policies, procedures, and actions Balance between what is right and what is profitable in a given situation Firms have many responsibilities—to customers, to employees, to investors, and to society as a whole Often no clear-cut choices Business ethics are often shaped by the organization's ethical climate Codes of conduct Ethical standards Doing the right things should be supported and applauded Highlight the difference between social responsibility (whose primary objective is the enhancement of society's welfare through philosophies, policies, procedures, and actions) and business ethics. Businesses must balance between doing what is right and what is profitable.

Business's Social Responsibilities

Businesses must balance their responsibility in all four areas, and these four areas require multiple areas of focus, including its relationship to the general public, to customers, to investors and the financial community, and to employees

Top 10 U.S. Trading Partners

Canada China Mexico Japan Germany South Korea United Kingdom France Saudi Arabia Brazil

Planning the Production Process

Choose what goods or services to offer in order to satisfy customers. Other decisions include: machinery purchases, pricing decisions, and selection of retail outlets Convert original product ideas into final specifications Design the most efficient facilities to produce those products.

Commercial Banks

Commercial Banks - offer a wide range of checking and savings accounts, loans, credit cards, securities and insurance Largest and most important financial institution in the United States Approximately 6,800 commercial banks hold assets of $14 trillion Due to bank mergers, today's commercial bank is five times as large as it was a decade ago

Components and Types of Information Systems

Computer-based information systems consist of four components and technologies: computer hardware, computer software, telecommunications and computer networks and data resource management. Databases are a centralized collection of data, at the heart of any information system. Databases are electronic filing systems, and they are specific to a business's operations.

Common Business Ethical Challenges

Conflict of Interest: Situation in which an action benefiting one person or groupcan potentially harm another. Honesty and Integrity: Telling the truth and adhering to deeply felt ethical principles in business situations. Loyalty versus Truth: Employees are expected to be loyal, and to act in the best interests of the company, but an ethical conflict can arise when the truth about a company is not favorable. Whistle-blowing: Employee's disclosure of illegal, immoral, or unethical practices in the organization.

Countertrade and Franchising

Countertrade - international transactions that do not involve currency payments but use bartering. Franchising - a contractual agreement in which a local entity gains rights to sell the franchisor's product in the foreign market. Franchise 500 list from Entrepreneur magazine Foreign licensing agreement - allows a firm to produce or sell its product, use its trademark, patent or manufacturing process. Subcontracting - involves hiring local firms to distribute, produce, or sell goods and services. After import/export, the next level of involvement, with increased risk, is countertrade, franchising, and foreign licensing. Countertrade is a system of international bartering agreements. Contractual agreements include franchising, foreign licensing, and subcontracting, and companies should be very clear regarding contractual agreements with local parties. A franchise is a contractual agreement in which a wholesaler or retailer (the franchisee) gains the right to sell the franchisor's products under that company's brand name if it agrees to the related operating requirements. The franchisee can also receive training, marketing, management and business services from the franchisor. These arrangement are common among leading fast-food brands. Foreign licensing allows another firm to produce or sell its product, or use is trademark, patent or manufacturing process in a specific geographic area. Franchising globally has the same basics as franchising in the U.S. Franchising is another key reason to understand international contractual agreements.

Additional Steps in the Strategic Planning Process

Creating strategies for competitive differentiation - this involves the different ways a firm differentiates itself from competitors Implementing the strategy - once the four phases of the strategic planning process are complete, managers are ready to put those plans into action. Monitoring and adapting strategic plans - when performance fails to meet goals. Secure feedback, compare actual against forecasts, survey, listen to feedback from customers, interview employees, and so on.

Exchange Rates

Currency Rates are influenced by Domestic economic and political conditions Central bank intervention Balance-of-payments position Speculation over future currency values Values fluctuate, or "float," depending on supply and demand National governments can deliberately influence exchange rates The exchange rate is the value of one nation's currency compared with the currencies of other nations. The Euro, Yen, and Dollar are easily converted currencies or "hard currencies." Foreign currency is the world's biggest market. Some governments take steps to devalue their currency, which is a process of dropping the value relative to other currencies. Currency rates and changes are a large part of doing business globally. Click on the link to see up-to-date currency exchange rates.

Current Ethical Environment

Current environment includes ethical compliance officers Companies adopt a three-pronged approach to ethics and social responsibility Corporate philanthropy Anticipating and managing risks Identifying opportunities to create value by doing the right thing

Customer Oriented Layout

Customer-oriented layout arranges facilities to enhance the interactions between customers and a service. Service organizations must also decide upon appropriate layouts for their production processes. Banks, libraries, dental offices, hair salons, and universities use a form of process layouts but high-interaction processes in the service industry are commonly called customer-oriented layouts. If you consider patients to be inputs, then a hospital implements a form of the process layout.

Data, Information, and Information Systems

Data - raw facts and figures Information - knowledge gained from processing data Information system - organized method for collecting, storing, and communicating information on operations Chief information officer (CIO) - executive responsible for directing information systems and operations The CIO traditionally reports directly to the CEO.

Managers as Decision Makers

Decision making is the process of recognizing a problem or opportunity, evaluating alternative solutions, selecting and implementing an alternative, and assessing the results. Programmed decision involves simple, common problems with predetermined solutions. Nonprogrammed decision involves a complex, unique problem or opportunity with important consequences for the organization.

International Sources of Factors of Production

Decisions to operate abroad depend upon: Availability, price, and quality of labor Natural resources Entrepreneurship Capital Doing business overseas spreads risk Different nations at various stages of business cycle or development spreads risk If demand falls off in one country, it may enjoy strong demand in another Trading with other countries allows a company to spread risk - if demand falls off in one country, the company may still enjoy strong demand in another. Companies can spread their investment risk by "going global." Businesses are looking globally for factors of production as well as labor and customers.

Going Global

Determining which foreign markets to enter Analyzing the expenditures required to enter a new market Deciding the best way to organize overseas operations Good starting point for research: CIA World Factbook Expanding into overseas markets can increase profits and marketing opportunities, but it also introduces complexities to a firm's operations

Chapter 14: Using Technology to Manage Information

Distinguish between data, information, and information systems. List the components and types of information systems. Discuss the security and ethical issues affecting information systems. Explain disaster recovery and backup.

Downsizing and Outsourcing

Downsizing is the hard choice of eliminating jobs (reducing employees) due mainly to cut costs Can be accomplished with early retirement plans or voluntary severance programs Downsizing can have negative effects Outsourcing - another way to create a leaner organization by transferring jobs from inside a firm to the outside. Types of jobs outsourced: office maintenance, security, data processing, manufacturing, design.

Security Issues (Info Systems)

E-Crime Computer Viruses Worms Trojan Horses Spyware Common e-crimes include changing data to create misleading information and modifying computer programs to create false or illegal transactions or to access computer systems for their own benefit or knowledge. Individuals, businesses, and organizations are vulnerable to computer crime. Another threat for organizations is the potential theft of computer hardware. Malware are malicious software programs designed to infect computer systems. Viruses are programs that secretly attach themselves to other programs and change or destroy them. A worm is a small piece of software that exploits a security hole and replicates itself. A trojan horse is a program that claims to do one thing but does something different. It might claim to be a game and then erases your hard drive. Spyware is software that secretly gathers user information for advertising purposes. Once spyware is installed, it monitors the user's activity.

Ethical Leadership

Executives must demonstrate ethical behavior in their actions Use clear, explicit language Encourage behavior that generates and fosters values Practice moral absolutism Without a framework of ethics, damage can impact shareholders Stakeholders include customers, investors, employees, and the public Ethics becomes a core part of an organization when executives model ethical behavior and honest corrective action when necessary. "Maverick" ethical leaders follow a moral code with three characteristics. Ethical leadership should go further and charge each employee at every level with the responsibility to be an ethical leader.

Expectancy Theory and Equity Theory

Expectancy theory describes the process people use to evaluate the likelihood that their efforts will yield wanted results, and the degree to which the results are desired. Equity theory is an individual's perception of fair and equitable treatment in terms of effort and rewards. Victor Vroom developed the expectancy theory. The theory is simplistic - a person's motivation can be affected by what he or she expects. The equity theory focuses on fair and equitable treatment, as all employees want to be treated fairly. Equity theory is an individual's perception of fair and equitable treatment in terms of effort and rewards. see pg. 233-4

Ethical Action

Firms must allow structures and approaches Structure allow decisions to be turned into ethical actions Set realistic goals An employee hotline with ethics officers can provide advice Ethics happen when employees make ethical decisions. Firms must allow structures and approaches that allow decisions to be turned into ethical actions. Texas Instruments provides its employees with questions on a reference card: Is the action legal? Does it comply with our values? If you do it, will you feel bad? How will it look in the newspaper? If you know its wrong, don't do it! If you're not sure, ask Keep asking until you get an answer

Organizations Promoting Trade

General Agreement on Tariffs and Trade (GATT) Most industrialized nations found organization in 1947 to reduce tariffs and relax quotas The World Trade Organization succeeded GATT Representatives from 153 countries Reduce tariffs and promote trade World Bank Funds projects to build and expand infrastructure in developing countries International Monetary Fund (IMF) Operates as lender to troubled nations in an effort to promote trade

The Contemporary Ethical Environment

High-profile investigations and arrests in headlines Corporate Social Responsibility Benefits Consumers Investors The environment The companies themselves The vast majority of businesses are ethical New corporate officers charged with deterring wrongdoing and ensuring ethical standards Access Coca-Cola's Global Sustainability Report Business ethics continues to be pervasive in the media. Gaining the trust of the general public as a company is work. Corporate social responsibility benefits include consumers, investors, the environment, the companies themselves Coca-Cola's sustainability report highlights the company's goals related to women, water, and well-being. Despite the lack of ethics by some companies, many have maintained enduring companies without breaking the rules. Johnson & Johnson, (next slide), is a company with a well known basic code of ethics in place for more than 70 years. (The credo is the ethical standard against which the employees evaluate how well their firm is performing)

Multinational Corporations

ICBC China Construction Bank JP Morgan Chase General Electric Exxon Mobil HSBC Holdings Royal Dutch Shell Agriculture Bank of China Berkshire Hathaway PetroChina

Individuals Make a Difference

Individuals can make the difference in the ethical environment of an organization Ethical behavior is identified as: Putting one's own interest ahead of the organization Lying to employees Misrepresenting hours Safety violations Internet abuse Technology has expanded unethical behavior All employees face ethical dilemmas

Development of Individual Ethics

Individuals develop ethical standards in the three stages Preconventional (own interests) Conventional (group interests) Postconventional (personal principles to solve ethical dilemma)

Economic Differences

Infrastructure: Basic systems of communication, transportation, energy facilities, and financial systems. Currency Conversion and Shifts: Fluctuating values can make pricing in local currencies difficult and affect decisions about market desirability and investment opportunities. Devalued currency can make a market less attractive for exports but more attractive for investments because payment in local currency is a relative bargain. Furthermore, poor roads and limited access to the Internet can cause problems with shipping and communication. In the U.S., buyers have significant access to many forms of payment processing, including online, electric, credit and debit cards. Foreign currency fluctuations present pricing issues and even more widespread business decisions such as production and/or manufacturing location(s). Financial systems also provide a type of infrastructure for businesses and affect commerce. Do buyers have widespread access to checks, credit cards, and debit cards, as well as electronic systems for processing payments? Implicit economic differences can cause huge problems.

ISO Standards

International Organization for Standardization (ISO)- mission is to promote the development of standardized products to facilitate trade and cooperation across national borders. Representatives from more than 146 nations. ISO 9000 series of standards sets requirements for quality processes. Nearly half a million ISO 9000 certificates have been awarded to companies around the world. ISO 14000 series also sets standards for operations that minimize harm to the environment.

International Economic Communities

International economic communities promote regional economic integration. Countries may establish a free trade area in which they trade freely among themselves without tariffs or trade restrictions Each maintains its own tariffs for trade outside the area. In a common market, or economic union, members go beyond a customs union and try to bring all their trade rules into agreement. International economic communities include: NAFTA CAFTA European Union North American Free Trade Agreement (NAFTA) World's largest free-trade zone: United States, Canada, and Mexico U.S. and Canada are each other's biggest trading partners Central America-Dominican Republic Free Trade Agreement (CAFTA) Free-trade zone among U.S., Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua $33 billion traded annually between U.S. and these countries European Union Best known example of a common market Goals include promoting economic and social progress, introducing European citizenship as complement to national citizenship, and giving EU a significant role in international affairs

Social and Cultural Differences

Language: Potential problems include mistranslation, inappropriate messaging, lack of understanding of local customs, and differences in taste. Values and Religious Attitudes: Differing values about business efficiency, employment levels, importance of regional differences, and religious practices, holidays, and values about issues such as interest-bearing loans.

Managers as Leaders

Leadership is the ability to direct or inspire people to attain certain goals. Three traits are common among many leaders: Empathy Self-awareness Objectivity in dealing with others Leadership involves the use of influence or power from the following sources: A leader's position in the company A leader's experience and expertise A leader's personality

Types of Organizational Structures

Line Organization Oldest and simplest form; direct flow of authority from CEO to subordinates Chain of command indicates who directs which activities and who reports to whom. Line-and-Staff Organizations Combines line departments and staff departments Line departments participate directly in decisions that affect the core operations of the organization Staff departments lend specialized technical support Organizations with staff functions have departments/employees that support line departments. Staff may include legal, marketing, or human resource support to an organization.

The Financial System

Made up of households, businesses, government, financial institutions, and financial markets The process by which money flows from savers to users Some individuals and businesses (savers) have incomes greater than expenditures and invest to earn rate of return from their savings Businesses (users) in need of capital might turn to a lender The financial system is one in which businesses, governments, and individuals participate. Some individuals and businesses have excess income, so they invest the additional funds to earn a rate of return. Businesses in need of capital for inventory, for example, may borrow those funds from a lender. This is an example of a typical transaction that makes up the financial system.

Implementing the Production Plan

Make, Buy, or Lease Decision Choosing whether to manufacture a needed product or component in-house, purchase, or lease. Decision factors: cost, supplier availability, duration of supply needs, and confidentiality. Selection of Suppliers Choosing the best vendors by comparing quality, pricing, delivery reliability, and services. Inventory Control Balancing stock-on-hand against carrying costs. Just-in-Time Systems Providing the right part, at the right place, at the right time. Materials Requirement Planning Computer-based production planning system to track parts and materials needed for production There are two important types of inventory: ] Perpetual inventory: Systems continuously monitor the amounts and locations of stocks.  Vendor-managed inventory: Inventory control functions handed over to suppliers. Just-in-time systems allow managers to reduce the amount of inventory on hand. These systems can save money for an operation but they require effective communication and management to work well. Materials requirement planning aids in managing the purchase and planning of materials required for production. These systems can be key in keeping the cost of inventory down.

Structure of an Ethical Environment

Most ethical lapses in business reflect the values of the firms' corporate cultures. Developing a corporate culture to support business ethics happens on four levels: (pyramid) Ethical awareness Ethical education Ethical action Ethical leadership

Disaster Recovery and Backup

Natural Disasters Power Failures Equipment Malfunctions Software Glitches Human Error Terrorist Attacks The most basic precaution- backup Disaster can cause organizations billions of dollars. Many companies run their entire business using technology. Disaster recovery plans are imperative- they outline how to prevent system failures and continue operations if computer systems fail. Many organizations conduct off-site data storage.

Responsibilities to Investors and the Financial Community

Obligation to make profits for shareholders Expectation of ethical and moral behavior Protection of investors by the Securities and Exchange Commission and state regulations

Types of Information Systems

Operational Support Systems Transaction Processing System Process Control System Management Support Systems Management Information System (MIS) Decision Support System (DSS) Executive Support System (ESS) Operational support systems are designed to produce a variety of information on an organization's activities for both internal and external users. Transaction processing systems record and process data. Process control systems monitor and control physical processes. Management support systems aid in making effective decisions. Management information systems produce reports for managers. A decision support system provides support to businesspeople during the decision-making process. An executive support system lets senior executives access the firm's databases and combines relevant data and details to support decisions and operations.

Managerial Functions

Planning: Process of anticipating future events and conditions and determining courses of action for achieving organizational objectives. Organizing: Blending human and material resources through a formal structure of authority. Directing: Guiding and motivating employees to accomplish organizational objectives. Controlling: Evaluating an organization's performance to determine whether it is accomplishing its objectives. Establish performance standards. Monitor actual performance. Compare actual performance with established standards. Take corrective action if required. Managers must make plans for the company. They must organize workers and resources. They must also lead and direct the actions of employees. Finally, managers must constantly check on the progress of plans, employees, and other goals. Controlling requires four steps: establishing performance, monitoring the performance, comparing the performance to the standard, and then taking corrective action.

Political and Legal Differences

Political Climate Stability is key consideration Legal Environment U.S. Law International regulations Country's law Climate of corruption Foreign Corrupt Practices Act forbids U.S. companies from bribing foreign officials, candidates, or government representatives International Regulations Treaties between U.S. and other nations. Tariffs are taxes charged on imported goods. Enforcement problems, as with piracy. In some cases like counterfeits and intellectual property, the enforcement of international regulations along with the climate of corruption can be key issues for doing business abroad. The U.S. has many trade agreements and is a member of the World Trade Organization (WTO) in an effort to support and promote trade. (Click on the Foreign Corrupt Practices Act to go to the website for more detail.) The growth of online business has introduced new elements to the legal climate of international business. Patents, brand names, trademarks, copyrights, and other intellectual property are difficult to police.

Departmentalization

Process of dividing work activities into units within the organization Product departmentalization: organized based on the goods and services a company offers. Geographical departmentalization: organized by geographical regions within a country or, for a multinational firm, by region throughout the world. Customer departmentalization: organized by the different types of customers the organization serves Functional departmentalization: organized by business functions such as finance, marketing, human resources, and production. Process departmentalization: organized by work processes necessary to complete production of goods or services

Controlling the Production Process

Production control creates a well-defined set of procedures for coordinating people, materials, and machinery for production efficiency. A five-step process: Planning Routing Scheduling Dispatching Follow-up Production control creates a well-defined set of procedures for coordinated people, materials, and machinery to provide maximum production efficiency. The number of workers, raw materials, parts, and machines the plant needs to meet a production schedule are determined based upon output requirements (units). Production planning determines the amount of resources an organization needs to produce a certain output. Routing determines the sequence of work throughout the facility and specifies who will perform each aspect of the work at what location. Scheduling - managers develop timetables that specify how long each operation in the production process takes for workers. This scheduling includes using PERT and GANTT diagrams. Dispatching is the phase of production control process where the manager dictates who will do what and the time allotted. Follow-up is the point where managers spot problems in the production process and determine needed changes.

Strategic Importance of Production

Production is a vital business activity and function necessary for generating money to pay employees, lenders, and stockholders. Effective production and operations management can: Lower a firm's production costs Boost the quality of its goods and services Allow it to respond dependably to customer demands Enable it to renew itself by providing new products Along with marketing and finance, the production process is a vital business activity to any company or nonprofit. Effective and efficient production processes increase quality, meet customer demands, provide new products, and lower a firm's production costs.

Objectives of HR Managers

Providing qualified, well-trained employees for the organization Maximizing employee effectiveness in the organization Satisfying individual employee needs through monetary compensation, benefits, opportunities to advance, and job satisfaction

Responsibilities to the General Public

Public Health Issues Dangerous products Protecting the Environment Using resources efficiently Developing a quality workforce Education and diversity initiatives Corporate philanthropy Contributions and volunteer efforts

The Importance of Quality

Quality - goods and services free of deficiencies Fixing, replacing, redesigning deficient products is costly. The costs of poor quality can equal 20 percent of revenues. Benchmarking - A process used by companies to ensure high quality products are produced Involves determining how well other companies perform business functions and tasks

Quality Control

Quality control is measuring goods and services against established quality standards. Six Sigma concept A company tries to make error-free products 99.9997% of the time, a tiny 3.4 errors per million opportunities. Quality control involves measuring output against established quality standards. Such checks are crucial to spotting defects and to avoid delivering defective products to customers. Quality standards should be set high. Quality can be managed through visual inspection, electronic sensors, robots, and X-rays. In addition, surveys can provide quality-control information in services. Quality is the goal of a good production process. The lack of quality can cost a company revenue. All companies must measure and control quality. Companies like General Electric, Heinz, 3M, Sears, and the U.S. Military are among the organizations that use the Six Sigma concept to reduce the number of defective products.

Levels of Involvement

Risk increases with the level of involvement Many companies employ multiple strategies Exporting and important are entry-level strategies Importing is the process of bringing in goods produced abroad Exporting is the act of selling your goods overseas

Human Resource Management

Role: To achieve a high level of job satisfaction and dedication among employees Attracts, develops, and retains employees to perform the jobs necessary to accomplish organizational objectives Responsibilities: Plan for staffing needs Recruit and hire workers Provide for training and evaluate performance Determine compensation and benefits Oversee employee separation

Acting Responsibly to Satisfy Society

Social Responsibility Equal value in considering profit, consumer satisfaction, and societal well-being Concerns with qualitative dimensions and traditional quantitative measures A firm's social performance is measured through a social audit, and by: Equal employment opportunities Cultural diversity Environmental concerns Safe and healthy workplace Charitable contributions and community service Although profits and employment remain important, today many factors contribute to an assessment of a firm's social performance, including providing equal employment opportunities; respecting the cultural diversity of employees; responding to environmental concerns; providing a safe, healthy workplace; and producing high-quality products that are safe to use. This encompasses the issue of social responsibility, or management's acceptance of the obligation of management to consider more than just profits.

Barriers to International Trade

Social and cultural barriers Economic barriers Legal and political barriers Free markets

Typical Production Systems

Sometimes the production process results in a tangible good like a car or an intangible service such as cable television, which also converts inputs into outputs. Every organization has its own inputs, transformation process, and outputs. The raw materials and assembly process differ greatly based on the output that the business produces. see pg. 274

Understanding Stock Markets

Stock markets, or exchanges, are the best known of the world's financial markets In these markets, shares are bought and sold by investors. The New York Stock Exchange (NYSE) and the NASDAQ , the two largest stock markets in the world, are in the United States. The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks on the NYSE and NASDAQ.

Minimum Compliance

Table 2.1 Provides an overview of the requirements of programs created by the federal government. The federal government created the U.S. Sentencing Commission to institutionalize ethics compliance programs that would establish high ethical standards and end corporate misconduct.

Types of Trade Restrictions

Tariffs - taxes surcharges, or duties on foreign products Tariffs generate income for the government Protective tariffs raise prices of imported goods to level the playing field for domestic competitors Nontariff Barriers - also called administrative trade barriers Quotas limit the amount of a product that can be imported over a specified time period. Dumping is the act of selling a product abroad at a very low price. An embargo Exchange controls imposes a total ban on importing a specified product. Exchange controls through central banks or government agencies regulate the buying and selling of currency to shape foreign exchange in accordance with national policy. Trade restrictions take the form of taxes on imports and complicated administrative procedures which create additional barriers to international business. They may limit consumer choice while increasing the costs of foreign-made products. Trade restrictions are imposed to protect citizen's security, health, and jobs. Other restrictions are imposed to promote trade with certain countries. As a member of a trade organization like WTO, however, countries agree to reduce and restrict barriers. There are two types of trade restrictions: Tariffs and Nontariff.

Skills Needed for Management Success

Technical Skills Manager's ability to understand and use the techniques, knowledge, tools, and equipment of a specific discipline or department. Human Skills Interpersonal skills that enable a manager to work effectively with and through people. Conceptual Skills Ability to see the organization as a unified whole and to understand how each part of the overall organization interacts with other parts.

Stock Exchanges

The New York Stock Exchange founded in 1792 one of the oldest and biggest stock exchanges in the world 2,800 companies are listed on the NYSE NASDAQ - National Association of Securities Dealers Automated Quotation Over 5,000 stocks are listed on the NASDAQ World's largest intranet Other U.S. Stock Markets: The American Stock Exchange, Regional Stock exchanges, and foreign markets AMEX focuses on smaller firms and options. Regional exchanges exist in Chicago, Boston, Cincinnati, and Philadelphia. Other stock markets exist all over the world. The London Stock Exchange is one of the largest outside the United States. There are foreign stock exchanges worldwide, which exist in most developed countries.

Regulation of the Financial System

The financial system is subject to government regulation and oversight Banks are heavily regulated to ensure public confidence in the banking system Government regulation of the financial markets is performed through the Securities and Exchange Commission (SEC) Dodd-Frank Wall Street Reform and Consumer Protection Act Industry Self-Regulation by professional organizations and market surveillance Regulation of the U.S. financial markets is primarily a function of the federal government. The U.S. Securities and Exchange Commission oversees the securities market. A big area the SEC monitors is insider trading: the use of material nonpublic information to make investment profits. Professional organizations have their own rules of conduct for members. Security markets have different methods to spot possible violations. NYSE monitors trading activity with a tool called Stock Watch that flags unusual price and volume.

Responsibilities to Customers

The public demands that a company considers the wants and needs of its customers in making decisions Consumers have certain rights, as follows: The right to be safe The right to be informed The right to choose The right to be heard

Offshoring and Direct Investment

The relocation of business processes to a lower-cost overseas location is offshoring Not initiating business but gaining cost savings Extremely controversial The ultimate level of global involvement is international direct investment Directly operating production and marketing in foreign country Acquisition Joint Venture Overseas Division

Reducing Barriers to International Trade

The world is moving toward more free trade Many communities and groups monitor and promote free trade International Economic Communities reduce trade barriers and promote regional economic cooperation Free-trade area: Members trade freely among selves without tariffs or trade restrictions Customers union: Establishes a uniform tariff structure for members' trade with nonmembers. Common market: Members bring all trade rules into agreement

Measuring Trade Between Nations

To understand the measurement of inflows and outflows, the concepts of balance of trade and balance of payments are introduced. Balance of Trade: Difference between a nation's imports and exports Balance of Trade Surplus: When a country exports more than it imports Balance of Trade Deficit: When a country imports more than it exports Balance of payments: Overall flow of money into or out of a country Balance of payments surplus: more money has moved into a country than out of it Balance of payments deficit: more money has moved out of a country than into it A trade deficit may help during an economic expansion. The balance of trade can be misunderstood as an indicator of the health of the economy. During a recession, countries like to export more to create jobs and demand. During an expansion, on the other hand, countries like to import more, providing price competition, limiting inflation and providing goods to meet supply. The measurement of trade allows nations to review the inflows and outflows of trade. Balance of trade determines the balance of payments. Other factors also affect the balance of payments, including overseas loans and borrowing, international investments, profits from such investments, and foreign aid payments.

Sarbanes Oxley Act

Today's contemporary ethical environment includes stricter oversight of companies The Sarbanes-Oxley Act of 2002 was established in response to the Enron Corporation scandal, along with others from 2000 on. New rules and regulations were created for securities trading and accounting practices, as outlined. A 2002 law that added oversight for the nation's major companies Includes a special oversight board to regulate public accounting firms that audit the financial records of these corporations New rules and regulations for securities trading and accounting practices Companies are required to publish a code of ethics Development of ethical compliance programs Provides safeguards for whistleblowers

Government Corruption

Transparency International produces an annual corruption index for businesspeople and the general public Top ranking countries (least corrupt): Denmark New Zealand Finland Sweden Norway

Information Systems and Ethics

Use of information systems by employees and vendors Personal use Privacy Organizational use of information Employment records Employee monitoring Customer data Many organizations have specific ethical standards and policies regarding the use of information systems by employees and vendors. There are also policies to protect security and privacy confidentiality. Monitoring employees and access to employment records are also ethical issues affecting information systems.

Responsibilities to Employees

Workplace Safety Quality-of-Life Issues Ensuring Equal Opportunity on the Job Age Discrimination Sexual harassment and sexism

Gantt Chart and PERT Diagram

see pg. 290-1 Production managers use a variety of analytical methods and tools to schedule work. One of the oldest methods, the Gantt Chart, tracks projected and actual work progress over time. Gantt Charts are more effective for scheduling relatively simple projects. Gantt charts show at a glance the status of a particular project. A more complex project might require a PERT chart -- Program Evaluation and Review Technique. These diagrams seek to minimize delays by coordinating all aspects of the production process. They outline a critical path to identify to managers the sequence of operations with the longest time for completion. The gold line is called the critical path, or the sequence of operations that requires the longest time for completion. A PERT chart shows how long it will take to complete a project.

Types of Bonds

see pg. 464

Chapter 7: Management, Leadership, and the Internal Organization

1. Define management and the three types of skills necessary for managerial success. 2. Explain the role of vision and ethical standards in business success. 3. Summarize the benefits of planning and distinguish strategic, tactical, and operational planning. 4. Describe the strategic planning process. 5. Contrast the types of business decisions and list the steps in the decision-making process. 6. Define leadership and compare different styles of leadership. 7. Discuss the meaning and importance of corporate culture. 8. Identify the five major forms of departmentalization and four main types of organization structures.

Chapter 8: Human Resource Management: From Recruitment to Labor Relations

1. Explain the role of human resources: the people behind the people. 2. Describe recruitment and selection. 3. Discuss orientation, training, and evaluation. 4. Describe compensation. 5. Discuss employee separation. 6. Explain the different methods for motivating employees.

Chapter 10: Production and Operations Management

1. Explain the strategic importance of production. 2. Identify and describe the production processes. 3. Explain the role of technology in the production process. 4. Identify the factors involved in a location decision. 5. Explain the job of production managers. 6. Discuss controlling the production process. 7. Determine the importance of quality.

How Managers Make Decisions

1. Recognize problem/opportunity 2. Develop alternative courses of action. 3. Evaluate alternatives. 4. Select and implement chosen alternative. 5. Follow up to determine effectiveness of decision.

Organization of the Federal Reserve

12 Federal reserve districts, each with its own district bank Each district supplies its banks with currency and clears checks District banks are run by a nine-member board of directors headed by a president The Board of Governors is the governing body of the Federal Reserve Bank - consisting of 7 members, a chair and a vice chair appointed by the president Federal Open Markets Committee (FOMC) consists of 12 members and sets most policies concerning monetary policy and interest rates The board of governors has seven members. Members are appointed by the president and confirmed by the Senate. A full term is 14 years. The chair of the board of governors is jokingly said to be the second most powerful person in the nation. The duties of the open markets committee sets monetary and interest rates which drive and focus the overall economy.

Setting a Vision

A vision is a founder's perception of marketplace needs and the methods an organization can use to satisfy them. Vision serves as the target for a firm's actions Vision helps direct the company toward opportunities Vision differentiates a company from its competitors A vision must be focused yet adaptable to changes in the business environment.

Financial Institutions

An intermediary efficiently transferring funds between savers and borrowers Without financial institutions, prospective borrowers would have to negotiate terms with each saver individually Classified as: Depository Institutions - commercial banks that accept deposits that customers can withdraw on demand Nondepository Institutions - life insurance companies, mutual funds, and pension funds Financial institutions are one of the most important components of the financial system. They serve as the intermediary between savers and borrowers. Funds are collected from savers and loaned to individuals, businesses, and government. Banks make money by pooling together the funds from savings, checking, and other services -- and then lending most of the funds out in loans. Banks make money mostly from the interest they collect. Borrowers pay competitive rates by using a financial institution like a bank.

Production Processes

Analytic Production System Reduces a raw material to its component parts in order to extract one or more marketable products. Synthetic production system Is the reverse of an analytic system. It combines a number of raw materials or parts or transforms raw materials to produce finished products. An intermittent production process Generates products in short production runs, shutting down machines frequently or changing their configurations to produce different products. The production process to make an iPad and a gallon of gasoline are very different. A continuous production process generates finished products over a lengthy period of time (steel industry blast furnaces never completely shut down except for malfunctions).

The Role of the Federal Reserve

Created in 1913 -- called "The Fed" for short Central bank of the United States Regulates commercial banks Acts as the bankers' bank for members Performs banking-related activities for the U.S. Department of Treasury Sets monetary policy Provides wire transfer facilities, clears checks, replaces worn out currency, lends banks money Not all banks belong to the Fed, but banks with federal charters are required to belong to the Fed. Large banks are all federally chartered. The Fed regulates commercial banks, acts as the bankers' bank for members, performs banking-related activities for the U.S. Department of Treasury and sets monetary policy. The Federal Reserve also provides wire transfer facilities, clears checks, replaces worn out currency, and lends banks money.

Delegating Work Assignments

Delegation - assigning work activities to subordinates Providing employees with the responsibility and the necessary authority Employees have accountability, or responsibility for the results of the way they perform their assignments. Authority and responsibility move down Accountability moves up Span of management is the number of subordinates, or direct reports, a supervisor manages. Centralization: decision making is retained at the top of the management hierarchy. Decentralization: decision making is located at the lower levels. Many firms believe it enhances their flexibility and responsiveness to customer needs.

Top Management

Develop long-range strategic plans for the organization. Inspire executives and employees to achieve their vision for the company's future. Intense and demanding which includes key executives: CEO, CFO, and Executive Vice President. Decisions include new product introduction, acquisitions, and entering new geographic markets.

Motivating Employees

Employers look for ways to motivate employees to perform at their peak Motivation begins with high employee morale - a positive attitude towards the job High morale - good management and the ability to understand human needs Low morale - a poor relationship between managers and employees Managers use extrinsic (pay, benefits, praise) and intrinsic (pride/achievement) rewards to motivate Employers are constantly looking for ways to motivate employees in order to have employees perform at their peak, and to meet company goals. High morale generally results from good management, including an understanding of human needs and an effort to satisfy those needs in ways that move the company forward. When employees feel valued and empowered, they perform better. Managers use extrinsic and intrinsic rewards to motivate employees: Extrinsic - rewards external to the work itself, including pay, benefits, and praise. Intrinsic - feelings related to job performance, such as meeting a goal or deadline or feeling proud.

Federal Deposit Insurance Corporation

Enacted by the Banking Act of 1933 to restore public confidence in the banking system Commercial bank deposits are insured by a federal agency, the FDIC If a bank fails, insured depositors are paid up to $250,000 Runs were common before deposit insurance A run occurs when many people attempt to withdraw money from a bank all at once Commercial bank deposits up to a set amount are insured by the Federal Deposit Insurance Corporation. The amount of coverage has increased since the financial crisis of 2007. The FDIC is an important consumer protection to maintain confidence in the financial markets. Deposit insurance shifts the risk of bank failures from individual depositors to the FDIC.

Setting Ethical Standards

Ethical standards are critical to a firm's relationships with: customers suppliers the general public Ethical standards are set in compliance with: industry regulations federal regulations New standards are set in response to unethical actions by managers (Sarbanes-Oxley) The ethical tone set by top management can encourage, motivate and inspire employees Taking an ethical stand as Google did with censorship in China can cost a company revenues.

Understanding the Financial System

Financial System Savers Those with surplus funds Users Spending needs exceed income to create deficit Financial Institutions Financial Markets

Middle Management

Focus on specific operations, products, or customer groups within an organization Responsible for developing detailed plans and procedures to implement the firm's strategic plans. includes positions such as general manager, plant managers, division managers, and unit managers.

Herzberg's Two-Factor Model of Motivation

Frederick Herzberg, a social psychologist and consultant, offers another theory and tool for managers to think about. Herzberg surveyed workers to find out when they felt good or bad about their jobs. He learned that certain factors, hygiene or maintenance factors, were important to job satisfaction though they might not contribute to motivation. Hygiene factors, such as job environment, salary, job security, and so on, refer to aspects of work that are not directly related to a task itself but instead related to the job environment. Motivator factors, such as achievement, recognition, advancement, and the job itself, relate to the specific aspects of a job, can produce high levels of motivation when they are present. Herzberg's theory emphasizes the fact that the absence of a condition did not cause employees to feel bad, although that factor could motivate employees. Hygiene Factors (extrinsic) result in satisfaction Job Environment Salary Job Security Personal Life Working Conditions Status Interpersonal Relations Supervision Company Policies Motivator Factors (intrinsic), if present, can produce high levels of motivation Achievement Recognition Advancement The Job Itself Growth Opportunities Responsibility

Transferring Funds Between Savers and Users

Funds are transferred between savers and users directly or indirectly A direct transfer means that the user raises the needed funds directly from savers. A school district selling bonds to investors The other way in which funds can be transferred indirectly is through financial institutions Borrowing from a bank - a bank pays depositors interest for the use of their money, and charges borrowers interest.

Employee Benefits

In addition to wages and salaries, benefits to employees and their families as part of their compensation. They include: Vacation Retirement plans Profit-sharing Health insurance Gym memberships Child and elder car Tuition reimbursement Benefits required by law include Social Security and Medicare contributions In addition to wages and salaries, companies provide benefits to employees and their families as part of their compensation. Benefits represent a large component (almost one-third) of an employee's total compensation. Because of the increasing cost of health care, many employers are shifting the cost of health care to employees. In addition, many companies are putting caps on what they will pay for retiree health benefits.

Technology and the Production Process

Green Manufacturing - manufacturing focused on reducing waste, energy use, and pollution. Robot - a reprogrammable machine capable of performing tasks requiring the repeated manipulation of materials and tools. Computer-Aided Design - allows engineers to design components and entire products on computer screens more efficiently than traditional drafting systems. Computer Aided-Manufacturing - computer tools to analyze CAD output and enable a manufacturer to analyze the steps that a machine must take to produce a product or part. Flexible Manufacturing Systems - a production facility that can be modified to manufacture different products. Computer-Integrated Manufacturing - production system in which computers assist , in an integrated function, in the design of products, control machines, handle materials, and control the production function. Technology has dramatically changed production. Technology boosts efficiency and enhances flexibility. Robots were most common in automotive and electronics manufacturing but they're now being used in a variety of processes. Police use robots to dispose of bombs. Companies can now design, produce, and adapt products more quickly to meet customers' changing needs.

Steps in the Recruitment and Selection Process

Identify job requirements Choose sources of candidates Review applications and resumes Interview candidates Conduct employment tests and check references Conduct follow-up interviews Select a candidate and negotiate an offer see pg. 221 for more details

Supervisory Management

Implement the plans developed by middle managers. Responsible for non-managerial employees. Motivate workers to accomplish daily, weekly, and monthly goals. include positions such as: section chiefs, team leaders, and store managers.

Mass, Flexible, and Customer-Driven Production

Mass Production - a system for manufacturing products in large quantities by combining employees with specialized skills, mechanization, and standardization. Flexible Production - more cost-effective for producing smaller batches using information technology, communication, and cooperation Customer-Driven Production - evaluating customer demands in order to make the connection between products manufactured and products bought Mass production makes outputs available in large quantities. Much of the foundation of economic growth in the U.S. has been driven from mass production. The assembly line is a key byproduct of mass production. A very good example of flexible production is the auto industry. Changing from mass production to flexible production enabled companies to produce different kinds of cars at the same plant. Flexible production is more cost-effective for producing smaller runs. It can take many forms, but it generally involves using information technology to share the details of customer orders, programmable equipment to fulfill the orders, and skilled people to carry out tasks to fill a particular order.  Customer-driven production is used to drive short-term forecasting and design production schedules. In some cases, products are not produced until orders are received. Point of sale retail sales data and information from sales drive production.

Investor Participation in the Market

Most investors use the services of a broker or an online brokerage firm to buy and sell stocks. Investors establish an account Orders are entered to trade stocks The brokerage firm executes the trade on behalf of the investor for a fee Types of orders Market order - broker obtains the highest price when selling and the lowest price when buying (most common) Limit Order - a price ceiling is set when buying, or a price floor when selling

Selecting and Hiring Employees

Must follow legal requirements Title VII of the Civil Rights Act of 1964 Americans with Disabilities Act of 1990 Equal Employment Opportunity Commission programs Civil Rights Act of 1991 Understanding the laws is important Hiring is a costly process Some employers require employment tests Title VII of the Civil Rights Act of 1964 - prohibits employers from discriminating against applicants based upon their race, religion, color, sex, or national origin Americans with Disabilities Act of 1990 - prohibits employers from discriminating against applicants with disabilities Equal Employment Opportunity Commission programs Civil Rights Act of 1991 - victims of employment discrimination have the right to a jury trial, punitive damages, and damages for emotional distress Failure to follow these exposes company to risk of litigation. Hiring is a costly process for employers - advertising, interviewing, administering tests, and once the employee is hired, orientation and ongoing training. Some employers require employment tests to verify job-related skills

Orientation, Training, and Evaluation

Newly-hired employees complete an orientation program Includes information about company policies Describes employee rights and benefits Benefits/programs Employees may receive an employee manual Training programs provide skill building and knowledge. Types of training: On-the-Job Training Classroom and Computer-Based Training Management Development Orientation and training programs provide information about what is expected of employees. Orientation and training are sometimes administered jointly between the human resource department and the department in which the employee will work. Training programs can range in the type and focus. Orientation includes information about the company's policies and acquaints the employee with benefits and types of training program(s). Training programs can range from on-the-job training to classroom-based and computer-based training to management development programs.

Setting Objectives for the Organization

Objectives set guideposts by which managers define the organization's desired performance in the following areas: New product development Sales Customer service Growth Environmental and social responsibility Employee satisfaction

Corporate Culture

Organization's system of principles, beliefs, and values. Managers use symbols, rituals, ceremonies, and stories to reinforce corporate culture. Corporate culture is an organization's system of principles, beliefs, and values. The leadership style of its managers, the way it communicates and the overall work environment influence an organization's culture. Corporate culture is typically shaped by the leaders who founded and developed the company and by those who have succeeded them. Cultures can be strong and enduring, but sometimes they must change to meet changing demands in the business environment. Corporate culture can be changed, but that is challenging. Strong culture is where everyone knows and supports the same principles, beliefs, and values. A weak or constantly shifting culture has a lack of a clear sense of purpose.

Organizational Structures

Organization: structured grouping of people working together to achieve common goals. Three key elements: Human interaction Goal-directed activities Structure Steps in the organizing process: 1. Determine specific work activities necessary to implement plans and achieve objectives 2. Group work activities into a logical pattern or structure 3. Assign activities to specific positions and people and allocate necessary resources 4. Coordinate activities of different groups and individuals 5. Evaluate results of the organizing process

Distribution of Outstanding Commercial Bank Loans

Outstanding bank loans are in the following sectors: Single-family real estate: 25% Other real estate: 16% Commercial: 17% Consumer (non-real estate): 17% Other: 25%

Goal Setting Theory

People will be motivated to the extent to which they accept specific, challenging goals and receive feedback that indicates their progress toward goal achievement. A goal is a target, objective, or result that someone tries to accomplish. Goals energize and motivate people, and help them stay focused on the important parts of their jobs. Goals create a positive tension between the current state of affairs and the desired state of affairs. The premise of goal setting theory is that people will be motivated to the extent to which they accept specific, challenging goals and receive feedback that indicates their progress toward goal achievement. Managers want to motivate employees toward the organization's goals. Organizations look for the target, objective, and results through goals. Goal-setting theory has become a popular motivation theory to follow with a process popularized by Peter Drucker - Management by Objective. The components of goal setting theory include: Goal specificity - clear and concrete (we want to reduce carbon emissions by 2%) Goal difficulty - how hard the goal is to reach (a harder goal can actually be more motivating) Goal Acceptance - the extent to which people understand and agree to the goal (a goal may be rejected if it is too challenging) Performance Feedback - information about performance, and how well the goal has been met.

Performance Appraisals

Performance appraisals are used to evaluate an employee's job performance Feedback is intended to improve performance Decisions about compensation, promotion, training needs, transfers, and even termination are made One type of performance review is a 360-degree performance review To be effective, performance reviews should be: Linked to organizational goals Be based on objective criteria Take place in the form of a two-way conversation The goal of performance appraisals (conducted by an employee's manager), is to help employees improve their performance by comparing actual results with desire outcomes, outlined in job descriptions. For a performance review to be effective, it should: take place several times a year; be linked to organizational goals; be based on objective criteria; and take place in the form of a two-way conversation. There are various types of performance appraisals: peer reviews in which co-workers evaluate one another, and 360 degree reviews, a process in which feedback is gathered from a review panel of 8 to 12 people. Some companies utilize cloud-based performance appraisal software.

Fixed-Position Layout

Places the product in one spot, and workers, materials, and equipment are brought to it. Fixed-position layouts are most common when building large, bulky, heavy or fragile products like homes, bridges, or highways. Fixed-position layouts are found in the following industries: construction, ship building, aircraft, aerospace, and oil drilling.

The Job of Production Managers

Plan the overall production process Determine the most appropriate layout Implement the production plan Control the manufacturing process for quality Production and operations managers oversee the work of people and machinery to convert inputs (materials and resources) into finished goods and services. Planning the production process- what goods and services will we offer? Determining the facility layout- managers must decide the best layout for the facility. A good layout can reduce material handling, decrease costs, and improve product flow. Implementing the production plan involves making a decision to make, buy, or lease; selecting the best suppliers; and controlling inventory. Controlling the production process - to maintain the highest possible quality. Part of the control process involves continuous evaluation of results. If problems occur, managers return to the first step and make adjustments.

Importance of Planning

Planning is categorized by scope and breadth long range short range and very narrow Planning can be divided into: Strategic Tactical Operational Contingency Organizations should have a comprehensive planning framework Plans outline the steps the company will take to meet outlined goals and objectives. Turns vision into action, take advantage of opportunities, and avoid costly mistakes.

Determining the Facility Layout

Process Layout - grouping machinery and equipment by function Product Layout - sets up production equipment along a product-flow line. Fixed-Position Layout - places the product in one spot, and workers, materials, and equipment are brought to it. Customer-Oriented Layout - Customer-oriented layout arranges facilities to enhance the interactions between customers and a service. see pg. 284

Process Layout

Process layout groups machinery and equipment by function Facilitates production of a variety of nonstandard items in relatively small batches Work-in-process moves around the plant to reach different workstations.

Recruitment and Selection

Recruiting techniques continue to evolve as technology advances. In addition to a company's website, Internet recruiting is quick, efficient, and inexpensive. Reach a large pool of job seekers - www.indeed.com Use social networking sites - www.linkedin.com HR must be creative in searching for qualified employees. Businesses look both internally and externally.

Federal Reserve Policy Tools

Reserve Requirements Banks are required to maintain reserves equal to a percent of deposits A change in reserves impacts the amount banks have available to lend The Discount Rate or interest rate at which loans are made to member banks An increase slows the growth rate (more expensive for banks to borrow) A decrease has the opposite effect Open Market Operations controls the money supply through the purchase and sale of U.S. Treasury securities The Fed requires banks to hold a reserve, which is a percentage of what the bank holds in deposits. The higher the reserve requirement, the less money the bank can lend customers. Another policy tool is the discount rate, which is the interest rate at which the Fed makes short-term loans to member banks. Open market operations is the technique of controlling the money supply growth rate by selling U.S. Treasury securities. The Fed has three major policy tools for controlling the growth in the supply of money and credit: reserve requirements, the discount rate, and open market operations. The Fed requires banks to maintain reserves equal to a certain percentage of what the banks hold in deposits. Another policy tool is the so-called discount rate, the interest rate at which Federal Reserve banks make short-term loans to member banks. If the Fed wants to slow the growth rate in the money supply, it increases the discount rate. This increase makes it more expensive for banks to borrow funds. Banks, in turn, raise the interest rates they charge on loans to consumers and businesses. The end result is a slowdown in economic activity. Lowering the discount rate has the opposite effect. The third policy tool, and the one used most often, is open market operations, the technique of controlling the money supply growth rate by buying or selling U.S. Treasury securities.

Depository Institutions

Savings Banks - originally established to make home loans, offer many of the same services as commercial banks Credit Union - not for profit cooperative financial institutions owned by their member depositors Savings banks act somewhat like commercial banks. Formerly called savings and loan associations or thrift institutions, they were originally formed to offer mortgages. Credit unions have a maximum amount of assets that they can maintain. Credit unions are owned by their depositors, who are also members.

Financial Markets

Securities are issued and traded in financial markets. Primary Market When a firm or government offers a stock or security for sale to the general public for the first time Secondary Market Collection of financial markets in which previously issued securities are traded among investors. Stocks and bonds sold to the investing public are mostly sold through investment bankers. Corporations and governments are willing to pay for the services provided by investment bankers because they are financial market experts. Most media reporting regarding the financial market pertains to the secondary market. Securities are traded among investors. Previously issued securities in the secondary market do not involve the company. When a company needs capital to purchase inventory, expand a plant, make major investments, acquire another firm, or pursue other business goals, it may sell a bond or stock issue to the investing public.

Types of Securities

Securities, also called financial instruments, represent obligations on the part of the issuers Issuers can be businesses or government Purchasers seek an expected or stated return on the funds invested or loaned Three categories of securities: Money Market Instruments - debt security Bonds - debt security Stocks - units of ownership in a company

Money Market Instruments

Short-term debt securities are issued by: Governments Financial institutions Corporations Mature within one year from date of issue Issuer pays interest to investors for use of funds Low risk Examples: U.S. Treasury bills, commercial paper, and bank certificates of deposit Treasury bills are issued by the U.S. Treasury and backed by the full faith and credit of the U.S. government. Treasury bonds are considered risk free. Commercial paper, slightly riskier than Treasury bills, is securities sold by corporations. A certificate of deposit is a time deposit with a financial institution such as a bank.

Monetary Policy

The Fed's most crucial job is: controlling the supply of money and credit maintaining a balance of growth to allow the economy to expand, and inflation to remain in check. If the money supply grows too slowly, economic growth will slow, unemployment will increase, and there is an increased risk of a recession If the money supply grows too rapidly, inflationary pressures will build. Policy tools are used to increase or decrease interest rates The Fed's most important job is supplying money and credit, which is monetary policy. The goal is to maintain a balance of growth that allows the economy to expand and inflation to remain in check. There are two measures of money supply: M1 and M2. M1 consists of currency in circulation and balances in bank checking accounts. M2 equals M1 plus balances in some savings accounts and money market mutual funds.

Compensation

The amount employees are paid in money and benefits Impacts job satisfaction Wages refer to hourly pay (factory workers) Salaries refer to annual pay (professionals) Compensation decisions are based upon: What competitors are paying Government regulation Cost of Living Company profits Employee's productivity HR departments work to create an equitable compensation system. Compensation is how much employees are paid in money and benefits - which has a tremendous influence on where they live, what they eat, and how they spend their leisure time. Compensation is important to an organization, but it is also one of the organization's largest costs. The HR department must find a balance between a good compensation package and balancing costs.

The Strategic Planning Process

see pg. 197 1. Mission 2. Assess Competitive Position 3. Objectives 4. Strategies for Competitive Differentiation 5. Turn strategy into action (implement) 6. Evaluate results & refine plan 1. The first step in the strategic planning process is defining the [company's mission statement.] 2. During the strategic planning process, the organization must [assess its competitive position.] It must examine the factors that may help or hinder the organization. 3. Once an organization has begun to focus its mission and identify opportunities, the firm will [set objectives.] Objectives are the guideposts by which managers define the organization's desired performance. Managers think about profitability, customer service, growth, and employee satisfaction. Once the four phases of the strategic planning process are complete, managers must implement them. They must identify the specific points at which resources are needed. The final step in the strategic planning process, which follows implementation, is monitoring and adapting plans. Monitoring requires matching performance with expectation by adapting plans when performance fails.

Planning at Different Management Levels

see pg. 197 Strategic - organizational objectives and long term plans by top management Tactical - departmental policies and procedures by middle management Operational - daily and weekly plans by supervisory or first-line management Contingency - primarily by top management, but all levels contribute to a company's contingency planning in the event of an emergency

SWOT Analysis

see pg. 198

Organization Chart

see pg. 206 Organizational charts are used to help employees understand how their work fits within the overall operation of the firm. The organizational chart is a visual representation of the firm's structure. There are five different forms of departmentalization which subdivides work by product, geographical area, customer, function, and process.

Line-and-Staff Organizations

see pg. 210 Accounting, engineering, and human resources are staff departments that support the line authority extending from the plant manager to the production manager and supervisors. Note the support functions of the staff. They do not have direct authority over the plant operations, but they support the department.

Matrix Organizations

see pg. 211 A structure that links employees from different parts of the organization to work together on specific projects Employees report to a line manager and a project manager. Advantages: Flexibility in adapting to changes Focus on major problems or products Outlet for employee's creativity and initiative Disadvantages: Integrating skills of many specialists into a coordinated team Team members' permanent functional managers must adjust the employees' regular workloads In the matrix organization, employees have two managers - a line manager and a project manager. Employees chosen to work on a special project receive instructions from the project manager, but they continue as employees in their permanent functional departments. Matrix comes from the intersecting grid of horizontal and vertical lines of authority. The matrix organization has become popular at high-technology and multinational corporations. The major benefits come from its flexibility.

Average Costs for Employee Compensation

see pg. 227 Legally required benefits include contributions to Social Security and Medicare, as well as payments to state unemployment insurance and workers' compensation programs, which protect workers in the event of job-related injuries

Assets of Major Financial Institutions

see pg. 472 Pension funds, however, have more assets than commercial banks, with over $16 trillion. Savings banks and credit unions both have a little over $1 trillion in assets, respectively. Commercial banks $14.7 trillion Savings Banks $1.06 trillion Credit Unions $1.1 trillion Life Insurance Companies $6.4 trillion Pension Funds $1.63 trillion Mutual Funds $12 trillion

Tools Used by the Federal Reserve

see pg. 479 stimulate or slow the economy. They include: reserve requirements, discount rate, and open market transactions.