Business Essentials, 9th Canadian Edition by Ronald J. Ebert, Ricky W. Griffin, George Dracopoulos and Frederick A. Starke

By

Business Essentials, Ninth Canadian Edition

 By Ronald J. Ebert, Ricky W. Griffin, George Dracopoulos and Frederick A. Starke

Business Essentials, Ninth Canadian Edition

Contents

Preface xv

Acknowledgments xix

About the Authors xx

PART 1 INTRODUCING THE CONTEMPORARY BUSINESS WORLD 1

01 UNDERSTANDING THE CANADIAN BUSINESS SYSTEM 2

Spin Master: Canadian Toy Maker Becomes a Global Children’s Entertainment Company 2

LO-1 The Idea of Business and Profit 4

LO-2 Economic Systems Around the World 4

Factors of Production 4

Types of Economic Systems 5

DISRUPTIONS IN BUSINESS Disruptions Are Everywhere! 6

THERE’S AN APP FOR THAT! 8

LO-3 Interactions between Business and Government 8

How Government Influences Business 8

THE GREENING OF BUSINESS Problems in the Ontario Power System 10

How Business Influences Government 11

LO-4 The Canadian Market Economy 11

Demand and Supply in a Market Economy 11

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS The Lucrative Business of App Development 13

LO-5 Private Enterprise and Competition 14

Degrees of Competition 14

Summary of Learning Objectives 16

Questions and Exercises 17

Team Exercises 17

business case 1 18

02 THE ENVIRONMENT OF BUSINESS 20

Growth and Success: A Few Dollars at a Time 20

LO-1 Organizational Boundaries and Environments 22

Organizational Boundaries 22

Multiple Organizational Environments 23

LO-2 The Economic Environment 23

Economic Growth 23

Economic Stability 26

THERE’S AN APP FOR THAT! 26

Managing the Canadian Economy 28

LO-3 The Technological Environment 28

Research and Development (R&D) 28

Product and Service Technologies 28

THE GREENING OF BUSINESS Environmentally Friendly Automobiles 29

LO-4 The Political–Legal Environment 30

DISRUPTIONS IN BUSINESS The Physical Environment 30

LO-5 The Socio-Cultural Environment 31

Customer Preferences and Tastes 31

Ethical Compliance and Responsible Business Behaviour 31

The Business Environment 31

The Industry Environment 32

ENTREPRENEURSHIP AND NEW VENTURES Goldline Curling: Dealing with New Industry Threats 33

LO-6 Emerging Challenges and Opportunities in the Business Environment 33

Outsourcing 34

The Growing Role of Social Media 34

Business Process Management 34

LO-7 Redrawing Corporate Boundaries 34

Mergers and Acquisitions 34

Divestitures and Spinoffs 35

Employee-Owned Corporations 35

Strategic Alliances 35

Subsidiary and Parent Corporations 35

Summary of Learning Objectives 36

Questions and Exercises 37

Team Exercises 37

business case 2 38

03 CONDUCTING BUSINESS ETHICALLY AND RESPONSIBLY 40

Is Legalization of Marijuana a Good Idea? 40

Ethics in the Workplace 42

LO-1 Individual Ethics 42

Business and Managerial Ethics 43

Assessing Ethical Behaviour 43

Encouraging Ethical Behaviour in Organizations 45

LO-2 Corporate Social Responsibility 46

LO-3 The Stakeholder Model of Responsibility 47

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS Retailers

Are Watching You: Is That Okay? 48

THERE’S AN APP FOR THAT! 49

DISRUPTIONS IN BUSINESS Key Issues in Whistle-Blower Programs 51

THE GREENING OF BUSINESS Which Car Pollutes Less? Electric or Gasoline? 53

Implementing Social Responsibility Programs 55

LO-4 Approaches to Social Responsibility 55

Managing Social Responsibility Programs 55

LO-5 Social Responsibility and the Small Business 56

Summary of Learning Objectives 57

Questions and Exercises 58

Team Exercises 58

Business case 3 59

04 ENTREPRENEURSHIP, SMALL BUSINESS, AND NEW VENTURE CREATION 61

Tim Hortons’ Franchisee Challenges: Heroes, and Villains 61

LO-1 Interrelationship of Small Business, New Venture Creation, and Entrepreneurship 63

Small Business 63

The New Venture/Firm 64

Entrepreneurship 64

Intrapreneurs 65

LO-2 The Role of Small and New Businesses in the Canadian Economy 66

Small Businesses 66

New Ventures 66

LO-3 The Entrepreneurial Process 67

Identifying Opportunities 67

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS Shopify: Helping Entrepreneurs Expand and Monetize

Their Client Base 69

Accessing Resources 70

THERE’S AN APP FOR THAT! 71

Building the Right Team 72

ENTREPRENEURSHIP AND NEW VENTURES Crowdfunding: Finance from the Masses 73

Assessing the Fit between Elements in the Entrepreneurial Process 73

THE GREENING OF BUSINESS Green Growth in Small Businesses 74

LO-4 Starting Up a Small Business 74

Buying an Existing Business 74

Buying a Franchise 75

LO-5 Success and Failure in Small Business 76

Reasons for Success 76

Reasons for Failure 77

LO-6 Forms of Business Ownership 77

The Sole Proprietorship 77

The Partnership 77

The Corporation 78

The Co-Operative 80

Summary of Learning Objectives 81

Questions and Exercises 82

Team Exercises 83

business case 4 84

05 THE GLOBAL CONTEXT OF BUSINESS 86

Couche-Tard: Your Global Convenience Store 86

The Contemporary Global Economy 88

LO-1 The Major World Marketplaces 89

LO-2 Emerging Markets: BRICS and Beyond 90

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS The Goose

Is Flying East: CanadaGoose.cn 91

LO-3 Forms of Competitive Advantage 92

The Balance of Trade 93

The Balance of Payments 93

Exchange Rates 93

THERE’S AN APP FOR THAT! 94

LO-4 International Business Management 94

Going International 94

Levels of Involvement in International Business 95

International Organizational Structures 96

LO-5 Barriers to International Trade 97

Social and Cultural Differences 97

ENTREPRENEURSHIP AND NEW VENTURES A Better Coconut Water 98

Economic Differences 98

Legal and Political Differences 99

Business-Practice Laws 100

DISRUPTIONS IN BUSINESS Is Supply Management Doomed? 101

LO-6 Overcoming Barriers to Trade 101

General Agreement on Tariffs and Trade (GATT) 101

World Trade Organization 101

The European Union 102

The North American Free Trade Agreement and the

New US-Mexico-Canada Agreement (USMCA) 103

Major New Agreements: TPP and CETA 103

Other Free Trade Agreements Around the World 104

Summary of Learning Objectives 104

Questions and Exercises 106

Team Exercises 106

business case 5 107

PART 2 THE BUSINESS OF MANAGING 111

06 MANAGING THE BUSINESS ENTERPRISE 112

A Surprising Change in Corporate Strategy at

Bombardier 112

Who Are Managers? 114

LO-1 The Management Process 114

Planning 115

Organizing 115

Leading 115

Controlling 115

Management: Science or Art? 116

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS Managing Customer Service Touch Points 116

Becoming a Manager 117

What Should You Expect in a Management Job? 117

ENTREPRENEURSHIP AND NEW VENTURES Innovations in Management 118

LO-2 Types of Managers 118

Levels of Management 118

Areas of Management 119

LO-3 Management Roles and Skills 120

Management Roles 120

Management Skills 121

LO-4 Strategic Management 124

Setting Business Goals 124

Formulating Strategy 125

THERE’S AN APP FOR THAT! 126

Levels of Strategy 127

LO-5 Contingency Planning and Crisis Management 128

Contingency Planning 128

Crisis Management 128

DISRUPTIONS IN BUSINESS When Disaster Strikes 129

LO-6 Management and the Corporate Culture 129

THE GREENING OF BUSINESS Mission Zero 130

Communicating the Culture and Managing Change 131

Summary of Learning Objectives 131

Questions and Exercises 132

Team Exercises 133

business case 6 134

07 ORGANIZING THE BUSINESS ENTERPRISE 136

Building a Foundation and Structure for Long-Term Success 136

What Is Organizational Structure? 138

LO-1 Determinants of Organizational Structure 138

ENTREPRENEURSHIP AND NEW VENTURES Organizing for Growth 139

The Chain of Command 139

The Building Blocks of Organizational

Structure 139

LO-2 Job Specialization 139

Departmentalization 141

Establishing the Decision-Making Hierarchy 142

LO-3 Assigning Tasks 142

Performing Tasks 143

Distributing Authority: Centralization and

Decentralization 143

Three Forms of Authority 145

LO-4 Basic Organizational Structures 146

The Functional Structure 146

The Divisional Structure 146

Project Organization 147

Matrix Structure 147

International Structures 149

Organizational Design for the Twenty-First

Century 149

Boundaryless Organization 149

Team Organization 150

Virtual Organization 150

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS “Simon

Says,” Alexa, What Have You Done? 150

Learning Organization 151

LO-5 The Informal Organization 151

Informal Groups 151

The Organizational Grapevine 151

THERE’S AN APP FOR THAT! 152

Summary of Learning Objectives 152

Questions and Exercises 154

Team Exercises 154

business case 7 155

08 MANAGING HUMAN RESOURCES AND LABOUR RELATIONS 157

An Avalanche of Sexual Harassment Cases 157

LO-1 The Foundations of Human Resource

Management 159

The Strategic Importance of HRM 159

Human Resource Planning 160

LO-2 Recruiting Human Resources 160

THE GREENING OF BUSINESS

What Are “Green” Jobs? 161

Selecting Human Resources 162

THERE’S AN APP FOR THAT! 163

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS

Artificial Intelligence Meets HR 164

LO-3 Developing Human Resources 164

New Employee Orientation 164

Training 165

ENTREPRENEURSHIP AND NEW VENTURES

Are You LinkedIn? 165

Evaluating Employee Performance 166

LO-4 Compensation and Benefits 167

Determining Basic Compensation 167

Incentive Programs 168

Benefits 169

LO-5 The Legal Context of HRM 170

Equal Employment Opportunity 170

Comparable Worth 170

Sexual Harassment 171

Employee Safety and Health 171

Retirement 171

LO-6 New Challenges in the Changing

Workplace 172

Managing Workforce Diversity 172

Managing Knowledge Workers 173

Managing Contingent Workers 173

LO-7 Dealing with Organized

Labour 173

The Development of Canadian Labour Unions 173

Unionism Today 174

The Future of Unions 174

LO-8 The Legal Environment for Unions in

Canada 174

Federal Legislation—The Canada Labour Code 175

Provincial Labour Legislation 175

Union Organizing Strategy 175

Union Security 176

Types of Unions 177

LO-9 Collective Bargaining 177

Reaching Agreement on the Contract’s Terms 177

Contract Issues 177

When Bargaining Fails 178

DISRUPTIONS IN BUSINESS Community College Strike

Disrupts Students’ Lives 179

Conciliation, Mediation, and Arbitration 179

Summary of Learning Objectives 180

Questions and Exercises 181

Team Exercises 182

business case 8 183

09 MOTIVATING, SATISFYING, AND LEADING EMPLOYEES 184

Hunter Harrison 184

LO-1 Forms of Employee Behaviour 186

LO-2 Individual Differences among Employees 187

Personality 187

Attitudes at Work 188

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS Caution:

Words Matter and Online Posts Can Haunt You 189

LO-3 Matching People and Jobs 189

Psychological Contracts 189

The Person–Job Fit 190

Motivation in the Workplace 190

Classical Theory 190

ENTREPRENEURSHIP AND NEW VENTURES Rebooting with Lessons from Past Ventures 191

Early Behavioural Theory 191

LO-4 Behavioural Theory in the Mid-Twentieth Century 192

Contemporary Motivation Theory 193

LO-5 Strategies for Enhancing Motivation 194

Reinforcement/Behaviour Modification 194

Goal-Setting Theory 195

Participative Management and Empowerment 195

Team Management 196

Job Enrichment and Redesign 196

Modified Work Schedules 197

THE GREENING OF BUSINESS The Compressed Workweek

and Telecommuting: Are They Really Green? 199

LO-6 Leadership and Motivation 199

Leadership and Power 200

LO-7 Approaches to Leadership 201

THERE’S AN APP FOR THAT! 202

LO-8 Recent Trends in Leadership 202

DISRUPTIONS IN BUSINESS Women in Leadership 204

Summary of Learning Objectives 205

Questions and Exercises 207

Team Exercises 207

business case 9 209

PART 3 MANAGING OPERATIONS AND INFORMATION 213

10 OPERATIONS MANAGEMENT, PRODUCTIVITY, AND QUALITY 214

The Robots Keep Coming 214

LO-1 Providing Goods and Services to Customers 216

Changes in Canadian Manufacturing over Time 216

Industrial Revolutions 217

ENTREPRENEURSHIP AND NEW VENTURES

Entrepreneurship That Matters: Speaking Loud and Clear 217

Creating Value through

Operations 218

LO-2 Differences between Service and

Manufacturing Operations 218

LO-3 Operations Processes 219

Business Strategy as the Driver of

Operations 221

LO-4 Operations Planning 222

Capacity Planning 222

Location Planning 222

Layout Planning 222

Quality Planning 224

Methods Planning 224

Operations Scheduling 225

The Master Operations Schedule 225

Detailed Schedules 225

Staff Schedules and Computer-Based

Scheduling 226

Project Scheduling 226

Operations Control 227

Materials Management 227

Production Process Control 227

LO-5 The Productivity–Quality

Connection 228

Meeting the Productivity Challenge 228

Meeting the Quality Challenge 229

LO-6 Managing for Quality 230

THERE’S AN APP FOR THAT! 231

Tools for Quality Assurance 231

LO-7 Adding Value Through Supply Chains 233

THE GREENING OF BUSINESS

Too Good to Waste 234

Summary of Learning Objectives 235

Questions and Exercises 236

Team Exercises 237

business case 10 238

11 UNDERSTANDING ACCOUNTING 240

Future Directions for the Modern

Accountant 240

What Is Accounting, and Who Uses Accounting

Information? 242

LO-1 Who Are Accountants and What

Do They Do? 243

Financial versus Managerial Accounting 243

Professional Accountants 243

THERE’S AN APP FOR THAT! 244

Accounting Services 244

Private Accountants 245

LO-2 The Accounting Equation 246

Assets and Liabilities 246

Owners’ Equity 246

ENTREPRENEURSHIP AND NEW VENTURES

Working with the Accounting Equation 247

LO-3 Financial Statements 247

Balance Sheets 247

LO-4 Income Statements 249

Statements of Cash Flows 250

The Budget: An Internal Financial

Statement 250

LO-5 Analyzing Financial Statements 251

Solvency Ratios: Borrower’s Ability to Repay Debt 251

Short-Term Solvency Ratios 251

DISRUPTIONS IN BUSINESS Skimming off the Top 251

Long-Term Solvency 252

Profitability Ratios: Earnings Power

for Owners 252

Return on Equity 252

Return on Sales 252

Earnings Per Share 252

Activity Ratios: How Efficiently Is the Firm

Using Its Resources? 253

LO-6 Bringing Ethics into the Accounting

Equation 253

Why Accounting Ethics? 253

LO-7 The Evolving Role of the Modern

Accountant 254

Summary of Learning Objectives 255

Questions and Exercises 256

Team Exercises 257

business case 11 258

PART 4 PRINCIPLES OF MARKETING 261

12 UNDERSTANDING MARKETING PRINCIPLES AND DEVELOPING PRODUCTS 262

Maple Leaf: Capitalizing on the Meatless Meat

Movement 262

LO-1 What Is Marketing? 264

Delivering Value 264

Goods, Services, and Ideas 265

Relationship Marketing and Customer Relationship Management 266

The Marketing Environment 266

LO-2 Developing the Marketing Plan 267

Strategy: The Marketing Mix 268

THERE’S AN APP FOR THAT! 268

Product 268

Pricing 269

Place (Distribution) 269

Promotion 269

LO-3 Marketing Strategy: Market Segmentation,

Target Marketing, and Positioning 269

Identifying Market Segments 270

LO-4 Marketing Research 271

The Research Process 271

Research Methods 272

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS

Crowdsourcing: Wisdom from the Consumer World 273

LO-5 Understanding Consumer

Behaviour 274

Influences on Consumer Behaviour 274

The Consumer Buying Process 274

LO-6 Organizational Marketing and Buying

Behaviour 274

Business Marketing 275

B2B Buying Behaviour 275

LO-7 What Is a Product? 275

The Value Package 275

Classifying Goods and Services 276

The Product Mix 276

DISRUPTIONS IN BUSINESS Counterfeit Products 277

LO-8 Developing New Products and Branding 277

The New Product Development Process 277

Product Life Cycle 278

ENTREPRENEURSHIP AND NEW VENTURES Copper

Branch: Plant-Based Power Food 279

Identifying Products: Branding

and Packaging 280

Packaging Products 281

Labelling Products 281

Summary of Learning Objectives 282

Questions and Exercises 284

Team Exercises 284

business case 12 285

13 PRICING, PROMOTING, AND DISTRIBUTING PRODUCTS 287

Amazon Versus the Bay: Past, Present, and Future of Retail 287

LO-1 Determining Prices 289

Pricing to Meet Business Objectives 289

Price-Setting Tools 290

LO-2 Pricing Strategies and Tactics 291

Pricing Strategies 291

THERE’S AN APP FOR THAT! 292

Pricing Tactics 292

LO-3 Promoting Products and Services 293

Promotional Strategies 293

The Promotional Mix 293

LO-4 Advertising Promotions and Media 294

Advertising Media 294

Traditional Media: Changing Times 294

Online: The Power of Consumer

Engagement 294

LO-5 Personal Selling, Sales Promotions, Direct

(or Interactive) Marketing, Public Relations, and

Publicity 296

Personal Selling 296

Sales Promotions 296

Publicity and Public Relations 297

DISRUPTIONS IN BUSINESS Now Here’s a Story About Disruption! 297

LO-6 The Distribution Mix 298

Intermediaries and Distribution Channels 298

THE GREENING OF BUSINESS Single-Use Packaging Under Fire 299

Distribution Strategies 300

Channel Conflict and Channel Leadership 300

LO-7 The Role of Intermediaries 300

Wholesaling 300

Retailing 301

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS The Long Tail, Revisited 302

LO-8 Physical Distribution 303

Warehousing Operations 303

Transportation Operations 303

Distribution through Supply Chains as a Marketing

Strategy 303

Summary of Learning Objectives 304

Questions and Exercises 306

Team Exercises 306

business case 13 308

PART 5 MANAGING FINANCIAL ISSUES 311

14 MONEY AND BANKING 312

RBC: A Symbol of Canadian Banking Strength 312

LO-1 What Is Money? 314

The Characteristics of Money 314

The Functions of Money 315

The Spendable Money Supply: M-1 315

M-1 Plus the Convertible Money Supply: M-2 315

Credit Cards and Debit Cards: Plastic Money? 315

LO-2 The Canadian Financial System 316

Financial Institutions 316

Financial Pillar #1—Chartered Banks 316

Services Offered by Banks 317

THERE’S AN APP FOR THAT! 317

Bank Loans 318

E-BUSINESS AND SOCIAL MEDIA SOLUTIONS Real-Time

Investing: Just a Click Away 319

Banks as Creators of Money 319

Other Changes in Banking 320

LO-3 The Bank of Canada 320

LO-4 Financial Pillar #2—Alternate Banks 321

Trust Companies 321

Credit Unions/Caisses Populaires 321

Financial Pillar #3—Specialized Lending and Savings

Intermediaries 322

Life Insurance Companies 322

Factoring Companies 322

Financial Corporations 322

Venture Capital Firms 322

Pension Funds 323

Financial Pillar #4—Investment Dealers 323

ENTREPRENEURSHIP AND NEW VENTURES Risky Business 323

Other Sources of Funds 324

Government Financial Institutions and

Granting Agencies 324

International Sources of Funds 324

LO-5 International Banking and Finance 324

Currency Values and Exchange Rates 324

The International Payments Process 325

THE GREENING OF BUSINESS Is Bitcoin

Environmentally Friendly? 326

The International Bank Structure 326

Summary of Learning Objectives 327

Questions and Exercises 328

Team Exercises 328

Business case 14 329

15 FINANCIAL DECISIONS AND RISK MANAGEMENT 331

Blockchain and Bitcoin: New Models

or Modern-Day Bubbles? 331

LO-1 The Role of the Financial Manager 333

Objectives of the Financial Manager 333

Responsibilities of the Financial Manager 333

LO-2 Why Businesses Need Funds 334

Short-Term (Operating) Expenditures 334

Long-Term (Capital) Expenditures 335

ENTREPRENEURSHIP AND NEW VENTURES Social Capital

Is Making the World a Better Place 335

LO-3 Sources of Short-Term Funds 336

Trade Credit 336

Secured Short-Term Loans 336

Unsecured Short-Term Loans 336

LO-4 Sources of Long-Term Funds 337

Debt Financing 337

THE GREENING OF BUSINESS What Are the Prospects

for “Green Bonds”? 338

LO-5 Equity Financing 339

Hybrid Financing: Preferred Stock 340

Choosing between Debt and Equity Financing 341

The Risk–Return Relationship 341

Securities Markets 343

Investment Banking 343

Stock Exchanges 344

LO-6 Buying and Selling Securities 345

Financing Securities Purchases 346

DISRUPTIONS IN BUSINESS Short Sellers

Are Everywhere 347

LO-7 Other Investments 348

Mutual Funds 348

Exchange-Traded Funds 348

Hedge Funds 348

Commodities 349

THERE’S AN APP FOR THAT! 349

Securities Regulation 349

Financial Management for Small Businesses 349

Establishing Bank Credit and Trade Credit 350

Venture Capital 350

Planning for Cash-Flow Requirements 350

LO-8 Risk Management 350

Coping with Risk 350

Summary of Learning Objectives 351

Questions and Exercises 353

Team Exercises 354

business case 15 355

APPENDIX A A BRIEF HISTORY OF BUSINESS IN

CANADA 359

APPENDIX B BUSINESS LAW 360

APPENDIX C USING TECHNOLOGY TO MANAGE

INFORMATION IN THE INTERNET AND SOCIAL MEDIA ERA 364

APPENDIX D MANAGING YOUR PERSONAL FINANCES: A SYNOPSIS 376

APPENDIX E INSURANCE AS RISK MANAGEMENT 378

Endnotes and Source Notes 381

Name and Organization Index 409

Subject Index 415

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