English For Corporate Communications - Cases in International Business

CasesiIn
rNGLISH Fn
CORPORATE
SOMMUNICATIONS
ENGLISH Fn
CORPORATE
SOMMUNICATIONS Cases in
International
Business
Jennifer Spring-Wallace
PRENTICE HALL See

Englewood Cliffs, New Jersey 07632
Library of Congress Cataloging-in-Publication Data
Spring-Wallace, Jennifer.
Corporate communications : cases in international business /
Jennifer Spring-Wallace.
p. cm.
ISBN 0-13-175340-1
1. Business communication—Problems, exercises, etc.
2. Communication in management—Problems, exercises, etc.
3. International business enterprises—Management—Problems,
exercises, etc. 4. International business enterprises—
Communication systems—Problems, exercises, etc. 5. English
language—Business English. |. Title.
HF5718.S66 1992
658.4’5—dc20 92-14048
CIP
Editorial/production supervision and

interior design: Christine McLaughlin Mann
Acquisitions Editor: Nancy Leonhardt
Copyeditor: Virginia Rubens
Cover design: Ray Lundgren Graphics
Prepress buyer: Ray Keating
Manufacturing buyer: Lori Bulwin
Scheduler: Leslie Coward
© 1993 by Prentice Hall Regents

Prentice-Hall, Inc.
A Paramount Communications Company
Englewood Cliffs, New Jersey 07632
All rights reserved. No part of this book may be

reproduced, in any form or by any means,
without permission in writing from the publisher.
Printed in the United States of America

105958" 76
ISBN 0-13-175340-1
Prentice-Hall International (UK) Limited, London
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Simon & Schuster Asia Pte. Ltd., Singapore
Editora Prentice-Hall do Brasil, Ltda., Rio de Janeiro
CONTENTS
Preface
Acknowledgments xiii
CHAPTER 1 Business Ownership

Introduction 3
Previewing 3
Case History: The Frozen Igloo 6
Comprehension Check 9
Group Problem Solving 10
Skill: Decision Making 12
CHAPTER 2 Management
Introduction 15
Previewing 18
Case History: The Usagi Motor Corporation 20
Skill: Giving & Receiving Feedback 26
CHAPTER 3 Organizational Behavior

Introduction 31
Previewing 31
Case History: Apollo Produits du Soleil 35
Skill: Running an Effective Meeting 42
CHAPTER 4 Human Resources
Introduction 47
Previewing 47
Case History: Director of Publicity for Dhuma Dhuma 52
Skill: Professional Interviewing 59
CHAPTER 5 Marketing
Introduction 65
Previewing 65
Case History: Grandma Jones, Inc. 69
Comprehension Check 7A
Group Problem Solving ap:
Skill: Giving a Business Presentation 74
CHAPTER 6 Ethics
Introduction 79
Previewing 79
Case History: The Innocuous Insurance Company 82
Group Problem Sclving 86
Skill: Using the Telephone 88
CHAPTER 7 International Business

Introduction 93
Previewing 93
Case History: Iguana Oil 98
Skill: Negotiating 106
CHAPTER 8 Finance
Introduction 111
Previewing 111
vi
Case History: The Blue Dragon 115
Skill: Being Persuasive 123
CHAPTER 9 Accounting
Introduction 129
Previewing 129
Case History: The Speakeasy Language Center 133
Comprehension Check “ 136
Skill: Making Journal Entries in Accounting 140
CHAPTER 10 Entrepreneurship
Introduction 149
Previewing 149
Skill: Using Visual Aids 154
Listening Practice Scripts 159
Glossary of Business Terms 165
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PREFACE
The purpose of English for Corporate Communications is to teach the basic concepts of
business while at the same time developing the oral and communication skills of ESL/EFL
students in a business context. The text focuses cn fictitious business cases which illustrate
business concepts, followed by the problem solving of the case. Not only do the students
become familiar with new concepts, but they also become actively involved in the process,
utilizing their language and cognitive abilities while working with others. Each of the ten
chapters also concentrates on related business skills. The text is accompanied pya tape using
the business skills area as the context.
Although detailed lesson-by-lesson guidance is provided in the Instructor's hacen the
following is a brief description of this text. Each chapter in English for Corporate Communica-
tions is generally made up of the following sections. : ay)
oH cme
Previewing
The Previewing section initially explores the business topic by allowing the students to apply
the business concepts to their own lives, relating their own knowledge, culture, background
and experience to the chapter topic. This section includes ‘Questions for Discussion’’ and
“Just in Case’’. “Questions for Discussion” are a series of questions which the students discuss
in small groups. Some questions are more technical than others, depending on the subject
matter of the chapter, but all questions are designed to focus on what the students already
know about the topic. ‘Just in Case” familiarizes the students with vocabulary and/or concepts
from the case prior to reading.
Case History
The fictitious business cases are designed to foster understanding of the specific business
concepts and allow the students to become active participants by then solving the case
problem with their groups. Chapter 10, Entrepreneurship, is a little different. In this chapter,
there is no business case. Instead, students are required to use all the knowledge gained from
the previous chapters to become entrepreneurs and create their own companies and products
and present them to the class.
ix
Comprehension Check
This section consists of two segments: “What's the Story?” and ‘What's the —?” ‘What's
the Story?” is a series of illustrations in chronological order that describe important events
from the case. The students retell the case in their own words using the illustrations as a
guide. It is essential that students understand the case fully before moving to the problem
solving section.
“What's the —2” has a different title in each chapter but the main concept is the same.
This part is designed to give the students additional practice with vocabulary or concepts
from the case.
Problem Solving
Problem Solving consists of two steps. Once the students have gained a full understanding
of the case, they must (in groups) 1. identify the problem and-2. reach a solution. This is
followed by a class discussion, group presentation, or group negotiating session, depending
on the chapter. Students then put their plans of action to actuality through a role play. The
role play is designed to take the students’ Plan of Action (their step by step solution) from the
dream stage to reality. This gives students a better idea as to whether or not their plan will
work. : ‘
Skills
The skills area in each chapter relates to the case and is designed to enhance the students’
ability to be more effective in functioning in the world of business. This section includes,
“For Further Practice’, which enables students to become more familiar with the business
skill through such activities as role play and information gap. A tapescript is included in the
back of the book presenting dialogues of typical business situations which the students then
critique.
Communication Strategies :
Where appropriate, this section is included to help students with functional language relating
to the skills area.
English for Corporate Communications is designed for ESL/EFL students at a high intermedi-
ate to advanced level of language instruction. This text does not require a previous knowledge
of business for either the student or instructor, as the business concepts are taught in a very
clear and simple manner. However, that is not to say that students with advanced knowledge
of business would not be challenged by the book. On the contrary, students with advanced
knowledge of business would be able to enhance the level and quality of the discussion.
Teachers needing additional background of the business topics and possible outcomes of the
business cases would benefit by consulting the Instructor’s Manual.
xX
The following are possible target student groups for English for Corporate Communications:
An individual who would like a preparatory course for academic study in business at a
university in the United States.
An individual who would like to become familiar with the basic concepts of business and
to practice speaking English in a business context.
A foreign business executive who needs to function effectively in the international business
world.
An individual who would like to become familiar with the case study method.
An individual who would like to improve such business skills as: interviewing, giving
presentations, using the telephone, decision making, and negotiating.
A high school student who would like to learn about basic concepts of business and related
business skills.
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ACKNOWLEDGMENTS
| would like to thank my former professor at Boston University, Dr. Steven J. Molinsky, who
encouraged me to undertake this project and Carol Brown-Morales, who provided valuable
assistance during the preparation of the text. | would also like to thank my family for all their
help and patience. Finally, this book is for Mackenzie. May you travel widely and learn many
languages.
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ENGLISH Fn
CORPORATE
OMMUNICATIONS
usiness
Ownership
KGEND A
& Winat are the different forms A
business ownership?
A What are some advantages and

disadvantages of each?
Winich form of business iw awes

53 Yhe most tisk?
\n your daily life, which forms of

business do you come in Contact
with the Most?
CHAPTER
1
INTRODUCTION
FOCUS
DECISION MAKING
All business owners must decide which form of legal organization—a sole proprietorship, a
partnership, or a corporation—best meets their needs. The decision is very important because
the choice affects many managerial and financial issues, including income taxes and the
owners’ liability. In determining which legal form their business should take, owners must
consider the advantages and disadvantages of each. These will be discussed in this chapter.
The business case presented, the Frozen Igloo, portrays a typical sole proprietorship and
some of the business decisions its owners face, such as ‘‘How can we increase and expand
the business? How much risk is involved?’’ Students must decide on the best plan of action
for expansion of the Frozen Igloo. Students will also become familiar with business analysis
through the process of decision making.
PREVIEWING
Forms of Business Ownership
Sole Proprietorship
Typically, the sole proprietorship is the ownership form chosen for the small-town restaurant,
the neighborhood grocery store, the local auto repair shop, and the bakery. Most sole proprie-
torships are small businesses, often having only one employee. However, there are some sole
proprietorships that are large businesses. Many of today’s largest companies started out as
sole proprietorships. Although the owner may employ someone to manage the business, more
commonly the owner is the active manager of the firm. The capital necessary for operating
the business is normally provided by the sole proprietor from personal wealth, frequently
aided by borrowing. The owner usually makes all decisions personally rather than delegating
them to employees. If the business is the owner's sole source of income, the ability to operate
it at a profit is extremely important to him or her.
Discuss the advantages and disadvantages of a sole proprietorship.
Partnership
The typical partnership is larger than the typical sole proprietorship, yet most partnerships
are relatively small businesses. There is no limit to the number of partners, and they may
invest equal or unequal amounts of money. Net profits must be-shared among all partners
involved. It is best, although not necessary, that the agreement between the partners be
written and signed. Such a contract may prevent misunderstanding and ill will at a future
date. The agreement should cover the following points: (1) Who will receive what share of
the profits? (2) Who does what, and who reports to whom?(3) What happens if one of the
partners dies? (4) If desired, how could the partnership be dissolved? Of the three common
types of business ownership, partnerships are the least used.
Discuss the advantages and disadvantages of a partnership.
Corporation
Corporations employ large numbers of people and are owned by large numbers of investors.
Only large businesses can mass-produce and mass-market the goods and services consumers
need and want. A corporation is a legal entity which is created by the law as an artificial
being that has the rights, duties, and powers of a person. A corporation does not change its
identity with changes in ownership. A corporation is brought into existence through a charter,
which is a document issued by a state authorizing the formation of a corporation. Corporations
can raise money by selling shares in the business—called stock—to investors. These investors
are known as stockholders, or shareholders. Stockholders are the owners of a business.
Business profits are distributed among stockholders in the form of dividends. Stockholders
vote in accordance with the number of shares they own. Annual meetings are called primarily
to elect a board of directors, who represent the stockholders. Once a board is elected, it
assumes final authority for allcorporate actions.
Discuss the advantages and disadvantages of a corporation.
QUESTIONS FOR DISCUSSION

In small groups, discuss the following questions.
1. Name some businesses that you are familiar with. Do you know what forms of ownership
they represent? Explain. Describe the products or services they offer.
2. Which of the three forms of ownership do you come in contact with most frequently?
Why?
3. Where are the various forms of business located in your community?
4. Which type of business do you like shopping at the most? Why?
5. If you were to open your own business, what form of ownership would you choose? Why?
JUST IN CASE
New Vocabulary
In each set, cross out the word that isn’t similar in meaning. Discuss the relationships among
the words in each set.
1. inventory stock product staff
2. reputation image illustration name
aN
bookkeeper auditor accountant stockbroker
debt mortgage dividend liability
profit expense income revenue
asset drawback benefit advantage
flavor inedible taste seasoning
renovate improve destroy remodel
proceed progress continue stop
rave condemn praise compliment
=SEONDURY
store shop establishment infirmary
CASE HISTORY
THE FROZEN IGLOO
Bob and Susan Murphy’s dream was to have their own ice cream parlor. Their
fascination with ice cream started fifteen years ago when the Murphys bought a
home ice cream maker. Bob and Susan began experimenting with their ice cream
maker by creating all different types of flavors. Susan’s favorite was the “Abominable
Ice-Age,’”” which was a blend of pecan crunch, maple, and vanilla flavorings. How-
ever, Bob was partial to the chocolate fudge walnut flavor, which he called the ‘““No
Pain, No Gain.” :
Whenever Susan and Bob had guests to their home, they created a new flavor to
serve. Their guests always raved about the delicious ice cream. This was encouraging
to Bob and Susan because they hoped to open their own ice cream parlor someday.
Now, as Bob was retiring from his engineering job of 32 years, he thought that his
dream could possibly become a reality. Bob and Susan had $50,000 saved, and they
thought this would be enough to keep them in business for the first two years of
operation.
Bob proceeded to find a small shop in a retail district in the center of town. The
town had a population of approximately 63,000 people. The town’s mayor, along
with the Chamber of Commerce, had been encouraging entrepreneurs to open
boutiques and innovative establishments in this area. Major renovations were made
to the old brick buildings to preserve the charm and antiquity of days past.
The little shop that Bob was interested in was priced at $35,000. Bob made a down
payment of $10,000 on the shop and took out a ten-year loan to cover the rest. The
monthly mortgage was only $220. In addition to this expense, the shop also had to
be remodeled to accommodate the kitchen area, a seating area for customers, and
display counters. Bob and Susan thought this place was perfect, and put in long
hours getting the shop ready for opening.
Business grew steadily in the first two years of operation. As bookkeeper, Susan
took care of the accounting procedures by recording all financial transactions. This
involved the recording of sales and expenditures. By the end of the second fiscal
year, Bob and Susan were very happy to announce that sales equaled $50,000, while
gross profits totaled $32,000.
The Murphys attributed their success to their reputation for offering a new and
exciting flavor every day of the month. They felt that this was their greatest asset.
YEAR-END STATEMENT
(Second Year of Operations)
Sales $50,000
COGS (Cost of Goods Sold) — 18,000
Gross Profit 32,000
Selling, General and Administrative Expenses — 15,000
Operating Profit
Income Tax (20%)
Net Income After Taxes
‘“‘Today’s Enticing Flavor’ was in addition to the regular product line, which featured
28 to 31 flavors, depending of the number of days in the month. The idea was that
if customers wanted to eat a new flavor every day of the month, they would never
get bored with the choices. The price of a small ice cream cone was $1.25, of a
medium cone, $1.65, and of a large cone, $2.00. Their inventory consisted of eight
different types of toppings to enhance the taste of any ice cream flavor, along with
three different types of cones. The Frozen Igloo also offered ice cream cakes for any
occasion, as well as one or two flavors of frozen yogurt. Bob was planning to expand
the number of flavors of frozen yogurt to take advantage of the trend toward greater
health-consciousness.
Bob was extremely happy with his new career after having worked in the high-
tech field for thirty years. He enjoyed having his own shop, and since business was
profitable, he thought that it was time to expand the Frozen Igloo in some way. Bob
had $20,000 to invest in the expansion.
On the other side of town, a brand-new mall was undergoing construction. This
new mall was planned to feature about thirty-five exclusive upscale shops. Bob and
Susan were considering opening a second Frozen Igloo in this mall. An alternative
to expanding to the site in the mall was to package and distribute the frozen products
directly to area grocery stores and restaurants.
Bob and Susan had only three weeks to notify the mall building contractors of
their decision. They had to decide quickly. As Bob was thinking over both opportuni-
ties, he decided to write down some of the advantages and disadvantages to consider
in making the decision. Here is his list:
THE MALL: DIRECT DISTRIBUTION:

ADVANTAGES ADVANTAGES
> increase customer base with people — > ability to reach customers who don’t
who shop in malls frequently shop in the downtown or
mall areas
v generate more revenue > generate more revenue
customers will associate the image of > more convenient for the customers
the upscale shops with the Frozen
Igloo
become better known to inhabitants become better known to inhabitants
of the city and surrounding areas of the city and surrounding areas
chance to expand operations easy to expand operations as the
the Frozen Igloo would be the only business grows by simply increasing
ice cream shop in the mall distribution
The popularity of malls is constantly Customers can purchase the product
increasing. People don’t go to malls in larger quantities
just to shop but also to escape
weather conditions, as a social
activity, and to curtail boredom.
Don’t have to rely on advertising for
sales. The big stores in the mall do
the advertising, and the Frozen Igloo
would take advantage of the traffic.
DISADVANTAGES DISADVANTAGES
> rent very expensive—$800 per month must build relationships with area
stores and restaurants
> only able to increase customer base must increase production facilities—
from those who shop at the mall $25,000 expansion expense
> have to hire and train staff must design packaging
> have to work nights and weekends must purchase or rent trucks for
deliveries
must hire production workers, a
sales representative, and a truck
driver
must increase advertising to include
local TV commercials; newspapers,
and billboards
As Bob was thinking about the advantages and disadvantages of the two plans for
expansion, two very important questions came to mind: What if the shop fails? Or
what if people don’t buy the products in their grocery stores? With these thoughts
in mind, and with the meeting with the contractors and management only three
weeks away, Bob and Susan needed to start making some decisions. However, before
making any decisions, Bob first resorted to eating his favorite flavor of ice cream,
the ‘““No Pain, No Gain.”
COMPREHENSION CHECK
What’s the Story?
Retell the case in your own words. Use the pictures below as a guide.
val
rv pt
yr
Aw
(SrA
5 osoee:
CREAM
What’s the Meaning?

Match each term from the year-end income statement with its meaning. Write the number
of the word on the line before the explanation.
1. sales ia =! This figure represents the cost of selling the
merchandise that was sold by the firm during
the year.
2. COGS — = If there were no expenses in connection with
sales, this figure would be the amount of net
income earned.
3. gross profit aa is) The amount that must be paid to the govern-
ment.
4. selling, general and —- = This figure is found by subtracting the total
administrative operating expenses from the gross profit on
expenses sales.
5. operating profit 22) @; This figure is the amount paid by customers
for a product.
6. income tax ie | =>,° The final figure on an income statement and
the one that represents the result of all opera-
tions of a business.
7. net income we 99 All of the costs that a business incurs in its
normal operations.
GROUP PROBLEM SOLVING

Identifying the Problem
Consider the following question and write down an answer without consulting anyone in
your group.
What Is the Main Dilemma Facing Bob and Susan Murphy?

When each member of your group has written down an answer to this question, compare
the answers.
p> Are the answers the same or different?

> Discuss each one.
> Come to a consensus on the main problem.
Reaching a Solution
Now brainstorm together, generating an many ideas as possible, to create a solution. Use the
following outline as a guide.
10
GENERAL POINTS TO CONSIDER WHILE BRAINSTORMING
> risk involved
> outlay of capital
> profitability
> short-term versus long-term success
Proposed Solutions
EVALUATION OF EACH PROPOSED SOLUTION
ADVANTAGES DISADVANTAGES
Class Discussion
With your group, be prepared to discuss and present to the class your ideas for the following
three areas.
RECOMMENDATION
What is the solution your group is proposing for Bob and Susan?
11
RATIONALE
Why does your group support this solution?
State your reasons.
PLAN OF ACTION
How does your group plan to implement this solution?
Explain step by step.
Is this plan realistic?
ROe PLay
SITUATION: BOB AND SUSAN MAKE THEIR DECISION
One person in your group is Bob and another is Susan. Talk about both opportunities and
decide which is the best course of action. Create a role play_of the conversation. Use the
guidelines below.
BOB SUSAN
At your age, you are concerned about You feel that Bob always makes all the
risky ventures and about incurring too decisions and never listens to what you
much debt. Your health also worries have to say. Since you.do as much
you. Even so, you enjoy working hard work as he does, you think you should
and want to make more money. have an equal share in making the
You are discussing the situation with decision.
Susan and finally agree on a solution.
Si
Decision Making
Just like Bob and Susan Murphy, everyone needs to make decisions. Businesspeople like the
Murphys must make wise decisions in order for their companies to survive and grow. Decision
making is a crucial part of the management process. It involves selecting the best course of
action for a particular situation. The following are the basic steps in the decision making
process.
TIPS FOR DECISION MAKING
1. Identify the problem. Gather as much information as possible, taking into account all
aspects of the problem.
2. Understand the problem fully and determine why it exists.
3. Generate possible solutions.
p Brainstorm. Write down as many ideas and possible solutions as you can. Remember,
don’t stop to analyze, and no idea is too crazy.
12
p> Choose your three best solutions.
p> Write down the advantages and disadvantages of each solution.
4. Choose the solution with the most advantages and the fewest disadvantages.
5. Formulate a plan of action. How will you implement this solution? Be specific.
p> Be patient, and give the implemented solution a chance to work.
FOR FURTHER PRACTICE

LISTENING PRACTICE
DECISION MAKING
Listen to the problem and solve it with your group using the five-steps of decision making:
1) Identify the problem 2) Determine the reasons for the problem 3) Generate possible
solutions 4) Choose your recommendation 5) Formulate your plan of action.
Written Practice
The following business situation contains a problem. Solve the problem with your group by
using the five steps of decision making. Once you have solved the problem, write a memo
to your employees notifying them of the new policy.
You are the manager of an office with twelve people. Office policy states that all workers
must arrive at work by 8:30. This policy is rarely adhered to. How can you enforce it?
TO:
FROM:
RE:
DATE:
13
anagement
KGENDA
& What are the four job functions
of a manager?
A Describe the different leadership

styles.
What personal qualities should a

§ managerl possess? \
& What are company bjectives?
& What is Japanese Management

syle?
CHAPTER
INTRODUCTION
FOCUS |
GIVING AND RECEIVING FEEDBACK
Management is the process of planning, organizing, leading, and controlling the resources
in an organization. Some of these resources are human, some are material, and some are
financial. These resources must be managed in a way that allows a company to achieve its
goals of supplying its products or services to the marketplace while also making a profit.
How individual managers work within this managerial process is termed leadership style.
Leadership is the way-in which managers interact with their subordinates in order to achieve
company objectives. The management process, leadership styles, objectives, and Japanese
management style will all be examined in this chapter.
The business case presented is about a Japanese car manufacturer, the Usagi Motor Corpo-
raion, which has set up a manufacturing plant in the United States. The overseas operation
has brought together Japanese work values and American workers. We all know that cross-
cultural working relationships can be difficult. In this case, a young Japanese manager named
Toshi Akatsu must gain the support of his American employees while addressing many cross-
cultural issues.
Leadership Styles
Describe and give an example of the different syles of managers shown in the following
pictures.
1. What are some advantages and disadvantages of each managerial style? Which would
you prefer as your manager?
15
AUTHORITARIAN LA/ISSEZ-— FAIRE
Management Functions
Planning, organizing, leading, and controlling are all aspects of a manager’s job.
PLANNING
Planning involves determining what the organization needs to do and the best way to achieve
it. A crucial part of this step is decision making.
ORGANIZING
The second basic managerial activity is organizing. In this portion of the manager’s job, he
or she must determine how best to arrange resources, human and material, to achieve desired
goals.
16
LEADING
In this area of a manager's job, he or she must guide and motivate employees to accomplish
company objectives. Through leadership, managers must exert influence and communicate
with their employees to ensure that employees understand and carry out assigned tasks.
CONTROLLING
The fourth managerial function, controlling, means monitoring the firm’s performance to
make sure that goals are being achieved. Managers compare actual performance with planned
performance and make changes based on the results.
1. With your group, give an example of each managerial function.
2. Do these functions occur independently of one another or are they interdependent?

Explain.
OBJECTIVES
What Are Objectives?
Managers must formulate company objectives in order for their companies to be successful.
Objectives are guidelines and goals for an organization to follow and achieve.
WHY USE OBJECTIVES?

> Objectives give the business a direction.
> Objectives set the standards for the company.
> Objectives motivate workers and managers to contribute their best efforts.
Rank the following major business objectives in order of importance. Discuss and compare
your answers with those of your classmates.
—— PROFITABILITY — EMPLOYEE WELFARE

eee eV Lid — MULTINATIONAL EXPANSION
Soe LILLY a= SOCIAL RESPONSIBILITY
a PRODUCTIVITY
PREVIEWING
Management

1. What do you think it means to be a good manager?
2. What personal qualities do you think a manager should have?
3. Have you ever worked under the supervision of a manager? Was this person an effective
manager? Why or why not? .
4. Have you ever supervised people? Do you think you were (are) an effective manager?
Why or why not?
5. What must happen to ensure that managers and employees from different cultures can
work together successfully?
6. What do you know about Japanese management style?
7. Why do you think the Japanese have been so successful economically?
18
JUST IN CASE
New Vocabulary
Japanese Jargon
The following Japanese terms from the case have been divided into three categories: People,
Places, and Principles. Within each category, guess the match for each term. After reading
through the case go back and check your answers.
People
____ area managers a. production workers
___ technicians b. small, closely supervised groups of production
workers
—_— work groups Cc. the supervisors of the work groups
Places
___ transplant a. overseas manufacturing operation
__— sushi bar b. Japanese restaurant
Principles
—— mission statement a. continuous, gradual improvement
____ open door policy b. Before a proposal is discussed at a meeting, it
is first circulated among managers, who either
approve of it or write their comments and sug-
gestions.
3. __. consensus building Cc. Workers are able to complain to management
without fear of retaliation.
4. _ Kaizen d. the company objective
In each set of words or idioms, cross out the word that does not have a similar meaning.
Discuss the relationships between the words in each set.
substitute temporary replacement permanent

lean sparse abundant insufficient
burden freedom responsibility strain
jot down sit down write take notes
penalize punish discipline reward
calisthenics exercise aerobics inactivity
keep on stop continue remain
OoAMAWHN
SN betray abandon loyal unfaithful
CASE HISTORY
THe Usaci MOTOR CORPORATION
Toshiharu Akatsu, an area manager for a small group of technicians, or production

workers, was getting ready for his weekly involvement circle meeting with his Ameri-
can workers. Toshi had recently arrived in the United States from Japan to be a
manager at the Usagi Motor Corporation.
The Usagi Motor Corporation, the third largest producer of cars in Japan, opened
its first Japanese-American plant in 1987. With 2,500 employees, this “transplant”
accounts for nearly 11 percent of the cars produced for the U.S. market, and that
percentage is likely to rise in the next few years.
The company’s mission statement is ‘Do it better, make it better, improve it even if
it isn’t broken.” This philosophy is based on the Kaizen concept of gradual unending
improvement, the setting and achieving of ever-higher standards.
The plant produces 63 cars an hour—much more than its American Big Three
counterparts, General Motors, Ford, and Chrysler.
“Please take a seat and we will begin the meeting,’”” Toshi, Sat:
The purpose of the weekly involvement circle meetings is to discuss the work
group’s ideas and opinions on how to continuously make improvements in per-
forming their tasks. The goal is twofold: to improve quality, and to eliminate un-
needed motion.
“lam speaking for everyone in the group,” said Dan, a young worker in his
twenties. ‘Today at our meeting, we want to také advantage of the ‘open door policy’
of being able to make complaints without being penalized.”
“Complaints?” Toshi said in amazement. ‘Well then, why doesn’t everyone first
say what he or she enjoys about the company? Then maybe we can address some of
the concerns.”
Mary, a young mother of two, said, ‘I am very pleased with my hourly wage of
$14.80, which is higher than any other assembly plant in the area. However, the pace
is too fast for me. | find it very difficult and exhausting to perform about six different
tasks in only 60 to 90 seconds. And the daily calisthenics—are they really necessary?”’
John, a former farmer, said, “I like being able to lease a new car at discounted
rates every year, but this nonstop work ethic is killing me. Besides a short break for
lunch, only two ten-minute breaks per each eight-hour shift just isn’t enough. And
forget about finding a substitute if you have to go to the bathroom. The staff is too
lean.”
Rich said, ‘I was laid off from my former job and was unemployed for four months
until | was finally hired by Usagi. Usagi’s philosophy of no layoffs is very important
to me. After all, | have four children | need to support. My only complaint is that |
never know if you think I’m doing a good job. You have told us that our work group
has improved our production time, but you have never given me any individual
feedback. What about me? How am | doing?”
Dan continued the discussion by saying, ‘Thanks for installing the Ping-Pong
tables and basketball nets for lunchtime games. | enjoy the recreation. However, |
don’t agree with the program of awarding merit points to work groups for accident-
free production. The pressure to achieve these merit points is so great that many
technicians don’t report their injuries to first aid. Instead, they keep on working.
I've heard about some employees working with injured wrists, hands, and elbows.
20
I’ve even heard about some workers reporting injuries of technicians in other
groups.”
Sue added, ‘I’m afraid even to take a sick day. | feel guilty, like I’m betraying my
work group because | know that they have to pick up the burden.”
“Well, thank you all for airing your opinions,” said Toshi. ‘‘As part of the Usagi
family, it is important that you are all loyal and committed workers. If something is
bothering you, we appreciate that you tell us. Now everyone must get back to work.
At our next meeting | will address these concerns.”
Toshi was looking forward to discussing the content of his involvement circle
meeting with the other Japanese managers after work at the Tokyo Sushi Bar. Late
evening eating or drinking sessions provided an excellent oppotunity to talk about
the work day’s events and for consensus building, or nemawashi. In consensus
building, before a proposal is brought up at a meeting, it must circulate among ,
managers, who either stamp their approval or jot down comments or suggestions.
Toshi was wondering if any other Japanese managers were experiencing the same
dilemma: continuing the successful practices of Japanese management while gaining
the support, commitment, and loyalty of their American workers.
21
COMPREHENSION CHECK
What’s the Story?
The following are pictures of the technicians in Toshi’s work group. Tell what each employee
said in the involvement circle meeting.
JlO
*
ii
ae ("|
RICH
Cl mi
What Kind of Manager Are You?

On the opposite page is a list of the four management functions. Read the sentences, choose
the management function that best applies to each, and write the letter in the left column.
More than one answer is possible. Then, based on your management experience, rate yourself
from 1 to 5. If you have not formally managed employees in a corporate setting, think about
a situation in which you were in charge of a group of people. Discuss your ratings with your
classmates.
Japanese or American?
Determine whether the following business characteristics are more closely associated with
Japanese (J) or Americans (A), or both.
__— Emphasis is on short-range planning.

—__ Workers are part of one big family.
_——— Individualism is valued more than collectivism.
Bed
fa)
hated.
__— Executives partake in nightly late-evening eating or drinking sessions to dis-
cuss the work day’s events.
5. ___ Lifetime employment is guaranteed.
>94
Always Usually Sometimes Occasionally Never
1 2 3 4 5
A. ORGANIZING C. LEADING
B. PLANNING D. CONTROLLING
MANAGEMENT PERSONAL
FUNCTION RATING
| praise, compliment, and reward my

employees when work is done well.
| evaluate the outcome of projects and make
changes as necessary.
| develop overall schedules and set deadlines

for all projects and activities.
| delegate projects to carry out company
goals.
| hold weekly staff meetings.

| let my staff make their own decisions when
possible so that they will feel they have some
authority over their own jobs.
| give individual and group feedback, both
positive and negative, to my staff.
| provide definite guidelines for work
procedures and expect people to follow
them.
| assign people to particular tasks based on

my perception of their special knowledge or
skills.
| determine specific work activities necessary
to accomplish the organization’s objectives.
6. ___ Positive individual feedback, ‘‘a pat on the back,” is important for improved
performance.
7. ___ Employees possess extreme company loyalty and commitment.
8. ___ Weekends and nights are spent with the spouse and kids.
9. ___ Worker participation is sought in shop-floor decisions.
10. __. Weekend golf games with other company executives are important for the
business.
11. ___ Meetings are filled with confrontation and heated discussions.
23
12. ___ A large number of women hold positions in upper management.
13. ___ Employees believe in a nonstop work ethic.
14. ___ Employees can complain freely to management without fear of retaliation.
15. ___ Raises and promotions are based on seniority.

your group.
What Is the Problem Facing Toshi Akatsu?

the answers.

> Discuss each one.
> Come to a consensus on the main problem. >
Understanding the Case

After reaching a consensus on the problem, determine why it exists. What events in the case
contributed to the dilemma?
Reasons for the Problem
Reaching a Solution
Now brainstorm together, generating as many ideas as possible to create a solution. Use the
following as a guide.
24
GENERAL POINTS TO CONSIDER WHILE BRAINSTORMING
> the Japanese work ethic versus the American work ethic
> productivity versus worker satisfaction
> cross-cultural relations
Proposed Solutions
Class Discussion
three areas.
RECOMMENDATION
What is the solution your group is proposing for Toshi Akatsu?
RATIONALE
State your reasons.
25
PLAN OF ACTION
ROLE PLAY
SITUATION: NEXT WEEK’s INVOLVEMENT CIRCLE MEETING
One person in your group is Toshi Akatsu, and the rest of the group are the technicians.
Create a role play of the next involvement circle meeting. Use the guidelines below.
TOSHI TECHNICIANS
After discussing your employees’ You are all anxious to hear what Toshi
complaints with your Japanese has to say. You.all feel very strongly
colleagues, you have decided what to about these issues. React to his
say to them. Address the group and comments.
their concerns.
SKILL
Giving and Receiving Feedback
Effective managers know how and when to give feedback—telling other people how you
feel about them or about something they’ve done—in such a way that it will benefit the
employee and his or her performance. One important objective of giving feedback is that it
should be helpful to the other person and allow him or her to become more effective.
Answer the following questions, using what you know about feedback.
1. When is feedback given? (Give a specific example)
2. Why is feedback necessary?
3. Tell about a situation in which you received positive or negative feedback.
a. What exactly was said?
b. What was your reaction?
26
c. Was the feedback helpful?
eee
THINGS TO REMEMBER WHEN THINGS TO REMEMBER WHEN

GIVING FEEDBACK RECEIVING FEEDBACK
> Feedback is intended to help the > Try not to be defensive.
individual receiving it. > Be sure you understand what the
> Be descriptive rather than evaluative. person is saying. Summarize the
(Describe the behavior/action, don’t points briefly.
judge it.) > Understand that the purpose of
> Be specific rather than general, with feedback is to further develop one’s
good, clear, and recent examples. effectiveness. ,
> Give feedback at a time when the
receiver appears ready to handle it.
> Give only as much as the receiver
can handle at one time.
COMMUNICATION STRATEGIES
What to Say When Giving Feedback
When giving feedback to someone, don’t just say, ‘You talk too much.” Instead it is better
to be more specific by describing the behavior. ‘‘I’ve noticed at our weekly department
meetings that you frequently give your opinion and don’t allow others to give theirs. At our
last meeting, the other managers became frustrated and lost interest because they weren’t
able to contribute.’’
What to Say When Receiving Feedback

When you receive feedback such as the kind described above, remain calm and consider
what is being said with an open mind. Don’t respond, ‘How can you say that? | always allow
other people to speak. Anyway, my opinion is more valuable than theirs. I’ve been with the
company a lot longer than they have.’’ Instead say, ‘‘You think that | talk too much at our
meetings? Well, | wasn’t aware of that. I’Il keep that in mind at our next meeting.”
LISTENING PRACTICE
GIVING AND RECEIVING FEEDBACK
Listen to the following conversation in which a manager is giving feedback to one of her
employees. Critique the session using the guidelines for giving and receiving feedback.
Oral Practice
Imagine you are one of the people in each of the situations below. One of you will be taking
- the role of the person giving feedback and other will be the person receiving the feedback.
Keep in mind the criteria for giving and receiving feedback.
4 Giving Feedback
You are an executive at a major advertising firm. For the last month you have been working
very hard to meet an important deadline for a very prominent client. The pressure has been
tremendous. Throughout the project your secretary has worked overtime and during her
lunch hours, and has been extremely patient with you. Without her hard work and efficiency
you couldn’t have gotten the project done. You know it hasn’t been easy for her and she’s
feeling some stress. Your clients have just informed you that they aren’t completely satisfied
with the campaign. They’ve requested that some changes be made. You know that in order to
complete the project and make the necessary changes, you'll need your secretary’s continued
support. You must talk to her today.
Receiving Feedback
You are an executive secretary at a major advertising firm. For the last month your boss has
been trying to meet a very important deadline. This has meant a lot of extra work for you
and a lot of extra pressure and stress. You like to do your best, and so you've worked very
hard on the project, sometimes at the expense of your family. There’s been a lot of overtime
required. You wonder if your boss has even noticed all of your efforts. You’re very glad that
the project is nearly finished.
Giving Feedback
You are the sales manager at a large computer company. Jack is a new sales representative
in your department. He has been in training for six months but you don’t really see any
progress. You've given him some existing accounts but he hasn’t managed to generate any
business. You are worried that maybe Jack isn’t cut out for sales. Talk to him about his
performance and his goals for the future. Suggest a transfer to another department.
28
Receiving Feedback
You were hired as a sales representative by a large computer company. You don’t feel that
you have had enough training for your job. All of the good accounts go to the senior sales
representatives. You can’t seem to get started because of the small accounts given to you.
Also, the person assigned to train you is always too busy and hasn’t really taught you anything
about sales.
Giving Feedback
You are the production supervisor at a baby food factory. There are twenty people on your
staff. You think that one of your newest employees has a less-than-serious attitude toward his
job; although he completes his quotas, he could exceed them but doesn’t make the extra
effort. What really concerns you, and even makes you angry, is that he distracts some of your
best workers, and their production has dropped. Talk to him.
Receiving Feedback
You've taken a year off from school before starting college so that you can save some money.
Three months ago, you were hired as a production worker in a baby food factory. You are
pleased with the $7.50 hourly wage, as it enables you to buy new clothes, make payments
on your new sports car and save for college. Your coworkers are a lot of fun and you enjoy
talking and joking with them. It makes the shift go by quickly. Your supervisor is very serious,
and you can tell she disapproves of your relaxed style. You know she doesn’t like you to
have fun on the job, but at least you always meet your quota.
29
rganizational
Behavior
KGEND A
vior?
& What is organizational elha
le
\ a What makes a group of peop Loge ther?
succ esst ul when Wonk ing
\
a
What motivates people to do
§ good \ob?
pames
& How can managers and com
motivate their employees?
CHAPTER
3
INTRODUCTION
FOCUS
RUNNING AN EFFECTIVE BUSINESS MEETING
Leading employees to achieve the objectives of the organization is one of the most challenging
roles of management. Motivating people to accomplish these objectives is a crucial part of
the leadership role and one of the most difficult. The study of organizational behavior is the
study of how people work together, and how their behavior affects performance. In this
chapter, we will examine how people work together and the conditions for working together
in a productive manner. The nature of motivation will also be studied.
The business case in this chapter describes a company president who must motivate his
employees under difficult circumstances. Mr. Depardieu, president of Apollo Produits du
Soliel, needs to meet a very important production deadline. The future of his company
depends on it. Students must formulate a plan for Mr. Depardieu in which he is able to
motivate his employees, produce the desired number of units, and make his company compet-
itive once again.
9) PREVIEWING
Organizational Behavior
Working Together
1. Explain how people in the following situations work together in order to produce the
desired results. What happens if one person does not cooperate?
a. a symphony orchestra
b. a sports team
c. a family
31
2. Describe situations from your personal experience when you worked. with other people
to achieve a common goal. Was the experience positive or negative? Explain.
3. Explain how people in the following business situations work together to produce the
desired results. What happens when one person does not cooperate?
a. a board meeting
b. an assembly line
Cc. a management team working towards a deadline
4. Describe situations from your work experience when you worked with other people to
achieve a common goal. Was the experience positive or negative?
‘
MOTIVATION
What Is Motivation?
Motivation is the process of stimulating employees so that they perform better in order to
reach company objectives as well as personal goals.
CHARACTERISTICS OF MOTIVATION
> Motivation originates within the self. People can only be motivated about things that they
truly want to achieve.
> Work-related behavior is influenced by external factors. These factors include rewards,
such as pay, and threats.
> Performance is influenced by the situation in which it occurs. The situation can be positive
or negative. Environmental factors include the people around us or even the company’s
reputation or technology.
1. What types of incentives are used in your country to motivate workers? Do you think they
are effective? Explain.
32
ONE MODEL OF HOW MANAGERS CAN MOTIVATE EMPLOYEES
AND AFFECT PERFORMANCE
Managers must determine the needs of their employees.
Managers must find out what their employees want from their jobs.
Managers must first set their own performance goals and objectives before they can sit
Vavey.
down with their employees to formulate their goals.
Managers must make sure the goals and objectives are realistic.
Managers must link the rewards to the desired outcomes of their goals and objectives.
Managers must ensure that rewards are significant, not trivial.
f
JOS
Sok
Vda Managers must ensure that star performers are rewarded more than good performers, and
good performers rewarded more than poor performers.
Discuss with your classmates how this model of motivation could be implemented in a typical
business situation in your country.

1. Describe some individuals you have difficulty working with. What are the causes of the
difficulty?
2. Describe some individuals you work well with. Why do you work well together?
3. What motivates you to do a good job?
4. Think about a situation in your life when you were extremely productive and efficient.
What factors influenced your behavior?
In answer to the question “What do | want from my job?’”’ rank the following in order of
importance to you. Compare your answers with those of your group and your classmates.
__ GOOD COMMUNICATION __ JOB SECURITY

__ PROMOTION AND GROWTH __ GOOD BENEFITS
__ POWER AND INFLUENCE __. AUTONOMY AND
__ FULL APPRECIATION FOR PSE
WORK DONE __ GOOD PAY
___ INTERESTING AND __ PLEASANT WORKING
CHALLENGING WORK CONDITIONS
JUST IN CASE :
‘. New Vocabulary
In each set of words, cross out the word that isn’t similar in meaning. Discuss the relationships
between the words in each set.
1. teamwork separate . joined together united

2. massive slight huge substantial
3. accelerate hurry delay promote
4. morale enthusiasm indifference confidence
5. exposure uncovered protection laying open
6. incentive deterrent stimulus motivation
7. contender rival competition cooperation
8. support help opposition involvement
9. apathetic commited uninvolved dispassionate
10. prudent unwise careful sensible
Idioms in Context
Rewrite the following sentences, replacing the word or words in parentheses with the correct
idiomatic expression from the list below. Be sure to put the idioms in their proper word form.
in spite of to conjure up
in order to to look for
to take advantage of to find out
bread and butter to get used to
1. Apollo, plagued by management problems, failed (to use an opportunity) the trend.
34
. Mr. Depardieu (discovered) that two of Apollo’s top French competitors were introducing
a new line of suntan products.
. Suntanning was the symbol of success and leisure, (imagining) images of the rich and
famous relaxing on the beaches of St. Tropez.
. Mr. Depardieu never (adjusted) to being the employee of a large foreign conglomerate.
. Mr. Depardieu was aware that many of his employees were (trying) to find jobs elsewhere.
. Should production levels of the old (mainstay) products be sacrificed to produce the new
product line?
. Mr. Depardieu needed to determine how many working hours his employees required
(so that) to meet the deadline?
. (Even though) the difficult situation, Apollo must meet the deadline.
CASE HISTORY
APOLLO PRODUITS DU SOLEIL
Mr. Depardieu cast a wary gaze from his office window on the sunlit city below. He
was worrying about how he was going to get the support of his employees in meeting
avery important production deadline. Business had not been easy for Apollo Produits
du Soleil since it was acquired by a German corporation four years ago.
Since that time, annual sales had decreased from $9.5 million to $6.8 million. In
an industry which had grown by 11 percent in the last four years, Apollo had lost
business and market share. In recent years, attitudes toward the sun and its effects
on the skin had begun to change, creating new opportunities for the industry. But
Apollo, plagued by management problems, had failed to take advantage of the trend.
Light tanning of the skin became fashionable in Europe after World War 1. It was
the symbol of success and leisure, conjuring up images of the rich and famous
relaxing on the beaches of St. Tropez. Suntans gained in popularity during the beach
days of the 1950s. This was when Apollo Produits du Soleil entered the market with
their special French tanning lotions and oils.
In 1970, Apollo was the first suncare products company to offer tropical-smelling
oils and lotions for tanning. Two years later, Apollo expanded its line of suntan
35
lotions and oils to offer a complete line of tanning care products. These products
enabled customers to accelerate their rate of tanning and also to preserve their
tans. These before-and-after tanning products were introduced with an advertising
campaign that stated, “To Radiate That Healthy Glow Use Apollo.” By 1980, Apollo
Produits du Soleil had built a 40 percent share of the French market. Apollo was also
investigating the prospect of exporting its products to the United States and other
European countries.
In 1983, Hautweichmittel Gmbh, a German skin care corporation, acquired Apollo
Produits du Soleil in a hostile takeover. Mr. Depardieu was not fired during the
takeover but was allowed to remain company president. Even so, he never got used
to being the employee of a large foreign conglomerate. In the years that followed,
Apollo experienced the uncertainties that resulted from being transformed into a
subsidiary. The parent company was not familiar with the French tanning product
market, nor with French tastes. Instead of reinvesting profits back into the business
for research and development, Hautweichmittel used the funds to offset losses in
other corporate holdings. Corporate decisions were made in Germany, not France.
Employees did not support the German company. Morale continued to decline, and
Apollo began to lose market share to competitors. ~
These developments coincided with significant changes in people’s attitudes to-
ward the sun and outdoor recreation. The deterioration of the ozone layer in the
upper atmosphere brought a marked increase in cases of skin cancer and a height-
ened awareness of the risks posed by the sun. People began to wonder not only
about weekend sunbathing at the beach, but also about the cumulative effects of
inadvertent exposure to the sun brought about by everyday activities such as garden-
ing, strolling, and even sitting at an outdoor café. Consumers began to demand a
reliable sunscreen that would provide maximum protection against harmful rays.
Sunworshippers wanted a product that would allow them to tan while protecting
them against skin cancer and premature aging.
Mr. Depardieu found out that two of Apollo’s top French competitors were intro-
ducing a new line of suntan products. These products contained a special formula
that enabled sunbathers to remain outdoors for long periods of time without any
damage to their skin. He informed the management at Hautweichmittel that unless
Apollo reacted quickly to the competition, Apollo would continue to lose sales and
market share.
Apollo told the parent company that despite the low budget devoted to research
and development, Apollo’s engineers were able to develop and test a new line of
natural cosmetics—moisturizers, foundations, and lipsticks—that could shield the
skin from the sun. Market research conducted by the German company also indi-
cated that the product line could be very successful. By targeting the products to
men, women, and children alike Mr. Depardieu thought that Apollo would become
a leader once again in the French market and possibly a strong contender for the
European market.
The Management at Hautweichmittel agreed to let Mr. Depardieu produce the
cosmetics and sunscreen lotion in time for the summer holiday season, just six months
away. The vice-president of finance of the German company told Mr. Depardieu to
package and produce 22,900 cases of the new product line: 13,100 cases of sunscreen
lotion, 5,000 cases of lipstick, 3,000 cases of moisturizer, and 1,800 cases of foundation.
A $500,000 advertising budget would be allotted for the new product introduction.
Hautweichmittel’s vice-president of finance wrote in a memo to Mr. Depardieu:
36
“Since we are experiencing severe financial problems, we will not be able to increase
salary and wage expenses to meet the production deadline. Therefore, you will not
be able to hire any additional employees. If the goods are not ready for sale by April
15, extreme cost-cutting measures will have to be taken at Apollo, including massive
layoffs. There is even the possibility of either closing Apollo Produits du Soleil or
selling off the operation.”
Mr. Depardieu was not pleased with the threats. He felt that a limit of six months
for packaging and producing the new products was neither reasonable nor prudent.
In spite of the difficult situation, Mr. Depardieu knew that Apollo must meet the
deadline. One key element to achieving the goal would be to unite his employees
and encourage teamwork. This would not be an easy task, since many of the employ-
ees had become apathetic about their work and had lost their loyalty to the company.
Mr. Depardieu also was aware that many of his employees were looking for jobs
elsewhere. Mr. Depardieu’s job was made even more difficult because of the fact
that overtime would be needed to meet the deadline and financial incentives would
not be provided.
Mr. Depardieu was reviewing last year’s actual sales (see Exhibit 2) and the pro-
jected sales for the new product line (see Exhibit 3). One important question was
“Should production levels of the old bread-and-butter products be sacrificed to
produce the new product line?”
EXHIBIT 1
EXISTING PRODUCT LINE NEW PRODUCT LINE
# OF WORKERS 10
# OF HOURS PER
WORKER 35 (per week) 2
# OF UNITS PRODUCED
PER WORKER PER
HOUR (average)
PRODUCT LINE: . light sunscreen tanning . medium sunscreen

lotion tanning lotion
. tropical suntan lotion . Maximum sunscreen
and oil (no sunscreen) tanning lotion
. before-tanning lotion . moisturizer (three
products for various
skin types)
. after-tanning lotion . foundation (five
products for various
skin tones)
. lipstick (eight different
shades)
37
EXHIBIT 2
LAST YEAR’S SALES (ACTUAL)
EXISTING UNITS UNITS COST PER | SELLING TOTAL

PRODUCT LINE PRODUCED SOLD UNIT PRICE SALES
light sunscreen
tanning lotion 500,000 426,667 $3.75 $7.50 3,200,000
and oil 350,000 3277273 $2.75 $5.50 1,800,000
EXHIBIT 3
SALES (PROJECTED)
NEW PRODUCT # OF PROJECTED | COST PER | SELLING TOTAL

LINE UNITS SALES PRICE SALES
medium sunscreen
tanning lotion 305,000 305,000 $ 9.50 2,897,500
maximum sunscreen
tanning lotion 350,000 350,000 $575 $11.50 4,025,000
moisturizer 150,000 150,000 $3.25 $ 6.50 975,000
foundation 90,000 90,000 $3.75 $ 7.50 675,000
lipstick 250,000 250,000 $3.50 $ 7.00 1,750,000
total 1,145,000 1,145,000 ates. Syfanoon teeae 10,322,500
In addition to developing a new production schedule, Mr. Depardieu also needed

to determine how many working hours his employees required in order to meet the
deadline. While he continued gazing out the window, Mr. Depardieu thought that
this was an excellent opportunity to bring Apollo back to its former position in the
industry and to prepare his company for the newly less restricted trade among the
European Community. He also thought of three possible options: 1. mandatory
overtime 2. voluntary overtime 3. some combination of the two.
38
COMPREHENSION CHECK
What's the Story?
a fo} = ea fo} n 4 = Ww n
SNOITIIN
39
What's the Difference?
Discuss the meanings and the relationships between the following pairs of words. How are
they similar? How are they different?
1. hire—fire 7. takeover—sell-off
2. parent company—subsidiary 8. employer—employee
3. conglomerate—corporation 9. manager—management
4. salary—wage 10. lotion—oil
5. profit—investment 11. mandatory—voluntary
6. research—development 12. product—production

. Identifying the Problem
your group.
What Is the Problem Facing Apollo Produits

du Soleil?
When each member of your group has written down an answer to the question, compare the
answers. ;
p> Discuss each one.

After coming to a consensus on the main problem, determine why it exists. What events in
the case contributed to the dilemma?
40
Reaching a Solution
Now brainstorm together, generating as many ideas as possible, to create a solution. Use the
following as a guide.
GENERAL POINTS TO CONSIDER WHILE BRAINSTORMING:

> How much of the old bread-and-butter products should continue to be produced?
>» How many working hours will it take to produce 22,900 cases of the new product line?
> How can the production deadline be met?
> How can the production workers be motivated?
Proposed Solutions

Class Discussion
three areas.
RECOMMENDATION
What is the solution your group is proposing?
41
RATIONALE
State your reasons.
PLAN OF ACTION
ROLE PLAY
SITUATION: THE MEETING BETWEEN Mr. DEPARDIEU
AND THE PRODUCTION LINE WORKERS
One person in your group is Mr. Depardieu and the rest of the group are his production line
employees. Create a role play of the meeting to discuss the upcoming deadline. Use the
following guidelines.
MR. DEPARDIEU PRODUCTION LINE EMPLOYEES

At the meeting, tell your employees In the meeting, Mr. Depardieu, your
how you plan to meet the deadline. boss, explains his solution for meeting
Explain the company’s situation and the _ the critical deadline. Think about how
reasons behind your decision. Ask for this will affect you and your fellow
their cooperation and support. workers. React to his plan. Present
your ideas. Ask questions.
SKILL
Running an Effective Meeting
Just like Mr. Depardieu, managers need to have meetings with employees to accomplish
desired goals and for two-way communication. Before calling a meeting, however, the
manager must decide if a meeting is the best way to achieve his or her objective. If it is, the
following are some tips to guide you in running an effective business meeting.
TIPS FOR RUNNING AN EFFECTIVE MEETING

> Objective—What is the goal, purpose, or basic reason for holding a meeting?
> Participation—Include only participants who can influence the fulfillment of the meeting
objective.
pe Agenda—Through a memo, let participants know in advance:
- the purpose for meeting
- the time
42
- the place
- topics to be discussed
- what materials (plans, facts, or data) they need to prepare
> Time—Set time limits in advance.
- begin punctually
- end on time
> Communication
- stick to the meeting objective
- discuss only one issue at a time
- give everyone a chance to speak (don’t allow one person to dominate the discussion)
- ask probing questions to keep the discussion moving
- summarize important points
Look at the memo below and discuss whether or not Mr. Depardieu followed the above
guidelines for setting up an effective meeting.
TO: Production Line Employees

FROM: Giles Depardieu, Operations Manager
RE: Special Departmental Meeting
DATE: October 10th
In order to meet the upcoming production deadline, we must discuss and develop a plan
of action. | would like each of you to be prepared to present your action plans as briefly
and concisely as possible. The meeting will be tomorrow from 9 a.m. to 10 A.m. in the
Executive Conference Room.
Please be prompt.

LISTENING PRACTICE
RUNNING AN EFFECTIVE MEETING
Listen to the following meeting between a manager and his employees. Critique the meeting
based on the following.
1) Did the manager give everyone a chance to speak?

2) Did he let the participants know the purpose for the meeting?
3) Was everyone on time for the meeting? How did the manager handle the situation for
those who were late?
4) Did the manager keep the discussion moving?
5) Did the manager summarize the important points of the meeting?
43
Oral Practice
The following are situations which can arise during meetings. Tell what you would do if you
were running the meeting.
. The meeting is scheduled for 9:00 a.m. and only half of the staff is present.
. One item is dominating the meeting, not allowing time for the rest of the agenda.
. One individual is dominating the meeting, not allowing other people to speak.
= . On arriving at the designated meeting place, participants find that the room is already
kwh
occupied.
. The complete agenda has not been covered but the allotted time has expired.
Hn. One individual whom you suspect has valuable insights refuses to participate.
7. Because of a malfunction of the copy machine, you are unable to distribute the agenda
for the upcoming meeting.
8. A verbal disagreement develops between two opposing sides:
se
44
When you are leading a meeting, it is important to encourage participation among members
in a positive way. The following are some key phrases to use while running a meeting.
> That’s an interesting idea.
> I'm glad you brought that up.
> Keep talking, you’re on the right track.
> How can we build on that idea?
> That’s great, how can we do it?
> What else do we need to consider?
> | like that!
45
Human
Resources
& What job do human resource

specialists periorm?
& Wihat are the Reps An selecting

a hew employee? ‘
Yow do companies compensate

§ vneit workers?
Wihy is tt important to match the

r52 Nght employee with the Nght job?
CHAPTER
INTRODUCTION
FOCUS
PROFESSIONAL INTERVIEWING
The emphasis in this chapter is on people and their importance in accomplishing an organiza-
tion’s goals. The acquisition, training, motivation, and retention of qualified personnel is a
critical factor in determining the success of any business. Human resources specialists, or
personnel managers, are employed by even the smallest firms. They help plan for future
personnel needs. They recruit, train, and develop employees. They arrange employee evalua-
tion, compensation, and benefits programs.
But, in fact, all managers are personnel managers. Managers from all areas—marketing,
finance, and accounting—help select prospective employees, train new workers, and evalu-
ate employees’ performance. Therefore, all managers must be cognizant of the basics of good
human resource management. In this chapter, students will have to choose and hire a director
of publicity to rescue the tourism industry of a small Middle Eastern country named Dhuma
Dhuma. Emphasis is also put on the interviewing process from the perspective of both the
interviewer and the interviewee.
PREVIEWING
Human Resources
The Right Person for the Right Job

In order for a company to hire the right person for the right job, the human resources manager
must do many things.
47
Job Analysis
The human resources manager must first write a job description of the position which outlines
the objectives, responsibilities, and key tasks in a job. It also describes the conditions of the
job and its relationship to other positions. In addition to the job description there is the job
specification. This describes the necessary skills, education, and experience needed to fill
the position. A human resources manager also needs to forecast the demand for labor.
Why is a good employee—job match important?
Wd.
“
Sf
Getting the Job

INS:
oe
As a first step, a Company must gather a large number of interested and qualified applicants
for a position. This is the recruitment phase. Managers must then sort through the applicants
and select the best candidate for the job.
What are some ways in which a company may recruit qualified applicants?
Starting the Job

When an employee is hired, some form of orientation is usually given. This helps the employee
learn more about the job, the company’s policies, and its programs. At this time, new
employees usually meet the people with whom they will be interacting.
Next, an employee is given some sort of training. This could be either on-the-job training
or off-the-job training. On-the-job training occurs while an employee is actually at work,
whereas off-the-job training takes place at a location away from the work site, usually a
classroom.
Which form of training is better for both the employee and the company? Explain.
On the Job
Every company needs to assess the performance of its employees in some way. This assess-
ment is called performance appraisal. It is an evaluation of how well workers are doing in
their jobs. Workers must first formulate goals and performance expectations with their manag-
ers. Then expectations are compared with actual performance. This comparison is used in
making decisions about training, promotions, compensation, and dismissal of the employee.
48
Explain why performance appraisals are necessary and an important aspect of business.
Compensation for the Job

Wages and salaries are the amounts paid to employees for their work. Wages are sums that
are paid according to the number of hours worked or the number of units produced; a salary,
on the other hand, is paid at regular intervals in return for doing a job, regardless of the
amount of time or output involved. ‘
Aside from wages and salaries, companies may also offer incentive programs to their
employees. These programs are designed to motivate improved performance and productivity
by offering additional pay over and above the normal wage or salary level. A common
example of this is a sales bonus. In a bonus arrangement, if an employee sells a certain
number or dollar amount, he will receive a special payment in addition to his wage or salary.
Those employees who do not reach this goal will earn no bonus.
Another type of incentive is profit sharing. This is based on profit levels of the firm. Profits
earned above a certain level are distributed to employees. Stock ownership by all employees
serves as an incentive to lowering costs and increasing productivity and profits, and thus
increasing the value of the employees’s stock.
In addition to incentives, wages, and salaries, firms offer their workers benefits in return
for their work. Examples of these include health insurance, retirement benefits, and paid
vacations and holidays.
What benefits do you consider most and least important in attracting workers? In keeping
workers? In motivating workers?

1. How did you find out about the availability of your present job?
2. Describe how you were selected for your present position.
49
3. Once you were hired, how were you oriented to your new position and to the company?
4. How is your performance evaluated at your job?
5. What types of benefits does your company offer? Which do you consider the most and
the least important?
6. Select your job or that of someone in your group. Write a job description and a job
specification for this position. ~
JUST IN CASE
Writing Your Résumé
Before you can go on a job interview and be hired by a company, it is important to have a
résumé highlighting your background and experience. Fill in the following information about
yourself to help organize your résumé.
NAME
ADDRESS
TELEPHONE
EDUCATION
(What kind of degree, diploma, or certificate did you receive?)
(Where did you receive it?)
50
(When did you receive it?)
WORK EXPERIENCE
(Position or job title)
(Name of company or organization)
(When and how long were you employed there?)
(What did you do?)
OUTSTANDING ACCOMPLISHMENTS
(What honors or awards have you received? OR What special skills
do you possess?)
LANGUAGE SKILLS
(Which languages do you speak, read, or write? List only if fluent.)
51
CASE HISTORY
DiRECTOR OF PUBLICITY FOR DHUMA DHUMA
Dhuma Dhuma is a small Middle Eastern country located on the Persian Gulf. This
desert land, rich in petroleum, has the most beautiful beaches in the Gulf area. Once
a popular vacation spot for international tourists, this tiny nation has suffered a
dramatic falloff in its tourism business as a result of the Gulf War and a devastating
oil spill. Although the Gulf War is over and the cleanup of the beautiful, white sandy
beaches is almost complete, the once-bustling tourism industry remains virtually
nonexistent.
The foreign minister of tourism of Dhuma Dhuma is looking for an exceptional
individual for the position of director of publicity to rebuild the shattered tourist
industry. In this vital role, you will create a public relations campaign for potential
tourists from Europe, the United States, Canada, and Australia. As director of public-
ity, you will work with the ministers of tourism from these countries, along with their
media and travel agents. Expert written and verbal communication skills are required,
with fluency in both Arabic and English. In addition, you must have 5 to 7 years’
experience in tourism, preferably in a public relations role, and have a degree in
communications or business.
The government of Dhuma Dhuma offers a highly competitive salary and generous
benefits. For prompt confidential consideration, send your résumé with salary history
to:
Mr. Khalid Abu

Deputy Assistant to the Foreign Minister of Tourism
POB 2345 Al Safat
Khayal, Dhuma Dhuma
Mr. Khalid Abu, Deputy Assistant to the Foreign Minister of Tourism, has advertised
for the position of director of publicity in the /nternational Herald Tribune and in the
American and European editions of the Wall Street Journal. Mr. Abu has just flown
to Geneva, Switzerland to interview the final three candidates. After the interviews,
he must make his decision. To help him, he has made a profile chart.
52
PROFILE CHART
Gustavo Lopez Nigel Carpenter Kathleen Kalil

NATIONALITY Spanish British American
WORK EXPERIENCE Manager of a chain of International banking Worked as director of

6 luxury hotels in officer. Facilitated tourism for the State of
Costa del Sol, Mallorca, banking transactions Alaska. Developed
the Canary Islands, and between Dhuma public relations
Barcelona. Dhuma and the US. campaign to bring
and Europe. tourists back to Alaska
after the Exxon Valdez
oil spill.
OUTSTANDING Helped the government Swam the English One of the first women
ACCOMPLISHMENTS to promote hotels in Channel. to graduate from an Ivy
Barcelona for the 1992 League MBA program.
Olympics.
EDUCATION Graduate of the Graduate of Oxford MBA degree, Columbia

University of Madrid. University. Major: law. University.
Major: business.
LANGUAGES Fluent in Spanish, Fluent in English, Fluent in English and

French, and English. French, Arabic, and Arabic.
German.
APPEARANCE Bright floral shirt with Professional, crisp- Navy blue suit with
khaki pants. Dark tan. looking designer suit white blouse. Short
Gold chain around with matching graying hair.
neck. briefcase.
COMMENTS Bragged incessantly Good contacts with Began the interview in

about his hotels. After foreign governments, Arabic, but her ability
some research, I has access to large sums to communicate in that
discovered that his of money. language was very poor.
hotels incurred a $5 Now I question the
million loss last year. validity of everything
else on her résumé.
53
COMPREHENSION CHECK
What's the Story?
Review the résumés below. Only the candidates’ work experience has been given. Fill in the
missing information based on the case.
Gustavo Lopez
Caleruega 11
28033 Madrid, Spain
Telephone: 34-1-541988
WORK EXPERIENCE
Title: Executive Director .
Where: Buenos Noches Hotel Chain (1986—present)
Responsibilities: + Managed operations for six resort hotels
- Promoted hotels to travel agents in Germany, England, and
France
- Renovated and expanded hotels to be more elegant and to
hold 50 percent more guests
- Arranged ‘package deals’”’ with Iberia, the national airline of
Spain
- Achieved a year-round average occupancy rate of 89 percent
EDUCATION
LANGUAGES
54
Nigel Carpenter
80 Burton Street #5A
London WC1
United Kingdom
Telephone: 44-71-7927799
WORK EXPERIENCE
Title: International Banking Officer
Where: The Bank of England (1980—present)
Responsibilities: - Facilitated banking transactions between Dhuma Dhuma and
the United States
- Assisted in investing oil profits in foreign banks
- Worked extensively with the government of Dhuma Dhuma
- Traveled widely throughout the country of Dnauma Dhuma
EDUCATION
LANGUAGES
55
Kathleen Kalil
200 East 59th Street
New York, New York 10022
Telephone: 212-932-9711
WORK EXPERIENCE
Title: Director of Tourism
Where: State of Alaska (1989—present)
Responsibilities: + Developed and implemented a public relations campaign
designed to promote tourism after the negative effects of the
Exxon Valdez oil spill
- Developed TV commercials promoting the ‘‘See Alaska’
campaign
- Arranged seven-day tours with cruise ships departing from
Seattle
- Worked with the Chamber of Commerce to send ‘‘See
Alaska’’ brochures to travel agents thoughout the United
States
- Monitored the cleanup of the oil spill
EDUCATION
LANGUAGES
56
ee
What's the Word?
Read the following statements and determine which term in the list describes the statement
best.
orientation profit sharing performance appraisal

benefits off-the-job training wages
salary job description recruiting
job specification on-the-job training incentive program
1. The LG ny, }S coming to campus next week to interview accounting ma-

jors. Z
te ee
. Ljust got a $2,000-a-year raise.
Za’
ry
0)
Wa :
3. The job says that the position reguures the individual to interact with top management
on a regular basis. wn N—
4. My first day on the job is
5. Do you need an MBA for the job?’
6. | just got accepted into the management training program at Bueno & Bueno. | will spend
& . . .
the first six weeks at company = sun with thirty other new trainees.
AID Bere
bY Wann
7. | exceeded my monthly sales go and now the company is giving me a VCR.
8. | go on vacation next week. [2b nor

9. | get paid $6.50 an hour. We
10. | always try to work ernelenpy Nis contribute to the profitability of the company.

Choosing the Best Candidate for the Job
your group.
Whom Should Mr. Khalid Abu Hire for the Position of

Director of Publicity?
the answers.
pe Are the answers the same or different?

pe Discuss and evaluate each candidate chosen.
57
EVALUATION OF EACH CANDIDATE
Class Discussion
three areas.
RECOMMENDATION
Which candidate has your group chosen to hire?
RATIONALE
Why has your group chosen this candidate?
PLAN OF ACTION
What does your group plan to offer this candidate? —for example, salary, benefits, etc.
ROLE PLay
SITUATION: Mr. ABU NOTIFIES

THE CHOSEN CANDIDATE
One person in your group is Mr. Abu and another person is either Gustavo Lopez, Nigel
Carpenter, or Kathleen Kalil, depending on which candidate your group has chosen to hire.
MR. ABU THE DIRECTOR OF PUBLICITY

You have finally decided whom you are ‘You are either Gustavo, Nigel, or
going to hire. Now you must call the Kathleen. You have just received a
person and invite him or her to dinner —_phone call from Mr. Abu inviting you
at the hotel in Geneva and notify him to dinner. He has told you that you’ve
or her that he or she has gotten the been chosen for the position. You're
58
job. Tell the person why he or she was very happy but thought the
chosen. Don’t forget to explain the remuneration would be better.
salary and other important details of
the job.
SKILL
Professional Interviewing
The following are some guidelines to aid you in the interviewing process, both as an inter-
viewee and as an interviewer.
INTERVIEWER INTERVIEWEE
. Create a supportive climate. . Dress professionally and
- Introduce yourself. appropriately.
- Use a warm, friendly tone of voice. . Be prepared. Know as much about
- Spend a few minutes in small talk the company and the job as possible
before you begin. and know why you're the person
- Don’t communicate an attitude of they should hire. Practice answering
superiority. possible questions.
. Structure the interview. Spend the . Be on time. It’s best to get there a
first 60-70 percent of the interview little early to allow time in case you
discussing the candidate, and the get lost and need to fix your clothes
last 30-40 percent discussing the and hair.
company and job. . Make a list of questions beforehand
. Probe thoroughly. to ask the interviewer.
- Ask for clarification: “What exactly . Give a firm handshake when
does that mean?” greeting the interviewer and when
- Ask for elaboration: ‘Can you tell saying good-bye.
me more about that?” . Maintain eye contact.
. Take notes of key information. . Be confident and try to act as calmly
. Pace the interview. Don’t get as possible.
bogged down in one area. . Be honest.
. Allow the candidate time to ask . Follow up the interview with a letter
questions. restating your interest and
. Conclude the interview: qualifications. If there was
- Thank the candidate for his or her something that you wanted to say
time and tell him or her what to but didn’t, say it now. Also, thank
expect in terms of a follow-up. the interviewer.
- Don’t give misleading cues to the
candidate.
gown 0
These are some questions that may be asked during an interview. Use them as a guide when
either conducting a job interview or being interviewed.
WORK EXPERIENCE
What jobs have you held? How were they obtained? Why did you leave?
What did you like most about your jobs? Least?
What were your primary accomplishments?
Why did you choose your field of work?
Vv
YY
WY.What has been your greatest frustration or disappointment in your current job?
EDUCATION AND UISASINEIE:
Why did you choose your particular place of study(ris aa technical school, college,
etc.)?
Do you feel your grades reflect the kind of work you are capable of doing?
How well has your schooling prepared you for your career?
SELF-ASSESSMENT
Describe yourself.
v What makes you a good investment for an employer?
How do you feel about your progress so far?
GOALS AND EXPECTATIONS
Where would you like to be in five years? In ten years?

v Why do you think you would like to work for us?
Aside from money, what do you want most from a job?
60
LISTENING PRACTICE
PROFESSIONAL INTERVIEWING
Listen to the following job interview for the position of management trainee at an international
bank. Critique both the interviewee and the interviewer using the guidelines for interviewing.
Oral Practice
Construct interviews based on the following information. The selection process has been
narrowed down to two candidates. One person in the class is the interviewer, while two
others are the candidates being interviewed for the position. The rest of the class has the role
of observing and critiquing the interview.
WANTED
VICE-PRESIDENT
OF
INTERNATIONAL
SALES
61
Job Description
The Thirsty Beverage Company is looking for a bright, energetic individual who is familiar
with the international beverage industry to develop our business in Eastern Europe and the
former Soviet Union. Excellent cross-cultural skills and the ability to speak English are essen-
tial. Russian and German a definite plus. International experience required along with an
MBA or equivalent degree. Salary commensurate with experience.
Company Background
The Thirsty Beverage Company produces soft drinks and beer in Belgium. The company is
ranked third in Belgium in volume of sales. Thirsty Beverage products are for sale only in the
Belgian market. But company president Etienne Marchot feels that with the opening of
international trade in Eastern Europe and the former Soviet Union, excellent business opportu-
nities are available. ‘‘We would like to investigate the possibility of some joint ventures.”
te.
Candidates’ Roles
The job has been narrowed down to two candidates.
Candidate #1: You are extremely interested in this position. Your present job is Interna-
tional European Marketing Director for a Danish beverage company. You have impressive
experience in the international beverage industry. You speak perfect English but are not
familiar with Russian or German.
Candidate #2: You are a former diplomat with the Belgian government, based in Eastern
Europe. You speak four languages fluently. Although you are not familar with the beverage
industry, you know that you could easily learn about it. You feel that the contacts you have
in Eastern Europe would prove extremely useful.
62
The Interviewer's Role
You are the president of the Thirsty Beverage Company, Etienne Marchot. The selection
process has been narrowed down to two candidates. You must pick one. In the interviews,
you should keep in mind the guidelines for professional interviewing.
The Class’s Role

Discuss the interviews after both candidates are finished. Base your discussion on the follow-
ing points:
. Which candidate would you hire for the job? Explain.

. Which questions helped to uncover the skills and background of the candidate?
. Were the questions answered effectively?
. Which questions ‘‘turned off’’ the candidate? What responses ‘‘turned off’ the interviewer?
= . What role did nonverbal
ah
wn communication play in the interview (eye contact, posture,
gestures, etc.)?
63
Marketing
KGEND A
r2) What is markeking?
or?
@ What is consumer behavi
marketing?
& What are the AP's of
pian?
r52 What is a Marceting
CHAPTER
5
INTRODUCTION
FOCUS
GIVING A BUSINESS PRESENTATION
Marketing is the link between the organization and the consumer. All organizations must
serve consumer needs if they are to succeed. Marketing begins with the identification of
consumer needs and the development of a product to meet those needs. Marketing managers
develop a marketing strategy based on the four principle elements of marketing. These four
elements, often called the four P’s of marketing, are product (including goods, services, and
ideas), price, promotion, and place (distribution). Together, these elements are known as the
marketing mix.
In this chapter, emphasis is put on the four P’s of marketing. Students must develop a
marketing strategy using the best marketing mix for the Grandma Jones Company. Grandma
Jones, a frozen food company, is planning to introduce a new product to the market. Emphasis
is also put on giving a business presentation. After students develop their marketing strategies,
they will deliver them in a presentation to the class.
PREVIEWING
Marketing
Marketing in Our Lives

1. Discuss how the following elements influence the products, services or ideas that are a
part of your lifestyle.
a. TV c. packaging e. coupons
b. billboards d. store windows f. your peers
65
2. How do you find out about certain products or sales? What entices you to buy these
products?
Marketing Behind the Scenes

1. Discuss what a company must do in the following areas before a product can reach your
hands.
product research and development

market research
an advertising campaign
. quality control
enorD
managing the relationship between manufacturer and distributor
2. What are the steps that a company takes to introduce a new product?

Think about yourself as a consumer and discuss the following:
1. When you shop, are you more concerned with price or with quality?
2. Do you buy only things that you really need or do you buy things that are the latest fad?
3. Do you plan your purchases carefully or do you buy on impulse?
66
How do the following influence you when you shop?
1. Shopping alone or with someone else
2. Salespeople
3. Your mood
4. Promotion
5. Price
6. Location of store
7. Time of day
67
JUST IN CASE
You the Consumer
Think about the last time you went shopping and made a purchase. Answer the following
questions based on your experience.
PRODUCT PLACE
What did you buy? Describe it Where did you buy it?
What kind of store was it?
=}
‘
MG,
CaS
BS
=ES
a
Saleem
SIISSAA
DO|
PRICE PROMOTION
How much did you pay for it? How did you find out about
How did it compare in price this product? What enticed
to other similar products? you to buy it?
68
CONSUMER
TARGET MARKET
Describe yourself here
Bring to class an advertisement from a magazine. Describe to the class the product that the
company is selling and who the target market is that the company is trying to reach.
CASE HISTORY
GRANDMA JONES, INC.
Ms. Sharon Dobson, the product marketing manager for frozen dinners at Grandma
Jones, Inc., was staying late at the office. She was trying to decide how she was going
to present her marketing plan to the board of directors and to the management of
the company. With the meeting only one week away, Ms. Dobson was still unsure
of the exact marketing strategy she would propose for implementation.
Ms. Dobson had started as a marketing intern at Grandma Jones, a frozen food
company, nearly four years ago while completing her M.B.A. Subsequently, she has
moved up through the ranks to become brand manager. Last year Ms. Dobson made
a proposal to management to create another line of frozen dinners that would be
targeted for a different group of consumers and thus would have a different market-
ing position.
Grandma Jones was founded in 1972. At that time, more and more women were
beginning to work full time. Even though women had less time to prepare meals and
to shop, they still wanted their families to eat tasty and nutritious meals. Grandma
Jones’ Frozen Dinners are targeted to working mothers who do the grocery shopping
and who are concerned about their families’ nutrition.
Grandma Jones products are known in the market for their delicious, homemade
taste. Dinners include a main dish (fish, poultry, meat, or pasta), a vegetable, rice or
potatoes (except with the pasta), and a dessert. Grandma Jones is priced a little bit
higher than the average price for frozen dinners, but this pricing strategy has proven
successful, because mothers are willing to pay a little more to ensure their loved
ones’ nutrition.
The frozen dinners market represents approximately $1.2 billion in annual sales.
The market traditionally increases at an annual rate of about 1.5 percent. Grandma
Jones has maintained an 18 percent market share in an industry where competition
is fierce. Because of the competition, it has been very difficult to gain any additional
share of the market.
Ms. Dobson, in her proposal last year, suggested that Grandma Jones create a
new product line specializing in gourmet/nouvelle cuisine type frozen dinners. As
Ms. Dobson told management in her proposal, ‘We are totally missing the 25-to-40-
69
year-old market segment. These people don’t want to buy a product named Grandma
Jones. This segment of the market is concerned with image. When eating alone after
a busy day at the office, this group prefers a convenient yet exotic dinner.”
The first product Ms. Dobson has proposed is a frozen sushi dinner. No other
frozen food company sells this specialty item, mostly because of the difficulty in
preserving the freshness and raw taste of the fish. This has been a major source of
investment for Grandma Jones. Grandma Jones’s product developers have invented
a special preservation process which enables the fish to retain its fresh taste. The
product has been tested and retested. In fact, last week, Ms. Dobson led a focus
group with six Japanese people to taste the sushi and to give feedback on whether
they liked it or not. Ms. Dobson didn’t tell the testers that the sushi had been
previously frozen. All six of the testers thought that the sushi was fresh and tasted
delicious. Ms. Dobson knew that she had a winning product on her hands.
Even though she knew that this was a great product, Ms. Dobson still had to
develop a sound marketing plan or the product could fail. These were the questions
she was trying to solve while staying late at the office:
PRODUCT
What should the name of the product be?
How should it be packaged?
PRICE
What should the selling price be?
How much will people pay for it?
How much profit do we need to make on the sale of each unit?
PROMOTION
Who is our target market?
How are we going to entice this market segment to buy the new product?
How can we motivate retailers to push our product?
What forms of advertising should be used?
PLACE
What type of store should distribute the product?
Should it be available regionally or nationally?
70
COMPREHENSION CHECK
What’s the Story?
Retell the case in your own words. Use the following pictures as a guide.
ey
What's the Problem?
Determine which of the four P’s the following problems are most closely associated with:
PRODUCT, PRICE, PROMOTION, OR PLACE.
1. The phone number for placing a telephone order is always busy.

2. The store is only open until 5:00 p.m. on weekdays.
3. The selling price of the product is only 5 percent higher than the cost
of manufacturing it.
4. The store runs out of the product during a special sale.
71
5. A new dress has a rip under the arm after it is worn once.
6. The product is 20 percent higher in price than other similar products.
7. The advertisment on TV is targeted to children as consumers and
influences them negatively.
8. A new flavor of ice cream is introduced in the winter.
9. The shoe store only has size fives (very small) and size tens (very
large) left in a very popular style.
10. A new product is displayed in the back of the store.

your group.
What Is the Main Problem Facing Grandma Jones, Inc.?
the answers.
> Are the answers the same or different?

pm Discuss each answer.
Reaching a Solution

The Target Market
Product
Price
Promotion
uv
VV.
ViaPlace
Description of the target market
72
PROPOSED MARKETING PLANS
Product
Price
Promotion
Place
EVALUATION OF MARKETING PLANS

Group Presentation
With your group, prepare a presentation using the four P’s of marketing. Develop an appro-
priate marketing strategy for Grandma Jones’s new product. Base your presentation on the
following areas:
RECOMMENDATION
What is the marketing plan your group is proposing?
73
RATIONALE
Why does your group support this marketing plan?
State your reasons.
PLAN OF ACTION
How does your group plan to implement this marketing plan?

RoLe PLAY
SITUATION: THE REACTION OF THE BOARD OF DIRECTORS
AND MANAGEMENT TO Ms. DoBsON’s PROPOSAL
One person is Ms. Dobson and the rest of the group are members of the board of directors
and management. Create a role play of this meeting. Use the guidelines below.
MS. DOBSON BOARD OF DIRECTORS

AND MANAGEMENT
You are presenting your marketing plan You are listening to Ms. Dobson’s
to the board of directors and the proposal. You all have been with the
management of Grandma Jones. You company since it began and are wary of
are nervous because you know that suggestions for change, especially from
they are very hard on newer and people who haven’t been in the
younger colleagues. Even so, you are company as long as you have. Take
prepared for your presentation and are _—notes on what she says and question
confident that you can convince them her about the things that concern you.
of the merits of your proposal.
SKILL
Giving a Business Presentation
Presentations are extremely important in business. In Sharon Dobson’s case, she has to give
a presentation to the board of directors and the management of her company to convince
them to approve and adopt her new proposal. Even if you have an excellent idea, its accep-
tance depends on how effectively it is presented. If you deliver an ineffective presentation,
the chances of achieving your goals are limited. The following are some tips to help you
avoid this situation.
74
Preparing the Presentation
The Analysis
First ask yourself the following three questions.
> Who is my audience?

> What kind of response do | want?
> What do | hope to communicate to this group?
The Presentation
Start developing your ideas based on your answers to the three questions above.
Select your main ideas and develop them.

Arrange those ideas so that they build logically. Make an outline.
Support each idea with facts and an explanation.
.Y. Develop your introduction and conclusion to attract the listener’s interest. Remember to
VeVi
summarize main ideas in the conclusion.
> Plan your content to fit the time allowed.
Prepare an outline of your presentation on 3 X 5 index cards to aid you in your delivery.
The Delivery
Above all, appear relaxed.
Try to gain a good rapport with the audience.

Your appearance:
- Dress in a comfortable and professional manner.
- Maintain good, straight posture.
- Maintain eye contact with the audience.
- Use hand gestures that will add to the presentation instead of distract from it.
- Show enthusiasm.
- Use visual or audiovisual visual aids.
Your voice:
- Don’t speak too fast.
- Pronounce your words clearly.
- Project your voice so that people in the back can hear you.
- Try not to use too many pauses or hesitations.
75
LISTENING PRACTICE
GIVING A BusINEss PRESENTATION
Listen to the business presentation and critique it based on the guidelines for giving a business
presentation.
Oral Practice
In each of the following situations, something goes wrong for the presenter. Tell what you
would do if it were you.
te A person in the audience keeps interrupting the presentation with questions and com-
ments. .
You forget to bring your notes with you to the presentation.
Several people in the audience are yawning and getting up for coffee.
aeAfter speaking for one hour and with only five minutes left of your allotted time, you still
haven’t presented your main points.
The microphone doesn’t work. iy
When you tell a joke as an opener, no one laughs.
When the host introduces you, he mispronounces your name.
You spill coffee on your suit right before the presentation is to start.
eee
eeJust before the presentation is to start, you are so nervous that your heart is beating
rapidly, your stomach is upset, and you feel that you can’t even talk.
10. You state a fact in your presentation that you aren’t sure is true.
76
A tape recorder is an excellent tool for self-improvement in public speaking. To find out how
effective you are when speaking English, make two five-minute recordings. For the first
recording, read aloud any material of your choice. The second one should be an informal
conversation with a friend. Listen to both tapes and rate yourself, using the following guide.
The left column lists characteristics of an effective speaker, and the right column lists areas
in need of betterment. If you do have some marks in the right-hand column, think about how
you can make improvements.
DO YOU SOUND:
___ Self-assured __._ Self-conscious
__— Warm, friendly —— Impersonal, indifferent
—___ Relaxed __. Tense
___ Fluent —__._Hesitant
aout Clear ___. Difficult to understand
—_— Communicative —_— Unresponsive
__— Appealing ——— Monotonous
____ Not too loud or too soft ____. Too loud or too soft
_____ Not too fast or too slow __ Too fast or too slow
77
Ethics
KGENDA
5 What is ethics?
Do you think that morals and
r2 Nalves should play an important
role in business?
What influences people to be .
§ unethical in the workplace of in
government?
Wihat can businesses and

government do {o Encourage
eXinical behavior?
CHAPTER
INTRODUCTION
FOCUS
UsING THE TELEPHONE
Business ethics deals with the right and wrong actions that arise in any work environment.
Sometimes a conflict exists between an ideal decision and one that is practical under certain
conditions. It is important that companies and individuals evaluate their ethical responsibilit-
ies when making decisions.
In this chapter, students examine various business situations and discuss whether or not
they are ethical. Differences of opinion may arise. It is important to remember that ethics are
both personally and culturally defined. In the business case, students must decide which
course of action Paul Massey should take: Should he please his friend or should he do what
he believes is right?
PREVIEWING
Personal Ethics
1. Discuss how ethical or unethical the following situations are. Do you think these situations
occur often?
cheating on an exam
. spreading rumors about someone that aren’t true
lying to make yourself look better
. taking home company supplies
eno
mD calling in sick when you are in perfect health
79
2. Name some situations that you have been faced with where a question of ethics was
involved.
Ethics in Business
1. Discuss how ethical or unethical the following situations are. Do you think these situations
occur often?
. a factory is dumping chemical waste into a nearby lake

. a company knowingly puts a faulty product on the market
. asales rep “‘pads’’ his expense accounts
. a bookkeeper embezzles funds
fe. a manager gives his 22-year-old niece a highly-sought- afer entry level job
eaam
2. Are you familiar with other business situations in which the ethics are questionable?
Ethics in Occupations
1. In which occupations do you think the greatest incidence of unethical behavior occurs?
With your group, rank the following in order from the greatest incidence to the lowest.
Discuss and compare your answers with your classmates.
— BANKING — MEDICINE — LAW

— FINANCE == MEDIA — GOVERNMENT
_—— SALES — MANUFACTURING — EDUCATION

1. Why do ethics vary from person to person?
80
2. Do you think people today have the same morals and values people had twenty years
ago? Explain.
3. Do you think that the people running your country’s government and businesses are
generally honest? Explain.
4. How do you think competition among employees affects ethics in the workplace? ’
5. Do you think that businesses and society today place too much emphasis on profit and
success? What effect does this have on ethical behavior?
6. Discuss the following statement: A company that wishes to encourage ethics must pursue
a strategy that includes non-economic goals.
7. How do you think companies should treat dishonest employees?
8. Do you agree with the statement “An honest person can be influenced to engage in
unethical behavior if the work environment has no system of checks and balances’’?
Explain.
9. What specific things can a company or a government do to encourage ethical behavior?

er
a rerarrrnrnnrnsnnnnE EEE
10. Do you think corporations have a responsibility in preserving our environment? Explain.
————
81
JUST IN CASE
New Vocabulary
The following words are taken from the case. Match the meaning of the italicized words with
their definition or synonym given below.
The police officer arrived in the nick of time to catch the robber.
The road was very slippery after the snowstorm.
The boutique’s clientele were very wealthy women.
Please accept my heartfelt sympathy for the loss of your mother.
___ There was a three-car collision on the highway.
Bee
ee
tage
Sopa
SEES Following her car accident, Jane had extremely high medical bills. Luckily, her
insurance company paid all the medical bills.
7. ___ He’s not a very good actor but he gets a lot of rolés in movies because he has
a good agent. ‘
8. ___ Since the snake bite was innocuous, the man didn’t need any medication.
shoppers b. representative
protection against lost . d. harmless
slick f. sincere
fgoo
at just the right moment h. crash
CASE HISTORY
THE INNOCUOUS INSURANCE COMPANY
It was Friday afternoon and Paul Massey, an insurance agent, was about to finish
another busy week at work. Paul had started his own business, Innocuous Insurance,
a year and a half ago after working for a large insurance company for ten years. It
hadn’t been an easy year and a half, trying to build up the business and increase his
clientele, but lately business had been good.
As Paul was leaving his office to go home to his wife Sylvia and their three children,
the telephone rang. It was Nick Perry, the owner of In The Nick of Time Body Shop,
an auto repair shop which also sold used cars. Paul and Nick had known each other
for years. They were first introduced while attending a family party. Nick’s wife Susie,
and Paul’s wife Sylvia were cousins. In fact, it was Nick who encouraged Paul to go
into business for himself.
Nick once said, ‘‘I’ll help you any way | can. Whenever | sell a used car or have a
customer who is unhappy with his insurance company, I'll refer him to you.”” And
that’s just what Nick did. In the last year and a half, Nick had sent over a dozen new
clients to Paul.
“Hi, Paul,” Nick said on the telephone. ‘‘How are you? How’s Syivia doing?”’
“Fine, Nick. How’s your family? What can | do for you?”
“Everyone’s fine, thank you. | just bought a new pickup truck and | need
liability insurance. I’m interested in getting coverage for property damage and
bodily injury.”
“Nick, you should also get collision insurance in case you get in an accident.”
“No, Paul, | don’t think | need it.’
“Well, | recommend that you get it just to be on the safe side.”
“No Paul, | don’t want to spend the money, and since I’ve never been in an
accident | don’t think that I’ll be needing it.”
“Sure, Nick, whatever you say. I'll write this up right away but it probably won’t
be sent out until Monday because my secretary has just left for the weekend.”
‘That's fine, Paul. Have a nice weekend and say hello to the family for me.’
On Sunday morning Paul and his family were getting ready for church when
the telephone rang. It was Nick.
“Paul, Susie was on her way to church today and had an accident. The road
was slippery and she slid through an intersection, striking another car and
extensively damaging my brand-new truck. Now | know | told you on Friday
not to include collision insurance, but since this has happened | want you to
include it.”
“Nick, I’m very sorry about the accident. Was anyone injured?”
“No, but my new truck is ruined. You have to add collision on the policy so
the insurance company will pay for all the damages.”
“But Nick, that’s dishonest. | can’t do that.”
“Well, Paul, you had better do it or I'll take my business somewhere else. Not
only my business, but I'll make sure that | tell all the people that | sent to you
to go elsewhere.”
“Nick, | need to think about this. Can | call you back in about ten minutes with
my decision?”
“1 can’t believe that you even need to think about this, but all right.”
As Paul hung up the phone, he was feeling very disturbed because he couldn’t afford
to lose all the business that Nick had given him. However, Paul also felt that principles
are an important component of one’s character and that one must not compromise
one’s heartfelt belief system.
COMPREHENSION CHECK
What’s the Story?
INNOCUOUS
INSURANCE
COMPANY
HOW ABOUT
NO, | DON'T NEED JT.
COLLISION I'VE NEVER HAD
INSURANCE ? AN ACCIDENT.
What's Ethical? What’s Not?
Read about the following situations and decide if they are ethical (no problem) or unethical.
84
Situation 1
The owner of a freight company is petitioned by an animal rights organization to stop
shipment of exotic tropical birds. The activists charge that the tropical bird trade is inhumane
and is leading to the extinction of several species. The shipping mogul, while sympathetic to
these views, argues that hundreds of destitute peasants who hunt the birds could be adversely
affected. Besides, the importation ofthe birds represents a significant amount of the company’s
earnings. He decides to continue the shipment but declares that 5 percent of the profits will
go toward creating a wildlife sanctuary in the rain forest.
UNETHICAL —____ NO PROBLEM ____
Situation 2
A rea: estate agent doesn’t tell the buyer that the house she is buying is near a former toxic
waste dump site.
UNETHICAL ____ NO PROBLEM ____
Situation 3
Upon receiving a major order, the procurement officer realizes that the shipper erred by
including merchandise in excess of the order. He recognizes that the surplus will enable him
to make up for lost inventory and doesn’t report the error.
UNETHICAL _____ NO PROBLEM ____
Situation 4
After a year of poor sales, a sales representative convinces her boss to let her give expensive
gifts to potential clients. The strategy works and sales increase.
Situation 5
A job applicant finds out the day before her job interview that she is pregnant. She decides
not to say anything rather than jeopardize her chances.
Situation 6
An administrative assistant routinely makes up excuses for her boss to upper management
and to his wife when he takes long lunches with his secretary.
UNETHICAL ____ NO PROBLEM ___
85
Situation 7
An executive learns that his company is about to be sold, which will send its stock price
soaring. He leaks this information to two clients as well as to several friends.
UNETHICAL —__ NO PROBLEM ———_

your group.
What Is the Main Problem Facing Paul Massey?

the answers.
> Are the answers the same or different? .

> Discuss each one.

Reaching a Solution
86
> Paul’s belief system
> Paul’s and Nick’s friendship
> Potential loss of clients who were referred by Nick
Proposed Solutions

Class Discussion
three areas:
RECOMMENDATION
If you were Paul Massey, what would you do?
What is the solution your group is proposing?
RATIONALE
State your reasons.
87
PLAN OF ACTION
ROLE PLAY
SITUATION: Paut Discusses His DECISION WITH NICK
One person in your group is Paul Massey and another person is Nick Perry. Create a role
play using the following guidelines.
PAUL MASSEY NICK PERRY

After thinking the situation over very You are very angry that Paul had to
carefully, you have made up your mind _ think this over. After all, you helped
what to tell Nick. You are dialing the him by sending him a lot of business.
phone so you can discuss this with You feel that he owes this to you.
him. Finally, the phone rings and it’s Paul.
SKILL
Using the Telephone
Paul Massey’s job requires him to conduct a large percentage of his business using the
telephone. In today’s business world, being able to communicate effectively on the telephone
can mean the difference between success and failure. Not only do sales jobs rely on the use
of the telephone, but the phone helps to carry out many functions that people rely on every
day, such as inquiring, confirming, interviewing, complaining, and ordering. The following
are some tips to help you be more effective when using the telephone.
Be Prepared
Write down the important points that you want to talk about before you dial the phone.
Be Direct
Know your purpose for calling, and know the desired results.
Be Friendly
Since you will be judged on your voice alone, it is important to project a warm, friendly, and
enthusiastic tone. People will be more responsive to you and more willing to talk to you.
88
Be Courteous
Use the commonly accepted format of greeting and closing: Conversations usually consist of
a greeting, a statement of purpose for calling, and a closing. A typical greeting and statement
of purpose for calling could be the following: ‘Hello, Mr. Smith. My name is Bob Jones and
I’m with the Orange Computer Company. How are you? (Response from the other person.) The
reason I’m calling is because. . . .’’ A typical closing could be (depending on the situation): “I
enjoyed talking with you and | hope that you will consider using our product. If | can be of
any help to you please don’t hesitate to call me. I'll send you our company brochure
highlighting our new product. Thank you for your time, Mr. Smith. | look forward to talking
with you soon.”
Be Interested
Listen to the person you’re talking with. Show that you’re interested in that person and what
he or she is saying. Listen to his or her concerns and try to resolve them.
Be Precise
Be able to explain yourself in a concise manner.
Be Articulate
Enunciate your words clearly and don’t speak too quickly.
Be Attentive
Give the person you're talking to your full attention. Don’t do other things at the same time
that may be distracting.
Leave Messages
If the person you want to speak with is not available, leave a message with his or her secretary
or on the answering machine. Don’t be afraid to speak into an answering machine. Wait for
the tone and identify yourself and your company and give your phone number. Know what
the message is that you want to leave, and say it in as few words as possible.
Be Resourceful
Don’t hang up until you’ve gotten the information that you want. You may have difficulty
reaching that person again.
89
LISTENING PRACTICE
Usinc THE TELEPHONE
Listen to the following conversations. The first one is about a person collecting money on a
past due account. The second conversation is about a Customer Service Representative
handling a complaint call. Critique the conversations based on the following:
1. How did the receiver respond to the caller? How did the caller respond to the receiver?
2. Was the caller and/or receiver:
prepared?
direct?
friendly and courteous? *
resourceful?
Vv.
¥, effective?
4Y.-VaV¥
Oral Practice
The following is designed to give you more practice when using the telephone. One of you
will be the person who is making the call (A) and the other will be the person who is receiving
the call (B). Keep in mind the list of tips for being more effective when using the telephone.
A. You are in the training program of a prestigious brokerage firm. Your sales goal for this
month is to invest $15,000 for new clients. The only way you can get new business is by
using the telephone and the phone book. It’s in the evening and you’re staying late at the
office so you can reach people at their homes.
B. You've just gotten promoted in your engineering firm. Finally, you are hoping to have
some money to invest for your two children’s college educations. You think the stock
market is very risky. The phone rings; it’s the stockbroker. i
A. The water pipes in your house have been leaking for three weeks. You have called the
plumber several times and have talked to his secretary and left messages on his answering
machine. You know that he has received the messages and you can’t understand why he
hasn't returned your calls. You are very annoyed.
B. You have been very busy because of the approach of winter. For the last two weeks you
have had emergency calls to take care of. You've gotten the messages but have been too
tied up to return the calls. Finally, you have a free moment and you respond to the call.
A. You would like to go on a trip to an exotic place but you aren’t sure where. To help you
plan your excursion, you call a travel agent that your coworker recommended.
B. You are a travel agent who is known for planning exciting vacations for people who don’t
know where they want to go. You attribute your success to asking a variety of questions
that help you to get to know your customers on a more personal basis. You have just
90
received a brochure on the Galapagos Islands. Your company is sponsoring a contest in
conjunction with the Galapagos travel package. The first travel agent who registers two
people to take the trip will be able to go free. You have always wanted to go to the
Galapagos but have never been able to because the trip is extremely expensive. The
phone rings; it’s a new client.
Trying to reach someone by telephone can be very difficult. Instead of leaving a vague
message such as ‘‘Have him call me when he gets back,”’ it’s better to be more specific. ‘I'll
call Ms. Galvez again this afternoon. Is two-thirty a convenient time for her, or should we
make it four o’clock? Which fits better into her schedule?’
Getting through to the boss often means getting past the secretary. It’s important to tell the
secretary why it’s to his or her advantage to talk with you. Don’t call and say, “I’m calling
because I'd like to tell you about our maintenance agreements on copiers.’’ The stronger
approach is, ‘I’m calling because | may be able to save you fifteen to thirty-five percent on
your maintenance costs for your office copiers. Just by asking Ms. Opalka four questions, I'll
be able'to give her a good idea of just how much she can save. Depending on your machines,
that could mean annual savings somewhere between $1,100 and $2,700. Can we schedule
a ten-minute call this afternoon, or is tomorrow morning better?”’
91
International
Business
@ What is international business?
&@ Wihy do nations trade?
& NWinetis a mulitnational company?
@ Wihat are some methods of

conducting international trade?
CHAPTER
7
INTRODUCTION
FOCUS
NEGOTIATION
International trade makes a wide variety of goods and services available to people everywhere.
Many of the items that we use daily are imports—products that are sold where we live but
produced or grown somewhere else. Conversely, products that are made or produced in a
country, but shipped abroad, are exports. Regardless of its resources, no country today can
produce all of the goods and services demanded by its citizens. Countries naturally tend to
export those things that they can produce better or less expensively than other countries.
They can then use the proceeds to import things they cannot produce efficiently at home.
The business case in this chapter demonstrates the transacting of international business
between a large multinational company and a poor developing country. Iguana Oil, a multina-
tional company, wants to arrange an agreement with the country of Guilipa to extract and
export its oil reserves. Students must negotiate the international business between the two
opposing sides. Specific attention is given to the process of negotiation.
PREVIEWING
International Business
The International User
1. Think about the following products that you may use everyday. Where do these products
come from?
a. televisions c. wine e. oil

b. coffee d. cars f. paper
93
they from?
2. Make a list of other products that you use in your daily life. What countries are
&
nn2
3. Why do these countries produce these products?
YOUR COUNTRY AS AN:
IMPORTER EXPORTER
. What are your country’s five top . What are your country’s five top
imports? exports?
. Why does your country import these . Why does your country export these
goods or services? goods or services?
94
3. From where does your country 3. Where does your country export
import them? them to?
4. What are the advantages and 4. What are the advantages and
disadvantages of importing them? disadvantages of exporting them?
5. Does your country have a balance between the amount of goods that it exports and
the amount that it imports (balance of trade)? Is this important? Explain.

Aside from exporting, the following are some other ways of conducting international trade.
Match the following methods to the descriptions that follow, and then discuss examples of
each within your group.
—__—._ 1. A joint venture __—_ 3. A licensing arrangement
oe 2A cartel __— 4. An offshore manufacturing operation
A. Under this type of agreement, a firm in one country permits a firm in another country to
use its patents, trademarks, and technical processes to manufacture and market a product.
B. Under this method, a foreign firm and one established in a host country share the owner-
ship and control of a third company in the host country.
C. A group of companies or countries handling similar goods join together in an effort to
control the market for their goods.
D. In this method, a company establishes its manufacturing plant in a foreign country to take
advantage of the cheap labor and to avoid the high cost of transportation of the goods.
When a firm operates in several countries, based in a parent country, and has global owner-
ship and management, it is a multinational corporation (MNC). What are the parent countries
of the following MNC’s?
Nestlé
International Business Machines (IBM)
Sony
Royal Dutch Shell
95
Name some other MNC’s that operate in your country. What are the parent countries of these
MNC’s?
What are some benefits that a MNC can bring to a developing country? Are there any
disadvantages?
JUST IN CASE
ay New Vocabulary
The words in bold are taken from the case. Read the following sentences and try to guess the
meaning of the words. Write a synonym or your own definition.
1. Atthe end of last year, Iguana Oil’s total assets were $38.9 billion and it was ranked
as the fourth largest petroleum company in the world based on revenues.
2. The company was founded in 1932 and experienced phenomenal growth during the
1930’s and 40’s; it made an important contribution to the war effort during World
War Il.
3. It’s growth continued well after the war as baby boomers bought cars to support
their need for mobility in their work, entertainment, and vacationing.
4. Now as Iguana Oil prepares for the twenty-first century, the world’s oil supplies
are diminishing and the cost of exploring and developing new oil fields is increasing
tremendously.
96
5. At our current rate of extraction, which is in accordance with world demand, our
present oil reserves are expected to be used up within the next twenty-five years.
a ee
iee ee ee Se eee
6. The oil reserve may be extremely large or it may be extremely small. There is no
way of knowing until we actually start developing the oil exploration sites already
staked out.
7. Since the 1970's, Guilipa has been plagued by a large deficit, unable to earn enough
foreign currency to pay for imports.
8. All of President Sanchez’s aides were exclaiming, ‘This is just what Guilipa needs
to help rebuild the economy!”
9. Even though President Sanchez thought this could be an excellent opportunity for
Guilipa, he was still a bit wary.
10. ‘Yes, Guilipa desperately needs economic help. We are in very difficult times.
However, we still want representation, autonomy, and dignity in the venture.
Now try to match the words with one of the given synonyms or definitions.
eet talk a. extraordinary

__- 2. phenonmenal b. independence
__._- 3. baby boomers c. shout
_ 4. diminish d. cautious
_._ 5. in accordance with e. order
__—-6.._ stake out f. demarcate
97
_._—«7«.-: deficit g. individuals born after the
immediate post-World War II
period
—_—- 8. exclaim h. corresponds to
——._-—C«*—8 ~wary i. decrease
—_ 10. autonomy j. shortage
CASE HISTORY
IGUANA OIL
Iguana Oil is a petroleum company with operations in the United States and more
than eighty other countries. The company’s operations include exploring for and
developing crude oil, a most important commodity in today’s world. In addition,
Iguana Oil is involved in transporting crude oil in pipelines, supertankers, and trucks.
At the end of last year, Iguana Oil’s total assets were $38.9 billion and it was ranked
as the fourth largest petroleum company in the world based on revenues.
The company was founded in 1932 and experienced phenomenal growth during
the 1930s and 1940s; it made an important contribution to the war effort during
World War II. Its growth continued well after the war, as baby boomers bought cars
to support their need for mobility in their work, entertainment, and vacationing.
During the 1970s, the Organization of Petroleum Exporting Countries (OPEC) helped
to increase the profits of Iguana Oil by raising oil prices. By the end of the 1980s,
Iguana Oil was in a strong financial position.
Now, as Iguana Oil prepares for the twenty-first century, the world’s oil supplies
are diminishing and the cost of exploring and developing new oil fields is increasing
tremendously. According to the president of Iguana Oil, Bill Rowen, “Iguana Oil
must prepare for the future by exploring for more oil reserves and developing new
sources of energy. The exploration and development of new reserves is urgent for
Iguana Oil. Our future depends on it. At our current rate of extraction, which is in
accordance with world demand, our present oil reserves are expected to be used up
within the next twenty-five years. Iguana Oil needs to find new sources, rich with
reserves, that will carry the company well into the twenty-first century.”
An initial exploration by Iguana Oil has determined that there is a strong possibility
there is an oil reserve off the coast of Guilipa, a poor developing nation located in
the tropics. However, the size of this reserve is not known. Yesterday Mr. Rowen
told the board of directors, ‘‘The reserve may be extremely large or it may be
extremely small. There is no way of knowing until we actually start developing the
oil exploration sites already staked out.’
The country of Guilipa has a population of about 4.5 million people. The per
capita income averages approximately $700 per year. Guilipa’s main exports are
sugar, coffee, fish and other seafood. Its main imports are raw materials for plant
and equipment, technological and electronic goods, and, of course, oil. Since the
1970s, Guilipa has been plagued by a large deficit, unable to earn enough foreign
currency to pay for its imports. This debt, and the balance of payments deficit,
has contributed to runaway inflation and to a severe shortage of consumer goods.
98
Recently, a native Guilipian remarked to the foreign press, ‘‘Now there are very few
products in our supermarkets. What is available for me to buy gets more expensive
every day because my money continues to lose its value. | don’t know what the
future holds for my family, but we are getting more and more desperate.
In addition, Guilipa is suffering from a high level of unemployment, especially in
the capital city. Outside the capital city, many of the citizens are peasant farmers or
fishermen on the coast.
Guilipa’s president, José Sanchez, who is running for reelection next year, re-
cently said at a campaign rally, “If | am elected as your president again, Guilipa’s
economy will continue on its path of improvement. More jobs will be created, your
children will eat and go to school, your money will be worth more!” With this, all
the people clapped and shouted, “Sanchez! Sanchez! Sanchez!”
When President Sanchez returned to his office later that day, he was contacted
by the Iguana Oil Company, which notified him of its interest in starting oil drilling
off Guilipa’s coast. All of President Sanchez’s aides were exclaiming, ‘This is just
what Guilipa needs to help rebuild the economy! Even though President Sanchez
thought this could be an excellent opportunity for Guilipa, he was still a bit wary.
“Yes, Guilipa desperately needs economic help. We are going through very difficult
times. However, we still want representation, autonomy, and dignity in this venture.”’
President Sanchez, clearly a man of the people, is considered by all to be above
undue influence. During the whole time José Sanchez has been his country’s presi-
dent, not a bit of corruption has touched him or his administration.
In response to Iguana Oil's interest in drilling for oil off Guilipa’s coast, President
Sanchez faxed a letter to Mr. Rowen, President of Iguana Oil.
Dear Mr. Rowen,
| arn delighted to learn about your company’s interest in drilling for oil off the
coast of Guilipa. A venture such as this could really help to solve some of the
economic problems my country is now facing. However, after reviewing the
contract that you faxed to my office, | am very concerned about certain areas.
In order for me to sign the contract, honestly representing all citizens of my
country, we must negotiate the following areas:
OWNERSHIP AND MANAGEMENT
How does Iguana Oil propose to develop the potential oil reserves?
Will Iguana Oil have centralized or decentralized control in the venture?
Who will the management consist of?
Vv
vw
wiv Will Guilipians hold positions in management? If so, how many, and
which positions?
What benefits will the workers receive?
VinV¥What kind of training will the workers receive?
» How much will the workers be paid?
99
PROFIT AND INVESTMENT
Who will own the oil? At what percentage?

How will Guilipa gain income on the oil?
What percentage of the profits will be Guilipa’s?
What percentage of the profits will be reinvested in the company for the
vvvyv
extraction of more oil in Guilipa?
> What percentage will be invested in the country’s infrastructure?
ECONOMIC ISSUES
> How much employment will the venture provide locally?

> How much oil will be provided for the domestic market? At what selling
price?
ENVIRONMENTAL ISSUES
> If there is an oil spill, who will be responsible?

> How will it be cleaned up? Who will pay for the cleanup?
> What happens if the spill destroys our fishing industry?
~
OTHER ISSUES
> We propose to take up additional issues as they arise, particularly as we

approach the active negotiation stage.
At our negotiating session next month in Guilipa, | hope we will be able to

come to an agreement on these areas.
Yours Truly,
yord Sanehe)
José Sanchez
President of Guilipa
COMPREHENSION CHECK
What's the Story?
Retell the case in your own words. Use the pictures below as a guide
&ae
W MW,MA
CG
SANCHEZ
Por
WT?
mets —H) i\¢ 1

frmL< > aanga oNee
rim Hh an 0See cA 7)
101
What's the Word?
Match the words in the first column with their meaning in the second column.
1. multinational i . the search for mineral deposits or other valuable

corporation (MNC) natural resources
2. commodity pie ib: the flow of all money into and out of a country
including imports and exports
3. cartel <= a the average amount of income per person in a
given country
4. exploration wt a. a thing or article which has specific use and
value. It can be bought or sold and is either man-
ufactured or extracted from the natural environ-
ment.
5. balance of ~~ . the rapid and unlimited rise of prices accompa-
payments nied by the excessive printing of money. Rates
usually exceed 100% per year.
6. infrastructure sad a very large firm that produces, markets, and
finances its operations throughout various na-
tions of the world
7. runaway inflation =? an association of suppliers or producers designed
to limit competition among its members with the
objective of increasing profits
8. per capita income Es . the basic structure of a nation’s economy includ-
ing transportation, highways, bridges, communi-
cations, and other public services

Setting Up
The class will be divided into three small groups for the negotiating session:
Group A: Iguana Oil

Your group represents the management of Iguana Oil. Someone on your team will be the
president of Iguana Oil, Bill Rowen. The other group members are experts in a specific area
needed to fulfill the team’s goals for the negotiation. For example, someone will be the vice-
president of finance. Your group will go first in the negotiating session, addressing the issues
that President José Sanchez raised in his memo to your company. Your group will ‘“‘have the
floor’ first, with each team member speaking about his or her specific area. Begin by first
introducing ali participants (in both Group A and Group B) and their specific roles. Keep in
mind the tips for negotiating which are located at the end of the chapter.
102
Group B: Guilipa
Your group represents the country of Guilipa. Someone on your team is President
José
Sanchez. All other members are experts in a specific area needed to fulfill the team’s goals
in the negotiation. For example, someone is the economy minister. Your team will first listen
to what Group A has to offer and then respond with what your group has decided is acceptable
and not acceptable. It is important that all team members take notes while Group A is
presenting its points, so as not to forget important points that you may want to address. Keep
in mind the tips for negotiating which are given at the end of the chapter.
Group C: The Judges

Your group analyzes the negotiating process. When the session is over, your group will have
five minutes to discuss and confer. The following are some points to keep in mind:
. Was the negotiating process successful? Why or why not?

. What ideas, techniques, or ways of speaking were effective in the negotiation?
. Did the session focus on important points, or were many irrelevant issues presented?
. Which important issues did both teams overlook?
= . Did everyone contribute to the session, or did only one or two students dominate the
Om
Wh
session?
. Was the agreement the best possible solution?
ND. What specifically was said that was crucial in reaching the agreement?
8. How could the negotiating session have been improved?
Preparing the Platform

To prepare your group for the negotiating session (only Groups A and B), discuss each issue
raised in the memo that José Sanchez sent to Bill Rowen. Decide what is acceptable and not
acceptable to your group for each issue. (Use additional lines if necessary.)
Ownership and Management
Profit and Investment
103
Economic Issues
Environmental Issues
Other Issues
Group Negotiation
Group A begins the session with an uninterrupted presentation of what it is willing to offer
to Group B. After Group A is finished, Group B presents its platform and reponds to what
Group A has to offer. The following is a worksheet to help you during the negotiating process.
The first part of the worksheet is designed to help you remember important points brought
up that you would like to address later in the session. The second part is designed to help
you evaluate the other team’s proposals, and the third part is provided to help you record
the final agreements. (Use additional lines if necessary.)
Points to be brought up later
104
EVALUATION OF THE OTHER TEAM’S PROPOSALS
Final Agreements
105
SKILL
Negotiating
Negotiation is a very common process and a very important one. Just as it is critical for Iguana
Oil and the country of Guilipa to find a mutually agreeable settlement, we also frequently
find ourselves negotiating with others, whether they be family, friends, or work associates.
Answer the following questions based on your own experience of negotiation.
1. Why do people negotiate?
2. Name some situations in your life in which you had to negotiate with a family member,
friend, or work associate. Was the negotiation successful? Explain.
THE FOLLOWING ARE SOME TIPS TO HELP YOU IN BEING A

SUCCESSFUL NEGOTIATOR
Be Cooperative
In a Cooperative approach to negotiating, the goal is to find a solution that will be perceived
as beneficial to both parties—a win—win situation.
Be Flexible
The negotiators must be able to adjust their demands in response to each other’s proposals.
Be Prepared
Know exactly what you want to achieve from the negotiation and what you are willing to
concede for those things if necessary.
Be Honest
It is important for both parties to share ideas and concerns openly. This creates an atmosphere
of trust and therefore a more cooperative negotiating session.
106
LISTENING PRACTICE
NEGOTIATING
Listen to the conversation in which two people are negotiating. After you hear it, critique the
negotiation based on the following:
1. Were both buyer and seller prepared for the negotiation?

2. Were the negotiators flexible? What would have happened if either party wasn’t?
3. Were the negotiators cooperative and open with each other?
4. Was it a win/win situation?
Oral Practice
Negotiate the following situations. One person takes the role of A and another takes the role
of B. The class should act as observers, judging the negotiating process.
Goal: Negotiate the selling price of the house.

A. Your company is transferring you to another city and it is imperative that you sell your
house immediately. You are asking $227,000 for the house, which you bought five years
ago for $200,000. At the time you bought the house, the real estate market was an
excellent investment. Now, however, the market is depressed, and has been for several
months. Even so, you don’t want to incur a great loss in selling the house.
B. You'll be getting married in six months and would like to buy a house. You’re in no hurry,
but you’re interested in this house. There are many houses on the market, but you’ve seen
only a few of them. Even so, you thought you'd put in an offer of $189,900.
Goal: Negotiate the type of food your restaurant will offer.

A. You have entered a partnership with a friend of yours to open a restaurant. You want to
open an Italian restaurant, for a number of reasons. First, you have many unique and
extremely delicious family recipes that have been handed down from generation to
generation. The city where you live is predominantly made up of people of Italian descent
and has many Italian restaurants. You feel that you should stick with what you know best
and with the kind of food that the local people like best.
B. You completely disagree with your partner. You want to open a Thai restaurant. There
are already too many Italian restaurants in the city. You want to offer something new and
different. You know a man from Thailand who was a chef in his country and is presently
looking for a job.
107
Goal: Negotiate an office agreement on smoking.
A. You’ve just been promoted and have moved to a new office. After the move, you discover
that the person you share an office with is a smoker. You strongly object to smoke in your
work space. Unfortunately, your company has no policy that covers this problem. You
decide to speak with your new office-mate.
B. You have been smoking cigarettes for fifteen years. Since you have a high-pressure and
stressful job, you find it necessary to smoke frequently. You feel that it calms your nerves
and that you would be a wreck without it. Your last office-mate was also a smoker.
108
The following phrases will help you achieve a win—win situation when negotiating.
“Please correct me if I’m wrong.”

It is important to establish a dialogue with the other person. To achieve this, it sometimes
helps if you present the information you have as though it might possibly be inaccurate.
“Mr. Wong, I’ve just learned—please correct me if I’m wrong—that the cost of produc-
ing your goods is $25 per unit. When | started doing business with your company last
month, | was told that the cost was $45. Have | been misinformed?”
“Could | ask you a few questions to see whether my facts are correct?”
Ask the other side to clarify its position.
“Is the cost of producing each unit $25?” This is less threatening than ‘The cost of
producing each unit is $25, which means that you have been overcharging me.’
“Let me see if | understand what you’re saying.”

Restate the other side’s position in positive terms to make sure you have understood it.
“Let me see if | understand what you’re saying, Mr. Wong. If I’ve understood you
correctly, you think that the unit selling price of $90 is fair because the costs of buying
the raw materials fluctuate.”
“One fair solution might be .. .””

Present a fair option for both parties.
“Given all the considerations we've discussed, one fair solution might be to sell the
goods to me at a fixed 50 percent markup over your production costs. The selling price
should fluctuate as the market price for raw materials fluctuates.”
“If we agree ... If we disagree .. .”

Make it easy for the other party to agree to your proposal.
“If you and | can reach an agreement now, I'll place an order for more goods. If we
can’t reach an agreement, I'll have to take my business elsewhere.”
109
inance
KGENDA
nt OPLLON
Winy is financing an {portaorate Use?
for bath personal and corp
s of personel
& What are some exarnple your We?
Anancing that you use WH
winch a
What are some sources rom
a?
@ company can acauire cap
n
Wihhatis the difference betwee
financing?
@ ghort-Lerm and long-verm.
CHAPTER
g
INTRODUCTION
FOCUS
BEING PERSUASIVE
Sores
Every company needs money in order to survive and grow. In this chapter, we will discuss
the sources and uses of short-term and long-term financing. Using funds involves risks, and
the financial manager needs to protect the firm from unnecessary financial losses.
Financial managers must ensure that the company’s earnings exceed its costs—the com-
pany must earn a profit. For a proprietorship or partnership, profits mean an increase in the
owners’ wealth. For a corporation, profits signify an increase in the value of its common
stock.
The chapter’s business case portrays a businessman who is interested in buying a franchise.
Students will take the role of a consultant and will decide how the new business venture
should be financed. Emphasis in this chapter is also put on the business skill of being
persuasive—a necessary quality of successful business dealings.
PREVIEWING
Personal Financing
1. Are you familiar with the following examples of personal financing? Explain how they
work.
charge accounts
. mortgages
student loans
ao
op savings and checking accounts
.
111
2. Are there any risks involved for either party? Explain.
Corporate Financing
1. The following are examples of short-term and long-term financing. These are some sources
from which a company can gain capital.
a. Trade credit allows the buyer to delay payment of the bill for the goods purchased. For
example, ‘2/10, net 30’ means that you can deduct a 2 percent discount from the total
bill if you pay within ten days. If you don’t, the entire amount is due by the thirtieth
day.
What are some advantages of paying early? Of paying late?
b. Companies also take out loans from commercial banks. It is the borrower's responsibility
to convince the lender that the money willbe returned on time, with interest.
Do you think this differs from personal bank loans?
c. Equity financing occurs when a company issues and sells ownership in the company.
Earnings are paid to shareholders in the form of dividends. If there are no earnings to
be shared, the firm can skip dividend payments. There are two different types of stock
that a company sells: preferred stock and common stock. Preferred stock is sold with
a specific dividend rate. Before any earnings can be distributed to common stock
shareholders, the preferred dividends must be paid.
Why then do you think investors buy common stock?
d. Debt financing occurs when a company raises capital by borrowing. The company
issues bonds, which are long-term notes that carry a specific interest rate and maturity
date. Payments of interest and the repayment of the loan are fixed legal obligations.
When these are due, the firm must pay.
Explain the difference between debt financing and equity financing.

eee
ee
ee EE EE Eee
112
1. If you were going to start your own business and needed to obtain capital, what would
you do? Explain.
2. What is a franchise? Tell about some of the franchises that exist in your country.
3. What are some ways in which a company uses money or capital?
4. Give some examples of ongoing expenses that a company may incur.
5. What is the difference between short-term and long-term financing?
6. Classify the following situations as utilizing short-term (ST) or long-term (LT) financing:
new equipment to increase output and production

. a buildup of inventory for the Christmas season
a new warehouse to expand operations
aoxre
. anew computer system to assist in inventory control
7. Why do people invest in the stock market? If you had $10,000 to invest, what would you
do with it?
113
JUST IN CASE
Idioms in Context
Replace the word or words in bold with the corresponding idiomatic expression. Rewrite the
sentence. Remember to change the idioms to their correct forms.
to eat out to come across to miss the boat

to sign up to think over to lose one’s cool
to bring in to send away for
1. The manager will consider your recommendation and give you an answer tomorrow.
2. | found this article unexpectedly and thought that you might want to read it.
3. The secretary became angry and told the manager that she would quit.
4. Have you registered for the business class yet?
5. Roberto lost the opportunity by not investing in the company when it first issued its stock.
6. Eva requested information from the Curry Company telling about its herbal products.
7. The boss hired two accountants to correct the inaccuracies in the financial report.
8. On Fridays, we usually have dinner at the Sol Restaurant.
In each set of words, cross out the word that isn’t similar in meaning. Discuss the relationships
between the words in each set.
1. tutelage guidance training position
2. industrious lazy hardworking diligent
3. patron customer shopper owner
4. combat truce fighting battle
5. grand opening termination unveiling beginning
6. survey questionnaire investigation policy
7. royalty fee profit regal payment
8. yuppie young professional geriatric Career-oriented
114
CASE HISTORY
THE BLuE DRAGON
Hau Truong was looking through the classified section of the Vancouver Courier.
Hau, an extremely industrious Vietnamese refugee, resettled in Vancouver, British
Columbia after escaping from his homeland ten years earlier. He opened a very
successful Vietnamese-French restaurant five years ago in the busy financial district
in the downtown area. He modeled it after one that his family had owned for two
generations in Saigon. The restaurant was very profitable; it was patronized mainly
by Vancouver's yuppie population, who eat out 3 to 4 times a week. Hau was looking
for a new opportunity. He came across the following advertisement.
TAE KWAN DO
OPEN YOUR OWN AUTHENTIC DOJANG
BY FRANCHISING FROM THE KOREAN MASTERS.
FOR MORE INFORMATION CONTACT:

THE BLUE DRAGON
YONGANGU WOHYORO, 1 GA 40-16
SEOUL, KOREA
822-598-4493
This reminded Hau of his days as a soldier in the army of Vietnam, when the soldiers
were taught Tae Kwan Do. While in the army, he reached the rank of first-degree
black belt. Hau was very interested, and sent away for more information. He received
the following brochure:
THE BLUE DRAGON

Business: Tae Kwan Do Dojang
Founded: 1945
Franchised: 1987
Start-up Investment: $60,000—$200,000
World Tae Kwan Do Federation, the

Blue Dragon was founded by Sun Ho
Park, a seventh-degree black belt and
former undefeated Korean National
Champion. Mr. Park runs the Blue
Dragon Dojang in Seoul, which was
founded in 1945, following Korea’s
liberation from Japan. Mr. Park de-
cided to franchise the operations in-
ternationally in 1987. Today the Blue
The Business Dragon franchise is located in fifteen
The Blue Dragon, under the tutelage countries and expects to be in five
of Korean Masters, is the only authen- more countries by the end of next
tic franchisor of the art of Tae Kwan year. An international franchise “‘do-
Do in the world. Endorsed by the jang’’ (gymnasium) can expect aver-
115
age yearly gross sales of $280,488. through the aid of tapes and videos.
The translation of Tae Kwan Do Students are required to purchase au-
from Korean means *’the art of kick- thentic ‘’Gi’s’’ (uniforms), complete
ing and punching’ —*‘the art of un- with the Blue Dragon emblem, which
armed combat.” Modern-day Tae are made in Korea. Students will have
Kwan Do is a unique martial art incor- the opportunity to compete in na-
porating both the quick, straightline tional and international Tae Kwan Do
movements that characterize the Japa- tournaments. As a franchise owner,
nese style and the flowing circular you will have the opportunity of spon-
movements of most Chinese methods. soring some of the yearly events.
What truly distinguishes Tae Kwan Do A Blue Dragon franchise includes a
are its unique and varied powerful weight room, which is necessary for
kicking techniques. It is this use of leg building up leg muscles, cross train-
and kicking forms that sets Tae Kwan ing and warming up exercises. The do-
Do apart from all other martial arts. jang also needs 1—2 large rooms for
Not only is Tae Kwan Do concerned instruction, complete with mirrors,
with physical conditioning; like other carpet, and punching and kicking
martiai arts it is also directed toward bags. Men’s and women’s locker
the spiritual development of its stu- rooms are necessary, along with a
dents. seminar room and a reception/lounge
As a franchise owner, you are re- area.
quired to spend six weeks in Korea The Blue Dragon also offers a de-
at the Blue Dragon Headquarters for luxe franchise model, which includes
training in moral development and a restaurant in addition to the dojang
Tae Kwan Do. This training will con- for the complete Korean experience.
tinue with the help of visiting Korean
Masters until the level of first-degree
black belt is achieved. Following the What It Takes
initial training, a Korean Master will Depending on the location and the
help with the grand opening of the model you choose, your initial invest-
dojang and will remain at your fran- ment will range from $60,000 to
chise for up to two months, de- $200,000. The terms of your fran-
pending on the need. chise agreement will apply for ten
As part of the Blue Dragon philoso- years, with a renewal period for an-
phy, seminars will be given every other ten years. You'll pay a royalty
month on the mental and spiritual as- fee of 10 percent of your gross
pects of Tae Kwan Do. Four seminars monthly sales to Blue Dragon head-
every year will be given by a Korean quarters.
Master traveling to your franchise, To open a regular facility, you can
while the others will be taught expect these start-up costs:
Initial franchise fee

Weight room equipment
Punching/kicking bags
Mirrors
Carpet
TV/VCR
116
Furniture (for lounge, seminar room
and reception area) 2,000
Lockers/bathrooms 8,000
Outdoor sign 3,500
“Gi’s’’ (uniforms) 2,000
Computerized cash register 4,000
Rent (first and last month’s) 1,800
Hau thought that the dojang sounded like a great idea, especially since there weren't
any Tae Kwan Do gyms in the Vancouver area. However, there were a number of
karate facilities. When Hau called two of them to inquire about classes, he was told
that he would have to wait about four months in order to sign up for beginning
classes.
Hau thought that the next step would be to conduct a market research survey.
He made up a questionnaire to give to his customers at his French-Vietnamese
restaurant. Two hundred people answered the survey. These are some of the results.
1. Have you ever heard of Tae Kwan Do? YES 76% NO 24%
2. Did you know that Tae Kwan Do is the martial art of
Korea? YES 9% NO 91%
3. Did you know that the varied powerful kicking tech-
niques are unique to Tae Kwan Do? YES 3% NO 97%
4. Did you know that Tae Kwan Do is also concerned
with the spiritual development of its students? YES 14% NO 86%
5. Would you be interested in learning the martial art
of Tae Kwan Do? YES 62% NO 38%
6. Have you ever eaten Korean food? YES 2% NO 98%
7. Would you be interested in trying it? YES 90% NO 10%
Hau was very encouraged by the results of the survey. He felt that opening the
franchise was an excellent opportunity and he didn’t want to miss the boat. Even so,
Hau still had many questions to think over regarding the details of the new business
operation.
To help with the decision making, Hau brought in a consultant. He told the
consultant that he wanted him to analyze the opportunity and present a recommen-
dation to him next week. Hau also told the consultant that his overall wealth was
valued at $400,000. This included the restaurant, valued at $125,000 and completely
paid for, his house valued at $175,000 with a mortgage of $50,000 outstanding, two
cars, a stock portfolio of $80,000, and $25,000 cash.
The consultant began asking questions, for example, Which model would you
like to open: the Deluxe or the Regular? How much will your start-up costs total?
Exactly what items are included in this amount? (i.e. rent or mortgage, franchise fee,
equipment, building renovations, anticipated cash flow needs for the first three
months of operation etc.). How do you plan to finance the new venture?
117
POSSIBLE OPTIONS
> Take out a business loan from the bank, keeping the French-Vietnamese restau-
rant in addition to and separate from the new venture. Determine the amount of
the loan and what will be used for collateral. (See Exhibit 1: Loan Application
Form)
> Use your own money from savings and from liquidating assets.
> Sell the French-Vietnamese restaurant valued at $125,000.
> Change the current restaurant into a Korean restaurant and find additional space
in close proximity for the dojang.
With all these questions and options to be considered, Hau lost his cool and told
the consultant, “I’m not sure which is the most cost effective course of action |
should pursue. That’s why | hired you.”
118
EXHIBIT 1
LOAN APPLICATION FOR A SMALL BUSINESS
First National Bank of Vancouver
Name: CSCSCSCSCSSCSUNUW
—- SS Home. Address:
Occupation: ___________________ Business Address:
|. Individual’s Overall Wealth
ASSETS LIABILITIES
cash amounts owed
real estate
stocks
automobiles
business property
Total Total
Net worth = ______________ (deduct total liabilities from total assets)
Il. Describe the business that you are seeking the loan for. Is it an existing business
or a new business? If it is a new business, why do you think it will be successful?
lll. Amount requested from the bank $
IV. Explain why you need this amount of money. Exactly what will it be used for?
Be specific.
. For a new business.

projected first year sales
anticipated first year expenses
For an existing business:
Give a sales history of the last five years of operation.
year
sales
expenses
net profit
If the loan is granted, I understand that if at any time | am not able to make payments to the
bank and arrangements are not made prior, some or all of my wealth may be repossessed
depending on the terms of the loan.
Signature Date
119
COMPREHENSION CHECK
What’s the Story?
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VIETNAMESE
FRENCH
RESTAURANT
ff M, 7 I
COLLABORATIVE
CONSULTANT S
120
What’s the Franchise?
Franchising is very popular, for several reasons. Potential investors and owners find it attractive
because franchising companies offer business models that have been proven to be successful.
These companies also offer start-up assistance and follow-up support. Although the initial
Capital required for a franchise is often more than the cost of starting your own business, the
failure rate is significantly lower.
Below are some companies that have franchised their operations internationally. In small
groups, try to match the franchise with its business definition.
1. Century 21 —— a. weight control programs and products

2. Lincoln Log Homes —— b. house cleaning service
3. McDonald’s ——. c. hotel
4. Greased Monkey —— d. coffee shops specializing in bakery
products
5. Duds’ N Suds —_— e. self-service laundry
6. Sheraton __ f. specialized routine car-care service
7. Merry Maids ——._ g. ice cream parlor
8. Dunkin’ Donuts —_— h. kits to build log cabins
9. Baskin Robbins Ice-Cream Co. — i. real estate sales
10. Diet Center ____ j._ fast food restaurant specializing in ham-
burgers
Which franchises exist in your country? Are they successful? Explain.
Of the franchises that don’t exist in your country, which is there a need for? Explain.

your group.
What is the Problem Facing Hau Truong?

the answers.
121
em Discuss each one.
Reaching a Solution

which model to franchise
risk involved
financing of the operation
availability of funds
Start-up costs
cash flow needs
vvvvvy for the first three months of operation
Proposed Solution
aee ee Eee
Eee

122
Class Discussion
three areas:
RECOMMENDATION
How should the new venture be financed?
RATIONALE
Why does your group support this solution? State your reasons.
PLAN OF ACTION
Role Play
SITUATION: Mr. TRUONG AND THE CONSULTANT
Discuss THE OPTIONS
The consultant is ready to make his recommendations to Mr. Truong. Create a role play of
this meeting. Use the following guidelines.
HAU TRUONG THE CONSULTANT

You still aren’t sure which course of You are prepared to offer a number of
action you should pursue. You disagree solutions to Mr. Truong. After you
with the recommendations of the explain them, tell which one you think
consultant. Finally, you make up your is the best. Convince Mr. Truong if he
mind. disagrees with you.
SKILL
Being Persuasive
A manager, an entrepreneur applying for a bank loan, a job applicant interviewing for a
position, and a sales representative all have something in common—they need to be persua-
sive in order to reach their goals. When selling our ideas, ourselves, and our products to
others, we need to be convincing. The following are some tips to help you to be more
persuasive in your business dealings.
123
Be Confident
Remember your body language: straight posture, eye contact, gestures, a strong voice, and
enthusiasm! Even though these are not words, they still communicate messages. Remember,
sometimes actions speak louder than words.
Be an Authority
Know your subject matter so that you are an expert. This gives you expert power and makes
it difficult for people to argue with you.
Compliment Your Listener

Honestly compliment the person you are trying to persuade. Flattery can easily be overdone,
but all of us appreciate recognition of an accomplishment.
“Everyone's Doing It”

Demonstrate that everyone is adopting the idea or buying the product. People always feel
the need to belong.
“Tt’s Up to You”
In order to be sure you're getting through to your listener, ask frequent questions to make
sure he or she understands what you’re saying. Your listener will give you valuable feedback
and you'll be able to establish a rapport by emphasizing your concern for clear understanding.
Be Calm and Objective

Resistance to persuasion usually increases when you act desperate and nervous over the
outcome. It is best to try to be calm and relaxed. Learn to look at situations objectively.
The following are some examples of persuasive interaction.
Giving a Compliment
You did a fantastic job on the Ivan Project.
Your presentation was very informative.
I’m very impressed with your work.
| understand that you’re a whiz at computers.
V
VV It’s always a pleasure doing business with you.
VSv=V-
124
Your work is always exceptional.
Your office is decorated so beautifully.
| heard that the project was your idea.
“Everyone’s Doing It’’

Last week | sold 500 units of this product. | just can’t keep enough in stock.
| only have a few left because of the unexpected demand.
If you don’t buy it today, you may have to wait awhile until | get another shipment.
All the top lawyers use this brand.
This is the most popular product on the market.
Please attend the meeting. All of the other employees will be there.
Are you going to the office Christmas party? Everyone’s going to be there.
vvvvvvy
“It’s Up to You”
Is this clear?
Do you understand?
Does this seem fair?
If it’s all right with you, I’d like to send you the first issue of the magazine.
V
V¥
Wa Does this sound like something you’d be interested in?
VaevV
125
LISTENING PRACTICE
BEING PERSUASIVE
Listen to the conversation between a salesperson and customer. Critique the interaction based
on the following guidelines.
. Was the salesperson confident?

. Was she an authority?
. Did she compliment the customer?
. Did she demonstrate that ‘‘everyone’s doing it’’?
. Did she ask questions to gain feedback from the customer?
. Was the salesperson calm and relaxed?
*S,
. What was the reaction from the customer?

= . Was the salesperson ‘‘pushy’’ or overbearing?
TSU
&wWwhrd
ON
; Oral Practice
Role play the following situations with your partner, trying to incorporate the tips on being
persuasive. One of you will be A and the other will take the role of B. The class will act as
the observers.
la You are the manager of a department that is using a manual system for inventory control.
In the past the system has worked well, but after completing an analysis, you are convinced
that the system should be automated. You predict that automation will bring added
flexibility and substantial savings. You’ve arranged to meet with another department
manager to discuss the matter.
You are the other department manager. You disagree with the analysis done by your
colleague in support of automating the inventory control system. Your concerns are
employee resistance, a system that is vulnerable to error, and the disruption created
whenever the system is down for repair. Since your departments are interdependent, you
must reach an agreement with the other manager. You will discuss the matter at a meeting.
You are a door-to-door sales representative for a vacuum cleaner company. Your company
is now offering a $5,000 bonus for the sales rep who sells the most vacuum cleaners this
month. You really need the money.
. You are the mother of three children aged 5, 3, and 1. Between the children and your
part-time job you are very busy. You don’t have a lot of time for socializing, cleaning, or
for yourself. You’re also short on cash at this time. Your doorbell rings.
. You are applying for a job as a telemarketer. The job requires that you telephone between
50 and 100 people each night to get them to buy season tickets to the ballet. You know
126
it is a difficult and perhaps an unexciting job, but you really need the money. You feel
that you are good at sales, and you are motivated by the amount of money you could
make.
. You need to hire a new telemarketer. Turnover is very high for this position since it is 100
percent commission and you want to make sure that you hire the right person for the job.
You realize that many people are afraid to make sales calls by telephone.
. You are the manager of a small retail store. In order to meet the Christmas demand, you
need all of your employees to work on Saturdays. Currently there are four who don't.
Even though they weren’t hired to work Saturdays, you need them to do so or you'll never
do the amount of business that you've projected.
. You are a group of four employees. You weren’t hired to work Saturdays but now your
manager is asking that you do so for the next six weeks. You aren’t very happy about this,
as you have many things you need to do to get ready for the holidays and would like to
spend time with your family.
127
Accounting
KGENDA
GD What is the purpose of accounting?
-
\
rs What is a balance sheet?
t?
& What is an income statemen
A Wihy is “the bottom. \ine™ so

Arnportant?
CHAPTER
9
INTRODUCTION
FOCUS
MAKING JOURNAL ENTRIES
It is the accountant’s responsibility to collect, analyze, and communicate financial informa-

tion. The accountant keeps records of financial transactions such as sales, expenses, taxes,
and income. He or she must sort, classify, and record these transactions. Then the accountant
must analyze how these transactions affect a business. Accountants can determine how well
a business is being managed and how financially strong it is.
The financial reports prepared by accountants are very useful. For example, potential
investors use them before buying stocks, and banks use them to decide whether or not to
make a loan. Inside a company, managers use them to decide the company’s future direction
and to understand and control operations.
In this chapter, students will have to analyze financial reports and make a recommendation
to the Speakeasy Language School. The school has been operating at a financial loss. Students
will also learn how to record and classify financial transactions by using T-accounts and
general journals.
PREVIEWING
Accounting
Assets
An asset is anything of economic value owned by the firm. Examples include land, buildings,
equipment, inventory, and accounts receivable (payments due to the company).
ASSETS = LIABILITIES + OWNERS’ EQUITY
129
Liabilities
A liability is a debt owed by the firm to others. Examples include loans to be repaid, accounts
payable, rent, mortgages, and taxes.
ASSETS — OWNERS’ EQUITY = LIABILITIES
Owners’ Equity
Owners’ equity, or equity, is the amount of money a firm’s owners invest into a business or
the amount they would receive if they sold all the company’s assets and paid off all its
liabilities.
ASSETS — LIABILITIES = OWNERS’ EQUITY
These equations can be illustrated using the following balance sheet. A balance sheet shows
a firm’s assets, liabilities, and equity. .
THE KING COMPANY

BALANCE SHEET AS OF MAY 31, 1991
~“
ASSETS LIABILITIES AND EQUITY
Cash $ 5,000 Liabilities and Equity

Other Assets 25,000 Liabilities $ 9,000
Total $30,000 Equity 21,000
Total $30,000
ASSETS ($30,000) = LIABILITIES ($9,000) + EQUITY ($21,000)

ASSETS ($30,000) — EQUITY ($21,000) = LIABILITIES ($9,000)
ASSETS ($30,000) — LIABILITIES ($9,000) = EQUITY ($21,000)
Answer the following questions based on the information just given. ~“
1. What are assets? Give an example.
2. What are liabilities?
130
3. What is equity?
4. Explain the difference between accounts receivable and accounts payable.
5. Suppose a business has assets totalling $18,000 and equity totalling $2,000. What is the
total of the firm’s liabilities?
6. The liabilities of the Bear Company total $3,000. The equity totals $15,000. What does
the company have in assets?
7. If a business has $22,000 in assets and $13,000 in liabilities, what is the amount of the
equity?

1. What would happen if a business decided to operate without maintaining any accounting
records? What kinds of problems might occur?
2. Indicate whether each of the following items would be classified as an asset (a), liability
(I), or equity (e).
a. office furniture ____ d. employees’ salaries

____ b. funds invested by the owner = €. rent on an office building
- utilities ___ f. notes payable
131
3. Look at the following examples of a balance sheet and an income statement. Explain the
difference between the two.
THE YOSHI COMPANY

BALANCE SHEET AS OF DECEMBER 31, 1990
Cash $ 3,449 Liabilities $12,119

Other Assets 32,787 Equity 24,117
Total $36,236 Total $36,236
THE YOSHI COMPANY

INCOME STATEMENT FOR THE YEAR 1991
Sales revenue . $75,478

Less cost of goods sold 52,227
Gross margin $23,251
Less operating expenses — 10,785
Income before taxes $12,466
Provision for income taxes — 6,344
Net income $ 6,122
4. What does “the bottom line” refer to in an income statement? Is this the most important
figure shown?
JUST IN CASE
New Vocabulary
The following sentences are taken from the case. Match the meanings of the italicized words
with the definitions given on the following page.
1. Between word of mouth and some direct advertising in that section of town, enrollment
increased every term.
2. The Speakeasy Language Center incurred a substantial loss for the past fiscal year.
132
i) - | went ahead and signed a ten-year lease with an option to buy upon renewal.
. Every term I try to project the number of new students and therefore how many books 1’II
need. But it never works out and I’m always sitting on my inventory.
. According to the year-end income statement, the revenue received from payment for the
classes was lower than expected, while the expenses were much higher.
. My accountant has just informed me that | should make a projection of the coming year’s
income statement.
. The students at Speakeasy are either refugees or immigrants.
. The lower-level classes were full, while students tended to drop out as the classes got
more advanced.
a. a contract used for renting real estate.

b. people who willingly leave their country to move to another
Cc. a report that shows the results of operations for a specific period of
time, identifying profits and losses
d. income that is gained from a given source
e. an accounting period of twelve months
f. an informal way of orally transmitting information from person to
person
g. to quit
h. a cost which must be paid
i. people who are forced to leave their country
j. to be stuck with
CASE HISTORY
THE SPEAKEASY LANGUAGE CENTER
Joe Charleston, owner and director of the Speakeasy Language Center, was sitting
at his desk feeling very depressed. The accountant had just finished collecting and
analyzing the financial transactions for the Center. According to the year-end income
statement, the Speakeasy Language Center had incurred a substantial loss for the
past fiscal year. (See Exhibit 1.)
“There were some problems in collecting money from the students in payment
for the classes,’’ he said (see Exhibit 2), ‘‘but | never thought it would have such an
effect on the ‘bottom line.’ My philosophy is that everyone should have a chance to
learn English. The students at Speakeasy are either refugees or immigrants. Many of
them don’t have enough money to take classes but they need to learn English in
order to function successfully in our community and our society.”’
Joe Charleston began the Speakeasy Language Center after teaching English in
various parts of Asia for ten years. “I finally decided it was time to go back to the
States. The first thing that | thought of was to open a language school. | opened the
school seven years ago, renting the second floor of a small building located in a
133
downtown neighborhood. The area was well known for its large immigrant and
refugee population. In fact, on the first floor of the building was a very popular
Chinese restaurant. When | first began, | was the only teacher. Between word of
mouth and some direct advertising in that section of town, enrollment increased
every term. The last term of the fiscal year had a total enrollment of 506 students,
with a teaching staff of twelve ESL (English as a Second Language) instructors.”
The school year at Speakeasy consisted of four twelve-week terms. Speakeasy
offered two different programs, the Intensive and the Regular. The schedule for the
Intensive program was for three hours per day, Monday through Thursday, either
from 8 to 11 in the morning or from 6 to 9 in the evening. The Regular program was
only twice a week, Mondays and Wednesdays or Tuesdays and Thursdays for four
hours a week either in the mornings or evenings. Fridays were free days at the
Center, reserved for field trips. Some of the field trips were to historical or recre-
ational places, while others were practical learning experiences. For example, one
week the students were taken to the telephone company so that they could learn
the procedure for paying bills. The cost of the Intensive program was $432 for a total
of 144 hours of class time, while the cost of the Regular program was $108 for 36
hours of class. Levels started from very basic, with no knowledge of English, to
advanced conversation classes. The lower-level classes were always full, but students
tended to drop out as the classes got more advanced. Mr. Charleston thought that
each class should have no more than fourteen students and no fewer than seven. ‘‘If
the classes are larger than fourteen, the students aren’t going to learn the language.
Students must be active participants in the learning process, and small classes allow
this.”
According to the year-end income statement, the revenue received from payments
for the classes was lower than expected, while the expenses were much higher (see
Exhibit 1). This was due to four major factors: the cost of teachers’ salaries, an
increase in monthly rent, uncollectable accounts, and the cost of buying the students’
textbooks.
The Center has a teaching staff of twelve ESL professionals—four full-time and
eight part-time. Teachers at the Center earn an hourly wage of $10 per hour. This is
the industry average. However, it is very difficult to get instructors to teach at night.
Many of them are afraid to go down to that area of the city after dark. Unfortunately,
evening classes are the most popular with the students. ‘Most of the teachers will
only teach in the morning. Every term I have students on waiting lists for the evening
classes, but never enough teachers. | figured out that last term alone cost me approxi-
mately $40,000 in lost business. And then there’s my salary. I’m not sure | should be
paying myself the salary | am collecting from the Center, but | feel that | am entitled
to reasonable pay. After all, | cannot work for nothing even if it is my own business.
Besides, the Center is paying a full-time salary to three other ESL professionals.
‘Three years ago a large building around the corner from where we were located
was available for rent. | thought the building would be perfect for my dreams of
expansion. But at $1,500 a month, it seemed to be quite costly. Even so, | went ahead
and signed a ten-year lease with an option to buy upon renewal.
“Then there’s the problem of uncollectable accounts. | haven’t been strict enough
on a policy. When students come to me and say they are a little short of money, |
usually say, ‘Don’t worry about it, pay me when you can.’ Unfortunately, many of
the students never pay me. | don’t let them register for another class until they do.
“Lastly, another big expense has been the buying of the ESL textbooks. Every term
134
| try to project the number of new students and therefore how many books I'll need.
But it never works out because some students share a book or they use the copies
on reserve at our ESL Resource Library. As a result, I’m always sitting on my inventory.
“My accountant has just informed me that unless | implement new business
policies and strategies, my center will go bankrupt. He also said that | should make
a projection of the coming year’s income statement.”
EXHIBIT 1

Income Statement for the Year 1990
Gross revenues $261,200

Less operating expenses (see Note 1) — 273,600
Operating loss — $12,400
Note 1. Operating expenses
Salaries (see Note 2) $174,400
Rent $18,000
Building expenses 36,400
54,400
Textbooks and other expenses 15,800
Miscellaneous 29,000
Total operating expenses $273,600
Note 2. Salaries (breakdown)
Full-time faculty $ 68,300
Part-time faculty 54,500
Fringe benefits 22,400
Administrative staff 29,200
Total salaries $174,400
EXHIBIT 2

Balance Sheet as of December 31, 1990
Cash $ 6,600 Note payable $101,200
Receivables 62,400 Owner’s equity $ 50,000
Furniture 33,200 Deficits (44,500) — 44,500
Other assets 4,500 (32,100 + 12,400)
$106,700 $106,700
135
COMPREHENSION CHECK
What's the Story?
HABLO ENewUSH/ ==
ieee | ae Alte |
i) “ Boyes chk |
136
What’s the Account?
Determine if each of the following is an asset account, a liability account, or equity.
Cash
Profits earned by the owners
Notes payable _
. Plant and equipment
nconetan poe
eee es
Initial investment into the company
Inventory
Rent
Loans
SeAccounts payable
eee
ree
ea
ee
See
ee
—"

your group.
What Is the Main Problem Facing Joe Charleston?

the answers.
> Are the answers the same or different?

> Discuss each one.
» Come to a consensus on the main problem.

SS
a a
aSS SE —e————————e———— ee
a EE —
137
Reaching a Solution
p> the need for a new business and management policy

mp the need to decrease expenses
p> the need to increase revenue
Proposed Solutions

138
Class Discussion
three areas.
RECOMMENDATION
What is the new management and business policy your group is proposing for the Speakeasy
Language Center?
What is your group’s projection of the coming year’s income statement?
Explain how this relates to the new management and business policy.
RATIONALE
State your reasons.
PLAN OF ACTION
Role Play
SITUATION: A DISCUSSION BETWEEN JOE CHARLESTON
AND THE SPEAKEASY LANGUAGE INSTRUCTORS
One person in your group is Joe Charleston and the other people are the ESL instructors at
the Language Center. Create a role play using the following guidelines.
JOE CHARLESTON THE SPEAKEASY ESL INSTRUCTORS

You have formulated a new You all know that things have always
management and business policy. Now __ been hectic and disorganized at
it is time to implement it. You are Speakeasy and you are eager to hear
explaining the situation and the new what changes Joe wants to make. You
policies to the teachers. all think that Joe is the nicest guy in
the world, perhaps too nice. However,
it is hoped that no one loses his or her
job.
139
SKILL
Making Journal Entries in Accounting
If you have your own checking account, you will have a better understanding of how firms
process their financial transactions. Each check you write reduces your checking account
balance. Conversely, each deposit you make raises the balance. Journal entries reflect changes
in a company’s accounts in a similar manner. For example, a cash sale increases the cash
account while at the same time reducing the inventory account. Since companies must
process several or even hundreds or thousands of financial transactions every day, the transac-
tions must be classified in an orderly fashion. In this way managers can analyze and keep
track of a company’s business progress.
Below is an example of a T-account. T-accounts record changes or transactions in a single
account for an accounting period of usually one month, one quarter, or one year.
1 = Beginning Balance 2 = Cash Withdrawal <i 3 = Ending Balance
EXAMPLE:
Cash
1. 300] 2. 200 .
3, 100
An Asset Account
The T-Account
Instead of changing balance sheet items directly, a device called a T-account is used.
Cash (title is written here)
The Beginning Balance

This is how a T-account looks at the beginning of an accounting period.
140
Cash
Beg. Bal.
10,000
Increases and Decreases

Transactions that affect the cash account during the accounting period can either increase
cash or decrease cash.
Cash
This side is for | This side is for

increases. decreases.
What Effect Will the Following Transactions Have on the Cash Account?
a. The business borrows $7,000 cash from a bank.
b. The business pays $3,000 cash to a creditor.
c. The business receives $300 cash from a customer.
d. The business sells merchandise for $1,000 cash.
Cash
Beg. Bal.
10,000
What Is the New Balance?
This is the figure that is shown on the balance sheet at the end of that accounting period.
141
An Example:
If John Smith pays $100 cash to the Yoshi Company to settle his accounts receivable, how
would the following two accounts of the Yoshi Company be affected?
Cash Accounts Receivable
_ A Liability Account
Increases and Decreases
A liability account is a little different.
Accounts Payable
This side This side
decreases. | increases.
An Example:
What effect would the following transactions have on the following three accounts? Remem-
ber, inventory is an asset.
a. The Yoshi Company pays $500 to a creditor.

b. Inventory costing $300 is purchased on credit.
c. Inventory costing $400 is purchased for cash.
ASSETS: LIABILITIES:
Cash Accounts Payable
Beg. Bal. 1,000 Beg. Bal. 2,000
142
Inventory
Beg. Bal. 4,000
Now Calculate the New Balances for Each Account:
Final Notes
Debit and Credit

In the language of accounting, the left-hand side of a T-account is called the debit side and
the right-hand side is called the credit side. Therefore, instead of saying that increases in cash
are recorded on the left-hand side of the cash account and decreases are recorded on the
right-hand side, accountants say that increases are recorded on the debit side and decreases
are recorded on the credit side.
The Abbreviations
The word debit is abbreviated as ‘‘Dr.,’’ and credit as ‘Cr.””
Cash
Dr. Cr.
Answer the Following:

The rules we developed in terms of “left-hand” and “right-hand” can now be stated in terms
‘of debit and credit. Circle the correct answer.
143
2 . Increases in assets are debits/credits
b. Decreases in assets are debits/credits
c. Increases in liabilities are debits/credits
d. Decreases in liabilities are debits/credits

LISTENING PRACTICE
MAKING JOURNAL ENTRIES
Listen to the following transactions and record them on the correct T-account.
Cash Accounts Receivable
Inventory Accounts Payable
Rent Cash
Furniture
and Fixtures
Cash Sales Inventory Cogs*
*Cost of Goods Sold
Cash Accounts Receivable Sales
Written Practice
While T-accounts record the changes or transactions of a single account, the general journal
lists all the accounts together. The financial transactions are recorded in chronological order,
with a brief description of the transaction. An example of a journal is given below.
THE KENZIE COMPANY

GENERAL JOURNAL
1992
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT

1992
June 1 Cash 2,000.00

Accounts Receivable 2,000.00
to record collection on account
June 15 Accounts Payable 3,000.00
Cash 3,000.00
to record payment on account
June 25 Inventory 1,000.00
Accounts Payable 1,000.00
to record purchase of inventory on account
145
— . Record the following transactions using T-accts, and then transfer the information to the
general journal given in #2.
a. On November 1, the Mishka Company bought furniture costing $8,000. The firm
agreed to pay $5,000 of the total cost in ten days and the remaining balance at the
end of the month. Record the transactions as of November 1 and as of November
30.
+o
Furniture Cash Accounts Payable
b. On November 22, the Mishka Company received a cash payment of $1,000 from
the XYZ Company.
=p se
Cash Accounts Receivabie
c. On November 25, the Mishka Company purchased inventory on credit for $3,000.
ase
Inventory Accounts Payable
146
d. On November 27, the ABC Company bought merchandise on account for $10,000
from the Mishka Company.
Accounts Receivable Inventory
2. The transactions for the month have been recorded in the general journal. Complete
the missing information and record it below.
=
BRWNH ONDA
THE MISHKA COMPANY

GENERAL JOURNAL
1992
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT

1992
#1 Furniture 8,000.00
Cash 5,000.00
Accounts Payable 3,000.00
Purchase of Furniture
Nov. 22 Cash 1,000.00
Accounts Receivable 1,000.00
#2
Nov. 25 Inventory
Accounts Payable Soni
To Record Purchase of Inventory on Account
Nov. 27 #5 10,000.00
#6 10,000.00
To record a credit sale

Accounts Payable #7
Cash #8
To record payment of balance due
on furniture
147
Entrepreneurship
AGENDA
& What is an entrepreneur?
& Do you know of any famous

entrepreneurs?
What are some behaviorial qualities

@ of an entrepreneut?
& Yow does one become an

entrepreneur?
CHAPTER
10
INTRODUCTION
FOCUS
UsING VISUAL AIDs
Entrepreneurs are risk takers. They have a strong desire to be their own boss rather than work
for someone else. These hard-working individuals first make a business plan and then form
an organization to achieve the objective. Some entrepreneurs set up new companies or
businesses, while others revitalize existing ones.
This chapter gives students a chance to be innovative entrepreneurs. Instead of studying
a business case, students develop their own companies, products, and business strategies.
Students should incorporate concepts from previous chapters into their projects.
PREVIEWING
Entrepreneurship
Entrepreneurs in Your World

1. Do you know of any entrepreneurs in your community who are involved in the following
businesses?
. a restaurant
. a beauty salon
a bakery
. another type of entrepreneurial business
anoxre
149
2. How did these entrepreneurs begin their businesses? Are they successful ?
as | LU ee
eS
Entrepreneurs in the World
1. Are you familiar with the following companies and the entrepreneurs who started them?
McDonalds’ Ray Kroc

. Apple Computer’s Steve Jobs
. Honda Motor Corporation’s Soichiro Honda.
. a well-known entrepreneur from your country
aoe
2. Why are these businesses successful? How did each of these entrepreneurs get started?
(If you don’t know, do some research. If possible, interview one entrepreneur in your
community.)

1. There are three ways to go into business: Start a new business, buy a franchise, or buy
out an existing firm. What are the advantages and disadvantages of each?
2. Starting a new business has been called the purest form of entrepreneurship. Why?
3. Do you think that in order for an entrepreneur to be successful, his or her idea has to be
unique and creative? Explain.
4. Do you think that many entrepreneurs are dreamers? Explain.
150
. Why do you think many start-up businesses fail?
Discuss the following quote from Tom Peters, author of In Search of Excellence and
Thriving on Chaos: ‘Successful entrepreneurs tend to be obsessed with quality and ser-
vice.”’
JUST IN CASE
Are You Entrepreneurial?
Answer “Yes’’ or ‘‘No” to the following questions. After you finish, look at the scoring key
at the bottom of the page, assign a score to each question, and then add up your points to
see if you really are entrepreneurial!
1. Does money motivate you?
Are you a risk taker?
Do you get disappointed and discouraged easily?
Is status important to you?
. Are you attracted by challenges?
. Would you like to have your income limited only by your abilities and energies?
Do you mind working extremely long and irregular hours?
YD
AME
SNWould you like to answer only to yourself?
Is the financial security that corporate employment provides very important to you?
Are you Creative and innovative?
11. Do you always set goals in your life and strive to accomplish them?
Urs Are corporate benefits, such as paid vacations, sick leave, insurance benefits, and a
regular paycheck very important to you?
13. Are you considered persuasive and influential in your dealings and relationships
with
others?
14. Do you have a strong need to direct or a need to do everything yourself?
can be
15. Is emotional satisfaction in your worklife extremely important to you? (Answers
found on page 158).
6. 2 yes, 1 no 11. 2 yes, 1 no
1. 2 yes, 1 no
7. 1 yes, 2 no 12. 1 yes, 2 no
2. 2 yes, 1 no
8. 2 yes, 1 no 13. 2 yes, 1 no
3. 1 yes, 2 no
9. 1 yes, 2 no 14. 2 yes, 1 no
4. 1 yes, 2 no
10. 2 yes, 1 no 15. 2 yes, 1 no
5. 2 yes, 1 no
151
In small groups, discuss and create a strategy for your own business and the product or service
your company will offer. -
The Entrepreneurial Strategy
Identifying a Business Opportunity: The Idea
Discuss markets that members of your group are familiar with. It is better to come up with
an idea in a field that you know well. What are the trends in this industry? Are there any
unmet needs that should to be addressed?
The Business Definition

Create information about the company:
What is the name of the company?

What is the business the company is involved in?
What is the history of the company, if any?
What form of ownership is the company under?
ay
Gy
AV
VY What job functions are necessary in the company? For example, president, marketing
manager, financial manager, etc.
Defining the Target Customer

After your group decides on your idea, determine who your potential customers are. You
have to know who you are trying to reach before you can go out and reach them.
> Demographics: geographical location, age range, income range, sex, educational level,
and other interests of this target market
> How frequently do you expect customers to use your service or buy your product?
> Give reasons why your target market will buy your particular product or service.
Your Competition
Know your competition and what they are doing. You can get this information through
observation, interviewing, group discussions, and surveys. How well do you think your
company will be able to compete?
Estimating Sales and Market Share

To estimate sales, determine the size of the industry in the specific area you are about to
enter and the size of the market segment you are targeting. Also, figure out your competitors’
market share. Your goal is to estimate what percentage of the customer base is likely to buy
your product or service.
152
The Marketing Plan
PRODUCT OR SERVICE
Describe your product: its name, features, etc.
Why is it unique or better than existing products in the marketplace?
How is the product packaged?
PRICE
Estimate your costs, variable and fixed. Variable costs are those that vary directly with
sales, while fixed costs are those that do not change as sales increase or decrease.
What is the cost of producing each unit or of offering the service?
How much profit do you need to make on the sale of each unit?
PLACE
Where exactly will your business be located?
If it’s a manufacturing business, where geographically are you going to distribute the
product?
What types of stores will carry your product?
How will the product be transported?
PROMOTION
How will potential customers find out about your product?
v What advertising channels will you use?
How much will you spend on advertising?
FINANCING
How much capital does your business need to get started and for the first six months of
operation?
Where will this money come from—your own savings, friends and relatives, bank loans?
Presentation
When your group is finished, present your business and product or service to the class, based
on the previous steps. The talk will be delivered as a business presentation, with each group
member playing a specific role or function in the company. You are encouraged to prepare
visual aids for your presentation.
153
SKILL
Using Visual Aids
Using visuals in a business presentation is an important supplement to aid and reinforce
learning. Think back to when you were in the audience of a presentation. Weren’t you more
interested and stimulated when the presenter used visual aids? Visual aids help to keep the
interest of the audience, improve the content of the presentation, and help to improve
understanding. Remember, though, that visuals are meant to clarify, not to confuse. The
following are some ideas to help you understand how you can incorporate visual aids into
your business presentations.
What forms can visual aids take? Some ideas:
1. overhead transparencies
2. signs or posters
3. drawings on the blackboard
4. slides, photographs, or videotapes
What are graphic aids? Graphic aids are used when you want to show quantitative data. The
following are some examples:
~
TABLES
Tables are convenient for showing large amounts of data in a relatively small space.
EXHIBIT 1: An Example of a Table
SALES PERCENT
REPRESENTATIVES TERRITORY GOAL ACTUAL OF GOAL
Saunders New York $2,000,000.00 $1,500,000.00 75.00

Mynick Boston $1,500,000.00 $1,700,000.00 113233
Cragie Philadelphia $1,000,000.00 $1,400,000.00 140,00
Gentile Pittsburgh $ 900,000.00 $1,100,000.00 2292
Adams Vermont/New Hamp. = $1,500,000.00 $1,300,000.00 86.67
Norris Washington D.C. $1,400,000.00 $1,500,000.00 107.14
Kinder Maryland $1,100,000.00 $1,000,000.00 90.91
154
Pie CHARTS LL
Since a circle gives such a clear idea of a total, a pie chart is an excellent way
of showing
the size of each part as a percentage of some whole. When making a pie chart,
never use
more than five components. If you do have more than five, select the five most important
to
your message and group the remainder into an ‘‘others’’ category. Also, put the
most important
segment to the right of the 12 o’clock line. Use color or shading for emphasis.
EXHIBIT 2: An Example of a Pie Chart
Lia
77 = aa
Company C Company D
$2,500 $2,500
Note: Company A has smallest share of sales.
BaR CHARTS
Bar charts are very effective for comparing unlike items. They can be vertical or horizontal.
When they are horizontal, the vertical dimension is not a scale, but is used for labeling the
measured items, as in the example shown for sales representatives. Therefore, you can arrange
the bars in any sequence that suits the ranking you want to stress. To identify the values in a
horizontal bar chart, use either a scale at the top or numbers at the ends of the bars, but not
both. Use the scale if you want a fast study of relationships, and use the numbers if they are
important to your message. When preparing both horizontal and vertical bar charts, make
sure that the space between the bars is smaller than the width of the bars. Always use shading
for emphasis.
155
LINE CHARTS
Line charts are helpful for depicting changes over a period of time, showing data and trends.
It is better to use a line chart instead of a vertical bar chart when you want to show a trend
which uses more than seven plots.
EXHIBIT 5: An Example of a Line Chart

(Changes in Student Dropout Rate)
PERCENT OF STUDENTS
20
15
rane
; Sac kak ee baie Gare
}0 faemnaviret Somes aaeee ey

1980 = 81 82 83 84 85 86 87 88 89 90
YEAR
Note: Student dropout rates have continually decreased since
1980 to the lowest point in 10 years.
Tips for Preparing Graphic Aids

1. Use color or shading to call attention to items you want to emphasize.
2. Make the chart or graph simple enough so that the reader can understand it quickly.
3. Give each graphic aid a title which summarizes the data in a message that you want your
audience to learn.
4. Use as few graphic aids as possible to convey the necessary data.
5. Remember that tables and charts should always be discussed, even though the discussion
can be brief. Don’t assume that your audience will pay attention to the aid or see the
significant data in it. You must provide the explanation.
157
LISTENING PRACTICE
Usinc VIsuAL AIDS
Listen to the following information and record it by making a graphic aid, using the form
which best fits the data. Don’t forget to give a title to the graphic aid, along with labeling its
components.
Written Practice
Determine which graphic aid you would use to present the following information, and make
an illustration, either with the help of a computer or by hand.
1. Most stores in the United States are small, often having nq paid employees. But some
retail firms are big businesses with billions of dollars in sales every year. Sears Roebuck
Company is the largest retailer, with $38,828,000,000 in annual sales, followed
by K Mart ($21,095,900,000), Safeway Stores ($19,642,201,000), and J. C. Penney
($13,451,000,000).
2. In the next ten years, employment growth will vary considerably from industry to industry.
The greatest increases are projected in the service industries (up 36 percent), construction
(up 48 percent), and the financial industries (up 34 percent). Other industries with projected
increases are manufacturing (up 23 percent), transportation and communications (up 21
percent), and government (up 15 percent). However, employment in agriculture is ex-
pected to decline by 7 percent.
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158
LISTENING PRACTICE SCRIPTS
CHAPTER 1: BUSINESS OWNERSHIP surprised to hear about this. In the

past you always have been one of
You've just started a job in an advertising firm. our top sales representatives. In
Even though it is only your second week, you fact, you didn’t even come close to
are very confused as to what are your job du- meeting your six month sales goal.
ties. You feel frustrated because you never Bob, what’s going on?
know what to do next until your manager, Mr.
Kaiser, tells you. While eating lunch with other Emp: How can you say that? | think that
people from your department, you find out you want me out of this company.
that you’re the third person to have your job You’ve made my sales goals so
in the last four months. You are also frustrated high that they’re impossible to
because at least one person is sick in your de- reach. As for the orders, I’ve sent
partment every day which means more work in the requests right away. There
for you. You would like to keep your job be- have been problems within the dis-
cause jobs in advertising are difficult to find tribution department. Many sales
but you feel very frustrated under the present reps are experiencing the same
conditions. problem.
Mer: This has not been brought to my
attention. | will contact distribu-
CHAPTER 2: MANAGEMENT tion to find out what's going on. |
also would like to review your past
Manager: Hi Bob. come on in. Would you sales record to see if your present
like a cup of coffee before we be- goals are realistic. However, the
gin? complaints from the customers
Employee: No thanks. are unacceptable. If | receive one
Mer: The reason I’ve called you in today more complaint, you will be put on
is because | wanted to discuss your probation.
sales performance for the last six You want to put me on probation?
Emp:
months. I’ve gotten a couple of I’ve worked for this company for
phone calls from some of your cus- 17 years. What do you know about
tomers complaining about the bad this business, you’re just out of
service you’ve been giving them.
college.
They claim that you have been very
slow to fill their orders, haven't re- Mgr: Bob, | think it’s best that you get
turned their phone calls and have back to work. Please let me know
been rude to them when they've when you’re having problems so
inquired about it. Bob, | was very we can work them out right away.
159
CHAPTER 3: ORGANIZATIONAL BEHAVIOR (noise: people bringing chairs
into the room.)
Mgr: OK, quiet everyone. We’re
Mgr: Does anyone have any sugges-
ready to start. I’m your new
tions on what we can do to
Operations Manager, Saleem
clear up the problem?
Rena. It’s a pleasure to be here
and I’m looking forward to be- Employee #1: | think that people who miss
ing your manager. As you can more than one day a month
see from the agenda sheet that shouldn’t get paid anyway.
| sent to you all last week, the Mgr: Thank you for your comments,
first item | want to discuss is Mr. Fahad, but what does
absenteeism. (door opens) everyone else think?
Come on in. | don’t think there (Door opens. More people
are any more chairs in the back. walk in.)
Please sit in the front. As | was Mgr: In the future, if you’re not here
saying, our branch has the at the exact time of the meet-
highest level of absenteeism in ing, please don’t come.
the entire company. There are Employee #3: My name is Izak Kaya. Most of
ten people working in our de- us didn’t like our last manager.
partment. In the last quarter, of He seemed as if he didn’t care
the ten full time employees, much about the business and
there were 47 absences. This about us. He always stayed in
means that we were working at his office and never came out
nearly 10% below our capacity. to see who was doing what. A
| want to discuss why this is so manager should be interested
and what we can do about it. in his employees.
I’d like to open this up for dis-
Employee #4: l agree. Not to put all the blame
cussion. Please be kind enough
on our last manager, but he
to first introduce yourself be-
didn’t have a rapport with us.
fore speaking.
He only talked to people above
Employee #1: I’m Abdulla Fahad. | never miss him—people in top manage-
work and when I’m sick, |come ment.
to work anyway. I’m tired of Mgr: What is your name please?
making up for other people
#A: I’m sorry,.1 forgot to introduce
who are constantly absent.
myself. My name is Josefina Or-
Mgr: (door opens) Come on in. tiz.
There aren’t any more chairs Mgr: OK, so what you're saying is
left in here. Why don’t you go
that by being supportive and
to the next room to get some.
interested in all of you, the at-
Employee #2: My name is Li-Ming Chiang. | mosphere will change. How
do miss work occasionally, but about giving a bonus to all the
that’s because | have small chil- people who don’t miss any
dren. Sometimes they’re sick work during the year.?
and they need me. All: That sounds great!
Employee #1: People like you aren’t the prob- Mer: Then what we've decided is to
lem. It’s the others who take a have a $100 bonus for each em-
lot of sick days because they ployee that doesn’t miss any
know they'll get paid for it. work. Also, | will be very active
160
in what happens at your work B. Well, it’s not changing tires. (chuckle) My
stations. Again, | ask that every- degree from the university is in accounting.
one come to the meeting on I’m very analytical. | like numbers. | like to
time. It’s time to go back to analyze them and interpret what they
work. Thank you and | think mean. Also, I’m very personable. | get
I’m going to enjoy working along well with others. In addition to these
with all of you. skills, | know I’d be effective in interna-
tional banking because | speak four lan-
guages fluently.
CHAPTER 4: HUMAN RESOURCES A. Very impressive Ms. Poggi. | see from your
resume that you are fluent in English,
A. Hi, my name is Giovanni Grottanelli. I’m
French, Russian and of course Italian. Now
the Personnel Manager at the International
Ms. Poggi, I’d like to ask you if you have
Bank & Trust. Please take a seat. any questions for me?
. Well, ummh, I’m sorry I’m late. My car B. Yes, Mr. Grottanelli, tell me more about the
broke down. | had a flat tire.
training program. Is it on-the job training
. Really? Well, I’m sorry to hear that, but we or off-the-job training?
had better get started since we’re running A. We offer a combination of the two. Class-
a bit late. Ms. Poggi, is it alright if 1 call you room instruction is given three days per
Gabriella? week. The other two days will be spent
No, | prefer to be called by my surname. working in the International Bank offices.
. Of course, Ms. Poggi. | have some ques- Unfortunately, we have run out of time.
tions to ask you and later I'll give you an Thank you for your interest in our bank,
opportunity to ask me some questions. Ms. Poggi. You should be hearing from us
Looking at your resume, | see that you’ve within two weeks to see if you’ve been
just graduated from the University of Milan. called back for a second interview.
You studied business. Why do you wish to B. Thank you Mr. Grottanelli. | enjoyed talk-
pursue a Career in business? ing with you. | apologize again for being
. | first became familar with business through late.
my father who had a small grocery store. |
started working in the store when I was four
years old. Unfortunately, my father never CHAPTER 5: MARKETING
let me participate in the business decisions
of the grocery store and he finally had to Speaker: Good morning everyone. My name
close it. is Ole Larson. I’m President of the
Tivoli Company. Today I’m going
. Do you think that if you were included in
to speak to all of you managers
the decision-making of the store you could
about MBO. Does anyone know
have prevented it from closing?
what MBO is?
Definitely.
Audience: (someone raises his hand) Manage-
> . What would you have done differently? ment by Objectives?
First, | would have moved the store loca- Speaker: Yes, that’s correct. First | will talk
tion. When my father opened the store, it to you about what exactly MBO is,
was in a good neighborhood. But through then the steps involved in the MBO
the years, the neighborhood declined. process. This afternoon we'll talk
. Very interesting Gabriella, | mean Ms. about the benefits and drawbacks
Poggi. Tell me, what are your strongest of MBO and how you can imple-
business skills? ment this technique in your com-
161
panies. | ask that you please hold formance review. This can include
your questions until the end, then changes in objectives or changes in
| will be happy to answer them. the plan of action to achieve the
Management By Objectives is a objectives. Each year new objec-
technique for involving employees tives are established which build
in all levels of planning and con- on past results and depend on the
trolling. It was first described by objectives formulated by top man-
Peter Drucker in 1954 as a way to agement. This ensures the continu-
motivate employees to become ation of the MBO process.
personally interested in their work. Now, to summarize what I’ve
MBO brings together superiors talked about so far. MBO is a tech-
and subordinates to define objec- nique for involving employees at
tives together and to control re- all levels in planning and control-
sults. ling activities. The four steps are:
The MBO process begins with 1) determine the objectives at all
major strategic objectives formu- levels 2) make specific plans of ac-
lated by senior executives who tion*to achieve these objectives 3)
then meet with subordinates to de- review each employee’s perform-
velop the next level of objectives. ance in relation to the objectives 4)
This process continues downward and lastly, make changes and adap-
throughout the organization. Su- tations to the objectives based on
periors join in with subordinates to performance and on the higher
establish objectives at each level level plans. of the company.
that are consistent and reinforce OK. We have about ten minutes
higher level objectives. During the left for questions . .
planning period superiors and sub-
ordinates meet periodically to re-
view performance and to redefine CHAPTER 6: ETHICS
objectives. Now if eveyone would ile A. Accounts Receivable (A/R) Agent:
look at the drawings in the front, “Hello, Mr. Nassif? This is Anil Gupta
you will see the four steps involved from Speedy Instant Printers. I’m calling
in the MBO process. again because your account is more
First you must determine the than ninety days past due and you did
objectives. Managers meet with promise to send.in your payment a
their employees individually to tell month and a half ago.”
them of higher-level plans and to
. Mr. Nassif: ‘Well, we’ve been having all
help them develop their own ob-
kinds of computer problems in account-
jectives. Employees should be en-
ing and everything is backed up.”
couraged to take a leading role in
expressing their ideas. . A/R: “Yes, | remember you told me
Next, employees should make about the problems when we talked last
specific plans of action on how time. You said you would write a check
they plan to achieve these objec- manually and mail it right away.””
tives. These should be written . Mr. Nassif: ‘Oh yeah, | remember. |
down. Then performance should think that the check must've gone out
be reviewed periodically to moni- late last week. If you haven’t gotten it by
tor progress toward achieving ob- Friday, send me a copy of the invoice
jectives. and I'll do some checking.”
And _ lastly, corrective action . A/R Agent: “Okay, then I'll look for it
should be taken after each per- sometime next week.’”’
162
2. The following is a complaint call. How do Marion: Well, | definitely can’t spend
the caller and receiver respond to each any more than $300.
other? Was the receiver (the Customer Ser- Fred: Marion, look over there!
vice Representative) effective? There’s a bookcase just like
the one you were describing.
Complainer: “Hello. | bought one of Marion: Let’s go over and look at it.
your toys yesterday for my
Marion: Excuse me sir. Can you please
son and | want my money
tell me about this bookcase.
back.”
Antique Dealer: Why sure. This bookcase is
Customer Service
made of solid oak and is at
Representative: “Hold on a minute. (90
least 100 years old. It was
seconds pass.) What is it
originally made to be used in
you want?
schools. This is a real sturdy
Complainer: “Tl want my money back. bookcase and it’s in excellent
My son had only been condition.
playing with the toy twenty
Marion: How much are you asking?
minutes when it broke. |
think your toys are junk.” Antique Dealer: For this bookcase? $400.
Customer Service
Marion: $400? You're kidding! I'd
Representative: “Well, | don’t know how never pay that. There’s a big
you can Say that. At least a chip on the bottom shelf.
dozen people a day call Antique Dealer: That's nota chip. It’s the nat-
just to tell me how good ural beauty of the wood.
our toys are.” You'll never find another
bookcase like this. It’s a rare
Complainer: “Look, | don’t care what
anyone else thinks. They one.
must be pretty stupid.” Marion: I’ve seen a lot of bookcases
like that one. | don’t think it’s
Customer Service
very rare. It’s not worth $400.
Representative: “Well you don’t sound too
smart yourself.” Antique Dealer: O.K. I'll give you a deal. I'll
give it to you for $375.
Complainer: “Don’t you start insulting
me. I’m going to get my Marion: No. Come on Fred, let’s go.
money back if it means—— Antique Dealer: $350 is my final offer. That’s
Customer Service a real bargain. You're crazy if
Representative: “My other line’s ringing. you pass that up. Look at the
You'll have to hold again.” unique molding around the
top. Next year pieces like that
will be worth twice what you
CHAPTER 7: INTERNATIONAL BUSINESS pay today.
Marion: Sorry but | wouldn’t pay
Marion: | just love buying antiques more than $300 for it.
and there are plenty to buy at
Antique Dealer: No m’am. | can’t do that. You
this antique show. Now, be
go and look around the an-
on the look-out for a book-
tique show and you won't
case with glass doors. We re-
find one as nice as this and at
ally need one for the living
this low price.
room.
Marion: (whispers) Fred, it is nice and
Fred: How much do you want to
it would look great in the liv-
spend?
163
ing room next to the fire- Customer: $52?
place. What do you think? Salesperson: Yes, but that’s a small price to
Fred: (whispers) Marion, if you repay for looking and feeling good
ally want it then get it. about yourself. And you do look
Marion: $325. That’s the highest 1’ll beautiful.
go. Customer: Yes, | do look better. Well, why
Antique Dealer: $335 and it’s yours. not? I’ll treat myself. Here’s my
charge card.
Marion: No, | said $325 would be the
highest.
Antique Dealer: O.K. you win lady, $325.
CHAPTER 9: ACCOUNTING
CHAPTER 8: FINANCE 1. The Osito Company just received a cash
Salesperson : Yes, may | help you with some- payment of $5,000 while at the same time it
thing? bought $6,000 worth of inventory on ac-
Customer: Well, I’m just looking, thanks. count. Record both transactions.
Salesperson: Have you seen our newest line
of cosmetics for the fall season? 2. At the beginning of the month the Image
Customer: No, | don’t think so. Company paid the monthly rent of $1,500
for the building and decided to also buy
Salesperson: It’s really the latest look. Every-
some new furniture and fixtures for $1,000.
one’s buying them.
Customer: (Looking and pausing.)
3. The Ho-Ho Christmas Company sold 500
Salesperson: Here, let me put some on you.
red sleds at $20 each. The sleds were re-
Take a seat. It will only take a
corded on the books at a value of $5 each.
minute.
Record the transactions and calculate the
Customer: Well, | don’t really have time. Ho-Ho Company’s profit.
Salesperson: It won’t take long and | promise
you won't regret it.
4. The Cree Company sold 300 units of inven-
Customer: Well, OK. tory at $3 each. They received a down pay-
Salesperson: You have such beautiful skin. ment of $500. Record the sale.
The makeup really accentuates
your beauty. The colors are per-
fect with your skin and _ hair
tones. These products are all
natural and they condition your CHAPTER 10: ENTREPRENEURSHIP
skin while you wear them. | use Inadequate financing is generally the leading
these products myself every day cause of small business problems. Sixty per-
and | think they’re wonderful. cent of the financing of a typical small business
Here, look in the mirror. Don’t comes from the entrepreneur’s personal re-
you look great? sources. Lending institutions, such as banks,
Customer: Well, it definitely is an improve- private investors, and the Small Business Ad-
ment. How much do these prod- ministration, account for 23 percent. These in-
ucts cost? stitutions are usually reluctant to make loans to
Salesperson: Well, altogether for the skin small businesses because of their high failure
cream, lipstick, mascara and rate. Friends and relatives contribute an aver-
blush, the price is $52. age of 9 percent.
164
GLOSSARY OF BUSINESS TERMS
A
accounting The system for collecting, analyzing, and communicating financial information.
accounts payable Amounts that a firm must pay to its suppliers for goods or services purchased on
credit.
accounts receivable Amounts that must be paid to a firm from customers who have purchased goods
or services on credit.
advertising Communicating with the public through paid commercial messages to persuade or inform
a large number of people about a product.
agent/broker An independent businessperson who represents a business and in return receives a
commission.
asset Anything of economic value that is owned by a firm or an individual.
authoritarian style A management style in which the manager makes all decisions and gives orders
without the input of subordinates.
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balance of payments The flow of all money into or out of a country including imports and exports.
balance of trade The total amount that a country exports minus its imports.
balance sheet A financial statement that shows a firm’s financial position on a particular date in terms
of its assets, liabilities, and owners’ equity.
benefits What a firm offers its workers other than wages and salaries.
board of directors A group of individuals who are elected to represent a firm’s stockholders by
assuming final authority for all corporate actions.
budget A detailed financial plan for estimating revenues and expenses for a period of time in the
future.
business An organization that sells goods and services with the goal of making a profit.
C
capital The money that is needed to run a business.
cartel An association of suppliers and producers designed to limit competition among its members
with the objective of increasing profits.
collateral Any asset that a lender has the right to possess if an individual is unable to repay a loan.
commodity A thing or article that has specific use or value. It can be bought or sold, and it is either
manufactured or extracted from the natural environment.
common stock Shares of stock whose owners have claim to a firm’s assets only after the creditors and
preferred stockholders have been paid. Common stock owners have voting rights in
the firm.
compensation system What a firm offers its employees in return for their work.
competition The battle among businesses to gain consumers.
consensus building / “nemawashi’”’ A principle of Japanese management in which, before a proposal
is brought up at a meeting, it first circulates among managers,
who either give their approval or write comments or suggestions.
165
consumer behavior The study of why individuals purchase and use particular products or services.
contract A legal agreement between two or more parties.
corporation A legal entity which is created by the law as an artificial being that has the rights, duties,
and powers of a person. The business is separate from its owners, with their liability
limited to their investment in the firm.
costs of goods sold (COGS) The cost of selling a good or service during a given time period.
coupon A sales promotion method that uses a certificate offering a small discount on the purchase
price of a product.
credit In accounting, any transaction that decreases assets or increases liabilities or owners’ equity.
It is always entered on the right-hand side.
D
debit In accounting, any transaction that increases assets or decreases liabilities or owners’ equity. It
is always entered on the left-hand side.
debt financing The practice of a company to raise money by borrowing outside the company, usually
in the form of long-term loans and the sale of corporate bonds.
decision making The aspect of a manager’s job concerned with choosing the best alternative when
problems arise.
democratic style A management style in which the manager uses subordinates’ input in making
decisions.
distribution (place) The part of the marketing mix that involves getting the product from the producer
to the buyer.
distribution channel The path that a product follows from the producer to the buyer.
dividend A part of a corporation’s profit that is paid out to shareholders.
———
ee, eee ee ee eee
entrepreneur An individual who organizes, manages, and assumes the risks of an independent busi-
ness.
equity financing The practice of a company to raise money by selling shares of stock.
ethics Principles or moral values dealing with what is good and bad, right and wrong.
expense Money that a firm spends.
exports Products which are made or grown in one country but sold in another:
—— ee ae F
fax machine A machine that can quickly transmit a copy of a document over telephone lines.
feedback The act of telling others how you feel about them, their work performance, and their actions.
focus group A market research technique involving a small group of people brought together to
discuss or test a particular product.
forecast To estimate or predict a future condition.
franchising A legal agreement in which a buyer (franchisee) purchases the right to sell a good or
service of a seller (franchisor).
ne
general partnership A business with two or more owners who share in the operation of the firm and
in the financial responsibility for the firm’s debts.
166
gross profit (gross margin) A firm’s revenues (net sales) less its cost of goods sold.
FO eeeeeeeeeS—SsS—
health insurance Insurance covering medical and hospital expenses.
human resource management The process of acquiring, training, developing, and appraising employ-
ees to produce maximum efficiency and worker satisfaction.
i eeesSSSSSSSSSSSSSSsSsSsS—
imports Products sold within a country that have been grown or made in other countries.
incentive program A program aimed at motivating workers to perform at higher-than-normal levels.
Workers are compensated over their normal wage and salary levels.
income (profit and loss) statement A financial statement that describes a firm’s revenues and expenses
and shows whether the firm made a profit or suffered a loss during
a given period of time.
infrastructure The basic structure of a nation’s economy, including transportation, highways, bridges,
communications, and other public services.
insurance The process in which an individual pays a fee to an insurance company in exchange for
monetary compensation if a loss occurs.
international firm A company that sells a large portion of its domestically produced products to other
countries.
inventory Materials and goods that a company plans to sell.
inventory control The system of monitoring and counting all goods and materials on hand to ensure
an adequate supply and financial accuracy.
involvement circle A group of employees from the same work area who meet regularly to discuss
problems pertaining to their work.
job description The objectives, responsibilities, and key tasks of a job. It also describes the conditions
of the job and its relationship to other positions.
job satisfaction Feeling good about one’s job performance.
job specification A listing of the necessary skills, education, and experience needed to fill a position.
joint venture An arrangement in which a foreign firm and a firm established in a host country share
ownership and control of a third company in the host country.
journal A chronological record listing a firm’s transactions, along with a brief description of each
transaction.
K
Kaizen A philosophy of Japanese management calling for gradual, unending improvement; setting
and achieving ever-higher standards.
L
laissez-faire style A management style characterized by the manager allowing subordinates to make
most decisions.
liability Any debt that a firm or individual owes to others.
167
licensing arrangement An arrangement in which a firm from one country permits a firm in another
country to use its patents, trademarks, and technical processes to manufacture
and market a product.
M
management The process of planning, organizing, leading, and controlling the resources—human,
material, and financial in an organization.
management by objectives (MBO) An approach to increasing motivation in which a manager and an
employee cooperatively establish goals.
market An exchange process between buyers and sellers of a particular good or service.
market research The study of what buyers need and how best to meet those needs.
marketing Identification of consumer needs and the development of a product to meet those needs.
This is followed by a strategy of pricing, promoting, and distributing the good or service to
satisfy both the buyer’s and the seller’s objectives.
marketing mix The combination of product, pricing, promotion, and dicnibutien strategies used in
marketing a product.
markup The amount that is added to the cost of an item so that the seller will earn a profit.
morale The attitude that employees have towards their work or workplace.
motivation The process of stimulating employees so that they perform better in order to reach company
objectives as well as personal goals.
multinational firm A firm that operates in several countries based from a parent country and that has
global ownership and management.
N
natural resources Goods that come from the earth, such as land, water, minerals, and trees.
negotiation A process in which two or more parties from opposing sides work together in order to
find a mutually agreeable settlement.
0 — Se eee
off-the-job training Training programs in which employees learn new skills at a location away from
the work site.
on-the-job training Training programs in which employees learn new skills while performing them at
work.
open door policy A policy that allows any employee to bring a complaint to management without
fear of retaliation.
operating expenses A firm’s expenses other than those included in the cost of goods sold.
organizational behavior Understanding how people work together and how their behavior affects the
organization’s performance.
owner’s equity The amount of money a firm’s owners would receive if they sold all the company’s
assets and paid off all its liabilities.
See =eeeneeeeeeeseseee P
packaging The physical container of a product, including the label.

parent company A company that owns another company.
performance appraisal An evaluation of how well workers are doing their jobs.
168
preferred stock A form of investment in which owners of the shares have first claim on the corpora-
tion’s assets and profits but do not have voting rights.
pricing The part of the marketing mix concerned with setting the price of a product so that the firm’s
profit objectives and the buyer’s purchasing objectives are met.
product A good, service, or idea available for sale.
product line A group of similar products targeted to the same group of consumers.
productivity The amount of goods or services a worker produces over a certain period of time.
profit The amount of money that a business has after its expenses are subtracted from its revenues.
profit-sharing plan An incentive program in which profits earned above a certain level are distributed
to employees.
promotion The part of the marketing mix involving the use of personal selling, advertising, and sales
promotion to effectively communicate the merits of the product to the consumer.
promotion Moving to a higher position in a company with greater responsibilities and usually an
increase in pay.
public relations An organization's communication with the public for the purpose of creating a
positive image.
Q
quality How well a product is made.
ey R
recruitment The process in which a company gathers a large number of interested and qualified
applicants for a position.
retained earnings A company’s net income after dividends are paid to stockholders.
revenues Money that a firm receives for selling a good or service.
risk Uncertainty about how much money could be gained or lost.
royalties Ongoing payments made to a granter in exchange for a licensed product.
runaway inflation The rapid and unlimited rise of prices accompanied by the excessive printing of
money. Rates usually exceed 100 percent per year.
S
salary Money that is paid regularly in return for doing a job regardless of the number of hours worked.
sole proprietorship A business owned and operated by one person who has complete responsibility
for the firm’s debts.
stockbroker A person who buys and sells stocks for clients.
stocks Shares of ownership in a corporation.
subsidiary corporation A corporation that is owned by another corporation.
survey A market research technique in which questions are asked of a representative sample of
consumers about their attitudes.
T
takeover An acquisition in which one company buys enough of the stock of another company to
assume control of it.
target market A specific group of people who have similar lifestyles, wants, or needs.
169
trade credit An arrangement in which the selling company allows the buyer to delay the payment of
goods on credit or pay early and receive a discount.
trade deficit A situation in which a country imports more goods than it exports.
trademark Words or symbols that legally identify a product.
transplants The Japanese term for manufacturing plants set up in the United States.
ss: Eb5 W
wages Money paid to employees based on the number of hours worked.
170
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Casesin International Busines =~

Jennifer Spring-Wallace
English for Corporate Communications teaches 1 (a=W of=tsj(em ere)glex>)
0) (M0)
business while developing the oral and communication skills of ESL/EFL
students.
Author Jennifer Spring-Wallace uses fictitious business cases designed

to illustrate everyday business situations. Each case concludes with
problems that require students to become actively involved in the
problem-solving process—utilizing their language and cognitive abilities
while working with other students.
English for Corporate Communications:

+ Includes a preview section that lets students explore topics by applying
the underlying business concept to their own lives and relating their
knowledge, culture, background, and experience to the issue at hand
* Features comprehension checks, a two-step problem-solving
approach, communications strategies, and more 5
ISBN O-13-175340-1¢
|90000
PRENTICE HALL REGENTS

Englewood Cliffs, New Jersey 07632 Be 9 7307311753405 |i

English For Corporate Communications - Cases in International Business

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English For Corporate Communications - Cases in International Business

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CasesiIn

PRENTICE HALL See

Editorial/production supervision and

© 1993 by Prentice Hall Regents

All rights reserved. No part of this book may be

Printed in the United States of America

CHAPTER 1 Business Ownership

CHAPTER 3 Organizational Behavior

CHAPTER 7 International Business

Breet$ emis shit nae so |

are uae = dase 1

VT er aK viet >, “wrt whadn dg mals Cadets ee" have nad

Ad Gre salle a Bas ~,

A What are some advantages and

Winich form of business iw awes

\n your daily life, which forms of

Discuss the advantages and disadvantages of a sole proprietorship.

Discuss the advantages and disadvantages of a partnership.

QUESTIONS FOR DISCUSSION

3. Where are the various forms of business located in your community?

4. Which type of business do you like shopping at the most? Why?

THE MALL: DIRECT DISTRIBUTION:

What’s the Meaning?

GROUP PROBLEM SOLVING

What Is the Main Dilemma Facing Bob and Susan Murphy?

p> Are the answers the same or different?

EVALUATION OF EACH PROPOSED SOLUTION

FOR FURTHER PRACTICE

A Describe the different leadership

What personal qualities should a

& What are company bjectives?

& What is Japanese Management

GIVING AND RECEIVING FEEDBACK

1. With your group, give an example of each managerial function.

2. Do these functions occur independently of one another or are they interdependent?

WHY USE OBJECTIVES?

—— PROFITABILITY — EMPLOYEE WELFARE

QUESTIONS FOR DISCUSSION

1. What do you think it means to be a good manager?

2. What personal qualities do you think a manager should have?

6. What do you know about Japanese management style?

7. Why do you think the Japanese have been so successful economically?

substitute temporary replacement permanent

Toshiharu Akatsu, an area manager for a small group of technicians, or production

What Kind of Manager Are You?

__— Emphasis is on short-range planning.

| praise, compliment, and reward my

| develop overall schedules and set deadlines

| hold weekly staff meetings.

| assign people to particular tasks based on

GROUP PROBLEM SOLVING

What Is the Problem Facing Toshi Akatsu?

p> Are the answers the same or different?

Understanding the Case

Reasons for the Problem

EVALUATION OF EACH PROPOSED SOLUTION

1. When is feedback given? (Give a specific example)

2. Why is feedback necessary?

3. Tell about a situation in which you received positive or negative feedback.

a. What exactly was said?

b. What was your reaction?

THINGS TO REMEMBER WHEN THINGS TO REMEMBER WHEN

What to Say When Receiving Feedback

GOOD COMMUNICATION JOB SECURITY