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New to This
Edition
As always, when revising material for the current edition,
all examples, figures, and statistics have been updated to
incorporate any recent developments that affect the world
of business. Additionally, content was updated to ensure the
most pertinent topical coverage is provided.
Here are the highlights for each chapter:
Chapter one
THE DYNAMICS OF BUSINESS AND ECONOMICS
• Three new boxed features describing real-world business
issues
• A new section on “The Importance of the American
Economy”
• New examples of real-world business issues
• New material on standard of living
Chapter two
BUSINESS ETHICS AND SOCIAL
RESPONSIBILITY
• Three new boxed features describing issues in business
ethics and social responsibility
• New examples of ethical issues facing today’s businesses
Chapter two appendix
THE LEGAL AND REGULATORY ENVIRONMENT
• A new section on Source of Law
• A new section on Courts and the Resolution of Disputes
• A new section on Regulatory Administrative Agencies
• A new section on the Important Elements of
Business Law
• A new section on Laws Affecting Business Practices
• A new section on The Internet and Legal and Regulatory
Issues
• A new section on Legal Pressure for Responsible Busi-
ness Conduct
viii
Chapter three
BUSINESS IN A BORDERLESS WORLD
• Three new boxed features describing issues in interna-
tional business
• New examples of international business practices
• Updated data for the top 10 countries with which the
United States has trade deficits and surpluses
Chapter four
OPTIONS FOR ORGANIZING BUSINESS
• Three new boxed features describing real-world business
issues
• New examples of organizing business
• Updated list of major worldwide mergers and acquisitions
from 2007 to 2017
Chapter five
SMALL BUSINESS, ENTREPRENEURSHIP, AND
FRANCHISING
• Three new boxed features describing current business
issues
• New section on the sharing economy
• New examples of small business, entrepreneurship, and
franchising
• Updated data on number of firms by employment size
• Updated data on most business-friendly states
Chapter six
THE NATURE OF MANAGEMENT
• Three new boxed features describing current business
issues
• New examples of management in business practices
• Updated data on CEO compensation packages
• Inside look at the leadership of Starbucks
Chapter seven Chapter twelve
ORGANIZATION, TEAMWORK, AND DIMENSIONS OF MARKETING STRATEGY
COMMUNICATION • Three new boxed features describing current marketing
• Three new boxed features describing current business issues
issues • New examples of marketing strategy in business
• New figure describing desired attitudes and behaviors • Updated data on the 10 most valuable brands in the world
associated with corporate culture
• New examples of organization, teamwork, and communi-
cation in business
Chapter thirteen
DIGITAL MARKETING AND SOCIAL NETWORKING
• Three new boxed features describing current digital mar-
Chapter eight keting issues
• New examples of digital marketing and social networking
MANAGING SERVICE AND MANUFACTURING • New learning objective to understand online monitoring
OPERATIONS and analytics for social media
• Three new boxed features describing current business • New section on Social Media Marketing
operational issues • New section on Consumer-Generated Digital Media
• New examples of managing service and manufacturing • Snapchat, YouTube, and LinkedIn added to the Social
operations Network section
• Updated airline scorecard data • New section on Online Monitoring and Analytics

Chapter nine Chapter fourteen

ACCOUNTING AND FINANCIAL STATEMENTS
MOTIVATING THE WORKFORCE
• Three new boxed features describing current accounting
• Three new boxed features describing current business issues
issues • New learning objective to analyze financial statements,
• New examples of motivating employees in the using ratio analysis, to evaluate a company’s performance
workforce • New information on the financial information and ratios of
• Updated information on best places for businesses and Microsoft
careers • Financial ratio comparisons of Microsoft and Google
• New examples of accounting and financial statements in

Chapter ten business practices

MANAGING HUMAN RESOURCES Chapter fifteen

• Three new boxed features describing current
HR issues
MONEY AND THE FINANCIAL SYSTEM
• New examples of managing human resources in business • Three new boxed features describing current financial issues
practices • New material on reward cards
• New examples of financial systems in business

Chapter eleven Chapter sixteen

CUSTOMER-DRIVEN MARKETING
• Three new boxed features describing current marketing
issues
• New material on marketing analytics
• New examples of customer-driven marketing
• Updated data for buying power of U.S. minorities
by race
• Updated statistics of companies with the best consumer
service
FINANCIAL MANAGEMENT AND SECURITIES
MARKETS
• Three new boxed features describing current financial
issues
• New examples of financial management and securities in
business
• Updated examples of U.S. corporate bond quotes
• Updated data for estimated common stock price-earnings
ratios and dividends for selected companies

new to this edition ix

brief
contents
Part one Part three
BUSINESS IN A CHANGING WORLD MANAGING FOR QUALITY AND
chapter 1 The Dynamics of Business and COMPETITIVENESS
Economics 2 chapter 6 The Nature of Management 108
chapter 2 Business Ethics and Social chapter 7 Organization, Teamwork, and
Responsibility 22 Communication 126
chapter 2 Appendix: The Legal and Regulatory chapter 8 Managing Service and Manufacturing
Environment 41 Operations 144
chapter 3 Business in a Borderless World 54

Part two
STARTING AND GROWING A BUSINESS
chapter 4 Options for Organizing Business 74
chapter 5 Small Business, Entrepreneurship, and
Franchising 92
Part four
CREATING THE HUMAN RESOURCE
ADVANTAGE
chapter 9 Motivating the Workforce 164
chapter 10 Managing Human Resources 180

Part five
MARKETING: DEVELOPING
RELATIONSHIPS
chapter 11 Customer-Driven Marketing 200
chapter 12 Dimensions of Marketing Strategy 218
chapter 13 Digital Marketing and Social Media 240

Part six
FINANCING THE ENTERPRISE
chapter 14 Accounting and Financial Statements 258
chapter 15 Money and the Financial System 280
chapter 16 Financial Management and Securities
Markets 298
Notes 316
Name Index 341
Subject Index 343
©Steve Allen/Stockbyte/Getty Images RF

x
contents
Part one BUSINESS IN A
CHANGING WORLD 2
CHAPTER 1 THE DYNAMICS OF BUSINESS
AND ECONOMICS 2
THE NATURE OF BUSINESS 3
The Goal of Business 3
The People and Activities of Business 4
Why Study Business? 5
THE ECONOMIC FOUNDATIONS OF BUSINESS 6
Economic Systems 6
The Free-Enterprise System 8
The Forces of Supply and Demand 9
The Nature of Competition 10
Economic Cycles and Productivity 11
Whole Foods in a “Food Fight” to Win and Retain
Customers 11
THE AMERICAN ECONOMY 14
The Importance of the American Economy 15
General Mills Brand Strategy: No Trix, Just Treats 15
A Brief History of the American Economy 16
The Role of the Entrepreneur 17
Warby Parker Sees its Business Differently 18
The Role of Government in the American Economy 18
The Role of Ethics and Social Responsibility in Business 19
Building Your Soft Skills by Setting Goals 19
Team Exercise 19
CAN YOU LEARN BUSINESS IN A CLASSROOM? 20
Are You Prepared to Take Advantage of Emerging Job
Opportunities? 21
THE NATURE OF SOCIAL RESPONSIBILITY 33
Social Responsibility Issues 34
Drug Pricing: A Shot in the Arm and a Hole in the Wallet 37
UNEMPLOYMENT 39
Team Exercise 39
Building Your Soft Skills by Considering Your Ethics 39
Are You Ready to Go Green and Think Ethics with Your
Career? 40
APPENDIX: THE LEGAL AND REGULATORY ENVIRONMENT 41
CHAPTER 3 BUSINESS IN A BORDERLESS
WORLD 54
THE ROLE OF INTERNATIONAL BUSINESS 55
Why Nations Trade 56
Trade between Countries 56
Balance of Trade 57
INTERNATIONAL TRADE BARRIERS 58
Economic Barriers 58
Ethical, Legal, and Political Barriers 59
Bobbie the Bridestowe Bear: The Sweet Smell of Success 59
Social and Cultural Barriers 61
Technological Barriers 62
TRADE AGREEMENTS, ALLIANCES, AND ORGANIZATIONS 63
General Agreement on Tariffs and Trade 63
The North American Free Trade Agreement 63
The European Union 64

CHAPTER 2 BUSINESS ETHICS AND SOCIAL

RESPONSIBILITY 22
BUSINESS ETHICS AND SOCIAL RESPONSIBILITY 23
Hugh Jackman and Fair-Trade Coffee: It is a Laughing
Matter 24
THE ROLE OF ETHICS IN BUSINESS 25
Recognizing Ethical Issues in Business 26
Fairness and Honesty 29
Making Decisions about Ethical Issues 30
Improving Ethical Behavior in Business 31
Wells Fargo: The Stagecoach Runs Out of Control 32 ©Rene Lender/123RF

xi
 Steinhoff International: Not Losing any Sleep over
U.S. Entry 65
Asia-Pacific Economic Cooperation 66
Association of Southeast Asian Nations 66
World Bank 67
International Monetary Fund 67
GETTING INVOLVED IN INTERNATIONAL BUSINESS 67
Exporting and Importing 68
Trading Companies 68
Licensing and Franchising 68
Contract Manufacturing 69
Outsourcing 69
Offshoring 69
Joint Ventures and Alliances 70 ©Focal.Point/iStock/Getty Images RF
Direct Investment 70
BMW Revved Up about Carbon Fiber Batteries 70 TRENDS IN BUSINESS OWNERSHIP: MERGERS AND
INTERNATIONAL BUSINESS STRATEGIES 71 ACQUISITIONS 89
Developing Strategies 71 Building Your Soft Skills by Handling Conflict 90
Managing the Challenges of Global Business 72 Want to be An Entrepreneur? Know Which Form of Business
Team Exercise 72 is Best for You 91
Building Your Soft Skills by Understanding Cultural Team Exercise 91
Differences 72
Ready to Take Your Career on a Global
Adventure? 73
CHAPTER 5 SMALL BUSINESS,
ENTREPRENEURSHIP,
AND FRANCHISING 92
Part two STARTING AND
THE NATURE OF ENTREPRENEURSHIP AND SMALL
BUSINESS 93
GROWING A BUSINESS 74 What Is a Small Business? 94
The Role of Small Business in the American Economy 94
Industries That Attract Small Business 95
CHAPTER 4 OPTIONS FOR ORGANIZING Airbnb: Sharing, Caring, and Pairing 96
BUSINESS 74 ADVANTAGES OF SMALL-BUSINESS OWNERSHIP 98
SOLE PROPRIETORSHIPS 75 Independence 98
Advantages of Sole Proprietorships 76 Costs 98
Disadvantages of Sole Proprietorships 77 Flexibility 99
This Company’s Social Responsibility Cascades over Focus 99
Everything It Does 78 Reputation 99
PARTNERSHIPS 79 DISADVANTAGES OF SMALL-BUSINESS OWNERSHIP 99
Types of Partnership 79 Sseko Designs: Weaving Work, Women, and Their Welfare
Articles of Partnership 79 into One 99
Advantages of Partnerships 79 High Stress Level 100
Titan of a Mover that Moves the Titans 80 High Failure Rate 100
Disadvantages of Partnerships 81 STARTING A SMALL BUSINESS 101
Taxation of Partnerships 82 The Business Plan 101
CORPORATIONS 82 Forms of Business Ownership 101
Creating a Corporation 82 Financial Resources 101
Types of Corporations 83 Approaches to Starting a Small Business 102
Elements of a Corporation 84 Help for Small-Business Managers 103
Advantages of Corporations 86 Kombucha that Rocks: Enlightened and Synergy 104
Disadvantages of Corporations 87 THE FUTURE FOR SMALL BUSINESS 104
OTHER TYPES OF OWNERSHIP 87 Demographic Trends 104
Joint Ventures 87 Technological and Economic Trends 105
S Corporations 88 Building Your Soft Skills by Starting Your Own Business 105
Limited Liability Companies 88 MAKING BIG BUSINESSES ACT “SMALL” 106
Cooperatives 88 Team Exercise 106
REI: Co-opted into a Great Business Strategy 88 Do You Know How to Make a Small Business Survive? 107

xii contents
Part three MANAGING FOR CHAPTER 7 ORGANIZATION, TEAMWORK,
AND COMMUNICATION 126
QUALITY AND COMPETITIVENESS 108
ORGANIZATIONAL CULTURE 127
DEVELOPING ORGANIZATIONAL STRUCTURE 128
CHAPTER 6 THE NATURE OF It’s Getting Harder to Find Employees with
MANAGEMENT 108 Soft Skills 128
THE IMPORTANCE OF MANAGEMENT 109 ASSIGNING TASKS 130
Specialization 130
MANAGEMENT FUNCTIONS 110
Departmentalization 131
Planning 110
Pressure: Decision Overload in the Workplace 111 ASSIGNING RESPONSIBILITY 132
Organizing 113 Delegation of Authority 132
Directing 113 Degree of Centralization 133
Controlling 114 Sugar Bowl Bakery: Born in Vietnam . . . Success in the
United States 134
TYPES OF MANAGEMENT 114
Span of Management 134
Levels of Management 114
Organizational Layers 135
Areas of Management 117
FORMS OF ORGANIZATIONAL STRUCTURE 135
SKILLS NEEDED BY MANAGERS 118
Line Structure 135
Technical Expertise 118
Line-and-Staff Structure 136
Conceptual Skills 118
Multidivisional Structure 136
Analytical Skills 118
Matrix Structure 136
Human Relations Skills 119
THE ROLE OF GROUPS AND TEAMS IN
LEADERSHIP 119
ORGANIZATIONS 137
Harmless Harvest: Nuts about Their Farmers 119
Committees 138
The Apple Doesn’t Fall Far from the Tree 120
Task Forces 138
Employee Empowerment 121
Teams 138
Recognizing and Defining the Decision Situation 122
COMMUNICATING IN ORGANIZATIONS 139
DECISION MAKING 122
Formal and Informal Communication 140
Developing Options 123
Monitoring Communications 141
Analyzing Options 123
Zappos Takes Steps to Manage Differently 141
Selecting the Best Option 123
Improving Communication Effectiveness 142
Implementing the Decision 123
Team Exercise 142
Monitoring the Consequences 123
Building Your Soft Skills by Giving and Receiving
MANAGEMENT IN PRACTICE 124 Feedback 142
Team Exercise 124 Organization, Teamwork, and Communication: Are You
Building Your Soft Skills by Becoming a Better Leader 124 Ready to Apply These Skills on the Job? 143
What Kind of Manager Do You Want to Be? 125

CHAPTER 8 MANAGING SERVICE

AND MANUFACTURING
OPERATIONS 144
THE NATURE OF OPERATIONS MANAGEMENT 145
The Transformation Process 145
Amazon: A Prime Example of Distribution Success 146
Operations Management in Service Businesses 147
PLANNING AND DESIGNING OPERATIONS SYSTEMS 149
Planning the Product 149
Designing the Operations Processes 150
Planning Capacity 150
Planning Facilities 151
Sustainability and Manufacturing 153
MANAGING THE SUPPLY CHAIN 154
Purchasing 154
Quality Bicycle Products Pedals a Successful Wholesale
©Rawpixel.com/Shutterstock.com RF Model 155

contents xiii
 Managing Inventory 155 Expectancy Theory 173
Outsourcing 157 Goal-Setting Theory 173
Routing and Scheduling 157 STRATEGIES FOR MOTIVATING EMPLOYEES 174
MANAGING QUALITY 158 Behavior Modification 174
International Organization for Standardization (ISO) 160 Job Design 174
Trader Joe’s: Sometimes Less is More 161 Circling the Wagons: The Success of Radio Flyer 176
Inspection 161 Would You Be Good at Motivating a Workforce? 177
Sampling 161 Importance of Motivational Strategies 178
Building Your Soft Skills by Improving Your Organizational Building Your Soft Skills by Staying Motivated 178
Skills 161 Team Exercise 178
INTEGRATING OPERATIONS AND SUPPLY CHAIN
MANAGEMENT 162
Careers Abound in Operations Management 162 CHAPTER 10 MANAGING HUMAN
Team Exercise 162 RESOURCES 180
THE NATURE OF HUMAN RESOURCE MANAGEMENT 181
Part four CREATING THE HUMAN PLANNING FOR HUMAN RESOURCE NEEDS 181
Snagajob: Hooked on Helping and Hiring 182
RESOURCE ADVANTAGE 164
RECRUITING AND SELECTING NEW EMPLOYEES 183
Recruiting 183
CHAPTER 9 MOTIVATING THE Selection 183
Legal Issues in Recruiting and Selecting 185
WORKFORCE 164
DEVELOPING THE WORKFORCE 186
NATURE OF HUMAN RELATIONS 165
Training and Development 186
HISTORICAL PERSPECTIVES ON EMPLOYEE Assessing Performance 187
MOTIVATION 167 Turnover 188
Classical Theory of Motivation 167
COMPENSATING THE WORKFORCE 189
Put a Smile on My Face: Impact of the Unlimited Vacation
Financial Compensation 189
Plan 167
Ditch the Résumé and Solve a Puzzle: Changing Hiring
The Hawthorne Studies 168
Practices 190
THEORIES OF EMPLOYEE MOTIVATION 168 Benefits 191
Maslow’s Hierarchy of Needs 169
MANAGING UNIONIZED EMPLOYEES 192
Herzberg’s Two-Factor Theory 170
Collective Bargaining 192
McGregor’s Theory X and Theory Y 171
Resolving Disputes 193
Bar None: A Company Willing to Go “Out on a Clif” for Its
Employees 171 THE IMPORTANCE OF WORKFORCE DIVERSITY 194
Theory Z 172 The Characteristics of Diversity 194
Equity Theory 172 Why Is Diversity Important? 194
The Benefits of Workforce Diversity 195
Affirmative Action 196
Walmart’s New EDLP: Every Day Living Pay—and Low
Prices 196
TRENDS IN MANAGEMENT OF THE WORKFORCE 197
Are You Ready for a Job in Human Resources? 197
Team Exercise 198
Bringing Soft Skills to Your Résumé 198

Part five MARKETING:

DEVELOPING RELATIONSHIPS 200

CHAPTER 11 CUSTOMER-DRIVEN
MARKETING 200
NATURE OF MARKETING 201
The Exchange Relationship 201
©ColorBlind Images/Getty Images Functions of Marketing 203

xiv contents
 Product Line and Product Mix 222
Product Life Cycle 222
Identifying Products 224
Dollar Shave Club: Smooth Operator 226
PRICING STRATEGY 227
Pricing Objectives 228
Specific Pricing Strategies 228
DISTRIBUTION STRATEGY 228
Marketing Channels 229
Intensity of Market Coverage 231
Patagonia Climbs to New Level of Environmental
Responsibility 231
Physical Distribution 232
Importance of Distribution in a Marketing Strategy 233
PROMOTION STRATEGY 233
The Promotion Mix 234
Promotion Strategies: To Push or to Pull 236
Objectives of Promotion 237
Building Your Soft Skills by Developing Your Personal
Brand 238
©tashka2000/iStock/Getty Images RF Promotional Positioning 238
Are You Interested in Becoming a Marketing
Manager? 238
IMPORTANCE OF MARKETING STRATEGY 239
Creating Value with Marketing 203 Team Exercise 239
The Marketing Concept 204
Evolution of the Marketing Concept 205
DEVELOPING A MARKETING STRATEGY 206
Selecting a Target Market 207 CHAPTER 13 DIGITAL MARKETING AND
Developing a Marketing Mix 209 SOCIAL MEDIA 240
MARKETING RESEARCH AND INFORMATION GROWTH AND BENEFITS OF DIGITAL
SYSTEMS 210 COMMUNICATION 241
Boom or Bust: Don’t Overlook This Generation 211 USING DIGITAL MEDIA IN BUSINESS 242
Online Marketing Research 212
DIGITAL MEDIA AND THE MARKETING MIX 243
BUYING BEHAVIOR 212 Ipsy’s Subscription Is a Prescription for Success 245
Psychological Variables of Buying Behavior 213 Social Media Marketing 246
Social Variables of Buying Behavior 213
CONSUMER-GENERATED DIGITAL MEDIA 247
Whey Better than Other Bars: The Protein Bar 213
Social Networks 247
Understanding Buying Behavior 214
It Just Got Easier to Get a Piece of the Pie 247
THE MARKETING ENVIRONMENT 214 Blogs and Wikis 249
Sports Clips Shoots for the Male Sportster 215 Media Sharing 249
IMPORTANCE OF MARKETING TO BUSINESS Mobile Marketing 251
AND SOCIETY 215 Applications and Widgets 251
Team Exercise 215 ONLINE MONITORING AND ANALYTICS 252
Do You Have What It Takes to Get a Job in
USING DIGITAL MEDIA TO LEARN ABOUT
Marketing? 216
CONSUMERS 253
Building Your Soft Skills by Considering Your Personal
Brand 216 LEGAL AND SOCIAL ISSUES IN INTERNET MARKETING 253
Privacy 254
Identity Theft and Online Fraud 254
GE Plugs into Consumers 255
CHAPTER 12 DIMENSIONS OF MARKETING Intellectual Property Theft and Other Illegal
STRATEGY 218 Activities 256
THE MARKETING MIX 219 Team Exercise 256
PRODUCT STRATEGY 219 DIGITAL MEDIA’S IMPACT ON MARKETING 256
Developing New Products 219 What Does It Mean to Be a Digital Marketer? 257
Netflix: Full “Stream” Ahead 220 Building Your Soft Skills by Reflecting Your Personal
Classifying Products 221 Brand 257

contents xv
Part six FINANCING THE
ENTERPRISE 258

CHAPTER 14 ACCOUNTING AND

FINANCIAL
STATEMENTS 258
THE NATURE OF ACCOUNTING 259
Accountants 259
Accounting or Bookkeeping? 260
The Uses of Accounting Information 261
Fraudsters and Tipsters: Achieving Balance in the
Accounting World 262
THE ACCOUNTING PROCESS 263
The Accounting Equation 263
Double-Entry Bookkeeping 264
The Accounting Cycle 264
FINANCIAL STATEMENTS 266
The Income Statement 266
Buffalo Wild Wings: From Accounting Mess
to Success 269
The Balance Sheet 270
The Statement of Cash Flows 272
RATIO ANALYSIS: ANALYZING FINANCIAL
STATEMENTS 273
Profitability Ratios 274
Environmental Reporting: It’s Not Easy
Being Green 275
Asset Utilization Ratios 275
Liquidity Ratios 276
Debt Utilization Ratios 276
Per Share Data 276
Industry Analysis 277 ©Tetra Images/Getty Images RF
Team Exercise 278
IMPORTANCE OF INTEGRITY IN ACCOUNTING 278
Building Your Soft Skills by Thinking about Ethics 278 Building Your Soft Skills by Handling Conflict 296
Would You Make a Good Accountant? 279 Do You Want a Career in Finance or Banking? 296
Team Exercise 297

CHAPTER 15 MONEY AND THE FINANCIAL CHAPTER 16 FINANCIAL MANAGEMENT

SYSTEM 280 AND SECURITIES
MONEY IN THE FINANCIAL SYSTEM 281
Functions of Money 281
MARKETS 298
Banking on Credit Unions 282 MANAGING CURRENT ASSETS AND
Characteristics of Money 282 LIABILITIES 299
Types of Money 284 Managing Current Assets 299
Mr. CFO: “Houston, We Have a Problem!” 300
THE AMERICAN FINANCIAL SYSTEM 286
Managing Current Liabilities 303
The Federal Reserve System 286
Banking Institutions 289 MANAGING FIXED ASSETS 304
Cybersecurity: Making It Safer in Banking 290 Capital Budgeting and Project Selection 305
Nonbanking Institutions 292 Assessing Risk 305
Greenleaf Trust Has a Green Thumb and Much Pricing Long-Term Money 305
More 293 FINANCING WITH LONG-TERM LIABILITIES 307
Electronic Banking 294 Bonds: Corporate IOUs 307
Future of Banking 295 Types of Bonds 308

xvi contents
FINANCING WITH OWNERS’ EQUITY 308 Building Your Soft Skills by Becoming Financially
Cue Ball: In It for the Long Haul 309 Literate 314
INVESTMENT BANKING 310 Team Exercise 314
Legal Tax Evasion: The Flight of U.S. Companies What Is It Like to Work in Financial Management or
Abroad 311 Securities? 315
THE SECURITIES MARKETS 311
NOTES 316
Stock Markets 312
The Over-the-Counter Market 313 NAME INDEX 341
Measuring Market Performance 313 SUBJECT INDEX 343

contents xvii
business 6e
 chapter
one
the dynamics of
business and economics ©Steve Allen/Stockbyte/Getty Images RF

LEARNING OBJECTIVES
After reading this chapter, you will be able to:
LO 1-1 Define basic concepts such as business, LO 1-4 Describe the role of supply, demand, and
product, and profit. competition in a free-enterprise system.
LO 1-2 Identify the main participants and activities of LO 1-5 Specify why and how the health of the
business and explain why studying business economy is measured.
is important. LO 1-6 Trace the evolution of the American economy
LO 1-3 Define economics and compare the four types and discuss the role of the entrepreneur in
of economic systems. the economy.

2 PART 1 | Business in a Changing World

W
e begin our study of business in this chapter by
examining the fundamentals of business and eco-
nomics. First, we introduce the nature of business,
including its goals, activities, and participants. Next, we describe
the basics of economics and apply them to the U.S. economy.
Finally, we establish a framework for studying business in this
text. ■

by businesses support nonprofit

LO 1-1 Define basic concepts such as business,
organizations through donations business individuals
product, and profit.
from employees. or organizations who try to
earn a profit by providing
To earn a profit, a person or orga-
THE NATURE OF BUSINESS nization needs management skills
products that satisfy
people’s needs.
A business tries to earn a profit by providing products that to plan, organize, and control the
satisfy people’s needs. The outcomes of its efforts are ­products activities of the business and to product a good or
that have both tangible and intangible characteristics that pro- find and develop employees so service with tangible and
vide satisfaction and benefits. When you purchase a product, that it can make products consum- intangible characteristics
ers will buy. A business also needs that provide satisfaction
you are buying the benefits and satisfaction you think the prod-
and benefits.
uct will provide. A Subway sandwich, for example, may be marketing expertise to learn what
purchased to satisfy hunger, while a Honda Accord may be pur- products consumers need and want profit the difference
chased to satisfy the need for transportation and the desire to and to develop, manufacture, price, between what it costs to
present a certain image. promote, and distribute those prod- make and sell a product
ucts. Additionally, a business needs and what a customer pays
Most people associate the word product with tangible goods— for it.
financial resources and skills to
an automobile, smartphone, jeans, or some other tangible item.
fund, maintain, and expand its oper-
However, a product can also be a service, which occurs when nonprofit
ations. A business must cover the
people or machines provide or process something of value to cus- organizations
cost of labor, operate facilities, pay organizations that may
tomers. Dry cleaning, a checkup by a doctor, a movie or sports
taxes, and provide management. provide goods or services
event—these are examples of services. Some services, such as
Other challenges for businesspeople but do not have the
­Instagram, do not charge a fee for use but obtain revenue from
include abiding by laws and govern- fundamental purpose of
ads on their sites. A product can also be an idea. Accountants
ment regulations, and adapting to earning profits.
and attorneys, for example, generate ideas for solving problems.
economic, technological, political,
and social changes. Even nonprofit stakeholders groups
The Goal of Business organizations engage in manage- that have a stake in the
The primary goal of all businesses is to earn a profit, the difference success and outcomes of a
ment, marketing, and finance activi-
between what it costs to make and sell a product and what a cus- business.
ties to help reach their goals.
tomer pays for it. In addition, a business has to pay for all expenses
necessary to operate. If a company spends $8 to produce, finance, To achieve and maintain profit-
promote, and distribute a product that it sells for $10, the busi- ability, businesses have found that
ness earns a profit of $2 on each product sold. Businesses have they must produce quality products, operate efficiently, and
the right to keep and use their profits as they choose—within legal be socially responsible and ethical in dealing with customers,
limits—because profit is the reward for their efforts and for the employees, investors, government regulators, and the commu-
risks they take in providing products. Earning profits contributes nity. Because these groups have a stake in the success and out-
to society by creating resources that support our social institutions comes of a business, they are sometimes called stakeholders.
and government. Businesses that create profits, pay taxes, and Many businesses, for example, are concerned about how the
create jobs are the foundation of our economy. In addition, prof- production and distribution of their products affect the envi-
its must be earned in a responsible manner. Not all organiza- ronment. New fuel requirements are forcing automakers to
tions are businesses, however. Nonprofit organizations—such invest in smaller, lightweight cars. Electric vehicles may be a
as National Public Radio (NPR), Habitat for Humanity, and solution, but only about 1 percent of new car sales are plug-
other charities and social causes—do not have the fundamental in-electric.1 Other businesses are concerned with promoting
purpose of earning profits, although they may provide goods science, engineering, and mathematics careers among women.
or services and engage in fund-raising. They also utilize skills Traditionally, these careers have been male dominated.
related to management, marketing, and finance. Profits earned A global survey found that when the number of men and

CHAPTER 1 | The Dynamics of Business and Economics 3

 participants in business activities throughout this book. Next,
we will examine the major activities of business.

Management. Notice that in Figure 1.1, management and

Sustainability is a growing concern among both consumers and
businesses. Walmart has invested in solar panels at some of its stores
to decrease its energy usage.
©Thomas Cooper/Getty Images
women were evenly matched, the team was 23 percent more
likely to have an increase in profit over teams dominated by
one gender.2 Nonprofit organizations, such as the American
Red Cross, use business activities to support natural-disaster
victims, relief efforts, and a national blood supply.
LO 1-2 Identify the main participants and activities of
business and explain why studying business is important.
The People and Activities
of Business F I G U R E 1 .1
Overview of the Business World
Figure 1.1 shows the people and activities
involved in business. At the center of the figure
are owners, employees, and customers; the outer
circle includes the primary business activities—
management, marketing, and finance. Owners
have to put up resources—money or credit—to
start a business. Employees are responsible for
the work that goes on within a business. Own-
ers can manage the business themselves or hire
employees to accomplish this task. The presi-
dent and CEO of Procter & Gamble, David S. Competition
Taylor, does not own P&G but is an employee
who is responsible for managing all the other
employees are in the same segment of the circle. This is because
management involves developing plans, coordinating employ-
ees’ actions to achieve the firm’s goals, organizing people to
work efficiently, and motivating them to achieve the business’s
goals. Management involves the functions of planning, organiz-
ing, leading, and controlling. Effective managers who are skilled
in these functions display effective leadership, decision making,
and delegation of work tasks. Management is also concerned
with acquiring, developing, and using resources (including peo-
ple) effectively and efficiently.
Operations is another element of management. Managers must
oversee the firm’s operations to ensure that resources are suc-
cessfully transformed into goods and services. Although most
people associate operations with the development of goods,
operations management applies just as strongly to services.
Managers at the Ritz-Carlton, for instance, are concerned with
transforming resources such as employee actions and hotel
­amenities into a quality customer service experience. In essence,
managers plan, organize, staff, and control the tasks required to
carry out the work of the company or nonprofit organization.
We take a closer look at management activities in Parts 3 and 4
of this text.
Marketing. Marketing and customers are in the same seg-
ment of Figure 1.1 because the focus of all marketing activities
Economy
Finance
Owners
Digital
Technology
Emp

s
m er
Mana

employees in a way that earns a profit for inves-

loy

sto

es
tors, who are the real owners. Finally, and most Cu
e
ge m

importantly, a business’s major role is to satisfy

ti n
en

ke
t

the customers who buy its goods or services.

ar

M
Note also that forces beyond an organization’s
control—such as legal and regulatory forces, the
economy, competition, technology, the political Social Legal, Political, and
environment, and ethical and social concerns— Responsibility Regulatory Forces
all have an impact on the daily operations of and Ethics
businesses. You will learn more about these

4 PART 1 | Business in a Changing World

 People who work as accountants, stock-
brokers, investment advisors, or bankers
are all part of the financial world. Own-
ers sometimes have to borrow money
from banks to get started or attract addi-
tional investors who become partners or
stockholders. Owners of small businesses
in particular often rely on bank loans
for funding. Part 6 of this text discusses
financial management.

Why Study Business?

Studying business can help you develop
skills and acquire knowledge to prepare for
your future career, regardless of whether
you plan to work for a multinational For-
tune 500 firm, start your own business,
work for a government agency, or manage
or volunteer at a nonprofit organization.
The Aflac duck ad uses humor in its advertising to promote the insurance company.
The field of business offers a variety of
©Chance Yeh/Getty Images Entertainment/Getty Images
interesting and challenging career oppor-
tunities throughout the world, such as mar-
is satisfying customers. Marketing includes all the activities keting, human resources management, information technology,
designed to provide goods and services that satisfy consumers’ finance, production and operations, wholesaling and retailing,
needs and wants. Marketers gather information and conduct and many more.
research to determine what customers want. Using information
Studying business can also help you better understand the
gathered from marketing research, marketers plan and develop
many business activities that are necessary to provide satisfy-
products and make decisions about how much to charge for
ing goods and services. Some businesses such as Snap, par-
their products and when and where to make them available.
ent company of Snapchat, are operating for many years at a
They also analyze the marketing environment to understand
loss to build market share. Most businesses charge a reason-
changes in competition and consumers. The retail environ-
able price for their products to ensure that they cover their
ment is changing based on competition from online retailing
production costs, pay their employees, provide their owners
such as Amazon. This has caused some retail stores and malls
with a return on their investment, and perhaps give something
to close.3 Marketing focuses on the four P’s—­product, price,
back to their local communities and societies. Habitat for
place (or distribution), and promotion—also known as the
marketing mix. Product management involves such key man-
agement decisions as product adoption, development, brand-
ing, and product positioning. Selecting the right price for the
product is essential to the organization as it relates directly
to profitability. Distribution is an important management con-
cern because it involves making sure products are available
to consumers in the right place at the right time. Marketers
use promotion—advertising, personal selling, sales promotion
(coupons, games, sweepstakes, movie tie-ins), and publicity—
to communicate the benefits and advantages of their products
to consumers and to increase sales. We will examine market-
ing activities in Part 5 of this text.

Finance. Owners and finance are in the same part of Figure 1.1
because, although management and marketing have to deal
with financial considerations, it is the primary responsibility
of the owners to provide financial resources for the operation Many companies engage in socially responsible behavior to give back
of the business. Moreover, the owners have the most to lose if to their communities. Home Depot partners with Habitat for Humanity
the business fails to make a profit. Finance refers to all activi- to build homes for disadvantaged families.
ties concerned with obtaining money and using it effectively. ©Ariel Skelley/Getty Images RF

CHAPTER 1 | The Dynamics of Business and Economics 5

economics the
study of how resources
are distributed for the
production of goods and
services within a social
system.
natural resources
land, forests, minerals,
water, and other things that
are not made by people.
human resources
(labor) the physical and
mental abilities that people
use to produce goods and
services.
financial resources
(capital) the funds used
to acquire the natural and
human resources needed
to provide products.
economic system a
description of how a
particular society distributes
its resources to produce
goods and services.

Humanity is an international nonprofit organization building
housing for those who cannot afford simple, decent housing.
Habitat operates like a business relying on volunteer labor and
offers no-interest mortgages for repayment. Habitat ReStore
is a retail unit that sells new and used building materials that
are donated. The Home Depot Foundation provided grants to
remodel and renovate homes of U.S. military veterans.4 Thus,
learning about business can help you become a well-informed
consumer and member of society.
Business activities help generate the profits that are essential
not only to individual businesses and local economies, but also
to the health of the global economy. Without profits, businesses
find it difficult, if not impossible, to buy more raw materials,
hire more employees, attract more capital, and create additional
products that, in turn, make more profits and fuel the world
economy. Understanding how our free-enterprise economic sys-
tem allocates resources and provides incentives for industry and
the workplace is important to everyone.
LO 1-3 Define economics and compare the four types
of economic systems.
THE ECONOMIC
is to turn the factors of production and intangible resources
into a competitive advantage.
Economic Systems
An economic system describes how a particular society dis-
tributes its resources to produce goods and services. A central
issue of economics is how to fulfill an unlimited demand for
goods and services in a world with a limited supply of resources.
Different economic systems attempt to resolve this central issue
in numerous ways, as we shall see.
Although economic systems handle the distribution of resources
in different ways, all economic systems must address three
important issues:
1. What goods and services, and how much of each, will satisfy
consumers’ needs?
2. How will goods and services be produced, who will produce
them, and with what resources will they be produced?
3. How are the goods and services to be distributed to
consumers?
Communism, socialism, and capitalism, the basic economic
systems found in the world today (Table 1.1), have fundamental
differences in the way they address these issues. The factors of
production in command economies are controlled by govern-
ment planning. In many cases, the government owns or controls

FOUNDATIONS OF the production of goods and services. Communism and social-

ism are, therefore, considered command economies.

BUSINESS Communism. Karl Marx (1818–1883) first described

To continue our introduction to business, it is useful to explore
the economic environment in which business is conducted. In
this section, we examine economic systems, the free-enterprise
system, the concepts of supply and demand, and the role of
competition. These concepts play important roles in determin-
ing how businesses operate in a particular society.
Economics is the study of how resources are distributed for
the production of goods and services within a social system.
You are already familiar with the types of resources available.
Land, forests, minerals, water, and other things that are not
made by people are natural resources. Human resources,
or labor, refer to the physical and mental abilities that people
use to produce goods and services. Financial resources, or
capital, are the funds used to acquire the natural and human
resources needed to provide products. These resources are
related to the factors of production, consisting of land, labor,
capital, and enterprise used to produce goods and services. The
firm can also have intangible resources such as a good reputa-
tion for quality products or being socially responsible. The goal
­communism as a society in which the people, without regard
to class, own all the nation’s resources. In his ideal political-
economic system, everyone contributes according to ability and
receives benefits according to need. In a communist economy,
the people (through the government) own and operate all busi-
nesses and factors of production. Central government planning
determines what goods and services satisfy citizens’ needs, how
the goods and services are produced, and how they are distrib-
uted. However, no true communist economy exists today that
satisfies Marx’s ideal.
On paper, communism appears to be efficient and equitable,
producing less of a gap between rich and poor. In practice,
however, communist economies have been marked by low
standards of living, critical shortages of consumer goods, high
prices, corruption, and little freedom. Russia, Poland, Hun-
gary, and other eastern European nations have turned away
from communism and toward economic systems governed by
supply and demand rather than by central planning. However,
their experiments with alternative economic systems have been

6 PART 1 | Business in a Changing World

Another random document with
no related content on Scribd:
given anywhere in France without his permission, for which he
received a sum of money. He was such a tyrant that he had many
enemies, some of whom tried to poison his snuff, in order to get rid
of the King’s favorite.
“Le Roi Soleil” (The Sun King), as Louis XIV was called, had to be
entertained, and Lully understood so well how to keep him amused,
that the King could not get along without his composer whose
performances dazzled all beholders!
You must read French history of that period in order to
understand just how gorgeous and how extravagant life at the palace
of Versailles was and how eventually it led to the revolt of the people
and the French Revolution. Or perhaps you have seen the elaborate
gardens, fountains and palace,—a playground built at fearful cost
where the Kings of France might forget their cares! The King went so
far as to give Lully a post of royal secretary, usually held by nobles. It
is said that his only claim to the position was that he made people
laugh!
In 1681, his ballet Triomphe de l’Amour (Triumph of Love) was
given, in which, for the first time, women instead of men danced.
Indeed, ladies of the nobility took part in the ballet!
The French Overture introduced by Lully, was in two parts or
movements,—the first slow and serious, the second by way of
contrast fast, and bringing in the contrapuntal style of the church
composers; sometimes a third part resembling the first was added.
These overtures were very much liked in Lully’s time and during the
18th century, and was the form used by the German composers in
their orchestral suites and by Handel. Lully was very successful in
composing military music, and his military marches were used not
only by the French army, but by the armies marching against
France. All of his music is simple and clear in outline, it is easy to
remember, its rhythm is vigorous and definite, and the people, as
well as musicians of his day, loved and understood it. One writer said
that one of his songs from Amadis, an opera (1684), “was sung by
every cook in France and Lully would stop his carriage on the Pont
Neuf (the New Bridge across the Seine) to set some poor fiddler right
who was playing one of his airs.” His works reached Italy, Germany,
England, Holland and Flanders, and influenced many of the
composers like Purcell, Humphrey and Handel to say nothing of the
French composers who followed him.
Lully built up the orchestra, and used the different groups of
instruments in entirely new ways.
Lully died in 1687 as the result of having dropped the stick with
which he directed his orchestra on his foot. This does not sound
possible, but the baton used in his time was very large and heavy,
and the accident caused blood poisoning. He was very much missed,
for there was no one with his talent for conducting and disciplining
the singers and dancers to replace him.
 Rameau

In 1683, was born another French composer who carried on the

work that Lully had begun, a work so much loved by the French
public, that Jean Philippe Rameau found as strong a rival in the dead
Lully as his contemporaries had in the living. Rameau’s father was
organist of a church at Dijon, and although the family was very poor,
the father was determined to give his three children a musical
education, and began to teach them before they could read. As a
result of this early training little Jean Philippe, when he was only
seven years old, could play at sight on the harpsichord any music put
before him, and when he was sent to school, he was very unruly and
sang out loud in class or scribbled music all over his papers instead
of doing his lessons.
When he was eighteen, he went to Italy, but as he did not like the
music, he left. He was always headstrong and self-willed, and this
was one of the hasty decisions for which he was afterwards sorry. He
traveled from place to place on this journey, playing his way as he
went, on the organ in churches and the violin in a band of traveling
musicians. In the south of France, old Provence, the home of the
troubadours, he became organist at Clermont, and lived quietly for
six years. Here he wrote his first pieces for clavecin (spinet) and
three cantatas. (The cantata was a new form which came from Italy,
and was a small opera to be sung in a drawing-room.) When Rameau
grew tired of his work as organist at Clermont, he showed his
discontent by playing as badly as he possibly could, by using
untuneful organ-stops and by playing fearful discords. An attempt
was made to shut him off but he paid no attention until a choir boy
was sent to him with a message, whereupon he left the organ and
walked out of the church. He finally succeeded in making the
directors give him his release, but before many years he returned to
his old post, and was taken back in spite of his disagreeable temper,
and so proud was Clermont of its organist, that his chair is still kept
and exhibited.
From Clermont he went to Paris where he studied with the
organist Marchand, and read the old books of musical theory such as
Zarlino’s, for Rameau during his career wrote five important books
on musical theory and harmony. He was the first to establish
definitely the classic principles of harmony, and to put them into a
form that for many years was used by all students. You must
remember that up to the 17th century, counterpoint was the chief
study, but when Italian opera succeeded in breaking down the
polyphonic habit, a new science had to be made to explain the new
system of chords that had been gradually built up by the Italians and
also by Luther and his chorals. This was the science of harmony, and
Rameau’s Treatise of Music, containing the Principles of
Composition (1722), was one of the first books of its kind.
Until Rameau was fifty, he was known as an organist, a teacher of
composition and a writer of many charming works for harpsichord
and clavecin. He married a young singer when he was 43, and the
year after, he made the acquaintance of a wealthy patron of the arts,
at whose house he met artists, literary men, princes and
embassadors. Rameau taught his patron’s wife, and had the use of
his organ and private orchestra. Here he first found himself among
friends who understood and appreciated his talents; here he met the
great French writer, Voltaire, and the Abbé Pellegrin, both of whom
wrote librettos for his operas. There is a tale that the Abbé made the
composer sign an agreement about payment for the use of his book
but after hearing the first rehearsal he tore it up—so pleased was he
with Rameau’s first opera, Hippolyte et Aricie (1733). Now Rameau
met the jealousy of Lully’s followers, who tried to prevent the success
of the work. They hissed it and wrote slighting verse about it:
If difficulties beauty show,
Then what a great man is Rameau.
If beauty, though, by chance should be
But nature’s own simplicity,
Then what a small man is Rameau!—

(Frederick H. Martens’ translation of A History of Music by Paul

Landormy.)
It is curious how often a new style in music has been greeted with
just such criticism and prejudice as the “Lullyists” showed for
Rameau’s opera! They claimed that the work was not French, that he
used strange chords, that his music was too difficult to be
understood! In fact they said exactly the same things that are said
today about new works which are different from what the public is
used to hearing. Voltaire said that it takes a whole generation for the
human ear to grow familiar with a new musical style!
His third opera, Castor and Pollux, in 1737, was his first real
success. With this work, he became famous, and was regarded as
France’s greatest composer. An English noble in Paris at the time
stated “that although everyone was abusing Rameau’s ‘horrible’
work, yet it was impossible to get a seat at the opera.”
Although Rameau brought nothing new to opera, he was the step
between the Lully traditions and the innovators who came with
Gluck. The French composers today turn to him in their search for
the direct road along which French music has traveled.
In spite of Rameau’s unfriendly reserved nature, he won fame by
force of his genius. He was as unlike Lully as two men could possibly
have been. Rameau accepted favors from no one, and was generous
in his attitude towards his fellow composers. He talked very little and
was not popular. However, he was at the height of his career, when a
company of Italian singers arrived in Paris (1752), and played La
Serva Padrona by Pergolesi. The fresh sparkling little opera took
Paris by storm, and this was the beginning of a sharp fight known as
the war of the buffoons (page 330), which divided Paris into two
factions,—those who stood by Lully and Rameau, and those who
wanted to see French opera replaced by the new Italian comic opera.
“The charm of these light operas,” says Mary Hargrave in her little
book, The Earlier French Musicians, “lay in the simplicity of their
subjects, taken from scenes and persons in ordinary life, humorously
treated. They came as a delightful relief after the stilted classical
heroes and heroines, the threadbare episodes of gods and goddesses,
the Greek and Roman warriors in tunics, with ribbons and helmets
on powdered wigs, in short, all the artificial conventions of which
people had at last grown unutterably weary.”
Even the court was divided: Louis XV was on the side of French
music, but the Queen was for the Italian, and crowds gathered
nightly at the opera near the royal boxes, which were known as the
“King’s corner,” and the “Queen’s corner.” Word bombshells were
thrown from one camp into the other, and sometimes these became
real insults! Poor Rameau! First he was the butt of the Lullyists
because he was too modern, and now storms of abuse were heaped
on his head because he was too old-fashioned! Nevertheless, to the
end of his life his operas were received with great enthusiasm, and
on one occasion when the old man of eighty was seen hiding in the
corner of a box during one of his operas, he was called out with
storms of applause. He was always very shy about appearing in
public, applause embarrassed him, and no doubt much of his
disagreeableness was due to his being bashful.
Rameau looked upon his scientific studies as more important than
his composing, and Bach, Handel and many other composers studied
his theory work even when they were not great admirers of his
compositions. We never hear his operas, but his lovely pieces for the
harpsichord, many of which are out of his operas, are played in piano
recitals and are unsurpassed as examples of the French dance suite.
Following the fashion of his time, he gave his pieces amusing titles
such as The Call of the Birds, The Hen, The Whirlwinds, The
Egyptian.
A list of his works show that he wrote 26 operas, 2 cantatas, 5
books on theory, and 4 volumes of harpsichord music.
His death occurred in 1764, and all France mourned their “greatest
composer” and for years held memorial services in his honor.
Piron, a French writer, said of him: “All his mind and all his soul
were in his harpsichord and when he had closed that, the house was
empty, there was no one at home.”
 French Composers for Clavecin and Harpsichord

In every collection of French instrumental music of the 17th and

18th centuries, besides the names of Lully and Rameau, we find
Jacques Champion de Chambonnières (1600–1670), Jean Baptiste
Loeilly, or Loeillet (?–1728?), François Couperin (1668–1733), Jean
François Dandrieu (1684–1740), Jean Louis Marchand (1669–1733),
Louis Claude Daquin (1694–1772) and Schobert (1720–1768).
These writers for clavecin and harpsichord of the French school
were the first to write music for instruments to which they gave
names describing the nature of the compositions. So, now, in
addition to the names of dances which formed the suites, we find The
Coucou, Butterflies, Tambourine, The Windmill, The Turtle-Doves,
and so on. This was an important step for it led directly to the kind of
titles given to piano pieces in the 19th century by the German
romantic school.
The most important of this group was François Couperin, called
“the great,” as he was the most gifted member of a family, who
supplied France with musicians for two centuries. From 1665 to
1826, there were eight Couperins who were organists of St. Gervais’
Church in Paris.
We can compare the Couperin family to the Bachs who flourished
at the same time in Germany. François (1668–1733), was only a year
old when his father died, but a friend, who was an organist, taught
him and in time he, too, became organist at St. Gervais. He was
harpsichord player to the King, and was a favorite in court circles. No
fashionable affair was complete without Couperin at the harpsichord,
and every Sunday evening he played chamber music for Louis XIV,
the royal patron of Lully. One of the books of pieces for the clavecin
was published under the title of Royal Concerts, and in the preface,
Couperin told that they were written for “les petits concerts du roi”
(the little concerts of the king), and he also said that he hoped the
public would like the pieces as much as the King did. For twenty
years Couperin played in the King’s household, and taught several
princes and princesses.
 You know the old proverb, “All roads lead to Rome.” We would
change it, and say that all roads lead to Bach! And Couperin is one of
the main highways, for without knowing that he was doing so, he
prepared the way for Bach, Haydn, Mozart and Beethoven.
Everything he wrote, and most of his pieces were in the dance form
of the suite, was exquisite in refinement and taste. The French
musicians of today look upon him as one of their composers, most
truly French, and they try to follow in the way he led, so as to be able
to write music that will express the French people, in heart and
character. Later in the story of music, the German classic school and
then the romantic school had a very strong influence on the music of
every country in the world, and in France there was the desire to
brush aside the outside influences, and to find the road that the early
French composers of the 17th and 18th centuries had traveled. Paul
Landormy, a French writer on musical history has summed up
Couperin as “one of the miracles of the French spirit in music, and
across the gulf of time he clasps hands on one side with Jannequin
and Costeley (p. 437), on the other with Fauré and Debussy” (p. 416).
All the important music outside of opera written in France at this
time was for the clavecin and harpsichord, and if the flute or the viol
was invited to take part in a concert, it was only to double the melody
played by the harpsichord, and did not have a part especially created
for it.
Wouldn’t you be surprised today if you should see an
announcement of a concert to be given by the President’s chauffeurs?
But in the time of Couperin and Lully wind instruments were used in
all the court festivals, balls and ballets, and were played by men
attached to the great hunting stables of the king. The band was called
la musique de la grande écurie du Roi (music of the King’s stables).
There were twelve trumpets, eight fifes and drums, the cromornes
(krumhorn—a curved reed instrument), four to six Poitou oboes and
bagpipes, and twelve large oboes under which title were included
violins, oboes, sackbuts and cornets. These players of wind
instruments accompanied the royal hunting parties and made the
beautiful forests of France ring with their merry music. Each family
had its own hunting call, by which it was recognized from afar. We
heard a phonograph record in Paris of these ancient calls, and with
each one, the name of the family to whom it belonged was
announced.
By the way, do you know the difference between a band and an
orchestra? (This is not a conundrum!) A band was originally a group
of musicians who played while standing or marching, while the
orchestra was always seated. This word comes from the Greek word
meaning dance, and was first given to a group of players who
accompanied the dancers in the dramas, and were seated in that
section of the theatre which is still called the orchestra.
 CHAPTER XVII
Germany Enters—Organs, Organists and Organ Works

It is rather hard to believe that the largest of all instruments, the pipe
organ, is a descendant of Pan’s Pipes, played by the shepherds on the
hillsides of ancient Greece, is it not? The pipes of the church organ of
today are of different lengths and are built on the same principle as
were the pipes of Pan, our goat-footed friend, who broke off the reeds
by the bank of a stream way back when the world was young, to pour
out his grief in music for his lost love, Syrinx.
The next step was to supply the organ pipes with wind so they
could be made to produce tones without blowing on each one
separately. A wooden box was invented, and each pipe inserted into a
hole in the top of the box, which is still called the wind-chest. At first
this was supplied with air by two attendants who blew into tubes
attached to the wind-chest. Soon the tubes were replaced by bellows,
and were worked with the arms, and as the instrument grew larger,
with the feet like in a treadmill. An organ is spoken of in the Talmud
as having stood in the Temple of Jerusalem, and the hydraulic
(water) organ in which air was supplied to the pipes by means of
water power was built in Alexandria, Egypt, about the year 250 B.C.
The small organ with keys that could be carried from place to place
was called a portative (from the Latin porto—to carry); the larger
organ sometimes stationary and sometimes moved on wheels was
called a positive. The levers needed to produce the sound were soon
exchanged for keyboards which at first had only a few keys, and you
may remember our telling how the keys were pounded with the fists
and elbows, in the Winchester organ.
A Greek writer of the 4th century A.D. gives us a vivid description of
an organ: “I see a strange sort of reeds—they must methinks have
sprung from no earthly, but a brazen soil. Wild are they, nor does the
breath of man stir them, but a blast, leaping forth from a cavern of
oxhide, passes within, beneath the roots of the polished reeds.”
It is not known just when the organ was first used in the churches,
but there are records of its having been known in Spanish churches
as early as the 5th century A.D. Pope Vitalian introduced it in Rome in
666, and in the 8th century in England, organ-building became a
very popular profession. Cecil Forsyth says: “In those days a monk or
bishop who wished to stand well with society could not take up
essay-writing or social-welfare: what he could do was to lay hands on
all the available timber, metal, and leather, and start organ-
building.”
Pepin, the father of Charlemagne, imported an organ into
Compiègne, France, from Byzantium in the 8th century.
Charlemagne had it copied at Aix-la-Chapelle. The Arabians must
have been organ-builders, too, for one of their most famous rulers,
Haroun-al-Raschid, sent Charlemagne a pneumatic organ noted for
its soft tone. The instruments made in Germany and France up to the
10th century were small and unpretending, but were objects of
astonishment and curiosity.
In Magdeburg, in the 11th century, we find the first keyboard with
keys 3 inches broad. In 1120, we hear of an organ in the Netherlands
that had 2 manuals (keyboards) and pedals. Organ-building was
growing up! In the 14th century the manuals of many organs had 31
keys.
The organ was not always accepted in the church, for in the 13th
century its use was regarded as scandalous just as the English
Puritans in the 17th century called it a “squeaking abomination,” and
it is not even now admitted in the Greek Catholic Church!
Until the 14th century, the organ had been used only in a most
primitive way to guide the singers of plain-song. It became a solo
instrument when it was possible to grade its tone from soft to loud,
which was done by the invention and use of three manuals: the upper
one played “full organ” (very loud); the middle, the discant (softest),
played a counterpoint to the subject; the subject was played on the
lowest keyboard.
So we see how one invention led to another until the organ became
an instrument of almost unlimited possibilities, and how keyed
instruments had shown the composers how to develop music along
new lines. By the end of the 16th century, organ compositions and
organ-playing had made rapid progress all over Europe, and you will
recall the great organists in all the churches and cathedrals in the
Netherlands, in England, Italy, France, Spain, and even in Germany
which up to this time had not been on the “musical map.” (Chapter
XI).
Are you wondering why we have gone back into “ancient history”
at this point, or have you already discovered that these grand old
organists are leading us directly Bach-ward?
 Frescobaldi

Just a century before Bach’s time, the greatest of all Italian

organists, Girolamo Frescobaldi (1583–1644), was born at Ferrara,
Italy. So popular was he, that he filled the vast Cathedral of St.
Peter’s, whenever he played. His compositions were the most
important produced for organ in the early 17th century, and his
fugues were the first to be treated in modern fashion, in form, fancy,
and feeling for tone color, and were a foundation on which Bach’s
were built. His compositions include canzones, toccatas, ricercari,
and numerous pieces in the popular dance forms. Most of these are
found in two collections published for cembalo e organo (spinet and
organ). He was not interested in opera, but went his own musical
way expressing himself in an original and individual language far
ahead of his period. With Frescobaldi, Italy ceased to be the world’s
center for organists.
 German Organists

At this point, Germany came into the musical field, and soon
became the artistic center of organ-playing. Up to this time, the
country had produced less music than any of its neighbors: Italy had
written the greatest Church music, and invented opera; France had
followed closely in Italy’s footsteps; the Low Countries had helped in
music’s growth by their early work in polyphony and had taught all
Europe including Germany; England had led the world in her
compositions for virginals and harpsichord, the forerunners of piano
music. Although Germany did not at first rank musically with these
countries, the religious fervor and devotion to the cause of
Protestantism bore fruit in the grand chorales of Luther. In these we
find the birth of German music destined to rule the world for two
centuries, the 18th and the 19th, just as the Italian had in the 16th
and the 17th. The religious inspiration, the direct simplicity and
sincerity of the chorales are the qualities found in the works of the
first great German composer, Johann Sebastian Bach!
The religious wars of the first half of the 17th century crushed
almost all the music out of Germany. In the second half, the
organists became the leaders, and their music for organ inspired by
the chorale was the first real contribution that Germany made to the
growth of music.
One of the earliest of these German organists was Johann Jacob
Froberger (1605–1667), of Saxony, who was a pupil of Frescobaldi,
and court organist at Vienna. He went to London (1662), and as he
was robbed on the way, he arrived penniless. He found work as
organ-blower at Westminster Abbey. On the occasion of Charles II’s
marriage, he overblew the bellows and interrupted the playing,
which so enraged the organist Christopher Gibbons, son of Orlando,
that he struck him. Poor Froberger! But he had a chance to redeem
himself, for he sat down to the organ a few moments later, and
started to improvise in a manner for which he was famous in Vienna.
A former pupil of his, recognizing his style, was overjoyed to find
him, and presented him to the King. He was invited to play on the
harpsichord which he did to the astonishment of every one.
 A Dutch organist, Johann Adam Reinken (1623–1722) and a Dane,
Dietrich Buxtehude (1637–1707) belong to this school, as they lived
in Germany most of their lives and worked along the lines the
Germans were developing. Reinken was a pupil of Frescobaldi; he
had a direct influence on Bach who often walked from Lüneburg to
Hamburg to hear the far-famed organist. When Reinken was 99
years old he heard Bach improvise on his Chorale “By the Waters of
Babylon,” which drew from him the praise, “I thought that this art
was dead, but I see that it still lives in you.”
 Absolute Music

It is very probable that had Buxtehude not lived, Bach would have
written his organ works in a different style, so deeply did the younger
composer study the older man’s compositions. Buxtehude was
organist in Lüneburg and there he started a series of concerts which
became so popular that they were continued into the 19th century.
Bach walked fifty miles to hear Buxtehude play, but was too shy to
make himself known to the great man; it was probably to hear one of
the concerts which had the poetic name of Abendmusik (Evening
Music), that he went. Buxtehude was one of the first to try to make
instrumental music stand as music (a language in itself), without a
dance form, a plain-song or chorale or poetic idea behind it, to act as
a Biblical text does in a sermon. This music for music’s sake is called
“Absolute Music” and Bach was one of its strongest disciples.
Absolute music, which was so beautifully handled by Buxtehude,
became the basis of the Classic School of the 18th and early 19th
centuries.
The organ chorale prelude which was so important a musical form
during this period had a very interesting history. Today the organist
in our churches plays the hymn through before it is sung; he plays it
quite simply just as it is written in the Hymnal, but in the day of
these old German organists, the artistic feeling was deeper, and the
organist was allowed to weave the chorale or hymn into a beautiful
and complete composition. But in his love of composing and of
showing how many different ways he could decorate the chorale, he
often exceeded his time limit, and the chorale prelude was left
behind. In its place the organ fantasia and the sonata appeared.
Johann Pachelbel (1653–1706), of Nüremberg, was a pupil of
another celebrated director and organist, Johann Kaspar Kerl (1628–
1693), who was said to be one of the best teachers of composition of
his day. There were also three German organists born late in the 16th
century, all of whom were followers of the famous Dutch composer
Jan Sweelinck. They were known as the “three S’s”—Heinrich Schütz
was the greatest of them. He wrote organ music, but also worked out
a scheme for combining the chorale with the ideas of Peri and
Caccini for use with Bible texts in the Lutheran Church. This was
called Passion music and was originally written for Good Friday. On
this foundation Bach built some of his grandest oratorios. The Italian
influence came into Schütz’s work while he was a pupil of Gabrieli in
Venice. Johann Heinrich Schein was a Cantor at St. Thomas’ School
before Bach, and wrote many chorales. The third of the “three S’s”
was Samuel Scheidt who was called the German Frescobaldi. “What
plain-song was to Palestrina and his school, the chorale was to
Schütz and his followers.” (Quoted from Charles Villiers Stanford.)
 The Inventor of the Sonata and of “Program Music”

Johann Kuhnau (1660–1722), wrote many compositions which

today we find very amusing! For his day, however, he must have been
looked upon as ultra-modern! The composition which first brought
him into public notice was a motet, written for the election of the
town council. Could you imagine anyone writing a serious
composition for an election today, or anyone willing to listen to it at
the polls? He was organist of St. Thomas’, in Leipsic, a graduated
lawyer, master of several languages, writer of satirical poems,
musical director of the University, and finally Cantor in two
Churches. He was admired and honored after his death as one of the
greatest musicians of his day and one of the most learned men. He
invented a style of music for the clavier which he called Sonata. It
was in several movements and was not based on dance tunes as were
the suites. While it was not in the form that later was known as
sonata-form, it was a sign-post pointing the way. Seven of these
sonatas he named Fresh Clavier Fruit! And it was fresh in style as
well as in name.
He was the first German composer to write “program music,” that
is the kind which tries to tell a story, or to imitate the actual sounds
of natural objects, such as the crash of thunder, the motion of a
windmill, the rocking of a cradle, and the cackling of a hen. You can
see how long a list one might make and how easy it would be for
anyone with a vivid imagination to make up all sorts of pictures in
music. This is just the opposite from music for music’s sake which we
described to you as “Absolute Music,” and most of it which follows
this period when music comes of age can be put into one of the two
camps,—the Program Music Camp, or the Absolute Music Camp.
Kuhnau’s program music took a queer turn! He was living at a
time when religion was uppermost in every one’s thoughts, when the
Bible stories were bedtime stories and when the leading
compositions were the sonatas written for organ. So in 1700 he
published six Biblical-history Sonatas. In David and Goliath, he
attempts to put into music the rude defiance and bravado of the
giant; the fear of the Hebrews; David’s courage and fearlessness, and
the battle and fall of the giant; the flight of the Philistines (can’t you
imagine how the composer would represent this with all kinds of
runs and scales?); the joy of the Hebrews; the celebration of the
women who probably came out to meet David “with timbrels and
harps”; and general jubilation.
At the end of the 17th century, Germany was strongly under the
influence of France and Italy, especially in opera. In Dresden, Berlin,
Munich and Vienna, one heard only opera in Italian sung by Italian
singers, but Hamburg tried to develop a national music by giving
German opera sung by German singers, and attracted many serious
musicians. Johann Mattheson (1681–1764) a singer, conductor and
composer, is remembered chiefly for a book called A German Roll of
Honor, in which he gathered up all the information he could find
about German composers up to his time. He asked all the living
composers to write accounts of themselves for his book, so we take it
for granted that it must be truthful!
Music had changed more in the 17th century than in any that had
gone before. If we tried to sum it all up in one word we should say
that it was a century of transition or the passage from one condition
to another. It began with the old Ecclesiastical, or Church, modes,
and ended with the major and minor scales which we still use today;
the reign of counterpoint was over, and now had to share the throne
on equal terms with harmony.
 Sonata-Form

The dominating musical form after Bach’s time was to be the

Sonata, a name we have often used. The sonata which found its
champions in Haydn, Mozart and Beethoven, was the child of the
sonata written by D. Scarlatti, Kuhnau, and Bach and his sons. It is
built on the principle of contrast as were the suites. A sonata is a
collection of three or four related pieces called movements: one, fast
—one, slow—then fast. If in four movements, the first is moderately
fast; the second, very slow; the third, fast (scherzo); the fourth fast
(usually rondo form).
Sonata-form is the name given to the first movement of a sonata, a
string quartet, trio, quintet, etc., concerto or a symphony. It has two
main themes which are announced, then developed and then re-
announced, forming three contrasting sections or panels: Statement
or Exposition, Development, and Restatement. From now on, when
we speak of sonata-form, this picture should come to you.
The stage is now all set for Bach and those who came after him.