Introduction to Business - Globalview

1 Introduction to Business Third Edition Dennis E. Schlais Richard N. Davis Kristi A. Schlais Copyright 2011 by Association Global View No part of this manual may be reproduced by any mechanical, electronic, or photographic process, nor may it be stored in a retrieval system, transmitted, or otherwise copied for private or public use, without written permission from Association Global View. ( ) Printed in the United States of America Acknowledgments The authors recognize the enormous value added to this innovative project by numerous project team members. Each member of the development team brought unique talents and strengths to the vision. The resulting vision was to create an Introduction to Business curriculum that was first, and above all else, for the benefit of the student.

2 The main question driving the team was, "How do students learn?" We do not mean, how do they memorize for tests. But rather, how can we transmit information, knowledge and understanding so each student will exit the course having a strong foundation in Business and in critical thinking which will support them in future course work and through life? The end result is an electronic, globally interactive program of study, which allows the student to learn, experience, and feel what its like to be an entrepreneur and a manager within the global Business community. We have sacrificed some knowledge content found in standard texts in order for the student to truly experience, understand, and appreciate the knowledge they have gained.

3 We feel that the gain in understanding and the creation of a solid foundation in Business is well worth the small sacrifice of rather minor information. The total program experience that is provided should not be judged solely on this text. The experience should include taking advantage of the active learning component, the entrepreneurial strategic Business simulation. The Business that is started is simulated, but the negotiations and interaction with competitors and partners around the world is real Business in real time. Students move from concepts in the text to a view of how real firms apply the concepts through application of that knowledge in the simulation. Enjoy the total experience, learn much, and prosper.

4 Thank you to all the collaborating professors who made this program possible and especially to the students that worked with the development team through two years of testing. Kristi Schlais, Editor Association Global View A non-profit association benefiting students and their curriculum world wide ALPHA TEAM WRITERS: Dennis Schlais California State University Chico Richard Davis, California State University Chico Kristi Schlais, Association Global View INTERNET DESIGN Jean Hulsoor Association Global View Kristi Schlais Association Global View SIMULATION DESIGN Paul Kinney Professor Emeritus, California State University Chico Dennis Schlais, California State University Chico ALPHA TESTING Jane LeMaster University of Texas- Pan American Donna Lees Butte Community College PARTICIPANTS SECOND ALPHA TEST University of Texas- Pan American Butte Community College CSUC hico HES Netherlands Eisenstadt Austria CHAPTER 1.

5 7 OVERVIEW .. 7 Overview .. 8 STEP 1: Create a team .. 9 STEP 2: Develop a process for decision making .. 9 STEP 3: File for Incorporation (create a firm) .. 10 STEP 5: Select Product 1 and/or Product 2 to sell .. 10 STEP 6: Determine if the firm will market in North American and/or Europe .. 11 STEP 7: Agree on how large a share of the market(s) your firm intends to control .. 11 STEP 8: Calculate how much capital (money) the firm must raise to be successful .. 12 STEP 9: Manage your Business over two simulated years (eight quarterly decisions are required) .. 12 The Global View Simulation .. 13 The World Of Global View:.. 13 Product .. 14 Environment .. 14 Political Situation .. 15 Economic Situation.

6 15 The Markets .. 16 Administrative Entities .. 16 Information Sources .. 17 The Global View Matrix .. 18 Time .. 20 ..And 20 CHAPTER 2 .. 21 THE GLOBAL Business ENVIRONMENT .. 21 The Global Business 22 What is Business ? .. 22 Risk and Return: .. 23 Incorporation .. 23 Entrepreneurs And Their 25 The Simulation Environment .. 26 Business Environment: .. 26 Political Environment: .. 27 Economic Environment: .. 27 Choosing A Firm 27 Trading Areas Within the Simulation: .. 28 Local Political Environments .. 30 Global Politics .. 30 Economies At Work: .. 31 Key Words: .. 32 CHAPTER 3 .. 33 MANAGEMENT .. 33 Management .. 35 How to Organize a Business : .. 37 Human Resource Management in the Simulation.

7 39 Strategic Management in the Simulation: .. 41 The Starting Point for a Business .. 41 The Starting Point for Your Team: .. 42 Strategy Development .. 43 Decision Making: .. 43 Key Words: .. 44 CHAPTER 4 .. 45 MARKETING -- THE 4 P'S .. 45 Marketing The 4P s .. 46 Infrastructure .. 46 The 4 Ps and Web Marketing .. 47 Product .. 48 Place -- Marketing And Distribution .. 49 Promotion .. 55 Retail Promotion: .. 55 Wholesale/Distributor Promotion: .. 56 Producer (Manufacturer): .. 56 The Push 57 The Pull Strategy: .. 58 Business Communication and Advertising:.. 60 Pricing .. 63 Price Based on Cost: .. 63 Price Based On Competition: .. 65 Price Based on Demand: .. 66 Pricing Using Margins.

8 71 Margins on Retail Price: .. 72 Margins on Manufacturer s cost .. 73 Margins on Cost: .. 74 Key Words: .. 75 CHAPTER 5 .. 76 MARKETING STRATEGY .. 76 Marketing Strategy .. 77 Porter s Four Generic Strategies .. 80 Cost Leadership:.. 81 Differentiation: .. 81 Focus: .. 81 Key Words: .. 81 APPENDIX A: .. 82 THE FIRST TRIAL 82 Place .. 82 Product .. 82 Determining How Much Product to Buy:.. 82 How to Purchase Product .. 85 Peacock Industries: .. 85 Peacock Prices .. 85 Making Your Contract .. 86 Contracts Run Time .. 86 Special Loans .. 86 Promotion .. 87 Advertising 87 Size of Sales Force .. 88 Size of Sales Force in 88 Compensation For Sales Force .. 88 Credit Policy For Buyers .. 89 Quality Control Budgets.

9 90 Price .. 92 Financing the Firm .. 94 Desired .. 94 Practice Decision Forms .. 95 CHAPTER 6 .. 97 ACCOUNTING .. 97 Accounting .. 98 Balance Sheet .. 98 Assets: .. 99 Liabilities: .. 99 Equity: .. 100 Special Stockholder Accounts: .. 101 Important Accounting Concept .. 102 Case Question 1: .. 103 Income Statement .. 103 Key Words: .. 106 APPENDIX B: .. 107 REPORT 107 Market Group Reports .. 107 Economic Report .. 108 Economic Index: .. 108 Consumer Confidence Index: .. 108 Bill Rate:.. 109 Prime Rate: .. 109 Financial Report .. 111 Stock Price: .. 111 Dividends per Share (Div/Shr): .. 111 New Financing: .. 111 Sales and Marketing Report .. 112 Total Sales (in units): .. 112 Total Wholesale Orders.

10 112 Total Backorders: .. 113 Total Advertising: .. 113 Ending Sales Lost: .. 113 Average Commission: .. 114 Average Salary: .. 114 Prices: .. 114 Sales Reps: .. 114 Firm Reports .. 115 Credit 115 Credit Rating: .. 115 Rate: .. 115 Debt-to-Equity Ratio: .. 116 Sales and Marketing Report .. 117 Total Unit Sales: .. 117 Wholesale Orders: .. 117 Backorders: .. 117 Returns: .. 117 Sales Lost: .. 118 Sales Reps: .. 119 Base Salary: .. 119 Sales Commissions: .. 119 Product Prices: .. 119 Market Share: .. 119 Production Report .. 119 Finished Goods Inv.: .. 120 Inventory Unit Cost: .. 120 The Income Statement .. 121 Sales Revenue: .. 121 Less Restocking Expense: .. 121 Net Sales: .. 122 Cost of Goods Sold.