Category:Introduction to Business

NAFTA
NAFTA is the North American Free Trade Agreement (Cooper, 1996). It is an agreement between Mexico, Canada, and the United States to remove tariffs and restrictive quotas from trade among the three countries (Collins, n.d.). It was formed with the intention of forming better cooperation among the countries, stimulating trade among the countries, and forming an “economic community” (Collins, n.d.). It has resulted in an enormous increase in trade among the three countries, but it also resulted in major economic shifts in the United States and Mexico (Cooper, 1996). The United States lost many of its manufacturing jobs to Mexico, and Mexico lost many of its agricultural jobs to the United States (Becker, 2003; Cooper, 1996).

European Union
The European Union is an entity formed by twenty-seven European nations which allows the free flow of goods and citizens among the member countries (Collins, n.d.). It was formed with the intention of forming better cooperation among the countries, stimulating trade among the countries, forming an “economic community,” and uniting the member countries into a solid bloc with superpower capabilities (Collins, n.d.). It has resulted in a significant increase in trade among the member nations, created a sense of unity among Europeans, and enabled European countries to form a solid front as a superpower against threats from powerful nations and large international corporations (Collins, n.d.; Jost, 2005). On the other hand, it has also resulted in significant emigration from some poorer member states to wealthier member states (Jost, 2005).

Nonprofits
Nonprofit organizations are started for a variety of reasons. They may be started because companies or individuals want to accomplish immediate philanthropic goals; these organizations incorporate as nonprofit organizations primarily for legal status reasons and the ability for donors to be able to donate tax-free. Some nonprofit organizations are created to complement existing businesses to one degree or another; consider the educational programs Proctor & Gamble started to teach kids about the importance of brushing their teeth (Collins, n.d.). Some nonprofits serve as ways to preserve and distribute wealth for founders' philanthropic interests under the direction of the founders' descendants; these are usually considered private foundations (and must abide by stricter rules and regulations than normal nonprofit organizations). There are also a few nonprofit organizations that are created specifically to avoid taxes, but they are a minority; moreover, the IRS usually catches them after a few years.

Profits for investors
As our textbook explains on page 49, managers of a company are responsible for ensuring that those who invest in the company (shareholders) receive an appropriate return on their investment (Collins, n.d.). If an business does not provide shareholder value, there is no reason for shareholders to invest in the business with the hope of achieving a return on their investment. If its shareholders did not receive a return on their investment, it could, in a sense, be considered a nonprofit (or at least unprofitable).

Supply and demand
Exploring Business discusses the concept of supply and demand on pages 18 through 20. What I noticed was particularly interesting is that the model that is presented discusses how one can make sales increase by lowering the prices (Collins, n.d.). The book basically says that one can sell more goods if one sells them for less (Collins, n.d.). It also explains, however, that one can identify an acceptable point at which decreasing the price will not result in significantly more sales (Collins, n.d.).

Managers and business ethics
Chapter 2 of Exploring Business discusses the importance of business ethics and how sometimes executives and managers must make tough choices in ethical dilemmas. We read the story beginning on page 39 about how CEO James Burke decided to recall all the Extra-Strength Tylenol on the market and replace it with Extra-Strength Tylenol that had tamper-resistant packaging (Collins, n.d.). We also saw that this incident did little to affect Tylenol's reputation because of the fast and comprehensive ethical action taken to ensure no one else was harmed (Collins, n.d.). It is quite interesting that my textbook from another class describes a similar situation. It says that Steelcase had been selling partition wall panels for office environments for a short period of time, but then the CEO realized that they were not compliant with the fire standards (Longenecker, Petty, Palich, & Moore, 2010, p. 38). He recalled them all and had them replaced with compliant panels; it cost the company $40 million (Longenecker et al., 2010, p. 38). When the Pentagon (which was using some of these panels) was attacked in 2001, it was found that the replaced panels had blocked much of the damage that would have otherwise occurred if the original panels had not been replaced (Longenecker et al., 2010, p. 38).

Tax loopholes
There will always be some unethical companies that will commit fraud and tax violations. The laws and penalties are already in place for them. Informed companies, however, will take advantage of any loopholes in the tax law. Companies often do not have to do anything illegal to evade paying their fair shares of taxes. To ensure it pays fairly, however, the government needs to fix the loopholes; it is not doing that adequately (Browning, 2006). Part of the reason there are so many loopholes is because the tax code is so complex; the other part is that people enjoy using the strange loopholes that do exist!

The exporting argument
An article I found described the foolhardiness of claiming that Americans can benefit from exporting. In the late 1980's, many Americans revamped their manufacturing processes so they would be more competitive than their foreign competitors; likewise, Reagan reduced the value of the dollar so that America would be able to compete with foreign nations better (Feder, 1987). It did not help; foreign countries usually do not have the money to buy American goods, and those that do frequently either block trade (like Japan) or get blocked by U.S. export law (Feder, 1987). If America slaps large tariffs on foreign trade to reduce the federal deficit, manufacturing jobs will be forced to return to America and the federal deficit will get paid off; the damage this would do to exporting is insignificant compared to the astronomical benefits.

Japan's economic problems
Japan did everything "right" and still did not fix its economy (Samuelson, 2010). While I was researching the topic online, I found another article that described the most recent economic recession in Japan. What caught my attention was that neither of these recessions was caused by a true economic catastrophe; both had their origins in a decrease in exports (Samuelson, 2010; Tabuchi, 2009). A third article about Canada described how it mostly evaded the economic downturn earlier in the century because it did not invest as heavily in the stock market; falling stock market prices helped cause Japan's economic woes in the 1980's (Krauss, 2002; Samuelson, 2010). Although increased spending and decreased taxes will help in the short run, it may result in government debt that must be repaid later.

Outsourcing
Outsourcing is profitable in the short run and harmful in the long run. Companies will continue to "race to the bottom" to find the lowest prices, and they will relocate their facilities as necessary to get the lowest prices. On the other hand, there is an unusual "end" that is appearing on the horizon: because China is running out of workers, its industries have to pay more to keep them (Bradsher, 2010).

Free trade arguments
The main argument I saw in favor of free trade agreements was that Americans would be able to export goods without being subject to tariffs. An important thing to consider is that the United States can operate without foreign trade. In fact, it can operate better economically without foreign trade. On page 68 of our textbook, we saw the claim that America does not produce all its goods because no nation can produce all the goods it needs (Collins, n.d.). As I learned in my ENG 101 course, this would be considered an oversimplication fallacy (Faigley, 2010). America can produce all the goods it needs if it does not export too many; in fact, it could produce far more than it needs if it was efficient with its workers.

A second thought to consider regarding free trade: if the federal government loses its tariff revenue, where will it go to get the rest of the money it needs? If the federal government needs money anyways, would it not be better to raise it through tariffs than through the income tax or other methods?

Multiple business entities
A company's multiple entities will not help it evade financial liability if it knows it is going bankrupt and tries to take out loans with the intent to defraud creditors (Longenecker, Petty, Palich, & Moore, 2010). It can, however, insulate parts of a company from unforeseen financial loss. In fact, that was part of the reason the corporation was created in the first place; corporations were originally created for individual vessel convoys that sailed from England so that the parent company would be insulated from financial disaster if something went wrong with just one convoy (such as if it got attacked by pirates or sank in a storm). Although I have not heard much about multiple entities being used to evade loan payments, I have seen a lot of companies using multiple entities to separate their assets and operations. Wal-Mart has a separate LLC that operates its trucking operations (if you look on the side of a Wal-Mart truck, you will see that it is "owned" by a Wal-Mart subsidiary, not Wal-Mart itself). (I believe Chrysler does this too with its trucking operations, but I would have to check again to be sure.) Meijer (a large competitor to Wal-Mart in Michigan) has individual entities for its different stores. If something were to go wrong with Wal-Mart's trucking operation or one of Meijer's stores (such as a fatal accident or a serious injury), the assets in the affected subsidiaries might be lost, but the rest of the company would be unaffected.

When one has committed fraud, one may still be held liable even if one has used multiple legal entities to shield oneself (Longenecker, Petty, Palich, & Moore, 2010). The situation where a corporation's legal structure is rendered ineffective in protecting an owner is called "piercing the corporate veil" (Longenecker et al, 2010, p. 213). It occurs regularly in cases of tax fraud and illegal activities (Longenecker et al, 2010).

Cap and Trade
The "Cap and Trade" would be a good idea if and only if all businesses worldwide were also obligated to operate under it (and they all paid the same fees). If that is not possible (some countries would probably refuse to participate or try to cheat), it would also suffice to ban the importation of products from countries which did not comply. Personally, I would see this as a really effective way to take care of the problems with most Chinese imports (they would either have to follow the rules or go out of business). Apparently a similar program achieved success with the coal industry (Broder, 2010).

Carbon taxes
The main problem with carbon taxes is that not everyone is required to participate (Clemmitt, 2006). Environmental taxes will not result in job loss provided all nations are equally required to abide by them. The main problem we have been having in America with environmental regulation is that manufacturers can just go somewhere else to evade the rules. If imports from nations which will not play by the rules are barred, manufacturers will have no choice but to respect the environment and pay any taxes associated with it. Until this situation is resolved, however, there is no point in even discussing the concept of carbon taxes.

Cash for Clunkers
Another peculiar example of well-meaning government policy producing peculiar effects on market trends would be the "Cash for Clunkers" program. The program was initially designed to make people convert to more efficient vehicles. What happened instead was people used the rebate to buy F-150's ("Gas guzzlers reign," 2009)!

Business structures
In Chapter 4 of our textbook, we read about some of the different business structures that can be used for companies (Collins, n.d.). Each of these entities has advantages and disadvantages, particularly regarding taxation, paperwork, and limitations on liability (Collins, n.d.). For most small and low-risk companies, taxation and paperwork are the primary concerns; liability is not a major issue. As companies get larger, however, they often undertake riskier projects. Sometimes companies will insulate this risk by placing their assets, properties, and operations in separate subsidiary entities (Asinof, 1996). One technique used by some companies is to place their safe assets (or, in some cases, their risky assets) in separate limited partnerships so that only part of an investment can be seized in the event of a bankruptcy or lawsuit (Asinof, 1996).

Managers and job security
Managers also face issues with job security; moreover, managers often do not have the same protection from dismissal that typical employees have (except for those who negotiate severance packages beforehand). Employees can be discharged if they themselves have bad performance; managers can be discharged if their employees have bad performance. If an organization is "flatter," there will be fewer management positions that are available and fewer opportunities for promotion (Collins, n.d.). Managers and supervisors are often paid a premium because they know a lot more than the average employee; if average employees learn how to do these tasks and are empowered to do them, why should the company retain the same number of managers?

Work environment and motivation
It is interesting that you mentioned that hygiene factors cannot motivate employees. For examples of hygiene factors, our textbook notes "quality of supervision," "pay," "company policies," "physical working conditions," "relations with others," and "job security" (Collins, n.d., p. 190). One may have a good supervisor, but will one try to work really hard because one has a good supervisor? Likewise, will one exert a lot of energy because one's job is secure? There are a few individuals who have a naturally strong work ethic, but they get that work ethic from sources other than their employers. For the majority of workers, however, it is necessary to create something that will motivate them to want to work harder.

The FISH! philosophy
There appear to be two "FISH!" philosophies; one is legitimate, and the other is not. The real "FISH!" philosophy is a customer-centric philosophy; the other philosophy was created by someone who did not know how the business actually operated and why they operated in the manner they did (Angelo, 2006; Pike Place Fish Market, n.d.).

Employee loyalty
As our textbook explains, people have to have their basic needs filled before they can be committed and loyal to a company (Collins, n.d.). One of these needs is the assurance that one will not lose one's job if one finds more efficient ways of performing work (Collins, n.d.). Indeed, one of the principles in lean manufacturing is that one must ensure that employees will not be laid off in the process (they should be reassigned to other duties). A key part of lean manufacturing is getting employee input and acting upon it; if employees fear that increased efficiency will make them lose their jobs, they will not help a company become more efficient.

Customer satisfaction and customer loyalty
There is a big difference between customer satisfaction and customer loyalty. A satisfied customer is happy with one's service or the product and may shop there again, but there is nothing that would stop the customer from getting drawn away by a competitor (Timm, 2008). A loyal customer, on the other hand, will often not shop at a competitor even if the competitor has a lower price (Timm, 2008). For instance, there are plenty of oil change facilities near my house. I take my car to a Tuffy Muffler shop fifteen miles away; the company has always treated me with excellent customer service, and I can trust them with my car. Why would I go anywhere else even if they are one or two dollars less?

Small businesses
According to the Small Business Administration, a small business usually has less than 500 employees (Collins, n.d., p. 123). If many small businesses suddenly closed, the impact would be quite devastating on the U.S. economy. There would be widespread unemployment, and consumers would be unable to get many of the goods and services they had grown accustomed to getting. Other businesses would be unable to purchase supplies and properly distribute their products; moreover, the economy in general would be in a dismal state and turmoil as companies and consumers tried to reorganize their purchasing habits and operations again.

Small business ownership
There are five significant advantages that one can achieve with small business ownership: (a) one is not subordinate to anyone else and can be independent, (b) one can make one’s work schedule conform to one’s lifestyle, (c) there is no limit on how much one can grow one’s business or the amount of money one can make, (d) one has the opportunity to learn many skills, and (e) one has the satisfaction of knowing that one is creating what one wants to create (Collins, n.d., p. 129).

Training employees inexpensively
On page 186 of our textbook, we read about the costs that are often incurred when one invests in the training of one's employees (Collins, n.d.). Additionally, our textbook describes how Booz Allen Hamilton found a way to let employees "train themselves" by creating a hands-on showcase of the different technologies on the market (Collins, n.d.).

Internal and external customers
These "customers" are sometimes classified as internal and external customers (Swartzlander, 2004). Internal customers are a company's employees and management; external customers are those outside the organization itself (Swartzlander, 2004). Although they are certainly quite different from external customers, internal customers share some similarities with external customers. A potential employee decides whether to "buy" a company's job offer and can "defect" if the person does not like the results of the deal. Likewise, a potential employer decides whether to "buy" a potential employee's application for employment and whether to continue the relationship if things do not work out well (Swartzlander, 2004).

Variable costs for pizza
To see if one could sell pizzas for less than $5, one would need to first calculate one's variable costs and fixed costs (Collins, n.d.). If one's variable costs are $2 a pizza and one's fixed costs are $25 an hour, one would know that one could make a profit selling pizzas at $4.75 if one sold ten pizzas an hour. However, if one's variable costs in the example above were $2.50 per pizza, one would be unable to do it.

The Recession of 2008
I guess I have not really heard anyone refer to it as worse than the Great Depression, but it seems that, despite the government's and economists' upbeat attitudes about the matter, calling it anything less than a depression seems like a cover-up to most people (hence the nickname the Great Recession). One significant difference between the Great Depression and the Recession of 2008, however, is that there is no major natural catastrophe to accompany it. In the Great Depression, there was the "Dust Bowl"; nothing is causing the current recession except bad market policy (Hansen, 2003).

Overexpansion
One of the basics in staying afloat financially is to not overexpand (Longenecker, Petty, Palich, & Moore, 2010). People and businesses often assume more debt than they can safely absorb in the event of a financial crisis; when financial crises come, they suffer and hurt everyone else. Local economies are being merged to form a global economy; when there is a global economy, local economic problems can easily become worldwide economic problems (Collins, n.d.). Fluctuations in exports trigger both booms and busts; if countries stopped relying on exports, much of the market volatility would cease.

Reasonable prices
Customers would consider pizza a reasonable price if it had the same or better value than competitors' pizzas at a matching or better price than competitors' prices. Little Caesar's Hot N' Ready pizzas sell for either $5 or $5.99 (depending upon the location); other competitors typically sell their pizzas at higher prices. If the equivalent competing pizzas were $5 or more, $5 or less would be considered a reasonable price for a pizza. If one could offer pizzas for even less, one would be certain to attract customers.

On the other hand, one might not be able to offer lower prices. One would need to compute one's fixed costs and variable costs first (Collins, n.d.). One would then need to calculate the expected number of pizzas sold to see if one would break-even with a low price (Collins, n.d.).

Location
Having a pizza shop in a busy downtown area may be good if one has an eat-in restaurant, but it could be a disaster if one does not have this eat-in capability (unless the majority of one's customers get their pizzas delivered). Likewise, construction can block customers from easily accessing one's facility; they may just choose to go elsewhere instead. The proper location can be the cause of a business's growth or doom (Longenecker, Petty, Palich, & Moore, 2010).

Lousy marketing campaigns
7-UP Antioxidant is a very good example of a good product with a lousy marketing campaign. When I see a beverage that has vitamins in it (Like Hi-C or Hawaiian Punch), I choose it over other beverages that are the same price. Claims of "all natural" and "no artificial flavors" are not enough to make people switch their loyalties; antioxidants will not do it either (actually, the term might drive customers away if they do not know what it means). As our textbook explains, people have to believe they have a need for one's products to make them consider buying it (Collins, n.d.). Customers already know they have a need for vitamin E; only a few have an obsession with antioxidants.

Calculating variable costs
In this case, it might be a good idea to calculate one's break-even point to see if it is feasible. As our textbook explains, we can calculate whether it is feasible by finding the fixed costs for operation, the variable cost per item sold, and the sales price of the item being sold (Collins, n.d.). If the fixed cost per hour is $20 (primarily wages for two employees), the variable cost per pizza is $2, and the sales price of a pizza is $7, one will know that one will break-even if one sells four pizzas every hour.

Thinking outside the box
Pulino's did not try to target the breakfast crowd with an average pizza (Levine, 2010). He had to think outside the box to attract the breakfast crowd. Many people are not accustomed to eating pizza in the morning. To get them more accustomed to it, Pulino's uses eggs and other "breakfast" toppings to ease the transition (Levine, 2010).

Package size
If the pizza I sell is too large, people who do not need a large pizza will be less likely to come to my restaurant. On the other hand, if I offer just a small pizza but I offer it at a really good price, customers who need a lot of pizza will just buy a couple of them and not complain. If twin-packs at a store have the same price per unit as the single packs, will the customer object if the store discontinues the twin packs? If one sells one's products in only the smaller packs but sells them at good prices, one will still keep one's customers happy while reducing the complexity of one's operations (Walton & Huey, 2010).

Labeling
The vitamin E is what actually matters (few care about the term antioxidant; I would not mind removing the term from the label). If I put my $0.99 Cherry 7UP with vitamin E next to $0.99 Cherry Coke at a stadium (where healthy beverages are typically not available), which one will the customer choose? Customers already know they need to drink healthier beverages, but soda is often the only beverage sold (sometimes there is spring water, but it often has a lousy taste and is priced significantly higher than soda). It may not be healthy, but it will be healthier than the other soda alternatives. By marketing my product as better than other sodas, I make my product different; when a product is obviously different from its competition, it is easier for customers to make a choice (Collins, n.d.).

Recession of 2008 compared with 1980s
I was surprised to see that the posted unemployment levels for 1982 and 1983 were higher than that of 2009 (U.S. Bureau of Labor Statistics, 2010). There could be several reasons for the perception that this is the worst situation since the Great Depression: (a) there was a stock market crisis associated with the 2008 recession (but not with 1982 or 1983), (b) there was a large economic surge in the mid-2000's that made the downturn appear sharp (no surge preceded 1982 and 1983), and (c) there were many college graduates who could not find work (college graduates have usually not been affected as severely by recessions and depressions).

Emails
Companies have different ways they communicate with their employees and management; email is one of the new ways of doing it. Email is a very efficient way of ensuring that everyone in a company is kept up to date; moreover, it also works well for record keeping (Swartzlander, 2004).

Sorting mail and email
One of my MGT 114 textbooks advised that one try to go through what one receives only once and make a decision immediately about whether one really needs it; if one is unlikely to need it, one should just discard it (Timm, 2008). It will get in the way of the other information one needs to access regularly (Timm, 2008). For instance, I will often get offers from Best Buy, but I rarely shop there. I will usually delete them when I get them, but if I need one I will just go back through the trash folder and find it.

At one time, I would read all the business newsletters that came to my email account. Although I would go through them efficiently, they took a lot of my time. One of my MGT 114 textbooks recommended that one not read everything one gets; one must decide what might be worth one's time and discard the rest (Timm, 2008). Instead of reading all my web development newsletters now, I look at the title and delete it unless it has something that specifically pertains to me.

Estimating pizza sales
I would consider the population of the town, the number and proximity of direct competitors in the area (other pizzerias), the quality of competitors’ pizzas, the number of local non-pizzeria restaurants, the price and value differences between my pizzas and those of my competitors, the likelihood that I will not sell as many pizzas as my competitors due to my lone pizza size, the ease in customers getting parking, local events that might cause increased and reduced sales, possible fluctuation with changes in the weather (customers are less likely to pick up pizzas in bad weather, but some may also have pizzas delivered during inclement weather instead of venturing out for fast food), increases due to televised sports events (like the Super Bowl), and fluctuations due to the school year (especially if there is a college in town).

To compute my sales, I would assume that (a) I was open six days a week for the same number of hours that other pizzerias were open (typically eleven hours a day with an extra hour on Friday and Saturday), (b) the region’s overall pizza sales will increase slightly as I attract customers from non-pizzeria restaurants, (c) the region’s average number of pizza sales per store will decrease when I start my business, (d) my sales will initially be lower than that of local competitors due to the lower level of customer awareness and the lack of eat-in accommodations.

I can ask local pizzerias (if they will give me that information) or ask a pizzeria in another town to get an estimate of the average number of customers an independent pizzeria normally gets (I would not be a competitor to a pizzeria in another town; it would be more willing to share information with me). I could also inquire at the local Chamber of Commerce, with local business associations, or with the National Association of Pizza Operators. If I cannot get the necessary information from others, I can visit local pizzerias and get rough estimates of the number of customers who come and the number of pizzas they sell.

Tesla's electric sports car
As a producer of an electric sports car, Tesla is focusing on wealthier customers and those who have an interest in sports cars. Customers will buy from Tesla because (a) it is better for the environment than gasoline cars or hybrids, (b) it is a cool sports car with excellent performance, and (c) its electric usage is far less expensive than that of gasoline (Tesla, n.d.). Customers will benefit by saving money, helping the environment, and getting the prestige associated with owning a sports car. California has high pollution, a very environmentally concerned populace, and a large number of wealthy individuals.