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•
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A Changing World
•
•
A Changing orld
SIXTH CA N ADIAN EDITION

O.C. Ferrell
University of New Mexico-Albuq_uerq_ue

Geoffrey A. Hirt
DePaul University

Linda Ferrell
University of New Mexico-Albuq_uerq_ue

Suzanne lskander
Humber ITAL

Peter Mombourq_uette
Mount Saint Vincent University

Mc
Graw
Hill
Education
Mc
Graw
Hill
Education

BUSINESS: A CHANGING \VORLD

Sixth Canadian Edition

Copyright © 2017, 2014, 2011, 2008, 2005, 2003 by t.1cGraw-Hill Ryerson Lhnited. Copyright © 2016, 2014, 2011, 2009, 2008,
2006, 2003, 2000, 1996, 1993 by McGraw-Hill Education LLC. All rights reserved. No part of this publication may be reproduced
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D E D I C Aili I O N

To SPG - S.I.

To the memory of Autumn Lea Mombourq_uette - P.M.

ABOUT THE AUTHORS

O.C. Ferrell
O.C. Ferrell is professor of 1nanage1nent and Creative Enterprise Scholar in the Anderson
School of l\1anage1nent, University of Ne,v l\1exico. He recently served as the Bill Daniels
Distinguished Professor of Business Ethics at t11e University of Wyoming, and the chair of
the departJnent of 1narketing and the Ehrhardt, Keefe, Steiner, and HottJnan P. C. Professor
of Business Administration at Colorado State University. He also has held faculty positions
at the University of tvle1nphis, the University of Tampa, Texas A&M University, Illinois State
University, and Soutl,ern Illinois University, as ,veil as visiting positions at Queen's University
(Ontario, Canada), University of Michigan (Ann Arbor), University of \Visconsin (Madison),
and University of Hannover (Gennany). He has served as a faculty me1nber for the 1naster's
degree program in 1narketing at Tha1nmasat University (Bangkok, Thailand). Dr. Ferrell
received his B.A. and M.B.A. fro1n Florida State University and his Ph.D. fro1n Louisiana State
University. His teaching and research interests include business etl1ics, corporate citizenship,
and marketing.
Dr. Ferrell is widely recognized as a leading teacher and scholar in business. His articles
have appeared in leading journals and trade publications. In addition to Business: A Changing
World, he has t\vo other textbooks, 1Warketing: Concepts and Strategies and Business E/Jiics:
Ethical Decision 1Waking and Cases, t11at are market leaders in t11eir respective areas. He also
has co-authored other textbooks for 1narketing, 1nanage1nent, business and society, and otl,er
business courses, as well as a trade book on business ethics. He chaired t11e Alnerican l\1arketing
Association (Al\1A) ethics conunittee t11at developed its current code of etlucs. He was the vice
president of 1narketing education and president of the Acade1nic Council for tl1e AMA. Currently
he is vice president of publications for the Acade1ny of Marketing Science.
Dr. Ferrell's 1najor focus is teaclung and preparing Jeanung 1naterial for students. He has
taught the introduction to business course using tlus textbook. This gives hiin t11e opportunity
to develop, i.Jnprove, and test the book and ancillary 1naterials on a first-hand basis. He has
traveiled extensively to ,vork wit!, students and understands the needs of instructors of intro-
ductory business courses. He Jives in Albuq,uerq,ue, New Mexico, and enj oys skiing, golf, and
international travel.

Geoffrey A. Hirt
Geoffrey A. Hirt is currently professor of finance at DePaul University and a Mesi.J·o,v Financial
Fellow. Fro1n 1987 to 1997 he was chair1nan of t11e finance departJnent at DePauJ University. He
teaches invest1nents, corporate finance, and strategic planning. He developed and was di.J'ector
of DePaul's M.B.A. progra1n in Hong Kong and has taught in Poland, Germany, Thailand, and
Hong Kong. He received his Ph.D. in Finance from t11e University of Illinois at Cha1npaign-
Urbana, !us M.B.A. fro1n Mianu University of Ohio, and !us B.A fro1n Ohio-\Vesleyan Univer-
sity. Dr. Hi.J't has di.J'ected t11e Chartered Financial Analysts Study program for the InvestJnent
Analysts Society of Chicago since 1987.
Dr. Hi.J't has published several books, including Foundations of Financial Management
published by McGra,v-HilVIr,vin. Now in its 13th edition, tlus book is used at more than 600
colleges and universities worldwide. It has been used i.J1 n,ore than 31 countries and has been
translated into 1nore than 10 different languages. Additionally, Dr. Hirt is well kl10,vi1 for his
text, Punda1nenlals of Investment Management, also published by McGraw-Hill/Irwin, and no,v
in its ninth edition. He plays tennis and golf, is a 1nusic lover, and enjoys traveiling ,vith his wife,
Linda.

Linda Ferrell
Dr. Linda Ferrell is associate professor and Creative Enterprise Scholar in t11e Anderson Scl1ool
of Manage1nent at t11e University of Ne,v Mexico. She co1npleted her Ph.D. in business adminis-
tration, ,vith a concentration in management, at t11e University of l\1e1nphis. She has taught at the
University of Ta1npa, Colorado State University, University of Northern Colorado, University of

IV ABOU T THE AUTHORS

Me1nphis, and the University of \Vyoming. She also tea1n teaches a class at Thanunasat Univer-
sity in Bangkok, Thailand, as well as an online business ethics certificate course through the
University of Ne,v Mexico.
Her ,vork experience as an account executive for McDonald's and Pizza Hut's advertising
agencies supports her teaching of advertising, 1narketing manageinent, 1narketing ethics, and
1narketing principles. She has published in the Jcntrnal of Public Policy and Marketing, Jcntrnal
ofBusiness Research, Joiunal of Business Ethics, Journal of Marketing Education, Marketing
Education Review, Joiunal of Teaching Business Ethics, and Case Research Journal, and is
co-author of Business Ethics: Ethical Decision Making and Cases (Seventh Edition) and Busi-
ness and Society (Third Edition). She is the ethics content expert for the AACSB Ethics Educa-
tion Resource Center and was co-chair of the 2005 AACSB Teaching Business Ethics Conference
in Boulder, Colorado.
Dr. Ferrell is the vice president of programs for the Acade1ny of l.\1arketing Science, vice
president of develop1nent for the Society for l.\1arketing Advances, and a past president for the
Marketing Manage1nent Association. She is a 1ne1nber of the college advisory board for Petco
Vector. She freq,uently speaks to organizations on teaching business ethics, including t11e Direct
Selling Education Foundation's training prograins and AACSB Inten,ational Conferences. She
has served as an expert witness in cases related to advertising, business ethics, and consUiner
protection.

Suzannelskander
Suzanne S. Iskander is professor, finance and econonucs, at The Business School, Humber ITAL.
Suzanne taught t11e undergraduate Introduction to Business course at t11e University of Guelph-
HUinber for many years, and using her skills as teacher, trainer, and coach, teaches finance and
econo1nics courses in both tl1e Humber degree and diplo1na prograins. At HUinber, she currently
serves as Prograin Coordinator for three programs, and has served as chair, Acadenuc Coun-
cil; as chair, the Sustainability Conference; and as a me1nber of various conu,uttees, includ-
ing Degree Cotmcil, Acade1nic Frainework Co1nmittee, Economics Conference Co1nnuttee,
Sho,vcase Co1mnittee, Progra1n Advisory Conumttee, and t11e Business School Scholarly and
Professional Society. She participated in t11e Moslli-HUinber CurricttlUin Develop1nent \Vorkshop
in Tanzania and has vo!UI1teered ,vith DECA to enhance the business skills ai,d education of
students in Canada.
Suzaru,e holds an MBA fro1n Schulich School of Business, is a holder of the Chartered
Financial Analyst (CFA) designation, and has co1npleted all q,ualifying exams for the Char-
tered Market Tecluucian (Cl.\1T) designation. Suzanne has co-autl,ored tl1e Canadian editions
of Business, A Changing World, ai,d tl1e Study Guide and llbrkbook for Money, Banking, and
Financial Markets, and has served as contributor and subject-matter expert for nUinerous publi-
cations. Her previous experience in business and in t11e financial services industry include t11e
position of vice president, trading for an inten,ational financial institution. To those ,vho Io,o,v
her, Suzanne is a Bruce Trail hiker and a nature photographer.

Peter Mombourquette
Peter S. l.\1ombourq,uette is an associate professor and chair of tl1e departinent of Business and
Touris1n and Hospitality Management at Mount Saint Vincent University, where he teaches intro-
duction to business, strategic 1nanage1nent, and entrepreneurship and small business. In addi-
tion to teaching and research, Peter founded and 1nanages the Entrepreneurship Skills Prograin
(ESP), a highly intensive, multi-disciplinary entrepreneurslup prograin ailned at encouraging
entrepreneurslup propensity a1nong tmiversity graduates. Peter has also founded and chairs t11e
lughly successful Social Enterprise for a Day (SE4D) conference where students and commtmity
leaders learn about social enterprise and start and run social ventures. Over Peter's tilne as chair
of the departinent, he has ,vorked with !us colleagues in creating an engaging envirorunent for
students and provided them witl1 an opportunity to give back to society ,vhile leanung about

ABO UT THE AU THORS V

career opportunities. Peter has worked collaboratively to create a highly successful Leaming
Passport program for students, an annual Career \\7eek, a job clubs, a 1nentorship progrrun with
conununity leaders, an annual Social Enterprise Study Tour, a q_uarterly newsletter, an annual
sustainable business tour, and so forth. Peter was recognized for his efforts by Mount Saint
Vincent University \vhen he received the Innovative Teaching Award. Peter has also been nonli-
nated on two separate occasions by Mount Saint Vincent University for the Atlantic Canadian
Leadership A\vard in teaclling.
Peter has completed his D.B.A. fro1n tl1e University of Soutl,em Queensland and previous
to that he graduated with an 1\1.B.A from Saint Mary's University, a B.Ed. from Saint Fran-
cis Xavier University, and a B.A. fro1n Cape Breton University. His research interests include
human resource practices in small finns, teaclling 1nethodologies, student engage1nent, and
Inte1net use by s1nall and 1nedimn-sized businesses. He has published and/or presented over
45 pieces of scholarly work, co-autl,ored seven books, and been a keynote speaker at a nUJUber
of conferences. At Mount Saint Vincent University he serves on the team that is 1nanaging tl1e
implementation of tl1e university's strategic plan, is a 1nember of the University's Senate, chairs
tl1e Senate Conunittee on Teaclling ru1d Learning, is a 1ne1nber of the University CurriculUJU
Plarming Co1mnittee, and sits on the Pension Goven1ru1ce Board, the University Investment
Co1nnlittee, and several other boards ru,d conunittees. Peter currently resides in Halifax \vith his
wife, Amanda, and they have had the i.Jnmense pleasm·e of having four cllildren, their \vonder-
ful son, Jack; a beautiful baby girl, Autm,m, \Vho tragically passed a\vay shortly before her fi.J-st
bi.J·thday; a young girl, April AutUJnn; and a baby boy, \Vill.

VI ABOU T THE AUT HO RS

BRIEF CONTENTS

PART 1
Bu11neu In • Changing World
1 The Dynanucs of Business and Economics 2
2 Business Ethics and Social Responsibility 22
3 Business in a Borderless World 58

PA RT 2
Starting and Growing a Bu11neu
4 Options for Organizing Business 80
s Small Business, Entrepreneurship, and Franchising 108

PA RT 3
Managing for Quality and
Compet1t1vene,,
6 The Nature of Management 140
7 Organization, Teamwork, and Con1n1unication 164
8 Managing Service and Manufacturing Operations 186

PA RT 4
Creating the Human Rewurce Advantage
9 Motivating the Workforce 210
10 Managing Human Resources 230

PART 5
Marketing: Developing Relationships
11 Customer-Driven Marketing 252
12 Din1ensions of Marketing Strategy 278
13 Digital Marketing and Social Neti.vorking 314

PA RT 6
Financing the Enterprise
14 Accounting and Financial Statements 342
15 Money and the Financial System 368
16 Financial Managen1ent and Securities Markets 386
Appendixes
A Business Plan Developn1ent Online
B The Legal And Regulatory Environment Online
C The Business Plan Online
D Personal Career Plan Online

BRIE F CONTENTS VII

CONTENTS

PART l Chapter 2: Business Et hics and Social

Business in a Changing World Respon sibilit y 22

Chapter 1: The Dynamics of Business DESTINATION C EO, RUSSELL K. G IRLING 23

and Economics 2 Introduct ion 24
Bus iness Ethics and S ocial Responsibilitg 25
D ESTINATION C EO, SYLVAIN TOUTANT 3 T he Role of Ethics in Bus iness 26
Introduction 3 Consider the Following, Tho Occupy Movoment 27
The Nature of Business 4 Responding to Business Challenges: The Case of
The Goal of Business 4 Voloant Pharmaceuticals 28
The People and Activities of Business 5 Consider the Following, Aro Social Modia Silos
Management 5 Fair Game for Employors? 30
Marketing 6
Recognizing Ethical Issues in Business 31
Going Green: Municipal Governments S•t the Consider the Following, Whon Is Organic Roally Organic? 31
Standard fo r Green l iving 6 • Responding to Business Challenges: Determining
Consider the Following: Why Study Business? 7 Ethical Behaviour: The Case of Uber in Canada 32
Finance 7 Abusive or Intinlidating Behaviour 33
Conflict of Interest 34
The Economic Foundations of Bus iness 7
Responding to Business Challenges: What Is Ethical
Economic Syste1ns 8
When Bribos Aro tho Norm? 35
Communism 9
Socialism 9 Fairness and Honesty 36
Capitalism 9 Consider the Following, Is Helping Poople Download
Mi.xed Econonties 9 Music and Vidoo, Wrong? 38
The Free-Enterprise Systen1 10 Comn1unications 38
Business Relationships 40
The Forces of Supply and Demand 11
Making Decisions About Ethical Issues 41
The Nature of Competition 11
• Consider the Following, Is Facobook Acting Ethically
Economic Cycles and Productivity 13
by Making Billions off Your Personal Information? 41
E,...-pansion and Contraction 13 Improving Ethical Behaviour in Business 42
Measuring the Economy 14
T he Nature of Social Respons ibilitg 43
The Canadian E conom9 15 Social Responsibility Issues 45
A Brief History of the Canadian Econon1y 15 Relations with Owners and Shareholders 45
The Early Economy 15 Employee Relations 45
The Industrial Revolution 15
Rosponding to Business Challenges:
The Manufacturing and Marketing Econon1ies 15 Nestle's Commitment to Africa 46
The Service and New Digital Econon1y 15
Consumer Relations 46
Entr..,.-eneunhip in Action: Stwdent Success: Considor the Following, Canada, the Counterfoiters'
A• M•rk•ting Project 16 Safe Hoven 47
The Role of the Entrepreneur 16 Considor tho Following, Aro Energy Drinks Safe? 47
The Role of Government in the Canadian Economy 17 Environn1ental Issues 48
The Role of Ethics and Social Responsibility in Business 17 Animal Rights 48
· Considor tho Following: Domand Eclipses Pollution 48
Supply: Bluofin Tuna 17 • Going Gre•n, Frocking fo r Natural Gos: Clean
Energy Solution or Environmental C.atastrophe? 50
Can You Learn Business in a Classroom? 18
Rosponding to Business Challenges: BP Disaster Leads
TEAM EXERCISE 19
to Questions about Ethics and Social Responsibility 51
LEARNING OBJ ECTIVES SUMMARY 19
Rosponding to Businoss Challenges:
KEY TERMS 20 Bailouts-Automakors, Nortol, and Bombardior 52
DESTINATION C EO DISCUSSION QUESTIONS 20 Comn1unity Relations 52
TEAM EXERCISE 54
SO YOU WANT A JOB IN THE BUSINESS WORLD 20
LEARNING OBJECTIVES SUMMARY 54
BUILD YOUR BUSINESS PLAN 21
KEY TERMS 55
CASE, APPLE STORES, TH E FUTURE OF RETAIL? 21 DESTINATION CEO DISCUSSION QUESTIONS 55

VII I CONTENT S
 SO YOU WANT A JO B IN BUSINESS ETHICS AND SOCIAL
PART 2
RESPONSIBILITY 55
BUILD YOUR BUSINESS PLAN 56 Starting and Growing a Business
CASE, SOCIAL MEDIA AND PRIVACY 56
Chapter 4: Options for O rganizing Business 80

DESTINATION CEO, H EATH ER REISMAN 81

Chapter 3: Business in a Borderless World 58
Introdu c tion 81
D ESTINATION C EO, MARC KIELBURGER 59 Sole Propriet orships 82
Introdu ction 59 Advantages of Sole Proprietorships 82
The Role of International Business 60 Ease and Cost of Fom1ation 82
Why Nations Trade 60 Secrecy 83
Trade between Countries 61 Distribution and Use of Profits 83
Balance of Trade 61 Flexibility and Control of the Business 83
Government Regulation 83
Inte rnation al Trade Barrie r s 62
Economic Barriers 62 Taxation 83
Economic Development 62 Closing the Business 83
Disadvan tages of Sole Proprietorships 83
Exchange Rates 62
Unlimited Liability 83
Going Gr•en: China Faces Growing
Limited Sources of Funds 84
Concerns over Pollution 63
Limited Skills 84
Ethical, Legal, and Political Barriers 63
Lack of Continuity 84
Laws and Regulations 64
Consider the Following: Microlanding Holps Small
Tariffs and Trade Restrictions 64
Entreproneurs Start Businesses 84
Consider the Following: The Loonie Has an
Taxation 85
Identity Crisis 64
Partne r s hips 85
Political Barriers 66
Types of Partnership 85
Social and Cultural Barriers 66
Technological Barriers 67 • Entreproneurship in Action: Bu1ine11 Ownership-An
E.. r·Ch..,ging Structure Story 86
Trade Agreem ents, Alliances , and Organizations 67
Parl:l1ership Agreen1ent 87
• Entrepreneurship in Action: Entrepreneurs
Advantages of Partnerships 87
Moko Mon.yin an Unu,...,I Woy 68
Ease of Organization 87
General Agreement on Tariffs an d Trade (GATT) 68
Con1bined Knowledge an d Skills 87
The North An1erican Free Trade Agreen1ent (NAFTA) 69
Availability of Capital and Credit 88
The European Union (EU) 69
Asia-Pacific Econmnic Cooperation (APEC) Decision Making 88
70
Regulatory Controls 88
Association of Southeast Asian Nations 71
Disadvan tages of Partnerships 88
World Bank 71
Disagreemen ts an1ong Partners 89
In ternational Mon etary Fund 71
Unlimited Liability 89
• Responding to Business Challongos: Starbucks Takes
Busin ess Responsibility 90
tho China Challonge 72
Life of the Parl:l1ership 90
Getting Involv ed in International Busines s 72 Distribution of Profits 90
Expor ting and l!n porting 72 Limited Sources of Funds 90
Trading Companies 73 Taxation of Partnerships 90
Licensing and Franchising 74 Co rpo r a .t ions 90
Contract Manufacturing 74
• Re sponding to Business Challangos: Should Partners
Outsourcing 75
Have a Shotgun? 91
Offshoring 75
Joint Ventures and Alliances 75 Creating a Corporation 92
Direct Invesl:lnent
Types of Corporations 92
75
Elen1ents of a Corporation 95
In t e rnation al Busine ss Strategie s 76
The Board of Directors 95
Developing Strategies 76
Share Ownership 96
Managing the Challenges of Global Business 77
Advantages of Corporations 96
TEAM EXERCISE 77
Limited Liability 96
LEARNING OBJ ECTIVES SUMMARY 77 Ease of Transfer of Ownership 96
KEY TERMS 78 Perpetual Life 97
DESTINATION CEO DISCUSSION QUESTIONS 78 External Sources of Funds 97
SO YOU WANT A JO B IN GLOBAL BUSINESS 78 Expansion Potential 97
BUILD YOUR BUSINESS PLAN 79 Tax Advantages 97
CASE, P&G STEPS UP ITS INTERNATIONAL EXPANSION 79 Disadvan tages of Corporations 97

CONT ENTS IX
 Double Taxation 97 High Failure Rate 12 1
Forming a Corporation 97 Exten1al Shocks 122
Disclosure of Infom1ation and Regulations 97 Undercapitalization 122
ln1pact on Management Decisions 97 Managerial Inexperience or Incon1petence 122
Employ~wner Separation 98 Inability to Cope With Growth 122
Other Types of O,vnership 98 Starting a S mall Business 122
Joint Ventures 98 Idea Generation 123
Cooperatives 99 Opportunity Identification and Assessn1ent 123
Going Green: CSAs for Everyone 99 • Entrepreneurship in Action: PARSEL-Helping People
• Responding to Businoss Chollongos: Hoartland Farm Mol<e Money on YouTub. and lnstagram 124
Foods Co·op Helps Preserve Beef-and a Way of Lifo 100 The Business Plan 124
Tre nds in Business O,vn ership: Merger s • Consider the Following: Check Your Creativity 1:ZS
and Acq,uisitions 101 • Going Green: EcoScr~ Blonds Profit with Sustainability 126
Consider the Following: Can Microsoft Succeod in Its FomtS of Business Ownership 126
Acquisition of Skype? 103 Financial Resources 126
TEAM EXERCISE 104 Eq,uity Financing 127
LEARNING OBJ ECTIVES SUMMARY 104 Consider tho Following: Aro Theso Angols from
KEY TERMS 105 Heaven or Greedy Dragons? 128
DESTINATION C EO DISCUSSION QUESTIONS 105
Debt Financing 128
SO YOU WANT TO START A BUSINESS 106
Approaches to Starting a Small Business 130
BUILD YOUR BUSINESS PLAN 106
Starting from Scratch versus Buying an Existing Business 130
CASE, CANADIAN ACQUISITIONS- NOT AS EASY
Family Business 130
AS THEY ONCE WERE 107
Franchising 130
Rosponding to Business Challenges: Holp from a Crowd 131
Help for Small-Business Managers 133
Chapter 5: Small Business, Entrepreneurship,
T he Future f or Small Business 133
and Franchising 108
Demographic Trends 133
DESTINATION C EO: KEVIN O'LEARY 109 Technological an d Economic Trends 134
Introduction 110 Making Big Businesses Act " Small" 134
TEAM EXERCISE 135
The Nature of E ntrepr eneurship and Small
LEARNING OBJECTIVES SUMMARY 135
Business 111
KEY TERMS 136
Consider the Following: What Is the Differonco betwoen
DESTINATION CEO DISCUSSION QUESTIONS 136
an Entrepronour and a Small Business Person? 111
SO YOU WANT TO BE AN ENTREPRENEUR OR
Consider the Following: Should You Start SMALL-BUSINESS OWNER 137
Your Own Business? 112:
BUILD YOUR BUSIN ESS PLAN 137
Entrepreneur Characteristics 113 CASE, FINDING A N ICHE IN THE GOLF APPAREL BUSINESS 138
What Is a Small Business? 113
T he Role of Small Business in the Canadian Economy 113
Job Creation 114 PA RT 3
h1novation 114
Managing for Quality and
Industries That Attract Small Business 115
Retailing and Wholesaling 115
Competitiveness
Services 116 Chapter 6: The Nature of Management 140
Manufacturing 117
Technology 117 DESTINATIO N CEO: SHERYL SANDBERG 141

Advantages of S mall-Business O,vnership 117 Introduction 141

Independence 117 T he Importance of Management 142
Consider the Following: Anothor Type of Entrepreneurship 118 Manageme nt Fun ctions 142
Enjoyment 119 Planning 142
Financial Rewards 119 Mission 143
Low Start-Up Costs 119 Goals 143
Managemen t 119 Objectives 143
Focus 120 Plans 143
Reputation 120 • Entrepreneurship in Action: Au1tr•li1 Aqu•culture
Disadvantages of S mall-Business O,vnership 120 Discovers Sustainable Fi~ 1'5
High Stress Level 120 Organizing 146
Limited Financial Rewards 120 Staffing 146
Time Den1ands 121 Directing 147

X CONT ENT S
Controlling 148 Delegation of Authority 172
Types of Management 148 Degree of Centralization 172
Levels of Managen1ent 148 Centralized Organizations 172
Top Management 148 Decentralized Organizations 172
Going Green: Potagonio Strives to Sove the P lanet 1,49 Entr..,..eneunhip in Action: An Online Teoching ond
Middle Management 151 Learning Pletfonn Thot's Eo1y, Flexible, ond Smart 173
First-Line Management 151 Span of Management 17'3
Areas of Management 151 Organizational Layers 174
Financial Managen1ent 151 Forms of Organizational Structure 174
Production and Operations Management 151 Line Structure 174
Human Resources Management 152 Line-and-Staff Structure 174
Marketing Management 152 Multidivisional Structure 175
huormation Technology (IT) Management 152 Matri,x Structure 176
Administrative Managen1ent 152 The Role of Groups and Teams in Or ganizations 176
S kills Needed by Manag er s 153 Conunittees 177
Leadership 153 Task Forces 177
Teclmical Expertise 154 Tean1s 178
Conceptual Skills 155 Project Tea1ns 178
· Consider tho Following: CEO Loods Rona's Rocovory 155 Quality-Assurance Teants 178
Analytical Skills 156 Self-Directed \Vork Teants 178
Human Relations Skills 156 Communicat ing in Or ganizations 178
\Vhere Do Managers Come From? 156 - Responding to Business Challengos:
Decision Making 157 Creating • Corporote Culture ... Virtuolly 179

• Responding to Businoss Challongos: Managors and Formal Conununication 179

Employees S.e Different Corporate Cultures 157
Informal Conununication Channels 180
Recognizing and Defining the Decision Situation 158 Monitoring C01nmunications 180
Developing Options 158 hnproving Comn1unication Effectiveness 181
Analyzing Options 158 TEAM EXERCISE 181
Selecting the Best Option 159 LEARNING OBJ ECTIVES SUMMARY 182
ln1plen1enting the Decision 159 KEY TERMS 183
Monitoring the Conseqpences 159 DESTINATION C EO DISCUSSION QUESTIONS 183
The Realit y of Management 159 SO YOU WANT A JOB IN GLOBAL BUSINESS MANAGING
TEAM EXERCISE 160 ORGANIZATIONAL CULTURE. TEAMWORK. AND
LEARNING OBJ ECTIVES SUMMARY 160 COMMUNICATION 183
KEY TERMS 161 BUILD YOUR BUSINESS PLAN 184
DESTINATION C EO DISCUSSION QUESTIONS 161 CASE: KEURIG GREEN MOUNTAIN
SO YOU WANT TO BE A MANAGER, WHAT KIND? 162 EMPOWERS EMPLOYEES 184
BUILD YOUR BUSINESS PLAN 162
CASE: LULU LEMON PRACTISES CRISIS MANAGEMENT
AND PERHAPS MARKETING ALL AT TH E SAME TIME 162
Chapter 8: Manag in g Service and
Manufacturing Operation s 186
Chapter]: O rganization, Teamwork, and
DESTINATION C EO: GERALD SCHWARTZ 187
Commun ication 164
Introduction 187
D ESTINATIO N C EO: GALEN G. WESTON 165 The Nature of Operations Management 188
Introduction 165 The Transfom1ation Process 188
Organiza tional Culture 166 Ope r ations Management in Service Businesses 189
· Going Green: Best Buy Emphosizes Teomwork ond Nature and Consumption of Output 190
Comm1.1nication to Promot• Sust.ainability 167 Unifomtity of Inputs 190
Developing Or ganiza.t ion al S t ruct ure 167 Unifomtity of Output 190
Assigning Tasks 168 Responding to Businoss Challengos: Volkswagen's
Specialization 169 Plan to Rebound in America 191
Departmentalization 169 Labour Reqpired 191
Functional Departmentalization 170 Measuren1ent of Productivity 191
Product Departmentalization 170 Planning and Designing Operations Systems 192
Geographical Departmentalization 170 Planning the Product 192
Customer Departmentalization 171 Desig,ting the Operations Processes 192
Ass igning Responsibility 171 Standardization 192

CONT ENTS XI
 Entr..,.-eneunhip in Action: Road, Leu Travelled 193 E>.i>ectancy Theory 221
Modular Design 193 S trategies for Motivating Employees 222
Customization 193 Behaviour Modification 222
Planning Capacity 194 Job Design 222
Planning Facilities 194 Job Rotation 222
Facility Location 194 Job Enlargen1ent 223
Facility Layout 195 Job Enrichment 223
Technology 195 Flexible Scheduling Strategies 223
Sustainability and Manufacturing 196 Consider tho Following: Enhancing Productivity:
Managing the S upply Chain 197 What's Mino Is Yours and What's Yours Is Mine 224
Purchasing 197 hnportance of Jl,fotivational Strategies 225
Managing inventory 198 Responding to Busine11 Challenges: Bad Moods
The Economic Order Quantity Model 198 Contribute to Decreased Productivity 226
Just-in-Tin1e h1ventory Managen1ent 198 TEAM EXERCISE 226
Material-Req,uirements Planning 199 LEARNING OBJECTIVES SUMMARY 227
Outsourcing 199 KEY TERMS 228
· Going Green: UPS Adds Green Practices to DESTINATION CEO DISCUSSION QUESTIONS 228
lb logistic, 199 SO YOU T HINK YOU MAY BE GOOD AT MOTIVATING
Routing and Scheduling 200 A WORKFORCE 228
Managing Quality 201 BUILD YOUR BUSIN ESS PLAN 229
CASE, IS IT POSSIBLE YOUR DOG COULD INCREASE
Establishing Standards-ISO 9000 203
BUSIN ESS PRODUCTIVITY? 229
· Consider tho Following: Stella & Chowy's:
Tho Food Dogs lovo 203
Inspection 204
San1pling 204
Chapter 10: Managing Human Resources 230
integrating Operations and Supply Chain Managen1ent 205 DESTINATION C EO: JACK WELCH 231
TEAM EXERCISE 205
Introduction 231
LEARNING OBJ ECTIVES SUMMARY 206
KEY TERMS 207 T he Nature of Buman Resources Management 232
DESTINATION C EO DISCUSSION QUESTIO NS 207 Planning for Human Resources Needs 232
SO YOU WANT A JOB IN OPERATIO NS MANAGEMENT 20 8 Recruiting and S electing Ne,v Employees 233
BUILD YOUR BUSINESS PLAN 208 Recruiting 233
CASE, TACO BELL MASTERS THE DRIVE-THRU 209 Selection 233
The Application 233
The Interview 234
PA RT 4 Testing 234
Reference Checking 235
Creating the Human Resource Advantage Legal Issues in Recruiting and Selecting 236
Chapter 9: Motivating t he Workforce 210 Developing the \Vorkforce 236
Training and Development 237
D ESTINATION C EO: DEBORAH G ILLIS 211 Assessing Performance 237
Introd uction 211 · Considor tho Following: Moralo among tho Survivors 238
Nature of Human Relations 212 Turnover 239
His torical Per spectives on Employee Motivation 214 Compensating the Workforce 240
Classical Theory of Motivation 214 Financial Compensation 241
The Hawthon1e Studies 214 - Going Green: Google Rewards Employ••• for
· Going Green: Whole Foods: loved by Employ••• Being Sustainable 2,42
.and the Environm.nt 215 Benefits 243
Theor ies of Emplo yee Motiva tion 216 Managing Unionized Employees 244
Maslow's Hierarchy of Needs 216 Collective Bargaining 244
Herzberg's Two-Factor Theory 217 Resolving Disputes 244
Considor the Following: Rowarding Porformors Labour Tactics 245
with Time Off 218 Management Tactics 245
McGregor's Theory X and Theory Y 219 Outside Resolution 246
Theory Z 219 T he Importance of Workforce Diversity 246
' Entr..,.-•neunhip in Action: Nu logy Embrace, The Characteristics of Divel'sity 246
Employ•• Democracy Mod•I of Managem.nt 220 Why Is Diversity Important? 246
Variations on Theory Z 220 The Benefits of Workforce Diversity 247
Eq,uity Theory 221 Employment Eq,uity 247

XII CONTENTS
· Consider the Following: Is It Ethical for Businesses Consider tho Following, Using Technology to Mine
to Punish Employees for Smoking? 248 Customer Opinions 271
Trends in Management of t he \Vorkforce 248 Consider tho Following: Y•lp: Whoro Consumers
TEAM EXERCISE 248 Hold tho Power 272
LEARNING OBJ ECTIVES SUMMARY 249 Understanding Buying Behaviour 272
KEY TERMS 249 The Marketing Environment 272
DESTINATION C EO DISCUSSION QUESTIONS 250 Going Green: Monsanto f.aces Threats from
SO YOU WANT TO WORK IN HUMAN RESOURCES
New Superweeds 273
250
BUILD YOUR BUSINESS PLAN 251 TEAM EXERCISE 274
CASE, RECRUITERS EMBRACE NON-TRADITIONAL LEARNING OBJ ECTIVES SUMMARY 275
RECRUITMENT METHODS 251 KEY TERMS 275
DESTINATION C EO DISCUSSION QUESTIONS 276
SO YOU WANT A JOB IN MARKETING 276
PA RT 5 BUILD YOUR BUSINESS PLAN 276
CASE, NEW "PLACES" HAVE EMERGED TO SELL
Marketing: Developing Relationships W EDDING GOWNS AND RINGS- HELPING COUPLES
LOWER WEDDING COSTS 277
Chapter 11: Customer-Driven Mar keting 252

D ESTINATION C EO, RONNEN HARARY AND ANTON RABIE 253

Introd uction 254
Nature of Market ing 254 Chapter 12: Dimensions of Marketing Strategy 278
The Exchange Relationship 255 DESTINATION C EO, TOBIAS LUTKE 279
Functions of Marketing 255
Introd uction 280
Buying 255
The Marketing Mix 280
Selling 255
Transporting 256 Product Strat egy 280
Storing 256 Developing New Products 280
Grading 256 Idea Development 281
New Idea Screening 281
Financing 256
Marketing Research 256 Business Analysis 282
Product Development 282
Risk Taking 256
The Marketing Concept 256 Test Marketing 282
Conunercialization 282
• Entrepreneurship in Action: Building a S..ltainable
Classifying Products 284
Clothing Company T•n Tr••• at • Time 257
• Going Green: Levi's Blue Jeans Go Green 285
Evolution of the Marketing Concept 258
Product Line and Product Mix 285
The Production Orientation 258
Product Life Cycle 286
The Sales Orientation 258
• Consider tho Following: Disney English:
The Marketing Orientation 259
A New Market Niche for Disney 287
Social Media Era 259
Develo ping a Marketing Str at egy 260
Identifying Products 287
Selecting a Target Market 260
Branding 287
Packaging 289
Market Segn1entation Approaches 261
Labelling 289
Responding to Busine ss Challongos: Loonard Aspor Is
Product Quality 289
Targeting Mon in His Return to Modia 262
Pricing Stra tegy 290
Bases for Segmenting Markets 263
Pricing Objectives 290
' Entrepr•neunhip in Action: Chine•• Bottled Specific Pricing Strategies 290
Water Br•nd Clu,lleng•• Foreign Brands 26.(
Price Lining 291
Developing a Marketing Mix 264 Pricing New Products 291
Product 264 Psychological Pricing 291
Price 265 Price Discounting 291
Consider the Following: RBC's Youth Marketing Strategy 265 Consider tho Following: Tim Hortons' Pricing
Consider the Following: Canada: A Talo of Two Segments 266 Strategy-Tricking You into Buying More Coffoe
Place/Distribution 266 or Giving You Wlu,t You Want? 292
Promotion 267 Distribution Strat e gy 292
Marketing Res earch and Information Sy stems 267 Marketing Channels 292
Buying Behaviour 270 Supply Chain Management 294
Psychological Variables of Buying Behaviour 270 Channels for Consumer Products 294
Social Variables of Buying Behaviour 270 Channels for Business Products 295

CONT ENTS XIII

Intensity of Market Coverage 295 Video Sharing 323
Physical Distribution 296 Photo Sharing 325
Transportation 296 • Considor tho Following: Going Viral 326
Warehousing 296 Podcasting 326
Entr..,.-eneurship in Action: Online G..rag• Sale Social Networks 327
App Complltea with Kijiji and Craigsliat 296 Facebook 327
Materials Handling 297 • Consider the Following: P interest Succoufully
Impor tance of Distribution in a Marketing Strategy 297 Combines Social Notworking a nd Photo Sharing to
P r omotion S trategy 297 Ovortako Flickr 327
The Promotion Mix 297 Linkedln 329
Advertising 297 Twitter 329
Online Marketing and Social Media 298 Social Media Dashboards 329
Consider the Following: Sponsoring t he
• Responding to Busine11 Challenges: Social
Olympics-A Golden Promotional Strategy? 299
Media Monitoring 330
Mobile Marketing 302 Virtual \Vorlds 330
Personal Selling 303
Mobile Marketing 331
Content Marketing 304
Us ing Digi.tal Me dia t o Rea ch Co nsumer s 332
Consider the Following: Examining Red Bull's
• Going Green: Mobile Apps Help Consumers to
Marketing Prowess 304
Become Greener 333
Guerrilla Marketing 305
Publicity 305 Us ing Digi.tal Media t o Learn
Consider the Following: Lululemon's About C ons umer s 334
Unconventional Marketing 306 Legal and S ocial Issue s in
Sales Pron1otion 306 Internet Marketing 335
Promotion Strategies: To Push or to Pull 307 Privacy 335
Objectives of Promotion 308 • Consider the Following: Viewpoints Network
Promotional Positioning 308 Helps Manage Brands Online 335
TEAM EXERC ISE 308 Identity Theft 336
LEARN ING OBJ ECTIVES SUMMARY 309 Online Fraud 336
Intellectual Property 337
KEY TERMS 309
DESTINATION CEO DISCUSSION QU ESTIO NS 310
Di git al Medias Impact o n Market ing 338
TEAM EXERCISE 338
SO YOU WANT TO BE A M ARKETING MANAGER 310
LEARNING O BJECTIVES SUMMARY 338
BUILD YOUR BUSINESS PLAN 311
KEY TERMS 339
CASE, FIN DI NG T HE REAL GREEN PRODUCTS 311
DESTINATION CEO DISCUSSION QUESTIONS 340
SO YOU WANT TO BE A DIGITAL MARKETER 340
Chapter 13: Digital Marketing and BUILD YOUR BUSIN ESS PLAN 340
Social Networki ng 314 CASE, SHOULD EM PLOYEES USE SOC IAL
M EDIA SITES AT WORK? 341
D ESTINATION C EO : ARLENE DICKINSON 315
Introd uction 316
\Vhat Is Digi.tal Marketing? 316
Gro,vt h and Bene fit s of Di git al Communication 317 PA RT 6
Using Di git al Media in Business 318 Financing the Enterprise
Digi .tal Media and the Market ing Mix 319 Chapter 14: Accounting and
Product Considerations 320 Financial State ments 342
Distribution Considerations 320
Entr..,.-eneurship in Action: Ehy: Tt.. Site for DESTINATION C EO: J ACK DORSEY 343
the Creative Entr•preneur 320 Introduct ion 343
Promotion Considerations 321 T he Natur e of Accounting 344
Pricing Considerations 321 Accountants 344
Social Networking 321 Accounting or Bookkeeping? 345
• Entr..,.-•neurship in Action: Mobovivo The Uses of Accounting h1formation 345
Allows Consunwrs Legol Access to TV and h1ten1al Uses 345
Movies on Mobile O.Vice1 321 Exten1al Uses 346
Types of Consumer-Gener at ed Marketing Going Green: Accounting Goes Gr•en 346
and Digi.tal Media 322 T he Accoun t ing P rocess 347
Biogs and Wikis 323 The Accounting Eq,uation 347

XIV CON T ENTS

Double-Entry Bookkeeping 348 The Canadian Financial S gstem 374
The Accounting Cycle 348 The Bank of Canada 374
Step One: Exantine Source Documents 348 Monetary Policy 374
Step Two: Record Transactions 348 Bank Notes 375
Step Three: Post Transactions 349 The Financial System 375
Step Four: Prepare Financial Statements 349 Funds Management Services 376
Financial Stat ement s 349 Banking Institutions 376
The Income Statement 351 Chartered Banks 376
Revenue 351 Trust Companies 376
Expenses 351 • Going Gr. .n: Is th• World Bank S•riou•
Net Income 353 about Susuinabiity? 3n
Temporary Nature of the Income Staten1ent Accounts 353 Credit Unions and Caisses Populaires 377
Entrepreneurship in Action: Entrepreneuri..al Succ•11 Insurance for Banking Institutions 377
Story Hita a Snag 354 Non-banking Institutions 378
The Balance Sheet 354 Diversified Finns 378
Assets 357 Insurance Companies 378
Liabilities 357 Pension Funds 378
Owners' Eq,uity 357 • Entr~•n..,nhip in Action: Twitt..- Co-found..-
The Statement of Cash Flow 357 Tactd.. Cr•dit Card R•ad.n 379
Rat io Anal9sis: Anal9zing Financial S t a t ements 359 Mutual Funds 379
Profitability Ratios 360 Brokerage Finns 379
Asset Utilization Ratios 360 Finance Companies 380
R•sponding to Business Challongos: Shoul d Electronic Banking 380
Canada Adopt Internati onal Fi nancial Automated Banking Machines 380
Accounting Standards? 361 Consider tho Following: Cost of Borrowing Poses a
Liq,uidity Ratios 361 Threat to Brazilian Consumers 380
Debt Utilization Ratios 362 Online Banking 381
Per Share Data 362 Future of Banking 381
Industry Analysis 363 TEAM EXERCISE 382
Importance of l n tegritg in Account ing 363 LEARNING OBJ ECTIVES SUMMARY 382
TEAM EXERCISE 364 KEY TERMS 383
LEARNING OBJ ECTIVES SUMMARY 364 DESTINATION CEO DISCUSSION QUESTIONS 383
KEY TERMS 365 SO YOU'RE INTERESTED IN FINANCIAL SYSTEMS
DESTINATION CEO DISCUSSION QUESTIONS 365 OR BANKING 384
SO YOU WANT TO BE AN ACCOUNTANT 366 BUILD YOUR BUSINESS PLAN 384
BUILD YOUR BUSINESS PLAN 366 CASE, ARE CREDIT UNIONS A BETTER
DEAL THAN BANKS? 385
CASE, WEB RETAILERS AND SALES TAX 367

Chapter 15: Money and the Financial System 3 68 Chapter 16: Financial Management and
Securities Markets 3 86
DESTINATION CEO: STEPHEN POLOZ 369
Introd uction 369 DESTINATIO N CEO: PREM WATSA 387
Mon eg in t he Financial S 9s t em 370 Introd uction 387
Functions of Money 370 Managing Current Asse ts and Li abilit ies 388
Mediun1 of Exchange 370 Managing Current Assets 388
Measure of Value 370 Managing Cash 388
Store of Value 370 Investing Idle Cash 388
Characteristics of Money 370 Going Green: Finance Executiv•s Recogniz:e the
Acceptability 370 B•n•fits of M•thod's Gr••n Efficienci•• 389
Divisibility 371 Maxintizing Accounts Receivable 390
Portability 371 Optintizing Inventory 390
Stability 371 Managing Current Liabilities 391
Durability 371 Accounts Payable 391
Difficulty to Counter feit 371 Bank Loans 391
Consid• r the Following: Will tho Yuan Consider tho Following: Y Combinator Gives
Becomo tho Noxt Global C urrency? 372 Boost to Start-up Compani• • 392
Types of Money 372 Non-bank Liabilities 393

CONTEN T S XV
Managing Fixed Assets 393 LEARNING OBJECTIVES SUMMARY 403
Capital Budgeting and Project Selection 394 KEY TERMS 404
Assessing Risk 394 DESTINATION CEO DISCUSSION QUESTIONS 404
Pricing Long-Term Money 395 SO YOU WANT TO WORK IN FINANCIAL
Financing with Long-Tenn Liabilities 396 MANAGEM ENT OR SECURITIES 404
Bonds: Corporate JOUs 396 BUILD YOUR BUSINESS PLAN 405
Types of Bonds 397 CASE, HERSHEY FOODS, M ELTS IN YOUR MOUTH
• Entreprent1ur1hip in Action: Studio• Tol<e AND MAY MELT YOUR HEART 405
Notice of Relativity Media 397
Financing with O,vners' Eq,uitg 398
Investment Banking 399 Appendixes
T he Securities Markets 400 A Business Plan Development Online
Stock Markets 400 B The Legal And Regulatory Environment Online
The Over-the-Counter Market 401
C T he Business Plan Online
Measuring Market Perfom1ance 401
D Personal Career Plan Online
Re sponding to Busine 11 Challe ngos: Advancing
Gondor Dive rsity in Finance 401
TEAM EXERCISE 402

EN DNOTES EN-1

GLOSSARY GL-1

INDEX IN-1

XVI CONTEN T S
 PREFACE
'

Welcome
This new edition reflects 1nany dyna1nic changes in the business environ1nent related to ho,v
1nanagers 1nake decisions. It is ilnportant for students to understand how the functional areas of
busi11ess have to be coordmated as the econo1ny, technology, global co1npetition, and consUJner
decision makil,g continue to evolve. All of these changes are presented in concepts that entry-
Jevel students can understand. Our book contains all of the essentials that most students should
learn ill a semester. Business: A Changing World has, since its inception, been a concise presen-
tation of the essential 1naterial needed to teach an introduction to business course. Fro1n our
experience in teachmg the course, we know that the 1nost effective way to engage a student
is by making business excitil1g, relevant, and current. Our teachable, from-the-ground-up
approach i11volves a variety of 1nedia, application exercises, and subject 1natter, includmg up-to-
date content supple1nents, boxed exrunples, video cases, PowerPoint presentations, and testing
1naterials that work for entry-level business students. We have ,vorked hard to make sure that
the content of this edition is as up to date as possible in order to best reflect today's dynamic
world of business. \Ve cover 1najor changes in our econo1ny related to sustainability, digital
1narketing, and social networkmg.

The Sixth Canadian Edition

The Sixth Canadian Edition represents one of our 1nost thorough revisions. This is because so
1nany recent events and changes m the environment relate to the foundational concepts in busi-
ness. Econonnc and financial instability have resulted in an economy sometimes called the "Ne,v
Normal." Tins 1neans that an introduction to business textbook has to provide adeq_uate cover-
age of these changes as they relate to traditional business concepts. Businesses must adapt to
be successful. Therefore, we have listened to your feedback and incorporated needed changes
in content, boxes, opening and closing cases, team exercises, and other features.
In this edition we expand on our chapter on digital 1narketing and social networking in busi-
ness, a dynannc area that continues to change the face of business. Entrepreneurs and s1nall
businesses have to be able to increase sales and reduce costs by using social networkmg to
conunUJlicate and develop relationships with custo1ners.
\V'Jille the title of our book re1nains Business: A Changing World, ,ve could have changed the
title to Business: A Green World. Throughout the book, we recognize t11e ilnportance of sustain-
ability and "green" business. By using t11e philosophy "Reduce, reuse, and recycle," we believe
every business can be 1nore profitable and contribute to a better world through green initiatives.
There are new "Going Green" boxes that cover these envirorunental changes. Our "Entrepre-
neurslnp in Action" boxes also discuss 1nany innovations and opportunities to use green busi-
ness for success. We have been careful to continue our coverage of global business, etlncs and
social responsibility, and information technology as it relates to tl1e foundations ilnportant in
an introduction to business course. Our co-autl,or tea1n has a diversity of expertise in tl1ese
important areas.
The foundational areas of introduction to business, entrepreneurship, small busmess 1nanage-
1nent, 1narketing, accounting, and finance have been co1npletely revised. Exrunples have been
provided to ,vlnch students can easily relate. An understandmg of core functional areas of busi-
ness is presented so tl1at students get a holistic view of t11e world of business. Box examples
related to "Respondmg to Business Challenges," "Entrepreneurship in Action," and "Going
Green" help provide real-world exrunples in t11ese areas.
Our goal is to 1nake sure tl1at tJ,e content and teachmg package for tins book are of tJ,e
Jnghest q_uality possible. \Ve wish to seize tins opportunity to gam your trust, and we appreciate
feedback to help us continually ilnprove these 1naterials. We hope tl1at the real beneficiary of all
of our ,vork will be well-iluonned students who appreciate tl1e role of business in society and
take advantage of the opportunity to play a significant role in ilnproving our ,vorld. As students

PREFACE XVII
understand ho,v our free enterprise syste1n operates and how ,ve fit into the global competitive
envirorunent, they will develop the foundation for creating their own success and ilnproving our
q_uality of life.

Chapter-by-Chapter Changes
Chapt.er 1
• New Destination CEO profile on Sylvian Toutant of Davids Tea ,vith discussion q_uestions
• New boxed features: Consider the Follo,ving, Entrepreneurship in Action, Going Green
• Updated Team Exercise
• Updated content in "So You Want a Job in the Business \Vorld" box at the end of the chapter
to offer valuable advice on a v;,ide spectnun of business career choices
• Inclusion of numerous new exrunples in the text
• Expanded discussions on the Canadian economy
• Expanded discussion on the role of entrepreneurship in Canada including profiles of young
entrepreneurs
• New closing case: "Apple Stores: The Future of Retail?"

Chapt.er 2
• Updated CEO profile on Russell Girling of TransCanada Corporation with ne,v discussion
q_uestions
• Inclusion of 1nultiple ne,v in-chapter discussion cases on relevant topics to encourage stu-
dent participation. Cases include "The Case of Valeru1t Phannaceuticals"; "The Case of Uber
in Canada"; "ls Facebook Acting Ethically by Making Billions off Your Personal hlforma-
tion?"; "Fracking for Natural Gas: Clean Energy Solution or Environmental Catastrophe?";
"Are Social Media Sites Fair Grune for E1nployers?".
• Updates to content in in-chapter cases including "When Is Organic Really Organic?"; "ls
Helpil1g People Download l\,lusic and Videos \Vrong?"; "Canada, the Counterfeiters' Safe
Haven"; and "Are Energy Drinks Safe?"
• Updated boxed features: Going Green, Responding to Business Challenges
• Updated Team Exercise
• Updated content in "So You Want a Job in Business Ethics and Social Responsibility" box
at the end of the chapter to offer valuable advice on a wide spectnun of business career
choices
• Updated closing case: "Social l\1edia and Privacy"

Chapt.er3
• New Destination CEO profile on !\,fare Kielburger of Free the Children, with new discussion
q_uestions
• New boxed features: Consider the Follo,ving
• Updated Team Exercise
• Updated content in "So You Want a Job in Global Business" box at the end of the chapter to
offer valuable advice on a wide spectnun of business career choices
• Expanded Wonnation on the relation of Canada to the global economy
• Updated illfonnation on the European financial crisis
• New closing case: "P&G Steps Up Its Inte1national Expansion"

Chapt.er4
• Updated CEO profile on Heather Reis1nan of Chapters-mdigo, v.'ith ne,v discussion
q_uestions
• New boxed features: Going Green, Entrepreneurship in Action, Responding to Business
Challenges
• Updated Team Exercise
• Updated content in "So You Want to Start a Business" box at the end of the chapter to offer
valuable advice on a wide spectnnn of business career choices

XVIII PREFACE
• New infonnation on IPOs, including Shopify, Spin Master, and Facebook
• New infonnation on joint ventures, including infonnation on Tun Hortons and Cold Stone
Crea1nery
• Expanded discussion on mergers and acq,uisitions including information on Burger King
and Tun Hortons, Royal Bank, TD Canada Trust, and the Bank of Nova Scotia 1naking sig-
nificant acq,uisitions
• New infonnation on the role of govenunent approval and regulations in approving acq,uisi-
tions with discussion on Bell Canada's purchase of Astral l\,ledia and the purchase of Rona
by Lowe's
• Updated closing case: "Canadian Acq,uisitions-Not as Easy as They Once \Vere," which
discusses acq,uisitions in the oilsands

Chapter5
• Updated Destination CEO profile on Kevin O'Leary of O'Leary Funds and DrG!Jons'
Den, with ne,v discussion q,uestions
• Updated boxed features: Going Green, Entrepreneurship in Action, Responding to Business
Challenges
• Updated Team Exercise
• Inclusion of nwnerous exainples of young entrepreneurs who started digital and/or social
enterprises
• Updated infonnation on advantages and disadvantages of entrepreneurship
• Nwnerous new exa1nples on social 1nedia
• Expanded discussion on raising 1noney to start a business, including a ne,v in-chapter case
on cro,vdfunding and peer-to-peer lending in Canada
• Updated closing case: "Finding a Niche in the Golf Apparel Business"

Chapter6
• New Destination CEO profile on Sheryl Sandberg of Facebook, ,vith new discussion
q,uestions
• New boxed features: Going Green, Entrepreneurship in Action, Responding to Business
Challenges
• Update Tea1n Exercise
• Updated content in "So You Want to be a Manager: What Kind?" box at the end of the chap-
ter to offer valuable advice on a ,vide spectrwn of business career choices
• New infonnation on the role of vision state1nents, 1nission state1nents, and value in an
organization
• Enhanced infonnation pertaining to leadership
• Updated closing case: "Lulule1non Practises Crisis Manage1nent and Perhaps Marketing All
at the Saine Tune"

Chapter7
• Updated Destination CEO profile on Galen Weston of Loblaw, with new discussion q,uestions
• New boxed features: Going Green, Entrepreneurship in Action, Consider the Follo,ving,
Responding to Business Challenges
• Updated Tea1n Exercise
• Updated content in "So You Want in Global Business: Managing Organizational Cultw·e,
Tea1n,vork, and Co1nmunication" box at the end of the chapter to offer valuable advice on a
wide spectrum of business career choices
• New closing case: "Kew·ig Green Mow1tain E1npowers E1nployees"

Chapters
• New CEO profile on Gerald Schwartz of Onex, ,vith new discussion q,uestions
• New boxed features: Going Green, Entrepreneurship in Action, Responding to Business
Challenges
• New section on sustainability and manufacturing

PREFACE XIX
• Updated Team Exercise
• Updated content in "So You Want a Job in Operations l\1anage1nent" box at the end of the
chapter to offer valuable advice on a ,vide spectrwn of business career choices
• New closing case: "Taco Bell l\1asters the Drive-Thru"

Chapter9
• New CEO profile on Deborah Gillis of Catalyst, with new discussion q_uestions
• New boxed features: Going Green, Responding to Business Challenges
• Updated Team Exercise
• Updated content in "So You Want Think You !\,lay be Good at Motivating a \Vorkforce" box
at the end of the chapter to offer valuable advice on a wide spectrum of business career
choices
• Updated closing case: "Is It Possible Your Dog Could Increase Business Productivity?"

Chapter 10
• Updated Destination CEO profile on Jack \Velch of GE, with new discussion q_uestions
• New Going Green boxed featw·e
• Updated Team Exercise
• Updated content in "So You Want to Work in Human Resources" box at the end of the
chapter to offer valuable advice on a wide spectrwn of business career choices
• New closing case: "Recruiters E1nbrace Non-traditional Recruitment l\1ethods"

Chapter 11
• Updated Destination CEO profile on Ronnen Harary and Anton Rabie of Spin Master Toys,
with ne,v discussion q_uestions
• New and updated boxed features: Going Green, Entrepreneurship in Action, Responding to
Business Challenges
• Updated infonnation on the marketing concept and the need by consumers to be heard and
engaged
• Introduction of the social 1nedia era
• Increased e1nphasis on the ilnpact of social 1nedia and digital 1narketing
• New iluonnation on the 1narketing n1ix, including ne,v trends emerging in pricing and place/
location strategies
• New i11-chapter case on market segmentation using fantasy sports and new 1nedia as the
1najor exa1nples
• Updated i11-chapter case on the role of Yelp in business in Canada
• Updated Team Exercise
• Updated closi11g case: "New 'Places' Have E1nerged to Sell Wedding Gowns and Rings--
Helping Couples Lower \Vedding Costs"

Chapter 12
• New Destination CEO profile Tobias Liitke and his con1pany Shopify, with ne,v discussion
q_uestions
• New and updated boxed features: Going Green, Entrepreneurship in Action
• Updated and enhanced infonnation on pricing
• New infonnation on the emerging trend of content 1narketing, including an in-chapter case
on Red Bull
• Updated case on Tin! Hortons increasing its cup size to 1nake 1nore 1noney
• New and greatly enhanced information on the pro1notional 1nix, including in-depth coverage
of digital 1nedia and social 1nedia, including new exrunples of Canadian co1nprulies using
Facebook, Linkedln, Pinterest, Instagra1n, Twnblr, 1\vitter, and so forth
• New material on mobile 1narketing
• Updated in-chapter case: "Lulule1non's Unconventional Marketing"
• Updated Team Exercise
• Updated closing case: "Finding the Real Green Products"

XX PREFACE
Chapter 13
• Updated Destination CEO profile on Arlene Dickinson of Venture Conununications, with
ne,v discussion q_uestions
• New and updated boxed features: Going Green, Entrepreneurship in Action, Responding to
Business Challenges
• Increased e1nphasis on mobile 1narketing, including nUJnerous Canadian exainples
• Updated and detailed discussion of digital 1narketing
• Updated discussion on social networking and social 1nedia
• Updated discussion on the iinpact of digital 1narketing
• New infonnation on the legal and social issues of digital 1narketing
• Updated in-chapter case on Canadian company l\1obovivo, the first co1npany to produce
video for iPods
• Enhanced in-chapter cases on topics such as 1nobile apps and Pinterest
• New Teain Exercise
• New closing case: "Should Einployees Use Social Media Sites at \Vork?"

Chapter 14
• Updated Destination CEO profile on Jack Dorsey of Twitter and Sq_uare, with ne,v
discussion q_uestions
• New boxed features: Going Green, Entrepreneurship in Action
• Updated infonnation on the financial information and ratios of Tiin Hortons
• Significant updates to industry analysis section
• New infonnation about accounting standards and principles
• Updated Team Exercise
• Updated content in "So You Want to be an Accountant" box at the end of the chapter to offer
valuable advice on a wide spectrUJn of business career choices
• New closing case: "Web Retailers and Sales Tax"

Chapter 15
• New Destination CEO profile on Stephen Poloz of the Bank of Canada, with ne,v discussion
q_uestions
• New boxed features: Going Green, EI1trepreneurship in Action
• Updated Team Exercise
• Updated content in "So You're Interested in Financial Syste1ns or Banking" box at the end of
the chapter to offer valuable advice on a ,vide spectrUJn of busiI1ess career choices
• Updated closiI1g case: "Are Credit Unions a Better Deal Than Banks?"

Chapter 16
• New Destination CEO profile on Prem \Vatsa of Fairfax, with ne,v discussion q_uestions
• New boxed features: Entrepreneurship in Action, Going Green
• Expanded coverage concerning capital budgeting
• Updated Tea1n Exercise
• Updated content in "So You Want to Work in Financial l\1ai1age1nent or Securities" box at the
end of tl1e chapter to offer valuable advice on a ,vide spectrUJn of business career choices
• Updated closing case: "Hershey Foods: Melts in YoUJ· l\1outh ai1d l\1ay Melt Your Heart"

Created from the Ground Up

Business: A Changing World was built fro1n the groU11d up-that is, developed and written
expressly for faculty and students who value a brief, flexible, ai1d affordable textbook with the
1nost up-to-date coverage available. \Vith market-leading teaching support and fresh content
and exainples, Business: A Changing World offers just the right 1nix of currency, flexibility, and
value that you need. What sets this book by Ferrell/Hirt/Ferrell/lskander/Mo1nbourq_uette apart
fro1n the con1petition is ai1 Ullrivalled 1nixture of current content, topical depth, and the best
teachiI1g support around.

PREFACE XXI
The Freshest Topics and Examples
Business: A Changing World reflects the very latest develop1nents in the business ,vorld, from
the growth of outsourcing to Asia and Southeast Asia to Toyota's business strategy. In addition,
ethics continues to be a key issue, and the authors use pedagogical boxes throughout to encour-
age discussion about ethical conduct in business.

Just Enough of a Good Thing

It's easy for students taking their first steps into business to beco1ne overwhehned. Business: A
Changi ng World carefully builds just the right 1nix of coverage and application to give students
a finn grounding in business principles. Instead of sprinting through the semester to get every-
thing in, the authors allow for tiine to explore topics and incorporate other activities that are
important to teachers and students.

Teaching Assistance That Makes a Difference

The first-and often 1nost serious-hurdle in teaching is engaging students' interest, 1naking
then, understand how textbook 1naterial plays a very real role in real business activities. The
instructor's 1naterial for Business: A Changing World is full of helpful resources, including
detailed teaching notes and additional 1naterial in the Instructor's l\'1anual. The Instructor's
Manual contains a 1natrix to help teachers decide ,vhich exercise to use with which chapter.
There's 1nuch 1nore to Business: A Changi ng World, and much 1nore it can do for the intro-
duction to business course. To lea1n about this book's great pedagogical features and top-notch
ancillaries, keep reading.

Getting a Handle on Business

Business: A Changing ffurld's pedagogy helps students get the 1nost out of their reading, from
Leaming Objectives at the beginning of each chapter to the Leaming Objectives Swnmary at the
end of each chapter.

XXII PREFACE
Learning Objectives LEARNING OBJECTIVES
These appear at the beginning of each chapter to provide goals for After r eading this ch a pter, yo u will be a b le to:

students to rea ch in their reading. The obj ectives are then used in Define b asic conce pts suc h as business.
p rod uct. a nd p rofit.
the Learning Obj ectives Summary at the end of each chapter, and
help the students gauge whether they've learned and retained the Id e n tify the m ain particip ants and
activities of business and explain why
1naterial. studying busine ss is import a nt.
De fine econom ics and compa r e the four
types of economic systems.
De scribe the role o f supply. d e mand . a nd
competition in a free-en terprise syste m.
Sp ecify why and ho w the health of the
economy is m easured .

Trace th e e vo lution o f the Canadian

eco nomy and d iscu ss the role o f the
e n trepre neur in the eco nomy.

Sylvain Toutant knows. bcver.,~s. hwving wOl'kcd most recently ;u president of coffee
distribtttor Ke:urig C M1.,d.,, Prior t o th.,t, ~ w.,s chief ope,.,ting oHic:er- of coffee distributor
V:,n Houtte and CEO of Oucbec's liquor board. Since he joined O:.vid.s Te., in 2014. ~ h:l.s t.:ike:n
the company public. S.hMes ol the company ~ tr..,de on the NaM:l;,q stock rn;,rket.
Owvids. Te., w;u founded by D.svid Seg.,I, ., 28-year-old t e.,·IOYing entreprencut, ,>nd his
cousin Herschel Segail, ., C:in.xli.:in retail pioneer. Wh:it did they h.,vc in eommon? A vision:
g re.:it te.,,., friendly environment., a nd., colourful, modern store. It seemed like., simple id,:~
but they couldn't find .,nyone e l~ th.,t was doing it. So they de'Cide:d to t:ike rn;,tters into their
own h.:,nd.s. W.th O.:,vid's energy :,nd e n thus.ia.$.11'1 :ind HerKhd's know-how, it w:is the perfect
b:il:ince of youth :ind e.J(perience.
W:ilk into., Owvids Te:i tod:iy :ind you c.:in choose from over 150 types ol te:i, including
e.J(dusive blends, limited-edition sc:i.son:i.l collections, tr:iditiOIWII str:i.ight te:is, :ind exotic
infusions from :,round the globe. Not to mention the 1:i.rgcst collection of Ol'g:inic te:is :ind
infusions in North Americ.:i.
Tout:int s:iy.s th:i.t te:i i.s ., big m;:,rket th:i t is growing :ind is YC,Y popul,;:,r with millenniills..
In the competitive l.:indK:ipe, he st:itcs th:it tea. i.s :in evolYi:ng c.;:,tcgory :ind much ol tM tea.
Destination CEO
purch:i..s.ed in NOC'th Amcric:i is purch:ised in ., grocery stOl'e. Specialty tea rct:iilers compete Each chapter opens ,vith an introduction to a key leader
with e.xh other, :ind :is tc:i. becomes more popul:i.r, it'.s helping O;,vids Te:i to c:i.rve out its owr,
pl.,ce. The comp:i.ny Ms ., different :ippro.,ch to tell: to m:ike: tc:i. fun aind Kcessible. The store in industry, by detailing each leader's personal journey,
designs :ire young.open, :ind YCrydcsi9""focused. The comp:iny h:i.s continued iu e;,cp:,nsion in
the United St:ites. In 2014, the comp:iny h:id 130 stores in C:in:i.c:fa :i.nd 24 in the United St;:,tcs.
how they got to the top, and ,vhat it took to stay there.
So. why te:i? The comp:iny ~ys b«:ius.e it's he:ilthy, delicious.. :ind fun. :ind it brings people
together. a.II o,,er the world. Also because it's the .s.econd·most popul;:,r drink on tM pl:,net.,
s.econd only to w;:,ter. And in ca.se you w:inted to know, Tout:int st:iru his daiy with his favou rite
tc:i. blend: Jumpy Monkcy- *ro.,sted pe:iberry coffee be.:ins with Argentine m;:,tit .:ind IKcd
with a lmonds, whit e chocobte :ind other ro.,sted b.,rks .:ind roots."'

Introduction
We begin our study of business by e;,camining the fund:imentals ol business :ind economics
in this ch:iptcr. First, we introduce the n:i turc of busi~s.s.. including its goals, .,ctiYitics, .:ind
particip:inu.. Ne.J(t, we deKribe tM b:.sic.s of economics :ind :ipply them to tM Can:idiain
economy. fi:n:ilty. we cst.,bli.s.h a fr..,mework for studying business in this te;,ct.

Pedagogical Boxes Consider the Following: Why Study Business?

An important feature of the book is the Co nsider
t he Following pedagogical boxes de1nonstrat- Studying bu.si1K1ss C:11'1 h.lp you develop skills :ind .:1C-qUn
knowledge to prcp.:iro- for your future C¥c«, rcig;wdlcss
ing real-world exa1nples to drive home the applied of whcthefo you pbn to work for a multi!wition;il firm.
st.:irt your own busin.Hs, worlc for a g ~t o1gcncy,
lessons to students. These features provide an or m:r,n.:igc or voluntcCf' ;at a l'IOft'prof.t org¥1iution.
The f.eld of buSA'\'Hs offers ,1 v.nicty of intHcuc.,g ;and
excellent vehicle for stiJnulating class discus- ch• Ctl9"9 urcor oppocturiitics throughout the world.
sions. such .» hum.:in resources ma,nagcmcnt. inform;ation
tcchnolog'I( fiNnCc. pc'oduction ,1nd opcutiorls, wholet·
siiling .:ind r<1uilin9, .:ind m:.ny moro-.
Studywtg busincu uin a.lso ti.Ip you bcttcir undcr-
st11nd the many buW\!Hs activities that .:iro- noccsury
to provide sa,tisfying goods ,1nd seNic.s-.:ind that
th~ ;acti,...._s c.arry a, pri« tag. Fot o-umplc, if you
p;ry to downloiid .:1 song. 11bout ha.If of the pric• goes
tow.wd activities rel.:itcd t o distribution ;ind the studio·s
CJ(pcnu~s .:ind profit m.:irgiM .:ind only ,1 sm.111 portion
goes to the .:irtist. Most buW'loHscs ch.:irge ,1 rc,uon·
iibl. p<icet for their l)l'oduc:ts to ilflSurc that thciy co~r
thcir ptodue1ion costs.. p,,y thciir employees.. pro-..idc
thcir ownC!f's with a, rot"'"' on thciir investment. ;and
pcirha5» gi~ somctlwig ~ck to their louil communi·
tics. f:or CJtiimpl•. tlw Roy.al S ank of Can40ii (RSC) is
aicti~y involved in supports\g scholiirships for 11niv.,...
.sity studcnu. dev.los*ig pro9r,1ms to help lhc mcnt;afy
challenged, aind supponing etnef'ging ¥lists! C.:in.adiiin
Jeff Skoll. form,cr punidcnt aind first employee of cBaiy,
~ dONited .:ipj)l'~tcly $1 billion to the Sltoll Foun-
cbtion, .:in org:,,niution he founded to .5\lppotl .:1 .s.ust•
.:iblc world. Sltoll's found.:i,tion invests ~.:,vily in "social
-,itritpl'CH"IC!urs: who c.:in bet defined o1s poopl• who o1re
11sing cntr•ptcnwriail sltil1s .5\lch ;u crHtivity .:ind rislt
u.king to solv. some cf society's l)l'obtcnu. Thus. lc.:im-
ing ;,.bout business uin help you become .:1 wcl1·infotmcd
coruumer .:ind member of $0Cioty.
Businciss :.ctiviti•s help 9-ate t~ profits that
a.rci cssC!t'ltia.1 not only to individ11.al busincsse>s o1nd
local economies but .:ii.so to the he:ilth of the glob.:lil
C1COnomy. Without profits, bu,-,..ucis find it difficllt,
if not Wl'lpossibl•. to buy mo..-c raw m.:1tHi.:1ls., hire more
~ ployecs., .:ittr.:ict mor• upit.:iJ. and crc.:it• addi·
tion.:il producu th.:it in turn m.:ik• mor• profits o1nd
fuel the world economy. UndHst.:iflOng haw our frH-
.,,tCl'priw ciconomic sy.u con .:1Uoco1tcs rcsourc•s and
provid.s inccntivc,s for widustry .:ind the Wot"9l.:1cc is
Wl'lporunt to evciryonc.

PRE FACE XX III

RESPONDING TO
What 1., Ethica l Wht>n Bribt>., Are tht> Norm?

Fet yc:,r,., bribes ;irid c o r r ~ in foreign co...itriH were

customary ,1nd consic::lc«id :,,cccpt:,bJc, mc:,riing :, C-·
di:,n COITJPMYO~tflg WI:, p:irt ol the world wt.e,,e bra),
r$'f w:,s the nonn would be forgiven for following loc:,I
customs ,ar,d could ~y ~ . Tl-.s :,ttitvd'c st:,rt.cd to
ch:,ngc, in 1999. ~ both the U.S. :,nd C ~ n goYetrr
mCl'IU st¥ted to p:iss tougher rules gcwcr~ how North
Amcric¥1 COl'f'IP:it1ies concluded bu$ineu glob:ill)t Like:
most of wh:,t happens in busineu though, things :,re not
:,lw.;rys .waight-fOtW:ird. Whae l.:,,rgc ~ibes. :,re no longer
consid'-d :,cccpuiblc,it stil isrl't de¥ :,bout .s.rnall bribes..
often rderred to :is "f:,cilit:,tion ~ymcnts.• t~t get
people to perform their job.s.. l=OI' cx:,mplc, in some E...-o-
pc.11n countries it is not ..n,iwa,I for the riwdm,n to knock
on your door o1t Owistm:,s loolcing for :, c.-sh gift. The norm
is dw,t you p:ry the gift or- you don't get your rrw,1 i1riymot'C,
DISCUSSION QUESTIONS The Responding to Business Challenges
l, Oo you thinlc it is. cthic:,,I to p:,y:, bribe in:,, country
,,,,•h,cuc it is.:, cultu~I norm? Why or- why not? boxes illustrate how businesses overco1ne tough
2, Oo you thinlc •bcil:it:,tion p"')'mcnts* should be challenges, and 1nany also highlight the impor-
coru.ic:lcrcd bribes? tf you r:,n:, comp:,ny in:,
country where: these: payment,; -re: the: norm. tance of ethical conduct and ho,v unethical
would you p:,y them?
conduct hurts investors, custo1ners, and indeed
3. Oo you thinlc C:ir.ad:i's le:9,1ol system should be:
invcstig:iting crimes such ,1os bribes which occur the entire business world.
in other countries? Why Ot' why not?

EN TREPRENEURSH IP
Entrepreneurs Ma ke Money m an Unusual Way

Oawlcl Aufflae:h, Anl Vall.a.bhaneN,
ancl Unchay Stracliey
Bfodine.s1 Sanergy
The Entr e preneurship in Actio n boxes Founcl•cli 2011. ,n Kenya
spotlight successful entrepreneurs and Sue:e:...St The idea for Sanergy won the three student
the challenges they have faced on the entrepreneurs the $100,000 g rand priJ.e tn MITs
annual 8 u$1ness Plan Competition. enabHn,g them lo
road to success. !.larl their Kenyan busmess..
Making money off human waste s.eems like an unu$Ual
{and dtsgu$bng) Idea. Bu-t for recent MBA graduate
Dawld Auerbach, tl IS an opportunity to make money and
me-el cnUcal ne~s 1n developing counlnes.. According
lo the World Health Organ1tabon. 2.6 btll,on people
lac-k proper san1la1.ton facllities. a s1luat1on A~rbach
w1tne~d when v1!.1t1ng Chlna. Auerbacl\parlner~ with
fellow s tudents An1 Vallabhanenl and Unds.ay Stradk-y to
$ubmtt a bus1neu plan for a s.an1tatlon bus1nes.s 1n Kenya.
They won MIT's annual Business Plan Com~bl,on and
recewed s-100,000 to !.larl Sanergy.
Sanergy 1nwotves a fou.r·slep process. First it builds
the san1tat1on fadl1bes, whkh include showers and
toilets. The centres are then franch1$ed lo o ther entre·
preneurs, who charge five cents for eacl\ use. The wasle
is collected darly and finally conwerl~ 1nlo electrid ty
and ferblittr and $old. In this way. Sanergy can make a
proftt. create dean sanltal,on fadl1bes for Kenyans.. and
generate jobs 11.multaneoudy."'

GO ING
GREEN I .
Mun ,c,pa l Governmen ts Set the Standard fo r G reen L,v,ng

lrna.gine if e-v~y major city reduced its greenhouse gas
emissions to 80 percent of its t990 ~vels within the ne.xl
decade. This is the goal Toronto set forth in its Climate-
Ac-t.On Plan. Toronto is one of S8 cities worldwide that
are part of the l arge Cities Climate Lead~ship Group
{CAO). M~bers include cities from capitalistic: coun·
tties {New York City and Vancouvet). socialistic coun·
tties {Paris and Stockholm), and commur1istic countries
{Beijing and Ho Chi Minh City).
GovernMents itlt~vene in the economy thtough regu·
lations design~ to proMOte cor,,.:,e-tition and ptotecl
eon.surner'S. emp&oye.es, and the e-nvitonMet'lt As the CAO
c-ities deMOnstrate. Many loc:.al g~nMet'llS are- taking
Mt"&sures that sutpass national regulations.. SmalerregiOl'\s
such as munk:ipalities can pass legislation MOre quk:kly,
wheteas pas.sing fed~al ~gislation C:81'\ take motwths or
yet1ts. This isevet'\ harder in capitalistic: countties wh~e the
government has less pow~ than in socialstic 8"d eommu·
nistic nations. The green actions ta~ by CAO cities th.is
take on evet'\ greater importance-..
The C AO cities are taki.\g diff~e-nt steps to te-duce-
their environmeMal impact SoMe are pauing regulatiOl'\s
to litrlit certain business and consumer &et.Mtie,.. 0th~
MOves ir,,.:iose- fe,w,er burdens on busine,sse.s.. Toronto. for
itlstance. has a progressive ~trate-gy to r~Mtut&li?e- the
Mouth of the Don River and COl'l"lprehet'l.sive plans for
sustainable COl'l"lmur1ity design 8"d Rood protection. The
City of Vancouver introduce-den ambitious plan to become
the gre-Mest c-ity in the wotkl by 2020.. This Greenest City
2020 Action Plan {GCAP) sel"ves as a gutde for Vancouver
to ach~ targets in 10 goal areas-rar19ing from climate The Going Green boxes show ho,v
leac:l~ship to :rero waste and evet'\ local food. If these cities
succeed in their goals. they wil have a s.gnificant impact issues of sustainability affect all levels
on sustam\llbility, especially considering that they currently of do1nestic business, and these boxes
produc-e-10 petce-nt of the world's c:t1tbon e-mis~ns..•
encourage students to keep their
eyes on ho,v "business as usual" no,v
DISCUSSION QUESTIOMS
includes an envirorunentally respon-
1. Why might it take king~ to pass sustainability
laws in capitalistic nations than in socialistic or
sible element.
eoMmunistic nations?
2. What are some of the- impacts 1.uch goals Might
have on business?
S. Why ate s uch diff~ent cities agreeing to se-t GHG
goals?

XXIV PRE FAC E

End-of-Chapt.er Material
The end-of-chapter 1naterial provides a great opportu-
nity to reinforce and expand upon the chapter content.

KEY TERMS •

budget derteit human resources

budget sutplus inflatioo
business Mixed eeot1omies
Key Terms Important terms, high- capitalism. e1 free ente, p, ise MOtlopolistic COtY!petition
communi sM IYIOtlOpoly
lighted in bold face throughout the t1atuntl , esources
competit60f'I
text with an acco1npa nying definition demand non-pr o fit organizations
on the page, are listed in alphabetical dep, es.sion oligopoly
e<:Otlomic contraction products
order for ease of reference. e<:Otlomic expansion p, ofit
e<:Ot1omic system pure competi tiOt'I
e<:Of'IOMicS re-cession
equilib,ium price socialism
et\trepret1eur stakeholders
ftnat1cial res ources suppty
free.market systeM unemployMet1t
gross domenic product (GOP)

SO YOU WANT A J OB in Business Et hics ancl Social Re.sponsumllllll

In the words of Kermit the Frog. " h's r'IOl easy beir19
9reer1.# It may not be easy. but gr~n busir1ess oppor·
tunities abound. A. popula r catch phrase. "Green is the
new black.# indicates how fashio nable green business is
becoming. Consume, s ate mote in tune wit h and C<ln·
cetned about g teen ptoducts. polic~s. and behaviouts
by companies tha t\ ev«."r befo,e. Companies are looking
for new hires to help the m see thei, business c,eatively
and bring insights to all aspects of business operations.
The Arne,ican Solar Ene, gy Societ y estimates that the
l'\umbe, of green jobs could rise to AO million in Notth
America by 2030. G teen business st,ategies not o nly
give a firm a con,metcial advantage in the matket place.
but h«."lp lead the way towatd a greener world. The fight
to ,educe out carbon foo tptint in a n attempt to teverse
climate change has opened up oppottunities fo, ren«."w-
able energy. recycling. conservation. and incr«."asing
overall efficiency in the way resources are used. New
businesses that focus on hydro. wind, and solar power
are on the rise and will need talented businesspe,ople
to lead then,. Catbol'\ emissions trading is gaining pop·
ulatity as large corpotatkins a nd individuals alike see-k
to decrease their footprints. A job ii'\ this growing field
C<luld be simila r to that of a stock trader. o r you coukl
lead the search fo r ca,bon-efficient companies in which
to invest.
In the e thics ar«."na, cuttent ttends in business gov·
«."tna nce strongly suppot t the dev«."loprnent of ethics
and compliance departments to help guide o tganiza·
tional integtity. This alone is a billion-dollar business.
and thete ate jobs ii'\ developing organizational ethics
programs. developing company policies. and training
employees a nd Management. An entry-level position So You Want a Job This end-of-
might be as a communication specialist or trainer for chapter feature offers valuable
programs in a business ethics departMent. Event ually
there's an opportunity to be<:ome a l'\ ethics officer with advice on a wide spectru1n of
typical , esponsibilities of M«."eting with «."mployees. the business career choices.
board of dire<:tors, and top ma nagement to d isc uss and
advise on ethics issues in the industty. developing and
dist ributing a C<1de of e thics: cteating a nd Maintaining
an anonytnous.. confidential set vice to answet questions
about e thica l issues: taking actions on possible ethics
C<1de violations: and reviewing and Modifying the code
of ethics of the organization.
There ate also oppott unities to s upport initia·
tives t hat help C<1mpanies , e late soe:ial responsibility

Build Your Business This Plan

end-of-chapter feature (along with
Appendix A, Business Plan Devel-
opme nt) helps students through the
develop1nent of their business plan
by relating the steps to the content of
each chapter. Additional infonnation
and resources can be found in the
Instructor's Manual.
BU IL D YOUR BUS IN ESS PLA N
Business Ethics and Social Responsib, ~y For eumple, if you are thinking of opening a lawn
care business.. you need to consldet what possible
Think about whkh lndustt y you are considering com·
petlng In with yout p roduct/service. Are there a ny kind
effects the chemkals you are using wal have on t he di·
ent and t he environment. You have a responsibUity not
of questlonable p, actices '" the way the product has to threaten your customers' health or safety. You also
been traditionally sold? Produced? Advertised? Have
there been any recent a ceusatlons regarding safety
have the soda I tesponslbllit y to let the community know
of any dam.aging effect you may be dfree tly or lndfree tly
within the Industry? What about any env!ro nmental
, esponsible for.
concerns?

PREFACE xxv
Market Leading Technology
Learn without Limits
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XXVI PREFACE
• Access instructor resources.
• View assigrunents and resources created for past sections.
• Post your own resources for students to use.

Instructors' Resources
Business: A Changing Wo1td, Sixth Canadian Edition, offers a co1nplete, integrated supplements
package for instructors to address all your needs.
• Instructor's Manual: The Instructor's Manual, prepared by the Canadian text authors,
Suzanne Iskander and Peter Mo1nbourq_uette, accurately represents the text's content and
supports instructors' needs. Each chapter includes the learning objectives, the glossary of
key tenns, a chapter synopsis, a con1plete lecture outline, and solutions to the end-of-chap-
ter discussion q_uestions.
• E Z Test Co mputerized Test Bank: This flexible and easy-to-use electronic testing pro-
gram allows instructors to create tests fro1n book-specific ite1ns. Created by Sandra Well-
1nan, Seneca College, the test bank has undergone a rigorous auditing and revision process
for the Sixth Canadian Edition. It contains a broad selection of nntltiple choice, true/false,
and essay q_uestions, and instructors may add their own q_uestions as well. Each q_uestion
identifies the relevant page reference and difficulty level. l\1ultiple versions of the test can
be created and printed.
• Po,verPointT>t Pr esentations : Prepared by Peter Mo1nbourq_uette of Mount Saint Vincent
University, these robust presentations offer high-q_uality visuals fro1n the text and higltlight
key concepts fro1n each chapter to bring key business concepts to life.

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Acknowledgements
The Sixth Canadian Edition of Business: A Changing World ,vould not have been possible without
the conunitinent, dedication, and patience of our excellent task 1nasters and guides at McGraw-Hill
Ryerson: Kun Brewster, group product 1nanager; Lindsay MacDonald and Rachel Wmg, product
developers; Shannon Martin and Jessica Barnoski, supervising editors; Sarah Strynatka, produc-
tion coordinator, Monika Schunnann, photo/pennissions editor; and Mike Kelly, copy editor.
Many others have assisted us with their helpful conunents, reconunendations, and support
throughout this and previous editions. \Vii d like to express our thanks to the following reviewers
who were a1nong the instructors who reviewed previous editions:

Glen Kobussen, St. Peter's College-University of Saskatchewan

Kayrod Nirunir, Dawson College
Dustin Quirk, Red Deer College
Frank Saccucci, l\1acE,van University
Brian Turford, Fanshawe College
-Suzanne Jska1uler and Peter Mombourq;uette

PREFAC E XXVII
Matcflal repUblished with the exptess permission of: National Post. a division of Postmcdla Netwofk Inc.

spi ced
apple
 LEARNING OBJECTIVES
After read ing this chapter, you will be able to:

Define basic concepts such as business.

product, and profit.
Identify the main participa nts and
act ivit ies of business and explain why
st udy ing business is importa nt.
~
Define econom ics and compare t he four
types of econom ic systems.
91!91
Describe the role of supp ly, demand, and
competition in a free-e nterprise system.

Sylvain Toutant knows beverages, having worked most recently Specify why and how the health of the
as presid ent of coffee distributor Keurig Canada. Prior to t hat. he economy is measured .
was chief operating officer of coffee d ist ri butor Van Houtte and C EO illliilliil Trace the evolution of the Canad ian
of Quebec's liquor board. Since he joined Davids Tea in 2014, he has economy and discuss the role of the
taken the company public . Shares of t he company now trade on the en trepre neur in the economy.
Nasdaq stock market.
Davids Tea was founded by David Segal, a 28-year-old tea-loving
entrepreneur, and his cousin Herschel Segal. a Canadian retail
p ioneer. W hat did the y have in common? A vision: great tea, a friendly
environment, and a colourful, modern store. It seemed like a s imple idea, but t hey couldn't
find anyone e lse t hat was doing it. So t hey decided to take matters into their own hands. With
David 's e ne rgy and enthusiasm and Hersc hel's know- how, it was t he perfect balance of youth
and experience .
Walk into a Davids Tea today and you can choos e from over 150 types of tea, including
excl usive blends, limite d-edition seasonal collect io ns, t raditional straight teas, and exot ic
infusions from around t he glob e. Not to mentio n the largest col lection of organic teas and
infusions in North America.
Toutant says that tea is a big market that is growing and is ve ry popular with mille nnials.
In the comp et itive landscape, he state s that tea is an evolving category and much of the tea
purchased in North America is purchase d in a g rocery store . Specialty tea retaile rs compete
with e ach othe r, and as tea b eco mes more popular, it's helping David s Tea to carve out its own
p lace. The co mpany has a d ifferent approach to tea: to ma ke tea fun and accessible. The store
desig ns are young, open, and ve ry des ign-focused. The company has continued its expansion in
the United State s. In 20 14, t he company had 130 stores in Canada and 24 in the Uni te d Stat es.
So, why tea? The company says b ecause it's healthy, de licious, and fun, and it brings people
tog ether, all over t he world. Also because it's t he second-most popular drink on the planet,
second on ly to water. And in case you wanted to know, Tout ant st arts his day with his favourite
tea ble nd : Jumpy Monkey- "roaste d pea berry coffee beans with Argentine mate, and laced
with almonds, white chocolate and other roasted barks and roots."'

Introduction
We begin ou r study of business by e xamining th e fundament als of business and econo mics
in this c hapte r. First, we int roduce th e nature of business, inc luding its goals, activities, and
participants. Next, we describe t he basics of eco nomics and apply th em to t he Canadian
e conomy. Finally, we estab lish a framework for stud ying business in this te xt.

C HAPTER 1 • The D ynamics of Business and Economics 3

 The Nature of Business
LOl Define basic concepts such as business,
product, and profit.

A business tries to earn a profit by providing products

that satisfy people's needs. The outco1nes of its efforts are
products that have both tangible and intangible charac-
teristics that provide satisfaction and benefits. When you
purchase a product, you are buying tl1e benefits and satis-
faction you think tl1e product
business individuals or will provide. A Subway sand-
organizations who try to earn a wich, for exa.inple, 1nay be
profit by providing products t hat purchased to satisfy hunger,
satisfy people's needs a Porsche Cayenne sport
utility vehicle, to satisfy the
products goods or services need for transportation a.Ild
with tangible and intangible the desire to present a certain
characterist ics that provide
iinage.
satisfaction and benefits Most people associate the Natural 4X
Laundry Detergent
profit the difference between word product ,vith tangible Detergent It lessive
4x nature!
what it costs to make and sell
a product and what a customer
pays for it
goods-an automobile,
co1nputer, phone, coat, or
so1ne other tangible ite1n
-
non-profit orgull- Ho,vever, a product can also
tions organizat ions that may be a service, whicll results
provide goods or services but when people or 1nachines
do not have the fundamental provide or process so1ne-
purpose of earning profits thing of value to custo1ners.
Dry cleanmg, a check-up by
a doctor, a perfon1la.Ilce by
a hockey player-these are exa.inples of services. So1ne
services, such as Flickr, a.Il online photo 1nanage1nent a.Ild Seventh Generation is a leading brand of environmentally friendly
sharing application, do not cllarge a fee for use but obtain household products. Its Natural IIX Laundry Detergent is packed in a
revenue from ads on tl1eir sites. A product can also be an bottle made from 100 percent recycled fibre.
idea. Consultants and attorneys, for example, generate ideas
for solving proble1ns.
To earn a profit, a person or organization needs 1nanage-
ment skills to plan, organize, and control the activities of
The Goal of Business the business and to find and develop e1nployees so tl1at it
The priinary goal of all businesses is to ea1n a prof it, the can 1nake products consu1ners ,vill buy. A business also
difference bet\veen what it costs to make and sell a prod- needs 1narketing expertise to learn ,vhat products conswn-
uct and ,vhat a custo1ner pays for it. If a company spends ers need and want and to develop, 1nanufacture, price,
$8.00 to 1nanufacture, finance, promote, and distribute a promote, and distribute those prod ucts. Additionally, a
product that it sells for $10.00, the business ea1ns a profit busmess needs financial resources and skills to fund,
of $2.00 on each product sold. Businesses have the right maintain, and expand its operations. Otl1er challenges for
to keep and use their profits as they choose-witlliil legal businesspeople include abiding by laws and govenllllent
liinits-because profit is the reward for tl1e risks they regulations; acting in an ethical and socially responsible
take in providing products. Eanliilg profits contributes to manner; a.Ild adapting to econo1nic, teclmological, politi-
society by providing e1nploy1nent, which in tun1 provides cal, and social changes. Even non-profit organizations
1noney tl1at is reinvested in tl1e econo1ny. In addition, prof- engage iil 1nanagement, 1narketing, and finance activities
its must be earned ill a responsible 1na.imer. Not all orga- to help reacl1 tl1eir goals.
nizations are busmesses. Non-profit organizations, such To achieve and 1namtain profitability, busmesses have
as tl1e Canadian Red Cross, Special Olympics, and otl1er found that they 1nust produce q,uality products, operate
charities and social causes, do not have the funda1nental efficiently, a.Ild be socially responsible and etllical in deal-
purpose of earning profits, altl1ough they 1nay provide ing witl1 customers, e1nployees, investors, govenllllent
goods or services and engage in fundraismg. regulators, the conunwlity, a.Ild society. Because tl1ese

PART 1 • Business in a Changing World

 groups have a stake in the
stakeholders groups that success and outco1nes of a
have a stake in the success and business, they are so1neti1nes
outcomes of a business called stak eholders . Many
businesses, for exa1nple, are
concerned witl1 ho,v stakeholders view the inlpact t11at a
business's waste has on the envirorunent. Concerns about
landfills becoming !ugh-tech graveyards plague 1nany
electronics fim1S. Best Buy offers recycling of electronics
at all of its stores. The stores take cellphones, ,vide-screen
TVs, and 1nost other electronic products in their green
program, regardless of where they were purchased. Otl1er
businesses are concerned about the q_uality of life in
the co1mnunities in which t11ey operate. For exainple,
Starbucks Canada launched tl1e "Opportunity Youth"
prograin by conunitting to Jure 10 percent of its work-
force fro1n a1nong disadvantaged young people. 2 Petro-
Canada sponsors "Stay in School" and "Future Leaders"
programs ahned at Aboriginal co1nmunities. Other compa-
1ues are concerned ,vith social responsibility in tinles of
natural disasters. After tl1e devastating earthq_uake in
Nepal in 2015, phone co1npanies, including \Vind Mobile,
Fido, and Rogers, ,vaived fees for Jong-distance calls to
the Hiinalayan country. Other co1npanies, such as Ho1ne
Depot, have a Jong history of supporting natural disaster
victi!ns, relief efforts, and recovery.
The People and Activities of Business
L02 Identify the main participants and activities of
b usiness and explain why stud ying business is
important.
Figure 1.1 shows the people and activi-
ties involved in business. At the centre Figure I.I Overview of the Business World
of the figure are owners, e1nployees,
and customers; the outer circle includes
the priinary business activities-
1nanage1nent, 1narketing, and finance.
Owners have to put up resources-
1noney or credit-to start a business.
Employees are responsible for the work
that goes on within a business. Owners
can 1nanage the business theniselves or
hire e1nployees to acco1nplish tlus task. Competition
The president of Shoppers Dn1g l\1art,
Mike l\1otz, does not O\VI1 Shoppers, but
is an einployee who is responsible for
1nanaging all the other e1nployees in a
way that earns a profit for investors,
who are the real owners. Finally, and
1nost inlportantly, a business's major
role is to satisfy tl1e customers ,vho buy
its goods or services. Note also that
people and forces beyond an organiza-
tion's control-sucl1 as legal and regula-
tory forces, the econo1ny, competition,
teclmology, and etlucal and social concerns-all have
an i.Inpact on tl1e daily operations of businesses. You ,viii
learn 1nore about these participants m business activities
throughout tllis book. Next, we ,viii exai11ine tl1e 1najor
activities of business.
Management. Notice in Figure 1. 1 that 1nanage1nent
and e1nployees are in tl1e sa1ne segment of the circle.
This is because 1nanage1nent involves coordinating
employees' actions to achieve t11e finn's goals, organiz-
ing people to work efficiently, and 1notivating the1n to
achieve t11e business's goals. Geoff l\1olson, chainnan
of Molson Coors and the owner, president, ai1d CEO of
tl1e Montreal Canadiens hockey team, reco91uzes tl1e
iinportance of 1nanage1nent to co1npany success. He
sees his job as one that supports tl1e role of the CEO.
He believes that good strategy drives shareholder value,
but that the execution of the strategy is really in tl1e
hands of 1nanage1nent.3 l\1anagement is also concerned
,vitl1 acq_uiring, developing, and using resources (includ-
ing people) effectively and efficiently. Ca1npbell's Soup
enlists its ,vorkers to help sq_ueeze n1ore efficiency out
of its plants. Operating efficiency co1nes from saviI1g
time, money, and effort. 4
Production and 1nanufacttuing is anotl1er elemei1t of
manage1nent At Campbell's Soup, for exan1ple, a 20-person
,vork tea.in ,vas created to deten11ine how best to cut costs
in son1e plants. In essei1ce, 1nanagers plan, organize, staff,
and control the tasks req_uired to carry out the work of the
company or non-profit organization. \Ve take a closer look at
manage1nrot activities in Parts 3 and 4 of tllis text
Economy
Information
Technology
Social Legal and
Responsibility Regulatory
and Ethics Forces
CHAPTER 1 • The Dynamics of Business and Economics 5

7li,,~®
RRROLL UP
-THE RIM TO-
O Helen Sesslons/ AJamy Stock Photo
One of the most successful marketing efforts in Canada is Tim Hortons'
"Roll Up the Rim to Win."
"M anagers plan. organize, staff. and
cont ro l t he tasks required to carry
out t he work of the com pa ny or non-
profit orga nizat ion."
Market ing. l\,larketing and consumers are in the sa1ne
seginent of Figure 1.1 because the focus of all 1narketing
activities is satisfying custo1ners. Marketing includes all the
activities designed to provide goods and services that satisfy
consumers' needs and ,vants. l\1arketers gather infonnation
Imagin e if every major city re duced its g reen house gas
emissions t o 80 percent of its 1990 levels with in th e next
d ecade. T his is th e goal Toronto set fort h in its C limate
Actio n Plan. Toronto is one of 58 cities worldwide that
are part of the Large C ities C limate Leadership Group
(C40). Memb ers include cities from cap ita list ic coun-
tri es ( N ew York Cit y and Vancouver), socialist ic coun-
tri es (Paris and St ockholm), and communistic countries
(Beijing and Ho Chi Minh C ity).
Governments intervene in the economy t hro ug h regu-
lat ions designed to p romote compet ition and p ro tect
consumers, emp loyees, and the environment. As the C40
cities d emonstrate, many local governments are t aking
measures that surpass national regulat ions. Smaller reg ions
such as municipalit ies can pass legislatio n more q u ickly,
whereas passing federal legislatio n can t ake months or
years. This is even harder in capit alist ic countr ies where the
gover nment has less power than in socialistic and commu-
nist ic nations. The green act ions taken by C40 cities thus
take o n even g reater importance.
The C40 cities are taking d ifferent st eps to reduce
t heir e nviro nmental impact. Some are passing regulations
to limit certain business and consumer activit ies. Other
moves impose fewer b urdens o n businesses. Toronto, for
6 PART 1 • Business in a Chang ing World
and conduct research to determine ,vhat custo1ners want
Using information gathered fro1n 1narketing research,
1narketers plan and develop products and 1nake decisions
about how 1nuch to charge for their products and when and
where to 1nake them a vailable. In response to an American
ca1npaign against childhood obesity, \Vahnart announced
tl1at it ,vould lower the sugars, fats, and salts in its products
over a five-year period. Such a response could be a s1nart
1nove on \Vahnart's part because 1narketing research shows
tl1at constuners are beco1ning more health-conscious.5
PepsiCo, for exa1nple, has expanded into healthier products
such as Tropicana and oallneaL CEO Indra Nooyi antici-
pates tl1at healthy products will make up 30 percent of the
co1npany's product portfolio by tl1e next decade.6 Marketers
use pro1notion-advertising, personal selling, sales pro1no-
tion ( coupons, ga1nes, sweepstakes, 1novie tie-ins), and
publicity- to co1mnunicate the benefits and advantages of
tl1eir products to consUJners and increase sales. Non-profit
organizations also use pro1notion. One of tl1e best-known
Canadian marketing initiatives of all time is Tun Hortons'
"Roll Up the Rinl to \Vm" campaign. The siinple idea was
developed by Tun Hortons executive Ron Buist, who says
tl1e idea was developed as a way to gaiI1 even more market-
ing leverage (strengtl1) fro1n its paper cup and to increase
sales. 7 \Ve ,viii exrunine 1narketiI1g activities in Part 5 of
tllis text.
instance, has a progressive strategy to re-nat uralize the
mouth of the Don River and comprehensive p lans for
sustainable community d esign and flood protection. The
City of Vancouver introduced an ambitious p lan to become
the greenest city in the world by 2020. This Greenest City
2020 Act ion Plan (GCAP) serves as a guide for Vancouver
to achieve t argets in 10 goal areas-ranging from climate
leadership to zero waste and even local food. If these cit ies
succeed in the ir goals, they will have a significant impact
on sust ainability, especially considering that they currently
produce 10 p ercent of t he world 's carbon emissio ns.•
DISCUSSION QUESTIONS
1. Why mig ht it t ake lo nger to pass sust ain abi lity
laws in capit alistic nations than in socialist ic o r
communistic n at io ns?
2 . What ar e some o f th e impacts su ch goals migh t
have o n b usin ess?
3. Why are such d iffe r ent citi es agreeing t o set GHG
goals?
 Stud ying business can help yo u d eve lop ski lls and acqu ir e
knowledge to p r e pa re fo r yo ur futu re ca reer, r ega rd less
o f w heth e r yo u plan to w o rk for a multinational fi rm,
sta rt yo ur own business, wo rk for a g ove rnme nt agency,
o r man age or vol unteer at a non-profit o rg an izatio n.
Th e field of business offers a variety o f int e rest ing and
cha lle ng ing career o p por tu nities thro ug ho ut t h e w o rld ,
suc h as human r esources managem e nt, information
t ech nolo gy, fina nce, p ro d uc t io n a nd o p eratio ns, w hole -
sali ng and reta iling, and many mo re.
Stud ying business can also he lp you b e tter u nder-
sta nd the many b usiness activ it ies t hat are necessary
t o prov ide satisfying good s a nd se rv ices-a nd that
th ese activities carry a price tag . Fo r examp le, if you
p ay to d o w nload a song, about h alf of the price g oes
t ow ard activities re late d t o d istributio n and the stud io's
exp enses and p rofit m argi ns and o nly a sm all p o r tion
goes to t h e ar tist. Most b usinesses cha rge a r eason-
able p rice for th eir p r o ducts to e n sure that t h ey cove r
th eir prod uc t io n co st s, pay t h eir e mployees, pro vid e
th eir owner s with a re turn on the ir investment , and
p er haps g ive someth ing back to the ir lo cal comm u ni-
ti es. Fo r exam pl e, the Ro yal Ba nk o f Can ada (RBC) is
active ly invo lved in suppor ting scholarship s fo r u nive r-
sit y students, deve lo pi ng p rog rams to he lp the ment al ly
chall enged , and support ing emergi ng ar tists.• Can adia n
Jeff Ske ll, fo rme r p r esident and fi rst emplo yee of eBay,
has don ate d ap prox im ately $1 bill ion to t h e Sk e ll Foun-
d at ion, a n org anization h e founded to sup por t a sust ai n-
able world . Ske ll's fo u ndatio n invest s heavily in "social
e ntre p r e ne ur s," who can b e d efined as people w ho are
using entrepreneurial skills such as creativity a nd risk
taking to sol ve so m e o f society's p roblem s. Thus, learn-
ing ab o ut b usiness can h e lp you become a well -inf o r med
co nsum e r and mem b e r of societ y.
Business activiti es h e lp g e n e rate the p r o f it s that
are essential not o n ly t o individ ua l business es and
local econ om ies b ut also to th e h ea lt h of t he g lobal
econo my. Witho ut profit s, b u si nesses find it d ifficu lt,
if not impossib le, to b uy more raw m ate ria ls, h ire more
emp lo yees, a tt r act m o r e cap ital, and cr e ate ad di-
t io nal pro du ct s t h at in t u r n ma ke m ore p r o f it s and
fue l the wo rld e co nomy. Under stan din g h ow o ur free-
e nterprise e conom ic syste m allocat es r eso urces and
p r ov ides incent ives for ind ust ry an d t he wo rk pla ce is
import ant to eve ryo n e.

Finance. Owners and finance are in tl1e sa1ne part of the free-enterprise syste1n, the concepts of supply and
Figure 1.1 because, altl1ough manage1nent and 1narketing de1nand, and the role of co1npetition. These concepts play
have to deal with financial considerations, it is the priinary ilnportant roles in detennining how businesses operate in
responsibility of the owners to provide financial resources a particular society.
for the operation of tl1e business. Moreover, the owners Economics is the study of how resources are distrib-
have the n1ost to Jose if the business fails to 1nake a profit. uted for the production of goods and services ,vithin a
Finance refers to all activities concerned with obtain- social syste1n. The Canadian
ing 1noney and using it effectively. People ,vho work as econo1ny has many of the econiifflks t he study of how
accountants, stockbrokers, investinent advisors, or bank- resources needed for the resources are distributed for
ers are all part of the financial world. O,vners so1netiJnes successful production of the production of goods and
have to borrow 1noney fro1n banks to get started or attract goods and services. You are services within a social system
additional investors ,vho beco1ne parmers or stockhold- already familiar with the
natural ,.IOUrces land,
ers. Owners of small businesses in particular often rely types of resources avail-
forests, minerals, water, and
on bank Joans for funding. Part 6 of this text discusses able. Land, forests, 1niner-
other t hings t hat are not made
financial manageinent. als, water, and other things
by people
that are not 1nade by people
are natu ral resources. '-nan .-irces the
The Economic Foundations Canada has an abundance physical and mental abilities
of natural resources, t hat people use to produce
of Business including vast supplies of goods and services; also called
fresh water, large areas labour
L03 Define economics and compare the four types of forest, nickel, copper,
of economic systems. uraniwn, and large deposits of oil and natural gas. Human
resources, or Jabour, refer to the physical and 1nental
To continue our introduction to business, it is useful to abilities that people use to produce goods and services.
explore the econo1nic environ1nent in which business is Some Canadian co1npanies have had challenges finding
conducted. In tl1is section, we exainine econo1nic syste1ns, enough ,vorkers in recent years, as the baby boomers,

CHAPT ER 1 • The Dynamics of Business and Economics 7

 Economic Systems
An economic system describes ho,v a particular soci-
ety distributes its resources to produce goods and
services. A central issue of
economics is how to fulfill an
unlimited demand for goods -.omlc system a
and services in a world with descript ion of how a par-
a limited supply of resources. ticular society distributes its
Different econo1nic syste1ns resources to produce goods
attempt to resolve this central and services
issue in nmnerous ways, as we
shall see.
Canada's abundant natural resources include vast quantities of oil.
Although economic systeins handle the distribution of
resources in different ways, all econo1nic syste1ns must
address three important issues:
1. \Vhat goods and services, and how much of each, will
who make up roughly one-third of Canada's population, satisfy consmners' needs?
retire. Financial resources, or capital, are the funds used
2. How will goods and services be produced, ,vho v;,j]]
to acq,uire the natural and produce the1n, and ,vith what resources will they be
financial remt.rem the hu1nan resources needed produced?
funds used to acquire the natural
to provide products. Cana-
dian co1npanies are able 3. How are the goods and services to be distributed to
and human resources needed consmners?
t o provide products; also
to readily access capital.
called capitol
Because natural, hu1nan, Conununis1n, socialis1n, and capitalis1n, tl1e basic
and financial resources are econonlic syste1ns found in the ,vorld today (Table 1.1),
used to produce goods and have fUJ1dainental differences in the way tl1ey address
services, they are so1netimes called factors of produc- these issues. The factors of production in co1nmand econ-
tion. The finn can also have intangible resources such as omies are controlled by govenunent planning. ln many
a good reputation for q,uality products or being socially cases, the govenunent owns or controls the production of
responsible. The goal is to tu1n the factors of production goods and services. Co1nmunis1n and socialis1n are, there-
and intangible resources into a competitive advantage. fore, considered co1nmand econo1nies.

Table I.I Comparisons of Communism, Socialism, and Capitalism

Communism Socialism Capitalism

Businessownership Most businesses are owned and
operated by the government.
Competition None. The government owns
and operates everything.
Profits Excess income goes to the
government.
Product availability and price Consumers have a limited
choice of goods and services;
prices ore usually high.
Employment options Little choice in choosing a
career; most people work for
government-owned industries
or forms.
Source: Based on 'Gross Domestic Product or Expendit" e. 1930-2002. • lnfoP/ease Cn.dJ. www.infopleose.com/ipo/AOIQq57s.html (accessed February 16. 2ooq).
The government owns and Individuals own and operate all
operates major indus1ries; businesses.
individuals own small
businesses.
Restricted in major indus1ries; Encouraged by market forces and
encouraged in small business. government regulations.
Profits earned by small Individuals ore free to keep profits and
businesses may be reinvested use them as they wish.
in the business; profits from
government-owned industries
go to the government.
Consumers have some choice Consumers hove a wide choice of goods
of goods and services; prices and services; prices are determined by
are determined by supply and supply and demand.
demand.
Some choice of careers; many Unlimited choice of careers.
people work in government
jobs.

8 PART 1 • Business in a Chang ing World

 Communism. Karl Marx (1818-1883) first described their choice, but they often ,vork in goverrunent-operated
communism as a society in ,vhich the people, ,vithout orgrulizations. Socialists believe their syste1n pennits a
regard to class, own all the nation's resources. In his higher standard of Jiving than other econo1nic systems,
ideal political-economic system, everyone contributes but the difference often applies to the nation as a ,vhole
according to ability and rather than to its individual citizens. Socialist econo1nies
communism first described receives benefits accord- profess egalitarianis1n-eq,ual distribution of inco1ne and
by Karl Marx as a society in ing to need. In a COIU IUU- social services. They believe their econo1nies are more
which the people, without nist econo1ny, the people stable than those of other nations. Although this 1nay be
regard to class, own all the (through the government) true, taxes and uneinploy1nent are generally higher in
nat ion's resources o,vn and operate all busi- socialist cotmtries. Perhaps as a result, 1nany socialist
nesses and factors of countries are also experiencing econo1nic difficulties.
socialism an economic system production. Central govern-
in which the government owns Capitalism. Capitalism, or free enterprise, is an
1nent planning determines
and operates basic industries econonlic syste1n in wllich individuals own a nd oper-
what goods and services
but individuals own most ate the 1najority of businesses that provide goods and
satisfy citizens' needs, how
businesses services. Co1npetition, supply, and de1nand deten1line
the goods and services are
produced, and how they ,vhich goods and services are produced, how they are
are distributed. However, no true conunnnist econo1ny produced, and ho,v they
exists today that satisfies l\1arx's ideal. are distributed. Canada, the Dapi1ulsn\ or free enter-
On paper, co1mnunis1n appears to be efficient and United States, Japan, and prisll an economic system in
eq,uitable, producing Jess of a gap between rich and Australia are examples of which individuals own and oper-
poor. In practice, however, conununist econo1nies have econonlic systems based on ate the majority of businesses
been 1narked by low standards of Jiving, critical short- capitalism. that provide goods and services
ages of constuner goods, high prices, and little freedo1n. There are two fonns of
Russia, Poland, Hm1gary, and other Eastern European capitalism: pure capitalism ,,.,._moncet system pure
and 1nodified capitalis1n. In capitalism, in which all eco-
nations have turned away fro1n conununis1n and toward
pure capitalis1n, also called nomic decisions are made with-
econo1nic syste1ns governed by supply and de1nand rather
out government intervention
than by central planning. Ho,vever, their experiments a free-market system, all
with alternative econo1nic syste1ns have been fraught econonlic decisions are mi:ic-d economies econo-
with difficulty and hardship. Cuba continues to apply made ,vithout government mies made up of elements from
conununist principles to its econo1ny, but is also experi- intervention. This econo1nic more than one economic system
encing econo1nic and political change and appears more system was first described
open to free enterprise no,v. Si.Jnilarly, China has beco1ne by Ada1n S1nith in The Wealth of Nations (1776). S1nith,
the first conununist country to make strong economic often called the father of capitalis1n, believed that the
gains by adopti.J1g capitalist approaches to business. The "invisible hand of competition" best regulates the econ-
Chinese state is the largest s hareholder runong China's 01ny. He argued that co1npetition should detennine what
largest co1npanies and influences thousands of other goods and services people need. S1nith's syste1n is also
businesses. Econo1nic prosperity has advanced ill China called /.aissez-Jaire ("let it be") capitalism because the
with the govenunent claiming to ensure market open- govem1nent does not interfere in business.
ness, eq,uality, a nd failness. 10
Socialism. Closely related to co1mnunis1n is socialism, "Demand is t he number of goods
an econo1nic syste1n in ,vhich the goverrunent o,vns and and services that consumers are
operates basic industries-postal service, telephone, willing to buy at diff erent prices at a
utilities, transportation, health care, banking, and so1ne
1nanufacturing-but individuals own n1ost businesses. specific time."
Central planning detennines ,vhat basic goods and J\,lodified capitalis1n differs fro1n pure capitalis1n in that
services are produced, how they are produced, and how the government intervenes and regulates business to some
they are distributed. Individuals and s1nall businesses extent. One of the ,vays in wllich the Canadian govern-
provide other goods and services based on consumer ment regulates business is through Jaws. Laws such as the
de1nand and the availability of resources. As with co1n1nu- Privacy Act in Canada, which protects consmners' private
nis1n, citizens are dependent on the govenunent for 1nany i.Jtfonnation, illustrate the i.Jnportance of the govern1nent's
goods and services. role in tl1e econo1ny.
Most socialist nations, such as Sweden, India, and Israel,
are democratic and recognize basic individual freedo1ns. M ixed Economies. No cotmtry practises a pure fonn of
Citizens can vote for political offices, but central govem- conununism, socialis1n, or capitalis1n, although 1nost tend
n1ent planners usually 1nake decisions about ,vhat is best to favour one syste1n over the others. Most nations oper-
for the nation. People are free to go into the occupation of ate as mixed economies, wllich have ele1nents fro1n n1ore

CHAPTER 1 • The Dynamics of Bus iness and Economics 9

than one economic system. In Canada, most businesses are
o,vned and operated by private individuals, yet a number
of goverrunent-o,vned businesses or Cro,vn corporations
exist, including tl1e Canada Post Corporation, tl1e Bank of
Canada, and the Canadian Dairy Conunission. While Cana-
da's econo1ny can still be classified as a nlixed economy,
the trend in recent years is toward a 1nore capitalist syste1n.
Many Canadian Cro,vn corporations have been taken
private, where tile goverrunent sells its stake in the busi-
ness and allows private citizens to 1nanage tile co1npany.
For example, over the last number of years, Canadian
National Rail,vay, Petro-Canada, and NS Power have all
been converted to private enterprises. The trend toward
greater capitalis1n has been aided in Canada by deregula-
tion, which is a reduction in tl1e nwnber of Jaws and rules
that goven1 the econo1ny. h1 Great Britain and Mexico, tile
gove1mnents are atteinpting to sell 1nany state-1un busi-
nesses to p1ivate individuals and companies. h1 Gennany,
the Deutscl1e Post is p1ivatized and trades on tl1e stock
1narket. In once-co1mnwlist Russia, Hungary, Poland, and
other Eastern European nations, capitalist ideas have been
iinpleinented, including private o,vnership of busmesses.
Countries such as China and Russia have used state
capitalis1n to advance the econo1ny. State capitalis1n tries
to iI1tegrate the powers of the state witil the advantages
of capitalism. It is Jed by tile govern1nent but uses capi-
talistic tools such as listing state-o,vned companies on
the stock market and embracing globalization." State
capitalis1n includes some of the ,vorld's largest companies
such as Russia's Gazprom, which is tile largest natural
gas company. China's ability to make huge invesonents
to tile point of creatiI1g entirely new mdustries puts 1nany
private industries at a disadvantage. '2
The Free-Enterprise System
Many econo1nies-including tl1ose of Canada, the United
States, and Japan-are based on free enterprise, and 1nany
co1mntulist and socialist countries, such as China, are apply-
mg 1nore principles of free enterprise to tileir o,vn econo1nic
systems. Free enterprise provides an opportlmity for a busi-
ness to succeed or fail on tile basis of market de1nand In
a free-enterprise syste1n, co1npanies that can efficiently
1nanufact1rre and sell products that conswners desire ,vill
probably succeed. Inefficient businesses and those tl1at sell
products that do not offer needed benefits will likely fail as
conswners take their business to finns tilat have 1nore con1-
petitive products.
A number of basic individual and busmess rights n1ust
exist for free eitterprise to ,vork. These rights are the goals of
1nany cowttries tl1at have recently einbraced free enterprise.
1. Individuals 1nust have the right to own property and
to pass this property on to tileir heirs. This right moti-
vates people to work hard and save to buy property.
2. Individuals and businesses must have the right to ea1n
profits and to use the profits as tiley ,vish, within tile
constraints of their society's Jaws and values.
10 PART 1 • Business in a Changing World
3. Individuals and businesses n1ust have the right to
make decisions that determiI1e tile ,vay the business
operates. Although tilere is goverrunent regulation,
the philosophy in countries like Canada and Australia
is to pennit 1na.xiinwn freedo1n within a set of rules
of fain1ess.
4. Individuals 1nust have tile right to choose ,vhat career
to pursue, where to live, what goods and services to
purchase, and 1nore. Busmesses 1nust have the right
to cl1oose where to locate, what goods and services
to produce, what resources to use in tile production
process, and so on.
\Vithout tilese rights, businesses cannot function
effectively because they are not motivated to succeed.
Thus, tilese rights 1nake possible tile open exchange of
goods and services. In the countries that favour free
enterprise, such as Canada, citizens have the freedom
to 1nake 1nany decisions about the e1nploy1nent tiley
choose and create their own productivity syste1ns. !',,Jany
entrepreneurs are more productive in free-enterprise
societies because personal and financial incentives are
available that can aid in entrepreneurial success. For
many entrepreneurs, their ,vork beco1nes a part of
their syste1n of goals, values, and lifestyle. Consider
the panelists ("dragons") on tile CBC progra1n Drag-
ons' Den. Panelists on Dragons' Den give entrepreneurs
a chance to receive funding to realize their drea1ns by
deciding ,vhetiler to invest in their projects. They iI1clude
Jiln Treliving, who built the Boston Pizza franchise in
Canada; Michele Ro1nanow, founder of Buytopia.ca; and
Joe l.\fimran, who founded the clothing brands Joe Fresh,
Club Monaco, and Pmk Tartan. ,s
CBC's Dragons' Den allows potential entrepreneurs to receive funding
for their businesses, but only if they receive approval from the panel
of "dragons,· self-mode millionaires who choose whether to fund the
projects.
 The Forces of Supply and Demand " Competition, the riva lry among
businesses for consumers' dollars,
L04 Descr ibe the role of supply. demand, and
competi tion in a free-enterpr ise system. is a not her vita l element in free
enterprise."
In Canada a nd in other free-enterprise syste1us, the
distribution of resources a nd products is detenuined If the cost of making rugs goes up, businesses ,vill not
by supply and de1uand. Demand is the number of goods offer as many at the old price. Changing the price alters
and services that consumers are willing to buy at differ- the supply curve, and a new eq,uilibriwu price results.
ent prices at a specific ti.Jue. Fro1u your own experience, This is an ongoing process, ,vith supply and de1uand
you proba bly recognize that constantly changing in response to changes in econo1uic
demand the number of goods consu1uers are usually will- conditions, availability of resources, and degree of
ing to buy more of a n ite1u competition. For exa1nple, the price of oil can change
and services that consumers are
as its price falls because rapidly and has been between $35 and $145 a barrel
willing to buy at different prices
they want to save 1uoney. over the last five years. Prices for goods and services
at a specific time
Consider hanchuade rugs, vary according to tl1ese changes in supply and de1uand.
supply the number of products- This concept is tl1e force that drives t11e distribution of
for exa1uple. Consu1uers
goods and services- that resources (goods and services, Jabour, and 1uoney) in a
1uay be willing to buy six
businesses are willing to sell at free-enterprise econo1uy.
rugs at $350 each, four at
different prices at a specific time Critics of supply and demand say the system does not
$500 each, or only two at
equirtbrium price the price $650 each. The relationship distribute resources eq,ually. The forces of supply and
at which the number of products between the price and the de1uand prevent participation in the 1uarket by sellers who
that businesses are willing to sup- number of rugs consu1u- have to sell at higher prices (because their costs are !ugh)
ply equals the amount of products ers are willi.J1g to buy can and buyers who cannot afford to buy goods at the eq,uilib-
that consumers are willing to buy be shown graphically, riu1u price. According to critics, the ,vealthy can afford to
at a specific point in time with a demand curve (see buy n,ore than tl1ey need, but the poor are unable to buy
Figure 1.2). enough of what tl1ey need to survive.
Supply is the nu1uber of products that businesses are
willing to sell at different prices at a specific time. In
general, because the potential for profits is higher, busi- The Nature of Competition
nesses are ,villing to supply 1uore of a good or service Competition, the rivalry
at higher prices. For exa1uple, a co1upany that sells rugs ruuong businesses for competition the rivalry
1uay be willing to sell six at $650 each, four at $500 each, conswuers' dollars, is among businesses for
or just hvo at $350 each. The relationship between the another vital ele1uent ill consumers' dollars
price of rugs and the q,uantity the co1upany is ,villing to free enterprise. According
supply can be shown graphically with a supply ci,rve
(see Figure 1.2).
In Figure 1.2, the supply and de1uand
curves intersect at the point where supply Figure 1.2 Equilibrium Price of Handmade Rugs
and de1uand are eq,ual. The price at ,vhich
the number of products that businesses are
Price of
willing to supply eq,uals the aiuount of prod- Rugs
ucts that consumers are willing to buy at a (dollars)
specific point in ti.Jue is the equilibrium price. $800
In our n1g example, the company is willing to Equilibrium
supply four rugs at $500 each, and constuu- 650 Price
ers are willing to buy four rugs at $500 each.
Therefore, $500 is the eq,uilibriwu price for a 500
I
rug at that point in ti.Jue, and 1uost n1g compa-
nies will price their rugs at $500. As you 1night
350
i.Juagine, a business that charges 1uore than Supply Demand
$500 ( or ,vhatever the current eq,uilibriwu Curve Curve
200
price is) for its rugs ,vill not sell many and
nught not earn a profit On the other hand, a
business that charges less than $500 accepts 1 2 3 4 5 6 7
a lower profit per rug than could be 1uade at Handmade Rugs
the eq,uilibrituu price.

C HAPTER 1 • The Dynamics of Business and Economics 11

 to Ada1n S1nith, co1npetition fosters efficiency and low
prices by forcing producers to offer the best products at
the 1nost reasonable price; those who fail to do so are not
able to stay in business. Thus, co1npetition should ilnprove
the q,uality of the goods and services available or reduce
prices. For exa1nple, thanks to smart design and excellent
tilning, Apple dominates the 1narket for downloadable
n1usic with its iTunes online service, iPod MP3 player, and
iPhone. Ho,vever, 1nany con1panies have set their sights
on capturing so1ne of the finn's market share with new
products of their o,vn. Therefore, Apple 1nust constantly
seek to remain competitive by creating ne,v ilmovations
to 1naintain its 1narket share-and so1netilnes capture
1narket share fro1n other co1npanies. The iPad device
co1nbines the features of the s1nartphone and the laptop
into one product. The iPad also contains an interface
that allows users to read books and take pictures, which
will capture some of the e-reader 1narket dominated by
Alnazon's Kindle FiJ·e."
\Vithin a free-enterprise systein, there are four types of
con1petitive envirorunents: pure co1npetition, 1nonopolis-
tic co1npetition, oligopoly, and 1nonopoly.
Pure competit ion exists
pure competition the mar- when there are many s1nall
ket structure that exists when busi11esses selling one stan-
there are many smal I businesses dardized product, such
selling one standardized product as agricultural conmJodi-
ties like ,vheat, con,, and
monopolistic ~ l i o n cotton. No one business
the market structure t hat exists
sells enough of the prod-
when there are fewer businesses
uct to illfluence tl1e prod-
than in a pure-competit ion
uct's price. And because
environment and the differences
tl1ere is no difference in the
among the goods they sell products, prices are deter-
are small
nlined solely by the forces
of supply and de1nand. For
example, Atlantic Canadian lobster prices are set by the
forces of supply and de1nand. In recent years, de1nand has
slowed as people are Jess likely to spend large ainounts of
1noney on premiwn seafood dw·ing periods of econonlic
uncertainty. The low prices have forced so1ne fisher-
1nen out of business. Other fishennen have taken a 1nore
entrepreneurial route and have started to sell directly to
tl1e consmner and elilninated the 1niddle1nan to maxilnize
their earnings.
Monopolistic competition exists ,vhen there are fe,ver
businesses thai1 ill a pure-competition envil'orunent and
tl1e differences a1nong the goods they sell are s1nall.
Aspil'in, soft drinks, and vacuwn cleaners are exainples
of such goods. These products differ slightly in packag-
ing, warranty, na1ne, and otl1er characteristics, but all
satisfy the sa1ne conswner need. Businesses have so1ne
po,ver over the price they charge in 1nonopolistic co1npe-
tition because they can make consu1ners a,vare of prod-
uct differences through advertising. Dyson, for exainple,
atte1npts to differentiate its vacuwn cleaners through
product design, q,uality, and advertising. Consmners
12 PART 1 • Business in a Changing World
With the decline in lobster prices, many fishermen have decided to cut
out the middleman and sell directly to consumers. What do you think
ore the pros and cons of such on approach?
value so1ne features 1nore than others ai1d are often ,vill-
ing to pay lligher prices for a product with tl1e features
they ,vant. Advil is a non-prescription pain reliever that
contains ibuprofen instead of aspirin. Consumers ,vho
cannot take aspil'in or who believe ibuprofen is a 1nore
effective pail, reliever 1nay not mind paying a little extra
for tl1e ibuprofen in Advil.
An oligopoly exists whe!l ~ t he market struc-
there are very few busi- ture that exists when there are
nesses selling a product.
very few businesses selling a
In an oligopoly, individual product
businesses have control over
their products' price because ffiOnllPOIY the market
structure that exists when there
each business supplies a
large portion of the prod- is only one business providing o
product in a given market
ucts sold in the 1nai·ket-
place. Nonetheless, the
prices charged by different firms stay fail-Jy close because
a p1ice cut or increase by one co1npany will nigger a sinli-
Jar response fron1 another company. In the airlille industry,
for exrunple, when one airlille cuts fares to boost sales, other
airlilles q,uickly follow with rate decreases to re1nain co1npet-
itive. This co1mnonly occurs in the Canadian air travel busi-
ness, ,vhicll is donliluted by AiJ· Canada ai1d \VestJet. As soon
as one airlille drops its p1ices the other q,uickly follows. The
saine thing usually occurs ,vhe!l one of the airlilles raises its
prices. Oligopolies exist when it is expensive for new finns to
ei1ter the 1narketplace. Not just anyone can acq,uire enough
financial capital to build an auto1nobile production facility
or purchase enough airplanes and related resow·ces to build
an airlille.
\Vhen there is one business providing a product ill a given
Illarket, a monopoly exists. Utility co1npanies tl1at supply
electlicity, natural gas, and water are 1nonopolies. The
goven1ment pen1lits sucll 1nonopolies because the cost of
creating the good or supplying the seivice is so great that new
producers cannot co1npete for sales. Goveimne!lt-granted
monopolies ai·e subject to govenunent-regulated p1ices.
 So1ne 1nonopolies exist because of technological develop- are e1nployed and have 1noney to spend. Rapid expan-
1nents that are protected by patent Jaws. Patent Jaws grant sions of the econo1ny, however, 1nay result in inflation,
the developer of new technology a period of tiJne (usually a continuing rise in prices. Inflation can be hannful if
20 years) during which no other producer can use tl1e sa1ne individuals' incomes do not increase at the sa1ne pace
technology witl1out the agree1nent of the 01iginal developer. as rising prices, reducing their buying power. Zimbabwe
Canada granted tile first national patent in 1869, and no,v its suffered fro1n hyperinflation so severe that its inflation
patent office receives hundreds of thousands of patent appli- percentage rate rose into the hundreds of millions. \Vith
cations a year. It is estiJnated that China will soon overtake the eli1nination of the Zilnbabwean dollar and certain
other countries in patent filings.•• This 1nonopoly allows the price controls, the inflation rate began to decrease,
developer to recover research, development, and production but not before the country's econo1ny was virtually
expenses and to earn a reasonable profit. Exa1nples of this decilnated. ' 6
type of 1nonopoly include the drug release process devel- Economic contract ion occurs when spending declines.
oped by Biovail, a Canadian phannaceutical co1npany that Businesses cut back on production and Jay off work-
now operates as Valeant Pharmaceuticals International, Inc. ers, and the econo1ny
after it purchased the company in 2010 and opted to assume as a whole slows down. lrrfkltjofl a condition character-
its na.ine. The patented dn1g release syste1n allo,vs for a grad- Contractions of the econ- ized by o continuing rise in prices
ual release of drugs into a patient's body. Oilier exa1nples 01ny lead to recession- cm••
llC'OflMllic action a
include tl1e dry-copier process developed by Xerox. Xerox's a decline in production, slowdown of the economy char-
patents have expired, ho,vever, and 1nany ilnitators have employment, and inco1ne. acterized by a decline in spend-
forced 1narket prices to decline. Recessions are often char- ing and during which businesses
acterized by risil1g levels cut back on production and lay
of unemployment, which is off workers
Economic Cycles and Productivity measured as the percentage
of the population that wants rK•mon a decline in produc-
LOS Specify why and how the health of the economy tion, employment, and income
is measured.
to work but is unable to find
jobs. Figure 1.3 shows the un,ernplo)fflent the condi-
Expansion and Contraction. Econo1nies are not stag- overall une1nploy1nent rate tion in which a percentage of
nant; they expand and contract. Economic expansion ill the civilian Jabour force the population wants to work
occurs when an econo1ny fro1n 2010 to 2015. Rising but is unable to find jobs
economic expmmon the is growing and people are une1nploy1nent levels tend dllpresD011 a condition of the
situation that occurs when an spending 1nore 1noney. to stifle de1 na.i1d for goods economy in which unemploy-
economy is growing and people Their purchases stimulate a.i1d services, which can ment is very high, consumer
are spending more money; their the production of goods have the effect of forcing spending is low, and business
purchases stimulate the produc- and services, which in turn prices downward, a condi- output is sharply reduced
tion of goods and services, which sti1nulates e1nploy1nent. tion kno,vn as deflation.
in turn stimulates employment The standard of Jiving Canada has experienced nwnerous recessions, including
rises because 1nore people 1990-1992, 2001-2003, and 2008-2009. A severe recession
1nay tu1n into a depression, il1
Figure 1.3 Unemployment Rate in Canada, 20 10- 2015 which w1employment is very
high, conswner spending is low,
Percentage and business output is sharply
8.5 reduced, such as occurred ill
Canada and the United States il1
the early 1930s. The 1nost recent
global recession is often called
the Great Recession because it
was the longest and 1nost severe
econo1nic decline since the Great
Depression.
Econo1nies expand and
contract in response to changes
in conswner, business, and
gove1mnent spending. War also
6.0 ................................................................................................................................................................................................ can affect an econo1ny, so1ne-
Oct/2010 Oct/20n Oct/2012 Oct/2013 Oct/2014 Oct/2015
ti.Jnes sti.Jnulating it (as in Canada
during World \\Tars I and II) and
Source: Statistics Canada. 2015. ' Lobo.. force Survey. October ZOIS (chart>. Statistics Conodo CANSJM 282·0087. Released:
2015·11·06. http://www.stotcan.gc.co/doily·quoticlien/151106/dq)SII06o·englltm (occessed November 17, 2015>. so1neti.Jnes stifling it ( as in the

C H APT ER 1 • The Dynamics of Business and Economics 13

 Table 1.2 Economic Indicators of Different Countries (fro1n taxes). \Vhen a nation
spends Jess tl1an it takes in from
GDP (in billions GDP per Unemployment Inflation taxes it has a budget su rplus,
Country of dollars> Capita Rate (%) Rate (%) and when it spends 1nore t11an
it takes in fro1n taxes, it has a
Argentina $972 $22,600 7.60 27.60 budget deficit.
Australia 1,1189 65, 400 6.20 I.SO In recent years, Canada has
Brazil 3,192 15,600 6.40
been fiscally conservative, but
9.00
in 2016, it 1noved out of surplus
Canada 1,632 45,600 6.90 1.10 to a planned cwnulative defi-
China 19,390 14,100 4.20 1.40 cit of $119 billion over the next
decade. Deficits are especially
France 2,647 41,200 9.90 0.10 worriso1ne because, to reduce
Germany 3,841 46,900 4.80 0.10 t11e debt to a 1nanageable level,
India 7,965 6,200 4.90
t11e government either has to
7.10
increase its revenues (raise
Israel 282 33, 700 5.60 -0.60 taxes) or reduce spending
Japan 4,830 38,100 330 0.80 on social, defense, and legal
progra1ns, neither of which is
Mexico 2,227 15,100 4.50 2.70 politically popular. The national
Russia 3,718 25,400 5.40 15.50 debt figure changes daily and cru1
South Africa 724 13,200 25.90
be seen at the Cru1adiru1 Taxpay-
4.60
ers Federation website (~v.
United Kingdom 2,679 41,200 5.40 0.10 taxpayer.coin). Table 1.3 describes
United States 17,950 55,800 5.20 0.10 so1ne of the other ,vays we evalu-
Source: CIA- The World Factbook. https://www.cia.gov/librcry/publications/the-w<lfld.foctbook/rcncocder/ronkorderguide.
ate ow· nation's economy.
htm (accessed July 'l'I. 2016>.

United States during the Persian Gulf and Iraq_ wars).

Table 1.3 How Do We Evaluate Our
Although fluctuations in the econo1ny are inevitable, and
to a certain extent predictable, their effects-inflation and Nation's Economy?
unemployment-disrupt Jives and thus govenunents try to
Unit of Measure Description
1nininlize the1n.
Trade balance The difference between our exports and
our imports. If the balance is positive, as
Measuring the Economy. Countries 1neasure the it has been for much of the last 10 years,
state of their econo1nies to deten1line ,vhether they are it is called a trade surplus. Recently, the
expanding or contracting and whether corrective action balance has been negative; when this
is necessary to 1nininlize occurs it is called a trade deficit and is
the fluctuations. One generally viewed as unhealthy for our
gross domestic product economy.
conunonly used measure
CGDP> t he sum of all goods is gross domestic product Consumer price index Measures changes in prices of goods and
and services produced in o (GDP)-the smn of all goods services purchased for consumption by
country during a year and services produced in a typical urban households.
budget SIM'pllll the condi- country during a year. GDP Per capita income Indicates the income level of "average·
tion in which a notion spends 1neasures only those goods Canadians. Useful in determining how
less t han it takes in from taxes and services made witllin much ·average· consumers spend and
how much money Canadians are earning.
budget deficit the condi- a country and, therefore,
does not include profits Unemployment rate Indicates how many working age
tion in which a notion spends Canadians are not working who otherwise
more than it takes in from taxes
fro1n co1npanies' overseas
want to work.
operations; it does include
profits ea1ned by foreign Inflation Monitors price increases in consumer
companies witllin the country being measured. However, goods and services over specified periods
it does not take into account the concept of GDP in rela- of time. Used to determine if costs of
goods and services are exceeding worker
tion to population (GDP per capita). Table 1.2 co1npares a compensation over time.
number of econonlic statistics for a srunpling of countries.
Anotl1er inlportant indicator of a nation's econonlic Worker productivity The amount of goods and services
produced for each hour worked.
healtl1 is the relationship between its spending and inco1ne

14 PART 1 • Business in a Changing World


The Canadian Economy
As we said previously, Canada is a mixed economy
based on free enterprise. The answers to the three basic
econo1nic issues are detennined priinarily by competi-
tion and the forces of supply and de1nand, although the
federal govern1nent does intervene in econo1nic decisions
to a certain extent. To understand the current state of the
Canadian econo1ny and its effect on business practices, it
is helpful to exrunine its history and the roles of the entre-
preneur and the govenunent.
A Brief History of the Canadian Economy
L06 Trace the evolution of the C anad ian economy
and d iscuss the ro le o f the entrepreneu r in the
economy.
The Early Economy. Before the colonization of North
Alnerica, Native Alnericans Jived as hunter/gatherers and
fanners, with so1ne trade among tribes. The first European
settle1nents on the east coast of what was to beco1ne
Canada caine because of the fishing industry. The
settlers operated priinarily as an agricultural
economy. Abundant natural resources DID YOU
nourished industries such as fanning,
fishing, shipping, and the fur trade. The KNOW?
fur trade ,vas also iinportant to Canada's 610/o of adult women work
early develop1nent as it began in the
outside the home."
sixteenth century and remained a 1najor
industry for almost 300 years. The first 1najor
business co1npetitors in Canada ,vere the North
\Vest Trading Co1npany and the Hudson Bay Co1npany,
which re1nained active in the fur trade until the 1980s. ' 8
The Ind ustrial Revolution. The nineteei1th century and tl1e
Industrial Revolution brought tile develop1nent of ne,v tech-
nology and factories. The factory brought together all tl1e
resources needed to make a product-1naterials, machmes,
and workers. \\7ork in factories becrune specialized as work-
ers focused on one or t\vo tasks. As ,vork became more effi-
cient, productivity mcreased, making more goods available
at lo,ver prices. Industrialization n1ostly occurred in Central
Canada. Due to the size of the country, its relatively s1nall
population, and the riclmess of its resources, most Canadi-
ans continued to work in priinary mdustries. '9
The govern1nent of the day established the Canadian
Pacific Rail,vay and linked the country coast to coast.
Railroads brought 1najor changes, allowmg far1ners to
send their surplus crops and goods all over the nation for
barter or for sale. Factories began to spring up along the
rail,vays to 1nanufacture fann eq,uip1nent and a variety of
other goods to be shipped by rail.
The Manufacturing and Marketing Economies.
Industiialization brought iI1creased prosperity, and 1nany
Canadians fow1d jobs iI1 the manufacturing econmny~ne
devoted to 1nanufacturing goods and providing services
rather than producing agricultural products. The asseinbly
line was applied to 1nore industries, increasing the variety of
goods available to the conswner. Businesses becaine 1nore
concerned ,vith the needs of the conswner and entered the
marketing economy. Expensive goods such as cars and
appliances could be purchased on a tiine-pay1nent plan.
Co1npanies conducted research to find out what products
constuners needed and wanted. Advertising 1nade conswn-
ers a,vare of differences in products and prices.
Because tl1ese develop1nents occurred in a free-
enterprise syste1n, conswners detennined what goods
and services were produced. They did this by purchasing
the products they liked at prices they were ,villing to pay.
Canada prospered, and Canadian citizens had one of the
highest standards of living in tl1e world.
The Service and Ne w Digital Economy. After World
\Var II, ,vith the increased standard of Jiving, Canadi-
ans had 1nore 1noney and 1nore tiine. They began to pay
others to perfonn services that 1nade their Jives easier.
Beginning in the 1960s, more and more wo1nen entered
the workforce. The profile of the family changed:
Today there are 1nore single-parent fa1ni-
Jies and individuals Jiving alone, and
in t\vo-parent frunilies, botl1 parents
often work. One result of this trend
is that tiine-pressed Canadians are
increasingly paying others to do
tasks they used to do at ho1ne, like
cooking, latmdry, landscaping, and
child care. These trends have gradually
changed Canada to a service ecorunny~ne
devoted to the production of services that 1nake life
easier for busy conswners. Service industries such as
restaw·ants, bankmg, 1nedicmes, child care, auto repair,
leisure-related industries, and even education are growmg
rapidly and employ over 75 percent of Canadians. These
trends continue ,vith advanced teclmology contributing
to new service products based on teclmology and digital
media that provide s1nartphones, social net\vorking, and
virtual worlds. Table 1.4 provides evidence that the new
digital econo1ny is changing how ,ve use infonnation and
the service industry. More about the Internet, busmess,
and new online social 1nedia can be found iI1 Chapter 13.20
Table l.ij Popular Internet Activities
Activity Internet Users Performing Each Activity (%)
Send or read e-mail 92
Use a search engine 92
Get news online 76
Buy a product online 71
Visit social network sites 65
Source: The Pew Researdl Cente(s Internet & American life Project tracking surveys.
2002-2011. http://pewinternet.org.
CHAPTER 1 • The Dynamics of Business and Economics 15
 ENTREPRENEURSHIP Student Success: A+ Marketing Project
Alex Mac lean
Founded: 2013
The Business: East Coast Lifestyle
Success: Alex Maclean, a student at Acad ia Un iversity,
launched East Coast Lifestyle, a line of casual clothing
with a stylized anchor logo, while still at university. The
business, which is only a few years old, has sold more
than 250,000 units through its website.
Maclean, from Hal ifax, said he borrowed $800 from his
father to buy 30 hoodies as part of a marketing class
assignment after he came up with the concept of using
Clothing is big business for university student Alex Macl ean. The
entrepreneur was named Enactus Canada's Student Entrepreneur
National Champion in the spring of 2014.
The Role of the Entrepreneur
An e ntrepre ne ur is an individual who risks his or her
wealth, tiine, and effort to develop for profit a product or
service that he or she can sell. For exainple, Ryan Hobnes
of Vancouver, British Coltun-
entreprenaur an individual bia, founded ,vww.HootSuite.
who risks his or her weolth, coin in 2008 with the idea
time, and effort to develop for that marketers should be
profit an innovative product or able to manage multiple social
way of doing something media cainpaigns fro1n one
central ,vebsite. The company
currently has 10 nilllion
users and is tl1e world's most ,videly used social relationship
platfonn.22 \Vhile Hohnes has been q_uite successful, he did
16 PART 1 • Business in a Chang ing World
the words "East Coast Lifestyle" in a logo. Within weeks,
ECL became a staple on social media wit h thousands
of photos of East Coasters showcasing their pride from
all around t he world. The hype continued to escalate as
pictures of celebrities representing their coast made
their way to social med ia.
His success is a remind er that strategies taught in busi-
ness schools, such as social media marketing and social
entrepreneurship can both quickly pay off. His professor
teaches a systematic approach known as the "lean start-
up model," where the goal is to t ry out business ideas
quickly and cheaply with a "minimally viable prod uct.""
take on the risks of entrepreneurship, including investing
his 1noney and time with no guarantee of success. \Ve v;,ill
learn more about starting a new business in Chapter 5.
The free-enterprise syste1n provides the conditions neces-
sary for entrepreneurs to succeed. In the past, entrepreneurs
,vere often inventors ,vho brought all tl1e factors of produc-
tion together to produce a ne,v product. Joseph-Annand
Bo1nbardier, who invented the sno,vmobile, and Alexander
Graham Bell, ,vho invented the telephone, are early Cana-
dian entrepreneurs. Other entrepreneurs have succeeded by
offering consumers botl1services and products. For exainple,
the Irving Group based in New Brunswick retails gasoline,
sells hardware supplies, o,vns sports tea.ins, 1nanufactures
products such as paper and tissue, and is heavily invested in
the oil and gas business.23 Garfield \\7eston Ltd, whicll ,vas
started in tl1e late nineteentl1 century, now controls a great
deal of tl1e retail food business in Canada through its control-
ling interest in Lobla,vs.2.1 Although these entrepreneurs were
born in another century, tl1eir legacy to the Canadian econ-
01ny lives on in the companies they started, 1nany of whicl1
still operate today.
Entrepreneurs are constantly cl1anging business prac-
tices with ne,v teclmology and innovative 1nanagement
techniq_ues. Bill Gates, for exa1nple, built l\1icrosoft, a
software company whose products include \Vord and
\Vindows, into a multibillion-dollar enterprise. Frederick
Smith had an idea to deliver packages overnight, and no,v
his FedEx Co1npany plays an importai1t role in getting
docwnents and packages delivered all over the world for
businesses and individuals. Steve Jobs co-fotmded Apple
ai1d tu1ned the compai1y into a successful consumer elec-
tronics firm that revolutionized 1nany different industries,
,vith products such as the iPod, the iPhone, Mac co1nput-
ers, and tl1e iPad. The con1pany went fro1n near bank-
ruptcy in the 1990s to beco1ne one of the most valuable
brands in the entire world. We will exa1nine tl1e i.Jnpor-
tance of entreprenew-ship further in Chapter 5.
The Role of Government
in the Canadian Economy
The Canadian econo1nic syste1n is best described as a 1nixed
economy because entrepreneurs and citizens control 1nany
of the factors of production and own the 1najority of busi-
nesses, but tl1e government is still active in the econo1nic
syste1n through its ownership of Crown corporations and
the regulations it 1naintains to preserve competition and
protect conswners and employees. Federal and provin-
cial governments intervene in tl1e econo1ny witl1 la,vs and
regulations designed to pro1note competition and to protect
conswners, einployees, and the envirorunent. Many of these
Ja,vs are discussed in Appendix A
Additionally, government agencies such as Indus-
try Canada and the Depart1nent of Finance 1neasure
the health of the econo1ny (GDP, productivity, etc.).
Furthennore, the govern1nent-through the Bank
of Canada, tax policy, and, when necessary, spend-
ing-takes steps to 1ninimize the disruptive effects of
econo1nic fluctuations, and reduce une1nploy1nent.
\\Then the econo1ny is contracting and une1nploy1nent is
rising, the federal goverrunent tries to spur growth so
that constuners ,vill spend 1nore money and businesses
will hire 1nore e1nployees. To acco1nplish this, it 1nay,
through the Bank of Canada, reduce interest rates or
increase its o,vn spending for goods and services. \Vhen
the econo1ny expands so fast that inflation results, the
goverrunent 1nay intervene to reduce inflation by slow-
ing do,vn econo1nic gro,vth. This can be accomplished
Blu ef in t una is immen sely pop ular among sushi lovers,
cr eating a h igh demand for t h e fish. Supp ly, on the other
hand, is another matter. T he b luefin popu lation is being
re duced throug h globa l overfish ing and p ollution. T he
Center for Biologica l Diversity re quested endanger ed
species status for the bluef in, feari ng current fishing
p ract ices mig ht b r ing about e xt inction. Th e U.S. govern-
ment decl in ed the r eq uest. It argued that scientists
need time to assess the current status of bl ue fin than ks,
in p ar t, to the im pa ct o n its spaw ning g rou nds from the
BP Deepw ater Horizon oil spill. It did, how ever, p lace the
fish on its watch list.
Most scientists, environ mentalists, and law mak-
ers agree that the b lu ef in p opulation has significantly
decl ined, but m any feel an international agr eem ent
on how best to p r eserve the popu lation is p re ferable
to a m oratorium on fishing it. Th is assumes that f ish-
ermen w ill comp ly w ith regu lations. Ma ny fishermen
currently fish m ore than the legal quota, w ith some
fishing 100 percent illega lly. Reduced supp ly and stea dy
by raising interest rates to discourage spending by busi-
nesses and consumers. Techniq_ues used to control the
econo1ny are discussed in Chapter 14.
The Role of Ethics and Social
Responsibility in Business
In the past few years, you may have read about a number
of ethical issues at several well-known corporations,
including Enron, Maple Leaf, and SNC-Lavalin. In many
cases, misconduct by individuals within these finns had
an adverse effect on current and retired employees, inves-
tors, and others associated ,vith these firms. In some cases,
individuals went to jail for their actions. For example,
fonner SNC-Lavalin CEO Pierre Duhailne was arrested
by the RC!.\,IP after it was revealed that $56 million was
unaccow1ted for and appears to have been illegally paid
to co1nmercial agents. Top executives like Enron's Jeffrey
Skillmg received Jong prison sentences for theil· roles ill
corporate 1nisconduct. These scandals undermiI1ed public
confidence in the free-enterprise syste1n and sparked
a new debate about ethics ill business. Business ethics
generally refer to the standards and principles used by
society to define appropriate and inappropriate conduct
ill the workplace. In many cases, these standards have
been codified as Jaws prohibitil1g actions dee1ned unac-
ceptable.
Society is increasingly de1nanding that businesspeo-
ple behave ethically and socially responsibly toward not
only their custo1ners but also their e1nployees, investors,
d emand are driving u p the price of b luefin, maki ng it a
desirable catch . O ne f ish brought in $396 ,000. M itsubi·
sh i Corporatio n (t h e largest b lu efin pu rchaser g loba lly)
has store d a large amou nt of frozen bl ue fin in d efence
o f extinct ion. Unless t here is an effective way to p olice
fish ing and p r eserve habitats, the b lu efin may ultim ately
need official p r o te ct ion .25
DISCUSSION QUESTIONS
1. Why is the p r ice of b luefin tu na skyrocket ing?
2 . What are t he ethical issues involved in selling b luef in
tuna?
3 . Why might the Un ite d St at es be reluctant t o p lace
the b luef in tuna on t he end angered sp ecies list?
What are some o f t h e consequ ences of acti ng t oo
slowly or too quickly in t heir assessment?
CHAPT ER 1 • The Dynamics of Business and Economics 17
goverrunent regulators, conununities, Figure 1.4- The Organization of This Book
and the natural environ1nent. No area
is 1nore debated as online privacy.
Economy
Software, 1nusic, and film executives
(Chapter 1)
want to defend their intellectual prop-
erty. On the other hand, companies
such as Google are concerned that
strict laws would stifle innovation and
enable censorship.2'> \Vhen actions are
heavily criticized, a balance is usually
req_uired to support and protect vari-
ous stakeholders. Information
Competition
\Vhile one view is that ethics and Technology
(Chapter 1)
social responsibility are a good supple-
1nent to business activities, there is an
alternative viewpoint. Research has
shown that ethical behaviour can not
only enhance a co1npany's reputation
but can also drive profits.27 The ethi-
cal and socially responsible conduct
of companies such as \\1hole Foods,
Starbucks, and the hotel chain Marri-
ott provides evidence that good ethics Legal, Political, and Business Ethics
Regulatory Forces and Social
is good business. There is growing (Chapter 2 Appendix) Responsibility
recognition that the long-tenn value (Chapter 2)
of conducting business in an ethical
and socially responsible 1nanner that Special Topics:
Global Business (Chapter 3)
considers the interests of all stake-
Forms of Ownership (Chapter 4)
holders creates superior financial Small Business, Entrepreneurship, and Franchising (Chapter 5)
perfonnance.28
To pro1note socially responsible
and ethical behaviour while achiev-
ing organizational goals, businesses
can n1onitor changes and trends in society's values. Busi- 1nore courses in business, along witl1 so1ne practical experi-
nesses should detennine what society ,vants and atteinpt ence in the business world, to help you develop the special
to predict the long-term effects of their decisions. \Vhile insight necessary to put your personal strunp on knowledge
it req_uires an effort to address the interests of all stake- as you apply it. TI1e challenge in business is in tile area of
holders, businesses can prioritize and atte1npt to balance jud91nent, and jud91nent does not develop fro1n 1neinorizing
conflicting demands. The goal is to develop a solid repu- an introductory business textbook. lf you are observant in
tation of trust and avoid 1nisconduct to develop effective your daily experiroces as an e1nployee, as a student, and as
workplace ethics. a conswner, you will i.Jnprove your ability to 1nake good busi-
ness judg111e11ts.

Can You Learn Business
in a Classroom?
Obviously, the answer is yes, or there ,vould be no purpose
for this textbook! To be successful in business, you need
knowledge, skills, experience, and good jud91ne11t The
topics covered in this chapter and throughout this book
provide some of the kno,vledge you need to tmderstand the
world of business. The opening vignette at the beginning of
each chapter, boxes and exrunples within each chapter, and
the case at the rod of each chapter describe experiences
to help you develop good business jud91nent. Ho,vever,
good jud91nent is based on knowledge and experience plus
personal insight and understanding. Therefore, you need
" Busin ess et hics generally refers to
the st andards and principles used
by soc iety t o def ine appropriate
and inappropriate conduct in the
workplace."
Figure 1.4 is an overvie,v of how the chapters in this
book are linked together and how the chapters relate to
the participants, the activities, and tile environmental
factors found in tile business ,vorld. The topics presented
in tl1e chapters that follow are tilose that will give you the
best opportunity to begin the process of understanding
the world of business.

18 PART 1 • Business in a Changing World

Another random document with
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The Project Gutenberg eBook of The adventures
of a black coat
This ebook is for the use of anyone anywhere in the United States
and most other parts of the world at no cost and with almost no
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you are located before using this eBook.

Title: The adventures of a black coat

Containing a series of remarkable occurrences and
entertaining incidents

Author: Anonymous

Release date: April 7, 2024 [eBook #73346]

Language: English

Original publication: Dublin: Robert Bell, 1762

Credits: Brian Wilsden and the Online Distributed Proofreading Team

at https://www.pgdp.net (This book was produced from
scanned images of public domain material from the Google
Books project.)

*** START OF THE PROJECT GUTENBERG EBOOK THE

ADVENTURES OF A BLACK COAT ***
 THE
ADVENTURES
OF A
BLACK COAT.

C O N TA I N I N G

A Series of Remarkable
Occurrences
and entertaining Incidents,

That it was a Witness to in its

Peregrinations
through the Cities of London and
Westminster,
in Company with Variety of
Characters.
 As related by I T S E L F.

Qui mores hominum multorum vidit.

Hor.

DUBLIN:
Printed for Robert Bell, Bookseller
and Auctioneer, at his great Auction-
Rooms
on Cork-Hill, opposite to Lucas’s
Coffee-House. M DCC LXII.
[Price sewed 1s. 1d. bound 1s.
8d.]
 THE

he necessity which custom has intailed upon authors, of

prefixing an apology to their performances, makes it
requisite for me to say something on introducing the
following sheets to the public; and as long prefaces are in
general of little estimation amongst the readers of books of
entertainment, I will trespass as little upon their patience as possible.
To excite virtue, depress vice, and ridicule folly, is as much the
business of the Novelist, as it is the design of the Drama; and though
the former cannot, like the dramatic-writer, represent his scenes to
the Senses, yet it is in his power to set his characters in such a light,
as to strike the Minds of his readers, in a very forcible manner, with
the virtues he would have them imitate, or the errors he would wish
them to amend.—But our present novel-writers seem to have little
else in view than to amuse their readers; or, if they have any design
to instruct them, they gild the pill so very thick, that all its latent good
qualities are destroyed, or its effects prevented. To mix pleasure with
instruction, is certainly the most efficacious method a writer can take,
to render his labours agreeable to his readers. All I shall say of the
following petit performance is, that I have endeavoured to make the
Author less conspicuous than the moral.
If a blush should arise on the cheek of conscious vice, or a sense of
shame be awakened in the bosom of folly, on perusing any of the
characters exhibited in this performance, my intentions will be
answered, and there are hopes that such are not incurable. In this
age of Magazines and Chronicles, the Cacoethes Scribendi hath
infected the town so much, that almost every shop, or work-room,
harbours an author; and gentlemen of the file, now leave their more
useful labour at the vice, and toil to polish periods. When such
gentlemen assume the pen, I hope it will not be deemed vanity, if I
decline standing as candidate for literary fame, and declare myself
not desirous of sharing with them the honours that may be bestowed
on their labours: but though I profess myself careless of fame, I am
not callous to contempt; and should be pleased to hear critics say,
that though the performance claims no panegyric, yet the design of it
merits some praise.
Politicians will find nothing in this little work that will gratify their
malevolence, nor has my pen been employed to paragon the
wisdom of the present ministry.—In short, state affairs is not the
subject of the following pages; neither have I drawn upon myself the
enmity of so large and respectable a body as the clergy, by invading
the rich province of religion.
But not to detain my readers any longer, nor awaken their
entertainment by anticipating their expectations, I now refer them to
the performance itself, if they should not be prejudiced against it, by
deeming what they have here read as blossoms of weeds.
 THE

ADVENTURES
OF A

BLACK COAT.
Sable coat, whose venerable rents confest a life of business,
A and a length of years, long had hung sole tenant of a wardrobe;
till a gay white coat with care was ushered in, and laid at decent
length: when lo! with mortal voice, and sounds articulate, Sable was
thus heard to address the stranger: “Thy presence, spark, warns me
of my approaching dissolution; but when I cast a retrospect over my
former life, and behold thy native purity and unblemished form, I
cannot but pity the many and various misfortunes thou art, in all
probability heir to.”—To whom, White, “And when I behold thy queer
shape and rustic aspect, I cannot but return thy pity, and offer up my
prayers against longevity.”—Sable replied, “Boy, know that the
depredations of time, and the unseemly appearance of industry, are
not proper subjects of ridicule: were it possible thou couldst foresee
the train of misfortunes, which in the course of thy existence, and
revolutions of thy fortune, thou will be subject to, that gay and happy
mien would be changed to a gloomy and melancholy aspect.” Here
White bowed humility, craved the sages pardon, and supplicated his
advice in the conduct of his life. Sable, finding it a coat of manners,
and pleased with the deference paid to his importance, thus
answered, “To give advice is easy, but to profit by it is difficult; I will
therefore (if thou hast patience to listen) rehearse to thee the
vicissitudes of my fortune, from my first formation to this time, so that
thou may’st profit by my misfortunes, and learn to bear thy lot,
(whate’re it may be) with patience and resignation; and believe me
thou wilt have occasion for philosophy.” White politely expressing his
desire to be informed of the sage’s life, he thus proceeded: When I
contemplate the scenes I have experienced, and meditate on the vile
schemes I have been obliged to countenance in those whose sole
merit and reputation on arose from my close attachment to them, my
very threads blush at the indignity. Here Sable was heard to sigh
most piteously, and White, ’tis thought, laughed in his sleeve. After a
pause of some minutes—Sable thus opened the relation of his
adventures.
The death of a late Princess was the æra of my formation, at which
time I was called to this state as a symbol of sorrow, (formed by R
——’s skillful hand) for the use of a commoner of distinguished
abilities. With him, in the senate-house, have I seen the best heads
have the worst hearts, and fallacious eloquence silence truth, when
delivered in simplicity of language: but being naturally of a volatile
disposition, this life of idleness, for it was seldom I appeared in
public, grew irksome to me, and I languished to see the world. My
wishes were at length gratified; the limited time of mourning being
expired, I was disposed of to a favorite domestic, who soon after, for
a small consideration, consigned me over to Mr. ——, a merchant in
Monmouth-Street.
Here properly I may say I began to exist; my heart dilated with joy at
the prospect of seeing life, and associating with the various
characters that visit this place.
I was soon introduced by my new owner to the class of occasional
gentleman, each of whom I had the mortification to see frequently
depart from our prison of dust and moths, and enjoy liberty and fresh
air; many objecting to me on account of my size, which was then far
above the common, though now, as you may see, below it, having
lately been curtailed by the degrading scissars of a botcher, and
refused by more from my colour. At length an Irish footman, after
being disappointed by the whole class of Beaus, who were not equal
to his Herculean breadth of shoulders, determined to appear in a
character of gravity, and sallied forth with me on his back.
Various were my conjectures where this enterprizing genius was
carrying me, nor was I quite free from fear of receiving stripes, from
the temerity of my adventurer; for I concluded it was not an
expedition squared by the rules of right altogether; especially as
many of our community frequently brought home with them marks of
various disasters, sometimes being dragged through a horse-pond,
at other times rolled in a kennel, besides numberless canings and
kickings, and were generally afterwards delivered over to the
inhumanity of a scowerer, who impaired us more, with the variety of
brushes he tormented us with, than a whole year of service.
But I was surprized, and not a little pleased, when I found this bold
spark knock at the door of one of the managers of the theatres; the
door being opened, this worthy member of the party-coloured
society, was introduced to the manager, and my fears of a drubbing
subsided. The ceremony of salutation being ended, my conductor
was desired to open his business, which he did, with a genuine
Munster accent, in the following words, as near as I can remember;
—“Sir, finding myself capacitated to appear upon the stage from my
internal figure, and other qualifications, I am come to offer you the
refusal of me, in deference to the other house.” The manager
expressed his thanks for the favour he intended him, and requested
him to name the characters he thought he was the most capable to
perform. “Look you, Mr. ——,” says this Hibernian Roscius, “let us
first settle the sallary you are willing to give me, for ’tis not my way to
take a certainty for an uncertainty.” The manager remonstrated that it
was impossible to offer any sallary before he was acquainted with
his merit.—Our hero replied, “Why there is Mr. ——, I think I am not
superior to him in any thing, and he has, I am told, 1000l. a year;
therefore I would not ask more for the first year.”—1000l. a year,
(replied the manager) may not be equal to your merit; Mr. —— is a
favourite of the town, and that is one reason of his being paid so
much.—“By the almighty heavens! exclaimed the Munster hero, I
shall be as great a favourite as he, with all the ladies soon, for I am
as well proportioned a man as he is, and I don’t care a fig for him.”—
Upon my word, Sir, says the manager, I believe you wou’d beat him;
but Sir, I believe you have made a small mistake.—As how?—replied
the Hibernian genius,—Why Sir, you have mistaken the house, Mr.
Broughton lives in the Hay-market, where, if you will give yourself the
trouble to call upon him, you may perhaps meet with encouragement
on his amphitheatre,—“Why you little Crature, replied Teague, I have
a great mind to take satisfaction upon your small bones.—But here
the manager prudently made his exit, and left the enraged footman
to his soliloquy, who, after venting many execrations and threatnings,
left the house, and marched with me to my old habitation, where
being arrived, he sullenly disrobed himself, and with a curse threw
me on the floor, then put on his accustomed garb, adorned with the
insignia of his profession, and issued forth with hasty strides, to
attend the humble duties of his station.
This my first adventure was not over-pleasing to me; however, I
consoled myself with reflecting, that I was seeing characters and life,
for which I had a longing desire that seemed implanted in my nature;
and though I am sensible no coat of prudence ought to cherish such
a desire, yet, at the same time, I am certain, much useful knowledge
may be drawn from observing the various characters that are to be
met with in this metropolis. But to proceed:
Three months I lingered in dull apathy and close imprisonment;
(which to a coat of such a volatile spirit as I was then, was worse
than total dissolution, or the tormenting needle of a botcher, than
which nothing was half so dreadful to me) thrice a week indeed a
general review was made of our company, and every one cleansed
with cane and brush from moths and dust. But now a young
gentleman of a most graceful appearance, ordered me to be tried
upon him. I was fearful of being something too large, but the desire I
had to accompany this agreeable youth, made me contract every
thread to clasp him; and I so far succeeded, that he seemed equally
pleased with me as I with him. In short, we soon left the
neighbourhood of St. Giles’s, and with genteel deportment he
conducted me towards the court-end of the town, each, if I may be
allowed to say so much in my own praise, lending grace to the other.
Being arrived near St. James’s (after traversing the park once or
twice, during which I could discover great anxiety of mind in my
conductor; and feel his heart throb with great force) he stopt at a
house that bespoke the owner to be a man of distinction, and being
entered the hall, he enquired if his lordship was to be spoke with;
being answered in the affirmative, he was immediately waited upon
up stairs, and introduced into a spacious room, which was almost
filled with gentlemen who were waiting for his lordship: from the time
of his entering the house I found his heart beat with stronger
emotions, from whence I concluded he was near some important
period; I soon discovered the major domo was a minister in a certain
department, and that this was his lordship’s levee; —It was near an
hour before his lordship appeared; during this time, I employed
myself in an endeavour to discover, from the physiognomy of the
persons present, the various expectations that might be traced in
each countenance; doubt of success seemed to be predominant in
the assembly, and so much was every one engaged in a tacit
conversation betwixt himself and his lordship, that for the greatest
part of the time a total silence prevailed. At length the doors flew
open, and the minister’s coming was announced.—The peer
entered, and with great dignity bowed to his dependants, who
returned the salute with humble reverence. His lordship spoke to
each with a mild affability, as they stood in rotation, and
procrastinating the desires of his dependants, seemed to be the
general benefit conferred upon the company. At last it came to be my
conductor’s turn to address the peer, which he did in the following
words, but something inarticulate from his extreme modesty—I beg
permission to acquaint your lordship that it is this day two years
since I had the honour to be put upon your lordship’s list, to be
employed in an office your lordship should appoint, in the embassy
to the court of Spain, in consequence of an application to your
lordship from the honourable Mr. ——. Why Sir, replied the minister, I
do remember something of Mr. —— applying to me in your favour,
and ’tis probable I might then put you upon my list, but I can never
think it is two years since.—I would not, return’d the youth, impose
upon your lordship, nor assert a falsity. Pray Sir, rejoined the peer,
did you ever apply to me since the first application? My lord,
answered the young gentleman, I have attended your lordship’s
levee constantly once a month since, and should oftener, but was
fearful of being troublesome to your lordship—Do you understand
Spanish and the other requisites for such a station, Sir? says the
peer—My lord, urged my companion, permit me to say, it is now
more than a twelvemonth since your lordship pointed out to me the
necessary qualifications, and permit me also to add, my lord, that I
have dissipated my small fortune, in attaining those qualifications,
and rendering myself equal to the service, so that I might not
disgrace your lordship’s choice.—I am sorry, returned his lordship,
that it is not in my power to serve you, for all the employments have
been disposed of some time ago.—I hope your lordship, replied the
astonished youth, will serve me some other way, as a recompence
for my loss of time and the injury my fortune has suffered, by your
lordship’s unhappily forgetting me.—I don’t remember, says, the
absent peer, that I recommended you to lay out your money in any
thing about this affair; but if I did, I suppose I then intended to
appoint you, but it is now too late Sir, and I wou’d advise you to think
of something else.—I should presume, says the unfortunate youth,
on your lordship’s knowledge that it has cost me upwards of 200l. in
qualifying myself, agreeable to your lordship’s order, your lordship,
out of humanity, wou’d favour me with something that might retrieve
my shattered fortune—What you understand the Spanish language,
Sir? says his lordship.—Perfectly, replied the alarmed youth. Why
then, returned the peer, you have the advantage of me, and may
receive ample satisfaction, in reading the history of Don Quixote in
the original language, and with that piece of wit, he politely took his
leave of our thunderstruck youth, who on recollecting himself
exclaimed, Æsop’s fable of the boys and frogs is here fatally
exemplified, what is sport to him, is death to me—and instantly
departed, bending his steps towards the Bird-Cage walk in the Park,
where sitting upon a bench he passed two hours in silent meditation,
but at length rousing from his melancholy reverie, with a start that
put every thread of me to the proof, he took the resolution of entering
as a private soldier in the guards, and hoped that while he might be
upon duty under the cruel minister’s window, the reflection that he
had drove him to that course of life for bread, might if his soul was
not callous to every sensation, make him feel the pangs of wantonly
ruining a man who had never injured him. Thus resolved, he
hastened with me to my old habitation, where leaving me, he fled, as
I suppose, to execute his ill-fated purpose.
After undergoing the press for some hours, on my return, (a custom
we were all subject to, the frequency of which I may say was the
chief cause of my early decay) I indulged myself in reflecting on the
days adventure, which led me naturally to contemplate on the many
young people who quit a life of industry and competence, and pursue
the phantom of hope, through the various mazes of misery she
wantonly leads them; stimulated at first perhaps by choice, but at
length are forced to persevere through necessity, and how oft does
she lead these unhappy men to total destruction; seating herself in
the mid ocean and beckoning to her followers, who seldom have the
power to see the distance she is from the shore, or perceive the
whirlpools that intervene, but keeping their eye fixed upon her,
plunge in and are lost! But, continued the sage, I fear I am rather
troublesome, than entertaining to you. I beg returned the gay spark,
you will make no apology, for I am very far from thinking your
observations will be the least entertaining part of your narration—
Sable replied, young gentleman, I believe you speak ingenuously,
and am pleased I have an opportunity, before I leave this miserable
state, of communicating any thing that may hereafter be of service to
one who appears so deserving of it.—White politely thanked him for
the compliment, and Sable thus proceeded in the relation of his
adventures.
It was not long ere I was again summoned to the duties of my
station, by a tall genteelish kind of a person, who ordered me to be
tryed upon him, and I was engaged by him for the day.
Notwithstanding I thought myself a tolerable good physiognomist, yet
the appearance and deportment of this stranger caused my fancy
(that weathercock of judgment) to vary so often, that it was
impossible for me to fix any criterion: he had much the air of a
gentleman, but his gentility seemed a kind of a habit, that he had
acquired since he came to years of maturity, and appeared to be
only superficial, from the effect of close observation, rather than the
air and grace which naturally results from the manners being
property cultivated and corrected in youth.—In short he was
altogether a contradiction, and intirely conquered my sagacity, which
greatly added to the natural desire I had of proving the adventure.
It was in the morning that my unknown conductor took me through
the busy streets into the city, and entering a coffee-house, near the
Exchange, almost filled with company, he spent some time before he
could resolve where to seat himself; at length he determined on a
place, which, to me, appeared the most inconvenient one in the
room, it being in a box that was already almost full; here he
breakfasted and read the papers, but seemed more intent upon
remarking the company, than on the news of the day. We stayed
here about an hour, when my conductor rose up, and taking a
gentleman’s hat instead of his own, was leaving the room. As soon
as the owner observed the mistake, on acquainting him with it, he
asked the gentleman pardon, and at the same time informed him,
that he was so extremely near-sighted, that without the help of his
glass, (which he had unfortunately left at home) he was continually
mistaking; the gentleman begged he would make no apology, as
every man was liable to mistake; shortly after he took an opportunity
to go away without paying for his breakfast, which made me
conclude he had likewise unfortunately left his memory at home.
This caused me to reflect that I was very indifferently situated in
being obliged to accompany a man that went into company without
either eyes or memory, and I must own I began not to half like the
prospect of this adventure.—Soon after leaving this coffee-room, he
went into another, where seating himself as before, he drank a dish
of chocolate, and on his leaving the place, his eyesight again failed
him, and he mistook another gentleman’s hat for his own again, and
went off with it without interruption or paying for his chocolate: this
second mistake alarmed me greatly, fearing lest the owner of the hat
should be in pursuit of us, who possibly might not shew so much
regard for the infirmity of my conductor as the other gentleman had,
or not entertain so favourable an opinion of his veracity, especially as
the difference in value of the hat, was greatly in favour of this near-
sighted spark, which circumstance I observed in the preceding
mistake likewise; but my fears ceased, when coming into Corn-hill I
heard him call a coach, and stepping in, ordered the coachman to
drive to Covent Garden, but in Fleet-street he ordered him to stop in
middle Temple-lane, and to set him down at a certain door there, on
the coach stopping at the place appointed, he ordered the coachman
to wait, and I imagined that he was calling upon his lawyer, but found
he only went through a public office, which opened into two different
places and was used as a thoroughfare. Having passed the other
door, he very leisurely walk’d across the court, and so into Fleet-
street, and from thence, without stopping, he conducted me to the
piazza’s, Covent Garden. This extraordinary absence of thought in
leaving the coachman to wait for him, when it appeared evident he
did not intend to return to him, created some reflections in me that
did not end greatly in his favour; nor did they leave me in great
tranquillity, for my mind run now upon nothing but horseponds,
duckings, and kickings, which I had heard my companions speak of
suffering, and which I knew I must chiefly sustain, should any
instance of his infirmities terminate unfavourable—But to return,
being arrived in the piazza’s in Covent Garden, as I mentioned
before, from thence we ascended a pair of stairs, and I found myself
in a room amidst a great number of very genteel people, some of
whom were of the first fashion; I soon perceived it was an auction-
room; then my fears began to operate upon me least some of my
gentleman’s faculties should again fail him, and the ill consequence I
dreaded would fall upon me; but every thing remained quiet for a
considerable time; at length a chaised-watch, by Tompion, was put
up, which I found had a very strong effect upon my adventurer,
though I could not devise the cause, for as I knew he had not
sixpence about him, I could not conceive he intended to bid for it; as
the bidders advanced he became more anxious, marking every one
who bid, very strictly.—In the conclusion a certain nobleman, who is
observed to attend these kind of sales with great punctuality, bid 80
guineas, and was knocked down the best bidder, and the watch set
down to Lord ——. My adventurous spark now seemed calm and
determined, and instantly quitting the room, went into a tavern near;
where ordering a bottle of Madeira, and pen and ink, he took from
his pocket a message-card and wrote as follows—“The earl of ——
seeing lord ——’s equipage standing at ——’s auction-room door,
begs the favour of his lordship’s company at —— for a moment.—
Having just received an accident upon my right hand ——s writes
this to you, and promises to take it to your lordship himself.”—Having
wrote this he orders the master of the tavern to attend him, who
being come, our spark, after splitting the card, and securing the
writing by a wafer, told him he should be much obliged to him if he
would take that card to lord —— at ——’s auction: the landlord
assured him he would, but, adds, this cautious genius, deliver it to
—— the auctioneer, and he will hand it to his lordship: —— promised
to obey his orders punctually; the landlord being gone, my
companion, after recruiting his spirits with a glass of wine,
immediately decamps, leaving orders to acquaint lord —— he would
return before his lordship could be seated, and immediately goes
and posts himself in a place where he could see his lordship come
from the auction-room: very short was his stay before he saw his
lordship, attended by the landlord, step into the chariot, and drive to
the tavern; our bold youth was as good as his word, and followed his
lordship into the room before he was well seated, and told him that
the earl of —— was “just drove into the next street, and had ordered
him to wait upon his lordship with an apology for leaving the room,
but that he would be with him in an instant.” This excuse delivered
with a good grace by a seeming gentleman, satisfied his lordship,
and seating himself, our hero took his leave of his lordship, and
going to the bar, told —— the landlord, that he must go to —— the
auctioneer, and tell him, “that lord —— desired him to send the
watch he had lately purchased by him, as he just wanted to shew it
to the earl of ——”. Away goes the landlord and acquaints the
auctioneer with his lordship’s desire; the auctioneer knowing the
landlord, and seeing the lord —— go out with him just before, made
no hesitation, but delivers him the watch, who on meeting my
gentleman at the door, put it into his hand, and he flipping it into his
coat-pocket, again goes into his lordship, and telling him “the earl of
—— begged his patience a few minutes longer, as he had now just
finished the affair he was upon, and hoped he would stay, as he had
something to acquaint him with that would surprise him very much”.
His lordship answered it was very well; upon which our sharper left
his lordship to wonder what it could be that would surprize him so
much, and I make no doubt but in a short time he was greatly
surprized.
The planning of this artifice continued Sable, gave me a high opinion
of our sharper’s ingenuity, and the dexterity with which he conducted
it, entirely removed all my fears of any accident happening to us.
After this successful exploit, he walked through a few streets and
then took a coach, ordering the coachman to drive to a tavern near
the Exchange in the city; by this method he eluded the vigilance of a
pursuit, which he imagined must succeed his lordship’s discovering
the imposition, and which no doubt was in a very short time after
sent forth.
Being arrived at the tavern he ordered the coachman to take his
money at the bar, and was shewn into a very handsome room; he
immediately ordered a genteel dinner consisting of five dishes, and
ordered two courses, saying he expected a gentleman to dine with
him, and ordered if any one enquired for Sir —— to shew him in; but
I should have mentioned to you that as the coach was passing by
the Temple, he ordered one of the porters who ply there, to take a
card which he had been writing upon in the coach, to the very tavern
he had ordered the coachman to drive to, with strict orders for the
porter to be there with it by 5 o’clock; this card was directed to the
knight whose name and title he had now assumed.—By the time he
imagined dinner was ready, he rang and ordered the cook not to
spoil the dinner, but when it was ready to bring it in, saying he would
not wait a minute for the king in prejudice to the skill of the cook,—
whom he ordered to take a pint of wine at the bar. Dinner being
ended, and the cloath removed, champain and burgundy were
ordered, and he sat very composedly entertaining himself in
mediating on the labour of the great Tompion, and from thence took
occasion to descant on his own ingenuity, which he justly boasted
was not inferior to that famous artist, though it run in a different
channel: at the hour of five the waiter entered with a card for Sir ——
on which was wrote these words “Lord ——’s compliments to Sir
——, asks ten thousand pardons for not attending him at dinner as