Exam #1 (Chapters 1-3) - Introduction to Business
Chapter 1 aims: Businesses succeed by adapting to market changes. Profits are essential for growth, sustainability, salaries, equipment, expansion, and community impact.
Profit is essential for long-term survival and growth. Without it, companies cannot fund hiring, wage increases, investments, or sustain operations. Non-profits also need profits to fund their causes.
Basic definition of a business: An activity providing goods and services to others while seeking a profit.
Goods vs. services:
Goods: Tangible items you can own (e.g., shoes, cars, televisions).
Services: Intangible activities that require your presence (e.g., haircut, legal advice, car repair).
Economic ripple effect of profits: Employee salaries lead to community spending, job creation, and a higher standard of living.
Private ownership and consumer decisions: In private ownership economies, consumers decide what to buy. Companies produce based on demand, leading to rising living standards.
Success in business: Filling a market need with customers who can pay. The product must offer value greater than its price.
Role of profits in society: Profits drive economic well-being by funding growth, pay raises, and reinvestment.
Stakeholders are anyone affected by a business (customers, employees, stockholders, suppliers, communities, environmental groups). Businesses must balance their diverse needs with profitability.
Example: A clothing company deciding to use sustainable materials (addressing environmental and some customer stakeholder needs) even if it slightly increases production costs (potentially impacting shareholder/profit stakeholders).
Stakeholder visualization: A wheel around the business, requiring careful balance among diverse demands.
For-profit vs. non-profit organizations:
For-profits seek personal profit (e.g., Apple, Walmart).
Non-profits fund programs (e.g., American Red Cross, Doctors Without Borders). Both must manage finances effectively.
Non-profit employee considerations: Often face talent competition due to lower salaries, compensating with non-monetary benefits and meaningful work.
People in business: changing demographics: More working women (some out-earning husbands) and a rise in female CEOs (e.g., 0 in F500 in 1970 to about 33 in 2019).
Environments surrounding a business:
Internal: Controllable factors (e.g., employees, organizational structure, company culture).
External: Uncontrollable factors (e.g., economic, legal, technology, social, global events). Monitoring external factors is crucial.
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External environment: economic and legal context: Economic and legal contexts (laws, regulations) shape private ownership, exchange, and contracts; regulatory influence varies globally.
Example: New data privacy laws (like GDPR) require businesses to update their data handling practices, impacting operational costs and customer trust.
External environment: technology: Technology boosts efficiency and productivity (e.g., widespread use of AI for customer service, cloud computing for data storage, e-commerce platforms for sales).
Productivity: Productivity = output / input. Higher productivity lowers costs and prices.
Competitive environment and differentiation: Competition drives better products, fair pricing, and customer satisfaction. Differentiation is key to attract customers.
Example: A coffee shop differentiates itself by offering unique single-origin beans and a cozy ambiance, rather than just competing on price.
Social environment and demographics: The social environment includes demographics (population characteristics: age, race, gender, income). Shifts create opportunities (e.g., services for aging populations) and challenges (e.g., Social Security pressure).
Example: The increasing aging population creating demand for specialized healthcare services, accessible housing, and senior care technologies.
Diversity and global changes: Diversity (age, race, origin, sex) and global changes (opportunities, threats like war) impact business.
Economics: macro vs micro:
Microeconomics: Study of individual and organizational behavior in markets.
Macroeconomics: Study of the economy as a whole.
Supply and Demand Curves
Supply Curve: Illustrates the relationship between the price of a good or service and the quantity suppliers are willing to sell. As price increases, the quantity supplied typically increases (upward sloping curve). Influenced by production costs, technology, and number of sellers.
QS = f(P) (where QS is quantity supplied and P is price)
Demand Curve: Illustrates the relationship between the price of a good or service and the quantity consumers are willing to purchase. As price increases, the quantity demanded typically decreases (downward sloping curve). Influenced by consumer income, preferences, prices of related goods, and number of buyers.
QD = f(P) (where QD is quantity demanded and P is price)
Market Equilibrium: The point where the supply curve and demand curve intersect. At this price, the quantity supplied equals the quantity demanded, leading to market clearing.
If price is above equilibrium, there's a surplus; if below, there's a shortage.
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Resource development and standard of living: Resource development aims to increase resources and improve living standards. Five factors of production explain wealth creation.
Five factors of production: Land, Labor, Capital, Entrepreneurship, and Knowledge. They are crucial for wealth creation.
Economic systems:
Command Economy: Government controls production and distribution.
Free Market (Capitalism): Consumers and producers decide via voluntary exchange and prices.
Socialism: Government owns some basic businesses to fund social programs.
Communism: Government owns nearly all factors of production.
Mixed Economy: Blends market and government allocation.
The invisible hand (Adam Smith): Self-interested pursuit of profit unintentionally benefits society by allocating resources and stimulating economic activity.
Four basic rights under capitalism:
Right to own private property.
Right to own a business and keep profits.
Right to freedom of competition.
Right to freedom of choice.
Pros and cons of capitalism:
Pros: Encourages risk-taking, competition, innovation, and quality/fair prices.
Cons: Can lead to income inequality and challenges for disadvantaged individuals.
Current economic trends: Economic systems are evolving: socialist governments sometimes reduce programs, capitalist governments expand them. Governments are increasing regulations. The US is a mixed economy.
Major economic indicators and concepts to monitor:
GDP (Gross Domestic Product): Total value of goods/services produced in a year. \text{GDP} = \text{Total value of goods and services produced in a country in a year}
Productivity: Output per input; higher = lower costs/prices.
Unemployment: Percent of civilians 16+ actively seeking work. Types: structural, cyclical, seasonal, frictional.
Inflation: General rise in prices. Deflation: price decline. Stagflation: slow economy + rising prices.
CPI (Consumer Price Index): Measures inflation/deflation pace. \text{CPI} = \frac{\text{Cost of market basket in current year}}{\text{Cost of market basket in base year}} \times 100
PPI (Producer Price Index): Measures wholesale price changes.
Fiscal Policy: Government (taxation/spending) to stabilize economy.
Monetary Policy: Central Bank (Federal Reserve) manages money supply/interest rates.
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The US debt and debt-to-GDP context: US national debt is a concern, especially its ratio to GDP. High debt-to-GDP can be unsustainable.
Transition from manufacturing to services: Economies are shifting from manufacturing to services. Technology helps, but service productivity measurement is complex.
Service productivity and data challenges: A challenge is increasing service productivity and effectively managing data on individuals.
Takeaways for the exam:
Profit is foundational for business.
Distinguish goods vs. services; value > price.
Understand stakeholders and balancing their needs.
Define/differentiate economic systems, indicators, policy tools.
Know macro vs. microeconomics and performance drivers (GDP, inflation, unemployment, productivity).
Understand "invisible hand" (private incentives benefit society).
Explain fiscal vs. monetary policy.
Final note: This chapter emphasizes adapting to change, understanding the business environment, and applying economic principles to manage risk, create value, and contribute to societal well-being. Businesses today operate in an interconnected global environment, demanding constant adaptation to diverse worldwide markets.
Global Market Size: Approximately 8\times 10^{9} people, with projections exceeding 9\times 10^{9} by 2015. This offers vast opportunities for growth through international operations, as seen with companies like Starbucks and Walmart.
U.S. Role: The United States currently stands as the largest importer globally and the third-largest exporter, highlighting its deep integration into the world economy.
Importing: The process of buying goods and services from foreign countries for domestic use or sale. It allows access to products that are not available domestically, specialized goods, or items that can be produced more cost-effectively elsewhere.
Exporting: The process of selling domestically produced goods and services to customers in foreign markets. This strategy helps businesses expand their customer base, increase revenue, and achieve economies of scale.
Free trade, the movement of goods and services between countries without political or economic barriers (like tariffs or quotas), generally offers multiple economic benefits:
Benefits of Free Trade:
\text{Strengthens Comparative Advantage: Countries specialize in producing goods and services where they are most efficient (i.e., have a lower opportunity cost), leading to greater overall global production.}
\text{Encourages Innovation: Competition from foreign firms often pushes domestic companies to innovate and improve.}
\text{Increases Efficiency: Global specialization and trade lead to more efficient resource allocation.}
\text{Lower Consumer Prices & Greater Variety: Consumers benefit from lower prices and a wider selection of goods and services.}
Drawbacks of Free Trade: Can lead to the displacement of domestic workers in industries that struggle to compete with more efficient foreign producers, often leading to calls for trade protectionism.
Comparative Advantage: An economic principle where a country specializes in producing and exporting goods and services for which it has a lower opportunity cost compared to other countries. This efficiency drives international trade.
Absolute Advantage: Occurs when a country can produce a specific good or service more efficiently or at a lower cost than any other country, often due to unique natural resources or advanced production techniques (e.g., a country with abundant oil reserves having an absolute advantage in oil production).
Trade Dynamics and Concerns:
U.S. Small Businesses: While only about 1\% of U.S. small businesses engage in exporting, they collectively account for approximately one-third of total U.S. exports, indicating significant untapped global potential.
U.S. Trade Deficit: The U.S. has experienced a continuous trade deficit since 1975, meaning its imports exceed its exports. This has made the U.S. a major debtor nation, with China emerging as a significant creditor.
Fair Trade: Beyond just free trade, the concept of fair trade emphasizes ethical and equitable trading practices.
Dumping: The practice of selling products in a foreign country at prices below their cost of production or below their price in the home market. Dumping is generally considered an unfair trade practice and is typically illegal under international trade agreements, as it can severely harm domestic industries in the importing country.
Global Expansion Options (from lowest to highest risk/reward and commitment):
Licensing: Granting a foreign company the right to manufacture a product or use a trademark, patent, or other proprietary technology in exchange for a royalty fee. This is generally the lowest risk and lowest reward entry strategy, requiring minimal investment and offering limited exposure to foreign market risks (e.g., Coca-Cola licensing its syrup formula).
Franchising: Selling the rights to use a proven business model, name, operating methods, and product lines to an independent business owner (franchisee) in another country. It offers a relatively low-to-medium risk expansion with the benefit of local market adaptation (e.g., McDonald's tailoring its menu items to local tastes).
Exporting: The direct sale of domestically produced goods and services to customers in other countries. This can be done directly to foreign buyers or indirectly through intermediaries. It represents a relatively low-to-medium risk approach as production remains domestic.
Contract Manufacturing (Outsourcing): Engaging a foreign firm to produce goods or provide services on behalf of a domestic company under its brand name. This strategy leverages lower foreign labor costs or specialized production capabilities without significant capital investment abroad. It carries moderate risks related to quality control and intellectual property protection (e.g., Nike and Apple often rely on contract manufacturers).
Joint Ventures: A strategic partnership where two or more companies, often from different countries, pool resources, share ownership, control, and profits (as well as risks) to undertake a specific project or business activity. This allows for sharing technology, local market knowledge, and financial burdens, making it a medium-to-high risk/reward strategy.
Strategic Alliances: Less formal than a joint venture, a strategic alliance is a long-term partnership between companies to achieve mutual goals through collaboration, without creating a new independent entity or requiring a full merger. It allows for sharing resources and expertise while maintaining individual corporate identities.
Direct Foreign Investment (DFI): Represents the highest level of commitment and risk, involving the establishment of fully owned and controlled foreign subsidiaries to manufacture products or conduct business directly in a foreign country. DFI provides maximum control over operations but exposes the company to the full spectrum of economic, political, and cultural risks of the host country (e.g., setting up wholly-owned manufacturing plants).
Requirements and Barriers to Global Trade:
Social-Cultural Forces: Profound cultural differences significantly impact business operations. These include variations in language, customs, traditions, values, religious beliefs, and business etiquette. Failure to adapt products, marketing messages, or business practices to local cultural nuances can lead to market rejection (e.g., McDonald's offering region-specific menus like the McAloo Tikki in India, and Oreo adjusting sweetness levels for different international markets).
Economic/Financial Forces: The economic landscape of foreign markets, including income levels, purchasing power, and infrastructure development, critically affects market potential. Exchange rates, which define the value of one currency against another, constantly fluctuate, directly impacting the cost of imports and the competitiveness of exports. A strong domestic currency makes exports more expensive and imports cheaper. Counter-trade (barter or other non-cash payments) remains prevalent in certain developing markets due to currency convertibility issues or lack of foreign exchange.
Legal/Regulatory Environment: Legal and regulatory frameworks differ dramatically across countries, posing complex challenges. This includes varying contract laws, intellectual property rights (patent, trademark, copyright protection – with no single universal patent system), product standards, environmental regulations, and consumer protection laws. Companies must ensure compliance. A notable example is the U.S. Foreign Corrupt Practices Act (FCPA), which strictly prohibits U.S. companies and individuals from bribing foreign government officials.
Global Organizations and Trading Blocs:
GATT/WTO: The General Agreement on Tariffs and Trade (GATT) was a multilateral agreement regulating international trade. It was superseded in 1995 by the World Trade Organization (WTO). The WTO is an intergovernmental organization that regulates and facilitates international trade, mediating disputes, administering agreements, and serving as a forum for trade negotiations.
Trading Blocs (Regional Trade Agreements): Groups of countries that form agreements to reduce or eliminate trade barriers among themselves, often while maintaining common external tariffs for non-member countries. The goal is to promote economic integration and foster internal trade. Examples include the European Union (EU), Mercosur (Southern Common Market), the Regional Comprehensive Economic Partnership (RCEP), and the United States-Mexico-Canada Agreement (USMCA).
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BRICs: An acronym referring to the rapidly developing economies of Brazil, Russia, India, and China. These nations are characterized by large populations, significant natural resources, and fast-growing economies, positioning them as key emerging markets and increasingly influential players in the global economy.
Offshoring: The relocation of a business process (e.g., manufacturing, accounting) from one country to another, typically by contracting a foreign firm to perform these functions. It is primarily driven by lower costs and access to specialized skills.
Pros of Offshoring:
Cost Savings: Access to significantly lower wage rates and operating costs in other countries.
Focus on Core Competencies: Allows companies to allocate resources to their primary strategic activities by outsourcing non-core functions.
Increased Efficiency and Productivity: Foreign firms may offer specialized expertise or more efficient processes.
Enhanced Competitiveness: Lower costs can enable more competitive pricing or greater investment in innovation.
Access to Global Talent: Taps into a wider pool of skilled labor and specialized technical expertise.
Cons of Offshoring:
Domestic Job Losses: A significant concern is the displacement of jobs within the home country.
Quality Control Issues: Maintaining consistent quality standards across international operations can be challenging.
Supply-Chain Risks: Longer supply chains increase vulnerability to disruptions (e.g., geopolitical events, natural disasters, shipping delays).
Reduced Managerial Control: Companies may experience less direct oversight and control over outsourced operations, potentially leading to communication barriers or cultural misunderstandings.
Ethical and Social Concerns: In today’s consumer-driven world, customers expect companies to act ethically, be good citizens, and demonstrate social responsibility (CSR).
Water.org example: Matt Damon and Gary White founded Water.org to help families in developing countries access microloans to fund water operations, services, and related infrastructure. They have distributed loans to 34{,}000{,}000 people, enabling access to water and sanitation and positively impacting community economies.
Ethics goes beyond merely obeying the law; law is only the first step in ethical behavior. Historical scandals show that legality does not guarantee ethical conduct. Examples mentioned: housing market collapse, Enron, Tyco scandals, and Wells Fargo.
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Key idea: accountability is essential; following the golden rule (Do unto others as you would have them do unto you) means being responsible for your actions and treating others as you would like to be treated.
Ethical acts can be legal but unethical. Enron example (conceptual): a power-generation company could structure deals across state borders to exploit regulatory differences; such actions may be illegal in the US and unethical even if legal elsewhere.
Ethical dilemma: situations where people face choices that are both problematic or contested, potentially unlawful or unethical, requiring a tough decision.
Wells Fargo case (2015): Consumer Financial Protection Bureau fined Wells Fargo 185{,}000{,}000 because employees opened roughly 1{,}500{,}000 fake accounts through an internal incentive campaign.
The intention to perform well can collide with ethical boundaries when drive to achieve targets overrides customers’ interests.
The U.S. Foreign Corrupt Practices Act (FCPA): prohibits bribery of foreign officials; cases involve extortion in foreign countries but penalties apply to US companies under US law. The slide references 5 cases highlighted by FCPA activity.
Reputations and ethical standards: standards of moral behavior accepted by society where you live. Core values commonly cited: integrity, respect for human life, self-control, honesty, courage, and self-sacrifice (and sometimes references to self-satisfaction).
What is unethical behavior? Examples include goofing off, violating state safety standards, failing to volunteer, or plagiarizing schoolwork. Ethics begin with the individual and are shaped by organizations and the environment in which a business operates.
Ethical dilemmas and decision-making:
There may be no easy alternative; one must choose among unsatisfactory options.
Three guiding questions (to assess proposed actions):
1) Is my proposed action legal?
2) Is it fair to both sides?
3) How will it make me feel about myself?
How to address ethics in an organization:
Start with top-level management setting the tone (walking the talk).
Build trust by consistency between what is said and what is done; create a common purpose of fairness and honesty.
Be mindful that overly ambitious goals or incentives can foster unethical behavior (as in Wells Fargo).
Why should a business be managed ethically?
To maintain a good reputation and retain existing customers while attracting new ones.
To avoid lawsuits and government intervention; ethical environments tend to reduce employee turnover and increase trust among customers, employees, stockholders, and society.
Ethics begin with the individual, then are shaped by the organization and its operating environment.
Personal example (DuPont): spotting a competitor price list, returning it discreetly rather than using it; reflects a company code of ethics that prohibits taking competitive information or leveraging it for personal gain.
Codes of ethics: compliance-based codes vs integrity-based codes
Compliance-based codes emphasize preventing unlawful behavior through controls and penalties (e.g., suspension, firing).
Integrity-based codes articulate guiding values and shared accountability, creating an environment that supports ethical behavior without relying solely on fear of punishment.
Hershey Chocolate Company example: Hershey’s code of ethics emphasizes commitments to customers, marketplace trust, stockholders, global environment, and compliance with trade laws; integrity-based codes cover more than legality, focusing on core values like honesty, fair play, service, diversity, and community involvement.
Six steps to improve business ethics (three steps on one slide, three on the next):
Top management explicitly adopts and unconditionally supports a code of conduct.
Communicate the expectations clearly; employees understand consequences for noncompliance.
Provide training and annual reminders to ensure familiarity with the code.
Establish an ethics office/whistleblower mechanism (anonymous reporting).
Ensure outsiders (suppliers, distributors) understand the code; consider requiring supplier codes of conduct.
Walk the talk; enforce penalties consistently to demonstrate accountability.
What to do if you see something unethical:
You can ignore it, report it, or, if nothing is done, walk away.
When whistleblowing, carefully consider actions and consequences; there are protections but also potential retaliation.
Corporate Social Responsibility (CSR): the idea that businesses should have concern for society beyond profit, addressing welfare of the community and broader society; debate about the appropriate scope and role of business in social issues.
Example: Major League Baseball canceled the All-Star game in Atlanta due to perceived discrimination, while not canceling the World Series—illustrating mixed feelings about corporate involvement in social issues.
Arguments about CSR: some say business leaders should focus on product/service and profits; others argue that a company’s existence depends on society, so it should give back.
How CSR creates value for customers and society:
Consumers perceive value when benefits exceed price; CSR messaging can be facilitated by the internet and social media.
Guidelines for social media engagement:
Post about relevant topics for the company/industry.
Think before posting; delete incorrect or negative content.
Provide engaging, new information; avoid inflammatory political rants.
DuPont example of social initiatives: allowing employee time for United Way drives (company time and access to charities).
Social initiatives and corporate responsibility encompass: hiring minority workers, ensuring safe products and workplaces, and other responsible practices.
Corporate policy on social and political issues (e.g., “do no harm” and speaking out against human mistreatment).
Kennedy’s four basic consumer rights (as a foundation for consumer expectations):
The right to safety
The right to be informed
The right to choose among competitive offerings
The right to be heard
The relationship between profit and CSR:
Many admired, financially successful companies are valued for their CSR and ethics; maximizing profit and CSR are not necessarily in conflict when viewed through the lens of long-term value, trust, and customer loyalty.
The rise of social media makes it easier to communicate a company’s CSR stance and value proposition to a broad audience.
Social media best practices and pitfalls:
Discuss topics relevant to the company and industry.
Think before you post; ensure accuracy and appropriateness.
Avoid political rants and exploitative content; maintain professional communication.
Shared responsibility to stockholders and employees:
Insider trading: Ethical issues extend to insider trading (unethical use of nonpublic information for personal gain).
Insider trading example: Martha Stewart went to jail for acting on nonpublic information.
Businesses owe a responsibility to employees, including fair wages and benefits, and a safe, respectful work environment.
Turnover costs: employee retention and cost of recruiting/training new staff are significant; Costco’s health benefits for part-time workers illustrate how benefits can reduce turnover.
Fraud costs and employee behavior:
Fraud costs the economy, with estimates like 4.2\times 10^{10} losses annually and fraud contributing to the failure of many businesses (roughly 30\% of them).
Employee misconduct can include misusing company assets, falsifying expenses, defaulting on commitments, hoarding resources, and other forms of abuse.
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The role of nonprofits and green initiatives: Corporations sometimes fund nonprofits or engage in environmental projects that align with values and societal needs. A growing number of companies conduct social audits to measure progress toward social responsibility goals.
Social audits and watchdogs: There are five main groups that monitor corporate ethics and social responsibility: investors, research organizations, environmentalists, unions, and consumers.
Global context and supply chain responsibility:
Increasing regulations and expectations require multinational suppliers (e.g., Nike) to adopt codes of conduct, ensure worker safety, and pay fair wages.
US-based companies increasingly require international partners to maintain ethical standards and comply with social responsibility expectations.
Final takeaway for Chapter 3: Ethical problems and CSR issues are global; stringent laws and regulations are increasingly common. The best corporate leaders pair profitability with social responsibility, demonstrating that doing the right thing can coincide with long-term financial success.
Note on numerical references used in this summary: key figures have been highlighted in LaTeX-friendly formatting for clarity.
Water.org impact: 34{,}000{,}000 people helped
Wells Fargo fine: 185{,}000{,}000
Fake Wells Fargo accounts: 1{,}500{,}000
Fraud-related losses: 4.2\times 10^{10} (equivalently 42{,}000{,}000{,}000)
Percentage discussing turnover or risk: 30\%
Number of FCPA cases highlighted: 5
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Global Organizations and Trading Blocs (continued):
BRICs: Brazil, Russia, India, and China as rapidly developing economies and key emerging markets.
Offshoring: The relocation of a business process to another country to reduce costs or access specialized skills.
Pros of Offshoring (reiterated): Cost savings, focus on core competencies, increased efficiency, enhanced competitiveness, access to global talent.
Cons of Offshoring (reiterated): Domestic job losses, quality control issues, supply-chain risks, reduced managerial control.
Ethical and social concerns: CSR is increasingly expected by consumers.
Water.org example (reiterated): 34{,}000{,}000 people helped via microloans for water access.
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Reputations and ethical standards recap: ethics start with the individual and are shaped by organizations and the operating environment.
What is unethical behavior? Examples include goofing off, violating safety standards, failing to volunteer, or plagiarizing.
Ethical dilemmas and decision-making:
Guiding questions:
1) Is my proposed action legal?
2) Is it fair to both sides?
3) How will it make me feel about myself?
How to address ethics in an organization:
Top management tone, trust-building, and consistency between words and actions.
Beware aggressive incentives that foster unethical behavior (e.g., Wells Fargo case).
Why manage ethically? To maintain reputation, avoid lawsuits, reduce turnover, and build trust across stakeholders.
Personal example (DuPont): returning a competitor price list discreetly; reflects a code of ethics prohibiting using it for personal gain.
Codes of ethics:
Compliance-based codes emphasize preventions and penalties (e.g., suspension, firing).
Integrity-based codes emphasize guiding values and shared accountability.
Hershey’s example: integrity-based focus on values like honesty, fair play, service, diversity, and community involvement; compliance-focused elements also present.
Six steps to improve business ethics (continued):
Establish an ethics office/whistleblower mechanism; ensure supplier codes of conduct.
Walk the talk; enforce penalties consistently.
What to do if you see something unethical (summary): report or walk away if no action is taken; whistleblowing carries protections but potential retaliation.
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Corporate Social Responsibility (CSR) continued:
CSR creates value by aligning company actions with societal interests and leveraging CSR messaging to build trust.
Social media as a tool for CSR communication; careful, non-inflammatory use.
Kennedy’s consumer rights summary (reiterated): safety, informed, choose, heard.
CSR and profit alignment: long-term value, trust, and customer loyalty support the view that profit and CSR are not mutually exclusive.
Social media guidelines and pitfalls (summary): relevance, accuracy, professionalism; avoid political rants.
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Stakeholder and employee considerations:
Insider trading example: Martha Stewart case demonstrates ethical boundaries around nonpublic information.
Responsibilities to employees: fair wages, benefits, and safe workplaces; turnover costs are significant; Costco’s health benefits illustrate reducing turnover.
Fraud costs: the economy loses billions to fraud; impact on business stability and trust.
Employee misconduct can include misuse of assets, falsifying expenses, defaulting on commitments, hoarding resources, etc.
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The role of nonprofits and green initiatives (revisited): corporations fund nonprofits or engage in environmental projects; social audits measure progress toward CSR goals.
Social audits and watchdogs (revisited): investors, research organizations, environmentalists, unions, and consumers monitor ethics and CSR.
Global context and supply chain responsibility (revisited): multinational suppliers must adopt codes of conduct, ensure safety, and pay fair wages; U.S. companies increasingly demand ethical standards from international partners.
Final takeaway for Chapter 3: Ethical problems and CSR issues are global; regulations are becoming stricter. The best corporate leaders pair profitability with social responsibility, showing that doing the right thing aligns with long-term financial success.
Note on numerical references used in this summary (recap):
Water.org impact: 34{,}000{,}000
Wells Fargo fine: 185{,}000{,}000
Fake Wells Fargo accounts: 1{,}500{,}000
Fraud-related losses: $$4.2\