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1 SIXTH EDITION BUSINESS IN CONTEXT AN INTRODUCTION TO BUSINESS AND IIS ENVIRONMENT DAVID NEEDLE /V CENGAGE Learning" Australia Brazil Japan Korea Mexico Singapore Spain United Kingdom United States

CONTENTS List of cases xiii Preface xv Acknowledgements xvii 1 The Concept of Business in Context 1 Introduction 1 Businesses and their Contexts 2 Business activities 3 Business contexts 4

2 CONTENTS List of cases xiii Preface xv Acknowledgements xvii 1 The Concept of Business in Context 1 Introduction 1 Businesses and their Contexts 2 Business activities 3 Business contexts 4 Interaction-Influence, Systems and Contingency Approaches 6 The systems approach 6 The contingency approach 7 The Structure of this Book 7 Summary 8 Discussion questions 8 PART ONE THE ENVIRONMENTAL CONTEXT 2 Globalization 11 Introduction 11 Globalization and the Business in Context Model 12 What is Globalization? 13 When Did Globalization Start? 15 The Causes and Drivers of Globalization 16 Economic and Production Aspects of Globalization 18 Global markets 18 Globally organized production 19 Outsourcing and off-shoring 19 Global factory 22 Global value chains 25 Political Aspects of Globalization 27 Cultural Aspects of Globalization 27 Perspectives on Globalization 28 The globalist perspective 28 The anti-globalization perspective 29 The sceptical perspective 30 The Multinational and Transnational Corporation 32 Characteristics of the multinational corporation 33 MNCs and the global economy 34 Rationale for the development of MNCs 36 A theory of multinationals? 37 From multinational to transnational 38 Modes of Entry 41 Strategie alliances and joint ventures 42 Summary 54 Discussion questions 55 Further reading 55

3 3 The Environment and Business: The Economy and the State 57 Introduction 57 Models Used in Assessing the Environment 60 Critique of PEST 61 The Economy and Business 62 How we measure and compare national economies 63 A shift in global economic power? 64 The BRICs report 66 The BRICs predictions in perspective 66 Is BRICS more than a Goldman Sachs construct? 68 China: the future world order? 69 China versus India 76 Back in the USA 77 Changes in the Operation of national economies 79 The impact of business on the economy 83 The impact of the economy on business 84 The State and Business 85 State Intervention under different economic systems 87 Difficulties with State Intervention 88 Types of State Intervention 88 The business Community as a pressure group 90 International economic and political Integration 92 The European Union 94 Summary 106 Discussion questions 106 Further reading The Environment and Business: Technology and Labour 109 Introduction 109 Technology 110 Technology: determinant or choice? 111 Technology and strategy 112 Information and communications technology 114 Electronic commerce 118 Technology change, jobs and people 122 Labour 130 Employment trends 130 Globalization and labour market mobility 135 Trade unions 137 Summary 140 Discussion questions 141 Further reading Cultural and Institutional Frameworks 143 Introduction 143 Theoretical Overview 144 Convergence 145 Implications of convergence for managers 147 The limits of convergence 147 Approaches Based on Diversity 148 Culture 149 Defining culture 149 The World Values Survey 158 The implications of cultural diversity for managers 159 Institutional Frameworks 161 The business systems model of Whitley 161 The Anglo-Saxon model 162 The social market model 163 The Asian model 164 Varieties of capitalism: Liberal versus coordinated market economies 165 A convergence on Anglo-Saxon capitalism? 167 Institutional frameworks: Some conclusions 167 Japan: Convergence and Diversity 168 Convergence 168 Cultural explanations 169 Institutional explanations 169 Summary 175 Discussion questions 175 Further reading 176 PARTTWO STRATEGIC CONTEXTS ORGANIZATION AND 6 Business 181 Introduction 182 Goals 182 The nature of goals 183

4 How goals are developed 184 Multiple goals 185 Structure 189 Factors that influenae structure 190 Types of structure 194 Trends in Organization structure 202 Structure and Performance 205 Ownership 206 Types of ownership 206 Ownership and control 208 Management and control in the public sector 212 Privatization 214 Size 219 Small businesses 221 The value of small businesses 223 Organizational and Corporate Culture 225 The terms defined 225 Strang cultures and the excellent Company 226 Culture and Performance 228 How useful is organizational culture as a concept? 229 How useful is corporate culture as a concept? 229 Summary 234 Discussion questions 235 Further reading Management and Leadership 237 Introduction 237 Management 238 What is management? 238 The manager's right to manage 241 What managers are supposed to do 242 Models of management 242 Critique of management models 247 What managers actually do 248 Reality versus theory? 250 Leadership 251 What is leadership? 251 The differences between management and leadership 252 Why leadership? 253 Theories of leadership 253 Some concluding thoughts on leadership 263 Summary 268 Discussion questions 268 Further reading Strategy 271 What Is Strategy? 271 The Strategie Process 273 Approaches to strategy 273 Strategie contexts 278 The uses and value of strategy 279 Environmental Aspects of Strategy 280 The general environment 280 The immediate competitive environment 282 Environmental threats and opportunities 286 Strategy 288 Interaction of strategy and Organization 289 Resource analysis 290 Resource-based view (RBV) 290 The value chain 296 Portfolio analysis 298 Strategie Options 301 Business level strategies 302 Corporate-Ievel strategies 303 Strategie Choice 311 Summary 316 Discussion questions 316 Further reading Business Ethics and Corporate Social Responsibility 319 Introduction 319 Defining Business Ethics and Corporate Social Responsibility 321 Business ethics 322 Corporate social responsibility 324 Areas of activity in CSR 324 Stakeholders 326 Historical Development of Ethical Concerns in Business 329 Why Should Businesses Be Socially Responsible? 331 The moral argument 331 The business argument 331 The Strategie argument 334 The critical perspective 336 So can business be ethical? 339 Mechanisms for ethical business and social responsibility 340 Summary 347 Discussion questions 347 Further reading 348

5 PARTTHREE 10 Innovation 351 THE ACTIVITIES CONTEXT Introduction 352 Identifying the Concepts 353 Invention and Innovation 353 Research and development 354 Types and Scope of Innovation 356 Types of Innovation 356 The scope of Innovation 357 Expenditure on Research and Development 359 Entrepreneurship 363 What is entrepreneurship? 364 Environmental Aspects of Innovation 367 The role of the economy 367 Problems of linking Innovation and Performance 369 The role of the State 371 Problems with State Intervention in Innovation 373 National and cultural differences 373 Innovation and technology 377 Innovation 378 Organizational size and goals 379 Innovation and Organization structure 381 The role of Organization culture 384 Innovation and Management Strategies 384 Types of strategy 384 Integration: strategy, structure and culture 387 Constraints to effective Innovation strategy 388 Summary 393 Discussion questions 394 Further reading Operations 397 Introduction 398 Identifying the Operations Function 399 Differences between manufacturing and non-manufacturing industries 400 Conflicting objectives and changing solutions 401 The relationship between Operations and other functional areas 403 The Main Activities of Operations Management 407 The design of Operations systems 408 Operations planning and control 412 Operations and the Environment 423 Operations, the economy and the State 423 Operations and technology 424 Operations 425 Operations and Organization size 425 Operations and Organization structure 426 Operations Strategies 426 Approaches to Operations strategy 428 Lean production 429 Summary 435 Discussion questions 436 Further reading Marketing 439 Introduction 440 Definitions and Orientations 440 Marketing in different contexts 443 The Elements of Marketing 446 Market Research, Segmentation, Targeting and Positioning 446 Market research 446 Segmentation, targeting and positioning 448 Branding 451 Types of brand 452 Co-branding 453 The reasons for branding 454 Global brands 455 The critics of branding 456 Product, Price, Promotion and Place (the 4Ps) 457 The product 460 Price 463 Advertising 466 Place 470 Customer Service and the 7Ps 471 Buyer Behaviour 472 Environmental Aspects of Marketing 474 Marketing and the economy 474 Marketing and the role of the State 475 Consumerism 477

6 Marketing and technology 478 E-marketing, digital marketing and social media marketing 479 The role of national, social, cultural and institutional influences in marketing 482 Marketing 485 The Organization of marketing 485 Forms of structural arrangement in marketing 486 Marketing and other functions 487 The Strategie Aspects of Marketing 488 Segmentation, targeting, and positioning strategy 488 Branding strategy 489 Product strategy 489 Pricing strategy 489 Promotion strategy 491 Distribution strategy 492 An integrated marketing strategy 493 Summary 499 Discussion questions 499 Further reading 500 Human Resource Management 501 Introduction 502 Defining HRM 502 What are the activities of HRM? 505 How HRM is performed 506 Employee Resourcing 508 Recruitment and selection 508 Equal opportunities and diversity 512 Employee Development 514 The training and development process 515 Management development 516 Employee branding 516 Pay and Performance 517 Pay and reward systems 517 Performance management 520 Employment Relations 522 Employee involvement 523 Environmental Aspects of HRM 524 HR and globalization 524 HR and the economy 526 The role of the State 526 Technology 527 Cultural and institutional influences 527 HRM 529 Organization size 529 Organization structure and goals 530 HR Strategies 531 Human resource planning 531 Approaches to MR strategy 532 Effectiveness of HR strategies 533 Summary 538 Discussion questions 538 Further reading 539 Finance and Accounting 541 Introduction 541 Financial Management 543 Share capital 543 Loan capital 544 Other forms of financing 546 Management Accounting 546 Budgeting and budgetary control 547 Cost accounting 548 Investment appraisal 549 The management of cash flow 550 Contribution to management decision-making 550 Financial Reporting 551 The balance sheet 552 The profit and loss account 552 Cash flow statements 552 Ratio analysis 553 Users of published accounts 554 Accounting and corporate governance 556 Environmental Aspects of Finance and Accounting 557 The role of the economy 557 Differences in culture and national systems 557 Finance and Accounting 560 Accounting requirements of large and small firms 560 Organization structure, cost allocation and transfer pricing 560 Strategie Aspects of Finance and Accounting 563 Summary 567 Discussion questions 568 Further reading 568 References 569 Glossary 581 Credits 597 Subject Index 601 Name Index 611

Chapter 1 THE CONCEPT OF BUSINESS IN CONTEXT LEARNING OBJECTIVES At the end of this chapter you should be able to: Define and illustrate business as

Chapter 1 THE CONCEPT OF BUSINESS IN CONTEXT Define and illustrate business as a broadly-based and varied activity. Identify and illustrate the key activities of business and the relationships between