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Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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SOCIAL ENTREPRENEURSHIP: IMPROVING WORLD HEALTH WITH-

OUT PROFITS

Knowing that Victoria Hale was a pharmaceutical scientist, a friend called her, desperate. Their

13-year-old daughter had been diagnosed with a deadly form of cancer called Ewing’s sarcoma. The

daughter’s doctors were offering little hope, and the cancer was spreading fast. Could Hale help? With the

aid of a former FDA colleague, she began searching for experimental compounds that might offer any ray

of hope. They found two substances that had shown initial promise in fighting the cancer, but both were

sitting idle on laboratory shelves. No one was working to develop the compounds into drugs. The cancer

was too rare to create an attractive market for new treatments.

All organizations need money to operate. One of the major sources of money is investors who

give money to firms in order to make a profit. Those firms have to be profitable. Nonprofit organizations

usually rely on the donations from others to keep operating. Often that money comes from profit-making

companies, like Celera, who are concerned about disease prevention, but can’t stay in business unless

they make a profit. Hale has found a way to link these organizations. iv

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AMERICA’S LOST DECADE

It’s no secret that the past few years have been rough on the U.S. economy. Sadly, though, the

American financial sector’s recent rockiness tells only a portion of the decade’s dire story. When looked

at as a whole, the time known by some as the “Oughts” (2000–2009) was an enormous step backward for

For all its destructive elements, the economic debacle of the 2000s has succeeded in providing

government officials, financial experts, and the public with some much-needed perspective. Due to the

magnitude of the Oughts’ financial failures, economists will be unraveling all its lessons for some time.

However, one obvious source of reform for regulators is the banking industry. Instead of monitoring indi-

vidual banks closely, regulators must now observe the banking industry as a whole to measure its overall

effect on the economy. Reforms to Federal Reserve policy are also expected, but Fed officials are still

uncertain how to implement them.v

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EDUCATION’S NEW WHITEBOARD

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

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At schools fortunate enough to have them, interactive whiteboards are a blessing for educators

struggling to engage a generation of students raised with the Internet. In the United Kingdom 70% of all

primary and secondary classrooms have interactive whiteboards, compared with just 16% in the United

States. Students in those classrooms made the equivalent of five months’ additional progress in math.

Multiple studies suggest that the devices boost attendance rates and classroom participation. At Dorches-

ter School District 2 in Summerville, South Carolina, 1,200 interactive boards have been installed in the

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PREVENTING IDENTITY THEFT

Each year, millions of Americans fall prey to identity theft. Your identity is not just your unique

DNA and fingerprints. It is also your Social Security number, credit card numbers, driver’s license num-

HOW IDENTITY IS STOLEN

Thieves often rely on hacking vulnerable computer systems to harvest information. In 2005, the

credit card processing agency CardSystems revealed that it improperly kept information on credit card

customers for research. When hackers breached the system, over 40 million customers were exposed.

In January 2009, Heartland Payment announced that the company’s card processing system had

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HOW YOU CAN PROTECT YOURSELF

SIGNS THAT YOUR IDENTITY MIGHT HAVE BEEN STOLEN

Be alert to signs that require immediate attention such as:

1. Bills that do not arrive as expected

2. Unexpected credit cards or account statements

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3. Denials of credit for no apparent reason

4. Calls or letters about purchases you did not make

WHAT TO DO IF YOUR IDENTIFY IS STOLENvii

4. File a complaint with the Federal Trade Commission, and report the fraud to the Social Security

Administration.

Below are the important telephone numbers you will need to begin rebuilding your credit:

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MAGAZINES PLEAD PRINT’S CASE

For years, print media publications have been scrambling to find suitable ways to adapt to the

digital age. In anticipation of Apple’s iPad, for example, a group of magazine publishers combined their

efforts to devise a way to migrate magazines from the paper issue to the electronic tablet. But another

group of publishers, headed by Rolling Stone founder Jann Wenner, is defending the legitimacy of their

current medium with an unprecedented joint ad campaign. Along with publishers like Conde Nast, Mere-

dith, and Time Inc., Wenner and company aim to remind readers about the “power of print.”

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THE LANGUAGE OF BUSINESS

The population of the United States is becoming increasingly diverse. Today Hispanics are the

fastest-growing minority population. These consumers have significantly increased the demand for bilin-

gual salespersons and professionals throughout the economy.

Most workers in the United States don’t need to speak or write a second language. But recruiters

say some telemarketing, banking, engineering, and financial service companies are looking for workers

and managers with bilingual skills because of the growing immigrant population of the United States or

because they are doing more business in foreign countries. According to Manpower Professional, the For-

tune 500 companies are asking more frequently for managers who speak Spanish, Portuguese, and Man-

darin Chinese.

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THE HIGH DEMAND FOR GREEN DEGREES

We all know the job market has been tough on new college grads the past few years. Despite

drive and degrees, many graduates left school only to find few opportunities for the young and inexperi-

enced. In order to avoid the job crunch, currently enrolled students are beginning to seek majors that are

more likely to promise success in the job market after graduation. One such area is environmental sus-

tainability, which the Obama administration estimates will have 52% job growth through 2016. As a re-

sult, more schools are adding green majors to their curriculums, and students are filling the classes in

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MILESTONES IN BUSINESS

190 Development of the abacus

1946 A general-purpose computer is available

1950s The service economy takes off

1955 Disneyland opens

1963 Equal pay for equal work

1972 E-mail is invented

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EARNING AN HONEST McPAYCHECK

McJobs, a term that refers to low-paying, advancement-free work, came into prominence in the

United States as the recession ravaged the job market. Understandably, McDonald’s didn’t appreciate the

association very much. After all, as the company’s vice president for the Boston area Robert Garcia said,

“with a McJob comes a McPaycheck.” And while unemployment continues to soar, McDonald’s did its

part to spur on growth on April 19, 2011, by hiring 50,000 people in a single day.

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

supplement their incomes. One hiring spree on the West Coast in 2010 brought in more than 60,000 ap-

plications for 13,000 positions.

critical

thinking exercises

Name: ___________________________

Date: ___________________________

critical thinking exercise 1-1

HOW MUCH PROFIT?

1. BANKING

Corporation _____________________ Percent Estimated Profit ____________

2. FOOD MANUFACTURER

Corporation _____________________ Percent Estimated Profit ____________

3. AIRLINE

Corporation _____________________ Percent Estimated Profit ____________

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4. COMPUTER COMPANY

Corporation _____________________ Percent Estimated Profit ____________

notes on critical thinking exercise 1-1

Students often have a much-exaggerated idea of the amount of profit big corporations make. This

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Name: ___________________________

Date: ___________________________

critical thinking exercise 1-2

JOB AND CAREER VERSUS OWNING A BUSINESS

1. CAREER SALARY OPPORTUNITIES (circle one)

2. CAREER JOB OPPORTUNITIES (circle one)

3. SMALL-BUSINESS OWNERSHIP OPPORTUNITIES (circle one)

Requires Up-Front Investment (small investment/medium-sized investment/large invest-

4. POTENTIAL RETURN ON THE SMALL-BUSINESS PURCHASE (circle one)

5. If you could, would pursuing your ideal career be worth the investment? (yes/no)

6. Are you willing to make the investment (more schooling) and work for moderate pay to get the

knowledge and experience to make this investment pay off? (yes/no)

7. If you could investment in your own business, would you and could you obtain the necessary fi-

nances to make this happen? (yes/no)

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

8. Is the risk of the unknown in the business environment worth the pursuit of your time, money,

and family adjustment to own your own business? (yes/no)

9. Given the two choices, what direction would you rather pursue?

Name: ___________________________

Date: ___________________________

critical thinking exercise 1-3

MAKING ETHICAL DECISIONS

Throughout the textbook, you will see a box in each chapter called Making Ethical Decisions.

You will be given a short description of a situation and then asked what you would do in that situation.

These boxes may or may not be assigned by your professor, but you will benefit greatly by reading them

and answering the questions. If they are assigned, you probably won’t be required to hand in a written

report. Your professor will probably have no real way of knowing if you read the boxes and answered the

questions. You are likely to be “on your honor.”

This is your first ethical situation in this course: You come to a Making Ethical Decisions box in

your text. What do you decide to do—read and answer the questions, or skip it and go on?

Use the questions below to help you make your decision.

1. What is the problem?

2. What are your alternatives?

3. What are the effects of each alternative? (What will happen if you choose that alternative?)

4. Which alternative will you choose? Why?

5. Is your choice ethical? (Would you want your family and professor to know of your decision?

Would you want it printed in the school paper? Is it fair to all parties involved?)

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notes on critical thinking exercise 1-3

bonus

cases

bonus case 1-1

THE WORLD’S LARGEST CHARITY

Bill Gates is one of the wealthiest people in the world. According to Forbes magazine, his net

worth is $56 billion. But at age 50, Bill Gates earned respect in a new way. Along with his wife Melinda,

the chair of Microsoft became the greatest philanthropist in history. Melinda, a former Microsoft col-

league, has a bachelor’s degree in computer science and economics and a master’s in business from Duke

University. (Bill dropped out of Harvard at the end of his sophomore year to run Microsoft.)

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The foundation has been able to instill a rare level of accountability from its grantees. In India,

the foundation runs an HIV AIDS-prevention program, headed by Ashok Alexander. Alexander calls the

program’s clinics “franchises.” In 2005, Alexander cut off funding to three nongovernmental organiza-

tions because they did not meet agreed-upon milestones. “People are not used to being terminated for

nonperformance,” says Alexander.

The gift more than doubled the size of the Gates Foundation. “We are awed by our friend Warren

Buffett’s decision to use his fortune to address the world’s most challenging inequities,” Bill and Melinda

Gates said in a statement. “As we move forward with the work, we do so with a profound sense of re-

sponsibility. Working with Warren and with our partners around the world, we have a tremendous oppor-

tunity to make a positive difference in people’s lives.” xii

discussion questions for bonus case 1-1

1. How do Bill and Melinda Gates use basic business principles to run the Gates Foundation?

2. Since the foundation does not earn a profit, how should its success be judged?

3. Most philanthropists are wealthy individuals who begin their charitable work late in life after

years of building an enterprise. Why do you think Gates started so early in his life?

4. Why do you think Buffett chose the Gates Foundation for his record-breaking donation?

notes on discussion questions for bonus case 1-1

1. How do Bill and Melinda Gates use basic business principles to run the Gates Foundation?

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2. Since the foundation does not earn a profit, how should its success be judged?

3. Most philanthropists are wealthy individuals who begin their charitable work late in life

after years of building an enterprise. Why do you think Gates started so early in his life?

4. Why do you think Buffett chose the Gates Foundation for his record-breaking donation?

bonus case 1-2

NETWORKING OUTSIDE THE NET

On the surface, people appear to network with one another now more than ever. Social media

dominate many people’s lives while smartphones ensure that everybody can get in touch with everyone

else anywhere at anytime. Nevertheless, digital interaction is no replacement for genuine human contact.

As social media become more prevalent and accessible, the information they disseminate runs the risk of

losing its value. To put it another way, Which carries more weight: a handshake or a Facebook poke?

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Networking face-to-face also means maintaining a professional image. Not only does that entail

discussion questions for bonus case 1-2

1. What can we conclude about digital interaction and human contact?

2. Why is it important to keep your Facebook account professional?

notes on discussion questions for bonus case 1-2

1. What can we conclude about digital interaction and human contact?

2 Why is it important to keep your Facebook account professional?

Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment

endnotes

i Source: “The World’s Billionaires,” Forbes, March 2011.

ii Source: Michelle R. Davis, “The Alternative: Younger Students Give Community College a Second Look,” The

2009.

xi Source: Katie Johnston Chase, “Fast–Food King Has Openings,” The Boston Globe, April 19, 2011.