Social Responsibility of Business and Government

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7 4 4-3 4-2 4-1 and Government of Business Social Responsibility Government RegulationandAssistance Government ProtectionActivities Social Responsibility

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A M Planning a Career in . . . GOVERNMENT

Accountants, interviewers, restaurant inspectors, Needed Skills and engineers are just a few of the many employment • Education level and experience required vary by opportunities in government. Federal, state, and local occupation. agencies employ more than 18 million people. As you • Specialized training and field experience will vary can see, government is a major employer in the U.S. depending on the occupational field in which you economy. desire to work. About 60 percent of federal workers hold mana- gerial, business, financial, and professional positions. • Elected government positions will require skills in While some government jobs require training similar communication, organization, and leadership. to that of business workers, other positions demand training that is more specialized. Food production What’s it like to work in . . . regulators and homeland security officials need aca- Government demic and practical experiences related to their fields. Kathleen works for her local school district, but Employment Outlook her job lasts all year. She • Increased job opportunity in some federal agencies is the assistant accoun- is being offset by slow growth and declines in other tant for the district. federal sectors. Her accounting job is • Despite increased demand for services from state just like an account- and local governments, employment levels will be ing job at a nonpublic affected by economic conditions and the availabil- business. Kathleen is ity of tax revenues. responsible for col- © Getty Images/PhotoDisc lecting expense and • Staffing of government positions is directly payment records. She must make sure that incom- affected by budget levels approved by legislative ing bills are correct and that payments are made in a bodies and local governing boards. timely manner. Kathleen also works with the school district’s head accountant to develop expense reports Related Job Titles and budgets. Throughout the year, Kathleen helps • Purchasing Agent the head accountant present reports to the school • Conservation Scientist board. Kathleen uses computer software for account- • Correctional Officer ing records, report writing, and presentations. She • Firefighter could use her accounting skills in the private sector and perhaps earn more money. Although a higher • Highway Maintenance Engineer salary would be nice, Kathleen enjoys working for the • Municipal Clerk school district and is happy with her career choice. • Registered Nurse What about you? What are some government jobs • Revenue Agent that might interest you? • Social Worker • Urban Planner • Job Placement Counselor

445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 7755 112/20/072/20/07 12:10:4112:10:41 AMAM 4-1 Social Responsibility

Goals Key Terms Focus on Real Life Describe social social responsibility Jo Ann Homer, owner of JA Kitchen Crafts, consid- responsibility issues. ers herself a socially responsible person and employer. non-renewable She serves on the board of the local United Way and chairs resource Identify benefits the job training committee of the local economic development and costs of social ethics board. She is also involved in literacy and mentoring programs. responsibility. JA Kitchen Crafts participates in United Way fundraising and business ethics donates to charities that assist the homeless and hungry. The com- Explain the purpose code of ethics pany also participates in a school-to-work program. of a code of ethics. The company encourages employees to be active in community affairs and to volunteer with a variety of organizations. In some cases, the company provides paid time off for volunteer commitments during work hours. In a recent interview, Jo Ann said, “Workers are likely to be more satisfied on the job if they believe their company actively contributes to community life.”

main idea SOCIAL RESPONSIBILITY resources cannot be replaced. A ISSUES non-renewable resource is a natural Define social resource that cannot be replaced when responsibility issues. Social responsibility refers to the duty used up. Examples are gas, oil, and min- of a business to contribute to the well- erals, such as copper and iron ore. being of a community. In considering Pollution occurs when the environ- its responsibility to society, a business ment is tainted with the by-products must weigh the interests and concerns of of human actions. Some production many groups. A broadened view of social methods cause pollution of lakes, rivers, responsibility of business calls for more attention to social concern. This includes protection of the environment, inclusion of minorities and women in the workplace, employment of physically challenged and older workers, and a healthy and safe work environment.

Environmental Protection Conservation is saving scarce natural resources. It is a goal of many companies. For example, lumber © Getty Images/PhotoDisc companies that consume trees have How does preserving the environment benefit business? reforestation programs. Some natural

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 7766 112/20/072/20/07 12:11:2412:11:24 AMAM and air. A socially responsible business takes action to improve or change operations that cause pollution. For example, FFYIYI engineers design new equipment for reducing pollution. Company safety programs often reward employees with cash bonuses, prizes, or additional vacation days for ideas that improve The federal government has set mea- the safety of the workplace. surable standards for water and air quality. The Environmental Protection Agency (EPA) monitors and enforces those decisions, including hiring, promotions, standards. Businesses and the EPA work or termination from a job. The law together to reduce pollution. They try to protects persons aged 40 and older. make the environment healthier. Job Safety Workplace Diversity Having a safe place in which to work is Businesses are more and more sensitive important to all employees. They should to the role of women, ethnic groups, and be able to work in an office or factory free physically challenged and older workers. from risks that could cause accidents. The The workforce of a business should reflect work environment should provide full the groups in a community. Members of protection from fire and other hazards. these groups must have equal access to edu- In addition to protection from physical cation, training, jobs, and career advance- harm, workers need to know how to man- ment. A major challenge facing businesses age the unexpected. Safety also involves today involves learning how to manage a employee training in how to work safely workforce made up of workers who repre- and what to do in case of an emergency. sent the diverse cultures in society. To ensure the right to safety, most Another issue involves the removal employers have put a variety of programs of employment barriers for women. For into practice to protect workers. Federal example, employers are not allowed to and state governments have also passed exclude women applicants from a physi- laws to make the workplace safer. Safety cally demanding job unless the business standards are regulated and enforced by can prove the job requires physical skills agencies such as OSHA, the Occupational that women do not have. Safety and Health Administration. Employers also have taken steps to accommodate individuals who are physically challenged. Passage and enforcement of the Americans with Disabilities Act (ADA), along with other federal and state legislation, has resulted in major improvements in accommodating workers who are physically challenged. Buildings must have access for wheelchairs. People with sight or hearing limitations must be accommodated on the job. Other laws have been passed to eliminate bias against older workers. The passage of the Age Discrimination in © Getty Images/PhotoDisc How has the Americans with Disabilities Act increased employment Employment Act bars employers from opportunities for people who are physically challenged? using age as a basis for employment

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 7777 112/20/072/20/07 12:11:3812:11:38 AMAM main idea Employee Wellness SOCIAL A healthy workforce is a productive work- Identify benefits RESPONSIBILITY and costs of social force. Workers who have good physical EVALUATION responsibility. health are valuable assets. Businesses today do a number of things to improve the Socially responsible actions can cause health of their workforce. Among pro- controversy. While a number of benefits grams offered are stop-smoking seminars, exist, these actions also have various counseling for employees with drug prob- costs. lems, and weight-loss sessions. Your general well-being as an employee Benefits needs to be protected, too. Clauses that Common benefits of socially responsible relate to employee well-being are often activities include the following: included in labor contracts and company policy manuals. These clauses are condi- • Expanded justice for groups of a tions of work that pertain to the health and society safety of employees while on the job. • Enhanced company image Many companies offer programs to • Reduced need for government promote good health. Seminars on eating actions a balanced diet, getting proper exercise, and maintaining a healthy lifestyle are a • Improved quality of life in a commu- few examples. Some businesses sponsor nity and around the world sports teams and encourage employees to • Increased awareness of social issues take part. among workers, consumers, and others chec kpoint ›››› What are four areas of social responsibility that may require the attention of Costs Checbusiness? kpoint There are costs involved when a business takes socially responsible actions. Money must be spent for new non- polluting or safer equipment, for building repairs to remove risks, for wellness and rehabilitation programs, and for social projects sponsored by a company. A business must make a profit to stay open. If a business does not earn a profit, the business will close and employees will lose their jobs. Spending on social programs must be at a suitable level so a business can still earn a rea- sonable profit.

chec kpoint ›››› What are the main benefits of social Brand X Pictures How do employees who are healthy benefit their employers? responsibility?

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 7788 112/20/072/20/07 12:11:5412:11:54 AMAM BUSINESS ETHICS Work as a Team A socially responsible business engages Using the three ethical guidelines on this page, in ethical business practices. Ethics are select a situation in a work setting that might be principles of morality or rules of conduct. considered unethical. As a team use these three Business ethics are rules about how questions to assess the ethical aspects of the businesses and their employees ought to situation. behave. Ethical behavior involves con- forming to these rules. Unethical behavior violates them. In dealing with business Companies concerned about ethical main idea ethics, a code of ethics can help a business behavior in their employees have set up educational programs on ethical conduct. Explain the purpose identify proper employee behavior. of a code of ethics. These programs are designed to promote employee honesty and integrity. Program Code of Ethics topics range from making personal phone A code of ethics is a set of rules for calls during work hours to taking sup- guiding the actions of employees or plies for personal use. Employees are also members of an organization. Codes of trained on how to make ethical decisions ethics address topics such as confidential- on the job. ity of business information. Figure 4-1 When considering the ethics of busi- lists other topics to consider when ness situations, you could follow these developing a code of ethics. Once guidelines. established, the code should be a guide of values for all employees within 1. Is the action legal? that company. 2. Does the action violate professional A code must be worded in terms of or company standards? acceptable behavior rather than forbid- 3. Who is affected by the action and den action. Even with a code of ethics, how? the choice of proper behavior can cause dilemmas for decision-makers within a business. Here are some examples of ethi- Guidelines for Writing a Code of Ethics FIGURE 4-1 cal dilemmas. Do you think a code of • Should a company expand into a 1. Determine the purpose of the code. ethics can increase a profitable market in another country 2. Tailor the code to the needs and business’ profits? How? where doing business requires giving values of the organization. expensive gifts to key government 3. Consider involving employees from all officials? levels of the company in writing the • Should a company continue to pro- code. duce a popular product after it dis- 4. Determine the rules or principles that covers a minor defect in it? all members of the organization will be expected to adhere to. Ethical Conduct Guidelines 5. Include information about how the code will be enforced. The ethical conduct of a business is greatly determined by its top manage- 6. Determine how the code will be ment. Executives who show strong moral implemented and where it will be published or posted. character and make ethical business decisions set the ethical standards for a 7. Determine how and when the code business. will be reviewed and revised.

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 7799 112/20/072/20/07 12:12:0212:12:02 AMAM A common concern in ethical decision-making involves a conflict of interest. This can occur when an action by a company or individual results in an unfair benefit. For example, it would be a conflict of interest if a person serving on a company’s board pressured the company to buy items only from businesses that the board member owns or controls. In addition to workplace codes of ethics, many employees, including accountants and engineers, adhere to codes of professional conduct established by their professional associations. They also participate in continuing education related to ethical issues specific to their professions.

chec kpoint ›››› © Getty Images/PhotoDisc What is the purpose of a code of ethics? What are some costs to society of unethical behavior?

4-1 Assessment school.cengage.com/business/introtobiz

Key Concepts 3. A code of ethics is designed to a. meet government regulations Determine the best answer. b. reduce operating costs of a company 1. An example of a non-renewable resource would be c. provide guidelines for proper behavior a. solar energy d. improve employee productivity b. gold c. agricultural products d. a library book Make Academic Connections 2. The Americans with Disabilities Act (ADA) requires that 4. Science List a variety of natural resources and agricul- a company tural products used in the production of goods and a. provide training to people with disabilities services. What actions might be taken by companies to b. find ways to help workers who are physically improve the efficient use of these resources? challenged 5. Technology Search the Internet to locate an example c. hire a certain number of people with special needs of a code of ethics. Describe the benefits of this code of d. adapt products manufactured for special-needs ethics for the organization. customers

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 8800 112/20/072/20/07 112:12:052:12:05 AMAM Sharpen Your Life Skills

Working in Teams • Keep focused on your goals. Avoid being distracted by minor issues and personality conflicts. Maintain a Each day, thousands of workers make decisions and apply team-oriented environment by saying “we, us, ours.” business actions in team settings. The ability to work in Avoid using “I, me, my, mine.” a team is rated by most employers as one of the most important career skills. The combined skills of the people • Be courteous to others. Respect differences in in a team are greater than that of individuals working opinions, personalities, and decision-making styles. alone. When working in a team in class or on the job, Working in teams is something you are likely to consider the following: do throughout your life. These experiences can be • Be prepared for minor conflicts in the first phase of a enjoyable and productive. Members of an effective team project. Differences in opinions will surface. Be team take responsibility for its work and take pride ready to adapt to the personalities, behaviors, and in its accomplishments. Some team projects will be actions of others. frustrating. It is important to maintain a positive attitude. Some of the best learning and most valuable Agree upon guidelines for project goals, meeting • experiences result from encounters with others times, location, agenda, missed meetings, conflict with different backgrounds and diverse points resolution, and other procedures. of view. • Define leadership and other roles. Some team members will keep notes and bring needed materials. Think Critically Others will conduct research or create visuals for a 1. What do you like about working in teams? Are there presentation. any aspects about working in teams that you dislike? • Determine methods for decision-making. Usually this Describe them. will be done based on agreement among team mem- 2. Describe a problem that might occur when working bers after discussion of various issues and opposing in teams. Explain how this situation might be points of view. resolved. © Getty Images/PhotoDisc

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 8811 112/20/072/20/07 12:12:1212:12:12 AMAM 4-2 Government Protection Activities

Goals Key Terms Focus on Real Life Identify the roles contract Brenda Hiam was driving to school when, all of a sud- and levels of den, a crack in the road caused her car to swerve and hit a patent government. bump. While there was no obvious damage to the vehicle, this copyright was a disturbing event. Explain government At this point, Brenda wanted to contact a government agency trademark protection activities. to notify them of this potentially dangerous driving hazard. She asked her friend, Kevin, if she should contact the city, county, state, Describe types of or federal highway department. intellectual property. “That depends if the road is a city, county, state, or federal highway,” he answered. “Well, this might not be as easy as I thought,” said Brenda in a confused tone.

main idea GOVERNMENT IN SOCIETY • Buying goods and services Identify the roles and Government plays a role in all economic • Hiring public employees levels of government. systems. Your role as a citizen and voter • Raising revenue has an effect on the decisions and actions Each of these roles has either a direct taken by government. In a private enter- or indirect impact on business expansion, prise system, government’s role is much consumer affairs, and economic growth in less extensive than in other economic sys- the economy. tems. It is still a vital one. The role of government in the economy often changes as Levels of Government newly elected officials take office. The main goal of the federal government Roles of Government is to oversee the activities that involve two or more states or other countries. In As issues facing society change, so must general, the Constitution gives the federal government change. There are some basic roles of government. Government is mainly concerned with these areas: • Providing services for members of society • Protecting citizens, consumers, businesses, and workers • Regulating utilities and promoting competition © Getty Images/PhotoDisc • Providing information and support to Can governmental activities support both businesses and consumers? businesses

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 8822 112/20/072/20/07 12:12:2212:12:22 AMAM through police and fire- fighting services. The armed forces provide for national defense. National security is a chief concern of the federal government. Worker Protection Laws have been established to help provide a safe work environment.

© Getty Images/PhotoDisc As a worker, you have a How does government regulate commerce? basic right to safe working conditions. Safety government the power to regulate foreign standards for build- and interstate commerce. ings, machines, and chemicals are set Interstate commerce is business deal- by government agencies. Government ings involving companies in more than inspection and regulation of work areas one state. The federal government would help reduce the number of job-related regulate a trucking company that ships accidents. products to several states. More government regulations result State governments regulate busi- from the need to protect the basic human ness actions within their own borders. rights of workers. For example, you can- Intrastate commerce refers to business not be denied work because of your dealings involving companies that do race, religion, sex, or age. Selection of business in only one state. A truck- someone for a job must be based on job ing company that hauls products only requirements, training, and experience. within a state’s boundaries would be Prejudices and personal biases must not regulated by that state and not the fed- affect a hiring decision. eral government. All states have assigned some of their Contract Enforcement legislative power to local governments. Contracts are another example of govern- Local governments include county boards ment protection. A contract is an agree- and city or town councils. Local government to exchange goods or services for ments provide services needed for an something of value, usually money. It is orderly society, such as police and fire a basic part of doing business. A contract main idea protection. may be written or unwritten. Certain ele- ments must be included for the contract Explain government to be enforceable. Figure 4-2 highlights protection activities. chec kpoint ›››› What are the three levels of government? FFYIYI GOVERNMENT PROTECTION ACTIVITIES It is important to read and understand a contract before signing it. The court system does not protect you from your own lack of Government protects your rights in a common sense. number of ways. Citizens are protected

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 8833 112/20/072/20/07 12:12:3612:12:36 AMAM 445610_04_Ch04_p074-097.indd 84 5 6 1 0 _ 84 tual propertyimportant? the organization.Whyisprotection ofintellec- how theseassetscontribute tothesuccessof companies andnonprofitorganizations.Explain patents, copyrights,andtrademarksownedby ble assets.Asateam,preparelistofvarious Intellectual propertiesarealsocalledintangi- Provide examplesofcontractsyoumightencounterinthefuture. FIGURE 4-2 intellectual property. Describe typesof 0 4 Work asaTeam Parties Competent Agreement Valid, enforceablecontractsmustcontain: Consideration Legality _ C main h CHAPTER 4 0 4 _ p 0 7 the contract must beoflegalageand 4 - The contract must beforaproductorservice 0 9 idea 7 . i n

An offermustbemade,andanacceptance must d d

Something ofmeasurablevaluemustbe 8 4 Those enteringinto occur. mentally competent. tion existsintheagreement. that maybelegallysold;also,nofraudordecep- parties involved. exchanged bythe SOCIALRESPONSIBILITYOF BUSINESSANDGOVERNMENT or ifyoufailtopay,legalactioncan finished. Ifworkisnotdonecorrectly You mustpayfortheworkwhenitis firm mustdotheworkasagreedupon. made onyourcarfor$65,thebusiness contracts. Ifyouagreetohaverepairs fit fromgovernmentenforcementof of apurchase. and documentsthatstatetheterms apartment, acreditcardagreement, of contractsincludealeasetorentan can resultinalegaldispute.Examples values ( disputes. Anitemseenashavingdifferent legality—are thebasisformanylegal competent parties,consideration,and contract. the mainprovisionsofeveryenforceable Contract Basics Both consumersandbusinessesbene- These fourelements—agreement, consideration ) bydifferentpeople difficult. business activitieswouldbevery honor theiragreements.Daily or businessownerscouldrefuseto enforcement, dishonestconsumers corrected orforceyoutopay.Without be takentoforcethework A new products,theymayobtainapatent. When individualsorcompaniescreate Patents and trademarks. property includespatents,copyrights, person cannottouchit.Intellectual with nophysicalcharacteristics—a Intellectual property PROPERTY PROTECTION OFINTELLECTUAL process. making orsellingrecorders usingthis It wouldpreventothercompanies from sion couldgetapatentforthisprocess. means torecordprogramsfromtelevi- 20 years.Acompanythatcreatesanew right tomake,use,orselltheitemfor Why isitimportantforcontractstobeinwriting? patent contract? What arethemainelementsofa chec kpoint gives theinventorsole ››› › ispurelyintangible,

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A M Copyrights A copyright protects the creative work of authors, composers, and artists. Copyright protection lasts for the life of the person receiving the copyright. It also extends for 70 years after the person’s death. Examples of copyright statements can be found on the front pages of most books. Copyrights are identified with the symbol ©. © Getty Images/PhotoDisc Trademarks Can you think of any kinds of publications that would A trademark is a word, letter, or symbol not be copyrighted? linked with a specific company or product. Businesses register company names, team emblems, and label designs with the government. A trademark can be very valuable. Many are famous all over the chec kpoint ›››› world and are often identified with a sym- What are three types of intellectual bol, called a logo. Can you think of some property? logos that you see frequently?

4-2 Assessment school.cengage.com/business/introtobiz

Key Concepts Make Academic Connections Determine the best answer. 5. Math A city government spends $186,000 a month on public services. Of that amount, 46 percent is used for 1. True or False. International trade with other fire and police protection. countries is the responsibility of state and local a. How much is spent each month for fire and police governments. protection? 2. True or False. An oral contract can be legally b. How much is spent each month for other services? binding. c. How much is spent by the city in a year for fire and police protection? 3. Fire and police protection is the main responsibility of 6. Math In a city in which there are 90,000 employed a. local government workers, 18,000 are public employees. Of this num- b. state government ber, the federal government employs 6,000; the state, c. federal government 8,000; and the city, 4,000. d. all levels of government a. What percentage of all workers are public employees? 4. A _?_ would protect the composer’s musical score. b. What percentage of the public employees does the a. patent federal government employ? b. trademark c. What percentage of all employees are employees c. copyright of the state government? d. contract 7. Law Prepare a list of possible problems that could occur in a contract situation.

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 8855 112/20/072/20/07 112:12:592:12:59 AMAM Doing Business in . . . Vietnam

Official name Socialist Republic of Vietnam Capital Hanoi Population 85.3 million Currency dong Major exports crude oil, marine products, rice, coffee, rubber, tea, gar- ments, shoes

Major export partners © Getty Images/PhotoDisc United States, Japan, China, Australia Major imports machinery and equipment, petroleum products, fertilizer, steel products, raw cotton Major import partners China, Singapore, Taiwan, Japan, South Korea

Source: CIA World Factbook

One minute you see peaceful villages with carts pulled by Vietnamese, it is polite to have the Vietnamese side facing animals. A moment later, you see busy city streets in which up. You may be asked how old you are. This classifies you seven of ten Vietnamese families use a motorcycle as their as either older or younger than the Vietnamese person in main method of transportation. order to determine the correct form of address. Vietnam is a country of contrasts, combining tradi- The business meal is likely to include tea and perhaps tional production methods with modern business activi- some exotic foods. You may be served bat meat, stir-fried ties. The nation is moving from decades of strong central baby birds, dog, or snake, as well as many types of sea- planning to emerging areas of capitalism. food. It is polite to taste and drink small amounts of all Even as Vietnam transitions to a modern market items you are offered. economy, the Vietnamese people continue to place a high The conversation will slowly lead to business nego- value on traditions and family relationships. Several gener- tiations. Take care to not move too quickly through the ations may live together in the same home. Children show agenda because this is considered rude. Use a low-pitched great respect for the elders of the family, even their older voice and low-key gestures. Do not allow your hosts to see brothers and sisters. the soles of your shoes. When doing business in Vietnam, you will need to get approvals from several levels of government agencies. In Think Critically recent years, the government has tried to attract foreign 1. What cultural factors affect business activities in investment for factories, technology, and infrastructure. Vietnam? Making connections with government officials and joint 2. How do business activities in Vietnam differ from those venture partners is especially important for business success. in other countries? At the start of a meeting, the exchange of business 3. Conduct library or Internet research to obtain additional cards occurs. Cards should be presented and received information about business and economic activities in with both hands. If your card is printed in both English and Vietnam.

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 8866 112/20/072/20/07 12:13:0912:13:09 AMAM 4-3 Government Regulation and Assistance

Goals Key Terms Focus on Real Life Explain actions by public utility The skateboard park in the city is one of the most government to regu- popular areas. Kent Walling recently noticed that monopoly late business. due to extensive use, the ramps, jumps, and tracks antitrust laws are wearing out. Using the skate park is not as much fun. Discuss efforts of Money is needed by the city government to maintain government to assist the skate park. Currently, the city faces many financial needs. businesses. Kent believes that the city should increase taxes to pay for the skate park improvements. His friend, Galib, thinks the city could Identify methods sell bonds to raise funds for the upgrade. Another friend, Marcus, used by government has heard a fee might be charged to use the skateboard facilities. to raise money.

REGULATORY ACTIVITIES main idea Business activity in the United Explain actions by States is structured as a private government to enterprise or free market system. regulate business. Private organizations own the factors of production. They choose efficient methods of production in order to earn a profit. Price and output decisions are made not by the government, but by businesses and consumers acting under vary- ing economic conditions. Government does get involved in some areas of business activities. These include regulating utilities and preventing unfair business practices. Regulation of Utilities Most goods and services you use come from private businesses. These businesses are for the most part free of government regulation. A public utility is an organization that supplies a service or © Getty Images/PhotoDisc Is it better for consumers if utilities are offered by competing product vital to all people. These businesses? include companies that provide

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 8877 112/20/072/20/07 12:13:2512:13:25 AMAM Work as a Team one business receives lower rates for the same quality and quantity of supplies Companies can take actions that reduce competition than other businesses receive, it has an and give consumers fewer choices. Describe some advertising, pricing, or branding actions that could advantage. Such action may result in result in unfair competition. unfair competition. A monopoly exists when a business has control of the market for a product local telephone service, water, and or service. A public utility monopoly may electricity. A public utility is chosen benefit consumers by making sure they to serve a community. If your city had receive a needed service at a fair price. six different electric companies, each Other monopolies may not be good might have its own utility poles, lines, for the economy. If the same company and expensive equipment. The service owned all food stores in your city, you would get would be more expen- consumers might not be treated fairly. sive and less efficient. The extra poles This business could charge high prices and wires would create an unattractive and sell poor-quality products. When environment. competition is present, consumers While many utility companies are get the best values at the fairest privately owned, usually government prices. closely regulates them. The rates they One government action meant to can charge for things such as electricity, promote competition and fairness and water, or natural gas have to be approved to avoid monopolies was the passage of by government agencies. In recent years, antitrust laws. Antitrust laws prevent there has been a trend toward deregula- other unfair business practices such as main idea tion of prices where competition can be false advertising, deceptive pricing, and introduced. misleading labeling. Each of these unfair Discuss efforts of government to assist practices hurts competition and reduces businesses. Prevent Unfair Business Practices consumer choice. Most businesspeople are fair and honest. A few may try to take advantage of their chec kpoint ›››› customers or competitors. Government Why does government regulate utilities? attempts to promote fair competition. If a company charges different prices to different people for the same product, it is treating its customers unfairly. If GOVERNMENT ASSISTS BUSINESS Government helps businesses by collect- ing and reporting valuable information. Data gathered by the government can With hundreds of agencies, the U.S. federal government has help with planning. Information about created a web site to assist citizens. Access the web site shown incomes, prices, worker availability, and below and click on the link for Chapter 4. This web site offers information about everything from Amtrak to zoos. Select a business failures can help a businessperson topic area of interest to you. Obtain information on the topic make wiser choices. For example, census and prepare a written summary of how this information might information can help a business decide be used by consumers or business. where a majority of potential customers live. The Bureau of Labor Statistics, school.cengage.com/business/introtobiz the Department of Agriculture, and the

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 8888 112/20/072/20/07 12:13:3912:13:39 AMAM Department of Commerce are a few of the government agencies that provide information. The federal government, through the Small Business Administration (SBA), helps new businesses get started by guaranteeing private bank loans. The new businesses must develop an acceptable business plan. Farmers and others may receive financial help in times of great hardship, such as during a drought, flood- ing, or other natural disasters. Destruction of home and property by a tornado may make a person eligible for a low-interest government loan. These programs are designed to promote the financial well- being of society.

Government Buys Goods and Services Government spends a great deal of money each day to buy an array of products and services. Total federal, state, and local government spending

make up about 20 percent of all the © Getty Images/Photodisc goods and services produced in the © Digital Vision United States. Why do you think a company would want to perform work for Governments buy everything from the government? file cabinets to buildings to military jet aircraft. In this role, government is a key economic force. Many businesses government. Although the number of depend on government contracts for employees has grown slowly in recent their survival. For instance, government years, good employment opportunities pays businesses to construct highways in government continue—in spite of and build schools. efforts to eliminate or reduce the size of some agencies. Government Employs Workers Government is the single largest employer in the U.S. economy. About chec kpoint ›››› 16 percent of workers are public How does government assist business? employees. Most people think only of police officers, firefighters, and sanitation workers as government workers. Government also employs GOVERNMENT RAISES MONEY main idea the same types of workers as private Government must have a way to raise Describe how the businesses. Administrative assistants, money to fund operations and pay wages government raises lawyers, teachers, meat inspectors, to workers. Government income is money. and data analysts are all employed by called revenue. Governments can obtain

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 8899 112/20/072/20/07 12:13:4112:13:41 AMAM revenue through taxes and borrowing. Your earnings as an individual are In addition, governments can raise subject to an income tax. Income taxes revenue in other ways. Fines for traffic are levied on the income of individuals. violations and other violations of the The individual income tax is the largest law provide revenue for government. source of revenue for the federal gov- Fees and licenses are a source of income. ernment. Corporate income taxes also Certain types of ventures require a provide government revenue. The cor- business license. For example, insur- porate income tax is based on business ance and real estate agents pay a fee profits. for the privilege of running a business. A major source of revenue for local Governments also charge fees for such governments is the real estate property things as driver’s licenses and fishing tax. This tax is based on the value of land privileges. and buildings. Most property tax revenue is used to pay for schools and other local Taxes government services, such as police pro- A government creates tax policies to pay tection and community parks. Businesses for the services it provides. Taxes are also pay a property tax. levied on earnings, the value of prop- The cost of buying things is increased erty, and on the sale price of goods and by a sales tax. A sales tax is a state or local services. tax on goods and services that is collected

E-Commerce in Action

Mass Customization

When the automobile was first based on a person’s income, age, Many online merchants tailor mes- mass-produced in the early 1900s, and household situation. sages and suggest purchases based Henry Ford would tell potential cus- Many online companies are on a customer profile. Previous tomers . . . “you can have any color involved in mass customization. They items bought as well as interests of car you want as long as it’s black!” provide goods and services tailored the buyer will promote future pur- Since then, businesses have continu- to customer demand. Dell Computer chases of books, music, DVDs, cloth- ally tried to make items that meet only builds personal computers that ing, and other goods and services. the distinct needs and wants of have actually been ordered. This consumers. approach keeps profit margin up by Think Critically Today, companies with mil- keeping inventory costs down. 1. Locate a web site or local busi- lions of customers are making Many automotive companies ness that would provide another products designed for the indi- allow you to design a car online. You example of customized products vidual. Consumers can buy vitamins can do this just for fun, or design or services. How does technol- matched to their health needs. CDs the car you want to buy. Because ogy make this situation possible? are offered with selected music automotive manufacturing is highly 2. Describe an idea to offer a tracks. Cosmetics can be mixed to mechanized, assembly lines can eas- customized product or service match facial features and skin tone. ily customize the design. online or in your community.. Financial services companies offer This approach can improve computerized investment advice customer service and add to sales.

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 9900 112/20/072/20/07 12:13:5012:13:50 AMAM by the seller. If you buy a can of paint for center, the funds needed are often raised $15.00 and the state sales tax is 6 percent, through borrowing. the seller collects $15.90 from you. The Government borrows money by seller then will pay 90 cents to the state. selling bonds. When you buy a govern- You were the one who provided the ment bond, you are helping to fund money for the tax. the services provided by government. Paying taxes is a duty of citizens and Banks, insurance companies, and other businesses. You should pay your taxes, but financial institutions help finance gov- not more than your share. Tax laws and ernments by purchasing bonds in large policies are set to help make the paying of numbers. taxes fair. Whether a particular tax or tax By borrowing money, the govern- policy is fair is always subject to debate. ment becomes a debtor and must pay Businesses, in spite of public misconcep- interest on its debt. Bonds issued by the tions, pay a lot of taxes to all levels of U.S. government are backed by the “full government. faith and credit” of the federal government. Bonds issued by the federal gov- Borrowing ernment are considered the least risky Government income from taxes and other of all debt. sources may not always be enough to cover the costs of providing services. Borrowing chec kpoint ›››› is another activity of government. When a What is the difference between tax rev- government wants to construct a building, enue and borrowing by government? such as a new courthouse or convention

4-3 Assessment school.cengage.com/business/introtobiz

Key Concepts Make Academic Connections Determine the best answer. 4. History Conduct research about various antitrust laws. What situations caused the creation of these laws? 1. Antitrust laws are designed to a. reduce utility rates 5. Communication Conduct a survey of people to b. lower taxes obtain their opinions about which types of taxes c. create more jobs are most appropriate to raise government revenue. d. maintain competition Prepare a summary data table with your findings. 2. A(n) _?_ tax is a common source of revenue for state 6. Economics Describe government actions to raise and local governments. money that might have a positive or negative influ- a. sales ence on business activities. b. import c. gift d. unemployment 3. True or False. A monopoly is never a benefit to consumers.

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 9911 112/20/072/20/07 112:14:522:14:52 AMAM CHAPTER 4 Assessment

school.cengage.com/business/introtobiz Business Notes 4-1 SOCIAL RESPONSIBILITY businesses, and workers; regulate utilities and 1. Socially responsible businesses care about their promote competition; provide information and communities. They help make them better places help to businesses; buy goods and services; hire in which to live. Social responsibility concerns public employees; and raise revenue. The levels of relate to environmental protection, workplace government are federal, state, and local. diversity, safety on the job, and employee 5. Government protects citizens through police and wellness. fire services, protects consumers and business 2. Benefits of social responsibility include expanded owners by enforcing contracts and intellectual justice for societal groups, enhanced company property rights, and protects workers through image, reduced need for government action, laws that require safe working conditions. improved quality of life, and increased awareness 6. The three types of intellectual property are pat- of social issues. Costs of social responsibility are ents, copyrights, and trademarks. that money must be spent for new or safer equipment, for building renovations to remove hazards, for wellness and rehabilitation programs, and for 4-3 GOVERNMENT REGULATION AND ASSISTANCE social projects sponsored by a company. These 7. Government regulates utilities and prevents costs must be balanced with profits to make sure unfair business practices. the business stays viable. 8. Government buys a wide range of goods and ser- 3. A code of business ethics is a guide for behavior vices and employs workers. Governments also col- within an organization. lect and report valuable information and provide loans to help businesses get started or overcome natural disasters. 4-2 GOVERNMENT PROTECTION ACTIVITIES 4. The primary roles of government are to provide 9. Governments raise needed funds through taxes services to society; protect citizens, consumers, and borrowing.

Communicate Business Concepts 1. What are some natural resources that you use 5. Make a list of public utilities that serve your every day? Which of those natural resources need community. to be protected? What can you as an individual do a. What services do they provide? to avoid using up non-renewable resources? b. Do you think it would be better for these ser- 2. Safety is often a matter of individuals being care- vices to be offered by several competing busi- ful about where they place things and how they nesses? Explain your answer. conduct their own business. Name some ways in 6. Here is a list of some of the public services pro- which you and others can help make a workplace vided by government. For each item, tell whether safe. the federal, state, or local government would 3. What does the term “discrimination” mean to most likely have the responsibility for the service. you? What examples of discrimination in the (Some services may be provided by more than workplace are you aware of? one level of government.) 4. Why do you think employers are willing to spend a. Fire protection money to help employees improve their general b. Education health? Be specific about how a company might c. Parks and recreation benefit. d. Water supply

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 9922 112/20/072/20/07 112:14:532:14:53 AMAM e. Highways between cities 8. Two students are discussing the topic f. Assistance to low-income families “Government Is Our Biggest Business.” Dan g. Sewage and trash disposal believes that some government activities are in h. Public buses direct competition with private businesses. He i. Police protection thinks that this is unfair. He believes that govern- j. Public libraries ment should limit its activities to those that pri- k. Street maintenance vate businesses cannot or will not take on. Brian l. National defense thinks that government should undertake any business activities that it can perform better or at 7. Each day people enter into many contracts, both a lower cost than private business. What do you written and unwritten. think? Give some examples of business activities undertaken by both private businesses and by a. Give examples of contracts between a government. consumer and a business, between two businesses, and between a worker and a 9. Why do you suppose government raises revenue business. through bonds that create debt and require inter- b. What services does government provide to est payments when government could raise the enforce contracts? revenue through an increase in taxes?

Develop Your Business Language Match the terms listed with the definitions. 18. An agreement to exchange goods or services for something of value. 10. Principles of morality or rules of conduct. 19. The exclusive right given to a person to make, use, 11. The obligation of a business to contribute to the or sell an invention for a period of 20 years. well-being of a community. 20. A word, letter, or symbol associated with a specific 12. Rules about how businesses and their employees product or company. ought to behave. 21. A business that has complete control of the mar- 13. A natural resource, such as gas, coal, copper, or ket for a product or service. iron ore, that cannot be replaced once it is used up. 14. A statement of values and rules that guides KEY TERMS the behavior of employees or members of an a. antitrust laws organization. b. business ethics c. code of ethics 15. A business that supplies a service or product vital d. contract to all people; the price charged for the service (or e. copyright product) is determined by government regulation f. ethics rather than by competition. g. monopoly 16. Laws designed to promote competition and fair- h. non-renewable resource ness and to prevent monopolies. i. patent j. public utility 17. Protection of the work of authors, composers, and k. social responsibility artists. l. trademark

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 9933 112/20/072/20/07 12:15:1912:15:19 AMAM Make Academic Connections 22. COMMUNICATION Interview various people to 24. TECHNOLOGY Explain how new technology is mak- ask them for a definition and an example of ing it more difficult to protect intellectual prop- “conflict of interest.” Prepare a summary report erty rights. of two to three paragraphs. 25. VISUAL ART Look for examples of trademarks and 23. MATH The Johnson Manufacturing Co. has an logos of products from companies based inside annual operating budget of $750,000. Each year and outside of the United States. Design a brand it budgets for the following expenses: pollution name or trademark that might be effective in control equipment, $37,500; contributions to several countries around the world. community projects, $22,500; employee fitness/ 26. CULTURE Research different systems of govern- sports programs, $7,500. ment. Explain how history and culture can affect a. What percentage of the annual budget business regulations in various countries. is allocated to each socially responsible action (pollution control, community 27. SCIENCE Research a patent on a product. Identify projects, fitness/sports)? What is the total the inventor, the year the patent was granted, and spent? the product’s function. Prepare a summary report of your findings. b. What will be the amount budgeted for each expense category next year if there is a 28. CAREER PLANNING Investigate various legal 15 percent increase? What will be the total restrictions that might be encountered when spent? applying for a job position.

Linking School and Community Interview someone in your community who owns a them how ethics might affect their daily lives and the business or works for a large company or organiza- lives of others. tion. Obtain information about actions that need Based on their answers, create a short code of ethics to be considered when hiring people, designing that might be used to guide the decisions made by products, and making other business decisions. Ask managers and employees in a company.

Web Workout Global warming is a hot topic. There is strong con- the issue. Visit at least one web site for each of sensus that the world is getting warmer. Eleven of the following categories: government agency, the last 12 years have been the warmest on record. environmental advocacy organization, large manufacturer, and energy company. In a short Although the warming trend is well documented, report, summarize what you find and offer an there is considerable debate about the cause. Could opinion about what should be done to combat it be part of a natural cycle? Or, is it due to human global warming. activity? Scientists, environmentalists, and policy- 2. Use the Internet to identify actions and strategies makers who believe that human activity is the cause that businesses, governments, and individuals of global warming point to the reduction of carbon could adopt to limit greenhouse gases. Report emissions as part of the solution. your findings in a table. 3. Choose three actions or strategies that could Think Critically help reduce greenhouse gases and write a short 1. Use the Internet to learn more about global explanation of how they might impact business warming and get some different perspectives on practices.

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445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 9944 112/20/072/20/07 12:15:3512:15:35 AMAM Decision-Making Strategies Centerville wants to build a new sports complex near Proposal B Establish a 1/4 percent city sales tax on the center of town. The complex will cost $250,000. all purchases. The revenue needed could be raised in There are two financing proposals: about five years. There would be no user fee charged to residents of Centerville. Construction would be delayed Proposal A Issue $250,000 worth of bonds at an inter- a few years. est rate of 4 percent. The town will pay $10,000 per year in interest for 15 years. The total interest would 29. What are the advantages and disadvantages of be $150,000. The amount borrowed ($250,000) would the two proposals? have to be paid off in 15 years. Fees charged to users 30. Which proposal do you favor, and why? of the complex would pay the interest each year and the amount due bondholders ($250,000). Construction could begin right away.

Community Service Project Event Successful businesses are actively involved in their PERFORMANCE communities. Community service projects can range from cleaning up the community to giving INDICATORS money to worthwhile projects or causes, and fre- EVALUATED quently focus on helping elderly citizens or young • Define the purpose of the project by stating students. project goals and service provided to the com- This team event (2 or 3 members) challenges FBLA munity and its citizens. members to develop a community service project. • Highlight the scope and intensity of the project Reports produced for this event must describe one (planning, development, and implementation). chapter project that serves the community and is • Explain what makes the project unique. designed for chapter participation rather than individual participation. • Describe the benefits to the community. • Demonstrate evidence of publicity. Written reports must include the purpose of the project, scope and intensity of the project, uniqueness You will be evaluated for your of the project, benefits to and impact on the com- • Clear and concise presentation with logical munity, and evidence of publicity. The report should arrangements of information be clearly written in a concise manner with logical arrangements of information. Creativity of written • Creativity of written presentation, design, and presentation, design, and graphics is encouraged. graphics Correct grammar, punctuation, spelling, and accept- • Correct grammar, punctuation, spelling, and able business style are expected. acceptable business style During the first round of oral presentations, team For more detailed information about performance indi- members have two minutes to give an oral abstract cators, go to the FBLA web site. of the project. Visual aids and audiovisual equipment may not be used in the preliminary round. Judges Think Critically are allowed five minutes to ask questions about the 1. What makes your project unique? project. 2. Who benefits from your project? During the second oral presentation, team mem- 3. How will you generate the maximum amount of bers are given 5 minutes to set up and 10 min- participation in the project by FBLA members? utes to present with visual aids and audiovisual 4. Why do businesses participate in community equipment. service? http://www.fbla-pbl.org/

Portfolio Activity Access the web site shown here to find portfolio activities for this chapter. Use the school.cengage.com/business/introtobiz activities to provide tangible evidence of your learning.

CHAPTER 4 ASSESSMENT 95

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Identify Goals • Explore the economic environment of another country. International • Research the cultural impact on a nation’s business environment. Business • Identify political factors affecting the business activities in a foreign country. Opportunities • Select a business idea (product or ser-

Activities Use your textbook, library materials, web sites, interviews with people, and other resources to complete the following. 1. Select a country. Conduct economic research for this country. Obtain information on natural resources, agricultural products, imports, exports, standard of living, GDP, and inflation. Write a summary to describe this information. 2. Locate information about foods, habits, customs, traditions, and beliefs of people in the country. Try to talk to a person who has visited or lived in the country. List two or three ways in which the country is different from most others. 3. Laws regulating business differ from country to country. Research the political and legal environment of your © Getty Images/PhotoDisc chosen country. Present your findings on laws, barriers, and taxes in a chart, table, or other visual format.

445610_04_Ch04_p074-097.indd5610_04_Ch04_p074-097.indd 9966 112/20/072/20/07 12:15:4012:15:40 AMAM 4. Based on your country research, describe a new business idea. This business opportunity could be based on climate, health care, food, transportation, natural resources, technology, or other aspects of the nation’s economy. 5. Foreign governments often take actions to protect companies in their own country. These trade barriers might include tariffs, import quotas, taxes, and other restrictions. Discuss an existing or potential trade barrier for the country you have researched. © Getty Images/PhotoDisc

Present 1. Prepare a portfolio (folder, file, or notebook) to store the information and materials you created in the activities above. 2. Create a poster (or other visual display) conveying the main points of a business idea (product or service) that could be sold in other countries. Highlight how the business opportunity was created and what needs or wants will be satisfied. 3. Interview a person who has lived in or traveled to another country. Ask questions related to the culture, food, leisure, customs, holidays, and business activities unique to the nation. Ask the person for per- mission to tape (audio or video) the interview.

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