RSM TEST 2 NOTES
Chapter 2 Business Ethic and Social Responsibility
Business ethic issues are at the heart of corporate social
responsibility (CSR), it’s primary objective is to enhance
society’s well-being through philosophies, policies,
procedures and actions. This benefits everyone include
consumers, the environment and the companies themselves.
Firms have many responsibilities to Customers, Employees,
Investors, and to the general public.
Responsibility to the general public: include dealing with
public health issues, protecting the environment, and
developing the quality of the workforce.
Public health issues: one of the most complex issues.
Central to the public health debate are dangerous
products such as tobacco and alcohol.
Protecting the environment: Businesses consume huge
amounts of energy which produce pollution.
Companies find they can be environmentally friendly
and profitable, too. (Recycling, Green marketing)
Quality of the workforce: An educated, skilled
workforce provides the know-how needed to develop
new technology, improve productivity and compete in
the global marketplace. Canadian businesses musk take
more responsibility for enhancing the quality of its
workforce, including encouraging diversity of all kinds.
Responsibility to Customers: Consumerism is the public
demand that a business consider the wants and needs of its
customers when making decisions. In 1962, Kennedy
developed four basic consumer rights, later called The
Consumer Bill of Rights: Right to be Heard, Right to be Safe,
Right to Choose, Right to be Informed.
Right to be Safe: Businesspeople have moral and legal
obligations to ensure their products are safe to use. Product liability refers to the responsibility of
manufacturers for injuries and damages caused by
Right to be Informed: Consumers should be able to get
enough education and product information to make
responsible buying decisions. The Competition Act has
rules and regulations that lead to advertising
Right to Choose: Consumers should have the right to
choose the goods and services they need and the goods
they want to purchase.
Right to be Heard: Consumers should be able to
express their valid complaints to the appropriate
Responsibilities to Employees: Companies have
responsibilities to employees which include workplace
safety, quality-of-life issues, ensuring equal opportunity on
the job, avoiding age discrimination, and preventing sexual
harassment and sexism.
Workplace Safety: The safety and health of workers on
the job is an important business responsibility. The
Canadian Center for Occupational Health and
Safety(CCOHS) promotes workplace health and safety.
Quality-of-life issues: Balancing work and family is
becoming harder for many employees. Taking care of
these employees become an issue for many companies.
Ensuring equal opportunity on the job: Technological
advances are expanding the ways people with physical
disabilities can contribute in the workplace.
Businesses also need to find ways to responsibly
recruit and manage older workers and workers with
Age Discrimination: The average age of Canadian
workers is steadily rising. The Canadian Human Rights
Act prohibits age discrimination. Sexual Harassment and Sexism: Every employer has
responsibility to ensure that all workers are treated
fairly and are safe from sexual harassment.
Responsibilities to Investors and the financial community:
A fundamental goal of any business is to make a profit for its
shareholders. But investors and the financial community
also demand that businesses behave ethically and legally.
Walmart’s social responsibility priorities: Envrionment,
People, Responsible Sourcing and the Community
Sarbanes-Oxley Act of 2002 in US required companies to
publish their code of ethics.
Four most common ethical challenges that businesspeople
face: Conflict of Interest, Honesty and Integrity, Whistle
Blowing and Loyalty versus Truth.
Conflict of interest: occurs when a businessperson is faced
with a situation where an action the benefits one person or
group has the potential to harm another
Honesty and integrity: An employee who is honest can be
relied on to tell the truth. An employee with integrity goes
beyond truthfulness, behaving according to one’s deeply felt
ethical principles in business situations.
Loyalty versus Truth: Businesspeople expect their
employees to be loyal and to act in the best interests of the
company. Individual sometime has to decide between
loyalty to the company and truthfulness in business
Whistle Blowing: an employee’s disclosure to company
officials, government authorities or the media of illegal,
immoral or unethical practices.
In 2004, The Public Servants Disclosure Protection Act was
introduced to protect people who expose problems.
A corporate culture that supports business ethics develops
on four levels: Ethical Awareness, Ethical Reasoning, Ethical
action and Ethical Leadership. Ethical Awareness: The foundation of an ethical climate.
One way for a firm to provide this support is to develop a
code of conduct.
Ethical Education: Businesses must provide the tools
employees need to evaluate the potions and arrive at
suitable decisions. (Training programs)
Ethical Action: Firms must provide structures and
approaches the allow decisions to be turned into ethical
actions. (Employee hotline)
Ethical Leadership: Executives need to show their actions.
1. Use clear language rather than euphemisms for corrupt
2. Encourage behavior that generates and fosters ethical
3. Practise moral absolutism, insisting on doing right,
even if it proves financially costly.
A second major issue affecting business is the question of
social responsibility-business’s consideration of society’s
well-being and consumer satisfaction, in addition to profits.
Social audits measure social performance of firms. It’s
formal procedures that identify and evaluate all company
activities that relate to social issues.
Corporate philanthropy: an organization’s contribution to
the communities where it earns profits. (Cash contributions,
donations of equipment and products, volunteer of company
employees.) CHAPTER 10 Production and Operations Management
Mass Production: A system for manufacturing products in
large quantities by using effective combinations of
employees with specialized skills, mechanization, and
Flexible Production: uses three resources information
technology to share the details of customer orders,
programmable equipment to fill the orders, and skilled
people to carry out the tasks needed to complete an order.
Customer-Driven Production: assesses customer demands
to make connection between the products that are
manufactured and the products people want to buy. Another
approach is to wait until a customer orders a product and
then produce it.
Analytic production system: reduces a raw material to its
component, or individual, parts to extract one or more
Synthetic production system: Combines two or more raw
materials or parts, or transforms raw materials to produce
Continuous production process: creates finished products
over a long period of time.
Intermittent production process: creates products in short
production runs. Machines may be shut down frequently or
may be changed so they produce different products.
TECHNOLOGY AND THE PRODUCTION PROCESS:
Green Manufacturing Processes: More manufacturing firms
are investing resources into developing processes that result
in less waste, lower energy use and little or no pollution.
(LEED, leadership in energy and environmental design
Robots: a machine that can be programmed to perform
tasks that require the repeated use of materials and tools. Computer-aided design (CAD): is a process used by
engineers to design parts and entire products on the
computer. Engineers who use CAD can work faster and with
fewer mistakes. Computer aided manufacturing (CAM) then
picks up where the CAD system leaves off.
Flexible Manufacturing System (FMS): is a production
facility that workers can quickly change to manufacture
Computer-Integrated Manufacturing (CIM): Combination of
robots, CAD/CAM, FMS, computers and other technologies. It
involves a new type of automation that is organized around
the computer. It brings increased productivity, decreased
design costs, increased equipment utilization and improved
THE JOB OF PRODUCTION MANAGERS
1. Planning the overall production process: Begins by
choosing the goods or services to offer to customers.
2. Selecting the best layout for the firm’s facilities: An
efficient facility layout can reduce material handling,
decrease costs, and improve product flow through the
facility. Three most common layout designs:
Process layout: groups machinery and equipment
according to their functions.
Product layout: assembly line, sets up production
equipment along a product-flow line.
Fixed-position layout: places the product in one
spot. He workers, materials, and equipment go to
the product’s location.
Service organizations must also decide on suitable
layouts for their production processes. (customer
3. Carrying out the production plan:
Make, Buy, Or Lease Decision: whether to
manufacture a product or part in-house, buy it
from an outside supplier, or lease it. Selection of Suppliers: After a company decides
what inputs to buy, it must choose the best
suppliers for its needs. Managers compare quality,
prices, dependability of delivery, and services
offered by competing companies.
Inventory Control: Managers need to balance the
costs of storing inventory with the need to have
stock on hand to meet demand.
Just-in-Time System (JIT): a broad management philosophy
that reaches beyond the narrow activity of inventory control
to affect the entire system of production and operations
Materials Requirement Planning (MRP): a computer-based
production planning system that ensures a firm has all the
parts and materials it needs to produce its output at the
right time and place and in the right amounts.
4. Controlling the manufacturing process to maintain the
highest possible quality: Production control creates
well-defined procedures for coordinating people,
materials and machinery to provide the greatest
production efficiency. Five-step process:
Planning: managers decide on the amount of
resources needed to produce a certain output.
Routing: Manager decides on the sequence of
work throughout the facility, who will perform
each part of the work, and where the work will be
done. Routing choices depend on two factors: the
nature of the good or service and the facility
Scheduling: Mangers develop timetables that
show how long each operation in the production
process takes and when workers should perform
it. Efficient scheduling means that production will
meet the delivery schedules and make efficient
use of resources. Dispatching: managers instruct each department
on the work it needs to do and how long it has to
do the work. The dispatcher authorizes
performance, provides instructions and lists job
Follow-Up: managers and employees, or team
members, spot problems and come up with
IMPORTANCE OF QUALITY
Quality matters because it is costly to fix, replace or
redesign imperfect products. Companies can use
benchmarking to ensure that they always produce high-
quality products, the process of looking at how well other
companies perform business functions or tasks and using
their performance as a standard for measuring another
Quality Control involves measuring output against quality
standards. Firms use quality control to spot defective or
imperfect products and to avoid delivering poor-quality
goods to customers.
ISO Standards stands for International Organization for
ISO 9000 help organizations to ensure that their products
and services 1) Are of high quality 2) provide a basis for
ISO 14000 ensure that operations 1) cause little harm as
possible to the environment 2) continually improve their
environmental performance. Chapter 7 Management, Leadership, and the Internal
WHAT IS MANAGEMENT?
Management is the process of achieving organizational
goals through people and other resources.
Three levels of a firm’s management:
1.Top management: The highest level of management.
Include CEO, CFO, and executive vice-president. They decide
whether to introduce new products, purchase other
2.Middle management: Second level of management.
Includes general managers, plant managers, division
managers, and branch managers. They focus their attention
on specific operations, products or customer groups.
3.Supervisory management (First-live management):
Includes supervisors, section chiefs and team leaders. They
work directly with employees who produce and sell the
firm’s goods and services.
Skills Needed for Managerial Success:
Three basic skills: Technical, human, and conceptual.
1) Technical skills: manager’s ability to understand and
use the techniques, knowledge, tools and equipment of
a specific department or area of study. (First-line
2) Human skills: Interpersonal skills that help managers
to work effectively with people which include the
ability to communicate with, motivate, and lead
employees to complete their assigned activities.
3) Conceptual skills: Help a manager to see the
organization as a single unit and to understand how
each part of the overall organization interacts with
other parts. Especially important to top-level managers.
Four Basic Managerial Functions:
a) Planning: the process of looking forward to future events
and conditions and deciding on the courses of actions for
achieving organizational goals. b) Organizing: the process of blending human and material
resources through a formal structure of tasks and
authority: arranging work, dividing tasks among
employees and coordinating them to ensure plans are
carried out and goals are met.
c) Directing: include training, setting up schedules, assigning
tasks, and monitoring progress.
d) Controlling: has four basic steps: setting performance
standards, monitoring actual performance, comparing
actual performance with the standards, and making
corrections if needed.
IMPORTANCE OF PLANNING
Four Types of Planning
1) Strategic Planning: The most far-reaching level of
planning. The process of deciding on the primary
objectives of an organization and then taking action
and setting aside resources to achieve those objectives.
2) Tactical Planning: involves carrying out the activities
set out in the strategic plans.
3) Operational Planning: Sets the detailed standards that
help to carry out tactical plans.
4) Contingency Planning: Helps firms to resume
operations as quickly and smoothly as possible after a
THE STRATEGIC PLANNING PROCESS
Six steps in Strategic Planning:
1) Defining the Organization’s Mission: Translate the
firm’s vision into a mission statement. A good mission
statement states the firm’s purpose for being in
business and its overall goal.
2) Assessing Competitive Position: Decide on the firm’s
current, or hoped position in the marketplace. SWOT:
short form for strengths, weaknesses, opportunities
and threats. Is often used in this part of strategic
planning. 3) Setting Objectives for the Organization: Objectives set
targets so that managers can plan for the organization’s
hoped for performance. Such as new product
development, sales, customer service, growth,
environmental and social responsibility and employee
4) Creating Strategies for Competitive Differentiation: the
unique mix of a company’s abilities and resources that
set it apart from its competitors.
5) Implementing the Strategy: The middle managers or
supervisors are often the people who actually
implement a strategy.
6) Monitoring and Adapting Strategic Plans: Monitoring
involves gathering feedback about performance.
Managers can continue to use SWOT analysis and
forecasting to help adapt their objectives and
functional plans as changes occur.
MANAGERS AS DECISION MAKERS
Decision-making is the process of seeing a problem or
opportunity, assessing possible solutions, selecting and
carrying out the best-suited plan, and assessing the results.
Two basic kinds of decisions:
Programmed Decision: involves simple, common and
frequently occurring problems that already have
Nonprogrammed decision: involves a complex and
unique problem or opportunity and has important
results for the organization.
How Managers Make Decisions:
See Problem or Opportunity-Develop Possible Ways or
Taking Action-Evaluate options-Select and Carry out one
MANAGERS AS LEADERS
Three personal qualities of managers: Empathy, self-
awareness, and objectivity. Leadership Styles:
1) Autocratic Leadership: Centered on the boss. They
make decisions on their own without consulting
2) Democratic Leadership: Centers on employees’
contribution. The concept of empowerment shares
authority, responsibility and decision making with
3) Free-rein Leadership: They allow employees to make
most of their own decisions. They communicate with
Three key elements of an organization: human interaction,
goal directed activities, and structure.
Steps in organizing process:
1) Decide on the specific activities need to carry out plans
and achieve objectives.
2) Group all work activities into a pattern or structure
that makes sense.
3) Assign activities to specific employees and give them
the resources they need
4) Coordinate the activities of different groups and
5) Evaluate the results of the organizing process.
Departmentalization is the process of dividing work
activities into unites within the organization.
Product departmentalization: Organizes work unites
based on the goods and services a company offers.
Geographical departmentalization: Organizes unites by
geographical regions within a country.
Customer departmentalization: Used by a firm that
offers a variety of goods and services for different types
of customers. Functional departmentalization: organize work unites
according to business functions.
Process departmentalization: For goods and services
require multiple work processes to complete their
Types of Organization Structures:
Line Organizations: The oldest and simplest
organization structure. It sets up a direct flow of
authority from the chief executive to the employees.
Line and Staff Organizations: Combines the direct flow
of authority of a line organization with staff
departments that support the line departments.
Committee Organization: a structure that places
authority and responsibility in a group of individuals,
not a manager.
Matrix Organizations: Links employees from different
parts of the organization who work together on specific
Chapter 9 Top Performance through Empowerment,
Teamwork, and Communication
Sharing Information and Decision-Making Authority:
One of the most effective ways to empower employees is to
keep them informed about the company’s financial
The second way that companies empower employees is by
giving them broad authority to make decisions that carry out
a firm’s vision and its competitive strategy.
Linking Rewards to Company Performance:
Companies offer worker ownership in two ways:
Employee Stock Ownership Plans: About 7 percent of
Canadians participate in ESOPs. Under ESOPs, the
employer buys shares of the company stock on behalf of the employee as a retirement benefit which motivate
employees to work harder and smarter.
Stock Options: Employees can own the stock
themselves if they exercise or use their options by
purchasing stock. About 9 million employees in North
American companies hold stock options.
Five basic types of teams:
1) Work Teams: Perform day-to-day work of the
2) Problem-Solving Team: Temporary combination of
workers who gather to solve a specific problem.
3) Self-Managed Team: Team that has the authority to
decide how its members will complete their daily tasks.
4) Cross-Functional team: Made up of members from
5) Virtual teams: groups of geographically or
organizationally separated co-workers who use
telecommunications and information technologies to
accomplish an organizational task.
Team size: range in size from two people to 150. Most
teams have fewer than 12 members. Research shows
that teams achieve their best results with six or seven
Team Level: Team’s average level of ability, experience,
personality or any other factor.
Team diversity: Represents the team’s differences in
ability, experience, personality or any other factor.
Five Stage of Team Development:
Forming: Orientation period when team members get
to know each other and learn what behaviors are
acceptable to the group. Storming: The personalities of team members begin to
Norming: Members resolve their differences, accept
each other, and reach broad agreement about the roles
of the team leader and other participants.
Performing: Members focus on solving problems and
Adjourning: The team adjourns after members have
completed their assigned task or solved the problem.
Six Elements of the process of Communication:
Sender, message, channel, audience, feedback and context.
BASIC FORMS OF COMMUNICATION:
Oral communication: Communication transmitted
Written communication: Communication transmitted
Formal communication: Communication transmitted
through the chain of command within an organization
to other members or to people outside the organization.
Informal communication: Communication transmitted
outside formal channels without regard for the
organization’s hierarchy of authority.
Nonverbal communication: Communication
transmitted through actions and behaviors rather than
through words. (Intimate zone, personal zone, social
zone, public zone) Chapter 16 The Financial System
THREE TYPES OF SECURITIES:
1) Money Market Instruments: Short-term debt securities
issued by governments, financial institutions, and
corporations. Mature within one year from the date of
2) Bonds: Bondholders are creditors of a corporation or
government body. Usually between 1000-25,000.
Government bonds: Bonds sold by the Canadian
Government. Least risky of all bonds. As little as
Provincial and municipal bonds: Issued by
provincial or local governmental unites with
a) Secured bonds: Bonds that are backed by
b) Unsecured bonds (Debentures): Bonds that
are backed by the financial health and
reputation of the issuer.
Mortgage-backed corporate bonds (MBSs):
Backed by a pool, or group, of mortgage loans
purchased from lender. Low risk.
Common Shares: The basic form of corporate
ownership. Holders of common shares vote on
major company decisions and expect to receive
some sort of return.
Preferred Shares: Holders of preferred shares
receive preference in the payment of dividends.
Convertible Securities: This feature gives the
bondholder or holder of preferred shares the
right to exchange the bond or preferred shares for
a fixed number of common shares. Quality rating for bonds: two factors affect the price of a
bond, its rick and its interest rate. Bonds with the lowest
level of risk are rated AAA. As ratings descend, risk increases.
Bonds with ratings of BBB and above are classified as
“Investment-grade bonds”. Bonds with ratings of BB and
below are classified as “Speculative bonds or junk bonds”.
Primary markets: Firms and governments issue
securities and sell them initially to the general public.
In the share offering, investors are offered the
opportunity to purchase ownership shares in a firm
and participate in future growth.
Secondary markets: a collection of financial markets
where previously issued securities are traded among
Bank rate: The interest rate that the Bank of Canada
charges banks for loans. An increase in the bank rate
slows the growth rate in the money supply and
Open market operations: The buying and selling of
government securities. Selling government securities
reduces bank reserves and slows the growth rate in the
money supply and economic growth. CHAPTER 17: Financial Management
THE ROLE OF THE FINANCIAL MAMAGER
Three senior managers often report directly to the CFO.
I. Vice-President of Financial Planning: responsible for
preparing financial forecasts and analyzing major
investment decisions related to new products, new
production facilities, and acquisition