Business and Its Environment, 7th Edition Instructor’s Manual David P. Baron Stanford University
Contents Introduction Sample Course Outline
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Part I Strategy and the Nonmarket Environment 36 Chapter 1 Market and Nonmarket Environments 37 Chapter 2 Integrated Strategy 52 Chapter 3 The News Media and Nonmarket Issues 60 Chapter 4 Private Politics 74 Chapter 5 Crisis Management 110 Part I Integrative Case: Wal-Mart: Nonmarket Pressure and Reputation Risk (A) 117 Part II Public Politics and Nonmarket Strategy Chapter 6 Nonmarket Analysis for Business Chapter 7 Nonmarket Strategies for Government Arenas Chapter 8 Implementing Nonmarket Strategies in Government Arenas Part II Integrative Case: Amazon.com and the Amazon Tax
121 122 137 150 167
Part III Government and Markets 169 Chapter 9 Antitrust: Economics, Law, and Politics 170 Chapter 10 Regulation: Law, Economics, and Politics 179 Chapter 11 Financial Markets and Their Regulation 190 Chapter 12 Environmental Management and Sustainability 205 Chapter 13 The Investor’s Perspective: Renewable Energy 214 Chapter 14 Law and Markets 221 Part III Integrative Case: Spectrum for Wireless Broadband: Old Media versus New Media 237 Part IV Global Nonmarket Strategy Chapter 15 The Political Economy of the European Union Chapter 16 China: History, Culture, and Political Economy Chapter 17 Emerging Markets Chapter 18 The Political Economy of India Chapter 19 The Political Economy of International Trade Policy Part IV Integrative Case: Toys ‘R’ Us and Globalization
239 240 254 270 280 290 302
Part V Ethics and Responsibility Chapter 20 Corporate Social Responsibility Chapter 21 Ethics Systems: Utilitarianism Chapter 22 Ethics Systems: Rights and Justice Chapter 23 Behavioral Ethics, Individuals, and Management Chapter 24 Ethics Issues in International Business Part V Integrative Case: GlaxoSmithKline and AIDS Drug Policy
318 319 330 356 365 377 385
Instructor's Manual for Business and Its Environment, 7th Edition Introduction This instructor's manual includes a brief discussion of the objectives of each chapter, teaching notes for each case, and updates on the developments of each case. Several follow-up “(B)” cases are included, which can be distributed in advance or during class to extend the discussion. These cases are printed on separate pages to allow reproduction. The manual also contains a sample course outline. Powerpoints to supplement the book are available at the Instructors Resource Center, www.peasronhighered.com/irc. A helpline is available at http://247.pearsoned.com. A Test Item File containing examination questions for each chapter is included at the back of this manual. The cases in the book and this manual can also be used as a basis for examination questions.
Objectives of the Book Business and its Environment is intended for managerially-oriented courses focusing on business issues that arise primarily in the nonmarket environment of firms. The focus is on those issues that are not resolved solely in markets, and hence the term “nonmarket environment of business” is used. That environment is characterized by the issues, interests, institutions, and information that impact the performance of firms. The book does not take a public policy perspective but instead adopts the perspective of managers responsible for the performance of their firms. The approach focuses on strategies for effectively addressing nonmarket issues and emphasizes analysis and reasoning as the foundation for strategy formulation. The book presents methods and conceptual frameworks that form that foundation. The frameworks include the ethics systems of utilitarianism, moral rights, and justice. Many of the issues that arise in the environment of business are sufficiently complex that simple prescriptions are poor substitutes for careful analysis. In addition, when normative and ethics issues are involved, people may differ in their judgments about appropriate courses of action. What serves managers best in the long-run is being able to reason thoroughly and thoughtfully about issues and to develop strategies for addressing them that are responsible and improve performance. Because of the complexity of the issues and the diversity of perspectives held by individuals, discovery through discussion can be an important component of the learning process. To provide vehicles for that discovery, each chapter includes cases that are integrated with the text. The cases provide an opportunity to explore issues in more depth in complex settings. Many of the cases include considerable background and texture; others are short. The short cases are intended to engage the reader quickly, and provide only that descriptive detail necessary to apply the chapter material. The cases are not necessarily intended to provide exemplary lessons or descriptions of best practice but instead focus on challenges for managers that require analysis, 1
formulation of a strategy, and a course of action. The cases typically are set at the point at which the firm must make a decision, develop a policy, or formulate a strategy. The book also contains integrative cases at the end of each of the five parts.
Features of Business and Its Environment, 7th Edition The book focuses on concepts, methods of analysis, and approaches to strategy formulation and its implementation, as well as on contextual and institutional detail. The chapters provide sufficient institutional detail to support the conceptual material, and examples are used to illustrate the concepts. The chapters are intended to help students learn to analyze and reason about issues in complex managerial settings. The cases then provide opportunities to practice analysis and develop strategies for addressing nonmarket issues. The text contains a number of illustrative examples. Some of the distinguishing features of the book are the following. First, it provides a conception of the field of business and its environment and carries that conception throughout. The conception is that firms must operate effectively in both their market and nonmarket environments and that market and nonmarket strategies must be integrated. The approach is managerial and focuses on how firms and their managers can address nonmarket issues effectively in conjunction with the associated market implications. Second, the book provides a comprehensive and integrated approach to the field of business and its environment. It covers strategy formulation, business and politics, the news media, activist and interest groups, crisis management, regulation, antitrust, environmental protection, intellectual property, common law, products liability, international trade policy and politics, country analysis and the nonmarket environment of business in China, India, the European Union, and emerging markets, corporate social responsibility, ethics and ethical reasoning, the application of ethics to managerial issues, and ethical issues in international business. The coverage emphasizes how these subjects are related and interrelated. For example, the news media and activists are considered because they play an important role in shaping the development of many nonmarket issues, some of which develop into crises. Ethics is included because nonmarket issues often have moral dimensions that require the application of moral principles. The book is integrated by adopting a consistent perspective that guides the frameworks presented. The frameworks include positive and normative methods for analyzing issues and formulating strategies for addressing them. The perspective is that issues in the nonmarket environment of business are contested, and the forces that shape their outcomes require the attention of management. Companies must participate effectively and responsibly in the public and private processes addressing those issues, and to do so they must understand the issues and how they can be favorably resolved. Third, the book adopts a managerial perspective and focuses on the formulation of nonmarket strategies. The managerial focus is used both in the chapters and in the cases, which are vehicles for considering how a firm should address nonmarket issues. Most of the cases are not descriptions of what a company did but instead characterize a challenge or issue facing a company and ask how the company should deal with it.
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Fourth, the guiding approach to nonmarket issues involving government is that of political economy. This approach focuses on understanding how government institutions function and what forces determine outcomes. Interest group analysis, for example, is one foundation for this approach. Combining interest group analysis with knowledge of government institutions provides the basis for formulating effective nonmarket strategies. Fifth, normative issues focusing on the responsibilities of business are considered as are issues with distinctly moral dimensions. The approach to these issues involves the application of ethics reasoning based on moral principles. Many of the issues considered are those on which reasonable people of goodwill may differ and hence on which ethics reasoning can contribute to clarity of understanding if not consensus. Applications to issues involving corporate social responsibility, interacting with stakeholders, and international business are provided. Sixth, the book is current. It addresses a number of topics with which managers continue to struggle. For example, the cases address social and environmental entrepreneurship, Internet regulation, pricing of AIDS drugs in the developing world, activist challenges, globalization, pharmaceuticals safety, emerging markets, censorship in China, compulsory licensing, privatization, privacy, operating in developing countries, obesity, fair trade, environmental management, and social responsibility. Many of these issues will remain current for many years. Seventh, the book is international. Many of the frameworks and perspectives are applicable to both domestic and international settings and issues. In addition, six chapters are devoted to international topics, including chapters on emerging markets, China, India, the European Union, international trade, and ethics issues in international business.
Principal Changes in the 7th Edition The seventh edition of Business and Its Environment represents continuity and change. It retains the structure, much of the subject matter, and the conceptual frameworks of the sixth edition. It also retains the strategy orientation and the guidance of the normative subjects of ethics and social responsibility. The seventh edition includes chapter cases for class discussion of managerial issues and applications of the conceptual frameworks and institutional material. At the end of each of the five parts of the book are integrative cases on an nonmarket challenges facing Wal-Mart, fuel economy standards, credit card regulation, global strategy, and the pricing of AIDS drugs for low-income countries. The seventh edition continues the focus on strategies for improving performance by addressing the challenges in the nonmarket environment and their effects on the market environment. The approach draws on the disciplines of economics, political science, law, and ethics to provide a foundation for strategy formulation and a deeper understanding of the environment of business and nonmarket issues. An integrated perspective strengthens the managerial orientation of the book and also enhances the usefulness of the conceptual materials for other parts of the business curriculum. The seventh edition includes four new chapters: Chapter 11, Financial Markets and Their Regulation; Chapter 13, The Investor’s Perspective: Renewable Energy; Chapter 18, The Political Economy of India; and Chapter 23, Behavioral Ethics, Individuals, and Management, and three 3