Complete MBA FOR DUMmIES ‰ 2ND EDITION by Kathleen Allen, PhD, USC Marshall Business School and Peter Economy Coauthor, Managing For Dummies, 2nd Edition, and Building Your Own Home For Dummies Complete MBA For Dummies®, 2nd Edition Published by Wiley Publishing, Inc. Hoboken, NJ 07030-5774 www.com Copyright © 2008 by Wiley Publishing, Inc., Indianapolis, Indiana Published by Wiley Publishing, Inc., Indianapolis, Indiana Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permis- sion of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600. Requests to the Publisher for permission should be addressed to the Legal Department, Wiley Publishing, Inc., Indianapolis, IN 46256, 317-572-3447, fax 317-572-4355, or online at http://www.com/go/permissions. Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc.
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Some content that appears in print may not be available in electronic books. Library of Congress Control Number: 2007941221 ISBN: 978-0-470-19429-4 Manufactured in the United States of America 10 9 8 7 6 5 4 3 2 1 About the Authors Kathleen R. Allen, PhD, is the author of Entrepreneurship and Small Business Management, 3rd Ed., Launching New Ventures, 5th Ed., Bringing New Technology to Market, and Growing and Managing an Entrepreneurial Business, as well as several other trade books. As a Professor of Entrepreneurship at the Lloyd Greif Center for Entrepreneurial Studies, based in the Marshall School of Business at the University of Southern California, Allen has helped hundreds of entrepreneurs start their ventures.
At USC, she’s also director of the Marshall Center for Technology Commercialization, where she works with scientists and engineers to help bring their inventions to market. As an entrepreneur herself, Allen has co-founded four companies and is presently the co-founder and president of N2TEC Institute, which is dedicated to technology-based economic development in rural areas of the United States (www. Allen holds a PhD from USC, an MBA, and a master’s degree in Romance Languages. Peter Economy (La Jolla, CA) is Associate Editor for the Apex Award–winning magazine Leader to Leader, a member of the National Advisory Council of the Creativity Connection of the Arts and Business Council of Americans for the Arts, a member of the board of directors of SPORTS for Exceptional Athletes (www.org), and bestselling co-author of The SAIC Solution: How We Built an $8 Billion Employee-Owned Technology Company.
He has also worked on more than 30 other books, including Managing For Dummies, 2nd Ed., The Management Bible, Enterprising Nonprofits: A Toolkit for Social Entrepreneurs, and Writing Children’s Books For Dummies. Peter invites you to visit him at his Web site: www. Dedication To the visionary business people who are infusing the entrepreneurial spirit into organizations –– here, and around the world. Authors’ Acknowledgments We would like to give our sincere thanks and appreciation to our talented publishing team at Wiley –– particularly Joyce Pepple, Stacy Kennedy, Chad Sievers, and Josh Dials.
Kathleen would like to thank her husband John and kids Rob, Jaime, and Greg, who have always been champs about putting up with an author in the house. Peter would like to thank his wife Jan and kids Peter, Sky, and Jackson, for being a constant source of wonder, love, and amusement, as well as his mother Betty Economy for helping to pay for his MBA courses. Will the circle be unbroken? Publisher’s Acknowledgments We’re proud of this book; please send us your comments through our Dummies online registration form located at www. Some of the people who helped bring this book to market include the following: Acquisitions, Editorial, and Media Composition Services Development Project Coordinator: Kristie Rees Project Editor: Chad R.
Sievers Layout and Graphics: Reuben W. Jester, Barbara Moore, Acquisitions Editor: Stacy Kennedy Christine Williams Copy Editor: Josh Dials Anniversary Logo Design: Richard Pacifico (Previous Edition: Tina Sims) Proofreader: Tricia Liebig Editorial Program Coordinator: Indexer: Broccoli Information Management Erin Calligan Mooney Technical Editor: Matthew Will, PhD, MBA Editorial Manager: Michelle Hacker Editorial Assistants: Joe Niesen, LeeAnn Harney Cartoons: Rich Tennant (www.com) Publishing and Editorial for Consumer Dummies Diane Graves Steele, Vice President and Publisher, Consumer Dummies Joyce Pepple, Acquisitions Director, Consumer Dummies Kristin A. Cocks, Product Development Director, Consumer Dummies Michael Spring, Vice President and Publisher, Travel Kelly Regan, Editorial Director, Travel Publishing for Technology Dummies Andy Cummings, Vice President and Publisher, Dummies Technology/General User Composition Services Gerry Fahey, Vice President of Production Services Debbie Stailey, Director of Composition Services Contents at a Glance Introduction .1 Part I: The New, Improved World of Business.7 Chapter 1: The MBA in a Nutshell .9 Chapter 2: Today’s Hottest Business Trends.19 Chapter 3: Entrepreneurship for Everyone.31 Chapter 4: Global Business: Fun and Profit in Katmandu .51 Chapter 5: Polish Your Crystal Ball for Some Strategic Planning.69 Part II: Managing a Business in the New World .91 Chapter 6: Managing Is Hard; Leading Is Even Harder .93 Chapter 7: Carrots and Sticks: The ABCs of Motivating Employees.113 Chapter 8: Hiring and Firing: How to Get Good Employees and Keep Them .131 Chapter 9: One for All and All for One: Building Teams That Really Work .151 Part III: Money: What You Don’t Know Will Hurt You.167 Chapter 10: All You Ever Wanted to Know about Accounting .169 Chapter 11: Working Your Way through Financial Statements .191 Chapter 12: Deciphering the Mysteries of Financial Planning and Analysis .203 Chapter 13: Understanding Stocks and Bonds .225 Chapter 14: It Takes Money to Make Money .243 Part IV: Marketing in the New World .261 Chapter 15: You Are Nothing without a Customer.263 Chapter 16: Getting Noticed with Advertising and Promotion.285 Chapter 17: Navigating the New World of Selling.299 Part V: Other Important Stuff .315 Chapter 18: Manufacturing and Distribution: It’s a Brave New World.317 Chapter 19: The Ins and Outs of Risk Management .335 Chapter 20: In Business, Everything Is Negotiation.351 Chapter 21: Econ 101: The Basics of Economics.365 Part VI: The Part of Tens .377 Chapter 22: Ten Biggest Mistakes Managers Make .379 Chapter 23: Ten Effective Ways to Market Your Products and Services .385 Chapter 24: Ten (Or So) Steps to Improve Your Cash Flow .395 Table of Contents Introduction.1 About This Book.1 Conventions Used in This Book .2 What You’re Not to Read.3 How This Book Is Organized.3 Part I: The New, Improved World of Business .3 Part II: Managing a Business in the New World .4 Part III: Money: What You Don’t Know Will Hurt You .4 Part IV: Marketing in the New World.4 Part V: Other Important Stuff.4 Part VI: The Part of Tens .5 Icons Used in This Book.5 Where to Go from Here.5 Part I: The New, Improved World of Business .7 Chapter 1: The MBA in a Nutshell .9 Do You Really Need an MBA?.10 Exploring the New World of Business .11 What’s so great about change?.12 Making an entrepreneurial mindset part of your toolkit. And a global perspective wouldn’t hurt.14 Managing and Motivating an Engaged Workforce.14 One Part of Business Hasn’t Changed: Money .15 Reaching Out to Customers.16 The Rest of Your MBA Syllabus .17 Chapter 2: Today’s Hottest Business Trends .19 The World Really Is Flat!.19 From outsourcing to insourcing: Listing the flattening factors.20 Hello, neighbor: When did China move in next door?.21 Googlevision: Searching everywhere for Waldo.21 Turnabout: When little businesses get big businesses to work for them .22 Do It Yourself: User-Generated Everything .23 Tapping the new opinion leaders .24 Amateurs compete with experts online and over the airwaves.25 Do It for Others: Becoming Socially Responsible .25 Doing good is good business .26 It’s not easy being green .26 x Complete MBA For Dummies, 2nd Edition The Changing Workforce: Harnessing the Power of the Millennials .27 The Millennials: Understanding the age of entitlement .28 Motivating new Millennial employees .29 Chapter 3: Entrepreneurship for Everyone .31 Understanding the Importance of Entrepreneurship .32 Entrepreneurs contribute to economic growth.32 Entrepreneurship gives birth to new industries .32 Entrepreneurs create new jobs.33 Thinking as an Entrepreneur .33 Understanding entrepreneurial thinking.34 Testing your entrepreneurial mindset .34 Beginning to think like an entrepreneur.35 Finding an Opportunity .37 Identifying the barriers to creativity.38 Removing the barriers to creativity.39 Testing a New Business Idea.40 Develop a business concept .41 Conduct a feasibility study .47 Even with all the planning, sometimes businesses fail .47 Corporate Venturing: An Oxymoron? .48 Learning from corporate entrepreneurship models .48 Surviving as an entrepreneur in a large company .49 Chapter 4: Global Business: Fun and Profit in Katmandu .51 Going Global Is No Longer a Choice .51 Understanding the appeal of being global .52 Determining whether your business has what it takes to go global.52 Figuring out when to go global .53 Spinning the Globe: Where to Begin? .54 China: Possible, but not always easy.54 India: Outsourcing heaven .57 The European Union: Finding common selling ground .57 Mexico: Doing business with a neighbor.58 Understanding the Role of Foreign Agents and Other International Types .59 Choosing your intermediary.60 Putting your agreement in writing .61 Avoid headaches: Using a freight forwarder.62 Considering the Price of Global Growth .63 Getting a letter of credit .63 When it’s time to make a sale .65 Knowing Where to Go for Help.65 Hitting the road: Trade shows and trade missions.66 Calling on Uncle Sam.67 Table of Contents xi Chapter 5: Polish Your Crystal Ball for Some Strategic Planning .69 Comparing Strategy and Tactics .72 Scanning the New Business Horizon .73 Do you really know your customers? .73 Riding the market rollercoaster.74 Keeping up with the changing competition .74 Designing Your Strategy Right the First Time.76 Something New: Strategic Improvising.76 Keep your head up .77 Power to the people.78 Employing a SWOT Analysis.79 Examining your company’s strengths .81 Evaluating your company’s weaknesses .81 Recognizing your company’s opportunities and threats .82 Putting your company through a test.83 Planning for Success with Operational Innovation.84 What operational innovation is all about.
