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AOF Principles of Finance

Lesson 12Today’s Business Environment

Student Resources

Resource Description

Student Resource 12.1 Graphic Organizer: The Changing Business Environment

Student Resource 12.2 Reading: Today’s Business Environment

Student Resource 12.3 Assignment: Fictional Case Study, Part One

Student Resource 12.4 Example: Fictional Case Study

Student Resource 12.5 Assignment: Fictional Case Study, Part Two

Copyright © 2009-2015 National Academy Foundation. All rights reserved.

AOF Principles of FinanceLesson 12 Today’s Business Environment

Student Resource 12.1

Graphic Organizer: The Changing Business Environment

Student Name:_______________________________________________________ Date:___________

Directions: As you view the presentation or read Student Resource 12.2, Reading: Today's Business Environment, record the ways in which each element listed below can affect a business’s decision-making process.

Technological Advances and Innovations Government Involvement

Social and Societal Norms Globalization of Business




Reading: Today’s Business Environment

There are many factors that business owners and managers must consider when making decisions. Today, we are going to look at some of the business trends that business owners and managers have to consider when making decisions to lead their companies in the 21st century.



If you own or run a business, you make lots of decisions every day. Some are small decisions, like letting an employee go home early if he or she is feeling sick. Some are very big decisions, like choosing to open a second location.

Many of these decisions are caused by things you have control over. If your store sells good products, a lot of people might buy them. Now you need to order more product to keep up with the demand. You made that happen because you chose good products and you marketed them well.

On the other hand, sometimes external factors―things you didn’t cause and can’t control―will affect your business. Things like advancing technology, government regulations, or changes in the workforce will affect all businesses ―yours and your competitors. The most successful businesses will be the ones whose managers or owners can respond effectively to these new trends.



There are many different factors that can affect a business. Changes in customer preferences, new competitors, economic downturns―even a major weather event, like a hurricane or massive snowstorm―all of these are examples of factors that businesses must respond to in order to be competitive.

For now, we are going to focus on four key types of environmental factors:

• Technological innovation

• Demographic and societal trends

• Government rules and regulations

• Globalization of business

Let’s look more closely at each of these.



Technological innovations are all around us. They’ve changed the way we live and the way we work. Forty years ago there were no personal computers and mobile phones were science fiction. Twenty-five years ago, most people didn’t know what the Internet was. Now, the largest and most successful companies in the world use computers, mobile phones, and the Internet every day. Another dramatic change has been the massive databases that companies now use for a multitude of reasons, including compiling information on consumers.



Today’s business leaders need to think about how to use technology to increase their profits. That might include online sales or even creating their own app for mobile sales. For most businesses today, it also includes marketing online through social media.

Technology also raises some big internal questions for business. What technology is the company giving to employees? Is that the tech they need, or is something new coming along that will change how you do business? For example, many companies use video conference calls and Skype to have face-to-face conversations with employees around the country and around the world, which reduces the need for some business trips. Companies are experimenting with the use of online chat programs or text messaging as a way for employees to communicate, too.

Of course, there are potential problems with technology. What do you do with an employee who posts on Facebook all day instead of getting work done? What happens if an employee shares confidential information online by accident? How does the company respond if an employee is sending offensive jokes in an email from a company email address? Managers have to consider both the good and the bad aspects of technological innovation.



The success of a company depends in large part upon the competence and dedication of its workforce. For this reason, companies try to make sure their employees are satisfied and feel that they’re being treated fairly.

But employee expectations evolve. Managers must stay informed, not only about how their employees feel today but also about changes in the marketplace that might affect how employees feel tomorrow—because an unhappy worker goes to work for someone else.

Managers must also be sensitive to demographic changes in the workforce as a whole. Sixty years ago, the leaders of American business were all men―and all Caucasian. Today, while many companies are still led by Caucasian men, you will see business leaders of every ethnicity, male and female. New workers bring new experiences, questions, and expectations into the workforce, and managers need to adjust.

Source of data in infographic: Pew Research Report, “Breadwinner Moms,” May 29, 2013.



The younger workers today, often referred to as Millennials, have new expectations for their workplace. They want an environment that is relaxed and fun―no three-piece suits everyday―and they want to be able to wear piercings and tattoos without scaring their boss. Many workers, not just Millennials, also want to work for a company that understands that its employees have a life outside work. They want to be able to adjust their work hours so they can still see their child’s soccer game or take their elderly mom to the doctor. They want to work from home sometimes. If they have to be in the office, maybe they could have childcare options nearby, or free lunch served in the office every Tuesday, or a discount on their subway pass if they have to commute. Health care benefits, paid time off, and retirement plans, are also popular benefits. Which of these benefits can a particular business offer? There are financial implications to all of these.

In addition, today’s workers expect to be treated respectfully, no matter how diverse they are. Adoptive parents want to get paid time off when they bring home their new baby―even if they are adopting an older child. Employees with certain religious beliefs expect to be able to pray multiple times a day. It can be difficult to find the balance between respecting individuals and still maintaining a company policy that works for most people, but people do not want to stay in a work environment that feels unfriendly or unsupportive.



The government imposes certain rules on industry. Companies have to pay taxes, for example—this is expected and is considered a cost of doing business. Companies are supposed to keep poisonous material out of the local drinking water; they aren’t allowed to fire an employee because of his or her religious beliefs, and they can’t sell a product the government has decided is unsafe.

Some rules apply to all businesses (like not discriminating against employees), and some are focused on a specific industry. Businesses that run factories, for example, have to meet standards about pollution. Some regulations vary by state; insurance companies, for example, are regulated by individual states’ requirements, and the states can change requirements as they deem appropriate.

Decision makers must be careful not only to know and obey the rules—they must also stay vigilant for future changes. If a company has advance warning about a state planning a new tax on a certain line of business, or a new FDA regulation that will impose new health regulations on a product, the company can respond in a way that will be most beneficial for the organization.



Government rules and regulations are not popular with most people. Think about how you feel when your parents give you a bunch of rules to follow at home. You probably complain and argue with them, right? But you also know that at least some of those rules exist for a good reason, because your parents are trying to keep you safe. In the same way, government regulations are supposed to be for a good reason, like keeping the public safe and requiring companies to be honest about how they do business.

Sometimes there are advantages to government regulations. If the government requires all homes to have a new type of smoke detector, for example, companies that make smoke detectors have a new source of business. The government also offers grants, loans, and other types of funding for specific projects. If you can demonstrate that your business meets the requirements, you might actually get tax money to help fund your business!



Now travel is possible to anywhere on Earth and you can have a face-to-face meeting with someone on another continent. Forward-looking managers saw the trend coming and took advantage of it in many ways—by exporting their goods internationally, by creating websites where people from other countries can purchase their products, or even by moving some of their operations to another country.

With 95% of the world’s population living outside the United States, multicultural knowledge and cultural awareness have become necessary in order to deal in the global economy. The companies that quickly took advantage of the trend toward globalization developed new markets and beat out their competitors.

What does this mean for you as an individual? It certainly means that there is more competition for certain jobs. People in other countries can make a good living on much less than we need in the United States, so they can do the job for less money. On the other hand, global business may require you to travel around the world or even live in amazing places while you are working. Imagine being a brand-new college graduate who starts her first job in London or Tokyo! Picture being a business executive who has visited almost every continent of the world while managing major financial deals. There are definitely some bright spots in a global future.



Globalization has provided many new opportunities for business. Now anyone with an Internet connection can sell his or her products anywhere in the world. But doing business internationally has its own complexities.

People in other countries speak different languages and may have different customs or expectations from US customers. Doing business in another country requires you to learn about that country’s laws. If you are exporting or importing goods, you will have to consider issues likes tariffs, or taxes, that are imposed on imported goods or services. The exchange rate may fluctuate, which could mean that all the yuan you earned in China will be worth fewer American dollars than you expected.

Globalization also means that you can hire people in other parts of the world. That may save you money, since workers in some countries work for lower wages. But it also means you have to think about how to manage people who live in a different time zone and who may speak a different language. Globalization offers exciting opportunities, but that doesn’t mean the decisions are easy.



It’s common for managers to see their job as dealing with events within the organization. Even good managers can get caught up in dealing what’s happening right in front of them—Jai wants a raise, or one of the trucks has broken down—and these things are important. But by also turning outward and considering how changes in the business environment might affect the future of the organization, managers can make strategic decisions based on all the information that affects the company’s performance, today and in the future.




Assignment: Fictional Case Study, Part OneStudent Name:_______________________________________________________ Date:___________

Directions: For this assignment you will write your own case study of a fictional company.

What is a Case Study?A case study is a careful examination of an individual, a group, or an organization. Case studies involve in-depth research and an analysis of some sort of problem or issue. Case studies are generally written in narrative form and usually offer solutions to the issue being described. There are many different types of case studies, and they are used throughout the professional and academic world.

A case study gives an example of a particular situation, problem, or issue. Some topics are very complicated and difficult to explain without specifics. By connecting a very complex topic with a concrete situation, you make it easier for people to understand. Think about some of the readings you have done for this course. Wasn’t it easier to understand banking or investing if there was a specific example in front of you?

How to Write a Case StudyOf course, a case study is more detailed than the readings you have been doing so far. But it serves the same purpose: it illustrates a complicated idea to help people better understand it.

1. Choose an issue or topic that interests you. Possible issues or trends include flexible schedules, changes to office environment or “perks,” demographic changes in the workforce, tolerance of diversity among employees, use of social networking sites, environmental regulations, and outsourcing. Think about the decision questions you saw in the presentation to help you come up with ideas.

2. Identify a business that would be affected by that topic. You can use a real business as a starting point or you can invent a new (but plausible) business.

3. Do research on your topic. Look for specific examples of how businesses are managing this issue.

4. Write your case study (more on that later!).

Things to Keep in Mind Your case study needs to be realistic. That is, it needs to be about a business that does exist (or

plausibly could exist) and a real-life issue or trend that type of business has to face. You will be writing about a real business issue or trend as it pertains to a fictional business, so although your case study is fictional, it should be realistic. This trend may be beyond the decision-makers’ control. That often happens with real businesses. However, it is the decision-makers’ response to these external factors and/or the situation that is important to describe.

Remember that your case study is essentially a narrative that provides a detailed account of a real-world situation. It should creatively narrate specific events in its examination of a real and relevant issue. At its essence, a case study is a story. As mentioned above, it needs to be 100% realistic, but it's a story nonetheless. Keep in mind that a good case study is an engaging,



interesting, and realistic version of a story that provides important anecdotes for a business concept. You should have fun with it and make it interesting, but you must remember to keep the story realistic. It's not okay to embellish or exaggerate it with unrealistic details.

Your case study should provide the reader with enough information so that he or she can understand what the problem or issue is. After analyzing the circumstances, the reader should be able to come up with a reasonable solution, which may or may not reflect the solution that is presented in the case study. Remember, the reader doesn’t necessarily have to agree with you. It is your duty to provide the information in an unbiased and descriptive way.

Step 1: Choose a TopicWhat topics interest you? Think about the information you saw in the presentation or look at the list of potential topics provided above. Write down as many topics as you like, then pick one that is the most interesting to you and circle it, underline it, or put a star by it.

Remember: Not all of the potential topics are problems or issues for a business. Telecommuting or working remotely can allow businesses to hire people from all over the world without asking those people to relocate. That can be a tremendously exciting opportunity for a business. It’s up to you to decide how to present your topic―as a negative or positive.

Step 2: Choose a BusinessIs there a particular business, industry, or field that is interesting to you? If so, write it down here and you can use it for your case study.

If not, don’t worry―you may find one as you do your research!

Step 3: Do ResearchOnce you have decided on the topic for your case study, you need to complete some research. Use the following ideas to help guide your research.

Search for your topic (for example, “flexible work schedule”) and see what you can find. You can also use the topic along with terms like “impact” or “effect” (for example, “flexible work schedule impact”), or try “economic impact” or “economic effect.” If you think you want to focus on a specific industry, you can use that as part of your search (for example, “flexible work schedule impact banking”),



If you are having a difficult time finding information on your topic, talk to your teacher. You might need to choose a different topic or a different business or industry.

Be careful about your sources. News media sites or educational sites may have the most helpful and accurate information for a case study.

Pay attention to dates! Don’t use examples from 1995 to describe how your case study business should respond now!

Read specific articles about your topic and find out how other businesses are dealing with the same changes. For example, if your case study will focus on providing childcare services on the business site, you may want to research companies that are already doing this.

Preview other published case studies that focus on similar issues. You may wish to use the following websites to access case studies:

o http://business.usa.gov/search/site/case%20study?mode=Across%20business%20agencies

o http://ucs.ist.psu.edu/default.asp?button=2

Use the organizer below to help you track your research.

Notes Source


http://ucs.ist.psu.edu/default.asp?button=2

http://business.usa.gov/search/site/case%20study?mode=Across%20business%20agencies



Example: Fictional Case StudyCompanies across the United States have been figuring out how to handle the new trend of telecommuting. Telecommuting is when employees do not go to a central place of work or office. Instead, these employees—often referred to as telecommuters or teleworkers—work from their homes, coffee shops, or other locations. As of 2012, about 40% of the working US population could work from home at least part of the time. Who wouldn't want the chance to work at home in pajamas?

Many companies have found offering telecommuting benefits them by increasing employees’ overall job satisfaction, behavior, and attitudes. Teleworkers enjoy the freedom of deciding where, when, and how they complete their work. Additional benefits to society include reducing traffic congestion, greenhouse gases, and energy use. On the other hand, some companies have dealt with challenges resulting from telecommuting, including the loss of face-to-face interaction. Some companies see a decrease in the quality of communications because of dependence on email and phone calls, and not enough time dedicated to in-person conversations and meetings.

Carlos Fernandez is the manager for Creative Imaginings, Inc., an advertising firm in Chicago. The company has 75 employees and is considered a solid and reliable business. While they don’t break a lot of new creative ground, they have a reputation for pleasing their clients and creating effective campaigns on a reasonable budget. One of the firm’s best artists, Lucia, just had a baby and is about to return to work from her maternity leave. Lucia wants to keep working, but she doesn’t want to spend too much time away from her new baby. The firm doesn’t have the resources available for keeping a baby onsite, so Lucia has asked to telecommute; she wants to work from her home office three days a week. Lucia has told Carlos that if the firm can’t come up with a way to let her spend more time with her child, she will reluctantly have to quit her job.

Lucia is very good at her job, and Carlos knows that she is a very conscientious person, so he is not afraid that she will use telecommuting to slack off. He does have some concerns about instituting an office-wide telecommuting policy. Six months ago, Alice also had a baby. Alice is good at her job, but her supervisors note that she doesn’t work hard if she isn’t closely supervised. Alice asked to telecommute when her baby was born, but Carlos refused. Also, Carlos knows that Gordon would like to telecommute, because he and his wife just adopted a toddler. Further complicating matters is Imelda, who would like to telecommute because her chronic arthritis makes her drive to the office very uncomfortable. Carlos is worried that if he says yes to Lucia, the whole office will end up working from home.

Carlos decided to get online and research how other companies are handling the telecommuting trend. He discovered that there’s a lot to be gained by figuring out how to make it work for his company. Carlos had to choose from the following options:

Allow nobody to telecommute, causing Lucia to quit.

Allow only Lucia to telecommute, disappointing Alice, Gordon, and Imelda. But by disappointing Alice, Gordon, and Imelda, the business could face possible negative consequences. These could include a disgruntled and/or less productive workforce, continued and increased employee expectations about telecommuting and parenthood, and even lawsuits regarding discrimination and mistreatment of employees.

Change corporate policy to let new mothers telecommute, making Alice less productive and disappointing Gordon and Imelda. Again, Carlos is fearful that by disappointing his employees, the business could face negative consequences.

Change corporate policy to allow telecommuting for all new parents, which could affect Alice’s productivity and isn’t really fair to Imelda. This option could also lead to many more employees asking to telecommute.



Change corporate policy to allow telecommuting for all new parents and employees with medical issues. This option could lead to almost everyone asking to telecommute!

Change corporate policy to allow everyone to telecommute, with the stipulation that a certain number of people from each department must be in the office every day. Each department manager will work with employees to create an appropriate department schedule. In addition, all telecommuting workers will be available during certain hours for teleconferences.

After consulting with other managers and the affected employees, Carlos decides to institute a policy of telecommuting for new parents, but only with the recommendation of their supervisors. His decision allows Lucia and Gordon to telecommute, but because Alice can’t get her supervisor’s recommendation, she stays in the office. Alice and Imelda are both unhappy with the decision, and Imelda has filed a formal complaint with her supervisor because she considers the policy unfair.




Assignment: Fictional Case Study, Part TwoStudent Name: Date:

Directions: Use this assignment sheet to help you plan out your case study. If you need more guidance, look again at the example case study (Student Resource 12.4).

Writing the Case StudyIf you look at the example case study, you will see that the content is basically divided into four sections. Your case study should include the same four sections. Use these questions below to help you think about what information to include in each section.

Section 1: Introducing the Topic What trend or issue are you writing about? Provide a clear definition—sometimes phrases like

“flexible work schedule” or “outsourcing” can be interpreted in different ways by different people.

How do you know it’s a trend? What information (statistics, articles, quotes, other case studies) can you share to prove that this is happening to a lot of businesses, not just the one you’re writing about?

In general, what are the positives and negatives of this trend for businesses? Stick with broad statements here, such as “Some companies have experienced this positive result____.” You’ll have a chance to talk about your company a little later.

Section 2: Introducing the Company What does the company do or sell?

How big a company is it?

How successful is the company? Is the company responding to this trend because it’s a leader in its field? Because it’s trying to keep its doors open? Those are two very different scenarios, and a reader needs to know that kind of information.

Who is involved in the decision making? Focus on a manager, CEO, or business owner who will make the decisions in the case study.

Section 3: How the Topic Affects the Company Make the connection—why does this company care about this trend right now? What

circumstances are leading the owner/manager/CEO to explore this issue?

What are the company’s options? How will the various options affect the company financially?

Section 4: What the Company Did About It What did the owner/manager/CEO decide to do? Why did he or she make that decision?

How did the decision affect the company? Remember: This is supposed to be a realistic case study. In reality, there is usually someone (or more than one person) who does not like a decision, and sometimes an owner/manager/CEO makes a decision that really hurts the company’s bottom line. You decide: is your case study a description of an amazing success? A total failure? Or something in between?


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