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Chapter 1Research in Business

CHAPTER LEARNING OBJECTIVES

After reading this chapter, students should understand…

1. What business research is and how it differs from decision support systems and business intelligence systems.

2. The trends affecting business research and the emerging hierarchy of research-based decision makers.

3. The value of learning business research process skills.

4. The different categories of firms and their functions in the industry.

5. The distinction between good business research and research that falls short of professional quality.

KEY TERMS

Key terms are shown in bold, as they appear in the text, throughout the lecture notes.

DISCUSSION AND PROJECT IDEAS

Discussion topics:

The relationship between research, the manager, and the researcher.

The conflict that can exist when the manager is the researcher.

The characteristics that identify good and bad research.

Projects:

Have students investigate various journals for an article of interest to them. The article should be no more than two years old and have sufficient content for a two page report. The object of the critique is to describe how the study followed, or failed to follow, the criteria for good research, as described in Chapter 1. Students should speculate on which of the writer’s conclusions were warranted, and which were not. (See Handout on next page.)

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Chapter 1, Research in Business

Article Critique Instructions to Students

FROM: Professor ________TO: Students in Research Methodology CourseSUBJECT: Project ____________________________

For your first research project, please investigate one of the journals listed below for an article of interest to you. The article should be no more than two years old. Choose one that has sufficient content from which you can write a report a two-page report (approximately two double-spaced pages).

The object of your critique is to describe how the study followed, or failed to follow, the criteria for good research, as described in Chapter 1. Speculate on which of the writer’s conclusions were warranted and which were not. In addition to Chapter 1, Chapters 2 and 3 may be helpful in getting you started.

Journals to consider:

1. Academy of Management Review

2. Administrative Science Quarterly

3. Business and Society Review

4. Decision Sciences

5. Financial Management

6. Harvard Business Review

7. Industrial and Labor Relations Review

8. Journal of Accountancy

9. Journal of Applied Behavior Science

10. Journal of Applied Psychology

11. Journal of Banking and Finance

12. Journal of Finance

13. Management Review

14. Personnel Journal

15. Public Administration Review

16. Training and Development Journal

Other journals may also be used.

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CHAPTER LECTURE NOTES

BRINGING RESEARCH TO LIFE

Overview

Myrna Wines, director of consumer affairs for MindWriter, Inc., must assess MindWriter’s CompleteCare program for servicing laptops.

She sent several well-respected research firms a request for proposal (RFP).

She and her team are interviewing the last of those firms, Henry & Associates.

Myrna wants to find a research supplier from whom she can learn, as well as one she can trust to do high-quality research.

The last interviewee is Jason Henry, a partner in Henry & Associates who comes highly recommended.

After viewing his presentation and conferring with her team, Henry & Associates is chosen to conduct the required research.

They schedule a date to meet with CompleteCare personnel.

Jason Henry’s tasks during the meeting:

Asking probing questions

Listening to the facts that have been gathered

Determining what the problem is from management’s point of view

Identifying what the problem is at various levels of abstraction

Myrna Wine’s tasks:

Listening

Discussing

Looking at things from different viewpoints

Jason Henry’s tasks after the meeting:

Measuring

Scaling

Project design

Sample

Finding elusive insights

Collaborating with Myrna in order to produce a report of results

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WHY STUDY BUSINESS RESEARCH?

Business research is a systematic inquiry that provides information.

More specifically, it is a process of planning, acquiring, analyzing, and disseminating relevant date, information, and insights to decision makers in ways that mobilize the organization to act in ways that maximize business performance.

Managers use this information to guide business decisions and reduce risk.

Multiple types of projects can be labeled “business research.”

Decision scenarios:

You’re the manager of a full-service restaurant. You’ve experienced significant turnover in your waiter/waitress pool, and some customers have commented that the once-friendly atmosphere is changing. Is this a problem for which business research should be used? Where will you begin in trying to solve this problem?

You’re the head of the state’s department of transportation. You must determine which roads and bridges will be resurfaced next year. You usually look at the roads and bridges with the most traffic, in combination with those representing the biggest economic disaster if closed. However, these are often located in the most affluent regions of the state. Because your decision has numerous operational, financial, and public relations ramifications, your manager suggests using business research to assist with your decision making. Should you authorize the research?

Decision scenarios and decision makers can be found in every type of organization, whether for profit, non-profit, or public.

Decision makers rely on information to make more efficient and effective use of their budgets.

At no other time in history has so much attention been placed on measuring and enhancing return on investment (ROI).

At a basic level, measuring ROI means calculating the financial return for all expenditures.

Over the past dozen years, technology has improved our measuring and tracking capabilities, while managers simultaneously realized their need for a better understanding of employee, stockholder, and customer behavior in order to meet goals.

Although business research helps managers choose better strategies, the cost of such research is being scrutinized for its contribution to ROI.

A management dilemma is a problem or opportunity that requires a management decision.

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Factors that should stimulate your interest in studying research methods:

Explosive growth and influence of the Internet.

Stakeholders demanding greater influence.

More vigorous competition.

More government intervention.

More complex decisions.

Maturing of management as a group of disciplines.

Greater computing power and speed.

– Lower-cost data collection

– Better visualization tools

– Powerful computations

– More integration of data (data warehouse)

– More and faster access to information

– Advanced analytical tools for enhanced insights (data mining)

– Customized reporting

New perspectives on established research methodologies.

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PLANNING DRIVES BUSINESS RESEARCH

Understanding the relationship between business research and information generated by other information sources is critical for understanding how information drives decisions relating to organizational mission, goals, strategies, and tactics.

Goals

Even very different types of businesses have similar types of goals, which are related to such things as:

Sales (membership)

Market share

Return on investment

Profitability

Customer acquisition

Customer satisfaction

Employee productivity

Machine efficiency

Maximization of stock price or owner’s equity

Decision Support

The need to complete exchanges with prospective customers drives every organization.

An exchange can be a purchase, a vote, attendance at a function, or a donation to a cause.

Each exchange, along with the activities required to complete it, generates data.

If organized for retrieval, these data constitute a decision support system (DSS).

During the last 25 years, advances in computer technology made it possible to share this collected data among an organization’s decision makers, over an intranet or an extranet.

An intranet is a private network that is contained within an enterprise (not available to the public at large).

It typically includes connections to the outside Internet, but it’s primary purpose is to share company information and resources among internal audiences.

An extranet is a private network that uses Internet protocols and the public telecommunication system to share an organization’s information, data, or operations with external suppliers, vendors, or customers.

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Both intranets and extranets can allow access to proprietary relational databases.

Sophisticated managers have developed DSSs where data can be accessed in real time.

These managers have a distinct advantage in strategic and tactical planning

Business Intelligence

A business intelligence system (BIS) provides managers with ongoing information about events and trends in the business environment.

In our restaurant scenario, it might be collecting customer comments.

In the MindWriter example, it might be data about laptops needing repair.

Strategy

It costs less to retain a customer than to capture a new one, so businesses place a high value on keeping customers buying.

That is why customer satisfaction, customer loyalty, and customer assessment studies represent a significant portion of research studies.

Microsoft recently decided to tie its 600 managers’ compensation to levels of customer satisfaction rather than to sales and profits.

Strategy is defined as the general approach an organization will follow to achieve its goals.

A firm usually implements more than one strategy at a time.

The discovery of opportunities and problems, and the resulting strategies, often result from a combination of business research and BIS.

Tactics

Business research contributes significantly to the design and selection of tactics.

Tactics are specific, timed activities that execute a strategy.

The purposes of business research include:

Identifying and defining opportunities and problems.

Defining, monitoring, and refining strategies.

Defining, monitoring, and refining tactics.

Improving our understanding of the various fields of management.

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Emerging Hierarchy of Information-Based Decision Makers

Not all organizations use business research to help make planning decisions. Increasingly, however, the successful ones do.

Exhibit 1-2 shows an emerging hierarchy of organizations in terms of their use of business research.

In the top tier, organizations see research as the first step in any venture.

– They use creative combinations of research techniques to gain insights that will help them make better decisions.

– They may partner with outside research suppliers.

– Every decision is guided by business research.

– There is generally enterprise-wide access to research data and findings.

In the middle tier, decision makers periodically rely on research information.

Decision makers turn to business research when they perceive the risk of a particular strategy or tactic to be too great to proceed without it.

They rely heavily on tried-and-true methodologies, such as surveys and focus groups.

They often choose the methodology before fully assessing its appropriateness to the problem at hand.

There is limited access to research data and findings.

In the base tier, managers primarily use instinct, experience, and intuition to facilitate their decisions.

Decisions are supported with secondary data searches.

They often rely on informal group discussion, a small number of individual interviews, or feedback from the sales force.

Large firms that occupy this tier are often influenced by culture; smaller companies because they think formalized research is too expensive to employ.

Managers who do not prepare to advance up the hierarchy will be at a severe competitive disadvantage.

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HOW THE RESEARCH INDUSTRY WORKS

The research industry is one of extremes.

– Very large suppliers account for the sales portion of sales in the industry.

– Smaller firms and one-person shops dominate when you look at the number of research firms.

Exhibit 1-4 provides an overview of the suppliers within the research industry.

Internal Research Suppliers

Firms that rely on research to make decisions are likely to have an internal research department or an individual who coordinates research initiatives.

The number of firms with internal research departments began to grow in the 1960s.

In the 1970s, researchers were often assigned to a functional area, such as marketing, and reported to the executive in charge of that area.

The researcher’s influence at the strategic level was constrained by their role… order takers who reacted to the demand for research projects and reports.

Through the 1990s, the accuracy and actionability of the information provided by research was thought to be low.

In 2001, the Cambridge Group and ARF sought to redefine the research function in order to make it more relevant to senior management.

Based on executives’ feedback, research began to expand into such areas as:

– Providing actionable insights

– Reducing risk in marketplace actions

– Improving return on investment

This evolution is consistent with Philip Kotler’s contention that, as costs rise, CEOs and board members demand greater accountability for decisions and expenditures.

However, there is no trend toward staffing large internal research departments. In poor economic times, internal research departments may be eliminated altogether, because firms feel that such services are expendable or available from external suppliers.

In some ways, the prominence of the DSS and BIS functions has forced the researcher into an even more subordinate role.

While both information technology management and research are critical, in most organizations the two functions have little to do with one another.

External Research Suppliers

More than 2,000 research firms operate in the United States.

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Research Firms

Full Service Firms

Full-service researchers include some of the largest research firms, and some of the smallest.

Exhibit 1-5 identifies some of the largest firms.

These firms are often involved in research planning from the moment of discovery of a dilemma or from the definition of a management question.

Such firms often have expertise in both quantitative and qualitative methodologies, as well as multifaceted facilities.

Some are capable of working in worldwide venues, while others are limited to one industry or geographic region.

These firms are often a combination of research and consulting operations.

Custom Researchers

Often described with phrases like “ad hoc research” or “custom-designed research”

A custom researcher crafts a research design unique to the decision maker’s dilemma. In other words, each project starts from ground zero.

What is implied is that such firms do not assume that a given methodology is appropriate for each client’s research.

Although a custom researcher may not always be a full-service research firm, a full-service researcher would always fit into the custom research category.

Proprietary Methodology Researchers

A proprietary methodology is a research program or technique that is owned by a single firm.

It may be a new method developed by the firm, or a twist on an established methodology.

Firms often brand these methodologies to distinguish themselves from the competition. (ACNielsen did this with its Homescan syndicated panel.)

The Gallup Organization reinvented itself using the proprietary research model, moving from public opinion pollster and custom researcher to research-based consulting firm.

– Q12 is a Gallup proprietary methodology that uses 12 questions to measure customer engagement.

– Gallup uses these same questions with all clients, so Q12 serves as a benchmark diagnostic for its subsequent consulting work.

– These questions and the survey instrument are copyrighted to guarantee that its intellectual property remains protected.

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– Having a proprietary method allows Gallop to charge significant premiums for its research and consulting services.

Specialty Research Firms

Specialty researchers represent the largest number of research firms.

These firms specialize in one or more arenas:

– Methodology

– Process

– Industry

– Participant group

– Geographic region

They may also perform a subset of a methodology specialty, such as:

– Offering focus group moderators, but not the focus group facilities

– Offering recruitment of focus group participants, but not the facilities or the moderator

Firms doing observation studies are another subset of specialty researchers.

– They often study retail shoppers

Envirosell and Design Forum both offer observation studies

– Envirosell’s research is designed to make retail environments and processes more productive.

– Design Forum uses research to create internal and external environments that establish and reinforce the retailer’s image.

Ethnography is a type of study that combines the skills of cultural anthropologists with communication and business experts.

Firms providing Web page optimization research and Web performance metrics are an emerging group of methodology specialists. (Yahoo!, NetIQ, NetConversions)

Other specialty research firms:

– MORInsight : employee research

– Mercer HR Consulting : employee research

– Survey Sampling, Inc .: suppliers of samples for telephone, mail, and online surveys.

– Greenfield Online : assists research firms by providing online samples and a large panel of opt-in participants in the online community.

– Qualtrics Lab s: an array of software and service products

– QuestionPro.com : complex surveys

– PerfectSurveys.com : online surveys

– Training Technologies, Inc. : designs, fields, tracks, and posts survey results

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Specialty researchers often assist other research firms with their projects.

Syndicated Data Providers :

A syndicated data provider tracks the change of one or more measures over time, usually in a given industry.

– Product movement may be tracked through retail outlets and wholesale environments.

– Sales performance may be tracked through coupon drop, distribution of product samples, special events, etc.

– May also be responsible for tracking price elasticity.

Frequency of data collection and reporting is based on the need of the members in the syndicate.

– Nielsen Media Research is well known for its People Meter research that reveals the viewing habits of television watchers. Data is collected four time per year during sweep weeks.

– Exhibit 1-6 lists some syndicated data providers.

Omnibus Researchers

Specializes in fast survey research, such as 24- to 48-hour turnaround

An omnibus researcher fields research studies, often by survey, at regular, predetermined intervals.

An omnibus study combines one (or a few) questions from several decision makers who need information from the same population.

Typically bills by the number of questions ($700 to $1,500 per question).

Research generally done via phone or internet.

Exhibit 1-7 shows samples of Omnibus studies.

Communication Agencies

Advertising, public relations, sales promotion, and direct marketing agencies are heavy users of syndicated research data.

It is difficult to develop a creative strategy without research on target audience knowledge, motivations, attitudes, and behavior.

Some agencies do extensive basic research on:

– Ad recall and wear-out

– Ad placement effectiveness

– Effectiveness of creative approaches

– ROI on media buys

– Effectiveness of different action stimulants

All agencies do extensive testing when building a campaign. Such measures combine custom research with syndicated research to explain why a campaign was a success.

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Consultants

Offer a wide range of services at the strategic and tactical levels.

All are involved in doing extensive secondary data research for clients.

May be major influencers in research design.

Are often involved in the interpretation of results.

Some conduct both qualitative (focus groups, expert interviews) and quantitative studies (surveys) as they seek new opportunities or solutions to their clients’ problems.

Trade Associations

Promote, educate, and lobby for the interests of their members.

Not all conduct or supply research services.

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WHAT IS GOOD RESEARCH?

Good research generates dependable data that are derived by professionally conducted practices, and that can be used reliably for decision making.

It follows the standards of the scientific method: systematic, empirically based procedures.

Exhibit 1-8 shows actions that guarantee good business research.

Characteristics of the scientific method:

– Purpose clearly defined.

– Research process detailed.

– Research design thoroughly planned.

– High ethical standards applied.

– Limitations frankly revealed.

– Analysis adequate for decision maker’s needs.

– Findings presented unambiguously.

– Conclusions justified.

– Researcher’s experience reflected.

Good business research has an inherent value only to the extent that it helps management make better decisions that help achieve organizational goals.

– The value of information is limited if the information cannot be applied to a critical decision.

Business research finds its justification in the contribution it makes to the decision maker’s task and to the bottom line.

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ANSWERS TO DISCUSSION QUESTIONS

Terms in Review

1. What is business research? Why should there be any question about the definition of research?

Business research, as it is used in this text, is a systematic inquiry that provides information to guide managerial decisions. More specifically, it is a process of planning, acquiring, analyzing, and disseminating relevant data, information, and insights to decision makers in ways that mobilize the organization to take actions that maximize business performance.

Questions arise when people begin to provide their own definitions of research, which in some way restrict the meaning of “research” to specific approaches, topics, or procedures.

2. Distinguish between omnibus studies and syndicated research studies.

An omnibus study combines one or a few questions from several decision makers who need information from the same population. These studies are usually conducted by phone or via the Internet, and are often conducted on a regular schedule (weekly, monthly, annually, etc.).

A syndicated research studies are used when managers want comparative performance and opinion data, evaluating themselves against their competitors in sales, market share, share of voice, image, or salary and benefit levels. A syndicated data provider tracks this type of information over time, usually in a given industry.

3. Distinguish between full-service researchers and specialty researchers.

A full-service research firm is often involved in research planning for their clients from the moment that a management question or problem is discovered. Such firms usually have expertise in both quantitative and qualitative methodologies, and they often have multifaceted facilities capable of servicing a wide variety of research designs.

Specialty research firms, on the other hand, tend to develop a specialty in one or more arenas, such as methodology, process, industry, participant group, or geographic region.

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Making Research Decisions

4. A sales force manager needs to have information in order to decide whether to create a custom motivation program or purchase one offered by a consulting firm. What are the dilemmas the manager faces in selecting either of these alternatives?

To choose either option, the sales manager must first determine the goals of the motivation program, in terms of desired attitudes and behavior. He/she needs to know the current motivation level of the employees, and the incentives or penalties that would motivate them to adopt desired attitudes and behavior.

If the existing program can achieve the desired results, it would be the right choice. However, if it only meets some of the requirements, the manager would have to weigh such things as total benefits, cost, ease of administering the training, implementation time, cost and development time of a custom program, and so on.

5. You are the manager of the retail division of a major corporation. Your firm has 35 stores scattered over four states. Corporate headquarters asks you to conduct an investigation to determine whether any of these stores should be closed, expanded, moved, or reduced. Is there a possible conflict between your roles as researcher and manager?

Student answers will vary. Sample answer:

As a manager in this situation, I would try to review the pertinent information objectively. However, I might subconsciously favor findings that called for the continuation and possible expansion of the stores under my control. Or, the findings might reflect my preconceived thoughts, wishes, or goals. Store moves and closures would mean possible layoffs and redeployment of colleagues, which might also hamper my objectivity.

6. The new president of an old, established company is facing a problem. The company is currently unprofitable and is, in the president’s opinion, operating inefficiently. The company sells a wide line of equipment and supplies to the dairy industry. Some items it manufacturers, and many it wholesales to dairies, creameries, and similar plants. Because the industry is changing in several ways, survival will be more difficult in the future. In particular, many equipment companies are bypassing the wholesalers and selling directly to dairies. In addition, many of the independent dairies are being taken over by large food chains. How might business research help the new president make the right decisions?

Student answers will vary. Sample answer:

Many different studies might be helpful in this situation. The most likely lines of investigation should be on (1) the firm’s operating inefficiencies, and (2) its future prospects in the changing dairy industry. In the first case, the president might want to

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determine whether the inefficiency is caused by internal production problems, poor organization, ineffective cost controls, weak sales management, and so on. This might take the form of a company audit of internal processes. The examination of the industry and the firm’s future in it would likely be directed at discovering possible trends in consumption patterns and distribution systems. It might also entail polling the end user of the products to see if anything other than price is prompting them to buy directly from manufacturers.

Having this information would allow the researcher to either support the president’s contention that inefficiency is the root problem, or rule it out. Further, it would allow him to determine such things as whether any overlooked opportunities (markets) exist, if his company is the only one experiencing problems, if the trend is likely to reverse, and so on.

7. You have received a business research report done by a consultant for your firm, a life insurance company. The study is a survey of customer satisfaction based on a sample of 600. You are asked to comment on its quality. What will you look for?

I would ensure that the purpose of the research had been clearly defined; that the research process had been thoroughly documented and planned; that limitations had been revealed; that highly ethical standards were applied; that there was adequate analysis; that the findings were straightforward (unambiguous); that the conclusions were justified, and that the researcher’s credentials were stated. Further, I might evaluate the demographics of the 600. Were they all in the same age range? From the same region of the country? Buyers of similar insurance products?

8. As area sales manager for a company manufacturing and marketing outboard engines, you have been assigned the responsibility of conducting a research study to estimate the sales potential of your products in the domestic (U.S. or Canadian) market. Discuss key issues and concerns arising from the fact that you, the manager, are also the researcher.

This is a touchy situation. As a representative of the company, I would like to present fair and unbiased facts. However, it would be tempting to slant the information. For instance, a common source of bias is to understate demand. This makes sales goals easier to achieve, which makes the sales department look good. Understating demand, however, may mean that production gears down, which can negatively impact availability and customer satisfaction, and hence the ability to make sales. And if sales projections are too low, it may mean layoffs or territory consolidations.

On the plus side, it would help me pinpoint key products, salespeople, territories, and customers. All of which could help me refine the sales force, it’s methods, and training needs.

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Bringing Research to Life

9. In the Bringing Research to Life vignette, what evidence is presented of data warehousing? Of data mining?

Data warehousing means storing information, from which useful information may be gleaned. Data mining entails extracting this information from the warehouse in a way that begets knowledge.

In this vignette, Myra Wines is looking for a way to study customer satisfaction. They have access to the CompleteCare facility and it’s records, from which customer information may be pulled. A rational assumption would be that the CompleteCare service repair records is the data warehouse. From this, they need to mine such information as customer names, most frequently repaired laptops, parts with the highest failure rates, and so on.

>From Concept to Practice

10. Apply the principles in Exhibit 1-8 to the research scenario in question 8.

First, you would need to clearly define the purpose of the research. Is it to support production expansion? Layoff of the sales staff? Increase or decrease in the number of products sold?

Then, a research process would need to be defined. In other words, putting on paper an overview of the entire research project.

Following this, the research procedures must be planned. Will data be based on past sales only? On customer or dealer surveys? By interviewing salespeople? By obtaining and reviewing competitors’ sales?

Next, one must ensure that the report will be unbiased. What safeguards will be put into place to safeguard the information provided by, and/or the personal information of, the study participants? Who will ensure that the data gathered (and recommendations made) will not exceed the scope of the study?

Then, if any limitations are recognized, they must be stated. For instance, sales records are limited to the prior six months. Or, project sales may be affected by the number of visitors to the boat show.

When the information is gathered, it must be tied to the collection instruments and thoroughly analyzed. For instance, one should count ALL survey responses, not just a sampling or percentage of them.

Findings should be clearly organized and presented in charts, graphs, and words, and clearly tied to the conclusions or recommendations made. In other words, the findings should clearly justify the conclusions.

And, finally, one should present his/her qualifications to both conduct the study and make the recommendation.

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Note to Adopters of Business Research Methods 8e or Earlier

In redesigning the content in chapters 1 through 3, we extracted information on research classification to make room for new material on research industry structure. Some of our reviewers thought this early classification material was simplistic and confusing when compared with the more detailed discussion of research design in Chapter 6.

Although we don’t want to confuse students, some instructors find an early understanding of broad research classifications broadens their students’ perspectives of possible options.

This extracted material provides two different classification systems. The first views business research from an applied verses pure research (basic research) approach. The second classification system divides business research into four types: reporting, descriptive, explanatory, or predictive. This material includes four mini-cases for discussion.

If you would like to continue using this material, you and your students will find the extracted content (including the mini-cases) on the student CD in the folder for Chapter 3. This stand-alone content supplement may be used with Chapter 1 or with content introduced in either Chapter 3 or Chapter 6.

Answers to the discussion questions ending the supplement appear in Chapter 3.

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