The Integrated Nature of Business
Jason Powers
MGT 790, Fall 2018

Table of Contents?
I. Four Business Area Integrations Addressed 2
II. Accounting/Management 4
A. Domino’s Pizza 5
B. T-Mobile 7
C. Personal Experience (I) – Ascend Federal Credit Union 9
III. Finance/Economics 11
A. Country Wide Mortgage 12
B. Personal Experience (II) – Ascend Federal Credit Union 13
C. Doc’s Q’in Pit Stop Success 14
IV. Ethics/Marketing 16
A. Anheuser-Busch 17
B. Activia Yogurt 17
C. Altria 17
V. Business Law/Marketing 19
A. Lane Bryant 20
B. Gillette 21
C. Personal Experience (III) – Ascend Federal Credit Union 22
VI. Conclusion and Insight 23
VII. References 25?

I. Four Business Area Integrations Addressed

The four business function integrations I have chosen are: Accounting/Management, Finance/Economics, Ethics/Marketing, and Business Law/Marketing. Accounting and Management have a close relationship because the primary purpose of accounting is to provide information to management needed to manage sound business decisions. The relationship between Finance and Economics takes the current and expected economic conditions into account when making business decisions:
How should management finance its decisions/transactions?
How will economic conditions affect these decisions?
Will interest rates rise or fall?
Will consumer demand increase or decrease?
The economic questions are important to answer as they have a direct impact on the decisions made in the Finance arena. The relationship between Ethics and Marketing is important as it relates to the questions of how to advertise or market the value created by the firm in such a way as to increase customer loyalty and consumption without crossing the line into unethical practices such as false advertising. Other questions that Marketing and Ethics raise are concerned with ethical practices versus unethical practices and their impact on an organization’s brand equity. For instance, if a firm decides it can save on expenses or increase revenue $1 million in the short term by behaving legally but unethically, it must also consider how much it may have to spend in the long term in advertising and marketing to counteract any negative brand affects to repair its brand image. The relationship between Business Law and Marketing rounds out the four chosen relationships because of the important nature of compliance and trust. Organizations, especially financial institutions, must adhere to regulatory guidelines surrounding advertising and disclosures. One such regulation that banks must follow is Regulation DD which implements the Truth in Savings Act. The relationship between Business Law and Marketing is important because consumers must be able to trust the advertisements a bank markets and be able to make informed decisions about their accounts at depository institutions. This is accomplished using uniform disclosures. According to The Federal Reserve’s Consumer Compliance Handbook, uniform disclosures “aid comparison shopping by informing consumers about the fees, annual percentage yield, interest rate, and other terms for deposit accounts” (The Federal Reserve, 2010).
Now, let us consider each of these four pairs of business functions and analyze how they interrelate and integrate.

II. Accounting/Management

The relationship between Accounting and Management hinges on the flow of information. It also pivots on the intended recipients and use of that information. Accounting has three major subcomponents, Financial Reporting, Auditing, and Managerial Accounting.
Financial reporting generally describes what Management has done through the firm’s various transactions that are recorded. Obviously then, Management influences Accounting by taking certain actions and making certain decisions. Accounting then must take those actions and decisions, interpret them, and present them according to Generally Accepted Accounting Principles (GAAP). Financial reporting has strict guidelines codified through the Financial Accounting Standards Board (FASB). FASB is “based in Norwalk, Connecticut, and is a private, independent, and not-for-profit organization which establishes the standards for financial accounting and reporting for both private and public companies and not-for-profit organizations that follow GAAP. These standards are recognized as authoritative” (, 2018). Consumers of this type of accounting information include investors, creditors, shareholders, and government authorities and agencies.
Auditing is a very useful part of accounting that serves as an independent third-party review that examines the controls, policies, and procedures surrounding financial reporting. This analysis includes an objective review of the financial statements which results in an audit opinion. A clean, or un unqualified opinion means that the auditor has no reservations concerning the financial statements (, 2018). This declaration means that the financial statements appear to be presented fairly, an assurance that lower a firm’s cost of capital by giving credibility to the financial statements that are used by lenders, investors, and potential creditors. Additionally, Auditing serves as an honest “check” to ensure Management acts in the best interest of the Board of Directors whose fiduciary duty is to its firm’s shareholders. Both Financial Reporting and Auditing tell those outside the firm how Management has operated the business through its various past transactions.
Contrary to Financial Reporting and Auditing, Managerial Accounting provides reports that are for internal consumption by Management. This type of accounting is used for projections because it is focused on the future rather than the past. Managerial Accounting can provide detailed information about products, plants, and processes. There are no regulatory restrictions surrounding Managerial Accounting, and the information can be supplied in whatever format Management deems is helpful in making sound economic decisions.
A. Domino’s Pizza
The first example of the interrelationship between Management and Accounting is Domino’s Pizza’s common Form 10 report (Form 10-K for annual reports and Form 10-Q for quarterly reports). This report is a blend of Management and Accounting information. Below is a snippet of this report from Domino’s 2017 annual Form 10-K (See Table 1). These reports are required for public companies by the Securities Exchange Commission with the underlying basis of keeping shareholders and markets informed transparently on a regular basis and include important financial information (See Table 1).
Table 1 – Domino’s Financial Data; Source – Domino’s 2017 Form 10-K

As one reads through Domino’s 10-K, she can understand Management’s influence on Accounting and vice-versa. For instance, on page 24 as Management is discussing its result of operations, it says the following about its relationship with Accounting:
The following discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, our management evaluates its estimates, including those related to revenue recognition, long-lived and intangible assets, insurance and legal matters, share-based payments and income taxes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. Changes in our accounting policies and estimates could materially impact our results of operations and financial condition for any particular period (Domino’s, 2017; emphasis added).
B. T-Mobile
A second business example of this relationship is an auditor’s Report on Audited Financial Statements. According to the American Institute of Certified Public Accountants (AICPA):
The auditor’s report is customarily issued in connection with an entity’s basic financial statements—balance sheet, statement of income, statement of retained earnings and statement of cash flows. Each financial statement audited should be specifically identified in the introductory paragraph of the auditor’s report. If the basic financial statements include a separate statement of changes in stockholders’ equity accounts, it should be identified in the introductory paragraph of the report but need not be reported on separately in the opinion paragraph since such changes are part of the presentation of financial position, results of operations, and cash flows (, 2018).
Figure 1 below is T-Mobile’s letter from PricewaterhouseCooopers, LLP, stating its audit opinion (T-Mobile, 2017).

Figure 1 – PricewaterhouseCoopers LLP Audit Opinion; Source T-Mobile 2017 Annual Report

A clean audit opinion, such as the example above, provides those outside of Management an assurance that the numbers have not been misstated materially. It also presents that the results of Management’s decisions have been recorded accurately. Finally, the requirement of these independent audits also influences Management to act and manage in such a way as to mitigate fraud and associated losses.

C. Personal Experience (I) – Ascend Federal Credit Union
A third business example of Management and Accounting influence each other through accounting reports comes from my own personal experience as a Financial Analyst for Ascend Federal Credit Union. Management consumes much information derived from regulatory reporting required by federal regulatory agencies for their respective depository institutions. For example, each quarter the National Credit Union Administration requires credit unions to fill out a 5300 Call Report. Many accounting items are included, such as balance sheets, income statements, and various and sundry statistical items including the number and types of loans, rates on those loans, number of employees, number of branch locations, etc. From the data included in the Call Report, many different ratios and managerial accounting data can be calculated. This is invaluable as it enables apples-to-apples peer comparisons and benchmarks (see Figure 2, Return on Assets).

Figure 2 – Return on Assets; Source – Callahan & Associates
By studying quarterly Call Reports, one can detect chosen strategies of various organizations. Some choose to compete on convenience with higher pricing, while other choose to compete on low prices and efficiency. Using longitudinal analysis, these types of accounting reports can also help Management gauge its own strategic direction by answering questions such as:
Is the Credit Union achieving an adequate Return on Assets (ROA)?
Is the Credit Union gaining market share?
Is the Credit Union realizing an appropriate level of efficiency?
Are the Credit Union’s Key Performance Indicators (KPIs) moving in the right direction over time?
In summary, Management takes certain actions and Accounting records those actions as transactions and reports both externally (Financial Reporting) and internally (Managerial Accounting). Management consumes these reports and makes more decisions about future transactions – and the cycle continues. Accounting compels Management to “speak” in a certain uniform language regarding a company’s financial condition to foster transparency among all stakeholders of an organization. This uniformity in the presentation of a firm’s financial condition provides stakeholders a basis of analysis and comparison for companies, industries, and the broader economy in general.

III. Finance/Economics

Finance and Economics are differing disciplines, yet they inform and influence each other. Economics can be subdivided into two primary categories: Macroeconomics and Microeconomics. Macroeconomics is defined as “a study of economics in terms of whole systems especially with reference to general levels of output and income and to the interrelations among sectors of the economy.” Microeconomics is defined as “a study of economics in terms of individual areas of activity (such as a firm.” While Economics is either the study of the whole economy (macro), or a single, individual player in the economy (micro), Finance is the system that provides funding for the economy and includes the circulation of money, the granting of credit, the making of investments, and the provision of banking facilities. It also means the science or study of the management of those funds (Merriam-Webster). There are three types of Finance: public finance, corporate finance, and personal finance. In this discussion, we will limit our scope to corporate finance.
Economics impacts Finance by influencing the markets in which Finance operates. One of the primary goals of Finance is to maximize shareholder wealth. This goal is accomplished by allocating resources to activities that create value and generate revenue and by controlling expenses associated with the allocation of resources. The principle question a firm asks is how to finance its value-creating activities? A company is interested in financing its value-creating activities at the most efficient cost. A firm can do finance value-creating activities through one of three ways or a combination of these three ways: liquidate assets, i.e., use cash to pay for the value-creating activity; debt financing, or using loans to finance value-creating activities; equity financing, such as the sale of stock for publicly traded companies, or an injection of capital from a firm’s owners if it is not a publicly traded company. Current and expected economic trends will influence this cost of capital, and ultimately the decision a Finance manager makes. If the supply of money is low, interest rates will be high causing debt financing to be more expensive. If interest rates are generally high in the market, investors will require greater returns on their investments. If these required returns cannot be generated, or the current and/or expected general economic conditions are in a slump, it will have an adverse effect on the individual economic condition of a firm causing stock prices to devalue and sending a firm into a different direction seeking to finance operations at a lower cost. Conversely, the finance activities of a company can influence the economics of an industry, or a nation.
A. Country Wide Mortgage
An example of this interrelationship is the housing crash that began a cascade of economic disasters which ended up in the Great Recession (Worstall, 2015). This economic housing-price bubble was influenced by financing decisions. Risky loans were made to consumers who traditionally could not afford home ownership. When the price of oil and gas began to peak, these consumers who could least afford their homes in the first place, and who had purchased these homes with no money down, suddenly realized they could not afford their mortgages and walked away. The price of houses dropped precipitously, and many, many more Americans walked away from their underwater (financially speaking) homes. One of the largest companies involved in this crisis was Countrywide Mortgage which, according to Gretchen Morgenson was, “a freewheeling mortgage machine based in Southern California, and was at the epicenter of the mortgage meltdown that in 2008 brought the nation’s economy to its knees” (Morgenson, 2016).
B. Personal Experience (II) – Ascend Federal Credit Union
Another interesting example of the interplay of Finance and Economics is the current increase of liquidity risk in depository institutions. At our institution, our current loan-to-deposit ratio has exceeded 100%, and we have borrowed funds from the Federal Home Loan Bank in Cincinnati, Ohio, to be able to meet our customers’ lending needs. As intermediaries, FIs make their money on the margin by borrowing on the short side of the yield curve and lending on the long side of the yield curve. For example, an FI will pay a consumer an interest rate for a one-year certificate of deposit approximately equal to the market rate for one-year money, and then lend that money to another consumer who wants to purchase an automobile for the approximate price of two or three-year money, plus servicing costs and credit risk. As an FI reaches for yield by lending for longer and longer terms (i.e., 30-year fixed mortgages), it increases its interest rate risk by locking in an interest rate for an extremely long period, and liquidity risk by tying up its assets in an instrument where the principal is not repaid quickly. If too many consumers demand their deposits, an illiquid FI must liquidate its assets below market value to satisfy its liabilities. If an FI keeps a large sum of cash on hand to eliminate liquidity risk, it increases risk to earnings since cash does not generate a return and loses value due to inflation. Since interest rates are influenced by the supply and demand for money, FIs must be attuned to the current and expected economic realities to manage these risks successfully. During economic boom times, many FIs have had to increase depository rates to attract deposits or borrow funds to raise the capital needed to meet the demand for lending.
C. Doc’s Q’in Pit Stop Success
Another example of the interrelationship of Finance and Economics is the loan a small business receives to expand its operational capacity. According to the Federal Reserve Bank of San Francisco:
Financial markets help to efficiently direct the flow of savings and investment in the economy in ways that facilitate the accumulation of capital and the production of goods and services. The combination of well-developed financial markets and institutions, as well as a diverse array of financial products and instruments, suits the needs of borrowers and lenders and therefore the overall economy (Federal Reserve Bank of San Francisco, 2005).

In a gas station parking lot on Highway 132 in Modesto, California, Derek Taylor began a dream when he opened Doc’s Q’in Pit Stop in 2006. His business continued to grow, and he purchased a location in a building, but he still needed to expand. He needed a loan to build a food truck. He obtained that loan through a company call Opportunity Fund. Three loans, two food trucks, and a second brick and mortar location later, Doc’s Q’in Pit Stop is still growing and thriving, in part due to the ability to access capital to expand his small business (Martinez, 2018). This expansion has impacted his family, suppliers, and customers in positive ways.
To summarize, the economy will dictate the price of money, which in turn influences financial decisions regarding the financing of value-creating activities. At the same time, aggregate decisions made by individual organizations regarding financing expansions, or other balance sheet and profitability initiatives, such as debt restructuring, increasing liquidity, expense reductions (layoffs, vendor partnership terminations), etc., can affect the economy in return by influencing the behavior of consumers and other businesses.

IV. Ethics/Marketing

Ethics and Marketing have a unique relationship in that they exist with a dynamic tension. At one time, when commerce was carried on locally in the marketplace, common law dictated that caveat emptor ruled the day. The literal interpretation of Caveat emptor, “Let the buyer beware” is a legal principle that determines if there is no warranty, the buyer assumes the risk of the purchase. This principle worked well when the buyer and seller knew each other and neither had an advantage. Now with the technological advances of modern commerce, many regulations have been written to protect consumers. Financial institutions are not immune to these new regulations as Congress has even created a Consumer Financial Protection Bureau (CFPB). Today, ethics and social responsibility saturate almost every aspect of strategic marketing management. Few marketing executives subscribe to the outdated view that if an action is legal, then it is also socially responsible and ethical. Many executives understand that their decisions and actions will be weighed in public by a diverse population with differing values and interests (Marketing Strategy, 2014). On the positive side of this relationship, ethics has constrained marketing to ensure its advertisements are fair, accurately represent the product, and promote social responsibility. Marketing no longer attempts to sidestep ethical questions or situations but embraces them and, many times, promotes ethical and social responsibility. On the negative side, there are still some marketers left who subscribe to the previous view, “if it’s legal, it’s okay.” These firms may experience short-term profitability but will suffer in the long-term.
A. Anheuser-Busch
One positive example of the relationship between Marketing and Ethics illustrated by Anheuser-Busch. Since 1982, Anheuser-Busch has spent over $830 million to promote responsible drinking of alcoholic beverages through national advertising campaigns and community-based efforts. In recognizing its ethical obligation to its customers, Anheuser-Busch is willing to forgo some business income which could be generated from misuse of its products (Marketing Strategy, 2014).
B. Activia Yogurt
A negative example of this relationship is the misleading advertising of Activia Yogurt. Dannon’s popular Activia brand yogurt attracted consumers into pay more promising nutritional benefits, when in reality, it was similar to other brands of yogurt. Dannon falsely claimed that its nutritional benefits were “scientifically” and “clinically” proven. A class action lawsuit was settled when Dannon was forced to pay up to $45 million in damages (McMullen, 2010). Dannon still stands by its advertising, but it was forced to alter its advertising.
C. Altria
One interesting example of this relationship is the advertisement that tobacco companies are required to run admitting that smoking is harmful, that tobacco companies made them more addictive and unethically enticed consumers to smoke by deceiving them in to think that low tar cigarettes were less harmful (Kodjak, 2017). The dynamic is that to be ethically and socially responsible, tobacco companies will need to put their tobacco businesses out of business. Tobacco companies seem to be at least paying lip service to ethical and social responsibility. Altria released this statement by Murray Garnick, Altria’s Executive Vice President and General Counsel: “We remain committed to aligning our business practices with society’s expectations of a responsible company. This includes communicating openly about the health effects of our products, continuing to support cessation efforts, helping reduce underage tobacco use and developing potentially reduced-risk products” (Altria, 2017).
In summary, ethics has had an enormous impact on marketing which seems to only continue to grow. Marketing has taken notice and has allocated resources to ethical communications with consumers. Only time will tell if the return on the investment of ethics can be financially proven with a Return on Investment (ROI). The initial returns portend to positive increases in brand equity for the ethically responsible (Parrish, 2016). Of course, there will always be bad actors, but hopefully the market will eventually root them out. Until then, “Caveat Emptor!”

V. Business Law/Marketing

Business Law impacts every area of business in that it governs a wide range of areas including bankruptcy, corporate law, mergers and acquisitions, securities and financial institution regulation, finance, commercial law, taxation, and Marketing (among others). As interstate commerce has grown along with a myriad of ways to advertise, the importance of mitigating unlawful advertising practices has grown. Advertising truthfully, fairly, and without deception fosters trust between the organization and its customers and potential customers. One of the most important regulating bodies in the marketplace regarding advertising is the Federal Trade Commission (FTC). The FTC has been given broad authority under the Federal Trade Commission Act (FTC Act) to prohibit unfair or deceptive acts or practices for interstate advertisements. Although the mandate is broad, the FTC has published guidelines to help marketers and advertisers avoid misleading and/or false advertisements. In addition to the FTC, states have laws prohibiting unfair trade practices and false advertising which are enforced by each state’s attorney general (Ohio State Bar Association, 2017). The mission of the FTC is to protect consumers “by stopping unfair, deceptive or fraudulent practices” (FTC). They stop unfair, deceptive or fraudulent practices by conducting investigations, suing companies and individuals who violate the law, develop rules (rulemaking), and educate businesses and consumers about their rights and responsibilities. The Business Law function of an organization thus ensures the marketing and advertising of a firm remains congruent with applicable federal and state laws.
Marketing can have a profound effect on the amount of needed resources from the Business Law function to ensure compliance with regulation. Both inhouse and outside counsels can be kept busy reviewing advertising materials submitted to them by the Marketing departments of firms asking for review and advice. Many times a cost-benefit analysis may be used to decide how far to push the boundaries of advertisements. Is the risk appetite high enough for the firm to only need to be able to provide a defensible position to avoid fines and lawsuit damages, or is the firm’s risk appetite so low that it wants to avoid litigation altogether? Providing this parameter will go a long way to establishing just how much control Business Law exerts over the Marketing arm of the firm.

A. Lane Bryant
One example of the interrelationship of Business Law and Marketing is the required “fine print” in many advertisements. In its blog entitled “THE FINE PRINT – READ IT,” Truth in ( sums up the requirements of fine print this way:
Ah, the fine print – the teeny words at the bottom of an ad that contain the details of an offer. Even radio ads use a similar tactic where a fast-talking announcer rambles off some lingo at the beginning or end of a commercial. Many of us tune out and don’t even see or hear the fine print in ads.

The problem is that advertisers are onto us and some take advantage of our tendency to turn a blind eye and deaf ear to the pesky little details.

There are rules in place that are meant to protect us. First, fine print isn’t supposed to contradict other statements in an ad or clear up false impressions the ad might leave. In other words, what the headline giveth, the fine print is not supposed to taketh away ( illustrates a bad example of how the fine print can disqualify everything just said previously with an advertisement from Lane Bryant. The ad states the entire store is on sale – absolutely everything! Except, not everything is on sale since it excludes DKNY JEANS products, SPANX, and ASSETS products.

B. Gillette
A second example of the relationship between Business Law and Marketing is the requirement for an organization that advertises its products are “Made in USA” means that “all or virtually all” the product has been made in America. This requirement means that “all significant parts, processing and labor that go into the product must be of U.S. origin” (FTC). After seeing a Gillette ad which seemed to imply that Gillette razors were made in the U.S.A., went to the grocery store to investigate the origin information on Gillette’s product packaging. They reported, “Out of 17 Gillette shaving products sampled by that listed a country of origin on packaging, only two packs of cartridges for the Fusion5 and the Fusion5 ProGlide razors were labeled ‘Made in U.S.A.’ The rest of the cartridges, razors, and blades were either wholly or partially made in Brazil, Mexico, Poland or China. This includes at least four of the razors featured in the ad, all of which had handles made abroad” (, 2017).

C. Personal Experience (III) – Ascend Federal Credit Union
A final example of the interrelationship between Marketing and Business Law comes from my own experience at Ascend Federal Credit Union. As we develop our marketing campaigns, the campaigns are run through an approval process which includes Operations, Corporate Administration, and probably most importantly, our Legal Department. While all of the other departments may check for the particular areas of compliance with which they are familiar, Legal runs the gauntlet of regulations to ensure compliance with all applicable regulatory agencies and/or rulemaking bodies. This self-imposed process is obviously designed to ensure that our marketing advertisements are truthful, fair and not deceptive or misleading and attempts to reduce overall risk; however, requiring this process also increases complexity, production costs in terms of time and corporate resources, and reduces flexibility and responsiveness to Marketing’s perceived needs.

VI. Conclusion and Insight

Within an organization, there are many cogs, levers, and buttons, and they all interrelate in some form or fashion. Just like ratios, if one adjusts one side of the fraction without adjusting the other, the balance, formula and result changes.
One of the most important things I have learned from this class and this writing assignment is that there are so many interrelated associations and connections within each business function, that it is imperative for a firm to have a written, agreed upon strategic plan and the visionary leadership in place to ensure each function is moving in the same direction and concerned with meeting the same strategic objectives. Without such a plan and leadership, each business function is left to pursue its own agenda without any consideration as to how each business function impacts the others. In the absence of such a strategic alignment, an individual business function may impede the progress of other functions – without even realizing it.
I have experienced an example of this antagonistic dynamic in my own organization between Operations and Marketing. Both areas are striving to pursue its interpretation of the overarching mission of the credit union. Operations perceived that because of customer demand and competitive requirements, it needed a new lobby system software which would enable a customer to check in online and/or schedule an appointment with credit union staff at the branch location of the customer’s choice. Marketing sensed that to meet the credit union’s strategic objective, it needed to develop a new website with a strong branding image and new, technologically-advanced data tracking methods. The two collided when Marketing felt that the out-of-the-box software Operations had elected to purchase did not meet the branding specifications that Marketing had begun to formalize as it built its new website. Operations believes that Marketing is being too fastidious by not adding tangible functionality important to customers because of intangible “tastes.” Both areas believe they are safeguarding the objective of the strategic plan, yet they are at an impasse as to the implementation of this new technology. I do not yet know how this disagreement will play out, but it will be interesting to see how these two areas will interrelate and integrate in order to fully pursue the credit union’s stated strategic plan.
In conclusion, all business functions play a role in an organization. Sometimes the roles are complementary, or supplementary, and sometimes the roles integrate as checks and balances, but they all are interrelated and exert some amount of influence and direction on other areas of the business. It takes skilled leadership and vision to ensure all of these various functions row in the same direction to fulfill a firm’s vision and achieve its mission and strategic objectives.