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 Gary J. Bissonette
Queen’s University

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 viii C o ntents

Case for Discussion 1 239 CHAPTER 8

Case for Discussion 2 242
Developing Your Business Structure
and Culture 280
CHAPTER 7
Entrepreneurship and Forms of Business Learning Objectives 280
Ownership 246 Snapshot—What to Expect in This Chapter 281
Business in Action: Inclusion and Diversity—It
Learning Objectives 246 Does Make a Difference 281
Snapshot—What to Expect in This Chapter 247 Business System Design 282
Business in Action: Saputo Inc.—A Case of Business in Action: Aligning Strategy and
Classic Entrepreneurship 247 Organizational Structure 284
Entrepreneurship 248 Developing the Organizational Framework 285
Business in Action: Success Is in the Structure 286
Details 250 Business in Action: Virtual Organizations 289
The Business of Entrepreneurship 251 Business in Action: The Importance of a Strong
Core Fundamentals 251 Corporate Culture 293
Business in Action: Payfirma (Merrco)—Making Culture and Environment 294
Payments Delightful, One Business at a Business in Action: Tony Hsieh, CEO
Time 255 Zappos 297
The Concept of Risk: Life in the Management Approach 298
“Uncertainty Lane” 256 Business in Action: Microsoft—Restructuring for
Offsetting Risk Uncertainty: The Business the Future 303
Plan 257 The Concept of Restructuring 304
Franchising: One Way to Mitigate Management Reflection—The Importance of
Risk 258 Business System Design 306
Business in Action: So, You Want to Start a Chapter Summary 307
Booster Juice 259 Developing Business Knowledge and
Financing Your Business Start-Up 261 Skills 307
Business in Action: Kickstarter—Bring Your Key Terms 307
Creative Project to Life 262 Questions for Discussion 307
Business Ownership Options 264 Question for Individual Action 308
Sole Proprietorships 265 Team Exercise 308
Partnerships 266 Case for Discussion 1 309
Corporations 268 Case for Discussion 2 311
Legal Ownership Evolution 270
Business in Action: Sequoia Capital 272
A Note Pertaining to Not-for-Profits 273 CHAPTER 9
Management Reflection—The Launch Managing and Leading the Organization’s
Decision 274 Talent 313
Chapter Summary 275
Developing Business Knowledge and Learning Objectives 313
Skills 276 Snapshot—What to Expect in This Chapter 314
Key Terms 276 Business in Action: The War for Talent 314
Questions for Discussion 276 The Importance of Talent 315
Question for Individual Action 276 Business in Action: Creating an Employer
Team Exercise 277 Brand 316
Case for Discussion 278 The Employee Transformation Process 318

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 Contents ix

Business in Action: Gokhan Cifci—Rewarding Staff Snapshot—What to Expect in This Chapter 357
for a Job Well Done 321 Business in Action: Facebook and YouTube: Still
What Constitutes a Great Company? 322 the Social Network Industry Leaders 357
What Makes for a Great Job? 323 Marketing’s Purpose 359
Compensation and Lifestyle Marketing’s Link to Strategy 360
Influences 323 The Concept of Positioning 362
Business in Action: Creative Ways to Reward Business in Action: D-Wave Systems Inc.—
Employees 324 Positioning within a Specialized Niche 363
The Motivational Tool Kit 326 Segmentation and Target Marketing 365
Business in Action: Evolution of Motivational Marketing Research: A First Step in the
Theory 328 Segmentation Process 365
Managing Your Workforce 330 Transitioning Segmentation Analysis to
The Core Management Challenge 331 Target Marketing 367
Skills Successful Managers Must Business in Action: 3M Company 369
Possess 332 Business in Action: Loblaw Companies
Understanding Your Power Base 334 Limited—Repositioning Its Brand 370
Determining the Culture/Structure Marketing’s Challenge 371
Balance 336 Need Identification 372
Managing in a Unionized Environment 337 Business in Action: Vector Media 375
Inclusiveness, Diversity, and Employment Understanding the Consumer Decision-
Equity 339 Making Process 376
Triggers of Performance Erosion 340 Responding to Needs: Value Proposition
The Danger of Short-Term Pressures 342 Development and Communication 380
Leadership/Management—Today, Tomorrow, A Note Pertaining to Not-for-Profits 383
and Beyond 343 Management Reflection—Back to Strategy 384
HR Management in the Small Chapter Summary 385
Business Setting 346 Developing Business Knowledge and
Management Reflection—Finding the Right Skills 386
Balance 347 Key Terms 386
Chapter Summary 348 Questions for Discussion 386
Developing Business Knowledge and Question for Individual Action 386
Skills 349 Team Exercise 386
KEY TERMS 349 Case for Discussion 387
Questions for Discussion 349
Question for Individual Action 349
Team Exercise 350
CHAPTER 11
Case for Discussion 1 351 Understanding the Marketing
Case for Discussion 2 353 Effort 389
PART 3 Learning Objectives 389
Snapshot—What to Expect in This Chapter 390
Business in Action: The Battle for Cloud-Based
Managing the value chain Gaming Heats Up 390
Four Pillars of the Marketing Effort 392
CHAPTER 10 Product Strategy: Value Proposition
The Marketing Challenge 356 Attributes versus Product Attributes 394
Business in Action: Canada’s Most Admired
Learning Objectives 356 Brands 397

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 x C o ntents

Pricing Strategy: Return on Sales Business in Action: Walmart—A Lean, Keen

Maximization 400 Operating Machine 450
Business in Action: The YMCA of Kingston— Value Chain Analysis: Support
How Understanding Price Impacts Business Activities 451
Decisions 403 The Operations Cycle 451
Distribution Strategy: Connecting with Process Management 454
Customers 404 Business in Action: AI—Assisting Our Response
Business in Action: Business-to-Business (B2B) Capabilities in Emergency Situations 459
Sales 411 Supply Chain Management 461
Communication Strategy: Communicating Product/Service Management 464
the “Fit” 412 Business in Action: Limelight Platform—
Business in Action: The Emergence of Redefining the Experiential Marketing Business
Omnichannel Marketing 418 Model 466
Managing a Product’s Life Cycle 420 Information Technology–Based
Managing across the Life Cycle 423 Operational Analytics 468
Business in Action: Transportation—Cost Business in Action: Desire2Learn—Pioneering
Implications (Global Reach) 425 Innovative Methods in eLearning 472
Managing a Product Portfolio 426 Establishing Quality Standards 474
A Note Pertaining to Not-for-Profits 427 Operations Management in Small Businesses 477
Business in Action: The Hospital for Sick Management Reflection—Operational
Children—Marketing a Fundraising Campaign 428 Success 478
Management Reflection—Managing the Marketing Chapter Summary 478
Effort 430 Developing Business Knowledge and
Appendix—Advanced Topics Relating Skills 479
to Pricing 430 Key Terms 479
Chapter Summary 434 Questions for Discussion 479
Developing Business Knowledge Question for Individual Action 480
and Skills 435 Team Exercise 480
Key Terms 435 Case for Discussion 1 481
Questions for Discussion 435 Case for Discussion 2 483
Question for Individual Action 435
Team Exercise 436
Case for Discussion 437 PART 4

CHAPTER 12 Financial Management

Technology, Analytics, and Operations
Management 440 CHAPTER 13
Understanding Business Finances 485
Learning Objectives 440
Snapshot—What to Expect in This Chapter 441 Learning Objectives 485
Business in Action: The Big Data Revolution Is Snapshot—What to Expect in This Chapter 486
Here 441 Business in Action: Assent Compliance—Securing
Operations Management: Fitting Into the Big Equity Capital Funding 486
Picture 442 The Fundamentals of Financial Analysis 487
Responsibilities of Operations Managers 444 The Revenue Model 488
The Organization’s Value Chain 447 Business in Action: Apple—Where Does Its
Value Chain Analysis: Primary Activities 448 Revenue Come From? 491

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 Contents xi

Cost Structure and Cost Drivers 493 Liquidity, Solvency, Efficiency, and Capacity 544
Variable versus Fixed Costs 494 Business in Action: Tying Financial Results to
Business in Action: What Is the Best Way Executive Compensation 545
to Cut Costs? 496 Three Primary Financial Statements 547
Breakeven Point Analysis (BEP) 497 Statement of Comprehensive Income 547
Margin Requirements 503 Statement of Changes in Financial
Business in Action: Dollar Stores—Rise of the Position 551
Ultra-Low-Cost Player 504 Business in Action: It Is All About Cash Flow 555
Cash Operating Cycle 506 Statement of Cash Flows 556
Capitalization Requirements 508 Analyzing and Interpreting Financial
Sources of Funds 508 Information 560
Business in Action: What Is an IPO and How Ratio Analysis 561
Does It Work? 517 Business in Action: The Vulnerability of
Putting It All Together 518 Leverage 562
A Note Pertaining to Not-for-Profits 520 Leverage Analysis 564
Management Reflection—The Need Trend or Comparative Analysis 566
for Capital 521 Absolute Analysis 570
Appendix—Advanced Topics Relating to BEP, Forecasting and Budgeting 571
Pricing, and Revenue Model Management 522 A Note Pertaining to Not-for-Profits 573
Using BEP to Understand Profit Management Reflection—Keeping Your Finger on
Objectives 522 the Pulse of the Organization 574
Using BEP to Ensure That Full Cash Flow Appendix—Computation of Ratios 575
Needs Are Realized 524 Profitability Ratios 575
Using BEP to Assist in the Setting of Liquidity and Solvency Ratios 577
Price 526 Debt Ratios 578
Chapter Summary 530 Activity Ratios 580
Developing Business Knowledge and Chapter Summary 582
Skills 530 Developing Business Knowledge and
Key Terms 530 Skills 582
Questions for Discussion 531 Key Terms 582
Question for Individual Action 531 Questions for Discussion 582
Team Exercise 531 Questions for Individual Action 583
Case for Discussion 1 532 Team Exercise 584
Case for Discussion 2 534 Comprehensive Exercise—Chapters 13
and 14 585
CHAPTER 14 Case for Discussion 588
Financial Statements Structure and
Interpretation 539 CHAPTER 15
Analyzing New Business Ventures 590
Learning Objectives 539
Snapshot—What to Expect in This Chapter 540 Learning Objectives 590
Business in Action: Assessing Financial Snapshot—What to Expect in This Chapter 591
Statements—A Key Requirement in Buying a Business in Action: Vanhawks—The Challenges of
Business 540 Commercializing a Great Idea 591
The Role of Financial Statements 542 Chapter Overview 593
Two Fundamental Types of Business Analyzing Business Ventures 594
Transactions 542 Market Analysis 595

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 xii C o ntents

Business in Action: Disney—Recognizing a Market Management Reflection—The “Go or No Go”

Shift and Opportunity 597 Decision 622
Value Analysis 598 Chapter Summary 623
Business in Action: Shopify Inc.—A Canadian Developing Business Knowledge and
Tech Success Story 599 Skills 624
Financial Analysis 601 Key Terms 624
Business in Action: Business Development Bank Questions for Discussion 624
of Canada (BDC) 608 Question for Individual Action 624
Operations Analysis 609 Team Exercise 624
Management Competency Analysis 611 Case for Discussion 1 625
Contingency Plans or Exit Options 612 Case for Discussion 2 628
Reality Check—The Perils of Starting a New
Business 612
Acquiring an Existing Business 613 Glossary GL-1
Case Study—So You Want to Buy a Small Endnotes EN-1
Business 616 Chapter Sources CS-1
A Note Pertaining to Not-for-Profits 620 Index IN-1
Business in Action: SolarShare—Cooperatively
Redefining Renewable Energy Investments 621

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 Preface
An Innovative Approach to Teaching
Business Management Fundamentals
In a marketplace full of introductory business textbooks, what makes this one
different? Why does it make sense to choose this textbook versus others available
to you? The response to these questions can be best described by the analogy of
Blue Ocean versus Red Ocean thinking.
In creating the first edition of this textbook for the Canadian marketplace, the
choice that presented itself was the following: create a textbook in a similar vein to
the many books that already populate the marketplace and seek to convince you to
try an alternate version of already existing products (Red Ocean), or create a new,
unique, and thought-leading approach that supports the teaching of core concepts
and models in a manner that generates a true understanding of business and commu-
nicates an excitement and appreciation for its role in today’s society (Blue Ocean).
Business: Strategy, Development, Application third edition builds upon and
continues to reinforce this latter approach. Created from the ground up for the
Canadian market by an author with considerable middle and senior management
expertise and many years of teaching experience at both the university and college
levels, this textbook delivers a unique interpretation of the practical application of
business in a way that ensures a true understanding of today’s complex—yet
exciting—business environment. Fundamental to its delivery is the communication
of chapter content in a manner that students can easily grasp, and that ensures core
learning takes place. Rich in examples, Web-based interaction, and practical-application
illustration, the textbook delivers to the instructor and students a sound base for future
business management learning and ­action.
Yes, this textbook is truly different in its approach—“Blue Ocean” different. It is
uniquely positioned: focusing on knowledge and skill development in a usable format
that students can immediately transfer to current employment situations, or use to
leverage in managerial or self-employment opportunities that will challenge them in
the future. It is also significantly more interactive, challenging students to participate
in the current global marketplace via active, Web-based searches and references.

Why Choose This Textbook?

Many of us have been challenged throughout our careers with trying to find the
perfect textbook that would enable an instructor to deliver an entry-level business
management course in a way that was creative, thought provoking, and of interest
to students. Essential to this search was the desire to have a textbook that goes
beyond the typical template, definition-focused approach common to entry-level
textbooks, and deliver content that results in a true understanding of business fun-
damentals. This textbook responds to this challenge and desired outcome. Specifi-
cally, Business: Strategy, Development, Application delivers the following:
• chapter content that explains the use of key business concepts and models via a
writing style that encourages understanding and generates interest in the topic
being discussed;
• extensive use of Canadian-based examples from a wide spectrum of business
scenarios within the for-profit, not-for-profit, and SME (small and medium-size
enterprise) business environments;

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 xiv p r efac e

• a full understanding and appreciation of the globalization taking place

today and the unique positioning that Canada and its economic base
currently have—and will continue to benefit from—due to this globalization
process;
• an emphasis on identifying and defining current business trends occurring
within the Canadian marketplace, including but not limited to multicultural
diversification, sustainable business thinking and practices, and regulatory
trends and shifts; and
• delivery of key business concepts and models from the viewpoint of the C-level
or general ­manager, thus ensuring not only a base-level understanding of such
core business requirements, but also an understanding of how and why such
concepts and models are used in managing a business entity.

A Special Note to Students

Regardless of the occupation that you enter into, you will come in direct contact
with the world of business and, ultimately, the global marketplace. Whether you
enter into the field of marketing, engineering, nursing, programming, or social ser-
vices, or consider a business opportunity as an entrepreneur, many aspects of your
job responsibilities will be framed around the business concepts and models dis-
cussed within this textbook. In writing this textbook, it is my hope that you will
come to fully understand how businesses and the marketplace operate, and how you
can use this information to your advantage as you pursue your chosen career. Also
unique to this textbook is the writing style that is focused on defining and describing
the role of the general manager in overseeing a business entity and how business
fundamentals come into play within their decision-making process. The textbook’s
intent is to deliver a variety of business and management tools illustrated in a man-
ner that will help to ensure easy application in the future.

Organization of the Textbook

Business: Strategy, Development, Application has been designed to be as flexible
and modular as possible with each chapter possessing the ability to stand on its own.
The textbook is built around four themes:
• Macro Business Environment
• Managing and Guiding Your Team
• Managing the Value Chain
• Financial Management
Although presented within the textbook as noted above, each section (theme)
has been developed independently of the other sections so that instructors can
feel comfortable in rearranging sections to fit their teaching style and/or course
emphasis. A special focus has also been placed on ensuring that the textbook
responds not only to the operational framework of corporate Canada, but also
to the needs of students and instructors interested in SMEs and not-for-profit
organizations.
Specific areas of focus within the four theme sections are as follows:

Part Chapter Topics

Part 1: Macro Business Chapter 1 What Is Business?
Environment Chapter 2 The Canadian Economic Environment
Chapter 3 The Global Marketplace
Chapter 4 The Environment and Sustainable Business Practices

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 p r e fac e xv

Part Chapter Topics

Part 2: Managing and Chapter 5 Ethics and Corporate Social Responsibility
Guiding Your Team Chapter 6 Developing a Business Strategy
Chapter 7 Entrepreneurship and Forms of Business Ownership
Chapter 8 Developing Your Business Structure and Culture
Chapter 9 Managing and Leading the Organization’s Talent
Part 3: Managing the Chapter 10 The Marketing Challenge
Value Chain Chapter 11 Understanding the Marketing Effort
Chapter 12 Technology, Analytics, and Operations Management
Part 4: Financial Chapter 13 Understanding Business Finances
Management Chapter 14 Financial Statements Structure and Interpretation
Chapter 15 Analyzing New Business Ventures

In-Chapter Learning Features

A fundamental feature of this textbook is its turnkey approach to supporting student
learning. Each chapter has been carefully crafted in a manner that will ensure that
students fully understand the m
­ aterial being presented, and that they are directed to
supplemental resource locations to update and ­enhance their competencies of criti-
cal concepts and models. In-chapter learning features include the following:

Learning Objectives
Help students preview what they should know after reading the chapter.

Snapshot—What to Expect in This Chapter

Outlines the key topics covered within the chapter.

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 xvi p r efac e

Business in Action Vignettes

Spread throughout each chapter; provide practical, marketplace applications of
business situations and business best practices.

Web Integration
Refer students to specific Web sites where they can continue to analyze the success
of a business or the challenge highlighted within a Business in Action vignette.

Highlighted Key Takeaways

Presented throughout each chapter; reinforce the key learning fundamentals that
students should understand as they read through and comprehend the information
offered within a chapter’s various sections.

Management Reflection
Provides a closing commentary on how managers use the key models and concepts
discussed within a chapter and, in some cases, how small businesses or not-for-
profits respond to the themes/challenges posed in the material presented.

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 p r e fac e xvii

End-of-Chapter Support: Developing

Business Knowledge and Skills
In addition to the above, the end-of-chapter support within Business: Strategy,
Development, Application has been designed to provide instructors and students
with an effective review and with additional learning materials focused on reinforc-
ing the critical takeaways from within each chapter. Key ingredients of this end-of-
chapter support include the following:
• Chapter Summary: An overview of the content of a chapter and the key
models and concepts that were presented;
• Key Terms: Identification of the key business terms used in a chapter;
• Questions for Discussion: A set of chapter-related questions and points of
reflection that ensure students fully understand the key components of chapter
material presented;
• Question for Individual Action: A chapter-specific assignment suitable for
assigning to an individual student;
• Team Exercise: A chapter-specific assignment that instructors can
assign to groups or teams of students for analytical and/or presentation
purposes; and
• Case for Discussion: A pertinent and to-the-point application/illustration of
the chapter theme designed to complement both the reading material presented
and the in-class discussions that will take place. Case discussions have been
designed for use within a single instructional session.

Award-Winning Technology

McGraw-Hill Connect® is an award-winning digital teaching and learning solution

that empowers students to achieve better outcomes and enables instructors to im-
prove efficiency with course management. Within Connect, students have access to
SmartBook®, McGraw-Hill’s adaptive learning and reading resource. SmartBook
prompts students with questions based on the material they are studying. By assess-
ing individual answers, SmartBook learns what each student knows and identifies
which topics they need to practise, giving each student a personalized learning ex-
perience and path to success.
Connect’s key features also include analytics and reporting, simple assignment
management, smart grading, the opportunity to post your own resources, and the
Connect Instructor Library, a repository for additional resources to improve student
engagement in and out of the classroom.

Manager’s Hot Seat Videos

This resource allows students to watch real managers apply their years of experi-
ence to management and organizational behaviour issues. Students assume the role
of the manager as they watch the video and then answer multiple-choice questions
following the segment. The Manager’s Hot Seat videos are ideal for group or class-
room discussions.

Application-Based Activities
The Connect Application-Based Activities are highly interactive and automatically
graded application- and analysis-based exercises wherein students immerse them-
selves in a business environment, analyze the situation, and apply their knowledge

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 xviii p r efac e

of business strategies. Students progress from understanding basic concepts to

assessing and solving complex real-world scenarios.

iSeeIt! Videos
These brief, contemporary videos offer dynamic student-centred introductions,
illustrations, and animations to guide students through challenging concepts. Ideal
for before class as an introduction, during class to launch or clarify a topic, or after
class for formative assessment.

Instructor Resources
• Instructor’s Manual: Prepared by the text author, Gary Bissonette, this manual
contains a short topic outline of the chapter and a listing of learning objectives
and key terms, a resource checklist with supplements that correspond to each
chapter, a detailed lecture outline including marginal notes recommending
where to use supplementary cases, lecture enhancers, and critical thinking
exercises.
• Computerized Test Bank: Written by Greg Libitz, Queen’s University, contains
a variety of true/false, multiple-choice, and short and long essay questions.
True/false questions test three levels of learning: (1) knowledge of key terms,
(2) understanding of concepts and principles, and (3) application of principles.
We’ve tagged each question according to its knowledge and skills areas.
Designations align questions with the text’s Learning Objectives, topics, and
difficulty levels as well. Multiple versions of the test can be created and
printed.
• Microsoft® PowerPoint® Presentation: Prepared by Sandra Wellman, Seneca
College, the slideshow for each chapter is based around the learning objectives
and includes many of the figures and tables from the textbook, as well as some
additional slides that support and expand the text discussions. Slides can be
modified by instructors with PowerPoint®.

bis54915_fm_i-xx.indd 18 1/28/20 8:19 PM

 ®

Effective. Efficient. Easy to Use. Impact of Connect on Pass Rates

McGraw-Hill Connect is an award-winning digital teach-
ing and learning solution that empowers students to

72.5% 85.2%
achieve better outcomes and enables instructors to
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Without Connect With Connect

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review questions to give skills, while offering you
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improve focus with Connect’s Management System with
visual and actionable dash- Connect for single sign-on Available on mobile smart devices—with both online
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bis54915_fm_i-xx.indd 19 1/28/20 8:19 PM

 xx p r efac e

Acknowledgements
Although the cover of this textbook lists me as the sole author, this is somewhat of a
misnomer. The completion of what is now the third edition of this textbook could not
have been accomplished without considerable contribution by many others. First
and foremost, I would like to thank my wife, Lynda. Not only has she been an
ongoing supporter of this initiative, but she spent countless hours proofing, editing,
and questioning the communication approach within it. It was truly a joint initiative.
Her commitment to enabling me to succeed will never be forgotten. She is truly the
best life partner one could ever hope for.
Much of what I have learned over the course of my career has been the result of
a combination of my own experiences, both positive and negative. Equally as impor-
tant has been my advantage to work at Queen’s University with some of the bright-
est minds in Canada. The work of Drs. Ken Wong, Peter Richardson, and Elspeth
Murray has had a real influence on both my teaching style and conceptual ­emphasis.
David McConomy has been a true mentor, both in reviewing and commenting on
this textbook as it unfolded and in demonstrating best practices in the classroom.
Additional thanks goes to Queen’s professors Greg Libitz and Darren McCaugherty,
who, in using the first two editions of this textbook, provided insight and commen-
tary into the enhancements and adjustments found in both the second and, now, this
third edition. In addition to his constructive feedback, it should be noted that Greg
Libitz has also contributed to this third edition via the preparation of a number of
the new cases found at the end of many of its chapters. I would also like to acknowl-
edge the Smith School of Business of Queen’s University, which has also been an in-
valuable part of my professional development, offering an academic environment
second to none.
With respect to my publisher, I would like to recognize and thank the editorial
and marketing team at McGraw-Hill, including Amy Clarke-Spencley, Portfolio Man-
ager; Amy Rydzanicz, Senior Content Developer; Jessica Barnoski, Senior Supervis-
ing Editor; and Kelli Howey, Copy Editor, for their patience, commitment, and
support to this undertaking. Their guidance and professional interaction is truly
appreciated.
Finally, I extend sincere thanks to the reviewers who provided insightful feed-
back that helped to shape this book over these three editions.

bis54915_fm_i-xx.indd 20 1/28/20 8:19 PM

 PART 1

CHAPTER 1

What Is Business?
LEARNING OBJECTIVES
This chapter is designed to provide students with:

LO1 A macro-level understanding of what business is

LO2 An overview of the major components of a business model and how their successful
development and execution determines business performance

LO3 An awareness of the overarching role of the business owner or “C-suite” management team

LO4 An understanding of how businesses plan

LO5 Exposure to the concept of visionary leadership

LO6 Via a Management Reflection, an overview of the relationship between business strategy
and business model development, and the importance of successfully executing both for a
business to achieve its identified objectives

LO7 Via an Appendix, an introduction to the difference between profit and profitability

bis54915_ch01_001-033.indd 1 1/26/20 12:37 PM

 2 part 1 Macro Business Environment

Snapshot
What to Expect in This Chapter
This chapter provides students with a broad introductory overview of what a business owner or a senior
management team needs to understand to successfully manage a business organization. The content
emphasized in this chapter includes the following:

• The Big Picture

• What Is Business?
• The Full Business Model
• The Role of the Business Owner or “C-Suite” Manager
• Putting Plans into Action
• Thinking across Multiple Horizons
• Corporate Social Responsibility
• The Concept of Visionary Leadership
• Management Reflection—The Business Decision-Making Landscape
• Appendix—The Business Model and Profitability
• The Difference between Profit and Profitability
• Improving Profitability

Business IN ACTION

Microsoft—Reinventing the Business Model Fast-forwarding to 2018, Nadella’s visionary leader-

ship has propelled Microsoft from that of what many
Over the past 5+ years, a quiet renaissance has
considered to be an aging dinosaur in 2014 to, on
been occurring at Microsoft. After years of relying on
November 30, 2018, briefly stealing (from Apple) the
operating system sales (Windows) and its Office suite
title of the world’s most valued company, a position it
of products (Word, Excel, PowerPoint, etc.), Micro-
had not held since 2002.
soft made a critical change in 2014. It was during this
year that Microsoft brought in its new CEO, Satya Recognizing that the new market model e
­ volving was one
Nadella, to take the helm of one of the world’s larg- of an open ecosystem, whose software development
est software and technology companies. Disruptions
within the marketplace, driven largely by market and
technology forces, required Microsoft to redefine
where and how it would do business. Looking long-
term, Nadella and his management team redefined
Microsoft’s approach to business from that of a
proprietary, closed-technology system organization
to one that embraced open-sourced systems and
cooperative ventures and partnerships with rivals,
and looked to the cloud versus maintaining a depen-
dency focus on singular PC-based software sales and
a consumer-faced mobile (cellular) market presence. © Bloomberg/Contributor/Getty Images

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 CHAPTER 1 What Is Business? 3

roots had shifted to a broad technology design commu- For Nadella, the go-forward risk lies in in two critical
nity for application creation and support, Nadella and areas. First, rivals that possess service capabilities
his team abandoned the previous fixed notion that comparable to Microsoft (Amazon and Google, for
Microsoft software was to be available only on Micro- example) will continue to actively compete for custom-
soft devices and embraced a market-driven mandate ers. Amazon in particular has demonstrated significant
requiring Microsoft products to be available across an strength and success in the delivery of cloud-based
increasingly broad business ecosystem. Today, Micro- services. Second, the intensification of competition
soft Office products operate across a variety of op- has exerted significant downward pressure on price,
erating systems including Apple’s iOS (iPad, etc.) and thereby impacting operating margins and overall
Linux-based applications. Microsoft has also executed profitability. To put this in simple terms, the old
on the necessary steps to ensure that its Windows business model, where Microsoft delivered 100% of
operating system would work as an open-style soft- a business’s core services with little to no competi-
ware in the smartphone sector, thereby improving its tion, thereby enabling it to generate significant profit
presence in a market in which up to this point it had margins from its core product base (Office, Windows,
been a marginal player. etc.), is no longer sustainable in today’s technology-­
So why the change? The PC-centric world of d ­ oing diverse and hypercompetitive market. To compete
business is being disrupted by a variety of key ­factors. with competitors in this environment (content and
Mobile services are changing the way that people work application marketplace), Microsoft faces the risk of
and communicate. Cloud technologies are ­redefining higher costs and lower operating margins.
how data are collected, managed, and stored. New So far, the investment community is demonstrating
entrants such as Amazon and Google have disrupted its support for the new vision Nadella and his team
traditionally strong profit streams within the storage have communicated for Microsoft. Share value for
and computing sector via lower prices. Microsoft stock has risen from $36.89 in January
So just what is Microsoft’s focus today? Microsoft has 2014 to a high of $115.62 on October 1, 2018. With the
refocused its business model to one that looks to initial renaissance complete, Nadella and his team
support its customers whose own business models must continue to focus on keeping Microsoft rel-
require the need for a variety of diverse approaches evant in today’s rapidly changing technology sector.
to business and technology management. This Businesses as well are shifting key aspects of their
requires the creation and maintenance of a strong business models faster than ever before. This means
network of application development and delivery that standing still at Microsoft is not an option. The
capabilities, supported by a flexible platform in a way company must continue to innovate in a way that
that will remain central to customer needs, thereby enables it to maintain a leadership position in the
accelerating Microsoft’s growth. market segments it chooses to compete in.

The Big Picture

Perhaps the best way to begin thinking about business, in its broadest context, is to
view it as a system of integrated actions designed to
a. ensure that an organization develops and grows a market for its goods and/or
services and, in doing so,
b. create organizational value (wealth) on behalf of its stakeholders
To accomplish both facets of this definition organizations must succeed in
­ roperly identifying solutions to needs that the marketplace desires, and create the
p
right business model for delivering such solutions to the right customer, at the right
place, at the right time, for the right price. Critical to this is the ability to a
­ ccomplish
the above-mentioned objectives in a manner that offers its customers superior value

bis54915_ch01_001-033.indd 3 1/26/20 12:37 PM

 4 part 1 Macro Business Environment

when compared against its rivals. This process results in the development of a series
of integrated actions that are often departmentalized into cross-functional areas
such as technology application, product engineering and design, manufacturing and
operations, marketing and sales, distribution, and service.
How a business operates can initially be assessed against three fundamental
characteristics (see Figure 1.1):
a. the commercial endeavours it undertakes
b. its employee interaction model, and
c. its organizational culture and formalized decision-making structure
Commercial Endeavours Commercial endeavours refers to the markets the organization serves, the
­refers to the markets the orga- products and services it offers, and the needs it professes to meet in the market-
nization serves, the products
place. It reflects the results of understanding the demand/supply relationships
and services it offers, and the
needs it professes to meet in that exist in the marketplace at large, as well as within the customer segments it
the marketplace. chooses to pursue. It also, as part of its ongoing assessment process, recognizes the
capacities and capabilities of competitors within such selected markets to deliver
products/services to similar buyers. Understanding this relationship, coupled with
an understanding of the cost requirements needed to produce goods and services,
along with the price sensitivities of targeted customers, is what enables the creation
of a business model—the successful execution of which ideally results in delivering
a profitable outcome to the organization.
Employee Interaction refers Employee interaction refers to the value-creating skills that an organization’s
to the value-creating skills an employees bring to the marketplace. The success of many businesses lies with the
organization’s employees
specialized skills that exist within its labour force. The leveraging of these skills in
bring to the marketplace.
The s­ uccess of many the production of goods and/or the delivery of services is what enables a business to
­businesses lies with the create value and enables transactions to occur that will allow the firm to make a
­specialized skills that exist profit. A great way of understanding the importance of the talent (people)
within its labour force.
­component of an organization is the viewpoint expressed via the following state-
ment: A ­successful business strategy results from 5% planning and 95% execution,
and s­ uccessful execution of a company’s strategy is the result of the leveraging of

Figure 1.1 Business: The Big Picture

Commercial
Endeavours

Business
Entity

Organizational
Employee Culture and Formalized
Interaction Decision-Making
Structure

bis54915_ch01_001-033.indd 4 1/26/20 12:37 PM

 CHAPTER 1 What Is Business? 5

5% technical competencies and 95% people capabilities. Again, it is the people who
make a difference in a business’s overall success. As an example, a company can
have ­superior technology and/or financial capital when compared to rivals, but if its
management team and its employees cannot leverage such advantages then overall
results most likely will be compromised.
Organizational culture and decision-making structure is a reflection of the Organizational Culture and
framework of business activities and decision-making ecosystem that exists within Decision-Making Structure is
a reflection of the framework
an organization. It comprises the underlying business system and its related culture, of the business a­ ctivities and
which an organization creates, and the transaction processes that it develops to ser- decision-making ecosystem
vice the marketplace it targets. that exists within an
These three characteristics, when assessed jointly, result in a macro-level ­organization.
u nderstanding of a business entity whose objective is the development,
­
­communication, and delivery of goods and/or services that are sought after by the
marketplace, in response to a defined need, in a manner that is valued by the
­customers being targeted.
As an example of this assessment process, think of the industry-leading search
engine company Google (Alphabet Inc.). Google’s business system can be assessed
against the three characteristics identified above. For Google, the “commercial en-
deavour” objective is the generation of revenue and profits resulting from such mar-
ket offerings as its “point and click” and mobile-based advertising services, its
pursuit of new business opportunities through acquisitions (YouTube, Dropcam,
Skybox Imaging, Nest Labs, Inc., and DoubleClick, to name a few), and its business
activities related to markets such as mobile phone services (voice, applications, and
software), mapping and navigation, security services, aerospace (drones and UAVs),
artificial intelligence (Google Home, etc.), and gaming. Its “employee interaction”
relates to the many developers, engineers, and system designers with specialized
skills whom Google employs to develop and support the products and services the
company offers. Google’s “organizational culture and decision-making structure” re-
fers to the formal framework it has put into place to manage and deliver its products
and services. It refers to Google’s server farms and related infrastructure, manage-
rial hierarchy, operating processes, and decision-making and communication
processes.

The efficiency and effectiveness of a business entity can be assessed against

three fundamental characteristics: the commercial endeavours it undertakes, its
human resource (employee) interaction model, and its organizational culture and
decision-making structure.

What Is Business? LO1, LO2

“Business” is a challenging word to define and understand because it has several dif-
ferent but related meanings. For some, it is simply a mechanism from which to drive
profit via the sales of goods/services. For others, it is the ability to create and Business refers to the
develop an organization whose primary mission is to satisfy an identified customer ­mission-focused activities
aimed at identifying the needs
or society-based need. Recognizing that the definition will be personalized by each of a particular market or
of us involved in a business operation, let’s try to provide a broad-based definition of ­markets, and the development
what business is all about. of a solution to such needs
Business can most easily be thought of as a set of mission-focused actions through the acquisition and
transformation of resources
aimed at identifying the needs of a particular market, or markets, and the into goods and services that
­development of a solution to such needs through the acquisition or transformation can be delivered to the
of goods and services that can be delivered to the marketplace at a profit. Through ­marketplace at a profit.

bis54915_ch01_001-033.indd 5 1/26/20 12:37 PM

Another Random Scribd Document
with Unrelated Content
 “Well,” she conceded, as the woe-begone child clung
convulsively to her skirt, “I will come back to-morrow, and take you
away.”
But with that curious intuition that characterises most children,
Sarah sensed that she was about to be abandoned for a third time.
She flung herself on the bed, sobbing, as her nurse accompanied her
aunt down the stairs to the street below, where a fine equipage of
boxwood and plush, prancing horses and liveried footmen was in
waiting.
Rosine got into her carriage, dabbing a lace handkerchief at her
eyes. She had a tender heart and was firmly resolved to write to
Youle at once—Julie was in London—and make her take her child.
The footman regained his seat, the coachman clucked to his
horses and the equipage moved away. But before it had gone two
feet there was a heartrending wail and shriek, followed by a chorus
of affrighted shouts, and a body came hurtling past the coach to the
pavement. It was Sarah. The child had attempted to jump from the
tiny first-floor window into the coach as it passed.
When Sarah awoke she found herself in a great, clean bed,
surrounded by kind faces. She was at the home of her aunt in the
rue St. Honoré. She had a double fracture of her right arm, and a
sprained left ankle.
Julie, who was sent for immediately, arrived three days later,
together with numerous other members of Sarah’s family. For the
first time in her brief existence, Sarah found herself a person of
importance.
For the next two years little Sarah was an invalid, capable of
walking only a step or two at a time. She passed this period sitting in
a great arm-chair, unable to move without pain, dreaming childish
dreams of splendour for the future.
“Never once,” said Sarah in speaking of this period to me, “did I
include in those dreams a suspicion that I would one day be an
actress. I had never seen the inside of a theatre, and although many
actors and actresses were among the friends constantly in and out
of my mother’s home at 22, rue de la Michodière—a rather
meretriciously furnished flat with gilded salons and musty bedrooms
—I was shy with them and they with me, and learned little from
their conversation.
“In fact, the stage and all appertaining to it remained a deep
mystery to me for nearly ten years after my accident. My actual
going on the stage was an accident—or rather the solution of a
problem which had worried my mother almost to death.”
How this came about will be described in a later chapter.
At seven years of age, Sarah Bernhardt had so far recovered
that she could walk and move without difficulty, and there was
serious discussion about sending her to school. Her volatile mother,
absent for the most part during Sarah’s convalescence, nevertheless
resented the presence of the child in her home as irksome, and
chafed to place her where she would be in good hands and could do
without maternal supervision and attention.
As a matter of fact, at the age of seven Sarah could neither read
nor write, and had never heard of arithmetic!
When her mother explained that she was to go to live in a place
where there were hundreds of other little girls, who were to become
her playmates, Sarah was overjoyed. During the terrible two years
when she could not run about like other children, Sarah had had no
playmates whatever; and, during her airings in her mother’s or her
aunt’s carriage, had often wistfully watched other and luckier little
girls rolling hoops along the gravelled paths of the Champs Elysées,
or in the fields which then fringed what is now the Boulevard de
Clichy. She had been an intensely lonely child from her infancy and
could scarcely contain her happiness at the thought that at last she
was to be as other children, and have little friends with whom she
could talk and play as an equal.
Probably the main reason for sending Sarah away at this
juncture was the fact that Julie was again about to become a
mother.
It may be as well to state here that Julie Bernhardt was the
mother of four children including a boy who died. Sarah was the
first, Jeanne the second, and Régine the third. More will be told
hereafter concerning these two turbulent sisters of the actress. They
both lived unfortunate lives and died still more unfortunate deaths.
A report of Sarah’s parentage that has won considerable
credence was published by a weekly Paris newspaper in 1886, and
re-published again as recently as April 8, 1923, by La Rampe, a Paris
theatrical paper. I quote from the latter:

“Edouard Bernhardt, grandfather of Sarah Bernhardt, was

a Jew. He fulfilled the functions of chief oculist to the Court of
Austria. He came to St. Aubin-du-Corbier, in Brittany, and
there married the Marquise de la Thieulé du Petit-Bois de la
Vieuville, by whom he had four daughters and one son: Julie,
Rosine, Agathe, Vitty and Edouard. The Marquise died and
Edouard Bernhardt married, secondly, Madame Van Berinth,
who had been governess to his children. Rosine and Julie
(mother of Sarah Bernhardt) ran away to Havre, where they
obtained work as saleswomen in a confectionery
establishment. Their father sent for them, and they fled to
London. Shortly afterwards they returned to Havre, where
Julie lived as the wife of a man named Morel, a ship-builder.
They had fourteen children, of whom Sarah, born at Paris,
125, Faubourg St. Honoré, on October 23, 1840, was one.”

This seems circumstantial but it is absolutely inaccurate. I give it

here, together with the evidence to contravert it, because so many
people believe the above to be the true story of Sarah’s birth.
The rebutting evidence consists, first, in Sarah’s own denial,
which was published almost immediately after the story itself, and,
secondly, in the fact that the certificate of her baptism, in which the
truth was certainly given, states that she was born, not in the
Faubourg St. Honoré, but in the rue de l’Ecole de Médecine—not on
October 23, 1840, but on October 22, 1844; that her father was not
“Monsieur Morel,” but George Bernhardt; and that her mother was
not “Julie Bernhardt” but Julie Van Hard.
And, as I have said, Julie had only four children, not fourteen!
The same paper (La Rampe) says that Sarah was baptised at the
age of eight years. When she was eight, Sarah was still a Jewess
and at the school of which we shall shortly give an account. Sarah
was baptised, under the name of Rosine, five years later, at the
Grandchamps Convent, Versailles.
When she was seven, then, and five months before Jeanne was
born, Sarah was taken to Madame Fressard’s school, at 18, rue
Boileau, Auteuil. The building still exists, but it has been turned into
a private sanatorium.
 Sketch of Thérèse Meilhan (afterwards Mme.
Pierre Berton) by Georges Clairin, 1881.

The journey to Auteuil, which one can now make from the rue
St. Honoré in twenty minutes by underground railway or in half an
hour by tramway or motor-bus, was then quite a formidable affair.
Paris was left behind at the Avenue Montaigne, and from there the
way lay along the banks of the smiling Seine, with only a roadside
estaminet bordering what is now one of the most aristocratic streets
of all Paris. It took over an hour for the coach to reach the rue
Boileau, in the little village of Auteuil. Sarah, needless to say, was
enchanted with the journey and with the happy prospects ahead of
her.
 It was quite a ceremony, the installation of Sarah in her new
home. Besides Julie and Aunt Rosine, there was a General and
another man, who represented Sarah’s father, then absent in Lisbon.
They were very pompous and important, and inclined to exaggerate
the wealth that was so evident in the rich trappings of Aunt Rosine’s
coach.
After much talk and negotiation, during which the party
gathered around a bottle of wine opened by Madame Fressard,
Sarah was formally entered on the books of the school as a pupil.
Amongst other things Julie insisted on presenting Madame
Fressard with eight large jars of cold cream, with which she gave
orders that Sarah was to be massaged every morning. Another order
concerned Sarah’s mass of curly hair. It was not to be cut or
trimmed in any way, but to be carefully combed night and morning.
And when Madame Fressard ventured a slight protest at all these
injunctions, Julie only waved her hand with a large gesture, saying:
“You will be paid—her father is wealthy!”
The exact sum contributed by George Bernhardt towards Sarah’s
maintenance was four thousand francs annually.
During all the conversation that attended her installation as a
pupil at the Auteuil school, Sarah remained mute, too shy to say a
word.
“What a stupid child!” said Aunt Rosine, who was years before
she gained a very high opinion of Sarah.
“Naturally stupid, I’m afraid!” sighed her mother, languidly.
Only Madame Fressard, the stranger in the group, came to the
forlorn little creature’s aid:
“Well, she has your eyes—so intelligent, madame!” she said.
And with this the party left in their flamboyant coach, each
scrupulously kissing the child farewell at the gate, and each, without
any doubt at all, exceedingly glad to be rid of her.
Sarah was at last at school.
 CHAPTER V
In later years it was fairly well known amongst theatrical people that
Sarah was subject to “stage fright.” The only occasion however on
which nerves actually stopped her performance, occurred at Auteuil
school, when she was eight years and three months old. Sarah told
this story to me on one memorable day at Ville d’Avray, when, during
a fête given by the Grand Duke Peter of Russia, we had stolen away
from the crowd into Bellevue woods. I have never seen the incident
referred to in print.
“I had been at the school a little more than a year,” Sarah told
me, “when it was decided to give a performance of Clotilde, a play
for children, which concerned a little girl’s adventures in fairyland.
Stella Colas, afterwards the wife of Pierre de Corvin, was cast for the
name part. Another little fair girl (whose name I have forgotten) was
to play the rôle of Augustine, the partner of Clotilde. And I was cast
for the part of the Queen of the Fairies.
“At the rehearsals—we rehearsed all the winter—everything went
well. My part was not an important one, but it involved some pretty
realistic acting in the second act, when the Queen of the Fairies dies
of mortification on hearing Clotilde affirm that the fairies do not
really exist. This was the first ‘death scene’ in which I ever acted.
“I wore wings, of course, and many rehearsals were necessary
before the stage-manager, who was our kindergarten teacher, could
get me to fall without breaking them. Finally I learned the part, and
managed to do it to the entire satisfaction of everyone.
“When the great night came, we were, of course, all very
nervous, myself most of all, for my mother and two aunts had
written that they would be present accompanied by no less a
personage than the Duc de Morny, then considered to be the power
behind Napoleon the Third’s throne.
“Before the curtain went up, my knees were knocking together
and I felt a wild desire to fly. I tried to run away and hide, in fact,
but the teacher found me, petted me and made me promise to go
on with the part.
“I had nothing to do until the end of the first act, when Clotilde
and Augustine fall asleep at the foot of a great tree and dream of
the fairies. My part was to descend from the tree, assisted by
unseen wires, float to the middle of the stage, and then pronounce
the words: ‘On demande la reine des rêves? Me voici!’ (‘They want
the Queen of Dreams? Here I am!’)
“Clotilde and Augustine fell asleep, and trembling all over I
floated down and advanced to the front of the stage. We had no
regular footlights, and everyone in the little auditorium could be
distinguished from the stage.
“Instead of pronouncing the sentence about the Queen of
Dreams, I stood tongue-tied, unable to utter a syllable. Several
times my mouth opened, and I tried to speak, but the words would
not come. All the time I was anxiously searching the audience for
familiar faces. It was only when I saw none, and realised that my
mother was not present, that I managed to stutter:
“‘On d-d-dem-m-m-mande la reine d-des rêves? M-m-me voici!’
“The last word I uttered in one breathless syllable; then rushed
off the stage to the accompaniment of much amused applause.
“In the wings of the tiny stage I was met by the principal of the
school, who, affecting not to notice my embarrassment,
complimented me warmly on my ‘success,’ and then told me that my
mother and her party had not arrived. This, more than anything
else, gave me the necessary courage to go through with my part.
 “Even in later years when I was on the regular stage, the
presence of my mother in an audience invariably made me so
nervous that I could hardly play. She was ever the harshest critic I
had!
“The second act proceeded fairly well, since it was chiefly a
dance by the fairies, with myself in the centre, wielding a mystic
sceptre. All I had to do was wave the sceptre, and the fairies would
bow as it was raised and lowered. Finally came the big moment
when Clotilde awakens, and says: ‘Pshaw, I was dreaming; there are
no such things as fairies!’
“With these words I was supposed to stop and wave my sceptre
indignantly, on which all the other fairies disappeared, leaving me
alone with Clotilde and the sleeping Augustine. Clotilde advances to
me and asks: ‘Who are you?’ To my reply ‘I am the Queen of the
Fairies,’ she answers scornfully: ‘You are a fraud, for there are no
such things as fairies.’
“When she utters these words I stagger and then, moaning and
clasping my hand to my heart, sink slowly to the ground. Clotilde,
agonised, asks: ‘What is the matter?’ and I reply: ‘You have killed
me, for when a little girl says she doesn’t believe in the fairies, she
mortally wounds their Queen.’
“We had got as far as my reply ‘I am the Queen,’ when suddenly
I perceived, in the front row of the audience, six beautifully-gowned
ladies and two gentlemen, who had not been there before. In
trepidation I searched their faces, standing stock-still and not
listening to Clotilde’s scornful reply. Yes! There was my mother, and
there were my two aunts, as I had feared!
“All my stage-fright came back to me. And, instead of sinking to
the ground as I was supposed to do, I burst out sobbing and ran off
the stage, in the centre of which I left poor Clotilde standing, a
forlorn little girl of ten. Instantly there was a storm of laughter and
applause. Unable to stand it, Clotilde too ran off the stage, and the
curtain was hastily rung down.
 “Soon I was surrounded with teachers and elder girls, some
abusing me, others begging me to finish the play. But it was useless.
I could act no more and the play, for lack of an understudy, was
over. I was hustled, a weeping and very bedraggled-looking fairy, to
the dormitory, where I was left alone with my thoughts.
“I would have given worlds to have been left alone for the
remainder of the day! But it was not to be, for scarcely fifteen
minutes passed before the door opened and my mother appeared,
followed by my aunts and their whole party!
“I could have prayed for the floor to open and swallow me! I hid
my head in the bedclothes, like an ostrich, and affected not to hear
the words addressed to me. Finally I felt firm hands on my shoulders
and I was dragged forth, weeping violently.
“If mother had only taken me in her arms and kissed and
comforted me! I was only a tiny child, not yet nine years old and still
constitutionally weak, with high-strung nerves. But she stood there
holding me and looking coldly into my tear-filled eyes.
“‘And to think,’ she said icily, ‘that this is a child of mine!’
“‘One would never think it,’ said Aunt Rosine, sternly.
“All were hard, unsympathetic, seeming not to realise that they
were bullying a child whose nerves were at the breaking point and
who was in reality almost dead from exhaustion. I broke into
another storm of sobs and, kicking myself free from my mother, ran
to the bed and threw myself upon it in despair. With some further
unkindly remarks from my mother and aunts, the party finally left,
but as he reached the door the Duc de Morny, the last to go out,
turned and retraced the few steps to my bed.
“‘Never mind, my little one,’ he whispered. ‘You will show them
all how to act one of these days, won’t you?’
“His comforting words, however, had come too late. I had
sobbed myself into a fever and the next morning the doctor had to
be called. For several days I was kept in bed and forbidden to see
the other girls. Through these long four days I kept thinking
constantly of my mother. Why had she been so cruel, so cold to her
daughter? I knew that another child had been born the year before,
and with childish intuition I hit upon the right answer. Mother loved
the baby more than she loved me—if, indeed, she loved me at all. I
was inconsolable at the thought. How lonely a vista the coming
years opened to my immature imagination! Scores of times I sobbed
out loud: ‘I would rather be dead! I would rather be dead!’
“Alas! this was not the last time that my mother’s chilly
behaviour towards me threw me into a paroxysm of misery resulting
in illness. I never grew callous to her disapproval of me; her cutting
criticisms had always the power to wound me to the heart. And yet I
loved her! More, I adored her! Poor, lonely, friendless child that I
was and had ever been, my starved heart cried out to the one
human being whose love I had the right to claim, and who
responded to my caresses sometimes almost as if I had been a
stranger.”
This was the only occasion on which Sarah Bernhardt ever
bewailed to me or to anyone else, her mother’s lack of affection for
her. She was scrupulously loyal to both her parents, and on the rare
occasions when she mentioned them, it was always in terms of
genuine love and respect.
During her two years in Auteuil, Sarah’s mother went to see her
only three times, and her father only once. Her father’s visit took
place at the end of the first year, in December 1851. It was the first
time, to her recollection, that Sarah had ever seen him. They met in
the head-mistress’s office, and the occasion must have been replete
with drama.
“I was called from study one afternoon about three o’clock,” said
Sarah, “and taken to Mme. Fressard’s bureau. I found her waiting for
me at the door with a peculiar expression on her face, and in the
arm-chair near the fireplace I saw a very well-dressed man of about
thirty, with a waxed moustache.
 “‘Ma chérie,’ said Madame Fressard, ‘here is your father come to
see you.’
“Mon père! So this was the mysterious personage whose wish
and order governed my life; this the parent of whom my mother was
apparently so much in fear, and yet whom she seldom saw; this the
stranger who was responsible for my being!
“I advanced shyly and gave my face to be kissed, an operation
which my father performed twice, on both sides, his moustache
giving me a prickly sensation on my cheeks.
“‘Why, she is growing into quite a little beauty!’ he said to
Madame Fressard, holding me so that he could look at me closely.
Then he asked me many questions: Was I happy? Was I well? Had I
playmates? What had I learned? Could I read and write?—and spell?
—and do sums?
“The interrogation lasted ten minutes and then my father took
his tall grey hat and gloves, and prepared to leave.
“‘We will leave her with you for a little while longer, madame,’ he
said to Madame Fressard, while I listened with all my ears.
“‘I am going for a long journey and do not expect to return for
eight or ten months. When I come back we will consider what is
best to be done.’
“Kissing me again, he took his departure and Madame Fressard
drew me to her.
“‘I should think you would love your father very, very much,’ she
said. ‘He is such a handsome man!’
“‘How can I love him?’ I replied wonderingly. ‘I have never seen
him before.’”
A year later Bernhardt had not returned from South America, but
he sent Julie a letter, in which he urged that Sarah should be taken
from Madame Fressard’s preparatory school and sent to a convent;
he suggested Grandchamps Convent, at Versailles. He had written to
the Superior, he said, explaining the circumstances, and the latter
had replied that if little Sarah was sponsored by one other
gentleman, preferably one in Paris, the matter could be arranged.
Julie at once asked the Duc de Morny, who agreed to sponsor the
child.
In the same letter Bernhardt said that he had made his will, in
which he left 20,000 francs to Sarah, providing she had married
before the age of twenty-one.
“I do not intend my daughter,” he wrote coldly, “to follow the
example of her mother.”
Until she was twenty-one the income from the 20,000 francs was
to pay for Sarah’s schooling. Her mother was to pay for her clothes.
Although the letter said that Bernhardt did not expect to return
to France for several months, he actually caught the next boat to
that which carried his letter, and arrived in Paris just after Sarah had
been withdrawn from the school at Auteuil.
This had not been effected without a storm of protest on Sarah’s
part. The two years had passed happily at Madame Fressard’s, and
she feared the future, surrounded by strange and cold relatives.
Julie had gone to London, and it was Aunt Rosine who went to
the school to fetch the child.
Sarah delighted to tell of this departure from the school.
“I hated to leave,” she told me, “and it was two hours before
they could succeed in dressing me. Once this was accomplished, I
flew at Tante Rosine like a young fury, and spoiled all her elaborate
coiffure.
“She was furious and, bundling me into her coach, commanded
me to keep silent. But I would not, and throughout the journey in
the jolting carriage from Auteuil to 6, rue de la Chaussée d’Antin,
where my aunt and my mother owned a joint flat, I tore at her hair
and kicked at her legs, and otherwise performed like the disgraceful
young ragamuffin I really was.
 “I was no better on our arrival at the flat, and kept the whole
household in an uproar until I heard the sudden announcement that
my father had arrived! Then I collapsed and had to be carried to
bed, where I lost consciousness for three hours. When I awoke, it
was to find a doctor and nurse installed and an array of medicine
bottles on the table. I felt utterly exhausted and I heard Doctor
Monod, the great physician who had been called by the Duc de
Morny, tell my father that I was in an extremely delicate condition
and that my recovery depended upon my being kept absolutely
quiet. ‘Above all,’ said he, ‘she is not to be “crossed.”’”
Sarah’s father often visited her during her three days’
convalescence from the fever brought on by a fit of temper, and on
two occasions he brought with him Rossini, who lived in the same
street and was an intimate friend.
Julie had been informed of Sarah’s illness, but was herself ill at
Haarlem, in Holland, where she had just arrived from London. It was
a fortnight before she reached Paris, and in the meantime Sarah
stayed at Neuilly, in the home of another and married aunt whose
husband afterwards became a monk.
When Julie finally arrived, a dinner was arranged to take place
the night before Sarah was taken to the Convent. Edouard Bernhardt
was present. This was the last time Sarah saw her father, for he died
shortly afterwards in Italy.
Sarah’s life at the Convent has been more or less faithfully
described in her own Memoirs, and I shall not dilate on it here. She
was expelled three times—the last time for good. She was baptised
at the age of twelve under the name of Rosine, and from then on
dated her determination to become a nun. For two years she was
fanatical on the subject of religion, but this did not prevent her fits
of temper from breaking out and disturbing the whole school.
“All my time at the Convent I was haunted by the desire to be a
nun,” she said to me once. “The beautiful life of the sisters who
taught us at Grandchamps, their almost unearthly purity, their
tranquil tempers, all made a tremendous impression on me. I dearly
desired to take the vows and, had it been left to me, Sarah
Bernhardt would have become Sister Rosine. But I doubt whether I
would have remained a nun for life!
“I was never genuinely religious. It was the glamour and
mystery and, above all, the tranquillity surrounding the life of a
cloistered nun that attracted me. I should have run away from the
Convent before many weeks.”
Young Sarah was tremendously high-spirited and constantly in
trouble. The nuns were always sending despairing reports to her
mother.
Once, during a presentation of prizes, she pretended to faint and
acted the part so realistically that even the Superior was deceived
and believed her pupil to be dead. It gave her such a shock that the
poor lady was ill for days. Sarah was sent to her bedroom in
disgrace.
“I spent the time reading forbidden books and eating bonbons
that the concierge had smuggled in to me,” she said, in telling me
the story.
On another occasion she organised a flight from the Convent. In
the dead of night she and six other girls of a similarly adventurous
disposition climbed down torn and knotted sheets from their
dormitory windows to the ground. Clambering over the high wall
surrounding the Convent grounds, they took to their heels and were
caught only at noon the next day, when in the act of throwing
stones at horses of the Royal Dragoons.
For this exploit she was expelled, but was allowed to return on
her promise never to give trouble again.
Scarcely two months afterwards, however, she was discovered
by the mother-superior on top of the Convent wall, imitating the
Bishop of Versailles, whom the day before she had seen conducting
the Burial Service at a graveside. Expelled again!
 On still another occasion she was caught flirting with a young
soldier, who had tossed his cap over the wall. When the nuns tried to
catch her, she climbed the wall and stayed there for hours, until long
after dark. On this occasion she caught a chill which nearly resulted
in her death, and when she had recovered she left the Convent for
good.
 CHAPTER VI
At the age of fifteen Sarah was a thin, weedy, shock-headed girl,
about five feet tall, but undeveloped. Her complexion was pale and
dark rings under her eyes told the story of unconquered anæmia.
She had a chronic cough that would shake her thin body to
paroxysms. She was extremely subject to colds and chills, and the
slightest indisposition would send her to bed with fever. Doctors
shook their heads over her and predicted that she would die of
consumption before reaching the age of twenty.
Her anæmia gave to her face a species of sombre beauty which
was enlivened by the extraordinary play of expression in her eyes as
she talked. Her features reflected every change of mood, and her
moods were many. Judged by her face alone, she was not so much
beautiful as striking. Character fairly leapt at one when she spoke.
Her character was a curious composite of morbidity, affection,
talent and wilfulness. Her mother and her governess, Mlle. de
Brabender, a probationer nun, were often reduced to despair by her
temper, which seemed to grow worse as she became older. At other
times, but more rarely, she was tractable to the point of docility.
Sarah’s first visit to the theatre was to the Opéra-Comique. This
great event occurred when she was slowly recovering from the
illness which followed her expulsion from the Convent at
Grandchamps. One day she was at her music lesson with Mlle.
Clarisse, when her mother’s maid came to say that her presence was
desired in the salon. There she found her mother, the Duc de Morny,
and her younger sister Jeanne, who was never far from her mother’s
side when the latter was in Paris.
 Putting his hand on her curly head the Duke said:
“We have a great surprise for you.”
“A wonderful surprise,” added her mother.
Sarah clapped her hands excitedly. “I know—I know! You are
going to let me enter the Convent—I am to be a nun!”
She was overwhelmed with joy; never doubted but that her
fondest dream was to be made true.
“What is this?” demanded the Duke in amazement. “Our
beautiful little Sarah wants to be a nun? And why do you wish to
condemn yourself to that living death, may I ask?”
Living death! To the child, whose memories of the Convent were
so recent, the life of a nun was a living joy—a joy of service, sacrifice
and peace. To her restless, turbulent, almost exotic temperament
the thought of the calm, well-ordered existence of the tranquil
religieuses was a beautiful one, a sacred memory. She could not
bear the harsh laughter with which her mother greeted the
suggestion.
“Expelled from a convent and wants to be a nun!” said Julie,
scornfully. She could never bring herself to believe that this
amazingly complex creature was her own child.
“Hush!” commanded the Duke, frowning. “Now, my little one, my
question is not answered. Why do you wish to be a nun?”
Sarah looked fearlessly at her mother’s protector.
“The doctors say I am soon to die—I have heard them talk,” she
said. “I would like to die with my soul dedicated to God.”
To Julie, who was still a Jewess, this was cause for further
laughter; but the Duke, a man of much sentiment and some honour,
was much affected.
“Nonsense!” he said. “You are not going to die for many years!
The doctors are fools! We shall discharge them for idle talking.... No,
my little one, the great surprise is not what you thought. We are
going to take you to the Opéra-Comique to see a play.”
Instead of the stammered thanks he expected, Sarah began to
cry.
“I do not want to go to the Opéra-Comique!” she cried, stamping
her foot. “I won’t go! Mother Saint-Sophie (the superior at the
Convent) said that the theatre was wicked. I do not want to be
wicked: I want to be a nun!”
Threats and persuasion were both necessary before Sarah
consented to don the new gown her mother had purchased for her
and accompany her parent and the Duke to the latter’s box at the
Opéra-Comique.
This theatre was then in the Place du Chatelet, and little did the
child dream, as she entered it, that twenty-five years later she
herself would lease it from the city and call it the “Théâtre Sarah
Bernhardt”—which is its name to-day. Thus, the last theatre in which
she acted was also that in which she saw her first play.
Sarah fell an immediate victim to the theatre. The piece she saw
that night—Sarah herself did not remember its name—held her
enthralled. It was necessary for her companions to drag her away
after the curtain had fallen on the last act.
She had been transported to a new world, an unreal sphere of
delight. For days, for weeks thereafter she spoke of little else. She
besieged her mother with demands to be taken to the theatre again.
The latter, however, was too wrapped up in her own pleasure-loving
life to take much heed in the desires of her wilful daughter.
One day Sarah went off to the art school, where she was
learning to paint—her ambition to become a nun was almost
forgotten now, and she would spend feverish hours in preparation
for the career she was convinced was ahead of her as a great
portrait-painter—and did not return until the next morning.
 All that night searchers hunted throughout the city for the
truant; the police were informed and it was even suggested that the
Seine should be dragged, for it was remembered that to come home
from the art school, which it was ascertained she had left at the
usual hour, it was necessary for her to cross the Pont Neuf.
At nine o’clock the next morning a tired, sleepy and very dirty
Sarah returned to her mother’s flat and, in reply to a storm of
questions and reproaches from her almost frantic mother, explained
that she had spent the night in the Opéra-Comique.
She had gone there direct from her art school and had
succeeded in entering the theatre unobserved. Hiding under a seat
in one of the galleries, she had waited until the play began and had
then appropriated a chair. After the play, seized with panic, she was
afraid to go out with the rest of the audience and had hidden herself
again, only leaving when the doors were opened to the cleaners in
the morning.
After that the Duke gave her regular tickets for the theatre, and
she saw many plays. Frequently she would visit the same theatre a
dozen times, learn several of the parts by heart and surprise her
friends by reciting them.
It was at this period of her life that Sarah began to have friends
of the opposite sex, but she assured me that she loved none of
them.
“I had no foolishness of that kind in my head!” she told me on
one occasion. “My mother’s house was always full of men, and the
more I saw of them the less I liked them.
“I was not a very companionable child. I had few girl friends and
fewer male acquaintances, but these latter were assiduous in their
attempts to make me like them.
“The first man who asked me to marry him was a wealthy
tanner’s son, a young fellow of twenty who was earning forty francs
a week in his father’s establishment, but who expected to be rich
one day.
 “His father used to frequent my mother’s house and one day he
brought his son with him. I was sent for to complete the party and,
though I was haughty and kept the young fellow at a distance, I
could see that I had made a conquest.
“He came again and again, and would waylay me on my journey
to and from the art school, insisting on carrying my books. I did not
dislike him, for he was a handsome, earnest young man, but neither
did I like him particularly; and when he capped his attentions by
asking me to marry him I laughed in his face. He went away vowing
revenge.
“That night my mother came into my bedroom and asked me
whether the tanner had not proposed that day.
“‘Yes, mother,’ I said.
“‘And you accepted him?’
“I gave her a look of horror. ‘Accept him?’ I cried. ‘But no, of
course I did not accept him! I do not love him—that is one reason
——’
“‘It is a poor reason,’ said my mother angrily. ‘Do you suppose I
wish you on my hands for ever? Are you never going to marry? Your
sisters are growing up and soon they will marry and you will be left,
an ugly vieille fille! Love always comes after marriage!’
“‘I do not care,’ I persisted, ‘I will not marry your tanner! He has
large ears and his teeth are bad and he cannot talk. I will not marry
him, and if he comes here again I shall slap his face!’
“My mother was angrier than I had ever seen her. ‘Very well,
then, you shall do as you like! I wash my hands of you!’ she
exclaimed, and left me.
“I burst into a storm of tears and cried half the night. What a
lonely child I was! My only friends were Madame Guérard, who was
under the domination of my mother, and Mlle. de Brabender, a timid
soul, who would fondle and talk to me affectionately when we were
alone, but who was afraid to open her mouth in the presence of my
lovely mother.”
The tanners—father and son—ceased to frequent the Van Hard
house, and for a long while Julie did not speak to her daughter
except formally. To make up for it, she was tremendously and
ostentatiously affectionate with her two other daughters, Jeanne and
Régine, who had been born four years previously.
Régine had a childhood somewhat similar to that of Sarah; that
is to say, she was bundled from here to there, never nursed by her
mother, alternately the recipient of cuffs and kisses, and from the
age of three left pretty much to her own sweet devices. It is not to
be wondered at that she grew into a perfect terror of a child.
At the time of which we are writing now, Régine was forbidden
the reception rooms of the house, and spent most of her time in
Sarah’s room. Sarah became her nurse and teacher, and this
relationship continued until, fourteen years later, Régine died.
Julie Van Hard had become a fashionable personage in Paris,
owing to her relationship with the Duc de Morny, who was then one
of the most powerful men in France. The Duke kept her plentifully
supplied with money, and her gowns were the rage of Paris.
Beautiful, of commanding stature, her glossy reddish-gold hair
without a streak of grey in it, Julie was an idol to be worshipped by
the youthful dilettantes of the gay city. No reception, no first night at
a theatre, was complete without the presence of Julie Van Hard.
Dressmakers besieged her to wear their gowns for nothing, in
return for the advertisement she gave them. It was Julie Van Hard,
mother of Sarah Bernhardt, who launched the famous Second
Empire style of tightly-wound sleeves, with lace cuffs, square
décolleté and draped gowns with long trains. She was a great
coquette, and almost certainly the Duc de Morny was not the only
recipient of her favours.
Julie Van Hard’s home was spacious, and was invariably filled
with visitors. There was a dinner or an entertainment of some kind
every night. Gathered in the two gorgeously-decorated salons one
would see such people as Sarah’s two aunts, Rosine Berendt and
Henriette Faure; Paul Régis, who stood as her godfather at Sarah’s
baptism; General Polhés, an old friend of Julie’s and godfather of
Régine; Madame de Guérard, Count de Larry, Duc de Morny, Count
de Castelnau, Albert Prudhomme, Viscomte de Noué, Comte de
Larsan, Comte de Charaix, General de la Thurmelière, Augustus Lévy
the playwright, Vicomte de Gueyneveau, and many others.
Sarah seldom appeared at the parties in which these people
figured. Their activities did not interest her. She had refused to
continue with her piano studies, to the great disappointment of her
mother, who was an accomplished pianiste.
“I have always hated the piano!” Sarah told me once in 1890. “I
think it is because Mlle. Clarisse, my teacher, used to rap me on the
fingers with a little cane she carried to mark the tempo. Whenever I
hit a false note, down would come the cane, and then I would fly
into a fury, charge the poor lady like a small tigress and try to pull
her hair out. She did not remain to teach me very long and she was
never replaced!”
The next candidate to Sarah’s hand was a worthy glove-maker,
named Trudeau. He was wealthy, as wealth was counted then, and
while not precisely the son-in-law Julie would have wished, he would
doubtless have been welcome enough in the family had he
succeeded in breaking down the barriers Sarah had erected before
her heart.
Sarah’s chief objection to Trudeau was that he was too fat.
Then, again, he was smooth-shaven, and it was accounted very ugly
in those days not to have a moustache. Clean-shaven men, on
entering a theatre, would often receive a jeering reception from the
audience. The hirsute fashion of that period was long side-whiskers,
a short, double-pointed beard, and a pointed, waxed moustache.
Julie did not urge her daughter to marry Trudeau. She probably
knew that any such effort would have been doomed to failure from