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capitalism

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an economic system in which individuals own and operate the majority of businesses that provide goods and services

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mixed economy

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an economy that exhibits elements of both capitalism and socialism

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socialism

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the key industries are owned and controlled by the government. Depending on the country, private ownership of smaller businesses is permitted to varying degrees. Usually, people may choose their own occupations, although many work in state-owned industries. What to produce and how to produce it are determined in accordance with national goals.

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communism

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all workers would then contribute to this society according to their ability and would receive benefits according to their need.

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return on sales (or profit margin)

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a financial ratio calculated by dividing net income after taxes by net sales

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inventory turnover

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a financial ratio calculated by dividing the cost of goods sold in one year by the average value of the inventory

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current ratio

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a financial ratio computed by dividing current assets by current liabilities

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four phases of the business cycle

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the peak (sometimes called prosperity), recession, the trough, and recovery (sometimes called expansion)

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market economy

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an economic system in which businesses and individuals decide what to produce and buy, and the market determines quantities sold and prices

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service economy

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an economy in which more effort is devoted to the production of services than to the production of goods

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command economy

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an economic system in which the government decides what goods and services will be produced, how they will be produced, for whom available goods and services will be produced, and who owns and controls the major factors of production

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horizontal merger

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a merger between firms that make and sell similar products or services in similar markets. This type of merger tends to reduce the number of firms in an industry—and thus may reduce competition. As a result most horizontal mergers are reviewed carefully by federal agencies before they are approved in order to protect competition in the marketplace.

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vertical merger

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a merger between firms that operate at different but related levels in the production and marketing of a product. Generally, one of the merging firms is either a supplier or a customer of the other.

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conglomerate merger

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a merger that takes place between firms in completely different industries.

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trade deficit

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a negative balance of trade

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trade surplus

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a positive balance of trade

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embargo

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a complete halt to trading with a particular nation or in a particular product

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quota

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a limit on the amount of a particular good that may be imported into a country during a given period of time

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balance of trade

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the total value of a nation's exports minus the total value of its imports over some period of time

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Limited Liability Corporation (LLC)

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is a form of business ownership that combines the benefits of a corporation and a partnership while avoiding some of the restrictions and disadvantages of those forms of ownership. Like a sole proprietorship or partnership, it enjoys pass-through taxation. Like a corporation, it provides limited-liability protection for acts and debts. It extends the concept of personal-asset protection to small business owners.

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S-Corp

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a corporation that is taxed as though it were a partnership. In other words, the corporation's income is taxed only as the personal income of its stockholders.

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Corporation

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an artificial person created by law, with most of the legal rights of a real person. These include The right to start and operate a business The right to buy or sell property The right to borrow money The right to sue or be sued The right to enter into binding contracts.

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stock

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shares of ownership

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stockholders

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the people who own a corporation's stock—and thus own part of the corporation

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Non-profit

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a corporation organized to provide a social, educational, religious, or other service rather than to earn a profit.

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partnership agreement should address

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Who will make the final decisions What each partner's duties will be The investment each partner will make How much profit or loss each partner receives or is responsible for What happens if a partner wants to dissolve the partnership or dies.

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general partners

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run the risk of having to use their personal assets to pay creditors

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limited partners

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risk only their original investment

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limited-liability partnership (LLP)

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in which a partner may have limited-liability protection from legal action resulting from the malpractice or negligence of the other partners.

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Disadvantages of Sole Proprietorship

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unlimited liability, lack of continuity, lack of money, limited management skills, difficulty in hiring employees

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Advantages of Sole Proprietorship

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ease of startup and closure, pride of ownership, retention of all profits, no special taxes, flexibility of being your own boss

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Advantages to Partnership

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Availability of capital, ease of start up, personal interest, combined business skills and knowledge, retention of profits, no special taxes.

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Disadvantages to Partnership

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Unlimited liability, management disagreements, lack of continuity, frozen investment

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Characteristics of Entrepreneurs

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-independence; -a desire to determine one's own destiny; -a willingness to find and accept a challenge; -family background (in particular, researchers think that people whose families have been in business, successfully or not, are most apt to start and run their own businesses); and -age (those who start their own businesses also tend to cluster around certain ages—more than are between 24 and 44 years of age

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Contributions of Small Businesses

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provide technical innovation, provide employment, provide competition (provide benefits to large businesses), filling needs of society and other business

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Advantages of Small Businesses

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Personal relationships with customers and employees, ability to adapt to change, simplified record keeping, independence, ease of closure, keep all profits

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Disadvantages of Small Businesses

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Limited potential, risk of failure, limits to raising capital,

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Small Business Association offerings

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provides both financial assistance and management counseling; training, technical assistance; and education to more than small businesses. It helps small firms to bid for and obtain government contracts, and it helps them to prepare to enter foreign markets.

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top-line manager

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an upper-level executive who guides and controls the overall fortunes of an organization

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first-line manager

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a manager who coordinates and supervises the activities of operating employees

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middle manager

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a manager who implements the strategy and major policies developed by top management

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interpersonal skills

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involve the ability to deal effectively with other people, both inside and outside an organization.

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technical skills

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involve specific skills needed to accomplish a specialized activity.

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analytical skills

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identify problems correctly, generate reasonable alternatives, and select the "best" alternatives to solve problems

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conceptual skills

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involve the ability to think in abstract terms.

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autocratic leadership

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ask-oriented leadership style in which workers are told what to do and how to accomplish it without having a say in the decision-making process

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participative leadership

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leadership style in which all members of a team are involved in identifying essential goals and developing strategies to reach those goals

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Entrepreneurial leadership

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personality-based leadership style in which the manager seeks to inspire workers with a vision of what can be accomplished to benefit all stakeholders

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inventory

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The process of managing inventories to minimize costs, including holding costs and potential stock-out costs.

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scheduling

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The process of ensuring that materials and resources are at the right place at the right time.

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quality control

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Ensures that goods and services are produced in accordance with design specifications.

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computer-integrated manufacturing (CIM)

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a computer system that not only helps to design products but also controls the machinery needed to produce the finished product

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computer-aided manufacturing (CAM)

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the use of computers to plan and control manufacturing processes

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motivation-hygiene theory

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the idea that satisfaction and dissatisfaction are separate and distinct dimensions

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Maslow's hierarchy of needs

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a sequence of human needs in the order of their importance

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scientific management

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the application of scientific principles to management of work and workers...The more a person produces, the more he or she should be paid. This gave rise to the piece-rate system, under which employees are paid a certain amount for each unit of output they produce.

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the Hawthorne studies

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showed that such human factors are at least as important to motivation as pay rates. From these and other studies, the human relations movement in management was born. Its premise was simple: Employees who are happy and satisfied with their work are motivated to perform better. Hence, management is best served by providing a work environment that maximizes employee satisfaction.

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Goal-setting theory

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a theory of motivation suggesting that employees are motivated to achieve goals that they and their managers establish together

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equity theory

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a theory of motivation based on the premise that people are motivated to obtain and preserve equitable treatment for themselves

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Expectancy theory

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a model of motivation based on the assumption that motivation depends on how much we want something and on how likely we think we are to get it

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job enrichment

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motivation technique that provides employees with more variety and responsibility in their jobs

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Management by objectives (MBO)

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a motivation technique in which managers and employees collaborate in setting goals

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Empowerment

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making employees more involved in their jobs by increasing their participation in decision making

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Forming

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team members are introduced to one another and begin to develop a social dynamic

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Storming

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interaction may be volatile and the team may lack unity. team members will brainstorm to develop ideas and plans and establish a broad-ranging agenda.

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Norming

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the team begins to stabilize and each person's role within the group begins to solidify, and members recognize the roles of others.

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Performing

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the team achieves its full potential, finally focusing on the assigned task. may take a long time to develop, as team development issues can be complicated.

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Adjourning

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in the final stages, the team is disbanded because the project is complete.

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cross-functional team

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a team of individuals with varying specialties, expertise, and skills that are brought together to achieve a common task.

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virtual team

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a team consisting of members who are geographically dispersed but communicate electronically

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self-managed teams

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groups of employees with the authority and skills to manage themselves.

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problem-solving team

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a team of knowledgeable employees brought together to tackle a specific problem.

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recruiting

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the process of attracting qualified job applicants

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selection

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the process of gathering information about applicants for a position and then using that information to choose the most appropriate applicant

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planning

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establishing organizational goals and deciding how to accomplish them

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job analysis

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a systematic procedure for studying jobs to determine their various elements and requirements.

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human resources management

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consists of all the activities involved in the acquiring, maintaining, and developing an organization's human resources.

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external recruiting

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attempt to attract job applicants from outside an organization

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internal recruiting

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involves considering present employees as applicants for available positions.

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Equal Employment Opportunity Commission (EEOC)

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a government agency with the power to investigate complaints of employment discrimination and the power to sue firms that practice it.

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The Americans with Disabilities Act (ADA)

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prohibits discrimination against qualified individuals with disabilities in all employment practices

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Affirmative Actions

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not one act, but a series of executive orders issued by the POTUS. It prescribes that such employers actively encourage job applications from members of minority groups and hire qualified employees from minority groups who are not fully represented in their organizations.

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Employee Retirement Income Security Act

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passed in 1974 to protect the retirement benefits of employees.

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The Occupational Safety and Health Administration (OSHA)

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passed in 1970, this act is concerned with issues of employee health and safety.

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Title VII of the Civil Rights act of 1964

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forbids organizations with 15 or more employees to discriminate in employee selection and retention on the basis of sex, race, color, religion, or national origin.

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Equal Pay Act

answer

specifies that men and women who are doing equal jobs must be paid the same wage.

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Fair Labor Standards Act

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passed in 1938 and amended many times since, established minimum wages and overtime pay rates.

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On the job method

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trainee learns by doing the work under the supervision of an experienced employee.

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simulations

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the work situation is simulated in a separate area so that learning takes place away from the day-to-day pressures of work.

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conferences and seminars

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experts and learners come together to discuss problems and exchange ideas

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role-playing

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participants act out others' roles in order to better understand them

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employee training

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the process of teaching operations and technical employees how to do their present jobs more effectively and efficiently.

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management development

answer

the process of preparing managers and other professionals to assume increased responsibility in both present and future positions.

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