mie201 – Flashcards
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businesses
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any profit seeking org that provides goods and services designed to satisfy customer needs. aka firms/enterprises
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revenue
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money the company brings in through the sales of goods and services
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business model
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clear, simple outline of how the business intends to generate revenue/ how company is going to realize profit
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profit
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amount of money left over after expenses
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expenses
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all the costs involved in doing business
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How to add value
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1. generate revenue 2. realize profit 3. competing 4. linking risk with reward
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goods-producing businesses
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produce tangible goods. activities include manufacturing, contraction, mining, agriculture ex) coca cola, GM aka capital-intensive businesses
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service businesses
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perform activities for customers. finance, insurance, transportation, utilities, retail trade, banking, healthcare ex) H&R Block, Hilton Hotels -aka labor intensive businesses -accounts for 3/4 of economic output -accounts for more than 1/2 of top 100 firms
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business mindset
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view of business that considers the countless decisions that must be made and the many problems that must be overcome before companies can deliver products that satisy customer needs
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How business contribute to society
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1. offer valuable goods and services 2. provide employment 3. paying taxes 4. contributing to national growth, stability, and security
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Negative effects of businesses on society
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1. generating pollution and waste 2. health and safety risks 3. disrupting communities 4. causing financial instability
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interrelated economic environments
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1. Economic 2. Legal 3. Market 4. Social 5. Technological
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Economic Environment
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conditions and forces that affect the cost and availability of goods, services, and labor; shapes behavior of buyers and sellers
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market environment
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includes a company's target customers, and the buying influences that shape the behavior of those customers/ competitors that market similar products to those customers
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legal environment
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laws and regulations at all levels
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social environment
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trends and forces in society at large
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technological environment
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forces resulting from the practical application of science to innovations, products, and processes
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major functional areas in a business enterprise
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1. research and development 2. manufacturing/production/operation 3. marketing 4. finance and accounting 5. HR 6. business services
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research and development
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responsible for creating/designing new products
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mp
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where the company makes its products and performs its services
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marketing
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identifying opportunites in marketplace, working with R to develop products. includes sales, distribution, and customer service
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Sales
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develops relationships with potential customers/persuades them to buy companies goods or service
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distribution
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helps promote products to retailers/physically delivers products
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customer service
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makes sure customers have the support and info they need
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HR
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responsible for recruiting, hiring, developing, and supporting employees
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business services
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help companies with specific needs in accounting, law, banking, real estate, etc. can be performed by in-house staff or external ppl
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operations manager
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manages ppl and process involved in creating goods and services
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information teech manager
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designs, implements, and maintains systems that help deliver the right info to the right people at the right time
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marketing specialist
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branding strategy, electronic commerce, ads, pr, or interpersonal relations
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sales professional
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responsible for building relationships with sutomres/helping them make purchase decisions
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accountant
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collects, analyzes and reports financial matters. analyzes budgets, manufacturing costs of new products, preparing income statements
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financial manager
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plans for company's financial needs invests funds, raise capital
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economy
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sum total of all economic activity within a given region
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economics
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study of how human society uses scare resources to produce and distribute goods and services
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microeconomics
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study of how consumers, businesses, and industries collectively determine the quantity of goods and servieces demanded and supplied at different prices
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macroeconomics
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the study of "big picture" issues in an economy: competitve behavior bw firms, effect of govt polices, and overall resource distrivution issues
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nat resources
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land, forests, minerals, water usable in their natural state
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human resources
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all the people who work for an oranization
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capital
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physical, human-made elements used to produce goods and services, such as factories and computers; can also reder to funds that finance the ops of a business
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entrepreneurship
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combo of innovation, initiatice and willingness to take the risks required to create and operate new businesses
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knowledge
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expertise gained through experience/association
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factors of production
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1. nat resources 2. human resources 3. capital 4. entrepreneurship- spirit of innovation 5. knowledge- collective intelligence of an org
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scarcity is important because:
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1. it creates competition for resources 2. and forces trade-offs
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opportunity cost
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most appealing alternatice from all those you didnt choose/ way to measure the value of what you gave up when you pursued another opportunity
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economic system
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means by which a society distributes its resources to satisfy its peoples needs
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economic systems are generally categorized as:
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free market systems or planned systems
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free market systems
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decisions about what to produce and in what quantities are decided by the market's buyers and sellers.
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capitalism/private enterprise
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a free market system in which individuals own and operate the majority of businesses and where competition, supply, and demand determine which goods/services are produced
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mixed economies
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offer opportunities for wealth creation but usually attach an element of risk to the potential reward ex) if you want to start up a business, you could lose money if business isn't successful
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capitalism and private enterprise are the terms most often used to describe the ______.
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free market system
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planned system
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govts control the distribution of resources and limit freedom of choice in order to accomplish govt goals
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communism
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the planned system that allows individuals least degree of economic freedom ex) n korea and china
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socialism
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govt involvement is focused on industries considered vital to the common welfare like transportation, utlities, medicine, steel, and communications
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examples of socialized elements in the us economy
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public schools, postal service, transportation, some major health care programs
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govts can change the structure of economy by:
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nationalizing and/or privatizing
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nationalizing
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govt takeover of selected companies/industries ex) govt takeover of security after 9/11
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privatizing
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turning over services once performed by the govt by allowing private businesses to perform them instead. es) in the US, private companies now onwn a number of highways, bridges, ports, prisons
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what is the primary reason for privatizing?
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govt believes that if private firms are motivated by the profit incentive , they can do a more efficient job of running facilities
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T or F: no economy is truly "Free" in the sense that anyone can do whatever he or she wants
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True
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Demand Curve
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graphs the quantities of a product that buyers will purchase at various prices
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supply curve
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graphs the quantites that sellers will offer for sale regardless of demand
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demand
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behavior of buyers. willingness and ability to purchase products
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supply
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behavior of sellers. specific quantity of a product that the seller is able and willing to provide
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equilibrium point
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point at which quantity supplied equals quantity demanded. at that point, customers are willing to buy as many as the company is willing to sell
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the theory of _______ is the immediate driving force of the free market system
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supply and demand
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competition
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situation in which 2 or more suppliers of a product are rivals in pursuit of the same customers
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"big picture" issues in the economy that are essential to understanding the behavior of the economy:
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1. competition in free market system 2. business cylces 3. unemplyment 4. inflation
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T or F: nature of competition varies by industry
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True
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ideal type of competition
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pure competition
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pure competition
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characterized by three conditions: 1. marketplace of many buyers and sellers 2. product or service with nearly identical features 3. low barriers of entry
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monopoly
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theres is only one supplier of a product in a given market and the supplier thus is able to determine the price
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examples of monopolies
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cable service in specific area, sirius xm radio
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oligopoly
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market that is dominated by only a few suppliers ex) boeing and airbus industries
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most of the competition in free market economies is:
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monopolistic competition
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monopolistic competition
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competition in which a large number of sellers offer products that can be distinguished from competing products in at least a small way ex) restaurants, toothpastes, cosmetics, soft drinks
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business cycles
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fluctuations in the rate of growth that an economy experiences over a period of several years
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economic expansion
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occurs when the economy is growing and ppl are spending more money. consumer purchases stimulate businesses to produce more goods----stimulates employment and wages--stimulate more consumer purchases
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economic contraction
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occurs when spending declines businiesses cut back on production employees are laid off economy as a whole slows down
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if economic contraction is severe, nation may enter into a
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recession
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recession
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two consecutive quarters of decline in the GDP
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GDP
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a basic measure of a country's economic output
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A deep and prolonged recession is called:
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depression
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recovery
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period of time which income, employment, production and spending rise
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one of the most serious effects of economic contraction
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unemployment
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unemployment rate
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portion of the labor force currently looking for a job
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labor force is defined as:
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everyone over 16 who has/is looking for a job
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frictional unemployment
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"natural flow" of workers in and out of jobs ex) when a person leaves one job without first lining up a new job. (courtney)
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structural unemployment
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results froma mismatch between workers' skills and current needs of employers changes in external environments of a business make skills obsolete (being replaced by machines)
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cyclical unemployment
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caused by economic fluctuations
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seasonal unemployment
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reflects job subtractions and additions in industries that need diff #s of workers throughout the year
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inflation
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steady rise in the avg prices of goods and servies throughout the economy
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deflation
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a sustained fall in avg prices
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inflation
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_____ is a major concern for consumers, businesses, and govt leaders becuase of its effect on purchasing power
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purchasing power
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amount of good/service you can buy for a given amount of money
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consumers and businesses can also suffer from:
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above-average increases for specific goods or services
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why does the debate about the role of government in a free-market system continue?
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1) different groups have diff ideas about the role of government 2) bc the economy continually evolves, creating new opportunities and dangers
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much of the debate about the govts role can be framed as a question of:
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regualation vs. deregulation
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regulation
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having more rules in place to govern economic activity
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deregulation
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having fewer rules in place and relying more on the market to prevent excesses and correct itself over time
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proponents of more reguation believe that:
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companies cant always be counted on to act in ways the protect SH interests and the market cant be relied on as a way to prevent or punish abuses and failures
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proponents of degregulation believe:
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government interference can prevent innovations that help everyone by boosting the entire economy and that some regulations burden individual companies and industries with unfair costs
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four major areas in which the govt plays role in economy:
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1. protecting SH 2. boosting competition 3. encouraging innovation/economic development 4. stabalizing/ stimulating the economy
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in attempt to balance interests of SH and protect those who might be negatively affected by businesses, the US fed govt has established
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regulatory agencies
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antitrust laws
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limit what businesses can and cannot do to ensure that all competitors have an qual chance of producing a product
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to preserve competition and customer choice, govts occasionally prohibit companies from:
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combining through mergers or acquisitions
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in some cases, the govt may approve a merger but only with conditions suchas as:
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selling some parts of the company
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govts can use regulatory powers to encourage specific types of
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innovation and economic activity
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examples of innovation and economic activity
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encouraging development of specific innovations that are deemed beneficial (solar power)
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ways govt foster competition
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antitrust laws, merger and acquisition approvals
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tools the govt can use to stabalize/stimulate the economy
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1. monetary policy 2. fiscal policy
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monetary policy
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adjusting the nation's money supply, the amount of "spendable" money in the economy at any given time by increasing/decreasing interest rates
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fiscal policy
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changes in the govt's revenues/expenses to stimulate a slow economy or slow a growing economy that is in danger of overheating
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economic indicators
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statistics such as interest rates, unemployment rates, housing data that let businesses and political leaders measure and monitor economic performance
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leading indicators:
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suggest changes that may happen to the economy in the future and are therefore valuable for planning
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lagging indicators:
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provide confirmation that something has occured in the past unemployment: one of the most popular lagging indicators ..indicate that the economy has been doing poorly
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the importance of a lagging indicator is:
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its ability to confirm that a pattern is occuring or about to occur
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price indexes
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offer a way to monitor inflation/deflation in various sectors of the economy; a convenient way to compare numbers over time
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price index is calculated by:
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dividing the current value of some quantity by a baseline historical value and multiplying by 100
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using the price index computation, instead of saying something has increased by 28%, economists would say:
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the index is 128
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Consumer price index
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measures the rate of inflation by comparing the change in prices of a representative "basket" of consumer goods/servies ex) clothing food, housing
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Producer price index
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measures price at the producer or wholesaler level
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as global competition heats up, producers find they cant always pass along price increases and remain competitive, therefore the alternative is:
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to accept lower profit levels or find ways to improve prodictivity like investing in more efficient factories
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broadest measure of a nations economic wealth is
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GDP
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GDP concerned with where
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measures a country's output: production, distribution, and use of goods/services computes the sum of all goods/services produced for final use in a country during a specified perios (usually 1 year)
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GDP products may be produced by either domestic or foreign companies as long as production takes place in nations boundaries
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T: a Honda assembly plant would be included in the US GDP
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GNP concerned with who
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excludes the value of production from foreign-owned businesses within the nation's boundaries includes receipts from oversees operations of domestic companies
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economic globalization
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a result of commerce across borders that is the increasing integration/interdependence of national economies around the world
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6 reasons why countries and companies trade internationally:
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1. relative strengths (comparative advantage) 2. expanding markets (expand companies to other countries) 3.pursuing economies of scale: by expanding their markets, companies can benefit 4.acquiring goods, material, services: bc no country can produce everything its citizens want at prices their willing to pay 5. keeping up with customers: companies helps keep up with multinational customers 6. keeping up with competition: their forced to simply bc their competitors are doing so
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economies of scale
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produce goods/services at lower costs by purchasing and distributing higher quantities
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two key measurements of a nations level of international trade
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balance of trade balance of pament
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balance of trade
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total value of a country's exports minus total value of imports E-I
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when value of US exports exceeds the value of imports, the balance is said to be:
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positive
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trade surplus
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when ppl in other countries buy more goods/services from the US then we buy from them
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trade deficit
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when ppl in the US buy more from foreigh countries than they do from us
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US maintains a trade surplus in _____ but not in ________.
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services; goods
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balance of payments
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broadest indicator of international trade; total flow of money into the country minus the total flow of money out of the country I-O
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balance of payments includes:
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balance of trade plus net dollars received and spent on foreign investment, military expenses, tourism, foriegn aid, and other internation transactions
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foreign exchange
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the conversion of one currency into an equivalent amount of another currency
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exchange rate
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# of units of one currency that must be exchanged for a unit of the second currency/ rate at which the money of one country is traded for the money of another
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most international currencies operate under a:
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floating exchange rate system
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floating exchange rate system
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a currency's value/price fluctuates in response to the forces of global supply and demand
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a currency is called 'strong' and 'weak' relative to another when:
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its rate is higher or lower than normal
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"strong" and "weak" does not necessarily mean good or bad when it comes to exchange rates
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true
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exchange rates can dramatically affect a company's financial results by:
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raising/lowering the cost of supplies it imports and raising/lowering price of goods it exports
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floating exchange rate
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currency value fluctuates in response to the forces of global supply and demand; constantly chances, US$
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fixed exchange rate
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govt of one country can fix the rate of exhnage to another currency, exchange rate stays the same with pegged currency; china pegged to US$
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strong currency
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exchange rate is higher than normal ( when us dollar can buy more currency than usual) countries' buyers pay less for imports travel to other countries is cheaper countries exports are more expensive tourism is discouraged
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weak currency
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exchange rate is lower than normal (when the dollar cant buy as many euros as last year for ex.) countries' products are price competitive in foreign markets tourists will visit investment from foreigners are encouraged imports prices are higher intl travel is more expensive
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free trade
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intl trade not hindered by restrictive measures
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when govt believes free trade is not in best interes of natl security, etc, it can intervene using
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protectionism practices
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protectionism
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govt policies aimed at shielding a country's industries from foreign competition
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most common protectionism practices:
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1. tariffs 2. quotas 3. embargoes 4. sanctions 5. restrictive import standards 6. export subsidies 7. dumping
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tariffs
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taxes on imports
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quotas
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limits placed on # of imports a nation will allow
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embargo
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complete ban on imports and/or exports
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sanctions
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politically motivated embargoes
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restrictive import standards
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requiring special licenses for doing certain kinds of business, making it difficult for foreign companies. like requiring goods to pass certain tests
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export subsidies
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form of financial assistance in which producers receive enough $ from govt where they can lower their prices to compete more effectively in world market
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dumping
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practice of selling large quantities of a product at a lower price than cost of production or below what the company would charge in its home market
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dumping is used to:
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1. win foreign customers 2. reduce product surplus
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WTO
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permanent forum for negotiation, impletmenting, and monitoring intl trade procedures and for mediating trade siputes among its member countries
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WTO's primary goal is to:
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improve welfare of ppl worldwide by helping intl trade function more efficiently
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IMF
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fosters international financial cooperation. 1. monitors global financial developments 2. provides short-term loans to countries that are unable to met obligations 3. provides training
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World Bank
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founded after WWII. aimed at addressing poverty, health, education in developing countries
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trading blocs/ common market
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regional orgs that promote trade among member nations. ex) NAFTA
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NAFTA
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trading bloc agreement b/w mexico, us, and canada. eliminated tariffs/quotas
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one of the largest trading blocs is:
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European Union
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Asia-Pacific Econ. Cooperation Council (APEC)
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trying to liberalize trade in pacific rim
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the best way to prepare yourself for doing business with ppl from another country is
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to study that culture in advance
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businesspeople dealing w other countries should avoid:
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stereotyping (wide range of generalized attributes to a culture or individual), and ethocentrism (belief that your country is better)
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example of ethnocentrism
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french airlines refusing to speak any other language but french
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tips for improving intercultural communication:
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1. be alert to customs 2. deal with the indivdual 3. clarify your intent and meaning 4. adapt your style to the others 5. R-E-S-P-E-C-T
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common law
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law based on tradition, custom, judicial interpretation US/UK are examples
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civil law
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A law that governs relationships between individuals and defines their legal rights.legal limits are defined in detailed legal codes france/germany business contracts shorter/simpler since the code outlines more aspects of the transactionor relationship
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theocratic law
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law based on releigious principles
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foreign corrupt practices act
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us law that outlaws actions such as bribing govt officials in other nations to approve deals . does allow certain payments like payments to officials for speeding up govt actions
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critics of FCPA say that:
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payoffs are a routine part of world trade, so forbidding us companies cripples their ability to compete
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forms of intl business activity
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importing/exporting intl licensing: entitle one company to use some or all of another firms prop like trademarks, name copyright in return for a loyalty payment franchising; selling right to use a business system (brand names, trade secrets) strategic alliance joint venture fdi
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strategic alliance
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long term partnership bw 2+ companies to jointly develop , produce, or sell products in global marketplace
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joint venture
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special type of strategic alliance in which 2 or more firms join together to create a new business entity that is legally seperate from its parents
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Multinational corps (MNCs)
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companies with physical presence in numerous countries
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some MNC's increase their involvement in foreign countries by establishing
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foreign direct investment (FDI)
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FDI
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investment of money by foreign companies in domestic business enterprises
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multidomestic strategy
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a company creates highly independent operating units in each new country, giving local manager lots of freedom as though they were independent companies.companies try to achieve maximum local responsiveness by customizing both their product offering and marketing strategy to match different national conditions.
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global strategy
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highly centralized approach; headquarters in home country making all major decisions
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transnational strategy
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hybrid (mixed) approach; attempts to reap benefits of intl scale wile being responsive to local market dynamics "think globally, act locally"
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what needs to be considered when goin international
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products: standardize vs. customize customer support: must have some kind of customer support promotion: customizing messages/ads for each country pricing: biz needs to makes sure they can cover all costs and still be able to offer competitive prices staffing: mixing U.S + local personnel seems to work best
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customizing a product may seem like the easy choice but...
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it can increase cost and complexity
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good ethics in business is:
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competing fairly/honestly communicating truthfully not causing harm to others
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business communication ethics often involve question of
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transparency
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transparency
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the degree in which info flows freely within an organization , among managers, employees, and SH
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insider trading
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when company insiders use confidential info to gain an advantage in stock market ex) martha stewart!
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factors that influence ethical behavior of businessppl:
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cultural differences knowledge organization behavior
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ethical dilemma
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situation in which one must choose between two conflicting but arguably valid sides
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ethical lapse
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situation in which an individual makes a decision that is clearly wrong (giving trade secrets)
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Corporate Social Responsibility (CSR)
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idea that business has obligations to society beyond pursuit of profits imperitive for business and society--depends on the other being healthy/successful
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CSR activities
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philanthropy- donating $, time, other resources strategic CSR- helps itself and society at same time ex) toyota investing in the hybrid car
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minimalist csr
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only social responsibility of a business is to pay taxes and obey the law
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defensive csr
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companies engage in CSR only after being shamed/forced into it
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proactive csr
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companies have a responsibility to help society beyond simply paying taxes/obeying law---leads to philanthropy and strategic csr
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cynical csr
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companies use csr as a marketing ply to distract attention from self centered behavior
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public discussions of ecology led to the establishment of the Environmental Protection Agency which:
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regulates air/water pollution by manufacturers and utilities
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cap and trade
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tries to balance free-market economies with govt intervention. establishing a maximum allowable amount of a particular pollutant. if a compant lowers its emissions enought to stay under its limit, it can sell or save the 'leftovers'
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sustainable development
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efforts to minimize resource depletion/pollution which the UN defines as development that meets the needs of the present w/o compromising needs of future GE, Dow investing in solar power, etc
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consumerism
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movement that put pressure on businesses to consider consumer needs and interests
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consumerism:
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prompted many businesses to create consumer-affairs depts. JFK also announced a "bill of rights" for consumers: right to safe products right to be informed right to choose right to be heard
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COSC
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consumer product safety commision: agency imposed by govt that enforces safety standards ex) safe toys, food---online privacy
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identity thefy
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when criminals steal personal info
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Equal Employment Opportunity Commission
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agency that addresses job discrimination; monitors the hiring practices of companies and investigates complaints of job-related discrimination
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affirmative action
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programs developed in 1960s to encourage orgs to recruit and promote members whose economic progress had been hindered through legal/establish practices
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Americans with Disability Act (ADA)
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guarantees equal opportunities in housing, transportaion, education, etc
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occupational safety and health act of 1970 (OSHA)
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set mandatory standards for safety--which established the OSHAdministration
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stakeholders
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society owners customers creditors environment community employees suppliers
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code of ethics
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written statements setting forth principes that guide an orgs decision
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whistleblowing
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disclosure of info by a company insider that exposes illegal/unethical behavior by others within the organization
