Set A) The Foundations of the American Business System – Flashcards
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business in a macro sense
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a social process involving the assembly and utilization of productive resources to produce products and services of satisfying societies needs and wants
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business in a micro sense
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dedicated to profit-seeking activités that provide the goods and services that an economic system needs
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not-for-profit organization
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institutions with primary objectives other than returning profits to their owners of managers or fiduciary stewards
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risk-return tradeoff calculus
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maximization of shareholder wealth by striking a balance between the risk or threat of loss of a business investment and its potential gain
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social responsibility
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the ideal relationship between business and society
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accounting profit
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a companys earnings as formally reported
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return on investment
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a company's earnings after taking into account the cost of capital invested in the business
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cash-flow contribution
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a company's earnings before taking fixed-asset and capital costs into account
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shareholder
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stakeholders include managers and workers shareholders and other investors the consumeristic public and the general community
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social audit
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measures a company's record on issues such as affirmative action, environmental sensitivity, occupational safety and so on.
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corporate code of ethics
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the greatest good for the greatest number, the protection of human dignity, a fair distribution of burdens and benefits.
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ethical dilemma
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an issue has two conflicting but arguably valid sides
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ethical lapse
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the unethical decision or behavior of a business executive
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factors of production
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land (natural resources, building sites, forests, mineral deposits) labor (human resources) capital (financial- resources bus needs to finance operations in form of investment retained profits or loans, physical - elements used to produce goods and services like computers, robots, machines, tools and buildings)
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entrepreneurship
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the risk-taking function in a private enterprise system
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knowledge technology
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means to filter collected information and deliver it when needed, thus moving the business toward virtualization
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virtualization
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the eschewal of physical place when everything is accessible through technology
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learning organization and knowledge management
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effective leveraging and control of a firms knowledge assets
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strategic imagination
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fueled by logic-deductive reasoning of the sciences versus the contextual inferential reasoning used in the arts
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factors of production and their factor payments
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human resources: wages salaries entrepreneurship: profits capital: interest, dividends natural resources: rents information: intellectual capital digits
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planned (or command) economie
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an economy which relies on a centralized governmental apparatus to control all or most factors of production and to make all or most production and allocation decisions
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socialism
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popular term to describe economic system that draws its conceptual framework from writings of Karl Marx (particularly the book Das Kapital)`
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market economy
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an economy in which individuals control production and allocation decisions through the interaction of forces of demand and supply governed by the law of supply and demand
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law of demand
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buyers will purchase (demand) more of a product for sale as its price drops and less of a product as its price increases
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law of supply
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producers will offer (supply) more of a product for sale as its price rises and less as its price drops
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capitaalism
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philosophical origin from 18th central writings of Adam Smith (particularly the book The Wealth of Nations)
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pure capitalism
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market with supply & demand, and invisible hand (ensure production of goods society wants in quantities society wants it)
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invisible hand
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ensure production of goods society wants in quantities society wants it
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mixed capitalism
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wealth generated by individuals and businesses but an intercessionary government plays some role and include both a fiscal and monetary policy
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fiscal policy
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use of government revenue collection and spending
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monetary policy
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adjustments to nations money supply by increasing or decreasing interest rates
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profits
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after tax profit is the legitimate reward for the investment, effort, and risk-taking of those persons who provide the goods and services the public needs
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the three freedom of choices
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- freedom to choose a type of business, freedom to choose clientele and customer base, freedom to combine the factors of production in a lawful way in any manner to maximize profits - freedom to choose employment and with companies that offer the most incentivizing careers
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competition
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the confrontation b/w two or more businesses vying for the same resources and consumers
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pure competition
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market situation in which two conditions prevail, 1) all firms in a given industry are small in scale and restricted in scope 2) the number of firms in the industry must be large, ergo no single firm is powerful enough to influence the price of the product or service in the marketplace
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4 principles of pure competition
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1) products offered by each firm are so similar that buyers view them as identical 2) transparency or the factor that buyers and sellers know the prices that others are paying and receiving in the marketplace
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monopolistic competition
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market situation in which sellers are able to achieve some measure of product differentiation through branding, advertising, creativity, quality improvements, service response time etc.
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oligopoly
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market situation featuring a finite number of large producers offering either similar products or dissimilar products
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monopoly
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a market situation which features a single firm with no competition and only constrained by the fall of consumer demand in response to increased prices
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natural monopolies (examples)
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electricity, natural gas
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GNP (gross national product)
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the total value of all the goods and services produced by an economic system in a one-year period irrespective of where the factors of production are located *includes both domestic and international profits*
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real GNP
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when GNP is adjusted for inflation and changes in the value of a countries currency
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GDP (gross domestic product)
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another calculation of the value of all goods and services produced in the economy during a given period of time, usually a year *includes only domestic (in USA) profits*
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productivity
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a measure of economy growth that compares how much a system produces with the resources to produce it
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total productivity equation
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total productivity = output (goods & services produced) / input (human & natural resources, capital)
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balance of trade
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the difference between a country exports to and imports from other countries
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positive balance of trade
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generally considered favorable because new money flows into a country from the sales of its exports
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negative balance
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means that money is flowing out to pay for imports
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national debt
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the total amount that a nation owes its creditors, usually the result of a number of budget deficits in which a government has spent more money than it raises in revenues
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strategic leadership approach
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progression of dominant managerial logistics as the strategic drivers of the American business system
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the production dominant managerial logic
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- 1870 to 1900 - a period of industrialization and production - believes that a product will sell itself
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the financial dominant managerial logic
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- 1900 to 1914 - deals with mergers and acquisitions - finance was the driver of this period
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the sales dominant managerial logic
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- 1920's - an era of durable goods revolution - sales is a mission-driven skill that gives you a competitive advantage - sales and advertisements were huge
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the marketing dominant managerial logic
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- 1950's - gave marketing product development - Edsel example (biggest loser, car didn't sell itself) - anthropic cosmological principle bc it decenters business universe of this time (companies used to be the true center of the business universe and Edsel was the last example of this)
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the strategy dominant managerial logic
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- 1970's - period of the coming of strategy (competitors were taken into consideration) - there were technological, cultural, and societal changes
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the meta-strategic dominant managerial logic
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- 1990's - viral competition - there are changes in the share of customer and market (greater does not always mean more profit)
