Set A) The Foundations of the American Business System

Flashcard maker : Lily Taylor
business in a macro sense
a social process involving the assembly and utilization of productive resources to produce products and services of satisfying societies needs and wants
business in a micro sense
dedicated to profit-seeking activités that provide the goods and services that an economic system needs
not-for-profit organization
institutions with primary objectives other than returning profits to their owners of managers or fiduciary stewards
risk-return tradeoff calculus
maximization of shareholder wealth by striking a balance between the risk or threat of loss of a business investment and its potential gain
social responsibility
the ideal relationship between business and society
accounting profit
a companys earnings as formally reported
return on investment
a company’s earnings after taking into account the cost of capital invested in the business
cash-flow contribution
a company’s earnings before taking fixed-asset and capital costs into account
stakeholders include managers and workers shareholders and other investors the consumeristic public and the general community
social audit
measures a company’s record on issues such as affirmative action, environmental sensitivity, occupational safety and so on.
corporate code of ethics
the greatest good for the greatest number, the protection of human dignity, a fair distribution of burdens and benefits.
ethical dilemma
an issue has two conflicting but arguably valid sides
ethical lapse
the unethical decision or behavior of a business executive
factors of production
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)
the risk-taking function in a private enterprise system
knowledge technology
means to filter collected information and deliver it when needed, thus moving the business toward virtualization
the eschewal of physical place when everything is accessible through technology
learning organization and knowledge management
effective leveraging and control of a firms knowledge assets
strategic imagination
fueled by logic-deductive reasoning of the sciences versus the contextual inferential reasoning used in the arts
factors of production and their factor payments
human resources: wages salaries
entrepreneurship: profits
capital: interest, dividends
natural resources: rents
information: intellectual capital digits
planned (or command) economie
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
popular term to describe economic system that draws its conceptual framework from writings of Karl Marx (particularly the book Das Kapital)`
market economy
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
law of demand
buyers will purchase (demand) more of a product for sale as its price drops and less of a product as its price increases
law of supply
producers will offer (supply) more of a product for sale as its price rises and less as its price drops
philosophical origin from 18th central writings of Adam Smith (particularly the book The Wealth of Nations)
pure capitalism
market with supply & demand, and invisible hand (ensure production of goods society wants in quantities society wants it)
invisible hand
ensure production of goods society wants in quantities society wants it
mixed capitalism
wealth generated by individuals and businesses but an intercessionary government plays some role and include both a fiscal and monetary policy
fiscal policy
use of government revenue collection and spending
monetary policy
adjustments to nations money supply by increasing or decreasing interest rates
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
the three freedom of choices
– 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
the confrontation b/w two or more businesses vying for the same resources and consumers
pure competition
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
4 principles of pure competition
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
monopolistic competition
market situation in which sellers are able to achieve some measure of product differentiation through branding, advertising, creativity, quality improvements, service response time etc.
market situation featuring a finite number of large producers offering either similar products or dissimilar products
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
natural monopolies (examples)
electricity, natural gas
GNP (gross national product)
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*
real GNP
when GNP is adjusted for inflation and changes in the value of a countries currency
GDP (gross domestic product)
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*
a measure of economy growth that compares how much a system produces with the resources to produce it
total productivity equation
total productivity = output (goods & services produced) / input (human & natural resources, capital)
balance of trade
the difference between a country exports to and imports from other countries
positive balance of trade
generally considered favorable because new money flows into a country from the sales of its exports
negative balance
means that money is flowing out to pay for imports
national debt
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
strategic leadership approach
progression of dominant managerial logistics as the strategic drivers of the American business system
the production dominant managerial logic
– 1870 to 1900
– a period of industrialization and production
– believes that a product will sell itself
the financial dominant managerial logic
– 1900 to 1914
– deals with mergers and acquisitions
– finance was the driver of this period
the sales dominant managerial logic
– 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
the marketing dominant managerial logic
– 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)
the strategy dominant managerial logic
– 1970’s
– period of the coming of strategy (competitors were taken into consideration)
– there were technological, cultural, and societal changes
the meta-strategic dominant managerial logic
– 1990’s
– viral competition
– there are changes in the share of customer and market (greater does not always mean more profit)

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