Business Exam

Corporate Social Initiatives

: include enhances forms of corporate philantrophy directly, companies like UPS work to support humanitarian efforts by transporting support during natural disasters

National debt

: sum of government deficits over time

Productivity

:amount of output you generate given the amount of input(hours worked)

Technological environment

:information technology, efficiency, bar codes, databases, internet(all technology)

Demography

:statistical study of human population with regard to seize, density, other characteristics change affecting how people live and where they live

Forces affecting trading in Global markets

Sociocultural forces, economic and financial, Legal and Regulatory, Physical and Environmental

Comparative Advantage Theory

a country should sell to other countries those products it produces most effectively and efficiently and buy from other countries products it cannot produce as effectively and efficiently

Home based franchises advantages

no commuting extra time with family low overhead

LLC Disadvantages

no stock, fewer incentives, taxes, paperwork,

No tariff barriers

not as specific or formal as tariffs and import quotas but can be just as detrimental to free trade

Recovery

occurs when economy stabilizes and starts to grow

Acquisition

one company's purchase of the property and obligations of another company

Monopoly

one seller controls the total supply of a produce or service and sets the price(illegal in U.S.)

Multinational Corporation

one that manufacturers and market products in many different countries and has multinational stock ownership and management(type of FDI)

Multinational corporations

operate in several countries

Nonprofit organization

organization whose goals do not include making a personal profit for its owners or organizers

Cooperative(co-op)

owned and controlled by the people who use it-producers, consumers workers with similar needs who pool their resources for mutual gain

Cooperatives

owned and controlled by the people who use them.(farm coops, worldwide coops, members comtrol the business bu electing board of directors)

limited partner

owner who invests money in the business and does not have management responsibilities or liable for loses beyond teir investment

Conventional © Corporation

- state-chartered legal entity with authority to: have stock holders limits liability of owners enables many people to share in ownership

Franchising in Global Markets

-Canada is the most popular target for U.S.-based franchises. -Same advantages as in the U.S.: convenience and a predictable level of service and quality. -Adapting products and brand names to different countries creates challenges.

cooperatives:

-Some __________ ask members/customers to work at the organization for a number of hours a month as part of their duties -In rural areas electrical power is often sold by __________ that take advantage of the government's policy to sell them electricity at wholesale rates

A distinguishing feature of a cooperative is that

-is owned and operated by the people who use it.

the "second wave" of offshore outsourcing refers to:

-moving skilled service jobs such as those in accounting offshore.

Conglomerate merger

-unites firm in completely unrelated industries in order to diversify business operations and investments(softdrink company buys chip company, unrelated)

Five elements in the business environment

1 economic and legal, 2 technological, 3 competitive, 4social environment, 5global business

Benefits of International Joint Venture

1: shared technology and risk, 2:shared marketing and management expertise, 3: entry into markets where foreign companies are often not allowed unless goods are produced locally

Four phases of business cycle

Boom, recession, depression, recovery

Core inflation

CPI minus food and energy costs= core inflation

using technology in Franchises

Can extend a brand and benefit everyone. May include email, social media, a website.

Foreign Subsidiary

Common FDI,company owned in a foreign country by another company(parent company) company maintains complete control over enterprise it may possess

Social Environment

Demography,diversity, demographic changes, family changes

Responsibility to Investors

Ethical behavior doesn't subtract from the bottom line; it adds to it. Insider trading is an unethical means to improve a person's financial health. SEC Regulation FD (fair disclosure)

Which statement about farm cooperatives is most accurate?

Farm cooperatives have become a major force in American agriculture.

3 major indicators of economic conditions

Gross domestic product(GDP), unemployment rate, Price indexes

A company may chose to take a firm private:

Management or a group of stockholders obtains all the firm's stock by buying it back from the other stockholders

Situational absolutes

Many individuals today believe that ethical behavior is determined by what is best for them at the time. This is an example of

E -commerce in franchising

Most brick-and-mortar franchises have expanded online. -Many franchisors prohibit franchisee-sponsored sites because conflicts can erupt. Sometimes "reverse royalties" are sent to franchisees who believe their sales were hurt by the franchisor's site. Other franchises are solely based online.

Individuals can incorporate Corporations:

Normally do not issue stock to others. Do not share all the advantages and disadvantages of large corporations. Limited liability and tax benefits.

Disadvantages of Sole Proprietorship

Unlimited Liability, limited financial resource, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span

he decision of Nike to cancel orders from suppliers that violate its ethics code

Which event is an indication that U.S. businesses are demanding socially responsible behavior from their international suppliers

Corporation

a legal entity with authority to act and have liability apart from its owners

Benfit corporation

a mission-based company judged by how well it meets its own set of socially or environmentally beneficial goals.

S corporations

a unique government creation that looks like a cooperation but is taxed like sole proprietorships and partnerships -profits are taxed only as the personal income of ther shgareholders

Business

activity that seeks to provide tangible products(cars, clothes,food)

Master limited partnership(MLP)

acts like a corporation and is traded on the stock exchanges like a corporation but is taxed like a partnership and avoids corporate income tax

Corporate can fit into more than one category

alien corporations, domestic, doreign, closed(provate), open(public), Quasi-public, professional, nonprofit, multinational,

Global environment

all of the international factors that affect business(trade agreements, international economic conditions, war, climate change,terrorism)

Capitalism

all or most of the factors of production and distribution are owned by individuals operated for profit not by government officials (USA)

General PArtnership

all owners share in operating the business and in assuming liability for the business's debts

Standard of living

amount of goods and services people can buy with the money they have

Franchise agreement

an arrangement whereby someone with a good idea for a business(the franchisor) sells the rights to use the business name and sella product or service(the franchise) to others(the franchisees) in a given terretory

Leveraged Buyout(LBO)

an attempt by employees, management or a group of private investors to buy out the stockholders in a company, primarily by borrowing the necessary funds

Limited partner

an owner who invests money in the business but does not have any management responsibility or liability for losses beyond his or her investment

Stakeholders

are all the people who stand to gain or lose by the policies and activities of a business whose concerns the business needs to address(employees, customers, stockholders suppliers, dealers, bankers, media)

Quasi- public corporations

are chartered by the government as an approved monopoly to perform services to the general public(ex: public utilities)

Stockholders

are not liable for the debts or other problems of the corporation beyond the money they invest in it by buying ownership shares, or stock in company

Professional corporations

are owned by those who offer professional services(doctors,lawyers) shares in professional corporation aren't publicly traded

A franchise can be formed

as a corporation, partnership, or sole proprietorship.

Leverage

borrowing money or debt

Loss

business expenses are more than its revenues

Sole Properietorship

business owned and usually managed by one person

Foreign Direct Investment(FDI)

buying of permanent property and businesses in a foreign nations

Importing

buying products from another country

Risk

chance an entrepreneur takes of losing time and money on a business that may not be profitable

Corporate Philanthropy

charitable donations to nonprofit groups of all kinds

Embargo

complete ban on the import or export of a certain product, or stopping of all trade with particular country

Countertrading

complex from of bartering in which several countries each trade goods or services for other goods or services

Corporate Social RESPONSIBILITY(CSR)

concern businesses have for the welfare of society, not just the owners

Consumer price index(CPI)

consists of monthly statistic that measure the pace of inflation or deflation

Business environment

consists of the surrounding factors that either help or hinder the development of business

Franchising

contractual agreement whereby someone with a good idea for a business sells others the right to use the business name and sell a product or service in a given territory in a specified manner

Dimensions of COmpany's Social Performance

corporate of Philanthropy, social Initiatives, responsibility, Policy,

double taxatioon

corporations pay taxes on their profits. If they distribute after-tax profits to the stockholders, the stockholders also pay taxes on the distribution.

Economic and financial forces

countries differences can make it harder like their exchange rate, devaluation, countertrading, their currency

Responsibility to Employees

create jobs, treat them with respect, offer salaries and benefits to help them

North American Free Trade Agreement(NAFT)

created free trade among the U.S, Canada and MExico, ratified 1994

Central American Free Trade Agreement

created free trade zone with Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua , passed in 2005

Sociocultural forces

culture, social structures, religion, manners, every country has different cultural norms and rules

Competitive environment

customer service, stakeholder recognition, employee service, concern for the environment

Plagiarizing

cutting and pasting of info on internet or not giving credit

Unlimited Liability

debts or damages incurred by business are your debts and you must pay them

Integrity-based ethics codes

define the organization's guiding values, create an environment that supports ethically sound behavior, stress shared accountibility

Oligopoly

degree of competition where just a few sellers dominate a market(tobacco, gas, cars)

Revenue Tariffs

designed to raise money for the government

Market Price

determined by supply and demand, the price toward which the market will trend

Physical and Enviornmental Forces

developing countries have transportation and storage systems that make international distribution difficult or impossible, often technological capabilities are less than U.S.

net social contribution

difference between an organization's positive social contributions and its negative social impacts

Balance of Payments

difference between money coming into country(from exports) and money leaving the country(for imports) plus money flows coming into or leaving country from other factors(foreign aid, military, foreign investment)

People who form cooperatives

dislike the notion of having owners, managers, and customers as separate individuals with separate goals.

Foreign corporations

do business in one state but are chartered in another

Domestic corporation

do business in state in which they are chartered(incorporated)

Alien corporation

do business in the United States but are chartered(incorporated) in another country

Nonprofit organizations

don't seek personal profit for their owners

advantage of sole proprietorship

ease of starting and ending the business, being your own boss, pride of ownership, easiest kind of business, leaving a legacy, no special taxes, retention of company profits

Communism

economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production(china)

Socialism

economic system based on premise that some or most basic businesses should be owned by the government so that profits can be evenly distributed among the people(benefit, free education, free health care, social equality)

Economic boom

economy is booming

Stagflation

economy is slowing but prices are going up anyhow

NAFTA Objectives

eliminate trade barriers and facilitate cross-border movement of goods, promote conditions of fair competition, increase investment opportunities, provide effective protection and enforcement of intellectual property, establish a framework for further regional trade cooperation, improve working condition in north america

Compliance-based ethics codes

emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers

factors of Production

esource used to create wealth, land, labor,capital,entrepreneurship,knowledge

Command economics

exist when the government largely decides what goods and services will be produced, who gets them and how the economy will grow (socialism and communism)

Free-market economics

exist when the market largely determines what goods and services get produced who gets them and how the economy grows(Capitalism)

Mixed economies

exist where some allocation of resources is made by the market and some by the government( almost every system is somewhat a mixed economy)

Organization for economic corporation and development and transparency international

fight to end corruption and bribery in foreign markets and have had limited success

Contract Manufacturing

foreign company produces private-label goods to which a domestic company then attaches its own brand name or trademark

Types of Foreign Direct Investments:

foreign subsidiaries, multinational corporations, sovereign wealth funds.

Economic and legal environment

freedom of ownership contract laws, elimination of corruption, tradable currency, minimum taxes and regulations

ince the 1800s, the U.S. has evolved

from an agrarian economy to a manufacturing economy to a service-oriented economy.

Inflation

general rise in the price of goods and services over time(persistent increase in level of consumer prices or persistent decline in purchasing of money) Too many dollars chasing too few goods

General agreement on Tariffs and Trade(GATT)

global forum for reducing trade restrictions on goods, services, ideas and cultural programs

Responsibility to Society and the Enviornment

green movement emerged as concern about climate change, try to minimize carbon footprints, environmental efforts create job opportunity, environmental quality is public good

Limited Partnership

has one or more general partners and one or more limited partners

qualifications to be a S corporation

have no more than 100 shareholders, have shareholders that are individuals who are us citizens, have only one class of stock, service no more than 25% of income from passive sources(rents, interest,royalties)

Closed(private) corporations

have stock that is held by a few people and isn't available to the general public

Bartering

he exchange of merchandise or services for other merchandise or services without the exchange of money.

Price Index

help gauge the health of the economy by measuring the levls of inflation,deflation, disinflation, stagflation

Problme with conducting social Audit

how to determine what should be measured and how to calculate the effect on society.

Absolute Advantage

if a country can produce a specific product more efficiently than all other countries

Corporate Responsbility

includes everything that has to do with acting responsible for society, treating employees fairly and ethically

Disadvantages of corporations

initial cost, extensive paperwork, double taxation, two tax returns,size, difficulty of termination, possible conflict with stockholders and board of directors

Services

intangible products(education, travel, insurance) -make up 80% of us economy

Basic Moral values

integrity, respect for human life, self control, honesty, courage, self sacrifice

Soverign wealth funds(SWFs)

investment funds controlled by governments holding investment stakes in foreign companies

Ethical Dilemmas

is my action legal? Is it balanced? How will it make me feel about myself?

Home based franch disadvantages

isolation long hours

Vertical merger

joins two firms operating in different stages of related businesses(ex: softdrink company by sweetener company because sweetener goes into softdrink so related but different stages)

Five factors of production

land(natural resources), labor(workers), capital(machine, tools, buildings,etc), Entrepreneurship, Knowledge(information technology)

Monopolistic Competition

large number of sellers produce very similar products that buyers nevertheless perceive as different(hot dogs, soda,etc)

Disadvantages of Franchises

large start-up costs, shared profit, management regulation, coattail effects, restrictions on selling, fraudulent franchisors

Strategies for reaching Global Markets

licensing, Exporting, Franchising, Contract Manufacturing, international joint ventures, strategic alliances, foreign direct investment

Advantages of Corporations

limited liability, ability to raise more money for investment, size, perpetual life, ease of ownership change, ease of attracting talented employees, separation of ownership from management

LLC Advantages

limited liability, choice of taxation, flexible ownership rules, flexible distribution of profits and losses, operating flexibility,

Limited Liability Partnership(LLP)

limits partners' risk of losing their personal assets

Import quota

limits the number of products in certain categories a nation can import

Strategic Alliance

long-term partnership between two or more companies established to help each company build competitive market advantages

Microeconomics

looks at behavior of people and organizations in markets for particular product or service

Devaluation

lowers the value of nation's currency relative to others

Reasons for business to act ethically

maintain good reputation, avoid lawsuits, keep existing customers, avoid government intervention, do right thing

Advantages of Franchises

management and marketing assistance, personal ownership, nationally recognized name, financial advice and assitance, lower failure rate,

Monetary Policy

management of money supply and interest rates by the Federal reserve Bank(keep economy growing)

Taking a firm Private

management or a group of stockholders obtains all the firm's stock for themselves by buying to back from other stockholders

Producer Price INdex(PPI)

measures change in prices at the wholesale level

World Trade Organization(WTO)

mediates trade disputes among nations oversee cross-border trade issues and global business practices

Profit

money a business earns above and beyond the money that it spends for salaries and expenses

Advantages of Partnerships

more financial resources, shared management, pooled skills and knowledge, longer survival, no special taxes

Free Trade

movement of goods and services among nations without political or economic barriers(pros: productivity and innovation grows, global competition and lower costs)(cons: domestic workers lose jobs, pay cuts for workers, moving operations overseas)

Joint Venture

partnership in which two or more companies(usually different countries) join to undertake a major project

franchiser

people selling their idea

Unemployment rate

percentage of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks

Business Cycle

periodic rises and falls that occur in economics over time

Franchisee

person buying the idea from teh franchiser

Entrepreneur

person who risks time and money to start and manage a business

Corporate Policy

position a firm takes on social and political issues. Ex:patagonia's statement donating part of their sales to environmental groups

Disinflation

price increases are slowing, inflation rate is declining

Deflation

prices are declining

OUtsourcing

process whereby one firm contracts with other companies, often in other countries to do some or all of its functions

Pros and cons of outsourcing

pros:less strategic tasks can be outsourced globally, allows companies to create efficiencies, consumers benefit from lower prices Cons: jobs may be lost and wages lowered, may reduce product quality and can damage company reputation, communication with suppliers and customers becomes more difficult

Supply

quantities of products manufacturers or owners are willing to sell at different prices at a specific time

Demand

quantity of products that people are willing to buy at different prices at a specific time

Protective tariffs (import taxes)

raise retail price of imported products so that domestic goods are more competitively priced

Fiscal policy

refers to federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending(stabilizing economy)

Common Market(trading bloc)

regional group of countries with a common external tariff, no internal tariffs, ad coordinated laws to facilitate exchange among members

Merger

result of two firms joining to form one company

Licensing

right to manufacture its products or use its trademark to a foreign company(the license) for a fee(a royality)

Four basic rights under Free market capitalism

right to own private property, right to own a business and keep all its profits(after taxes), freedom of competition, freedom of choice

Responsibility to Customers

right to safety, right to be informed, right to choose, right to be heard

Open(public) incorporations

sell stock to the general public(ex general motors)

Dumping

selling products in a foreign country at lower prices than those charged in the producing country(used to reduce surplus of products in foreign markets and gain foothold in new market)

exporting

selling products to another country

DEpression

severe recession, usually accompanied by deflation

General partner

shared common ownership, shared profits and loses, right to participate in managing business operations

Limited Liability Company(LLC)

similar to s corp but without the special eligibility requirements

Watch dogs

socially conscious groups that make it their mission to measure the social responsibility levels of businesses, and provide consumers with their opinions about the level of corporate responsibility of various companies.

Five types of Watchdogs

socially conscious investors, socially conscious research organizations, environmentalists, union officials, customers

Ethics

society's accepted standards of moral behavior, behaviors accepted by society as right than wrong

Horizontal merger

soft drink company buys water company, same stage related business

Resource development

study if how to increase resources and create conditions that will make better use of them (like taking fish farming and recycling)

Economics

study of how society chooses toe employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals

Social Audit

systematic evaluation of an organization's progress toward implementing socially responsible and responsive programs difficult to establish procedure for measuring companies activities and effort to society, watchdogs

goods

tangible products(foods,cars)

Brain Drain

tax rates on well-respected professionals such as doctors tend to be very high since much of income is to government through taxes

Sole Properietorships are taxed how

taxed at the owners personal rate, must pay self emplyment taxes

Tariffs

taxes on imports making imported goods more expensive to buy

Limited Liability

the limited partners' liability for the debts of the business is limited to the amount they put into the company; their personal assets are not at risk

Keynesian economic theory

theory that government policy of increasing spending and cutting taxes would stimulate the economy in a recession(lower taxes give economy boost)

Perfect Competition

there are many sellers in a market and none is large enough to dictate the price of a product

Legal and regulatory Forces

there is no global system of laws, laws may be inconsistent, us businesses must follow laws while conducting global business, corruption may occur in other countries

Six Steps can improve U.S. Business ethics

top management adopt support corporate code of conduct, employees understand ethical expectations, managers trained to consider ethical implications in business decisions, ethics office set up whistleblowers, outsiders must be told ethics program, ethics code must be enforced with timely action

Revenue

total amount of money business takes in during a given period by selling goods and services

Gross domestic product(GDP)

total value of final goods and services produced in country in a given year

Balance of trade

total value of nation's exports compared to its imports measured over a particular period

Recession

two or more consecutive quarters of decline in the GDP

Disadvantages of Partnership

unlimited liability, division of profits, disagreements among partners,difficulty of termination

Trade Protectionism

use of government regulations to limit the import of goods and services(some country use it when wary of foreign competition)

Bylaw

used by corporations-a legal document setting forth key rules and regulations governing the corporation's day-to-day operations.

Invisible Hand

used to describe the process that turns self-directed gain into social and economic benefit for all

Insider Trading

uses private company information to further insider's own fortunes or those of their family and friends

Exchange Rate

value of one nation;s currency relative to the currency of other countries

Partnership

when two or more people legally agree to become co-owners of a business

Trade surplus(favaorable balance of trade)

when value of a country's exports exceeds that of its imports

Trade deficit(unfavorable balance)

when value of a country;s exports is less than its imports

Equillibirum point

where quantity demanded and supplied are equal