Business Test 1
Sole Proprietorship
A business that is owned, and usually managed, by one person.
Mixed economies
Some allocation of resources is made by the market and some by the government. economy tends to be called what it most resembles.
Corporate Social Responsibility
a business's concern for society's welfare
Foreign subsidiary
a company owned in a foreign country by another company, called the parent company
Advantages of home based franchises
no commuting, extra time for family, low overhead
Disadvantages of Limited Liability Company
no stock, limited life span, fewer incentives, taxes, paperwork
Outsourcing
operating out of a different country
Competitors
others that can meet buyer needs (Adidas)
Merger
the result of two firms forming one company
Responsibility to customers
the right to safety, the right to be informed, the right to choose, the right to be heard
Franchise
the right to use a specific business's name and sell its products or services in a given territory
Balance of trade
the total value of a nation's exports compared to its imports measured over a particular period
Gross Domestic Product (GDP)
the total value of final goods and services produced in a country in a given year
Exchange rate
the value of one nation's currency relative to the currencies of other countries
Business
- an activity that seeks to provide goods and services to others while operating at a profit - once you determine what consumers want and need, you need to reach them using media
The Business Cycle 4 phases
1. Economic boom- business is booming 2. Recession- high unemployment, increased business failures, drop in living standards 3. Depression- only one in 1930 4. Recovery- leads to an economic boom
Disadvantages of corporations
1. Initial cost 2. Extensive paperwork 3. Double taxation 4. Two tax returns 5. Size 6. Difficulty of termination 7. Possible conflict with stockholders and board of directors
Advantages of corporations
1. Limited liability 2. Ability to raise more money for investment 3. Size 4. Perpetual life 5. Ease of ownership change 6. Ease of attracting talented employees 7. Separation of ownership from management
Some basic business functions
1. Planning 2. Production 3. Operations 4. Risk management 5. Quality Control 6. Marketing 7. Sales 8. Purchasing 9. Human Resources 10. Accounting 11. Finance 12. Research/Development 13. Distribution/logistics
Ethical dilemmas
1. is my proposed action legal 2. is it balanced 3. how will it make me feel about myself
Five elements in the business environment
1. the economic and legal environment 2. the technological environment 3. the competitive environment 4. the social environment 5. the global business environment
Franchisor
A company that develops a product concept and sells others the rights to make and sell the products.
Franchising
A contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product/service in a given area.
The economic and legal environment
A country's economic system and laws can have a strong impact on level of risk. Private ownership of business. The legal system. Ex: freedom of ownership, contract laws, elimination of corruption, tradable currency, minimum taxes and regulations
Oligopoly
A degree of competition in which just a few sellers dominate the market
Trade surplus
A favorable balance of trade; occurs when the value of a country's exports exceeds that of its imports.
Contract manufacturing
A foreign country's production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing.
Licensing
A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty).
Strategic alliance
A long-term partnership between two or more companies established to help each company build competitive market advantages.
Joint venture
A partnership in which two or more companies (often from different countries) join to undertake a major project.
Master Limited Partnership (MLP)
A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax.
Limited partnership
A partnership with one or more general partners and one or more limited partners. Has general partners and limited partners who have limited liability.
Franchisee
A person who buys a franchise
Deflation
A situation in which prices are declining
Stagflation
A situation when the economy is slowing but prices are going up anyhow.
S Corporations
A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships. Profits are taxed only as the personal income of the shareholders. Have no more than 100 shareholders, have shareholders that are individuals or estates, and who are citizens or permanent residents of US, have only one class of stock, derive no more than 25% of income from passive sources
Producer Price Index (PPI)
An index that measures prices at the wholesale level.
Multinational corporation
An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management
Trade deficit
An unfavorable balance of trade; occurs when the value of a country's imports exceeds that of its exports.
Core inflation
CPI minus food and energy costs
The technological environment
Can make businesses more effective and efficient. Ex: information technology, databases, bar codes, the internet
The competitive environment
Companies need high quality products and services at competitive prices. Companies must understand their customers wants and needs. Companies need strong relationships with suppliers. Companies must differentiate themselves. Ex: customer service, stakeholders recognition, employee service, concern for the environment
Resource development
Creating new ways to produce goods and creating conditions to make better use of them. Ex: recycling
Disadvantages of home based franchises
Isolation Long hours
The global environment
It surrounds all of the other environmental influences. Ex: trade agreements, international economic conditions, war and terrorism, climate change
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, Joint venture, Strategic alliances, Foreign direct investment.
Advantages of Limited Liability Company
Limited liability Choice of taxation Flexible ownership rules Flexible distribution of profits and losses Operating flexibility
Advantages of franchises
Management and marketing assistance Personal ownership Nationally recognized name Financial advice and assistance Lower failure rate
Advantages of partnerships
More financial resources Shared management and pooled/complementary skills and knowledge Longer survival No special taxes
Limited Liability Companies
No special eligibility requirements
Acquisition
One company's purchase of the property and obligations of another company.
The board
Owners have an influence on how a business is managed by electing a board of directors. The board hires the top officers and fires them if necessary. It also sets the pay for those officers. The officers then select managers and employees with the help of the human resource department. They can fire people who started the business if necessary.
Absolute advantage
The advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.
Balance of payments
The difference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment.
Fiscal policy
The federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending.
The social environment
The population's demography impacts buying patterns. Ex: diversity, demographic changes, family changes
MY COMPANY
Walt Disney Co. Entertainment industry. Brands/products: Star Wars, The Muppets, the marvel cinematic universe, Disney princesses, pirates of the Caribbean, Pixar films, Winnie the pooh, Indiana jones, Disney plus, Walt Disney world, Disney land, National Geographic, etc. Walt Disney Co. is aimed to entertain, inform, and inspire people to tell their stories and go on adventures through their movies, parks, books, and shows. Disney is aimed at children and aims to make the kids happy. Their adventures like cruises, and entertainment media is what makes them so special like the characters and events they do. World's leading licensing business
Macroeconomics
What should the US do to lower its national debt? includes gross domestic product (GDP), unemployment rate, and price indexes
Microeconomics
Why do people buy smaller cars when gas prices go up?
Cooperative (co-op)
a business owned and controlled by the people who use it - producers, consumers, or workers with similar needs who pool their resources for mutual gain
Monopoly
a degree of competition in which only one seller controls the total supply of a product or service, and sets the price
Inflation
a general rise in the prices of goods and services over time
Corporation
a legal entity with authority to act and have liability apart from its owners
Partnership
a legal form of business with two or more owners
General partnership
a partnership in which all owners share in operating the business and in assuming liability for the business's debts
Limited Liability Company (LLC)
a partnership that limits partners' risk of losing their personal assets to only their own acts and the omissions and to the acts and omissions of people under their supervision
Disinflation
a situation in which price increases are slowing (the inflation rate is declining)
Company
a specific commercial business (Nike)
Social auditing
a systematic evaluation of an organization's progress toward implementing socially responsible and responsive programs
Marketing
advertising, media, promotion, pricing product, distributing product, how will my customers access the product, what are you trying to do and how do you get there
Productivity
amount of output generated vs amount of input
Franchise agreement
an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory
Leveraged Buyout (LBO)
an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing
Communism
an economic and political system in which the government makes almost all economic decisions and owns almost all thee major factors of production.
Insider trading
an unethical activity in which insiders use private company information to further their own fortunes or those of their family and friends
Stakeholders
anyone who gains or loses from the business's policies ex: customers, employees, stockholders, suppliers, dealers, bankers, people in the surrounding community, the media, environmentalists, competitors, unions, critics, and elected government leaders
Quality Control
are we going to sample everything? sample from the products and make sure they are correct
Socialism
benefit: more social equality (free education, health care, child care). takes away people's incentives - leads to brain drain. tends to result in fewer inventions and less innovation
Invisible hand
business owners are motivated to work hard because they know they will earn and keep the rewards of their labor
Free-market capitalism
businesses operated for profit, businesspeople make all decisions. gov may. determine minimum wages, farm prices, and lend money to businesses. 4 rights: the right to own property, the right to own a business and keep the profits, the right to freedom of competition, the right of freedom of choice
Importing
buying products from another country
Free-market economies
capitalism
Forces affecting trading in global markets
countries economic differences can muddy the water, exchange rate: high value of dollar means a dollar is trading for more foreign currency than previously. floating exchange rates: float in value accounting to supply and demand. devaluation: lowers the value of a nations currency relative to others. counter trading: accounts for over 20% of all global exchanges
Responsibility to employees
creates jobs and provide a chance for upward mobility, treat employees with respect, offer salaries and benefits that help employees reach their personal goals, employee fraud costs US businesses about 5% of annual revenue and causes 30% of all business failures
Industry
distinct group of enterprises (footwear)
Research/development
do you understand your customers
Entrepreneurs
earn money for themselves by taking risks, they employ others, they pay taxes and help their communities
Advantages of Sole Proprietorship
ease of starting and ending the business, being your own boss, pride of ownership, leaving a legacy, retention of company profits, no special taxes
Corporate social initiatives
enhanced forms of corporate philanthropy directly related to the company's competencies
Integrity based ethics codes
ethical standards that define the organization's guiding values, create an environment that supports ethically sound behavior, and stress a shared accountability among employees
Compliance based ethics codes
ethical standards that emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers
Purchasing
ex: hospital like what all the have to purchase to make it run
Production
factories, produce things, make sure we get what customers need
Licensing benefits
getting help with distribution, promotion, and consulting. gaining revenues it wouldn't have otherwise generated. spending little or no money to produce or market its products. offers the right to trademark, patent, trade secret or other term of intellectual property in return for a royalty or fee.
Keynesian theory
government policy of increasing spending and cutting taxes that could stimulate the economy in a recession
Conventional corporations
has stockholders, limited liability of owners, enables many people to share in ownership
Planning
have a sense of where you are going and strategies, what is going on in the company
Licensing drawbacks
if a product experiences remarkable growth in the foreign market, the bulk of the revenues belong to the licensee. the licensing firm is selling its expertise and trade secrets
Intrapreneur
inside the company a person comes up with an idea for that company
Sovereign Wealth Funds (SWFs)
investment funds controlled by governments holding large stakes in foreign companies
5 factors of production
land labor capital entrepreneurship knowledge
Operations
like what happens to operate a university
Risk Management
look at what risks there are and how to manage them
Exporting
manufacturing in one country, sell in another country. least number of changes in product and organization and less local employment in home country. competition may be less in another country
Consumer prices index (CPI)
monthly statistics that measure the pace of inflation or deflation
Foreign Direct Investment (FDI)
most common is foreign subsidiary. the buying of permanent property and businesses in foreign nations. primary advantage: parent company maintains control over its technology or expertise. primary disadvantage: must commit funds and technology within foreign boundaries
Market price
price toward which the market will trend
Demand
qualities of goods and services people are willing to buy at a given price
Accounting
record what you are doing, record in a positive way, planning
Others
regulators, donors if non-profit, etc.)
YOU
role you play as part of a company
Dumping
selling products in a foreign country at lower prices than those charged in the producing country
Joint ventures benefits
shared technology and risk, shared marketing and management expertise, entry into markets where foreign companies are often not allowed unless goods are produced locally
Command economies
socialism (everyone is equal, free childcare and healthcare) and communism
Ethics
standards of moral behavior, that is, behavior accepted by society as right versus wrong
Joint ventures drawbacks
stolen or obsolete technology, becoming too large to be flexible
Distribution/logistics
supply to distribute who is going to assemble
Supply and demand
the amount supplied will increase as the price increases because sellers can make more money with a higher price. the quantity demanded will increase as the price decreases.
Risk
the chance an entrepreneur or business takes of losing time and money on a business that may not prove profitable.
Monopolistic competition
the degree of competition in which a large number of sellers produce very similar products that buyers nevertheless perceive as different
Perfect competition
the degree of competition in which there are many sellers in a market and none is large enough to dictate the price of a product
Corporate philanthropy
the dimension of social responsibility that includes charitable donations
Corporate responsibility
the dimension of social responsibility that includes everything from hiring minority workers to making safe products
Corporate policy
the dimension of social responsibility that refers to the position a firm takes on social and political issues
Responsibility to society and the environment
the green movement emerged as concern about climate change increased, many companies are. trying to minimize their carbon footprints, environmental efforts may increase costs but can create new job opportunities, environmental quality is a public good
Conglomerate merger
the joining of firms in completely unrelated industries
Vertical merger
the joining of two companies involved in different stages of related businesses
Horizontal merger
the joining of two firms in the same industry
Free trade
the movement of goods and services among nations without political or economic barriers
Unemployment rate
the number of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks
Nonprofit organizations
their financial gains are used to meet their goals, not for personal profit. ex: public schools, civic associations, charities , etc.
Comparative advantage theory
theory that states that a country should sell to other countries those products that it produces most effectively and efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently
Balancing such demands is a major role of business managers
there is a diagram that explains how you need to balance all the people involved in a business
Buyers/customers
those buying your products
Suppliers
those providing products/services to meet your business needs
Human Resources
training, recruiting, how do we keep employees, evaluate employees
True or false: Businesses take in revenue in order to gain a profit while avoiding a loss
true, if a business loses money over time, it will close and put people out of work.
Disadvantages of partnerships
unlimited liability, division of profits, disagreements among partners, difficulty of termination
Disadvantages of Sole Proprietorship
unlimited liability- risk of personal losses, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span
Standard of living
varies in different countries, affected by the level of taxation and regulation
