Exam 1 Study Sheet - BUSA 120: Introduction to Business

outsourcing

(also contract manufacturing) Contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production.

direct investment

(or foreign direct investment) When firms either acquire foreign firms or develop new facilities from the ground up in foreign countries.

contraction

- A period of economic downturn, marked by rising unemployment and falling business production.

What does the World Trade Organization (WTO) do?

- A permanent global institution to promote international trade and to settle international trade disputes. - The WTO monitors provisions of the GATT agreements, promotes the further reduction of trade barriers, and mediates disputes among members.

depression

- An especially deep and long-lasting recession

How do you define a business?

- Any organization or activity that provides goods and services in an effort to earn a profit

What happened economically during periods 1930 to 1980?

- Domestic Economic Growth - Economic depression - Factories manufacture war goods - Post-war economic boom - Cold War spurs global aid and trade

What point does the excludability and rivalry matrix make about public, private, and voluntary sectors?

- Excludable goods are private goods, while non-excludable goods are public goods. A rival good is a type of excludable good because it can only be possessed or consumed by a single user. - The 'voluntary sector' refers to organizations whose primary purpose is to create social impact rather than profit. It is often called the third sector, civil society or the not-for-profit sector.

fiscal policy

- Fiscal policy refers to government efforts to influence the economy through taxation and spending decisions that are designed to encourage growth, boost employment, and curb inflation. - (tax and spending policies of the federal government) tax cuts and increased government spending

What is the role of leaders in setting and enforcing ethics?

- For better or for worse, leaders in organizations hold the power to guide the ethical behavior of employees—by establishing standards, modeling (setting a good example), and enforcing consequences - A formal, written document that defines the ethical standards of an organization and gives employees the information they need to make ethical decisions across a range of situations.

Who is the Prime Minister of Canada and the President of Mexico?

- Justin Trudeau - Andrés Manuel López Obrador

monetary policy

- Monetary policy refers to actions that shape the economy by influencing interest rates and the supply of money. - interest rates, supply of money- Federal Reserve

What problems emerged during the big business era?

- Overproduction - Management of large scale organizations - Social problems

Who was Robert Owen and what were his ideas and efforts?

- Scottish mill owner - Coined the term "socialism" - Eradicate poverty through education and mutual cooperation using industrialization in agriculture and manufacturing, rather than individual competition - Socialism would create a new person - Inspired plans for 500 intentional communities in the UK by 1835

Who was Adam Smith and what was the Wealth of Nations (1776) about?

- Scottish philosopher - Large firms hamper competition - Wealth will cause capitalism to slow - Competition is a moral force Assumptions - Newtonian mechanism and harmony - Enlightenment reason Laissez-faire - "Let do," allow events to take their course with minimal government intervention Invisible Hand - Self-interest promotes socially desirable products, prices, and behavior

Culture shock (skill #2)

- Talk with international students - Look at maps, the Web, videos - Explore and connect while traveling - Learn a language - Take an international course

What is profit

- The money that a business earns in sales (or revenue), minus expenses, such as the cost of goods, and the cost of salaries. Revenue 2 Expenses 5 Profit (or Loss).

Describe what business cycles are

- The periodic contraction and expansion that occur over time in virtually every economy. - no one can accurately predict when changes will occur or how long they will last.

What are the qualities of ethical dilemmas

- There is a right and wrong choice. In an ethical dilemma, you must decide between doing the right thing and the wrong thing. - Someone (or something) could be hurt. In an ethical dilemma, someone or something could be harmed if the wrong decision is made. - They often deal with what's legal.

What is loss?

- When a business incurs expenses that are greater than its revenue.

What are horizontal and vertical integration?

- acquire competitors - acquire supply chain Horizontal integration is when a business grows by acquiring a similar company in their industry at the same point of the supply chain. Vertical integration is when a business expands by acquiring another company that operates before or after them in the supply chain.

What is hyperinflation?

- an average monthly inflation rate of more than 50%

How companies address environmental uncertainty

- anticipating - absorbing - enduring - influencing - adapting

Know how to interpret a supply and demand chart and how to apply it to a real-life scenario

- go over examples

monopolies

- market structure with just a single producer completely dominating industry - where laws prohibit (or severely limit) competition.

What do the example of Switzerland's economy, government, and culture illustrate?

- market: A medium that allows buyers and sellers of a specific good or service to interact in order to facilitate an exchange Switzerland is a modern market economy with low unemployment, a highly skilled labor force, and a per capita GDP among the highest in the world

natural monopolies

- monopoly government allows when it would be too inefficient for each competitor to build its own infrastructure - allowed in the US - where the barriers to entry are something other than legal prohibition.

The macroenvironment: PEST-N

- political - economics - social/ demographic - technology - natural resources

Know the laws of supply and demand

- price: up - supply (producers) : up - demand (consumers) : down above equilibrium: surplus below equilibrium: shortage

Microeconomics

- the study of how households and firms make decisions and how they interact in markets - (individual firm) individual consumers, families, and individual businesses

Macroeconomics

- the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth -(economy as a whole) employment rate, gross domestic product, and taxation policies

What historical eras does the chapter identify?

-Industrial Revolution: -Entrepreneurship Era: -Production Era: Most products were purchased as soon as they were produced and distributed to consumers. In this context, the top business priority was to produce large quantities of goods as efficiently as possible. -Marketing Era: Many factories that had churned out military supplies converted to consumer production, flooding the market with choices in virtually every product category -Relationship Era: The marketing concept has gathered momentum across the economy, leading to the current era, unfolding over the last decade, which zeros in on long-term customer relationships. -Selling Era: Supply in many categories exceeded demand, which caused the emergence of the hard sell.

Describe the four causes of growth in the US economy from 1860 to 1930

-Inventions -Labor: (Immigration & Movement to cities) - Canals - Railroads - Telegraph - Large land area - Vast natural resources - Plentiful and cheap energy sources - Big Business - Industries - Railroads - Manufacturing - Oil - Automobiles - Vertical integration - Horizontal integration

corporate social responsibility

-The obligation of a business to contribute to society. - recommends that companies measure their success by evaluating a "double bottom line," one that accounts for traditional financial indicators, such as earnings, and one that accounts for social-responsibility indicators, such as community involvement. Business contributions to the community through the actions of the business itself rather than donations of money and time.

monopolistic competition

-market structure with many competitors selling differentiated products -producers have some control over prices, depending on the value they offer to consumers -new producers easily enter -successful product usually attracts new suppliers quickly

pure competition

-market structure with many competitors selling virtually identical products -new producers easily leave and enter the market -customers can't distinguish one product from another -no single producer has control over price

oligopolies

-market structure with only handful of competitors selling products that can be similar or different -ex. retail, gasoline, car manufacturing -tough market because it requires huge upfront investment

Briefly describe the Jacksonian era

1815-1846 An agrarian economy, businesses were financed by single investors or a few partners. Manufacturing and retail shops were small. Owners ran and knew their operations. Businesses were local and their practices—hiring, training, loans, credit—were informal.

balance of trade

A basic measure of the difference in value between a nation's exports and imports, including both goods and services.

embargoes

A complete ban on international trade of a certain item, or a total halt in trade with a particular nation.

balance of payments

A measure of the total flow of money into or out of a country.

How do exchange rates work?

A measurement of the value of one nation's currency relative to the currency of other nations.

foreign franchising

A specialized type of foreign licensing in which a firm expands by offering businesses in other countries the right to produce and market its products according to specific operating requirements

partnership

A voluntary agreement under which two or more people act as co-owners of a business for profit.

corporate philanthropy

All business donations to nonprofit groups, including money, products, and employee time

- Common good approaches

Although both are good, terminal goods (e.g., human well-being) are more important than instrumental goods (e.g., profit)

strategic alliance

An agreement between two or more firms to jointly pursue a specific opportunity without actually merging their businesses. Strategic alliances typically involve less formal, less encompassing agreements than partnerships.

Recession

An economic downturn marked by a decrease in the GDP for two consecutive quarters.

What is capitalism and how does it differ and build on markets?

An economic system emphasizing private ownership and decision-making Allocation through prices and exchange Fair competition supported by Legitimate government and rule of law Property rights Free trade

Identifying culturally-sensitive business disciplines

Authenticity challenge > Guilt Competence challenge > Anxiety Resentment challenge > Anger Comfort challenge > Discomfort

licensing

Authority granted by a domestic firm to a foreign firm for the rights to produce and market its product or to use its trademark/patent rights in a defined geographical area.

importing

Buying products domestically that have been produced or grown in foreign nations.

What are examples of other economic systems besides capitalism and socialism?

Capitalism. Communism. Socialism. Feudalism. Distributism. Statism. Fascist socialization. Hydraulic despotism.

Steps in adapting effectively to an international business culture (skill #1)

Diagnose the cultural code Identify your own personal challenges Adjust your behavior (within range) Practice and ask for feedback

sustainable development

Doing business to meet the needs of the current generation, without harming the ability of future generations to meet their needs.

What is the role of profit in a business?

Earning a profit is important to a small business because profitability impacts whether a company can secure financing from a bank, attract investors to fund its operations and grow its business. Companies cannot remain in business without turning a profit

Does following the law ensure ethical behavior? If not, what does ethics add to law?

Ethics provides us with guides on what is the right thing to do in all aspects of life, while the law generally provides more specific rules so that societies and their institutions can be maintained.

supply and demand graph

Excess supply is any point above the equilibrium point, Excess demand is any point below

- Shareholder

Firm value maximizationMaximize financial value for the owners Examples: Equity, firm value, the stock price Reason: Stewards of the owners' money

What happened economically from 1980 to the present?

Globalization - Japan - EU and Eurozone - China - Global climate change - Global south

What are three benefits that historical awareness provides?

Heritage Explanation Comparison

Bilateral and multilateral trade agreements (e.g., USCMA)

Multilateral agreements: A multilateral agreement is a commerce treaty between three or more nations. • US-Mexico-Canada Agreement (USMCA) • Central American Free Trade Agreement (CAFTA) A bilateral agreement (or what is sometimes referred to as a "side deal") is a broad term used simply to cover agreements between two parties. • Car sales agreement

protectionism

National policies designed to restrict international trade, usually with the goal of protecting domestic businesses.

What are the factors of production?

Natural Resources: This factor includes all inputs that offer value in their natural state, such as land, fresh water, wind, and mineral deposits. Capital: This factor includes machines, tools, buildings, information, and technology—the synthetic resources that a business needs to produce goods or services. Human Resources: This factor encompasses the physical, intellectual, and creative contributions of everyone who works within an economy Entrepreneurship: Entrepreneurs are people who take the risk of launching and operating their own businesses, largely in response to the profit incentive.

trade surplus

Overage that occurs when the total value of a nation's exports is higher than the total value of its imports

What is virtue ethics?

Person-Centered: Virtue ethics is person rather than action based: it looks at the virtue or moral character of the person carrying out an action -Trustworthy -Honest-Helpful -Courageous -Self-controlled -Patient

exporting

Selling products in foreign nations that have been produced or grown domestically.

trade deficit

Shortfall that occurs when the total value of a nation's imports is higher than the total value of its exports.

socialism

Socialism is an economic system based on the principle that the government should own and operate key enterprises that directly affect public welfare, such as utilities, telecommunications, and healthcare.

- Stakeholder

Stakeholder interest maximization Examples: Employees, customers, the community Reason: Responsibility to anyone who might affect or be affected by the firm

tariffs

Taxes levied against imports.

What are the functions of the US Federal Reserve Bank? What is its relationship to the US government?

The Federal Reserve acts as the U.S. central bank, and in that role performs three primary functions: maintaining an effective, reliable payment system; supervising and regulating bank operations; and establishing monetary policies.

what is value

The relationship between the price of a good or a service and the benefits that it offers its customers.

joint ventures

When two or more companies join forces— sharing resources, risks, and profits, but not actually merging companies—to pursue specific opportunities.

The competitive environment: Michael Porter's Five Forces

Within a competitive Environment -Market competitors -Threat of new entrants -Customer power -Threat of substitutes -Supplier power

recovery

a period of rising economic growth and increasing employment following a contraction

economic expansion

a period of robust economic growth and high employment

capitalism

an economic system- also known as the private enterprise or free-market system- based on private ownership, economic freedom, and fair competition

law of demand

quantity of a good demanded falls as price rises and vice versa

The four types of environmental change (seasonal, etc.)

seasonal/ cyclical erratic indirect

law of supply

the quantity of a good supplied rises as the market price rises and falls as market price falls