BCOR 199: ch 1, 2, and 3

What is a trade deficit?

Also known as "unfavorable balance of trade", it occurs when the value of a country's exports is less than its imports.

What is a trade surplus?

Also known as a "favorable balance of trade", it occurs when the value of a country's exports exceeds that of its imports

What two factors are putting skilled people out of work?

Global competition and improved technology

What is fiscal policy?

The federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending.

What is the equilibrium point?

The place where quantity demanded and quantity supplied meet

What is outsourcing?

The process where one firm contacts with the other countries, often in other countries, to do some or all of their functions

What are the factors of production?

The resources used to create wealth such as land, labor, capital entrepreneurship, and knowledge

What is the fastest-growing industry?

The service industries in law, health, telecommunications, entertainment, and finance. Services remains the largest area of growth as it makes up 80% of the US economy.

What are the advanatages of contract manufacturing?

+ Experiment in new market, low start-up costs, low labor costs

What are benefits of socialism? What are the drawbacks?

+ More social equality, free education through college, free health care, and free childcare - many creative thinkers leave the country (brain drain), fewer inventions, and less innovation

What are the benefits of capitalism? What are the drawbacks?

+ People are willing to take more risks, open competition, high quality products and good service - Income inequality

What are the benefits and drawbacks of a subsidiary?

+ company maintains complete control over any tech or expertise - need to commit funds and technology within foreign boundaries

What are the advantages of licensing? What are the drawbacks?

+ gain more revenue, licensors spend little or no money to produce and market their products - a licensee may break the agreement and being a competition

What are benefits of franchising? What are some drawbacks?

+ larger market, more revenue - must be careful to avoid offending, can affect reputation

What are the advantages of a joint venture?

+ shared tech and risk, shared marketing and management expertise - one partner may steal information, conflict between partners

What are stakeholders?

All the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address

What are the five elements in the business enviorment?

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

What are the 5 groups that serve as watchdogs to monitor how well companies enforce CSR?

1. socially conscious investors 2. socially conscious research organizations 3. environmentalists 4. union officials 5. customers

What are the tools of fiscal policy?

1. taxation 2. government spending on defense, social programs, education, infrastructure, (etc.)

What are the 6 steps to improve US business ethics?

1. top management must adopt and support 2. employees must understand that expectations begin at the top 3. managers and others must be trained to always consider the ethics in a business decision 4. ethics office must be set up where employees can communicate anonymously 5. outsiders must be told about these ethics 6. the ethics code must be enforced quickly

What is a foreign subsidiary?

A company owned in a foreign country by another company, called the "parent company". It operates like a domestic firm and must observe the legal requirements of both the home and host country.

What is an embargo?

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

What is franchising?

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

What is absolute advantage?

A country has this if it can produce a specific product more efficiently than all other countries. This cannot last forever as global competition causes absolute advantages to fade.

What is comparative advantage theory?

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

What is oligopoly?

A degree of competition in which just a few sellers dominate in market, as we see in tobacco, gasoline, automobiles, aluminum, and aircraft.

What is licensing?

A firm may decide to compete in a global market by licensing the right to manufacture its product or use its trademark to a foreign company (the licensee) for a fee (royalty). A company with an interest in licensing generally sends company representatives to the foreign company to help set up operations.

What is contract manufacturing?

A foreign country produces private-label goods in which a domestic company then attaches its own brand name or trademark.

What is the General Agreement on Tariffs and Trade (GATT)?

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

What is monopolistic competition?

A large number of sellers produce many similar products that buyers nevertheless perceive as different, such as hot dogs, sodas, personal computers, and T-shirts

What is a strategic alliance?

A long-term partnership between two or more companies established to help each company build competitive market advantages. They do not share costs, risks, management, or even profts.

What is a joint venture?

A partnership in which two or more companies join to undertake a major project

What is an entrepreneur?

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

What makes a product green?

A product's carbon footprint (the amount of carbon released during production, distribution, consumption, and disposal)

What is a common market?

A regional group of countries with a common external tariff, no internal tariffs, coordinated laws to facilitate exchange among members. The European Union is an example of a common market.

What is a social audit?

A systematic evaluation of an organization's progress toward implementing socially responsible and responsive programs

What are physical and environmental forces?

Affect a company's ability to conduct global businesses. For example, unclean water and primitive transportation/ storage systems.

What is free-market capitalism?

All or most of the factors of production and distribution are owned by individuals. They are operated for profit, and businesspeople, not government officials, decide what to produce and how much, what to charge, and how much to pay workers.

What is communism?

An economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production. It intrudes further into the lives of people than socialism does. For example, some communist countries control religion and a person's ability to change jobs or location.

What are the four stages of a business cycle?

An economic boom, recession, depression, recovery

What is socialism?

An economic system based on the premise that some, if not most, basic businesses (steel mills, coal mines, and utilities) should be owned by the government so that profits can be more evenly distributed among the people. Entrepreneurs often own and run smaller businesses, and individuals are often taxed relatively steeply to pay for social programs.

What are legal and regulatory forces?

Antitrust rules, labor relations, patents, copyrights, trade practices, taxes, product liability, child labor, prison labor, and other issues

What is a business?

Any activity that seeks to provide goods and services to others while operating at a profit

Why are most countries moving towards a mix economy?

Both types of economies have negatives, so a mix of them both is more effective

What is competitive environment?

Businesses have become more customer-driven instead of management-driven. To meet the needs of customers, firms must understand their needs and wants, establish strong relationships with suppliers, and differentiate themselves from their competitors

What do CSR defenders say?

Businesses have deep obligations to investors and should not attempt government-type CSR projects. However, they argue that CSR makes more money for investors in the long run.

What is corporate philanthropy?

Charitable donations of all kinds to nonprofit groups.

What other social contributions can be done in addition to charity?

Cleaning up the environment, building community toilets, providing computer lessons, caring for elderly people, and supporting children from low-income families.

What is the consumer price index?

Consists of monthly statistics that measure the pace of inflation or deflation. The government can compute the cost of goods and services, including housing, food, apparel, and medical care, to see whether or not they are going up or down

What is the business environment?

Consists of the surrounding factors that either help or hinder the development of businesses

What is the North American Free Trade Agreement (NAFTA)?

Created a free-trade area among the United States, Canada, and Mexico.

What are protective tariffs?

Created to raise the retail price of imported products so that domestic goods are more competitively priced.

What are sociocultural factors?

Culture, ethnocentricity, religion

What are integrity-based ethics codes?

Define the organization's guiding values, create an environment that supports ethical behavior, and stress shared accountability

What are revenue tariffs?

Designed to raise money for the government

What are compliance-based ethics codes?

Emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers

What is corporate social initiatives?

Enhanced forms of corporate philanthropy that are more directly related to the company's competencies. For example, UPS works together with other companies during large-scale natural disasters.

What is the technological environment?

Everything from phones to computers, mobile devices, medical imaging machines, robots, the internet, social media, and the various software programs and apps that make business processes more effective, efficient, and productive

What is corporate responsibility?

Everything that has to do with acting responsibility within society

What are command economies?

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 are variations on this economic system.

What are free-market economies?

Exist when the market largely determines what goods and services get produced, who gets them, and how the economy grows. Capitalism is a popular variation on this economic system.

What are nonprofit organizations?

Groups devoted to social causes that make a major contribution to the welfare of society. Their goals do not include making a personal profit

What is the Inter-American Convention Against Corruption

Identifies some form of common global efforts and fight corruption in global markets

What is the global enviroment?

Includes all of the international factors that affect businesses, such as trade agreements, international economic conditions, war and terrorism, climate change, (etc.). This can be shown in world trade ("globalization") and communication advantages such as the Internet

What are whistleblowers?

Insiders who report illegal or unethical behavior

What is sovereign wealth funds (SWFs)?

Investment funds controlled by governments holding investment stakes in foreign companies

How has technology impacted farming?

It has made it so productive that the number of farmers has dropped significantly.

What is an import quota?

Limits the number of products in certain categories a nation can import. The US has import quotes on products like sugar and peanuts

What is microeconomics?

Looks at the behavior of people and organizations in markets for particular products or services

What is macroeconomics?

Looks at the operation of a nation's economy as a whole (the United States)

What is the producer price index?

Measures the change in prices at the wholesale level. It tracks price changes in nearly all industries in the goods-producing sectors of the US economy.

What is a monopoly?

Occurs when one seller controls the total supply of a product or service and sets the price. Laws prohibit the creation of monopolies in the United States but there have still been some that sell natural gas, water, and electric power.

What is a multinational company?

One that manufacturers and markets products in many different countries and has multinational stock ownership and management

What are Export Assistance Centers?

Provide hands-on exporting assistance and trade-finance support for small and medium-sized businesses that wish to directly export goods and services.

What is one of the most powerful influences on a company's effectiveness and financial performance?

Responsible human resource management

What is dumping?

Selling products in a foreign country at lower prices than those charged in the producing country.

What type of businesses can participate in the global markets?

Small, medium, and large

What are ethics?

Society's accepted standards of moral behavior; behaviors accepted by society as right rather than wrong.

What is market price determined by?

Supply and demand

What limits global trade opprotunities?

Terrorism, nuclear proliferation, rogue states, income inequality

What do critics of CSR say?

That a manager's sole role is to compete and win in the marketplace. Spending money on CSR activities is "stealing" from investors.

What does the term "standard of living" refer to?

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

What is foreign direct investment?

The buying of permanent property and businesses in foreign nations

What is corporate social responsibility?

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

What is a balance of payments?

The difference between money coming into a country (from exports) and money leaving a country from other factors like tourism, foreign aid, military expenditures, and foreign investment.

What are the disadvantages of communism?

The government has no way of knowing what to produce because prices don't reflect supply and demand. As a result, shortages of many items, including food and clothing, may develop. Another problem is that communism doesn't inspire businesspeople to work hard because the incentives are not there.

What industry is currently increasing now that the service industry has slowed?

The information-based global and technical revolution will alter all sections (agricultural, industrial, and service)

What is monetary policy?

The management of the money supply and interest rates by the Federal Reserve Bank. The Fed's most visible role is the raising and lowering of interest rates. When the economy is booming, the Fed tends to raise interest rates.

What is free trade?

The movement of goods and services among nations without political or economic barriers.

What is the unemployment rate?

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

What is the business cycle?

The periodic rises and falls that occur in economies over time. Economists look at a number of business cycles, from seasonal cycles that occur within a year to cycles that occur every 48-60 years.

What is corporate policy?

The position a firm takes on social and political issues

What is social environment?

The statistical study of the human population with regard to its size, density, and other characteristics such as age, race, gender, and income

What is economics?

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

What is resource development?

The study of how to increase resources and create conditions that will make better use of them

What is Keynesian economic theory?

The theory that a government policy of increasing spending and cutting taxes could stimulate the economy in a recession

What is the balance of trade?

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

What is gross domestic product (GDP)?

The total value of final goods and services produced in a country in a given year. Both domestic and foreign-owned companies can produce the goods and services included in GDP, as long as the companies are located within the country's boundaries.

What is trade protectionism?

The use of government regulations to limit the import of goods and services

Why is selecting an ethics officer important when enforcing ethics?

They set a positive tone, communicate effectively, and relate well to employees.

Why should a business be managed ethically?

To maintain a good reputation, to keep existing customers and attract new ones, to avoid lawsuits, to reduce employee turnover, to avoid government intervention in the form of new laws and regulations, to please stakeholders, and to do the right thing

What is the World Trade Organization (WTO)?

To mediate trade disputes among nations. Headquartered in Geneva and all trade disputes are figured out within a year

What is new about the moral and ethical standards by which government leaders are being judged?

Top leaders are now being held to higher standards

What is insider trading?

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

What is perfect competition?

When there are many sellers in a market and none is large enough to dictate the price of a product. There are no perfect examples of perfect competition.

What are economic and financial forces?

exchange rate (the value of one nation's currency relative to others), countertrading (a complex form of bartering in which several countries each trade goods or services for other goods and services)

What are benefits of using social media to communicate CSR efforts to customers?

reaches broad/ diverse groups, allows them to connect directly with customers in an inexpensive way, and enables them to interact with specific groups more easily than through more traditional efforts.