Business Dynamics

Licensing

(least risky) the right to manufacture its product or use its trademark to a foreign company (the licensee) for a fee (a royalty)

Contract manufacturing

(midpoint of risk) When a foreign company produces a product and applies the domestic brand's name or label.

Foreign direct investment (FDI)

(most risky) The purchase of permanent property and businesses in foreign nations.

Exporting

(second least risky) The process of making a product at home and sending it to other nations.

Strategic alliance

(second most risky) A long-term partnership between two or more companies established to build competitive market advantages.

Franchising

(third least risky) The selling of the right to use a business name and sell a product or service in a given territory.

Joint venture

(third most risky) A partnership between two or more companies working together on a specific project or product.

Limited Partnership

1+ general partners and 1+ limited partners

Business over the years

1800s... agricultural industry -> better farming tech (cotton gin, plow tech, etc.) -> fewer farms -> 1900s industrial revolution -> move from farms to factories -> better tech -> fewer workers needed information based technological revolution -> information age

Vision

A broad explanation of why the organization exists and where it is trying to go.

Foreign subsidiary

A company owned in a foreign country by another company; most common form of Foreign Direct Investment

Multinational corporation

A company that manufactures and markets products in many different countries and has multinational stock ownership and management.

Embargo

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

Countertrading

A form of bartering in which several countries trade goods or services with each other.

North American Free Trade Agreement (NAFTA)

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

Central American Free Trade Agreement (CAFTA)

A free-trade zone with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Nicaragua, and Honduras.

General Agreement on Tariffs and Trade (GATT)

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

Niche marketing

A highly targeted form of advertising that focuses on a specific demographic.

Participative leadership

A leadership style where managers and employees work together to make decisions.

Autocratic leadership

A leadership style where managers make decisions without consulting others.

Free-rein leadership

A leadership style where managers set objectives and employees are free to accomplish them in their own way.

Import quota

A limit on the number of products in certain categories that a nation can import.

Common market

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

Regulation FD

A regulation that requires companies to release information to the public at the same time.

Social audit

A systematic evaluation of an organization's progress in implementing socially responsible programs.

PMI

A technique that lists the pluses, minuses, and implications of a solution to evaluate its pros and cons.

United States-Mexico-Canada Agreement (USMCA)

A trade deal signed by the United States, Mexico, and Canada that revised NAFTA and introduced new rules covering digital trade, anti-corruption, and good regulatory practices.

Stakeholders

All the individuals or groups who could be affected by the activities of a business, including investors, donors, and employees.

Ethnocentricity

An attitude that one's own culture is superior to other cultures.

World Trade Organization (WTO)

An independent entity of 164 member nations that oversees cross-border trade issues and global business practices.

Entrepreneur

An individual who starts and operates a business, taking on the associated risks and rewards.

Non-profit

An organization that uses business-like activities to focus on a cause rather than making a profit.

Mission statement

An outline of the organization's self-concept, philosophy, and long-term survival needs.

Business

Any activity that provides goods and services while operating at a profit.

Goals

Broad, long-term accomplishments that an organization wishes to achieve.

Corporate philanthropy

Charitable donations made by businesses to nonprofit groups.

Floating exchange rates

Currencies that fluctuate in value based on supply and demand in the global market.

External customers

Dealers and end users who buy products for their own personal use.

Enabling

Doing something challenging for another individual.

Integrity-based ethics codes

Ethics codes that define guiding values to promote ethical behavior and shared accountability.

Compliance-based ethics codes

Ethics codes that focus on increasing control and penalizing wrongdoers to prevent unlawful behavior.

Regulations on companies' ethics

Foreign Corrupt Practices Act (prohibits US citizens and entities from bribing foreign government officials to benefit their business interests), Inter-American Convention Against Corruption, UN condemnation of corporate bribery, ISO (international standards organization) 26000 (said products should be made in a socially responsible manner)

Factors influencing managerial ethics

Individual, values, organizational, environment

Internal customers

Individuals and units within the firm who receive services from other individuals or units.

Whistleblowers

Insiders who report illegal or unethical behavior within an organization.

Services

Intangible products that cannot be held in hand, such as insurance, education, and tourism.

Supervisory (first-line) management

Managers directly responsible for supervising workers and evaluating their daily performance.

Middle management

Managers responsible for tactical planning and controlling, such as plant managers and division heads.

Incubator

Offer new businesses low-cost offices with basic services like accounting, legal advice and secretarial help

Outsourcing

One firm contracts with other companies, often in other countries, to do some or all of its functions; The practice of removing a business function and having it performed by another company, often to reduce costs or improve quality.

One-to-one marketing

Personalized marketing that tailors products and communications to individual customers.

Corporate social initiatives

Philanthropic activities that are directly related to a company's work.

Specifications

Qualifications a person needs to be considered for a job

Planning

Setting organizational goals, developing strategies, and determining resources needed.

Ethics

Society's accepted standards of moral behavior.

Objectives

Specific, short-term statements detailing how to achieve the organization's goals.

Goods

Tangible products such as cars.

Revenue tariffs

Tariffs designed to raise money for the government.

Protective tariffs

Tariffs designed to raise the retail price of imported products and make domestic goods more competitive.

Tariffs

Taxes on imports.

Empowering

Teaching another individual to do something for themselves.

Human relations skills

The ability to communicate and motivate others, associated with leadership.

Technical skills

The ability to perform tasks in a specific discipline or department.

Conceptual skills

The ability to see the organization as a whole and understand the relationships among its various parts.

Empowerment

The act of allowing workers to make decisions essential to producing high-quality goods.

Profit

The amount of revenue left after subtracting expenses.

E-commerce

The buying and selling of goods online, either through business-to-consumer (B2C) or business-to-business (B2B) transactions.

Corporate social responsibility (CSR)

The concern that businesses have for society's welfare.

Production

The creation of finished goods and services using the factors of production.

Devaluation

The deliberate lowering of a nation's currency value relative to others.

Flexible manufacturing

The design of machines to perform multiple tasks and produce a variety of products.

Balance of payments

The difference between the amount of money going into and out of a country.

SWOT analysis

The evaluation of an organization's strengths, weaknesses, opportunities, and threats.

Top management

The highest level of management, including positions such as president, CEO, and CFO.

Computer-integrated manufacturing (CIM)

The integration of CAD and CAM systems in manufacturing.

Standard of living

The level of products and services that a consumer can afford with their available money.

Quality of life

The overall well-being of a society, including factors such as political freedom, education, healthcare, safety, and leisure.

Corporate policy

The position a company takes on social or political issues.

Demography

The practice of marketing to specific groups of people based on personal and human facts.

Greening

The practice of producing products that cause less environmental damage and save energy.

Dumping

The practice of selling products in a foreign nation at lower prices than in the producing country.

Transparency

The presentation of a company's facts and figures in a clear manner to all stakeholders.

Organizing

The process of allocating resources, assigning tasks, and establishing procedures to accomplish goals.

Rational decision-making model

The process of choosing between two or more alternatives based on rational criteria.

Leading

The process of communicating a vision, establishing values, promoting ethics, embracing change, and stressing accountability and responsibility.

Knowledge management

The process of finding, organizing, and making information known to everyone in the firm.

Staffing

The process of recruiting, hiring, motivating, and retaining employees.

Lean manufacturing

The production of goods using less resources than in mass production.

Factors of production

The resources necessary for producing goods and services, including land, labor, capital, entrepreneurship, and knowledge.

Consumer rights

The rights of consumers, including the right to safety, to be informed, to choose, and to be heard.

Utility

The satisfaction or value that a consumer gets from a good or service.

Culture

The set of values, beliefs, rules, and institutions held by a specific group of people.

Operations management

The specialized area of management that converts resources into goods and services.

Mass customization

The tailoring of products to meet the needs of a large number of individual customers.

Revenue

The total net cash flow generated by selling a certain number of units at a given price during a period of time.

Balance of trade

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

Continuous process

The type of manufacturing that has long production runs and turns out finished goods over time.

Intermittent process

The type of manufacturing that has short production runs and frequently adjusts machines to make different products.

Process manufacturing

The type of manufacturing that physically or chemically changes materials.

Assembly process

The type of manufacturing that puts together components to make a product.

Risk

The uncertainty and potential for loss that entrepreneurs take on.

Computer-aided manufacturing (CAM)

The use of computers in the production process.

Computer-aided design (CAD)

The use of computers to design products.

Trade protectionism

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

Insider trading

The use of private company information to further insiders' fortunes or those of family and friends.

Form utility

The value added to materials when a good or service is finished.

Exchange rate

The value of one nation's currency relative to the currencies of other countries.

Civil Rights Act of 1964

Title VII prohibits discrimination in hiring, firing, compensation, apprenticeships, training, terms, conditions, or privileges of employment based on race, religion, creed, sex, national origin, age, sexual orientation, and gender identity (for firms with 15+ employees)

Small business administration

US government agency that advises and assists small businesses by providing management training an financial advice and loans

Comparative advantage

When a company can produce products more efficiently than other countries or companies.

Absolute advantage

When a company has a monopoly on producing a certain product.

Loss

When a company operates at a negative net cash flow.

Low value of the dollar

When a dollar is trading for less foreign currency, making foreign goods more expensive.

High value of the dollar

When a dollar is trading for more foreign currency, making foreign products cheaper.

Offshore outsourcing

When a firm contracts with other companies, often in other countries, to perform some or all of its functions.

Trade surplus

When a nation exports more goods than it imports.

Trade deficit

When a nation imports more goods than it exports.

Insourcing

When foreign companies set up design and production in the US or bring production back to the US.

Gig economy

a single project or task for which a worker is hired, often through a digital marketplace, to work on high demand (gig workers work on a project basis)

Apprenticeship

a system for training a new generation of practitioners of a trade or profession with on-the-job training and often some accompanying study

Master Limited Partnership

acts like a corporation and is traded on stock exchanges like one but is taxed like a partnership and avoids corporate income tax (limited to oil, real estate, and gas industries)

3D printing

additive manufacturing, creating products layer by layer

General Partnership

all owners share in operating a business and assuming liability for its debts

JOBS Act of 2012

allows businesses to raise up to $1million from private investors without having to make an IPO

Fixed-position layout

allows workers to congregate around the product to be completed; product is too big to go through production lines so you bring the ingredients to make it to the product

Mentors

an experienced employee who supervises, coaches, and guides lower-level employees by introducing them to the right people and generally being their organizational sponsor

unlimited liability

any debts/damages incurred by a business are yours and you must pay them (risk of having a sole proprietorship)

Leveraged Buyout (LBO)

attempt by employees, management, or group of private investors to buy out the stockholders in a company (range from $50 million to $34 billion)

B corp

benefit corporation designed to do good as well as earn profits, mission-based, meets a set of socially and environmentally beneficial goods

Gain sharing plan

bonuses based on achievements of company goals

Profit sharing plan

bonuses based on company profits

Co-op

business is owned and controlled by the people who use it (producers, consumers, or workers)

Stock options

can buy stock at a cheaper price

Halo/horn effect

cognitive bias influences how we judge others based on one trait or aspect; can be positive (halo) or negative (horn) depending on whether we see the trait as desirable or undesirable (ex. supervision rates an employee low on all areas of performance because they did poorly in on area)

ISO 14001

collection of the best practices for managing an organization's impact on the environment

ISO 9001

common name given to the quality management and assurance standards

Materials requirement planning (MRP)

computer-based operations management system that uses sales forecasts to make sure needed parts and materials are available at the right time and place

Quality

consistently producing what the customer wants/expects in the product while reducing errors before and after delivery

Business plan

describes the nature of the business, the target market, the strategy, the financials, + ability of the owners/managers; includes 9 sections (ex. marketing plan, company background, management team) + cover letter

5 elements of business environment

economic and legal, technological, competitive, social, and global business

Franchising Agreement

franchisor sells existing business idea and product/service to others (franchisees) to run the business in a specific territory, can be formed as a sole proprietorship, partnership, or corporation

Cafeteria style fringe benefits

fringe benefits plan that allows employees to choose the benefits they want up to a certain dollar amount

Operational planning

front-line mangers set work standards and daily/weekly schedules; focuses on specific supervisors, department managers, and employees

Community development financial institutions (CDFIs)

fund businesses in lower-income communities b/c they take the hit if borrowers don't repay their loans

Enterprise/empowerment zone/community

geographic areas where governments lower taxes and offer support to encourage entrepreneurship

Flextime plan

gives employees freedom to choose which hours to work as long as they work the required number of hours or complete their assigned tasks

On-the-job training

hands on experience for employees who are the job they are being trained for

Service Corps of Retired Executives (SCORE)

has more than 10,000 volunteers from industry, trade associations, and education who counsel small businesses at no cost

Small business

independently owned/operated business that's not dominant in its field and meets certain standards or size

Venture Capitalists

investors (usually organizations) that ask for a stake in the company n exchange for the cash to start the business

Limited/silent partner

invests money in the business but does not manage it and is not responsible for losses/liability beyond his/her investment

Vertical Merger

joining of 2 companies in different stages of related business

Horizontal merger

joining of 2 firms in the same industry (mergers between competitors must be approved by Federal Trade Commission to avoid formation of monopolies)

Conglomerate merger

joining of firms in completely unrelated industries

Just-in-Time (JIT) Inventory Control

keep a minimum of inventory on the premises and deliver parts, supplies, and other needs just in time to go on the assembly line; process requires an accurate production schedule

Off-the-job training

learn job away from work through training center, universities, or associations; requirement for all apprenticeship standards

Limited Liability Companies (LLC)

like an S Corp but without the special eligibility requirements

Limited Liability

limited partner only responsible for liability up to the amount that they invested

Limited Liability Partnership

limits partners' risk of losing their personal assets to the outcomes of only their own acts and those of people under their supervision

S corp

looks like a corporation buy taxed like a sole proprietorship, has to have less than 100 shareholders, limited liability, has one class of stock, can only derive 25% of income from passive sources

Tactical planning

lower-level mangers set specific, short-range objectives (ex. deciding annual budgets)

Market

made up of consumers with unsatisfied wants and needs who have both resources and willingness to buy

Enterprise Resource Planning (ERP)

newer version of MRP that combines the computerized functions of all the divisions of the firm (ex. finance, human resources, order fulfillment) into a single integrated software program that uses a single database

Acquisition

one company's purchase of the property and obligations of another company; take on assets and liabilities of another organization; get rid of other companies management; Pacman

Sole Proprietorship

one person owns + manages business (most common, 72% of businesses)

Reasons people take entrepreneurial risk

opportunity, profit, independence, challenge

General Partner

owner who has unlimited liability, actively managing in the firm

Piecework system

paying workers based on the amount they produce rather than a fixed salary

Crowdfunding

peer-to-peer lending ex. GoFundME

Contrast effect

perception of an object or person is influenced by the presence of another object or person

4 functions of management

planning, organizing, leading, and controlling

Angel investors

private individuals who invest their own money in companies before they go public

Small business investment company (SBIC) program

private investment companies licensed by the SBA to lend money to small businesses; must have a min $5 million in capital and can borrow up to $2 from the SBA for each $1 of capital it has

Statistical process control (SPC)

process of testing statistics; samples of product components at each stage of production and plotting the test results on a graph

Statistical quality control (SQC)

process some mangers use to continually monitor all phases of the production process and ensure quality is being built into the product from the beginning

Age Discrimination in Employment Act

requires that age must be the determining reason for discrimination to prove any employment action against older workers

Kennedy's 4 basic rights of consumers

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

Americans with Disabilities Act

said people with disabilities will have special accommodations and receive the same consideration in employment

Six sigma quality

sets a benchmark of 3.4 defects per million opportunities and detects potential problems to prevent their occurrence (so that 99.999% of our products are error free)

Fringe benefits

sick leave pay, vacation pay, and other benefits that give additional compensation beyond wages

Micropreneurs

side hustle (tutor, babysitter, landscping)

Process layout

similar types of equipment and functions are grouped together

5 groups monitor how well companies enforce social responsibility policies

socially conscious investors, research orgs, environmentalists, union officials, and customers making buying decisions based on social conscience

Three major forms of business

sole proprietorship, partnership, + corporation

Corporation

state-chartered legal entity; liability is separate from the owners/stockholders

Mass Customization

tailoring products to meet the needs of individual customers

Modular layout

teams of workers combine to produce more complex units of the final product; workers produce component units of the product

Similar-to-me effect/affinity bias

tendency to prefer people that look and think like us • Hay method = compensation plan based on job grades, each of which has a strict pay range

Job simulation

test that involves real activities an employee might do in the role

Program Evaluation and Review Technique (PERT)

the method for analyzing the tasks for a project, the time needed for them and identifying the minimum time to complete the project

Human resource management (HRM)

the process of determining human resource needs and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling employees to achieve organizational goals

Management development

the process of training and educating employees to become good managers and then monitoring the progress of their managerial skills over time; includes on-the-job coaching, understudy positions, job rotation, off-the-job training

Critical path

the sequence of tasks that take the longest to complete the project

Strategic planning

top managers (CEOs) set broad, long-range major goals of the organization (ex. which customers to serve, what to sell, where to locate) and the policies, procedures, strategies, and resources it will need to achieve them

Contingency planning

top managers create backup plans in case primary plans fail; includes crisis planning which anticipates sudden changes in the environment (ex. terrorist attacks, natural disasters)

3 levels of management

top, middle, first line

Merger

two firms joining to form on company; allow management of other company to stay on board; don't have to keep other company name but can

Compressed workweek

work schedule that allows an employee to work a full number of hours per week but in fewer days

Assembly line/product layout

workers do only a few tasks at a time; product is manufactured in the order it needs to be put together

contigent workers

workers who do not have the expectation of regular full-time employment

Intrapreneur

works as an entrepreneur within a corporation