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