Survey of Business exam 1
acquisition
One company's purchase of the property and obligations of another company.
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
embargo
a complete can on the import of export of a certain product, or the stopping of all trade with a particular country
disadvantages of limited liability companies
no stock, limited life span, fewer incentives, taxes, paperwork
strategies for reaching global markets international joint ventures and strategic alliances
often mandated by countries as a condition of doing business (China) can increase a company's footprint and global growth can be used to join forces
multiational corporation
operate in several countries
Market price
the price determined by supply and demand
supply
the quantity of products that manufacturers or owners are willing to sell at different prices at a specific time
merger
the result of two firms forming one company
franchise
the right to use a specific business's name and sell its products or services in a given territory
demography
the statistical study of human population in terms of its size, density, and other characteristics such as age, race, gender, income, etc.
resource development
the study of how to increase resources and to create the conditions that will make better use of those resources.
National debt
the sum of government deficits over time (deficits increase national debt)
balance of trade
the total value of a nation's exports compared to its imports measured over a particular period
trade protectionism
the use of government regulations to limit the import of goods and services advocates of protectionism believe it allows domestic producers to survive, grow and produce jobs -some countries use it bc/ they are wary of foreign competition
Exchange rate
the value of ones nation's currency relative to the currencies of other countries -affects global markets -A high value of the dollar means a dollar is trading for more foreign currency than previously
Disadvantages of a corporation
-Initial cost -Extensive paperwork -Double taxation -Two tax returns -Size -Difficulty of termination -Possible conflict with stockholders and board of directors
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
Advantages of Limited Liability Company
-Limited liability -Choice of taxation -Flexible ownership rules -Flexible distribution of profits and losses -Operating flexibility
what are the advantages of partnerships
-More financial resources -Shared management -Pooled Knowledge -Longer survival -no special taxes
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
exporting goods and services
-competition may be less in another country -exporting provides a boost to the U.S. economy.
responsibility to employees
-create jobs and provide a chance for upward mobility -treat employees with respect -offer salaries and benefits that help employees reach their personal goals
What are the advantages of a 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
to qualify for S corporations you must
-have no more than 100 shareholders -Have shareholders that are individuals or estates, and who (as individuals) are citizens or permanent residents of the United States. -Have only one class of stock. -Derive no more than 25 percent of income from passive sources (rents, royalties, interest).
advantages of home based franchises
-no commuting -extra time for fam -low overhead
what is the difference between revenue and profit?
-revenue is the total amount of money a business takes in -profit is the total amount of money a business makes after expenses.
what is the standard of living?
-the degree of wealth and material comfort available to a person or community. -The amount of goods and services people can buy with the money
businesses want to act ethically why?
-to maintain good reputation -to keep existing customers -to avoid lawsuits -to reduce employee turnover
What are the disadvantages of a sole proprietorship?
-unlimited liability -limited financial resources -management difficulties -overwhelming time commitment -few fringe benefits -limited growth -limited life span
4 phases of the business cycle
1) Economic boom- business is booming 2)Recession- High unemployment, increased business failures, drop in living standards. (two or more consecutive quarters of decline in the GPD) 3)Depression- only one in 1930. (A severe recision usually accompanied by deflation ) 4)Recovery- leads to economic boom
President John F. Kennedy four basic rights of consumers
1) The right to safety 2) The right to be informed 3) The right to choose 4) The right to be heard
ethical dilemma
1) is my proposed action legal? 2) is it balanced? 3) how will it make me feel about myself?
what are the five elements of 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
Disadvantages of Franchising
1. Large start-up costs 2. Shared profit 3. Management regulation 4. Coattail effects 5. Restrictions on selling 6. Fraudulent franchisors
advantages of franchises
1. Management and marketing assistance 2. Personal ownership 3. Nationally recognized name 4. Financial advice and assistance 5. Lower failure rate
Benefits of joint ventures
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
Three major forms of business ownership
1. Sole proprietorships (a business that is owned, and usually managed, by one person) 2. Partnerships (a legal form of business with two or more owners) 3. Corporations (a legal entity with authority to act and have liability separate from its owners.
Steps to improve U.S. Business Ethics
1. Top management support 2. Employees' understanding that expectations for ethical behavior 3. Managers' training 4. Ethics Office 5. Outsiders must be informed 6. Enforcement of ethics code
unemployment rate
4 to 5 percent is functionally full employment Rule of "70" 70/rate= number of years to double
limited liability companies
A company similar to an S corporation but without the special eligibility requirements.
franchisor
A company that develops a product concept and sells others the rights to make and sell the products.
Countertrading
A complex form of bartering in which several countries may be involved, each trading goods for goods or services for services
strategic alliance
A long-term partnership between two or more companies established to help each company build competitive market advantages. companies don't share costs, risks, management, or even profits. They provide broad access to markets, capital, and technical expertise
joint venture
A partnership in which two or more companies (often from different countries) join to undertake a major project.
franchisee
A person who buys a franchise
invisible hand
A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all
common market
A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc. An example is the European Union.
Tariff
A tax imposed on imported goods
S corporation
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
North American Free Trade Agreement (NAFTA)
Agreement that created a free-trade area among the United States, Canada, and Mexico.
What are the advantages and disadvantages of trade protectionism and of tariffs?
Advantages to trade protectionism include the possibility of a better balance of trade and the protection of emerging domestic industries. Disadvantages include a lack of economic efficiency and lack of choice for consumers. Countries also have to worry about retaliation from other countries.
producer price index
An index that measures the change in 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
general partner
An owner (partner) who has unlimited liability and is active in managing the firm.
Neither free-market nor command economies are optimal why?
Because free-market mechanisms don't respond well to needs of the poor, elderly, or disabled Because free-market economies may not do enough to protect the environment Because many free-market economies have adopted social and environmental programs (social security, welfare) socialism and communism don't create wealth or grow economies fast enough
disgruntled workers relieve frustration by
Blaming mistakes on others. Manipulating budgets and expenses. Making commitments they intend to ignore. Hoarding resources. Doing the minimum.
Understanding Free-Market Capitalism
Businesses operated for profit, businesspeople make all decisions -no country is purely capitalist -government may determine minimum wages, set farm prices, and lend money to businesses
cooperatives
Businesses owned and controlled by the people who use it - producers, consumers, or workers with similar needs who pool their resources for mutual gain.
core inflation
CPI minus food and energy costs
Outsourcing
Contracting with other companies (often in other countries) to do some or all of the functions of a firm, like its production or accounting tasks.
Mixed economies
Economic systems in which some allocation of resources is made by the market and some by the government -the U.S. has a mixed economy
Free-Market Economies
Economic systems in which the market largely determines what goods and services get produced, who gets them, and how the economy grows (Example- Capitalism)
strategies for reaching global markets Exporting
Export assistance centers help small and medium companies with exporting indirect exporting is working with export-trading companies for help with negotiating and trading relationships
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.
Why trade with other nations?
No nation can produce all the products its people want and need. Global trade allows countries to produce what they make best and buy what they need from others
How owners affect management
Owners/stockholders (elect board of directors) ... Board of Directors (hire officers) ... Officers (set corporate objectives and select managers) Managers (supervise employees) Employees
4 degrees of competition within free markets
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) monopolistic competition (The degree of competition in which a large number of sellers produce very similar products that buyers nevertheless perceive as different) oligopoly (A degree of competition in which just a few sellers dominate the market) monopoly (A degree of competition in which only one seller controls the total supply of a product or service, and sets the price)
What is risk, and how is it related to profit?
Risk is the chance an entrepreneur takes in losing time and money on a business that may not prove profitable. Usually, entrepreneurs willing to take the most risk make the highest profit.
Ethics
Standards of moral behavior; that is, behavior accepted by society as right versus wrong.
In Free Market Capitalism they have 4 basic rights
The Right to Own property The right to own a business and keep the profits The right to freedom of competition The right to freedom of choice
The Dynamic Global Market
The U.S. market is 329 million people The world market is 7.7 billion people
who has the most billionaires in the world?
The United States
what is diversity?
The United States Equal Employment Opportunity Commission prohibits laws discriminating against: age, disability, genetic information, national origin, pregnancy, race, and religion, and sex
The basics of Supply and Demand
The amount supplied will increase as the price increases because sellers can make more money with a higher price -supply curves shows the relationship between the price and the quantity supplied The quantity demanded will increase as the price decreases -demand curves shows the relationship between the price and the quantity demanded
Foreign Direct Investment (FDI)
The buying of permanent property and businesses in foreign nations most common form is a foreign subsidiary primary advantage: parent company maintains complete control over it's technology or expertise Primary disadvantage: must commit funds and technology within foreign boundaries.
World Trade Organization (WTO)
The international organization that replaced the General Agreement on Tariffs and Trade, and was assigned the duty to mediate trade disputes among nations
Macroeconomics
The part of economics study that looks at the operation of a nation's economy as a whole
Equilibrium point
The place where quantity demanded and quantity supplied meet The market price will tend toward the equilibrium point
The social environment
The population's demography impacts buying patterns -includes size density, age, race, gender and income. -population shifts create new opportunities
demand
The quantity of products that people are willing to buy at different prices at a specific time
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
Keynesian economic theory
The theory that a government policy of increasing spending and cutting taxes could stimulate the economy in a recession
Gross Domestic Product (GDP)
The total value of final goods and services produced in a country in a given year
Legal and Regulatory Forces
Theres no global system of laws -laws may be inconsistent -U.S. businesses must follow U.S. laws while conducting global business
Ethics is more than legality
Those who break the law should be held accountable. behaving ethically reflects peoples relationships with each other An act can be legal but unethical
diversity in franchising
Women own about half of U.S. companies, but only 35 % of franchises
General agreement on tariffs and trade (GATT)
a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions on goods, services, ideas, and cultural programs
The economic and legal environment
a country's economic system and laws can have a strong impact on level of risk
strategies for reaching global markets Contract manufactoring
a foreign company's production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of oursourcing can be used to allow a company to experiment in a new market without incurring heavy start-up costs such as building a manufacturing plant
inflation
a general rise in the prices of goods and services over time
strategies for reaching global markets 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)
Import quotas
a limit on the number of products in certain categories that a nation can import -used to protect domestic companies and preserve jobs -nations also prohibit the import of certain products
Disinflation
a situation in which price increases are slowing (the inflation rate is declining)
Deflation
a situation in which prices are declining
stagflation
a situation when the economy is slowing but prices are going up anyhow
conventional corporation
a state-chartered legal entity with authority to act and have liability separate from its owners -has stockholders -limits liability of owners -enables many people to share in ownership
social audit
a systematic evaluation of an organization's progress toward implementing socially responsible and responsive programs
profit
amount of money a business earns after expenses
What is a business?
an activity that seeks out to provide goods and services to people while operating at a profit
What is a 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
an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing
Understanding communism
an economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production -intrudes further into peoples lives -some communist countries do not allow their citizens to practice certain religions, change jobs, or move to another town -government does not know what to produce bc/ prices do not effect supply and demand
Understanding socialism
an economic system based on the premise that some, if not most, basic businesses should be owned by the government so that profits can be more evenly distributed among the people -Free education, health care, child care etc. -Take away businesspeople's incentives -tends to result in fewer inventions and less innovation
limited partner
an owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment
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
are anyone who gains or loses from the business policies includes customers, employees, stockholders, suppliers, retailers, bankers, people in the surrounding community, the media, unions, critics businesses need to recognize and respond to their stakeholders
quasi-public corporation
are chartered by the government as an approved monopoly to perform services to the general public.
Professional Corporation
are owned by those who offer professional services
Why is it unlikely that there will be a single set of international rules governing multinational companies soon?
bc/ different countries have different set of rules
how to keep strong employees at nonprofits
be clear about your organization allow all employees to work with the groups they are serving invest in your employees. non profit work is draining
service industry
business that provides services to people instead of producing goods -law, health, telecommunications, entertainment, and finance -80 percent of the U.S. economy -includes more high paying jobs than the goods-producing sector
How are U.S. businesses demanding socially responsible behavior from their international suppliers?
by making sure their suppliers do not violate U.S. human rights and environmental standards.
what are the types of economic systems
command economics and free-market economics
dimensions of a company's social performance
corporate philanthropy, corporate social initiatives, corporate responsibility, corporate policy
Central American Free Trade Agreement (CAFTA)
created a free-trade zone with Central American nations Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua
sociocultural forces
culture may include social structures, religion, manners and customs, values and attitudes, language, and personal communication -its important to understand cultural differences and think globally
How do free markets work
decisions about what and how to produce are made by the market -the price tells producers how much to produce -when an item isn't available, the price goes up -prices are not determined by sellers; they are determined by buyers and sellers negotiating in the marketplace
Physical and Environmental forces
developing countries have transportation and storage systems that make international distribution difficult or impossible
foreign corporation
do business in one state but are chartered in another
Alien Corporation
do business in the United States but are chartered (incorporated) in another country.
domestic corporation
does business in its state of incorporation
nonprofit corporation
don't seek personal profit for their owners
Franchisor's different products for different countries
dunkin donut flavors in Taiwan sweet potato, honeydew Melon, Green Apple, Kiwi Fruit, Mango, Pineapple, Strawberry
Command economics
economic systems in which the government largely decides what goods and services will be produced, who will get them, and how the economy will grow (Example- socialism and communism)
corporate social initiatives
enhanced forms of corporate philanthropy directly related to the company's competencies
responsibility to investors
ethical behavior doesn't subtract from the bottom line; it adds to it
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
strategies for reaching global markets Franchising
franchisors need to be careful to adapt their product to the countries they serve -Yum! Brands, home of KFC, Taco Bell and Pizza Hut, learned that food preferences differ all around the world
Types of Partnerships
general partnership- shared ownership and liability limited partnership- A partnership with one or more general partners and one or more limited partners with limited liability master limited partnership- acts like a corporation but taxed like a partnership limited liability partnership- limits partners' risk
benefits of licensing are
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
closed (private) corporation
have stock that is held by a few people and isn't available to the general public
Global market terminology
importing (buying products from another country) exporting (selling products to another country)
what impact will the decline on the number of workers per retiree have in the future?
in the future, government might have to raise taxes and reduce benefits for individulas or use a means test in an effort to prevent social security payments from bankrupting the government
non-profit organization
include public schools, civic associations, charities their financial gains are to meet their goals not for personal profit
The Technological Environment
includes everything from phones to computers, mobile devices
The Global Environment
includes trade agreements, international economic conditions, war and terrorism, climate change -it surrounds all of the other environmental influences
basic moral values
inegrity respect for human life self-control honesty courage self-sacrifice
whistleblowers
insiders who report illegal or unethical behavior
sovereign wealth funds
investment funds controlled by governments holding large stakes in foreign companies
disadvantages of home based franchises
isolation long hours
Social Auditing
its difficult to establish procedures for measuring a firm's activities and their effects on society -workplace issues, charitable donations, and pollution control efforts are some areas to consider
problems with outsourcing are
loss of jobs and shoddy safety records and manufacturing
Devaluation
lowers the value of a nations currency relative to others -bartering may be an alternative if a nation's currency is weak.
The Federal Reserve Bank (the Fed)
manages monetary policy the fed's most visible role is raising and lowering interest rates controls the money supply
Consumer price index
monthly statistics that measure the pace of inflation or deflation
What are the factors of production
resources used to create wealth land, labor, capital, entrepreneurship, knowledge
dumping
selling products in a foreign country at lower prices than those charged in the producing country
open (public) corporation
sells stock to the general public
services
tangible products (that can't be held in your hand) hospitals, healthcare, insurance
goods
tangible products like computers, remotes, phones, clothes, cars, applications
two fiscal policy tools
taxation government spending on defense, social programs, education, infrastructure etc.
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 the united states has a comparative advantage in producing goods and services other countries have an absolute advantage in things like growing coffee and making shoes
what is the standard of living
the amount of goods and services people can buy with the money
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
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
Fiscal policy
the federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending.
monetary policy
the management of the money supply and interest rates by the Federal Reserve Bank
free trade
the movement of goods and services among nations without political or economic barriers
Microeconomics
the part of economics study that looks at the behavior of people and organizations in particular markets
The business cycle
the periodic rises and falls that occur in economics over time
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 is cannot produce as effectively or efficiently.
what funtions do entrepreneuers take
they earn money for themselves by taking risks they employ others they pay taxes and help their communities
what is revenue
total amount of money a business can take in during a given period of time
what are the disadvantages of partnerships
unlimited liability, potential for conflict, lack of longevity, disagreements among partners
trade surplus
value of a country's exports exceeds that of its imports
three types of corporate mergers
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) conglomerate merger (the joining of firms in completely unrelated industries)
loss
when a business expenses are more than its revenues
importing goods and services
when students studying abroad notice certain products are unavailable in their new country, they sometimes work with producers in their native country, becoming importers while still in school.
