Business 9 - Introduction to Business Midterm Exam Review

Franchises

1. A right conferred or established by a government, such as the right to vote (exercise one's franchise) in a local or national election. 2. Commerce: (1) A privilege granted to make or market a good or service under a patented process or trademarked name. (2) A business operating operating under such privilege. 3. Law: A government-conferred right to exist as a legal business entity within a particular jurisdiction and exercise corporate powers.

Demand

1. Commerce: A claim for a sum of money as due, necessary, or required. 2. Economics: (1) Desire for certain good or service supported by the capacity to purchase it. (2) The aggregate quantity of a product or service estimated to be bought at a particular price. (3) The total amount of funds which individuals or organizations want to commit for spending on goods or services over a specific period. See also law of supply and demand. 3. Law: An assertion of a legal right, such as to seek a compensation or relief.

4 Degrees of Competition

1. Perfect Competition 2. Monopolistic Competition 3. The right of freedom of competition 4. The right to freedom of choice

4 Basic Rights of Capitalism

1. The right to own private property 2. The right to own a business and keep all the business's profits 3. The right to freedom of competition 4. The right to freedom of choice

Corporation

A corporation is a legal entity that is separate and distinct from it owners. Corporation enjoy most of the rights and responsibilities that an individual possesses: enter contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes.

Job Enrichment

A job design technique that is a variation on the concept of job enlargement. Job enrichment adds new sources of job satisfaction by increasing the level of responsibility of the employee. While job enlargement is considered a horizontal restructuring method, job enrichment is a vertical restructuring method by virtue of giving the employee additional authority, autonomy, and control over the way the job is accomplished. Also called job enhancement or vertical job expansion.

Leadership Styles

A leadership style is a leader's method of providing direction, implementing plans, and motivating people. Various authors have proposed identifying many different leadership styles as exhibited by leaders in the political, business or other fields.

Empowering Workers

A management practice of sharing information, rewards, and power with employees so that they can take initiative and make decisions to solve problems and improve service and performance.

Levels of Management

A part of an organization that maintains responsibility for the productivity and the work performance of employees. There are generally three levels of management within an organization including top-level, middle-level, and first level that are tiered in numbers with more first level managers, a smaller amount of middle managers, and less top-level managers within one organization. Each level possesses certain job responsibilities within their position to ensure the effective overall operation of the organization.

Partnership

A partnership is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations.

Socialism

A political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

Sole Proprietorship

A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity.

Mission Statement

A written declaration of an organization's core purpose and focus that normally remains unchanged over time. Properly crafted mission statements (1) serve as filters to separate what is important from what is not, (2) clearly state which markets will be served and how, and (3) communicate a sense of intended direction to the entire organization. A mission is different from a vision in that the former is the cause and the latter is the effect; a mission is something to be accomplished whereas a vision is something to be pursued for that accomplishment. Also called company mission, corporate mission, or corporate purpose.

Adam Smith

Adam Smith believed that more wealth to common people would benefit a nation's economy and society as a whole. Adam was right, because there are more common people that work together would better the economy.

Vision

An aspirational description of what an organization would like to achieve or accomplish in the mid-term or long-term future. It is intended to serves as a clear guide for choosing current and future courses of action. See also mission statement.

Mixed Economies

An economic system in which both the private enterprise and a degree of state monopoly (usually in public services, defense, infrastructure, and basic industries) coexist. All modern economies are mixed where the means of production are shared between the private and public sectors. Also called dual economy.

Entrepreneur

An entrepreneur is an individual who, rather than working as employee, founds and runs a small business, assuming all the risks and rewards of the venture. The entrepreneur us commonly seen as an innovator, a source of new ideas, goods, services and business/or procedures.

Intrapreneurs

An intrapreneur is a person who pracrises intrapreneurship. According to this definition, a corporate manager who starts a new initiative for their company which entails setting up a new distinct business unit and board of directors can be regarded as an intrapreneur.

Intrinsic Reward

An outcome that gives an individual personal satisfaction such as that derived from a job well done.

Business

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

Comparative Advantage Theory

Comparative advantage is an economic term that refers to an economy's ability to produce goods and services at a lower opportunity cost than trade partners.

Exporting

Exporting is when someone outside of the U.S buy something from the inside of the U.S.

Standard of Living

Financial health of a population, as measured by per capita income and consumption of goods and services by individuals or households.

Free Trade

Free Trade is when international trade left to its natural course without tariffs, quotas, or other restrictions.

Why People Take the Entrepreneurial Challenge

Generally speaking, entrepreneurs take risks as it allows them to distinguish themselves from their competitors. In the competitive business environment that exists today, those who are willing to risk position themselves as leaders, while other get left behind.

Extrinsic Reward

Human resource management: A reward that is expected by an employee and does not lead to his or her greater satisfaction. See also hygiene factors.

Importing

Importing is something we buy outside of the U.S.

Loss

In financial accounting, a loss is a decrease in net income that is outside the normal operations of the business. Losses can result from a number of activities such as; sale of an asset for less than its carrying amount, the write-down of assets, or a loss from lawsuits.

Invisible Hand

Metaphor used by the 18th century Scottish economist Adam Smith (1723-90) to explain the unintended common-good caused by the activities of the individuals in pursuit of their own interests. Its positive aspect is that if everyone in a society seeks economic self interest (in an environment of free and open competition) then, as if prodded by an invisible hand, he or she (unknowingly and unintentionally) will also be serving the larger interest of the society as a whole. However, in the words of the US sociologist Russell Hardin (from his book 'The Back of The Invisible Hand')"all too often we are helped less by the benevolent invisible hand than we are injured by the malevolent back of that hand; that is, in seeking private interests, we fail to secure greater collective interests. The narrow rationality of self interest that can benefit us all in market exchange can also prevent us from succeeding in collective endeavors."

Micropreneurs

Micropreneur Law and Legal Definition. A micropreneur is an entrepreneur willing to accept the risk of starting and managing very small type of business, that allows him or her to do the kind of work s/he wants to do, and offers a balanced lifestyle.

Maslow's Hierarchy of Needs

Motivation theory which suggests five interdependent levels of basic human needs (motivators) that must be satisfied in a strict sequence starting with the lowest level. Physiological needs for survival (to stay alive and reproduce) and security (to feel safe) are the most fundamental and most pressing needs. They are followed by social needs (for love and belonging) and self-esteem needs (to feel worthy, respected, and have status). The final and highest level needs are self-actualization needs (self-fulfillment and achievement). Its underlying theme is that human beings are 'wanting' beings: as they satisfy one need the next emerges on its own and demands satisfaction... and so on until the need for self-actualization that, by its very nature, cannot be fully satisfied and thus does not generate more needs. This theory states that once a need is satisfied, it stops being a motivator of human beings. In personnel management, it is used in design of incentive schemes. In marketing, it is used in design of promotional campaigns based on the perceived needs of a market segment a product satisfies. Named after its originator, the US psychologist Abraham Harold Maslow (1908-70) who proposed it in 1954.

Hawthorne Effect

Observation that employee motivation is affected as much or more by recognition and show of concern, as it is by improvements in their work conditions. Observed by the US productivity researcher George Elton Mayo (1810-1949), during 1927 to 1933 at the Hawthorne (Illinois) plant of Western Electric company (where he was assessing the effects of lighting conditions). He reported that the worker performance went up and up whether the lighting was good or bad, because (presumably) workers were responding to the management's show of concern for their problems. This study was later severely criticized as too skimpy and unscientific to be of any practical value.

Profit

Profit is a financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. Any profit that is gained goes to the business's owners, who may or may not decide to spend it on the business.

Small Business Administration

Provide support to small business owners in the United States, including loan programs, counseling and contract negotiation that ensures 23% of federal dollars are allocated to small businesses.

Limited Liability Company

Relatively recent type of US business structure that combines that limited personal liability feature of a corporation with the single taxation feature of partnership or sole proprietorship firm. Its profits and tax benefits are split any way the stockholders/shareholders (whether individuals or other firms) choose. Tax return for a LLC is filed with the taxation authorities only for the purpose of information, and each shareholder files own tax return separately. Also called company limited by share. See also limited company.

Factors of Production

Resources required for generation of goods or services, generally classified into four major groups: 1. Land (including all natural resources) 2. Labor (including all human resources) 3. Capital (including all man-made resources), 4. Enterprise (which brings all the previous resources together for production) These factors are classified also as management, machines, materials, and money (this, the 4 Ms), or other such nomenclature. More recently, knowledge has come to be recognized as distinct from labor, and as a factor of production in its own right.

Fredrick Taylor

Scientific management is theory of management that analyzes and synthesizes workflows. ... It was one of the earliest attempts to apply science to the engineering of processes and to management. Scientific management is sometimes known as Taylorism after its founder, Frederick Winslow Taylor.

Business Plan

Set of documents prepared by a firm's management to summarize its operational and financial objectives for the near future (usually one to three years) and to show how they will be achieved. It serves as a blueprint to guide the firm's policies and strategies, and is continually modified as conditions change and new opportunities and/or threats emerge. When prepared for external audience (lenders. prospective investors) it details the past, present, and forecasted performance of the firm. And usually also contains pro-forma balance sheet, income statement, and cash flow statement, to illustrate how the financing being sought will affect the firm's financial position.

SWOT Analysis

Situation analysis in which internal strengths and weaknesses of an organization, and external opportunities and threats faced by it are closely examined to chart a strategy. SWOT stands for strengths, weaknesses, opportunities, and threats. See also PEST analysis.

Macroeconomics

Study of the behavior of the whole (aggregate) economies or economic systems instead of the behavior of individuals, individual firms, or markets (which is the domain of Microeconomics). Macroeconomics is concerned primarily with the forecasting of national income, through the analysis of major economic factors that show predictable patterns and trends, and of their influence on one another. These factors include level of employment/unemployment, gross national product (GNP), balance of payments position, and prices (deflation or inflation). Macroeconomics also covers role of fiscal and monetary policies, economic growth, and determination of consumption and investment levels.

Microeconomics

Study of the economic behavior of individual units of an economy (such as a person, household, firm, or industry) and not of the aggregate economy (which is the domain of macroeconomics). Microeconomics is primarily concerned with the factors that affect individual economic choices, the effect of changes in these factors on the individual decision makers, how their chives are coordinated by markets, and how prices and demand are determined in individual markets. The main subjects covered under microeconomics include theory of demand, theory of the firm, and demand for labor and other factors of production.

Absolute Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group.

Balance of Payments

The balance of payments, also known as balance of international payments and abbreviated B.O.P or BoP, of a country is the record of all economic transactions between the residents of the country and the rest of world in a particular period of the time.

Balance of Trade

The difference in value between a country's imports and exports.

Communism

The father of communism is Karl Marx. A political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs.

Functions of Management

The four functions of management include planning, or deciding upon business goals and the methods to achieve them; organizing, or determining the best allocation of people and resources; directing or motivating, instructing, and supervising workers assigned to the activity; and control, or analyzing metrics during business activities to ensure completion of tasks and identify areas for improvement.

Quality of Life

The general well-being of a society in terms of its political freedom, natural environment, education, health care, safety, amount of leisure, and rewards that ass to the satisfaction and joy that other foods and services provide.

Learning About Small-Business Operations

The key business skills to consider include: - Strategic Management. Creating a business and strategic plan for your business and making sure you keep to it. - Basic Accounting. Which records to keep, how to keep them and how to file them. - Financial Management - People Management - Marketing - Sales - Operations Management

Performance Appraisal

The process by which a manager or consultant (1) examines and evaluates an employee's work behavior by comparing it with preset standards, (2) documents the results of the comparison, and (3) uses the results to provide feedback to the employee to show where improvements are needed and why. Performance appraisals are employed to determine who needs what training, and who will be promoted, demoted, retained, or fired.

Human Resource Management

The process of hiring and developing employees so that they become more valuable to the organization. Human Resource Management includes conducting job analyses, planning personnel needs, recruiting the right people for the job, orienting and training, managing wages and salaries, providing benefits and incentives, evaluating performance, resolving disputes, and communicating with all employees at all levels. Examples of core qualities of HR management are extensive knowledge of the industry, leadership, and effective negotiation skills. Formerly called personnel management.

Economics

The study of how society chooses to employ resources to produce goods and services and distribute them

Supply

The total amount of a product (good service) available for purchase at any specified price. Supply is determined by: (1) Price: producers will try to obtain the highest possible price whereas the buyers will try to pay the lowest possible price both settling at the equilibrium price where supply equals demand. (2) Cost of inputs: the lower the input price the higher the profit at a price level and more product will be offered at that prices. (3) Price of other goods: lower prices of competing goods will reduce the price and the supplier may switch to more profitable products thus reducing the supply.

Revenue

Total Expenses Profit/Loss Revenue is the amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the top line or gross income figure from which costs are subtracted to determine net income.

Theory X and Theory Y

Two distinct sets of assumptions that managers, in general, have about their employees and which often turn out to be self-fulfilling prophesies. Theory-X assumptions are: (1) most people dislike work and will avoid it to the extent possible, therefore (2) they must be continually coerced, controlled, and threatened with punishment to get the work done, and that (3) they have little or no ambition, prefer to avoid responsibility, and choose security above everything else. Theory-Y assumptions are: (1) physical and mental effort are natural and most people (depending on the work environment) find work to be a source of satisfaction, (2) they generally, on their own motivation, exercise self-control, self-direction, creativity, and ingenuity in pursuit of individual and collective (company) goals, (3) they either seek responsibility or learn to accept it willingly, and that (4) their full potential is not tapped in most organizations. These assumptions serve as powerful behavioral models reflected in the way an organization is structured. Management that believes in theory-X assumptions, creates stick-and-carrot approach based firms with restrictive discipline and pervasive controls. Theory-Y believers create trust based firms with empowered employees. These concepts were introduced by the US college-administrator and professor Douglas McGregor (1906-64) in his 1960 book 'The Human Side Of Eenterprise.' See also theory Z.