Business in A Global Context

3 major indictors of economic conditions

-GDP -the unemployment rate -the price indexes

4 ways the government can foster entrepreneurship

-allowing private ownership of business -passing laws that enable businesses to write enforceable contracts -establishing a currency that is tradable in world markets -minimize corruption in business and in its own ranks

5 factors that drive competition

-entry -buyer power -supplier power -existing rivalries -substitution possibilities

four degrees of competition

-perfect competition -monopolistic competition -oligopoly -monopoly

The 4 P's of marketing

-product -price -promotion -place

Foreign Subsidiary

A company owned in a foreign country by another company

multinational corporation

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

Franchising

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

contract manufacturing

A foreign company's production of private-label goods to which a domestic company then attached its own brand name or trademark

Inflation

A general rise in the prices of goods and services over time

Balance of trade

A nations ratio of exports to imports

Deflation

A sustained drop in the price level

2 key indicators of effectiveness of global trade

Balance of trade Balance of payments

Culture

Beliefs, customs, and traditions of a specific group of people.

Foreign Direct Investment (FDI)

Buying permanent property and businesses in foreign nations

Countertrading

Complex form of bartering in which several countries may be involved, each trading goods for goods or services for services

Parts of the business cycle

Economic boom Recession Depression Recovery

business cycle

Fluctuations in economic activity, such as employment and production

Human Development Index (HDI)

Index that examines the wealth, health, and education of a country according to incomes, life expectancy, and years of schooling

Goods

Intangible products

Services

Intangible products

Productivity

Measured by dividing the total output of goods and services of a given period by the total hours of labour required to produce them

Consumer Price Index (CPI)

Monthly statistic that measures the pace of inflation/deflation

free trade

Movement of goods and services among nations without political or economic barriers

frictional unemployment

People who have quit their job because they didn't like the job or boss and who haven't found a new job. Also refers to people entering the work force for the first time or coming back after a long time

Seasonal unemployment

The unemployment that arises because of seasonal patterns

Recessions

Two or more consecutive quarters of decline in GDP

Licensing

When a firm gives the right to manufacture its product or use its trademark to a foreign company for a fee

Stagflation

When the economy is slowing but prices are going up regardless

A recovery

When the economy stablizes and starts to grow

strategic alliance

a partnership formed to create competitive advantage on a worldwide basis

Depression

a period of low economic activity and rising unemployment

Entrepreneur

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

Disinflation

a reduction in the rate of inflation

identity theft

act of obtaining personal information about a person and using that information for illegal purposes

Sustainability

allocation of resources for future generations

empowerment

allowing workers to make decisions essential to producing high-quality goods and services

standard of living

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

Profit

amount of money a business earns above and beyond what it spends for salaries and other expenses

joint venture

an agreement between two or more companies to share a business project

socialism

an economic system based on the premise that some, if not most, basic business should be owned by the government so that profits can be evenly distributed among the people

database

an electronic storage file in which information is kept

Business

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

Electronic business

any information system or application that empowers business process

Ethnocentricity

assuming one's own culture to be superior to other cultures

economies of scale

average cost reduction by an increase in volume of a single product

microeconomics

behaviour of people and organizations in particular markets

Generation Y

born in 1977-1994

two types of e-commerce

business-to-consumer business-to-business

E-commerce

buying and selling of goods and services online

Importing

buying products from another country

Risk

chance of loss, the degree of probability of loss, and the amount of possible loss

Outsourcing

contracting with other companies to do some or all of the functions of a firm such as production/accounting

product differentiation

creation of real or perceived product differences

market price

crossing point between supply and demand, which is also known as equilibrium

inequality

disparity between the amount of money the wealthy have and the amount of money poor people have

communism

economic/political system in which the state makes almost all economic decisions and owns almost all of the major factors of production

a Business

entity whose ultimate goal is to maximize economic profit

4 types of unemployment

frictional structural cyclical seasonal

capitalism

individuals seeking profits produce goods and services, free markets

The Five Factors of Production

land labour capital goods entrepreneurship knowledge

Devaluation

lowering a currency's value in relation to other currencies by government order

Loss

occurs when a business's expenses are more than its revenues

macroeconomics

operation of a nation's economy as a whole

Non-Profit organization

organization whose goals do not include making a personal profit to the owners/organizers

Effectiveness

quality of the output

Efficiency

quantity of inputs per units output

supply

quantity of products that manufacturers/ 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

Economic Boom

rapid economic growth

regulations

restrictions that provincial and federal laws place on businesses with respect to the conduct of their activities

economies of scope

results in a decrease in the average cost of production by an increase in the variety of goods produced (several products, same workers)

greening

saving energy and producing products that cause less harm to the environment

Exporting

selling some of what the firm produces to foreign markets.

mixed economies

some allocation of resources is made by the market and some is made by the government

Offshoring

sourcing part of the purchased inputs outside of the country

Demography

statistical study of the human population with regard to its size, density, and other characteristics

Economics

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

Balance of Payments

the difference in total value between payments into and out of a country over a period.

The 6 elements in the Business environment

the legal environment the economic environment the technological environment the competitive environment the social environment the global environment

climate change

the movement of the temperature of the planet over time

unemployment rate

the percentage of the labour force that actively seeks work but is unable to find work at a given time

resource development

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

Exchange rates

the value of a currency in one country compared with the value in another

perfect competition

there are many sellers in a market and no seller is large enough to dictate the price of a product

monopoly

there is only one seller for a good/service and they control the total supply of product and the price

Revenues

total amount of money received during a given period for goods sold and services rendered and from other financial sources

GDP

total value of final goods and services produced in a country in a given year

invisible hand

turns self-directed gain to social and economic benefits for all

structural unemployment

unemployment that occurs when workers' skills do not match the jobs that are available or the restructuring of firms

Cyclical Unemployment

unemployment that rises during economic downturns and falls when the economy improves

oligopoly

when a few sellers dominate a market

monopolistic competition

when a large number of sellers produce goods that are very similar but are perceived by buyers as different

Trade Surplus

when a nation exports more goods and services than it imports

Trade Deficit

when a nation imports more goods and services than it exports

absolute advantage

when an advantage provides a virtual monopoly

comparative advantage

when countries export goods and services they produce most effectively and efficiently

brain drain

when educated people in socialist countries leave for capitalistic countries with lower taxes

command economy

when the government largely decides what goods/services are produced, who gets them, and how the economy grows

free-market economy

when the market largely determines what goods/services are produced, who gets them, and how the economy grows