Business Test 1

Sole Proprietorship

A business that is owned, and usually managed, by one person.

Mixed economies

Some allocation of resources is made by the market and some by the government. economy tends to be called what it most resembles.

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

Advantages of home based franchises

no commuting, extra time for family, low overhead

Disadvantages of Limited Liability Company

no stock, limited life span, fewer incentives, taxes, paperwork

Outsourcing

operating out of a different country

Competitors

others that can meet buyer needs (Adidas)

Merger

the result of two firms forming one company

Responsibility to customers

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

Franchise

the right to use a specific business's name and sell its products or services in a given territory

Balance of trade

the total value of a nation's exports compared to its imports measured over a particular period

Gross Domestic Product (GDP)

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

Exchange rate

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

Business

- an activity that seeks to provide goods and services to others while operating at a profit - once you determine what consumers want and need, you need to reach them using media

The Business Cycle 4 phases

1. Economic boom- business is booming 2. Recession- high unemployment, increased business failures, drop in living standards 3. Depression- only one in 1930 4. Recovery- leads to an economic boom

Disadvantages of corporations

1. Initial cost 2. Extensive paperwork 3. Double taxation 4. Two tax returns 5. Size 6. Difficulty of termination 7. Possible conflict with stockholders and board of directors

Advantages of corporations

1. Limited liability 2. Ability to raise more money for investment 3. Size 4. Perpetual life 5. Ease of ownership change 6. Ease of attracting talented employees 7. Separation of ownership from management

Some basic business functions

1. Planning 2. Production 3. Operations 4. Risk management 5. Quality Control 6. Marketing 7. Sales 8. Purchasing 9. Human Resources 10. Accounting 11. Finance 12. Research/Development 13. Distribution/logistics

Ethical dilemmas

1. is my proposed action legal 2. is it balanced 3. how will it make me feel about myself

Five elements in 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

Franchisor

A company that develops a product concept and sells others the rights to make and sell the products.

Franchising

A contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product/service in a given area.

The economic and legal environment

A country's economic system and laws can have a strong impact on level of risk. Private ownership of business. The legal system. Ex: freedom of ownership, contract laws, elimination of corruption, tradable currency, minimum taxes and regulations

Oligopoly

A degree of competition in which just a few sellers dominate the market

Trade surplus

A favorable balance of trade; occurs when the value of a country's exports exceeds that of its imports.

Contract manufacturing

A foreign country's production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing.

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).

Strategic alliance

A long-term partnership between two or more companies established to help each company build competitive market advantages.

Joint venture

A partnership in which two or more companies (often from different countries) join to undertake a major project.

Master Limited Partnership (MLP)

A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax.

Limited partnership

A partnership with one or more general partners and one or more limited partners. Has general partners and limited partners who have limited liability.

Franchisee

A person who buys a franchise

Deflation

A situation in which prices are declining

Stagflation

A situation when the economy is slowing but prices are going up anyhow.

S Corporations

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. Have no more than 100 shareholders, have shareholders that are individuals or estates, and who are citizens or permanent residents of US, have only one class of stock, derive no more than 25% of income from passive sources

Producer Price Index (PPI)

An index that measures 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

Trade deficit

An unfavorable balance of trade; occurs when the value of a country's imports exceeds that of its exports.

Core inflation

CPI minus food and energy costs

The technological environment

Can make businesses more effective and efficient. Ex: information technology, databases, bar codes, the internet

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. Ex: customer service, stakeholders recognition, employee service, concern for the environment

Resource development

Creating new ways to produce goods and creating conditions to make better use of them. Ex: recycling

Disadvantages of home based franchises

Isolation Long hours

The global environment

It surrounds all of the other environmental influences. Ex: trade agreements, international economic conditions, war and terrorism, climate change

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, Joint venture, Strategic alliances, Foreign direct investment.

Advantages of Limited Liability Company

Limited liability Choice of taxation Flexible ownership rules Flexible distribution of profits and losses Operating flexibility

Advantages of franchises

Management and marketing assistance Personal ownership Nationally recognized name Financial advice and assistance Lower failure rate

Advantages of partnerships

More financial resources Shared management and pooled/complementary skills and knowledge Longer survival No special taxes

Limited Liability Companies

No special eligibility requirements

Acquisition

One company's purchase of the property and obligations of another company.

The board

Owners have an influence on how a business is managed by electing a board of directors. The board hires the top officers and fires them if necessary. It also sets the pay for those officers. The officers then select managers and employees with the help of the human resource department. They can fire people who started the business if necessary.

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.

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.

Fiscal policy

The federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending.

The social environment

The population's demography impacts buying patterns. Ex: diversity, demographic changes, family changes

MY COMPANY

Walt Disney Co. Entertainment industry. Brands/products: Star Wars, The Muppets, the marvel cinematic universe, Disney princesses, pirates of the Caribbean, Pixar films, Winnie the pooh, Indiana jones, Disney plus, Walt Disney world, Disney land, National Geographic, etc. Walt Disney Co. is aimed to entertain, inform, and inspire people to tell their stories and go on adventures through their movies, parks, books, and shows. Disney is aimed at children and aims to make the kids happy. Their adventures like cruises, and entertainment media is what makes them so special like the characters and events they do. World's leading licensing business

Macroeconomics

What should the US do to lower its national debt? includes gross domestic product (GDP), unemployment rate, and price indexes

Microeconomics

Why do people buy smaller cars when gas prices go up?

Cooperative (co-op)

a business owned and controlled by the people who use it - producers, consumers, or workers with similar needs who pool their resources for mutual gain

Monopoly

a degree of competition in which only one seller controls the total supply of a product or service, and sets the price

Inflation

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

Corporation

a legal entity with authority to act and have liability apart from its owners

Partnership

a legal form of business with two or more owners

General partnership

a partnership in which all owners share in operating the business and in assuming liability for the business's debts

Limited Liability Company (LLC)

a partnership that limits partners' risk of losing their personal assets to only their own acts and the omissions and to the acts and omissions of people under their supervision

Disinflation

a situation in which price increases are slowing (the inflation rate is declining)

Company

a specific commercial business (Nike)

Social auditing

a systematic evaluation of an organization's progress toward implementing socially responsible and responsive programs

Marketing

advertising, media, promotion, pricing product, distributing product, how will my customers access the product, what are you trying to do and how do you get there

Productivity

amount of output generated vs amount of input

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 (LBO)

an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing

Communism

an economic and political system in which the government makes almost all economic decisions and owns almost all thee major factors of production.

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

anyone who gains or loses from the business's policies ex: customers, employees, stockholders, suppliers, dealers, bankers, people in the surrounding community, the media, environmentalists, competitors, unions, critics, and elected government leaders

Quality Control

are we going to sample everything? sample from the products and make sure they are correct

Socialism

benefit: more social equality (free education, health care, child care). takes away people's incentives - leads to brain drain. tends to result in fewer inventions and less innovation

Invisible hand

business owners are motivated to work hard because they know they will earn and keep the rewards of their labor

Free-market capitalism

businesses operated for profit, businesspeople make all decisions. gov may. determine minimum wages, farm prices, and lend money to businesses. 4 rights: the right to own property, the right to own a business and keep the profits, the right to freedom of competition, the right of freedom of choice

Importing

buying products from another country

Free-market economies

capitalism

Forces affecting trading in global markets

countries economic differences can muddy the water, exchange rate: high value of dollar means a dollar is trading for more foreign currency than previously. floating exchange rates: float in value accounting to supply and demand. devaluation: lowers the value of a nations currency relative to others. counter trading: accounts for over 20% of all global exchanges

Responsibility to employees

creates jobs and provide a chance for upward mobility, treat employees with respect, offer salaries and benefits that help employees reach their personal goals, employee fraud costs US businesses about 5% of annual revenue and causes 30% of all business failures

Industry

distinct group of enterprises (footwear)

Research/development

do you understand your customers

Entrepreneurs

earn money for themselves by taking risks, they employ others, they pay taxes and help their communities

Advantages of 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

Corporate social initiatives

enhanced forms of corporate philanthropy directly related to the company's competencies

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

Purchasing

ex: hospital like what all the have to purchase to make it run

Production

factories, produce things, make sure we get what customers need

Licensing benefits

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. offers the right to trademark, patent, trade secret or other term of intellectual property in return for a royalty or fee.

Keynesian theory

government policy of increasing spending and cutting taxes that could stimulate the economy in a recession

Conventional corporations

has stockholders, limited liability of owners, enables many people to share in ownership

Planning

have a sense of where you are going and strategies, what is going on in the company

Licensing drawbacks

if a product experiences remarkable growth in the foreign market, the bulk of the revenues belong to the licensee. the licensing firm is selling its expertise and trade secrets

Intrapreneur

inside the company a person comes up with an idea for that company

Sovereign Wealth Funds (SWFs)

investment funds controlled by governments holding large stakes in foreign companies

5 factors of production

land labor capital entrepreneurship knowledge

Operations

like what happens to operate a university

Risk Management

look at what risks there are and how to manage them

Exporting

manufacturing in one country, sell in another country. least number of changes in product and organization and less local employment in home country. competition may be less in another country

Consumer prices index (CPI)

monthly statistics that measure the pace of inflation or deflation

Foreign Direct Investment (FDI)

most common is foreign subsidiary. the buying of permanent property and businesses in foreign nations. primary advantage: parent company maintains control over its technology or expertise. primary disadvantage: must commit funds and technology within foreign boundaries

Market price

price toward which the market will trend

Demand

qualities of goods and services people are willing to buy at a given price

Accounting

record what you are doing, record in a positive way, planning

Others

regulators, donors if non-profit, etc.)

YOU

role you play as part of a company

Dumping

selling products in a foreign country at lower prices than those charged in the producing country

Joint ventures benefits

shared technology and risk, shared marketing and management expertise, entry into markets where foreign companies are often not allowed unless goods are produced locally

Command economies

socialism (everyone is equal, free childcare and healthcare) and communism

Ethics

standards of moral behavior, that is, behavior accepted by society as right versus wrong

Joint ventures drawbacks

stolen or obsolete technology, becoming too large to be flexible

Distribution/logistics

supply to distribute who is going to assemble

Supply and demand

the amount supplied will increase as the price increases because sellers can make more money with a higher price. the quantity demanded will increase as the price decreases.

Risk

the chance an entrepreneur or business takes of losing time and money on a business that may not prove profitable.

Monopolistic competition

the degree of competition in which a large number of sellers produce very similar products that buyers nevertheless perceive as different

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

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

Responsibility to society and the environment

the green movement emerged as concern about climate change increased, many companies are. trying to minimize their carbon footprints, environmental efforts may increase costs but can create new job opportunities, environmental quality is a public good

Conglomerate merger

the joining of firms in completely unrelated industries

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

Free trade

the movement of goods and services among nations without political or economic barriers

Unemployment rate

the number of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks

Nonprofit organizations

their financial gains are used to meet their goals, not for personal profit. ex: public schools, civic associations, charities , etc.

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 it cannot produce as effectively or efficiently

Balancing such demands is a major role of business managers

there is a diagram that explains how you need to balance all the people involved in a business

Buyers/customers

those buying your products

Suppliers

those providing products/services to meet your business needs

Human Resources

training, recruiting, how do we keep employees, evaluate employees

True or false: Businesses take in revenue in order to gain a profit while avoiding a loss

true, if a business loses money over time, it will close and put people out of work.

Disadvantages of partnerships

unlimited liability, division of profits, disagreements among partners, difficulty of termination

Disadvantages of Sole Proprietorship

unlimited liability- risk of personal losses, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span

Standard of living

varies in different countries, affected by the level of taxation and regulation