MIE 201 Exam 1

Shamblin, Fall '26, Exam 1 material (Chp 1-3)

What is a business?

Individuals or organizations that try to earn a profit by providing products that satisfy people’s needs

What is profit?

The difference between what a product costs to make and sell a product and what a customer pays for it

What are products? What kind of things does it involve?

Tangible or intangible characteristics sold by a business that provide value or benefits to the consumer.

Includes tangible goods like automobiles, smartphones, clothing, services like a haircut, sports event or ideas like legal advice or intellectual property

What are goals of a business?

• earn a profit

• Maintain social responsibility

• pay all expenses needed to operate

What is a non-profit organization?

An organization that do not share the purpose of earning profits, provide goods and services by engaging in fund-raising and use management, marketing and finance to reach goals

What are stakeholders? What is the difference between primary and secondary stakeholders?

Groups that have a stake in the success and outcomes of a business

• primary: customers, employees, suppliers, investors

• secondary: media, trade associations

Management

planning, organizing, leading and controlling

Marketing

product, price, place, promotion

Finance

activities concerned with obtaining money and using it effectively

Why study business?

• Develop skills and acquire knowledge to prepare for future career

• Understand activities needed to provide goods and services

• become well-informed consumer and member of society

Economics

Study of how resources are distributed for the production of goods and services within a social system

Communism

People own all of the nation’s resources, government controls who gets what.

Critiques: low standard of living, critical shortages, high prices, little freedom

Socialism

Government owns basic industries but individuals own most businesses, allow higher standard of living

Critiques: higher taxes and unemployment

Capitalism

Individuals own and operate majority of businesses, competition + supply/demand determine which good are produced and how they are distributed

Free market vs Modified Capitalism

Free market: economic decisions made without government intervention

Modified capitalism: government intervenes and regulates business to some extent

Mixed economies

No country practices pure capitalism, socialism or communism. Mixed economies include elements from more than one economic system

The Free-Enterprise System

Basic individual and business rights must exists for free enterprise to work

Right to property, to earn profits, determine business operations, choose a career, place to live or locate a business, or what goods/services to purchase

Demand

The number of goods and services that consumers are willing to buy at different prices at a specific time

Supply

The number of products that businesses are willing to sell at different prices at a specific time

Equilibrium price

the price at which the number of products that businesses are wiling to supply equals the amount of products that consumers are willing to buy at a specific point in time

Competition Price

The rivalry among businesses for consumers dollars

Pure competition

one standardized product, prices determined solely by supply and demand

Monopolistic competition

Large # of businesses, differences among goods is small, businesses have some power over price due to marketing (ex. clothing stores)

Oligopoly

Very few businesses selling a product, individual businesses control price (ex. airlines)

Monopoly

One business providing a product, government permits due to the cost of supplying service (ex. Duke energy)

Economic expansion

Economy is growing and people are spending more money, purchases stimulate production of goods and services which stimulate employment

Rapid explanation results in inflation

Economic contraction

Slowdown of the economy characterized by a decline in spending and during which businesses cut back on production and lay off workers

Recession (decline in production, employment and income), Unemployment (% of the population wants to work, unable to find jobs), Depression (unemployment is very high, consumer spending is low, business output reduced)

Gross domestic product (GDP)

Sum of all goods and services produced in a country during a year, does not include profits from companies overseas operations

Budget deficit

The condition in which a nation spends more than it takes in from taxes

• To reduce government must raise taxes or reduce spending

Business ethics

Principles and standards that determine acceptable conduct in organizations.

• applies to the individual/work group

How do organizations with a high ethical culture encourage employees to act?

with integrity and adhere to the business values

What does it mean to “tone at the top”?

Requires top managers to acknowledge their own role in supporting ethics and compliance

• clearly communicate company expectations for ethical behavior all employees

• educate all managers and supervisors in the business about the company’s ethics policies

• train managers and employees on what to do if an ethics crisis occurs

Social Responsibility

An organization should maximize its positive impact and minimize negative impact on society

Ethics

Standards of right and wrong or having to do with human character, conduct, moral duty and obligations to the community

Employees and companies must:

• abide by laws and regulations

• cause no harm through dishonesty

• use company resources fairly and honesty

• use fair competition practices

• give full disclosure of potential harm by a product

What are 5 common ethical issues in business?

Bribes, misuse of company time, abusive and intimidating behavior, misuse of resources, conflict of interest

What are some common organizational misconduct in business?

Favoritism, management lying to employees, conflicts of interest, improper hiring practices, abusive behavior, health violations

What careers might have conflict of interest?

Financial advisors, surgeons, doctors, lawyers, real-estate agents, social media influencers

What questions should we ask to make decisions about ethical issues?

• Are there potential legal restrictions or violations that could result from the action?

• Does your company have a specific code of ethics or policy on the action?

• Is this activity customary in your industry? Are there any industry trade groups that provide guidelines or codes of conduct that address this issue?

• Would this activity be accepted by your coworkers? Will your decision or action withstand open discussion with coworkers and managers and survive untarnished?

• How does this activity fit with your own belief and values?

Four stages of social responsibility of a company

1. financial and economic viability

2. compliance with legal and regulatory requirements

3. ethics, principles and values

4. philanthropic activites

Ethical issues

An identifiable problem, situation or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical

What is the principal cause of unethical behavior in organizations?

Rewards for overly aggressive financial and business objectives

How are ethical issues in business categorized?

By context of relation with abusive and intimidating behavior, conflicts of interest, fairness and honesty, communications, misuse of company resources and business associations

Bribery

Payments, gifts, or special favors intended to influence the outcome of a decision

• benefits an individual or company at the expense of other stakeholders

Misuse of company time

Engaging in activities that are not necessary for the job

Abusive and Intimidating behavior

Can be anything from physical threats, false accusations, profanity, insults, yelling, harshness and unreasonableness to ignoring someone or simply being annoying.

Misuse of Company Resources

Issues might include submitting personal expenses on company expense reports, driving a company vehicle for personal use, or stealing office supplies

Conflict of Interest

When an individual must choose whether to advance the individual’s own personal interests or those of others

Business relationships

The behavior of businesspersons towards customers, suppliers and others in their workplace may also generate ethical concerns.

• ethical behavior within a business involves keeping company secrets, meeting obligations and responsibilities and avoiding undue pressure that may force others to act unethically.

Plagiarism

Taking someone else’s work and presenting it as your own without mentioning the source

How are ethical decisions in an organization influenced?

By individual standards and values, influence of managers and coworkers and the opportunity to engage in misconduct

What are professional codes of ethics?

Formalized rules and standards that describe what the company expects of its employees

Whistleblowing

When a employee exposes an employer’s wrongdoing to outsiders, such as the media r government regulatory agencies

What are the four stages of social responsibility?

1. financial

2. legal compliance

3. ethics

4. philanthropy

Corporate citiizenship

The extent to which businesses meet the legal, ethical, economic and voluntary responsibilities placed on them by their various stakeholders

What is ESG?

Environmental, social and governance framework

• enables the evaluation of a firm’s efforts to operate sustainabiy, contribute to social causes ad engage in responsible and ethical conduct

Sustainability

Conducting activities in such a way as to provide for the long-term well-being of the natural environment, including all biological entities.

International business

Buying, selling and trading of goods and services across national boundaries

Why do nations trade?

Nations and business engage in international trade to obtain raw materials and goods that are otherwise unavailable to them or available elsewhere at a lower price than what they produce

Absolute advantage

Exists when a country is the most efficient producer of a unique item

• Ex. Tequila from Mexico

Comparative advanatge

A country specializes in products that it can supply more efficiently at a lower cost than it can produce other items

• Ex. Wine from France, Oil from Saudi Arabia

Outsourcing

Transferring manufacturing and other tasks to countries where labor and supplies are less expensive

Exporting

Sale of goods and services to foreign markets

• Ex. US exports agricultural products, entertainment and technological products

Importing

The purchase of goods and services from foreign sources

Balance of trade

The difference in value between a countries exports and imports

Trade deficit

The country imports more products than it exports, creating a negative balance of trade

Balance of payments

The difference between the flow of money into and out of a country

What are some economic barriers to consider before doing business with another country?

Economic development and exchange rate

What are some ethical, legal and political barriers?

Laws and regulations, tariffs and trade restrictions, political barriers (NK, Cuba, Iran)

Exchange controls

Restrict the amount of currency that can be bought or sold

• some countries control trade by forcing businesspeople to buy and sell foreign products through a central bank

Quota

Limits the number of units of a particular products that can be imported into a country

Embargo

Prohibits trade in a particular product, generally directed at specific goods or countries and may be established for political, economic, health or religious reasons

What is the most common reason for setting quotas or tariffs?

To prohibit dumping (occurs when a country sells products at less than what it costs to produce them)

What is the GATT?

General agreement on Tariffs and Trade

What is the WTO?

World Trade Organization, international organization dealing with the rules of trade between nation

NAFTA

North American Free Trade Agreement

• Canada, United States and Mexico

• eliminated all tariffs on goods produced and traded among Canada, Mexico and the United States to create a free trade area

• replaced by the USMCA that introduced new policies

EU

European Union

• created to promote trade among its members

• standardized business regulations, import duties and value-added taxes

• long term goals to eliminate trade barriers, improve economic efficiency, stimulate economic growth between EU nations

APEC

Promotes open trade and economic and technical cooperation among member economies in SE Asia

ASEAN

Promotes trade and economic integration among member nations in SE Asia.

• facing challenges in becoming a unified trade block

• Different economic systems and political systems

• No common currency

  • no fully free labor flow

World Bank

Established by industrialized nations to loan money to underdeveloped and developing countries

International Money Fund

Established to promote trade among member nations by eliminating trade barriers and fostering financial cooperation.

• closet thing to an international central bank

Trading Company

Buys goods in one country and sells them to buyers in another country

• handle all activities required to move products from one country to another, including consulting, marketing research, advertising, insurance, product research and design, warehousing and foreign exchange services to interested companies

• Can produce and manufacture products or buy finished products from national producers to earn a profit

Licensing

A trade arrangement in which one company allows another company to use its company name, products, patents, brands, trademark, raw materials and/or production processes in exchange for a fee or royalty

Ex. Warner Bros, Hasbro, Mattel

Franchising

A form of licensing in which a company agrees to provide a franchise the name, logo, methods of operation, advertising, products, and other elements associated with the business.

• Ex. Dunkin, Hampton by Hilton, Anytime Fitness

Contract Manufacturing

Occurs when a company hires a foreign company to produce a specified volume of the firm’s product to specification

• final product carries the domestic firm’s name

Offshoring

The relocation of a business process by a company, or a subsidiary, to another country

• company retains control of the process

• may choose offshoring for lower wages, skilled labor or taking advantage of time zone differences

Joint Venture

A company that wants to do business in another country may set up a joint venture by finding a local partner to share costs and operation of the business

Strategic Alliance

A partnership formed to create competitive advantage on a worldwide basis

Companies that want more control, willing to invest considerable resources might consider..?

Direct investment

• development and operation of new facilities or purchase of all or part of an existing operation in a foreign country

Multinational Corporation

Highest level of international business involvement, a corporation operates on a worldwide scale without significant ties to any one nation or region

Multinational Strategy

Customizing their products, promotion and distribution according to cultural, technological, regional and national differences

Global Strategy (Globalization)

Standardized products for the whole world as if it were a single entity

• ex. American clothing, movies, music and cosmetics