KSB 100 Exam 1 (Ch 1-7)

industry

breaks down sectors and then breaks down into businesses

types of Revenue Streams

- Direct to consumer sales

- Advertising revenue

- Subscription models

- Licensing

profit

selling a good or service for more than it cost to make/market it

non-profit organizations

a business not for money, but for social/educational services

for-profit organizations

A business that makes profit but also has a social mission

business participants

- owners

- customers

- managers

- operation manager

- accountants

- financial managers

business activities

- management

- operations

- marketing

- accounting

- finance

operations

converting resources into goods and services

marketing

decides on how to best promote product and keep customers

accounting

prepare financial statements or reports on cost of material used in production process

finance

planning for, obtaining, and managing a company's funds

external forces that influence businesses

politics, economy, social, technology, legal, environment, consumer trends, and public pressure to act as good citizens

how does government project itself into businesses?

statutes, departments (labor debt, energy debt, etc), agencies (CSC, federal communications commission, etc), taxes, common law courts, executive orders

how do businesses respond to government's role in businesses?

trade associations, lobbying (giving into government), campaign donations, taxes, or adjust and move on

external social factors that affect a business

age (difference of how businesses/industries will market to different generations and what products serve different generation's needs)

external environmental factors that affect a business

climate, weather, pollution, and availability of oil, gas, etc

- ex: decrease in fuel prices might better affect a hotel industry because more people will travel because gas is cheaper

external technology factors that affect a business

technology effects how we ship (ex: amazon), how get around (gps), and the way we live at home (smart fridges)

corporate social responsibility (CSR)

- donating money (philanthropy)

- treating employees fairly (ethical labor practice)

- reducing carbon footprint (environmental)

- attend volunteer events

economics

study of the production, distribution, and consumption of goods and services

households role in economy

provide resources (factors of production) and consume goods and services

business' role in economy

buy resources and produce and sell goods and services

economic System

a society (households, businesses, and government) makes decisions about distributing resources to produce products and about distributing those products

pure capitalism

businesses are privately owned

pure socialism

government owned business

- ex: postal office, utilities, banking, and healthcare are government owned

mixed market economy

relies on both markets and the government to allocate resources (this is the US economic system)

perfect competition

many consumers buying a standardized product from numerous small businesses

demand

quantity of a product that people are willing to buy depends on its price

demand curve

shows the quantity of a product that'll be demanded at diff prices

supply

quantity of a product that sellers are willing to sell at various prices

supply curve

ex: shows the quantity of apples that farmers would be willing to sell at different prices, regardless of demand

equilibrium price

price where buyers are willing to buy at the same amount sellers are willing to sell

monopolistic competition

many sellers offer differientiated products (products that differ slightly but serve similar purposes)

- ex: pepsi and coke

oligopoly (fewer sellers)

each seller supplies a large portion of all the products sold in the market place

- ex: automobiles and airplanes

monopoly

one seller in the market

natural monopolies

inhibit competition but are legal because they're important to society (include public

utilities, such as electricity and gas suppliers)

legal monopoly

arises when a company receives a patent giving it exclusive use of an invented product or process for a limited time, general 20 years

3 goals that all economies share

- growth

- high employment

- price stability

GDP (gross domestic product)

market value of all goods and services produced by the economy in a given year (if gdp rises, economy grows. if gdp decreases, economy contracts)

recession

slowdown in economic activity (3-5 years)

depression

if recession lasts a long time (a decade or so)

full employment

occurs when everyone who wants a job has one (this leads to more spending money for goods and services which increases economy)

unemployment rate

percentage of labor force that's unemployed and actively seeking for work

price stability

average of prices for goods and services don't change or change very little

inflation

when overall prices go up

deflation

when overall prices go down

CPI (consumer price index)

measures inflation by determining the chagnge in prices of a hypothetical basekt of goods brought by a typical household

economic indicator

statistic that offers valuable info about the economy

logging indicators

statistics that report the status of the economy a few months in the past

leading indicators

predicts the status of a economy 3-12 months in the future

monetary policy

government exerts its power to regulate the money supply and level of interest rates

fiscal policy

uses its powers to tax and to spend

national debt

cumulative sum of deficits, money owned by the federal government

import

when countries buy goods and services from other countries

export

when countries sell their products ot other countries

absolute advantage

a nation has this when they are the only source of a product or can make more of product with using the same or fewer resources than other countries (climate and soil can change this for a nation)

comparative advantage

when a country can produce a product at a lower oppurtunity cost compared to another nation

oppurtunity costs

a country specializes in a product, it must sacrifice the production of another product

balance of trade

subtracting the value of its imports from the value of its exports

trade surplus

country sells/exports more products than it buys

trade deficit

country buys/imports more products that it sells (the US has this)

balance of payments

difference between the total flow of money coming into a country and the total of money going out

international licensing agreement

allows a foreign company to sell the products of a producer in exchange for royalty fees

- ex: mcdonald's changes their menu or products to fit the demand in a specific country

international franchise

a company grants a foreign company the rights to use its brand name and sells its products/services

international contract manufacturing/outsourcing

when compnaies manufacture their products in countries where labor costs are lower

strategic alliance

agreement between 2 companies (or a company and a nation) to pool resources to achieve business goals that benefit both partners

foreign direct investment

formal establishment of business operations on foreign soil

foreign subsidary

Independent company owned by a foreign firm (called its parent)

multinational corporation (MNC)

company that operates in many countries

joint venture

business arrangement in which 2 or more parties agree to pool their resources for the purpose of accomplishing a specific task

offshoring

a company sets up facilities in a foreign country that replaces US manufacturing facilities to produce goods that'll be sent back to the US for sale

challenges for successful international business deals are

- language

-time and sociability ("time is money" isn't universal)

- different communication styles (body language, voice pitch, greetings, etc)

- laws and regulations

- understanding local language and market

pros of protectionsim, tariffs, and subsidies

- protects specific industries

- protects new/struggling industries

- tariff in one country offsets subsidy in another

- shield industries vital to national defense

cons of protectionsim, tariffs, and subsidies

- restricts free trade (countries can't compete freely)

- creates unleveled playing field

exchange rate

tells you how much 1 currency is worth relative to another currency

if foreign currency goes up, relative to US dollar, then americans pay...

more for goods and services

if foreign currency goes down, relative to US dollar, then americans pay...

less for goods and services

foreign corrupt practices act (FCPA)

prohibits districution of bribes and other favors in the conduct of business

subsidies

a benefit given to a business by the government to remove some type of burden

trade control

policies that restrict free trade

protectionsim

use of trade control

tariffs

taxes paid by exporter of select goods, such as steel, to a foreign country (used by home countries that produce A to stop other countries that produce A, but sell it to the consumers of the homes country for cheaper by putting a tax on it)

quota

imposes limits on the quantity of a good that can be imported over a period of time (used to protect industries, mostly new industries or those facing competitive pressure, from foreign firms

embargo

for economic/political reasons, bans the import or export of certain goods to or from a country

dumping

practice of selling exported goods, below the price that the producers would normally charge in their home market (creates unfair competition for domestic industries)

general agreement on tariffs and trade (GATT)

encouraged free trade by regulating and reducing tariffs and by providing a forum resolving trade disputes

world trade organization (WTO)

encourages global commerce and lower trade barriers, enforce international rules of trade, and provides a forum of resolving disputes

international monetary fund (IMF)

loans money to countries with troubled economies

world bank

source of economic assistance for poor and developing countries

trading blocs

groups of countries join together to allow goods and services to flow without restrictions across their mutual borders

- ex: us-mexico-canada agreement and European union (27 european countries that eliminated trade barriers)

why do nations trade?

diversify supply chain, access to lower costs for goods and services, and access to goods and services in short supply in home market

entrepeneur

someone who sees a business opportunity and assumes the risk of creating and running a business to take advantage of it

traits of entrepreneur

- innovative

- organized

- leader/ visionary

- good networker

- high level of confidence

- adaptable

advantages of working in a large business

- better job benefits

- stability

- skilled employees you can learn from

- extensive training

disadvantages of working in a large business

- don't make your own decisions

- often just a number not a name

- structure creates internal tension

- more politics and regulations

4 fears that prevent people from starting a business

- not enough money to start up

- not getting a secure paycheck on a regular basis

- some wonder if they can compete with other businesses

- lack of ideas of what business to start

small business

independently owned and operated, organized for profit, and isn't dominant in its field

goods producing sector

all business that produce tangible goods (mainly involved with manufacturing, construction, and agriculture)

service producing sector

all businesses that provide services, but don't make tangible goods (80% of small business are in this sector)

advantages of small businesses

- independence (you're your own boss)

- lifestyle ( you decide when and where you want to work)

- financial rewards (you may make more money than if employed by someone else)

- learning oppurtunities (involvment in all aspects of the business so you can learn various business functions)

- creative freedom and personal satisfaction

disadvantage of small businesses

- financial risk

- stress

- time commitment

- undesirable duties