BMGT110F Final - University of Maryland

Goods

tangible

Services

intangible

Entrepreneur

Person who risks time and money to start business

Profit

Amount of money a business earns above what it spends on costs and expenses to run the operation.

Revenue

Total amount of money a business generates

Loss

Expenses > revenue

Standard of Living

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

Quality of Life

The general well-being of a society in terms of its political freedom, education, health care, safety, etc.

Stakeholders

All the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address

Examples of Stakeholders

Stockholders, customers, surrounding community, environmentalists, retailers, employees, government leaders, suppliers, media, and bankers

Outsourcing

Contracting with other companies (often in other countries) to do some or all functions of a firm (like production or accounting)

Insourcing

Foreign companies setting up facilities in other countries (i.e. Korea-based Hyundai designs cars in California, operates in Detroit, and produces in Montgomery)

Nonprofit Organization

Organization whose goals do not include making a personal profit for its owners or organizers

Five Factors of Production

Land, labor, capital, entrepreneurship, knowledge

Five Elements in the Business Environment

1. The economic and legal enviornment
2. The technological environment
3. The competitive environment
4. The social environment
5. The global business environment

Effectiveness vs Efficiency

Effectiveness means producing the desired result. Efficiency means producing goods and services using the least amount of resources

Productivity

Amount of output you generate given the amount of input, such as the number of hours you work

E-commerce

Buying and selling of goods online

Demography

Statistical study of the human population with regard to its size, density, and other characterisitcs such as age, race, gender, and income

Globalization

World trade

Economics

Study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals

Macroeconomics

Looks at entire nation's economy

Microeconomics

Looks at individual firms and organizations in markets

Resource Development

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

The invisible hand

Describes the process that turns self-directed gain into social and economic benefits for all

Capitalism

All or most factors of production and distribution are privately owned by individuals for profit

4 Basic Rights of Capitalism

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

How are prices determined in a free market?

By buyers and sellers

Supply

The quantities of products manufacturers or owners are willing to sell at different prices at a specific time

Demand

The quantity of products that people are willing to buy at different prices at a specific time

Perfect competition

Many sellers, no diversity in product (wheat)

Monopolistic competition

Many sellers, similar products (fast food)

Oligopoly

Few sellers (car companies)

Monopoly

One seller controls total supply of a product (electric companies in cities/states)

Socialism

Even distribution of wealth and profits among the people. Benefit is social equality

Communism

Government makes all economic decisions and owns all factors of production. Cuba, North Korea, China

Free-Market Economies

Market largely determines what goods and services get produced, who gets them, and how the economy grows

Command Economies

Government largely determines what goods and services will be produced, who gets them, and how the economy grows

Mixed Economies

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

GDP

Total value of final goods and services produced in a country in a given year. Includes everything produced inside country's border.

Unemployment Rate

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

Fritctional Unemployment

People who have quit work and haven't found a new job yet

Structural Unemployment

Unemployment caused by change in firm or job skills (robots taking jobs)

Cyclical Unemployment

Unemployment due to recession

Seasonal Unemployment

Demand for labor varies over the year

Inflation

General rise in prices over time

Disinflation

Price increases are slowing (the inflation rate is declining)

Deflation

Prices are declining

Stagflation

Economy is slowing but prices are going up anyhow

Consumer Price Index

Measurement of inflation. Based on basket of goods and services that represents typical consumption patterns.

Business Cycles

Periodic rises and falls that occur in economies over time

Recession

2 or more consecutive quarters of decline in the GDP

Depression

Severe recession

Fiscal Policy

Federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending

Monetary Policy

Management of money supply and interest rates by the Federal Reserve Bank

Importing

Buying products from another country

Exporting

Selling products to another country

Comparative Advantage

Some countries produce more efficiently and effectively in a specific field or niche

Absolute Advantage

If a country can produce a specific product more efficiently than all other countries

Balance of Trade

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

Trade surplus

Value of a country's exports exceeds that of its imports

Trade deficit

Value of a country's exports is less than its imports

Balance of Payments

Difference between money coming into a country and money leaving the country

Franchising

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

Licensing

Giving the right to manufacture a company's product or use its trademark to a foreign company for a fee

Joint Venture

partnership in which two or more companies join to undertake a major project

Exchange Rate

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

Tariff

Tax on imports

Quota

Limits number of products a nation can import

Embargo

Complete ban on the import or export of a certain product / the stopping of all trade with a particular country

Ethics

Society's accepted standards of moral behavior

Compliance vs Integrity-Based Ethics Codes

Compliance is based solely on law and policy, whereas integrity is also based on internal standards and a moral compass

Whistleblowers

Insiders who report illegal or unethical behavior

Insider Trading

Uses private company information to further an insider's own fortunes or those of their family and friends

Social Audit

Systematic evaluation of an organization's progress toward implementing socially responsibly and responsive programs

Sole Propietorship

A business owned and managed by one person

Corporation

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

Limited Liability Company (LLC)

a form of business ownership that offers both limited liability to its owners and flexible tax treatment

S Corporation

Unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships

Vertical Merger

Joins two firms operating in different stages of related businesses

Horizontal Merger

Joins two firms in the same industry and allows them to diversify or expand their products

Intrapreneurs

Creative people who work as entrepreneurs within corporations

Angel Investors

Private individuals who invest their own money in potentially hot new companies before they go public

Crowdfunding

GoFundMe, Kickstarter

Venture Capitalists

They ask for a stake in your company in exchange for the cash to start your business

Management

Process used to accomplish organizational goals through planning, leading, and controlling people and other organizational resources

Vision

Broad explanation of why the organization exists and where it's trying to go

Mission Statement

Outlines organization's fundamental purposes

Goals vs Objectives

Goals are broad, long-term accomplishments an organization wishes to attain whereas objectives are specific, short-term statements detailing how to achieve the organization's goals

Autocratic Leadership

Making managerial decisions without consulting others

Democratic Leadership

Managers and employees working together to make decisions

Free-Rein Leadership

Managers set objectives and employees are free to do whatever is appropriate to accomplish those objectives

Economies of Scale

Cost of goods descrease as output increases

Centralized Authority

Decision making is centralized at the top level of management

Decentralized Authority

Decision making is delegated to lower-level managers and employees more familiar with local conditions than headquarters management could be

Span of Control

Optimal number of employees a manager supervises or should supervise

Tall Organizational Structure

characteristic of centralized companies with multiple layers of management and a small span of control

Flat Organizational Structure

fewer layers of management and a broad span of control

Departmentalization

Divides organizations into separate units (design, production, accounting, etc.)

Line Organization

Direct 2-way lines of responsibility, authority, and communication running from the top to the bottom of the organization with everyone reporting to only one supervisor