foundations of commerce module 1

What is a business?

A complex and dynamic organizational system, existing in multiple environments, that creates value by strategically allocating and managing resources to meet customers' needs and achieve organizational objectives.

What is an organization?

A social collective with a recognized boundary, coordinating systems, existing in embedding environments, and engaging in purposeful, goal-directed activities.

What are the fundamental concepts of a business?

Complex and dynamic system; multiple environments; creates value; strategically allocates resources; meets customer needs; achieves organizational objectives.

Why do organizations organize?

Division of labor; leverage large-scale technology; power and control; legal benefits.

What is division of labor?

Breaking work into specialized tasks and assigning people to specific tasks.

What are the benefits of division of labor?

Durability, reliability, accountability, specialization, and increased efficiency.

Why is large-scale technology a reason to organize?

Organizations allow businesses to use technology and resources at a larger scale.

What are legal benefits of organizations?

Contracts, ownership, liability, and separation of the legal entity from individuals.

What does it mean that businesses do not exist in a vacuum?

Businesses are affected by their environments and also affect their environments.

What are the two perspectives on studying businesses?

Objectivist and subjectivist.

What is the objectivist perspective?

Understanding organizations through quantitative measurement and data.

What is the subjectivist perspective?

Understanding organizations through interpretation, sensemaking, and a humanistic viewpoint.

What are the three types of economic systems?

Planned, market, and mixed/hybrid.

What is a planned economy?

The government or community owns most or all factors of production and centrally controls the economy.

What is a market economy?

Individuals own and control factors of production.

What is a mixed/hybrid economy?

A combination of planned and market economic systems.

What are the four types of competition?

Perfect competition, monopolistic competition, oligopoly, and monopoly.

What is perfect competition?

Many small firms compete to provide similar or identical products.

What is monopolistic competition?

Many buyers and sellers compete with differentiated products.

What is an oligopoly?

A market dominated by a few major sellers or providers.

What is a monopoly?

A market with one seller and little or no direct competition.

What are major economic indicators?

GDP, deficit/debt, inflation, and unemployment.

What is the difference between a deficit and debt?

A deficit is a yearly shortfall; debt is the accumulated total of past deficits.

What are the major types of organizations?

For-profit, nonprofit, social enterprise, governmental agency, and social organization.

What is a for-profit organization?

An organization whose goal is to generate and retain profit.

What is a nonprofit organization?

An organization that generates money but uses it to support its mission rather than distribute profits to owners.

What is a social enterprise?

An organization combining business activity with social goals.

What is a governmental agency?

An organization operated by the government.

What is a social organization?

An organization formed around social activities or interests, such as sports or fraternities.

What is a sole proprietorship?

A business owned and operated by one person.

What are the advantages and disadvantages of a sole proprietorship?

Maximum flexibility and maximum personal risk.

What is a partnership?

A business owned and operated by two or more partners.

What are the two main types of partnerships?

General and limited partnerships.

What is a general partnership?

Partners share management and responsibility for the business.

What is a limited partnership?

Some partners have limited management involvement and liability.

What is a private corporation?

A corporation owned privately, potentially by one person or a family.

What is a public corporation?

A corporation whose stock is sold to the public.

What is a board of directors?

A group responsible for governing and directing a corporation on behalf of shareholders.

What are shareholders?

Owners of shares in a corporation.

What is a joint venture?

Two or more companies create or cooperate through a new entity for a specific project.

Why are joint ventures used?

To combine resources for large, risky, or complex projects.

What is a strategic alliance?

Two or more businesses cooperate to extend their capabilities while remaining separate organizations.

What is a cooperative?

An organization in which businesses or individuals join forces and share certain resources or tasks.

What did Socrates contribute to business thought?

Questions about leadership and whether leadership is transferable.

What did Sun Tzu contribute to business thought?

The importance of terrain, information, unpredictability, and flexible strategies.

What did Adam Smith contribute to business thought?

Division of labor and specialization.

What was the Industrial Revolution's impact on business?

Machinery and technology contributed to factories, worker specialization, and professional management.

What did Karl Marx contribute to business thought?

Analysis of capital, managerial control, labor subordination, alienation, and worker resistance.

What is labor alienation?

The separation of workers from the work they perform.

What is scientific management?

The use of scientific methods to break down and redesign jobs for maximum efficiency.

Who promoted scientific management?

Frederick Winslow Taylor.

What are the main ideas of scientific management?

Break jobs into components, redesign work scientifically, and maximize efficiency.

What is bureaucracy?

A formal organizational system based on rules, hierarchy, expertise, and defined offices.

Who developed the theory of bureaucracy?

Max Weber.

What are Weber's three sources of authority?

Traditional, charismatic, and rational-legal authority.

What is rational-legal authority?

Authority based on formal rules, laws, and established positions.

What are characteristics of Weberian bureaucracy?

Formal rules, hierarchy of offices, career paths, expertise, and full-time managers.

What did Mary Parker Follett emphasize?

Context, situations, humanism, and treating people as human beings rather than machines.

What were the Hawthorne Studies?

Studies examining how workplace conditions and observation affected worker productivity.

What did the Hawthorne Studies demonstrate?

Attention and observation can affect performance, and informal standards influence workers.

Who developed bounded rationality?

Herbert Simon.

What is bounded rationality?

Decision-making is limited by information, alternatives, and prediction ability.

What is satisficing?

Making the best decision possible given available information and limitations.

What is Open Systems Theory?

The view that organizations are systems that exist in and respond to dynamic environments.

Who developed Open Systems Theory?

Katz and Kahn.

What is the Open Systems model?

Inputs → Throughputs → Outputs → Feedback.

What are organizational inputs?

Labor, capital, materials, and infrastructure.

What are throughputs?

The processes that transform inputs into outputs.

What are organizational outputs?

Products and services produced by the organization.

What is feedback in an open system?

Information from outputs and the environment that influences future actions.

What is an organizational boundary?

The boundary distinguishing what is inside the organization from its external environment.

What is differentiation?

The movement toward specialization as an organization grows.

What is entropy?

The tendency of a system toward disorder and the need for resources or energy to maintain it.

What is homeostasis?

The tendency of a system to maintain a steady, balanced state.

What is equifinality?

The idea that there are multiple ways for a system to adapt and survive.

What is an environment?

An entity outside an organization's boundary that provides inputs, absorbs outputs, or influences the organization.

What are general environments?

Environmental factors that affect organizations broadly.

What are the general environments?

Social/demographic, cultural, legal, political, economic, trade, technological, and physical.

What are specific environments?

External groups directly connected to a particular organization.

What are the specific environments?

Customers, distributors, unions/labor, competitors, and government agencies/regulators.

What is environmental complexity?

The number and interconnectedness of environmental factors.

What is environmental dynamism?

The speed at which the environment changes.

What is environmental richness?

The availability of resources in the environment.

What determines environmental uncertainty?

Complexity, dynamism, and richness.

What environment creates the most uncertainty?

High complexity, high dynamism, and low resource availability.

What environment creates the least uncertainty?

Low complexity, low dynamism, and high resource availability.

What is ethics?

A set of moral principles or values defining right and wrong for a person or group.

What is the key difference between legal and ethical?

Legal asks what you can do; ethical asks what you should do.

What are sources of ethics?

Human history, laws, religion/philosophy, professions, and society/culture.

Why might people behave unethically?

Individual values, self-interest, peer/external pressure, and rewards for unethical behavior.

What are examples of unethical behavior toward employees?

Unfair pay, bullying, and nepotism.

What are examples of unethical behavior toward an organization?

Conflicts of interest and misuse of resources.

What are examples of unethical behavior toward others?

Misleading advertising, hiding mistakes, errors, and bribery.

Does unethical always mean illegal?

No.

How can leaders create an ethical organization?

Model ethical behavior, create controls and codes, and build an ethical culture.

What is Buffett's newspaper test?

Would you be comfortable if your action appeared in the newspaper?

What is a shareholder approach?

An approach focused on maximizing profits for owners/shareholders.

What is a stakeholder approach?

An approach focused on serving the interests of parties affected by the organization.

Who are internal stakeholders?

Leaders, employees, and owners/shareholders.

Who are external stakeholders?

Customers, suppliers/distributors, and the community.