BUS 110 - Chapters 1-4 Test

business

A _____ is any activity that seeks to provide goods and services while operating at a profit

Goods

Tangible products such as food, clothes, computers, appliances, etc.

Services

Intangible products such as health care, recreation, tourism, education, etc.

Entrepreneur

A person who risks time and money to start a business

Revenue

The total amount of money a business takes in over a period of time by selling goods and services

Profit

The amount of money a business earns above and beyond what it spends for salaries and other expenses needed to run the operation.

Risk

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

Standard of living

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

Quality of life

The general well-being of a society in terms of its political freedom, natural environment, education, health care, safety, amount of leisure, and rewards that add to the satisfaction and joy that goods and services provide.

Stakeholders

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

Outsourcing

Contracting with other companies (often in other countries) to do some or all of the functions of a firm.

Nonprofit Organization

An organization whose goals do not include making a personal profit for its owners or organizers.

1 - Land

2 - Labor

3 - Capital

4 - Entrepreneurship

5 - Knowledge

5 Factors of Production

Business environment

Surrounding factors that either help or hinder the development of business.

Productivity

The amount of output you generate based on the amount of input

Database

An electronic storage file for information

Empowerment

Giving employees and subordinates responsibility and some authority

Economics

The 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 the operation of a nation's economy as a whole

Microeconomics

Looks at the behavior of people and organizations in markets for particular products or services

Resource development

The study of how to increase resources (say, by getting oil and gas from shale and tar sands) and create conditions that will make better use of them (like recycling and conservation)

Adam Smith

Author of "...Wealth of Nations" and coined the term "Invisible Hand"

Invisible hand

Self-directed gain that has economic benefits for all

State capitalism

A combination of freer markets and some government control

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

Market price

The price toward which the market will trend, determined by supply and demand

Perfect competition

Exists when there are many sellers in a market and none is large enough to dictate the price of a product

Oligopoly

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

Ex: Tobacco, gasoline, cars

Monopoly

Occurs when one seller controls the total supply of a product or service, and sets the price

Brain drain

The loss of best and brightest people to other countries

Communism

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

Free market economies

When the market largely determines what goods and services get produced, who gets them, and how the economy grows, ie, capitalism

Command economies

When the government largely decides what goods and services will be produced, who gets them, and how the economy will grow, ie, socialism

Mixed economies

Exist where some allocation of resources is made by the market and some of the government

GDP (Gross Domestic Product)

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

Gross output

A measure of total sales volume at all stages of production

Inflation

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

Disinflation

Occurs when the price increases are slowing (the inflation rate is declining)

Deflation

Prices are declining

Stagflation

Occurs when the economy is slowing but prices are going up anyhow

Producer Price Index (PPI)

Measures prices at the wholesale level

Business cycles

The periodic rises and falls that occur in economies over time (recessions, recovery, depression)

Recession

TWO OR MORE consecutive quarters of decline in the GDP

Depression

A severe recession, usually accompanied by deflation

Fiscal policy

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

National debt

The sum of government deficits over time

Keynesian economic theory

The theory that a government policy of increasing spending could stimulate the economy in a recession

Monetary policy

The management of the money supply and interest rates by the Federal Reserve

Economic boom - recession - depression - recovery

The 4 stages of the Business Cycle

Importing

The buying of products from another country

Exporting

Selling products to another country

Free trade

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

Comparitive advantage theory

States that a country should sell to other countries those products it produces most effectively and efficiently, and buy from other countries those products it cannot produce as efficiently

Absolute advantage

A country has ______ ______ if it can produce a specific product more efficiently than all other countries

Balance of trade

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

Trade surplus

Occurs when the value of a country's exports exceeds that of its imports

Trade deficit

Occurs when the value of a country's exports is less than its imports

Balance of payments

The difference between money coming into a country (from exports) and money leaving the country (for imports)

Dumping

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

Licensing

The right to manufacture its product or use its trademark to a foreign company

Franchise

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

Contract manufacturing

Foreign company produces private-label goods to which a domestic company then attches its own brand name or trademark

Joint venture

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

Strategic alliance

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

Foreign Direct Invesment

The buying of permanent property and businesses in foreign nations

Foreign subsidiary

The most common form of Foreign Direct Investment where a company in a foreign country is owned by another company

Multinational corporation

A company that manufactures and markets products in many different countries and has multinational stock

Sovereign wealth funds

Investment funds controlled by governments holding investment stakes in foreign companies

Exchange rate

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

Devaluation

Lowers the value of a nation's currency relative to others

Countertrading

A complex form of bartering in which several countries each trade goods or services for other goods or services

Trade protectionism

The use of government regulations to limit the import of goods and services

Tariffs

Taxes on imports, making imported goods more expensive to buy

Import quota

Limits the number of products in certain categories a nation can import

Embargo

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

General Agreement on Tariffs and Trade (GATT)

A global forum for reducing trade restrictions on goods, services, ideas, and cultural programs

World Trade Organization (WTO)

Established by the Uruguay Round to mediate trade disputes among nations, replaced GATT

Common Market

Also called a "trading bloc", is a regional group of countries with a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members

Compliance-based ethics codes

Emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers

Integrity-based ethics codes

Define the organization's guiding values, create an environment that supports ethically sound behavior, and stress shared accountability

Whistleblowers

Insiders who report illegal or unethical behavior

Corporate social responsibility

The concern businesses have for the welfare of society, not just for their owners

Social audit

A systematic evaluation of an organizations's progress toward implementing socially responsible and responsive programs

China

Which country is the largest exporter in the world?

19 trillion

U.S. debt?

Brazil, Russia, India, China

What countries make up BRIC? (Emerging markets)

1 - Licensing

2 - Exporting

3 - Franchise

4 - Joint venture

5 - Strategic alliance

6 - Foreign direct investment

6 ways to enter a foreign market from least riskiest to riskiest?

4.1% - Actually closer to 10%

Unemployment rate