Guelph University MGMT*1000 Term Test

Business

An organization that strives for a profit by providing goods and services desired by its customers.

Goods

Tangible items manufactured by businesses (e.g., laptops).

Services

Intangible offerings that cannot be held, touched, or stored (e.g., physicians, airlines, car washes).

Tangible

Something physical that can be touched.

Intangible

Something non-physical that cannot be touched.

Standard of Living

Measured by the output of goods and services people can buy with the money they have.

Quality of Life

The general level of human happiness based on factors such as life expectancy, educational standards, health, and leisure time.

Revenue

The money a company receives by selling goods or providing services.

Costs

Expenses incurred (e.g., rent, salaries, supplies, transportation).

Profit

Money remaining after all costs are paid.

Loss

Occurs when costs are greater than revenue.

Risk

The potential to lose time and money or otherwise fail to accomplish organizational goals.

Not-for-Profit Organization

An organization that exists to achieve a goal other than the usual business goal of profit.

Goals (Not-for-Profit)

Goals that are not profit-focused (e.g., feeding the poor, preventing drunk driving).

Competition (Not-for-Profit)

They compete for talented employees, limited volunteer time, and donations.

Management (Not-for-Profit)

Successful not-for-profits apply business principles and are concerned with strategy, budgeting, measuring performance, encouraging innovation, and fostering an ethical workplace.

Economics

The study of how individuals, businesses, governments, and nations allocate their limited resources to satisfy unlimited wants and needs.

Resources

Inputs used to produce output, also called the Five factors of production.

Five Factors of Production

1. Land and other natural resources (providing raw materials). 2. Labour (physical and mental effort). 3. Capital (buildings, equipment, vehicles, cash). 4. Entrepreneurship (skill, drive, and creativity needed to bring other resources together). 5. Knowledge.

Circular Flow of Inputs and Outputs

Illustrates the dual roles of households and businesses: Households provide factors of production and consume goods/services, while businesses buy resources and produce/sell goods/services.

Economic Systems

Major economic systems fall into two broad categories: free market (capitalism) and planned economies (communism and socialism).

Mixed Market System

Many countries use this system, which differentiates based on whether the government or individuals decide how to allocate resources, what goods/services to produce, how they are produced, and how they are distributed.

Capitalism

Based on competition and private ownership of the factors of production. Guarantees the right to property, profit (main incentive), free choice, and competition.

Communism

Government owns virtually all resources and controls all markets; economic decision-making is centralized. Historically resulted in lower productivity and shortages due to tight controls.

Socialism

Basic, critical industries (e.g., transportation, utilities) are owned by the government or strongly controlled by it. Provides citizens with higher levels of services, resulting in higher taxes.

Mixed Economic Systems

Incorporates elements from more than one system. The U.S. leans capitalist but uses government policy for stability. Canada is a mixed economy, primarily free market, but the government controls some basic services and provides socialist characteristics.

Gross Domestic Product (GDP)

The market value of all goods and services produced domestically in a given year (excluding intermediate products).

GDP per capita

GDP divided by households; sometimes seen as a better performance indicator.

Business Cycle

Results from economic ups and downs (expansion and contraction).

Prosperity

Economy expands, unemployment is low, incomes rise.

Recession

A slowdown where GDP decreases and unemployment rises; defined by GDP falling for two consecutive quarters.

Recovery/Expansion

Economy starts growing again.

Depression

A prolonged recession where unemployment remains very high and production is severely curtailed.

Unemployment Rate

Percentage of the labour force unemployed and actively seeking work.

Full Employment

Achieved when about 95 percent of those wanting to work are employed.

Price Stability

Occurs when average prices change very little.

Inflation

When the overall price level goes up.

Consumer Price Index (CPI)

Tracks price changes of a basket of household goods.

Lagging Economic Indicators

Report the status of the economy a few months in the past (e.g., average length of unemployment).

Leading Economic Indicators

Predict the status three to twelve months into the future (e.g., new claims for unemployment insurance, housing starts).

Monetary Policy

Manages the money supply and interest rates.

Contractionary Monetary Policy

Decreases the money supply and raises rates to fight inflation.

Expansionary Monetary Policy

Increases the money supply and lowers rates to counter recession.

Fiscal Policy

Involves spending and taxation to manage the economy.

National Debt

A budget deficit results in borrowing; Canada's total national debt is over $1.430 trillion.

Technology

The application of science and engineering to solve production and organizational problems.

Productivity

The amount of goods and services one worker can produce.

Technological Innovation

A source of competitive advantage.

AI (Artificial Intelligence)

Used in virtual assistants, autonomous vehicles, and generative AI applications (e.g., ChatGPT).

Extended Reality (XR)

Supersets Augmented Reality (AR), Virtual Reality (VR), and Mixed Reality (MR), used in entertainment, sales, and education.

Breath Testing

Non-invasive collection of health data for disease control.

Green Hydrogen

Produced by zapping water with cheap solar/wind power, offering a clean replacement for fossil fuels.

Agricultural Drones

Used by farmers with GPS and sensor technology to improve crop treatment and expose issues with irrigation or soil variation.

Political and Legal Environment

Characterized by the amount of government activity, the types of laws passed, and political stability.

Regulations

Cover competition, minimum wages, environmental protection, and copyrights/patents.

E-commerce Issues

Key legal concerns include liability, intellectual property laws, and taxation of sales transactions.

Social Factors

Attitudes, values, ethics, and lifestyles that influence purchase decisions.

Demographic Factors

Age, gender, race, and location that are crucial for defining markets and workforce composition.

Generations

Businesses target different generations, such as Millennials, Generation X, and Baby Boomers.

Workforce Diversity

The growing minority population and immigration emphasize the value of hiring a diverse workforce.

Perfect Competition

Many small sellers offer a standardized product; no single seller can affect the price.

Demand

The quantity buyers are willing to purchase; typically increases as price falls.

Supply

The quantity sellers are willing to sell; typically increases as price rises.

Equilibrium Price

The intersection of supply and demand, where quantity supplied equals quantity demanded.

Monopolistic Competition

Many sellers offer differentiated products; companies have limited control over price.

Oligopoly

Few sellers, each supplying a large portion of the market; entry barriers are usually high.

Monopoly

Only one seller in the market; natural monopolies are legal but regulated.

Porter's Five Forces Analysis

An analytical tool used to identify the profit potential within an industry.

Rivalry among Competitors

Competitors use moves like advertising and price cuts; high rivalry reduces profit potential.

Rivalry

Fierce competition when competitors are numerous, industry growth is slow, products are undifferentiated, fixed costs are high, or exit barriers are high.

Threat of Potential New Entrants

Firms that might join the industry, increasing competition and reducing profit potential.

Threat of Substitutes

Offerings from other industries that fill similar needs, placing limits on pricing and profit potential.

Power of Suppliers

Suppliers provide inputs; powerful suppliers can demand higher prices, cutting into profit margins.

Power of Buyers

Buyers purchase goods/services; powerful buyers can force competitors to lower prices, weakening profit margins.

Production

The creation of products and services, converting inputs into outputs.

Operations Management

Managing the conversion process of production efficiently, emphasizing operational efficiency, cost control, and quality.

Supply Chain

The process of transforming a product idea into a finished product, converting raw materials into goods or services efficiently.

Value Chain

Identifies how value is added throughout the creation of the final good/service and relates operational activity costs to the final sale price.

International Trade

Driven by the fact that no national economy produces all the goods and services its people need.

Absolute Advantage

A nation is the sole source of a product or can produce more of it using fewer resources than others.

Comparative Advantage

A country can produce a product at a lower opportunity cost compared to another nation.

Opportunity Cost

What must be given up to obtain something desired; the value of the next best alternative.

Benefits of Global Trade

Includes faster productivity growth, increasing living standards, keeping prices down due to competition, spurring innovation, and spreading prosperity to developing countries.

Trade Barriers

Include natural, tariff, and non-tariff obstacles.

Natural Barriers

Physical barriers (distance/shipping costs) or cultural barriers (language).

Tariff Barriers

A tax imposed on imported goods, making them more costly; protective tariffs aim to make imports less competitive than domestic products.

Non-Tariff Barriers

Include import quotas, embargoes, buy-national regulations, and exchange controls.

Antidumping Laws

Counter the practice of dumping, which is charging a lower price for a product in foreign markets than in the home market.

World Trade Organization (WTO)

Replaced the General Agreement on Tariffs and Trade (GATT); works to reduce trade barriers, open markets, and has an effective dispute settlement procedure.

The World Bank

Offers low-interest loans to developing nations for infrastructure and debt relief, requiring them to lower trade barriers.

International Monetary Fund (IMF)

Promotes trade through financial cooperation and makes short-term loans to troubled member nations (lender of last resort).

Political considerations in foreign markets

Issues include intense nationalism (discouraging foreign investment), expropriation (government taking assets with compensation), and confiscation (taking assets without compensation).

Cultural considerations in foreign markets

Common values determine what is socially acceptable. Language requires careful translation of product names and slogans. Customs and traditions influence business practices (e.g., importance of personal relationships).

Economic considerations in foreign markets

Business opportunities are best in countries with established infrastructure (e.g., banking system, educational system, transportation, energy).

Emerging Markets

Countries transitioning from dictatorship to free market-oriented economies, characterized by rapid economic growth, modernization, and an expanding middle class. Key examples are the BRICS+ nations (Brazil, Russia, India, China, South Africa, plus new members like Egypt and UAE).

Micro-enterprises

Businesses with 1-4 paid employees.

Small businesses

Businesses with 1-99 paid employees.

Medium-sized businesses

Businesses with 100-499 paid employees.

Large businesses

Businesses with 500 or more paid employees.

Sole Proprietorship

Owned by one person; owner keeps all income, makes all decisions, profits taxed as personal income (no special taxes).