Foundations of Business Chapters 1-5

Team (or worm team)

A group of people with complementary skills who work together to achieve a specific goal

Goal

Something you want to achieve or accomplish or a specific task

Group (or working group)

Go about their jobs independently and meet primarily to work towards a shared objective

Manager-led team

The leader defines the team’s goals and activities and is responsible for it achieving its designed goals

Self-managed team

The leader may determine overall goals, but employees control the activities to meet them and have __considerable autonomy__. Absorbs activity of traditional supervisors

Cross-functional team

Designed to take advantage of the special expertise of members drawn from __different functional areas of the company__

Virtual team

Geographically dispersed members interact electronically in the process of pursuing a common goal

Effective teamwork

* Members depend on each other
* Members trust one another
* Members work better together than individually
* Members become boosters
* Team members enjoy being on the team
* Leadership rotates

Group cohesiveness

The attractiveness of a team to its members

What makes a team cohesive?

* Smaller size
* Similarity
* Success
* Exclusiveness
* Competition

Groupthink

The tendency to conform to group pressure in making decisions, while failing to think critically or to consider outside influences

Factors that erode performance

* Unwillingness to cooperate
* Lack of managerial support
* Failure of managers to delegate authority

What skills does a team need?

* Technical skills
* Decision-making skills
* Interpersonal skills

Task-facilitating roles

Addresses challenge #1 — accomplishing the team goals. Task facilitators are especially valuable when assignments aren’t clear or when progress is too slow

Ex. - Information seeking

- Reality testing

Information seeking

“Does anyone know if this is the latest data we have?”

Reality testing

“Can we make this work and stay within budget”?

Relationship-Building roles

* Challenging unmotivated behavior or help other team members understand their roles and addressing challenge #2 — maintaining or improving group cohesiveness
* Includes activities that improve team “chemistry”, from empathizing to confronting. Having a “feel” of the room

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Ex. - Energizing

- Consensus building

Energizing

“It’s been a long time since I’ve had this many laughs at a meeting in this department.”

Consensus building

“Do we agree on the first 4 points even if #5 needs a little more work?”

Blocking roles

Consist of behavior that inhibits either team performance or that of individual members

Ex. - Stalling, deflecting, presenting opinions as if they were facts

Stall

Frustrate efforts to come to conclusions: decline to agree, sidetrack the discussion, rehash old ideas

Resist

Throw up roadblocks in progress; look on the negative side

Entrepreneurs

Those who take risks and reap the rewards associated with starting a new business enterprise

Revenue

Represents the funds an enterprise receives in exchange for its goods and services

Profit

Is what’s left over (hopefully) after all the bills are paid

Owner

Primary role is to invest money in the business

Employees

Work for the company to help it reach its goals

Customers

People who buy or use a product or service from a

Stakeholder

Those with a legitimate interest in the success or failure of the business and the policies it adopts

Have an interest or “stake” in the success of a company

(Customers, vendors, employees, landlords, bankers, etc.)

Functional areas

• Management

• Operations

• Marketing

• Accounting

• Finance

Operations

Converting resources (labor, materials, money, etc.) into goods/services

The “behind-the-scenes” magic that makes a business run smoothly. The day-to-day activities/processes involved in producing and delivering goods/services

“The engine that keeps a business going”

Operations manager

The person who designs and oversees the transformation of resources into goods or services

Marketing

Consists of everything that a company does to identify customers needs and design products to meet those needs

Accounting

Measuring, summarizing, and communications financial and managerial information and advising other managers on financial matters

Keeping track of the money coming in and going out. Recording, analyzing, and reporting financial transactions to help businesses make informed decisions

Financial accountants

Prepare financial statements to help users, both inside and outside the organization, assess the financial strength of the company

Managerial accountants

Prepare information, such as reports on the cost of materials used in the production process, for internal use only

Finance

Planning for, obtaining, and managing a company’s funds

“Macro-environment”

The big picture view of a business’s external surroundings

Includes factors like the economy, technology, politics, and social trends that can impact the business

PESTEL

Political

Economic

Sociocultural

Technological

Environmental

Legal

Political (Pestel)

The impact of government including taxes, tariffs, trade agreements, and labor regulations

Economic (pEstel)

Includes inflation, employment rates, exchange rates, oil prices, GDP growth and others

Sociocultural (peStel)

Includes cultural attitudes and demographic factors such as age, race, and income

Technological (pesTel)

Includes the impact of the internet, smart devices, and automation on business and society

Environmental (pestEl)

Includes availability and care for natural resources, pollution levels, and carbon footprints

Legal (pesteL)

Requirements related to labor and consumer protection, equality, and product safety

Economics

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

Resources

The inputs used to produce outputs

• Land and other natural resources

• Labor (physical and mental)

• Capital, including buildings and equipment

• Entrepreneurship

• Knowledge

Factors of Production

The resources a business uses to produce things

Ex. The factors of production to produce a shirt:

• Land and electricity for factory and raw cotton for shirts

• Laborers who make the shirts

• Factory, equipment, and money

• Entrepreneurship skills and production knowledge

Economic System

The means by which a society (households, businesses, and government) makes decisions about allocating resources to produce products and about distributing those products

Planned System

The government exerts control over the allocation and distribution of all or some goods and services (Ex. Communism)

Socialism

Industries that provide essential services, such as utilities, banking, and health care, may be government owned. Some businesses may also be owned privately

Free Market System / Capitalism

Competition dictates how goods and services will be allocated

Limited government involvement

Private Property Rights

Business owners can expect to own their land, buildings, machines, etc. and keep the majority of their profits except for taxes

A key aspect of a free market system

Mixed Market Economy

Relies on both markets and the government to allocate resources

Privatization

The conversion of government-opened businesses to privately-owned

Laissez-faire

Leaving things along (left alone by government)

“Hands off”

Perfect competition

Exists when there are many consumers buying a standardized product from numerous small businesses

Supply

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

Demand

The quantity of a product that buyers are willing to purchase at various prices

Equilibrium Price

The point at which the supply curve and demand curve intersect on a graph

Shortage

When producers don’t produce enough of a product to satisfy demand

Surplus

When sellers supply more of a product their buyers need

Monopolistic Competition

Many sellers compete (not nearly as many sellers as perfect competition) but instead of selling identical products, they sell differentiated products

Differentiated products

Products that differ somewhat, or are perceived to differ even though they serve a similar purpose

(Ex. Can differ in quality, style, convenience, location, and brand name)

Oligopoly

Few sellers

Each seller supplies a large portion of all the products sold in the marketplace

A small number of firms enter the industry because the cost of starting a business in an oligopolistic industry is usually high

Monopoly

When there is only one company/seller that controls the entire market (the market could be a geographical area, such as a city/regional area, it doesn’t have to be an entire country)

Lies at the opposite end of the spectrum from perfect competition because it is like having no competition at all

Natural monopoly

When a single company has a monopoly over an industry because it’s more efficient for them to provide the goods or services due to high fixed costs

When it just makes sense for one company to handle it all

Legal monopoly

Arises when a company receives a patent giving it exclusive use of an invented product or process. Patents are issued for a limited time (approx 20 years)

Gross Domestic Product (GDP)

The market value of all goods and services produced by the economy in a given year

Includes only those goods and serviced produced domestically (in the U.S. only)

The Business Cycle

The economic ups and downs resulting from expansion and contraction

Can be divided into 4 general phases of:

• Prosperity

• Recession

• Depression (which is generally skipped)

• Recovery

Prosperity

The economy expands, unemployment is low, incomes rise, and consumers buy more products

Recession

GDP decreases, unemployment rises, and business revenues decline because people have less money to spend

Slowdown

Recovery

Economy starts growing again after recession

Depression

A recession lasts a long time (a decade or so), while unemployment remains very high, and production is severely reduced

Full Employment

Occurs when everyone who wants to work has a job (95%)

Unemployment Rate

The percentage of the labor force that’s unemployed and actively seeking work

Price Stability

Occurs when the average of the prices for goods and services either doesn’t change or changes very little

Inflation

When the overall price level for goods and services go up

Deflation

When the overall price level for goods and services go down (rarely happens)

Consumer Price Index (CPI)

Measures the rate of inflation by determining price changes of a hypothetical basket of goods, such as food, housing, clothing, medical care, appliances, automobiles, etc. bought by a typical household

Reported monthly by the Bureau of Labor Statistics

Economic Indicator

A statistic that provides valuable information about the economy

Lagging Economic Indicator

Statistics that report the status of an economy looking at past data

Leading Economic Indicators

Indicators that predict the status of the economy 3 to 12 months into the future

Monetary Policy

The management of the money supply and interest rates by the Federal Reserve Board (The “Fed”)

Tools:

• Money Supply

• Interest Rates

Fiscal Policy

The Federal Government’s efforts to keep the economy stable by increasing or decreasing taxes or government spending

Tools:

• Taxation

• Government Spending

Budget Surplus

The government takes in more money (through taxes) than it spends on goods and services (for things such as defense, transportation, and social services)

Budget Deficit

The government spends more than it takes in

National Debt

The result of too many Budget Deficits occurring in the U.S. government

Ethical

To know right from wrong and to know when you’re practicing one instead of the other

Business Ethics

The application of ethical behavior in a business context

Ethical Issues

The difficult social questions that involve some level of controversy over what is the right thing to do

Ethical Dilemmas

Situations in which it is difficult for an individual to make decisions either because the right course of action is unclear or carries some potential negative consequences for the people or people involved

Ethical Decision

Entails a “right-vs-wrong” decision — one in which there is clearly a right (ethical) choice and a wrong (unethical or illegal) choice

Rationalizations

Excuses for justifying misconduct

1. “My behavior isn’t really illegal or immoral”

2. “My action is in everyone’s best interests”

3. “No one will find out what I’ve done”

4. “The company will condone my action and protect me”

Fiduciary responsibility/duty

The duty and obligation of someone, such as a manger, to act in the best interests of their clients

Conflicts of Interest

Occur when individuals must choose between taking actions that promote their personal interests over the interests of others or taking actions that don’t

Insider Trading

Acting on information that is not available to the general public, either by trading on it or providing it to others who trade on it (is illegal)

Whistleblower

An individual who exposes illegal or unethical behavior in an organization

Frameworks for Business Ethics

• Corporate Social Responsibility (CSR)

• Environmental, Social, and Governance (ESG)

• Creating Shared Value (CSV)

Corporate Social Responsibility

The approach that an organization takes in balancing its responsibilities toward different stakeholders when making legal, economic, ethical, and social decisions