business dynamics midterm

Stakeholder

those with an interest in the success of a company

Factors of Production

land, labor, capital, entrepreneurship, knowledge

Business Environment

economic and legal

technological

competitive

social

Effectiveness

producing desired result

Efficiency

producing goods and services with the least amount of resources

Productivity

amount of output given amount of input

Free Market Capitalism

the right to own private property, own a business and keep profits, freedom of competition, freedom of choice

Perfect Competition

multiple sellers, none large enough to dictate price

Monopolistic Competition

many sellers produce similar products (fast food)

Oligopoly

few sellers dictate market (gasoline, aircraft)

Monopoly

one seller dominates market

Socialism

basic businesses should be owned by the government in order to distribute profits easily among people

Brain Drain

Highly skilled individuals leave societies/countries when they feel they are undervalued

Communism

government owns all factors of production

Fiscal Policy

federal government stabilizes economy by adjusting taxes and government spending

Monetary Policy

federal reserve adjusts interest rates and money supply

Balance of Trade

the total value of exports compared to imports

Balance of Payments

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

Licensing

when a firm (licensor) provides the right to manufacture its product or use its trademark to a foreign company (licensee) for a royalty

Export Assistance Centers

provide hands-on exporting assistance and trade-finance support for small and medium sized businesses

Franchising

contractional agreement whereby someone sells the rights to the name and sale of goods and services of a preexisting business

Contract Manufacturing

foreign company produces private label goods —> domestic company attaches name

Joint Venture

more than two parent companies join to undertake project (share risks)

Strategic Alliances

long-term partnership between more than two companies (don’t share risks)

Foreign Direct Investment

buying permanent property in foreign nations

Foreign Subsidary

company owned by domestic parent company

Multinational Cooperation

company that manufactures and markets in multiple countries

Sovereign Wealth Funds

investment funds controlled by government holding large stake in foreign countriess

Compliance Based Ethics Code

increases control and punishes wrongdoers

Integrity Based Ethics Code

defines organization’s values, creates environment around ethical behavior, and stresses shared accountabliity

Corporate Social Responsibility

the concern businesses have for the welfare of society

Utilitarianism (ethics tradition)

outcome

end justifies the means

Deontology (ethics tradition)

process

good actions are the most important

Virtue Ethics (ethics tradition)

people

ethical actions will follow wrongdoer

Sole Propreitorship

owned by one person

-pros: easy to start and end, retention of profit, no special taxes

-cons: unlimited liability, few fringe benefits, limited life span

General Partnership

all owners share in operating the business

Limited Partnership

mix of general partners (unlimited liability and active management) and limited partners (invests with limited liability)

Partnership Pros & Cons

-pros: more resources and knowledge, shared management, no special taxes

-cons: division of profit, partner disagreement, difficult termination

Conventional Corporation

state-chartered legal entity with authority to act and have liability separate from owners (stockholders)

-pros: ownership separate from management, perpetual life, limited liability

-cons: initial cost, extensive paperwork, double taxation

S Coroporation

looks like corporation, taxed like SP and partnership

-less than 100 American shareholders, one class of stock, less than 25% of income from passive sources

Limited Liability Company

S corporation without eligibility requirement

-pros: limited liability, choice of taxation, fewer ownership rules

-cons: no stock, limited life span, fewer incentives

Merger

two firms join to form one company

Vertical Merger

firms in different stages of related industry (soda + sweetener)

Horizontal Merger

firms in same industry (soda + bottled water)

Conglomerate Merger

firms in unrelated industries (soda + chips)

Acquisition

company’s purchase of property and obligations of other company

Franchise Agreement

creator (franchisor) sells rights to business name and proceedings (franchise) to multiple others (franchisees)

-pros: management and marketing assistance, recognized name

-cons: management regulations, coattail effect

Cooperatives

business owned and controlled by those who use it

-pooled resources, democratic election of board

Entrepreneurship

accepting the risk of starting a business

Micropreneur

willing to accept risk if business stays small

Intrapreneur

works as an entrepreneur within an organization

Enterprise Zones

specific geographic areas to which government attracts private business investment

Incubators

offer new businesses low-cost offices with complete services

Small Business

independently owned and operated, not dominant in its field, 500 employees or less

Business Plan

detailed, written statement that describes the nature of the business, the target market, the advantages the business will have over the competition, and the resources and qualifications of the owner

Venture Capitalist

individuals and companies that invest in new businesses in exchange for partial ownership

Small Business Administration

government agency that advises and assists small businesses with management training anf financial advice

Small Business Investment Company

private investment companies licensed by the SBA to lend to small businesses

Management

the process used to accomplish organizational goals through planning, organizing, leading, and controlling

Planning

phase 1 of management

setting institutional goals and developing strategies to reach them

Organizing

phase 2 of management

allocating resources, establishing procedures, hiring employees

Leading

phase 3 of management

guiding and motivating employees and providing feedback

Controlling

phase 4 of management

measuring results, monitoring performance, establishing corrective action

Mission Statement

outlines organization’s fundamental purpose

Vision

broad explanation of why organization exists and where it’s trying to go

Goals

broad, long-term accomplishments organization wants to attain

Objectives

specific, short-term statements; how to achieve goals

SWOT Analysis

strengths, weaknesses, opportunities, threats

Strategic Planning

setting broad, long-range goals by top managers

Tactical Planning

setting specific, short-range goals by lower managers

Operational Planning

setting of work standards and schedules

Contingency Planning

backup plans

Leadership Styles

autocratic, participative/democratic, free reign

The Control Process

establish clear standards → monitor and record performance → compare results against standardss → communicate results → if needed, take corrective action

Managerial Skills

technical, human relations, conceptual