Business Organization and Management Study Guide

Business Stakeholders

all of the different people or groups of people who are affected by the policies and decisions made by an organization

Business

the organized effort of individuals to produce and sell for a profit, the goods and services that satisfy society's needs

Profit

financial gain business makes when revenue exceed total costs & expenses

Free market

Individuals are free to decide what to produce, how to produce, and what price to sell. Customers are free to decide what to buy

Licensing

a contractual agreement in which one firm permits another to produce and market its product and to use its brand name in return for a royalty or other compensation

Franchising

a contractual arrangement for an individual or organization to operate facilities, typically stores, on behalf of another.

Contract Manufacturing

an arrangement in which one firm contracts with another business, often in another country, to manufacture products or product components to its specifications

Outsourcing

an arrangement in which one firm contracts manufacturing or other activities to a firm in another country that specializes in those activities and can offer them at a lower cost than domestic firms

Joint venture

a partnership formed to achieve a specific goal or to operate for a specific period of time

Strategic Alliance

a more recent form of international business structure, is a partnership formed to create competitive advantage on a worldwide basis.

Direct Investments

provides complete control over operations, but it carries a greater risk than the joint venture. The firm is really establishing a subsidiary in a foreign country.

Multinational firms

a firm that operates on a worldwide scale without ties to any specific nation or region

Economic Communities

promote regional cooperation, enhance economic integration, reduce trade barriers, and foster collective economic growth among member countries.

Trade Deficit

a negative balance of trade

Trade Surplus

a positive balance of trade

Balance of trade

the total value of a nation's exports minus the total value of its imports over a specified period of time

Balance of Payments

includes all financial transactions between a country and the world.

Social Responsibility Approach

Socio-economic / economic

Socio-Economic Model

The concept that business should emphasize not only profits but also the impact of its decisions on society.

Economic Model

The view that society will benefit most when business is left alone to produce and market profitable products that society needs.

Organized resources for businesses

Land, labor, capital, and entrepreneurship.

Fairness and Honesty

Businesspeople are expected to refrain from knowingly deceiving, misrepresenting, or intimidating others.

Organizational Relationships

A businessperson should put the welfare of others and that of the organization above his or her own personal welfare.

Conflict of Interest

Issues arise when a business person takes advantage of a situation for personal gain rather than their employer's best interest.

Communication

Business communications that are false, misleading, or deceptive are both illegal and unethical.

Gross Domestic Product (GDP)

The total value of all goods and services produced by all people in a country during a one year period. GDP = Consumption + Investment + Government Spending + Net Exports.

Inflation

A general rise in the price of goods and services.

Deflation

A general decrease in the prices of goods and services.

Unemployment Rate

The percentage of a nation's labor force unemployed at any time.

Consumer Price Index (CPI)

A monthly index that measures the average change in prices of goods and services purchased by consumers over time.

Purchasing Power Index (PPI)

Measures the average change over time in the selling prices received by domestic producers for their output.

Caveat Emptor

Let the buyer beware.

Right to safety

Means that products must be safe for their intended use and tested by the producer to ensure product quality and safety.

Right to be informed

Means that consumers must have access to complete information about a product before they buy it.

Right to choose

Means that consumers must have a choice of products, offered by different manufacturers and sellers, to satisfy a particular need.

Right to be heard

Means that someone will listen and take appropriate action when customers complain.

Right to consumer education

Entitles people to be fully informed about their rights as consumers.

Right to courteous service

Entitles consumers to convenience, courtesy, and responsiveness from manufacturers and sellers of consumer products.

Perfect Competition

Many sellers, identical products, no control over price, easy market entry and exit.

Monopolistic Competition

Many sellers, differentiated products, some price control, branding and marketing are key competitive tools.

Oligopoly

Few dominant firms, similar or identical products, significant price control, interdependent decision-making.

Monopoly

Single seller, unique product, complete price control, high entry barriers prevent competition.

FREDRICK TAYLOR Scientific Management

Improving efficiency through applying scientific principles to the theory of management, built on the principle of splitting up tasks, for example, the idea of the assembly line.

Piece-rate system

Under which employees are paid a certain amount for each unit of output they produce.

ABRAHAM MASLOW Hierarchy of Needs

Theorized that humans seek to fulfill a variety of needs, from things we need to survive to things we need to grow.

ELTON MAYO

Analyzed the effect work environment has on employee productivity through the Hawthorne Studies, focusing on social relationships and employee mental health, leading to the Human Relations Movement.

FREDERICK HERZBERG

Developed the Motivation-Hygiene Theory in the 1950s, differentiating satisfaction and dissatisfaction as two separate ideas associated with motivation and hygiene factors.

hygiene factors

Job factors that reduce dissatisfaction when present to an acceptable degree but do not necessarily result in high levels of motivation.

motivation factors

Job factors that increase motivation, although their absence does not necessarily result in dissatisfaction.

WILLIAM OUCHI

Introduced Theory Z in 1981, theorizing that different types of management systems dominate in the US and Japan, advocating for a system that integrates both and emphasizes participative decision making.

Theory X

A motivation theory consistent with Taylor's scientific management, assuming that employees dislike work and will function only in a highly controlled work environment.

Theory Y

A concept of employee motivation consistent with the human relations movement, assuming employees take responsibility and work toward organizational goals, achieving personal rewards in the process.

Reinforcement theory

Motivation based on the premise that rewarded behavior is likely to be repeated, whereas punished behavior is less likely to be repeated.

equity theory

A theory of motivation based on the premise that people are motivated to obtain and preserve equitable treatment for themselves.

Expectancy theory

A model of motivation based on the assumption that motivation depends on how much we want something and on how likely we think we are to get it.

Employee satisfaction

The level of contentment employees feel regarding their jobs, superiors, and the firm itself.

Motivation

An individual internal process that energizes, directs, and sustains behavior; the personal 'force' that causes one to behave in a particular way.

Morale

An employee's feelings about the job, about superiors, and the firm itself.

Positive reinforcement

Includes recognition and praise to encourage desired behavior.

Negative reinforcement

Strengthens desired behavior by eliminating an undesirable task or situation.

Punishment

a consequence for undesirable behavior

Top Management

an upper-level executive who guides and controls the overall fortunes of an organization

Example of Top Management

CEO (Chief Executive Officer) and COO (Chief Operating Officer)

Strategic Plans

plans made by top management to define the mission and strategy for the company

Middle Management

a manager who implements the strategy and major policies developed by top management

Example of Middle Management

Division Manager and Departmental Head

Tactical Plans

plans made by middle management

First Line Management

a manager who coordinates and supervises the activities of operating employees

Example of First Line Management

Office Manager and Supervisor

Operational Plans

plans made by first line management

HRM: Acquiring

the process of planning and managing human resources needs

Planning

the development of strategies to meet a firm's future Human resources needs

Forecasting demand

analyzing future business ventures, new products, projected expansions or contractions of a product line, past staffing levels, evolving technologies, economic trends

Forecasting supply

analyzing the existing employees and any changes that could occur

Replacement chart

used to replace key personnel such as a top level manager

Skills Inventory

a database of current employees experience

Matching supply with demand

if the supply is greater than demand then the firm must prepare plans to reduce the workforce

Rightsizing

steps to reduce the size of its workforce

Layoffs

involuntary, no fault of the employee; may be temporary

Firing

involuntary, fault of the employee, seen as most negative

Attrition

a reduction when an employee leaves the firm voluntarily; most humane

Early retirement

staff are permitted to retire early and may be provided with incentives

Diversity

differences among people in the workforce relating to gender, race, and ethnicity

Advantages of cultural diversity

benefits such as cost savings, resource acquisition, marketing edge, and flexibility

Job analysis

determining the exact nature of the positions

Job description

A list of the elements that make up a particular job.

Job specifications

A list of the qualifications required to perform a particular job, such as certain skills, abilities, education, and experience.

Recruiting

The process of attracting qualified applicants.

Internal Hiring

Hiring from within the organization, which motivates current employees and helps retain quality personnel.

Disadvantages of Internal Hiring

Cost of filling the vacant position and cost of training another employee.

External Hiring

Hiring from outside the organization, which can bring fresh perspectives.

Disadvantages of External Hiring

It may be expensive and may cause resentment among employees.

Selection

The process of gathering information about applicants and then using that information to choose the most appropriate applicant.

Employment Applications

Useful for collecting factual information on a candidate's education, work experience, and personal history.

Orientation

The process of acquainting new employees with an organization, which may be brief and informal or long and formal.

Onboarding

Integrating new employees into the firm.

Employee Relations

Increasing employee job satisfaction through satisfaction surveys, employee communication programs, exit interviews, and fair treatment.

Compensation

The payment employees receive in return for their labor.

Compensation System

The policies and strategies that determine employee compensation.

Hourly wage

A specific amount of money paid for each hour worked, with the possibility for overtime pay.