Understanding Business Chapters 1-5

business

Any activity that seeks to provide goods and services to others while operating at a profit.

profit

The amount of money a business earns above and beyond what it spends for salaries and other expenses.

entrepreneur

A person who risks time and money to start and manage a business.

revenue

The total amount of money a business takes in during a given period by selling goods and services.

loss

When a business's expenses are more than its revenues.

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 money they have.

Quality Of Life

The general well-being of a society in terms of political freedom, a clean natural environment, education, health care, safety, free time, and everything else that leads to satisfaction and joy.

stakeholders

All the people who stand to gain or lose by the policies and activities of a business.

Nonprofit Organization

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

Factors Of Production

The resources used to create wealth: land, labor, capital, entrepreneurship, and knowledge.

Business Environment

The surrounding factors that either help or hinder the development of business.

technology

Everything from phones and copiers to computers, medical imaging devices, personal digital assistants, and the various software programs that make business processes more efficient and productive.

productivity

The amount of output you generate given the amount of input (e.g., hours worked).

e-commerce

The buying and selling of goods over the internet.

database

An electronic storage file where information is kept; one use of databases is to store vast amounts of information about consumers.

empowerment

Giving frontline workers the responsibility, and freedom to respond quickly to customer requests.

demography

The statistical study of the human population with regard to its size, density, and other characteristics such as age, race, gender, and income.

goods

Tangible products such as computers, food, clothing, cars, and appliances.

services

Intangible products (i.e., products that can't be held in your hand) such as education, health care, insurance, recreation, and travel and tourism.

outsourcing

assigning various functions, such as accounting, production, security, maintenance, and legal work to outside organizations

Climate Change

the movement of the temperature of the planet up or down over time

Greening

The trend toward saving energy and producing products that cause less harm to the environment

Identity Theft

the obtaining of individuals' personal information, such as Social Security and credit card numbers, for illegal purposes

Economics

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

A part of economics that looks at the operation of a nation's economy as a whole

Microeconomics

The part of economics that looks at the behavior of people and organizations in particular markets

Invisible Hand

A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all.

Capitalism

Economic system in which all or most of factors of production and distribution are privately owned and operated for profit

Supply

The quantities of products that 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 determined by supply and demand.

Perfect Competition

Market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product

Monopolistic Competition

Market situation in which a large number of sellers produce products that are very similiar but that are perceived by buyers as different

Oligopoly

A form of competition in which just a few sellers dominate the market

Monopoly

A market in which there is only one seller for a product or service.

Socialism

An economic system based on the premise that some, if not most, basic businesses should be owned by the government so that profits can be distributed among the people

Brain Drain

Loss of the best and brightest people to other countries

Communism

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

Free-Market Economies

Economic system in which the market largely determines what goods and services get produced, who gets them, and how the economy grows.

Command Economies

Economic system in which the government largely decides what goods and services will be produced, who gets them, and how the economy grows.

Mixed Economies

Economic system in which some allocation of resources is made by the market and some by the government.

Gross Domestic Product (GDP)

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

Unemployment Rate

Number of civilians at least 16 years who have been trying to find a job within the prior four weeks.

Inflation

General rise in the prices of goods and services over time.

Deflation

A situation in which prices are declining

Business Cycles

Periodic rises and falls that occur in all economies over time.

Recession

Two or more consecutive quarters of decline in the GDP.

Depression

A severe recession.

Consumer Price Index (CPI)

monthly statistics that measure the pace of inflation or deflation

Disinflation

a situation in which price increases are slowing (the inflation rate is declining)

Fiscal Policy

The federal government efforts to keep the economy stable by increasing or decreasing taxes or government spending

Keynesian Economic Theory

The theory that a government policy of increasing spending and cutting taxes could stimulate the econemy in a recession.

Monetary Policy

The management of the money supply and interest rates by the federal reserve.

National Debt

The sum of government deficits over time.

Producer Price Index (PPI)

An index that measures prices at the wholesale level.

Resource Development

The study of how to increase resources and to create the conditions that will make better use of those resources.

Stagflation

A situation when the economy is slowing but prices are going up anyhow.

importing

buying 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

comparative advantage theory

theory that states that a country should sell to other countries those products that it produces most effectviely and efficiently and buy from other countries those products that it cannot produce as effectively/efficiently

absolute advantage

the advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more effciently 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

a favorable balance of trade, occurs when the value of a country's exports that of its imports

trade deficit

an unfavorable balance of trade, occurs when the value of a country's imports exceeds that of its exports

balance of payments

difference between money coming into a country (from exports) and money leaving the country (from imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment

dumping

selling products in a foregin country at lower prices than those charged in the producing country

licensing

a global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (royalty)

contract manufacturing

foreign country's production of a private label goods to which a domestic company then attaches its brand name or trademark, part of the broad category of outsourcing

joint venture

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

strategic alliance

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

foreign direct investment (FDI)

buying of permanent property and businesses in foreign nations

foreign subsidiary

company owned in a foreign country by another company, called the parent company

multinational corporation

an organization that manufactures and markets products in many countries and has multinational stock ownership and multinational management

sovereign wealth funds (SWFs)

investment funds controlled by governments holding large stakes in foreign companies

exchange rate

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

devaluation

lowering the value of a nation's currency relative to other currencies

countertrading

a complex form of bartering in which several countries may be involved, each trading goods for goods or services for services

trade protectionism

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

tariff

a tax imposed on imports

import quota

a limit on the number of products in certain categories that 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)

1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions

World trade organization (WTO)

international organization that replaced the GATT and was assigned the duty to mediate trade disputes among nations

common market

regional group of countries that have common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange, also called a trading bloc. (European Union)

North American free trade agreement (NAFTA)

agreement that created free trade area among US, Canada, and Mexico

Ethics

Standards of moral behavior, that is, behavior accepted by society as right versus wrong

Compliance-Based Ethics Codes

Ethical standards that emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers

Integrity-Based Ethics Codes

Ethical Standards that define the organization's guiding values, create an environment that supports ethically sound behavior, and stress a shared accountability among employees.

Whistleblowers

Insiders who report illegal or unethical behavior

Corporate Social Responsibility (CSR)

A business's concern for the welfare of society

Corporate Philanthropy

The dimension of social responsibility that includes charitable donations

Corporate Social Initiatives

Enhanced forms of corporate philanthropy directly related to the company's competencies

Corporate Responsibility

The dimension of social responsibility that includes everything from hiring minority workers to making safe products

Corporate Policy

The dimension of social responsibility that refers to the position a firm takes on social and political issues

Insider Trading

An unethical activity in which insiders use private company information to further their own fortunes or those of their family and friends

Social Audit

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

Sole Proprietorship

A business that is owned, and usually managed, by one person.

Partnership

A legal form of business with two or more owners.