Business Dynamics Midterm

Standard of Living

The amount of goods and services people can buy with the money they have

Quality of life

General well-being of the society

Stakeholders

People who stand to gain or lose by the policies and activities of a business (Customers, employees, stockholders, suppliers)

Outsourcing

Contracting with other companies (Often in foreign countries) to do some or all of the functions of a firm, like production or accounting tasks

Insourcing

Many foreign companies set up production facilities in the United States

Nonprofit Organization

Organization whose goals do not include making a personal profit for its owners or organizers

What are the five factors of production?

Land, labor, capital, knowledge, entrepreneurship

What are the 5 elements in business environment?

1.) Economic and Legal

2.) Technological

3.) Competitive

4.) Social

5.) Global Business

How can governments actively promote entrepreneurship?

Allow private ownership of business

What is the best thing governments of developing countries can do?

Minimize interference with the free exchange of goods and services

Efficiency

Producing goods and services with the least amount of resources

Productivity

The amount of output to generate given the input

Types of E-Commerce

B2C

B2B

Globalization

World trade

Intellectual Capital

Employee knowledge and skills that can be used to create new products, attract new customers, and increase profit

Ethics

Society's accepted standards of moral behavior

Questions to ask yourself when facing an ethical dilemma

1.) Is my proposed action legal?

2.) Is it balanced?

3.) How will it make me feel about myself?

Why should a business be managed ethically?

- Maintain a good reputation

- Avoid lawsuits

- Keep existing customers

- Avoid government intervention

- Please customers, employees, and society

Compliance-based Ethics Code

Preventing unlawful behavior by increasing control and penalizing wrongdoers

Integrity-based Ethics Code

Define the organization's guiding values, create an environment that supports ethically sound behavior, and stress shared accountability

Where do expectations for ethical behavior begin?

At the top management

Whistleblowers

Insiders who report illegal or unethical behavior. They must feel protected from retaliation

Ethics Officer

Set a positive tone, communicate effectively, and relate well to employees at every level

Corporate Social Responsibility

The concern that businesses have for the welfare of society, not just for their owners

What are some critics of CSR?

Not using money for its intended purpose

Corporate Philanthropy

Charitable donations to nonprofit groups of all kinds

Corporate Social Initiatives

Enhanced form of corporate philanthropy. They are more directly related to the company's competencies. UPS uses transportation to help during natural disasters

Corporate Responsibility

Treating employees fairly and ethically

Corporate Policy

A position a firm takes on social and political issues

Social Audit

Systematic evaluation of an organization's progress towards implementing socially responsible and responsive programs

Sole Proprietorship

A business owned, and usually managed by one person

Partnership

Two or more people legally agree to become co-owners of a business

Corporation

A legal entity with the authority to act and have liability apart from its owners

Advantages of Sole Proprietorship

1.) Ease of starting and ending the business

2.) Ability to be your own boss

3.) Pride of ownership

4.) Leaving a legacy

5.) Retention of company profits

6.) No special taxes

Disadvantages of Sole Proprietorship

1.) Unlimited liability

2.) Limited financial resources

3.) Management difficulties

4.) Overwhelming time commitment

5.) Few fringe benefits

6.) Limited growth

7.) Limited life span

General Partnership

All owners share in operating the business and in assuming liability for the business debts

Limited Partnership

Has one or more general partners and one or more limited partners

What is a general partner?

An owner who has unlimited liability and is active in managing the firm

What is a limited partner?

An owner who invest money in the business, but does not have any management responsibility or liability for losses beyond what they invested.

Master Limited Partnsership

Acts like a corporation, but is taxed like a partnership and avoids a corporate income tax

Limited Liability Partnership

Limits partners' risk of losing their personal assets to the outcomes of only their own acts and those of people under their supervision

Advantages of Partnerships

1.) More financial resources

2.) Shared management and pooled skills

3.) Longer survival

4.) No special taxes

Disadvantages of Partnerships

1.) Unlimited liability

2.) Division of profits

3.) Disagreement among partners

4.) Difficulty of termination

Conventional (C) Corporation

State-chartered legal entity with authority to act and have liability separate from its owners

Advantages of Corporations

1.) Limited liability

2.) Ability to raise more money for investment

3.) Size

4.) Perpetual life

5.) Ease of ownership change

6.) Ease of attracting talented employees

7.) Separation of owner from management

Disadvantages of Corporations

1.) Initial cost

2.) Extensive paperwork

3.) Double taxation

4.) Two tax returns

5.) Size

6.) Difficulty of termination

S Corporation

Looks like a corporation, but is taxed like a sole proprietorships and partnerships

LLC Advantages

1.) Limited liability

2.) Choice of taxation

3.) Flexible ownership rules

4.) Flexible distribution of profits

5.) Operating flexibility

LLC Disadvantages

1.) No stock

2.) Fewer incentives

3.) Taxes

4.) Paperwork

Franchise Agreement

Someone with a good idea for a business sells the rights to use a business name and sell a product or service to other in a given territory

Management

The process used to accomplish organizational goals through planning, organizing, leading, and controlling people and other organizational resources

Planning

1.) Setting organizational goals

2.) Developing strategies to reach those goals

3.) Determining resources needed

4.) Setting precise standards

Organizing

1.) Allocating resources

2.) Preparing a structure

3.) Assigning tasks

4.) Recruiting

5.) Placing employees where they'll be most effective

Leading

1.) Guiding and motivating employees

2.) Giving assignments

3.) Explaining routines

4.) Clarifying policies

5.) Providing feedback on performance

Controlling

1.) Measuring results against corporate objectives

2.) Monitoring performance relative to standards

3.) Rewarding outstanding performance

4.) Taking corrective action when necessary

What does planning include?

Anticipating trends and determining the best strategies and tactics

What does organizing include?

Designing the structure of the organization and creating conditions and systems in which everyone and everything work together to achieve the organization's goals and objectives

What does leading include?

Creating a vision for the organization and communicating, guiding, training, coaching, and motivating other to achieve goals and objectives in a timely manner

What does controlling include?

Establishes clear standard to determine whether an organization is progressing towards its goals and objectives, rewarding people for doing a good job, and taking corrective action if they are not

Vision

A broad explanation of why the organization exists and where it's trying to go

Who sets the vision?

Top management

Mission Statement

Outline's the organization's fundamental purposes

Strategic Planning

Determines the major goals of the organization and the policies, procedures, strategies, and resources it will need to achieve them

Tactical Planning

Process of developing detailed, short-term statement about what is to be done, who is to do it, and how

Operational Planning

Process of setting work standards and schedule necessary to implement the company's tactical objectives

Contingency Planning

Process of preparing an alternative course of action

Order of Management

1.) Top Management

2.) Middle Management

3.) Supervisory Management

4.) Nonsupervisory

Top Management Includes:

President

Vice Presidents

Middle Management Includes:

Plant Managers

Division Managers

Branch Managers

Supervisory Includes:

Supervisors

Department Heads

Section Leaders

Nonsupervisory Includes:

Employees

What are technical skills?

The ability to perform tasks in a specific discipline

What are human relations skills?

Communication and motivation

What are conceptual skills?

Let the manager picture the organization as a whole and see the relationships among its various parts

Knowledge Management

Finding the right information, keeping it in a readily accessible place, and making it known to everyone in the firm

Entrepreneurial Team

A group of experienced people from different areas of business who join to form a managerial team with the skills to develop, make, and market a new product

Intrapreneur

Creative people work as entrepreneurs within corporations

Micropreneurs

Maintaining a balanced lifestyle . Most of them are home-based owners

Incubators

Offer new businesses in the critical stage of early development low-cost offices with basic services such as accounting, legal advice, and secretarial left

Business Plan

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

Angel Investors

Private individuals who invest their own money in potentially hot new companies before they go public

Operations Management

Converts or transforms resources, including human resources like technical skills and innovation, into goods and services

Form Utility

The value producers add to the materials in the creation of finished goods and services

Process Manufacturing

Physically or chemically changes materials

Continuous Process

Long production runs turn out finished goods over time

Intermittent Process

Production run is short and the producer adjusts machines frequently to make different products

Computer-Aided Design

Depend on 3D modeling software to create new products

Computer-Aided Manufacturing

Possible to make custom-design products to meet the needs of small markets

Flexible Manufacturing

Designing machines to do multiple tasks so they can produce a variety of products

Lean Manufacturing

Production of goods using less of everything than in mass production

Facility Location

Process of selecting a geographic location for a company's operations

Interfirm

Companies work closely together to design, produce, and ship products to customers

Facility Layout

Physical arrangement of resources

Materials Requirement Planning (MRP)

Computer-based operations management system that uses sales forecasts to make sure needed parts and materials are available at the right time

Enterprise Resource Planning (ERP)

Combines computerized functions of all the divisions and subsidiaries of the firm

Statistical Quality Control (SQC)

Monitor all phases of production process and ensure quality is being built into the product from the beginning

Statistical Process Control (SPC)

Process of testing statistical samples of product components

Human Resource Management

Process of determining human resources and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling to achieve organizational goals

Job Analysis

Study of what employees do who hold various job titles

Job Description

Specifies the objectives of the jobs, the type of work, the responsibilities and duties