Business Dynamics Midterm

Business

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

Goods

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

Services

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

Revenue

Total amount of money a business takes in during a given period by selling goods and services

Profit

Amount of money a business earns above and beyond what it spends for salaries and other expenses

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 the money they have

Quality of Life

The general well-being of a society in terms of its political freedom, natural environment, education, health care, safety, amount of leisure, and rewards that add to the satisfaction and joy that other goods and services provide

Stakeholders

All the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address

Nonprofit organization

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

Factors of production

The five resources used to create wealth: Land, labor, capital, entrepreneurship, and knowledge

Business environment

The surrounding factors that either help or hinder the development of businesses

Productivity

The amount of output you generate given the amount of input

E-commerce

The buying and selling of goods over the Internet

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

Sole proprietorship

A business owned, and usually managed, by one person

Partnership

A legal form of business with two or more owners

Corporation

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

Unlimited liability

The responsibility of business owners for all debts of the business

Conventional Corporation

A state-chartered legal entity with authority to act and have liability separate from its owners (its stockholders. Enables many people to share in ownership

S Corporations

A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships. Have shareholders, directors, and employees, plus the benefit of limited liability. Profits are taxed only as the personal income of the shareholders.

Limited Liability Companies

Similar to an S corporation but without the special eligibility requirements. More than half of new business registrations in some states are this type of corporation.

Merger

The result of two firms forming one company.

Acquisition

One company's purchase of the property and obligations of another company

Vertical merger

The joining of two companies in different stages of related businesses

Horizontal merger

The joining of two firms in the same industry

Conglomerate merger

The joining of firms in completely unrelated industries

Franchise agreement

An arrangement whereby someone with a good idea for a business sells the rights to use the business name and sells a product or service to others in a given territory

Co-Op

A business owned and controlled by the people who use it---producers, consumers, or workers with similar needs who pool their resources for mutual gain.

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

Balance of trade

Total value of a nation's exports compared to its imports over a particular period

Trade surplus

When the value of a country's exports exceeds that of its imports

Trade deficit

When the value of a country's imports exceeds that of its exports

Dumping

Selling products in a foreign country at lower prices than those charged in the producing country

Exchange rate

The 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

Trade protectionism

The use of government regulations to limit the import of goods and services. Allows domestic producers to survive, grow, and produce jobs

Tariffs

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 the stopping of all trade with a particular country

Outsourcing

Process whereby one firm contracts with other companies to do some or all of its functions

Ethics

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

Compliance-based ethics codes

Emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers

Integrity-based ethics codes

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

A business's concern for the welfare of society -- multiple stakeholder groups

Corporate philanthropy

Includes charitable donations

Corporate social initiatives

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

Corporate responsibility

Includes everything from hiring minority workers to making safe products

Corporate policy

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

Management

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

Vision

More than a goal; an encompassing explanation of why the organization exists and where it's trying to go

Goals

The broad, long-term accomplishments an organization wishes to attain

Objectives

Specific, short-term statements detailing how to achieve the organization's goals

Mission statement

An outline of the fundamental purposes of an organization

SWOT analysis

A planning tool used to analyze an organization's strengths, weaknesses, opportunities, and threats

Top management

Highest level, consisting of the president and other key company executives who develop strategic plans

Middle management

Includes general managers, division managers, and branch and plant managers who are responsible for tactical planning and controlling

Supervisory management

Those directly responsible for supervising workers and evaluating their daily performance

Technical skills

The ability to perform tasks in a specific discipline or department

Human relations skills

Communication and motivation; they enable managers to work through and with people

Conceptual skills

The ability to picture the organization as a whole and the relationship among its various parts

Autocratic leadership

Make managerial decisions without consulting others

Free-rein leadership

Managers set objectives and employees are relatively free to do whatever it takes to accomplish those objectives

Empowerment

Progressive leaders give employees the authority to make decisions on their own without consulting a manager

Enabling

Giving workers the education and tools they need to make decisions

Human resource management

The process of determining human resource needs and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling employees to achieve organizational goals

Fringe benefits

Sick-leave pay, vacation pay, pension plans, and health plans that represent additional compensation to employees beyond base wages

Cafeteria-style fringe benefits

Fringe benefit plan that allows employees to choose the benefits they want up to a certain dollar amount

Flextime plans

Gives employees some freedom to choose which hours to work

Core time

The period when all employees are expected to be at their job stations

Compressed workweek

An employee works the full number of hours, but in fewer than the standard number of days

Total product offer

Everything that consumers evaluate when deciding whether to buy something

Product line

A group of products that are physically similar or intended for a similar market

Product mix

The combination of product lines offered by a manufacturer

Product differentiation

The creation of real or perceived product differences. Marketers use a mix of branding, pricing, advertising, and packaging to create different images

Product life cycle

A theoretical model of what happens to sales and profits for a product class over time. Introduction, growth, maturity, then decline.

Target costing

Designing a product so that it satisfies customers and meets the profit margins desired by the firm

Competition-based pricing

A pricing strategy based on what all the other competitors are doing

Break-even Analysis

The process used to determine profitability at various levels of sales

Break-even point

Where revenues equal cost

Total fixed costs

All the expenses that remain the same no matter how many products are made or sold (rent, insurance)

Variable costs

Costs that change according to the level of production (Labor, Materials).

Skimming price strategy

Strategy in which a new product is priced high to make optimum profit while there's little competition

Penetration strategy

Strategy in which a product is priced low to attract many customers and discourage competition

Everyday low pricing

Setting prices lower than competitors and then not having any special sales

High-low pricing strategy

Setting prices that are higher than EDLP stores, but having many special sales where the prices are lower than competitors

Psychological pricing

Pricing goods and services at price points that make the product appear less expensive than it is

Marketing

The activity, set of institutions and processes for creating, communicating, delivering, and exchanging offerings with value for customers, clients, partners, and society at large.

Marketing concept

A three part business philosophy. Customer orientation, which is identifying what consumers want and providing it. Service orientation, which is to focus on customer satisfaction. Profit orientation, which is focusing on selling good/services most profitable

Marketing mix

The ingredients that go into a marketing program; also known as the four Ps: Product, price, place, and promotion

Marketing research

Every decision in marketing depends upon information

Secondary data

Information that has already been compiled by others and published in journals and books or made available online

Primary data

Data that you gather yourself (not from secondary sources)

Market segmentation

Dividing the total market into groups whose members have similar characteristics