Business Orientation (MGT 201) Study Guide

The system of business in which individuals are free to decide what to produce, how to produce it, and at what price to sell it

Free enterprise

Why study business?

1. For help choosing a career

2. To be a successful employee

3. Start own business

4. Become a better informed consumer and investor

A system that recognizes and respects the differences among people because of their age, race, ethnicity, gender, sexual orientation, and ability.

Cultural or workplace diversity

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

Business

The four resources of businesses or the “organized effort” of individuals?

Human resources: furnishes labor to business for wages.

Material resources: The raw materials used in manufacturing, as well as buildings and machinery.

Financial resources: Money required to pay employees, purchase materials and keep business operating.

Informational resources: Info that tells managers how effectively the other three are being combined and used.

The organized effort of individuals to produce and sell for a profit, the goods and services that satisfy society’s needs through the facilities available on the internet

E-business

What is the ULTIMATE objective of a business?

Satisfy the needs of customers.

What remains after all business expenses have been deducted from sales revenue?

Profit

All the different people or groups of people who are affected by an organization policies, decisions, and activities.

Stakeholders

The study of how wealth is created and distributed.

Economics

The study of the decisions made by individuals and businesses

Microeconomics

The study of the national economy and the global economy

Macroeconomics

The way in which people deal with the creation and distribution of

wealth

Economy

What is the meaning “Factors of Production”?

Inputs and resources used to produce goods and services.

What are the four factors of production?

Land and natural resources

Labor

Capital(money)

Entrepreneurship

A person who risks time, effort, and money to start and operate a business.

Entrepreneur

What are the two economic systems that exist today?

Capitalism and Command economies

What are the four basic economic questions?

What goods and services will be produced?

How will these goods and services be produced?

For whom will these good and services be produced?

Who owns and who controls the major factors of production?

An economic system In which individuals own and operate the majority of businesses that provide goods and services.

Capitalism

Capitalism stems from theories of the Scottish economist _______

Adam Smith

This term, created by Adam Smith used to describe how an individual’s own

personal gain benefits others and a nation’s economy

Invisible hand

What implies that there should be no government interference in the economy?

Laissez-faire

What economic system in which businesses and individuals decide what to

produce and buy, and the market determines prices and quantities sold (also known as a

free-market economy)?

Market economy

What are the four assumptions of Adam Smith’s Laissez-Faire Capitalism?

1. Right to create wealth

2. Right to own private property and resources

3. Right to economic freedom and freedom to compete

4. Right to limited government intervention.

What economy exhibits elements of both capitalism and socialism?

Mixed economy

In a mixed economy, the four basic economic questions (what, how, for whom,

and who) are answered through the interaction of:

Households, Businesses, and Governments

What is an economic system in which the government decides

what goods and services will be produced, how they will be produced, for whom

available goods and services will be produced, and who owns and controls the

major factors of production?

Command economy

What are the two economic systems that serves as command economies?

Socialism and communism

average level of output per worker per hour?

Productivity

The total dollar value of all goods and services produced by all people within the boundaries of a country during a specified time period—usually a one-year period

Gross Domestic Product

To make accurate comparisons of the GDP for different years, dollar amounts

must be adjusted for ______ and __________

Inflation and Deflation

What displays general rise in prices

Inflation

What displays general decrease in prices

Deflation

What are three other economic indicators that measure a nations economy?

Unemployment rate

CPI

PPI

What is the percentage of a nations labor force unemployed at any time

unemployment rate

What is the monthly index that measures the changes in prices of a fixed basket of goods purchased by a typical consumer in an urban area.

CPI

What is the monthly index that measures prices that producers receive for their finished goods.

PPI

What is the term “Business cycle”?

The recurrence of periods of growth and recession in a

nation’s economic activity.

What are the 4 stages of the business cycle?

1. Peak

2. Recession

3. Trough

4. Recovery

Two or more consecutive three- month periods of decline in a country’s GDP.

Recession

A severe recession that lasts longer than a typical recession and has a larger decline in business activity when compared to a recession

Depression

To offset the effects of recession and depression, the federal government uses both _______ and _______ policies.

monetary, fiscal

What policy is the Federal Reserve’s action to promote maximum employment, stabilize

prices, and increase or decrease interest rates

Monetary Policies

Government influence on the amount of savings and expenditures; accomplished by altering the tax structure and by changing the levels of government spending.

Fiscal policies

What is it when a shortfall is created when the federal government spends more in a fiscal year than it receives?

Federal deficit

Total of ALL federal deficits?

National Debt

Rivalry among businesses for sales to potential customers?

Competition

What are the four types of competition?

1. Perfect: Many business firms/suppliers 

2. Monopolistic: Many business firms/suppliers

3. Oligopoly: Few number of business firms/suppliers

4. Monopoly: One everything

This type of competition displays the market situation in which there are many buyers and sellers of a product, and no single buyer or seller is powerful enough to affect the price of that product

Perfect or (pure) competition

What is the quantity of a product that producers are willing to sell at each of various prices.

Supply

What is the quantity of a product that buyers are willing to

purchase at each of various prices?

Demand

What is the price (of any product) at which the quantity demanded is exactly equal to the quantity supplied?

Market price

This type of competition displays a market situation in which there are many buyers along with a relatively large number of sellers who differentiate their products from the products of competitors (Examples: Clothing, shoes, soaps, furniture)

Monopolistic Competition

The process of developing and promoting differences between a company’s products and all competitive products.

Product differentiation

This type of competition displays a market (or industry) in which there are few sellers (Examples: Automobile, airline, and car rental industries)

Oligopoly

This type of competition displays a market (or industry) with only one seller, and customers can only buy the product or service from that seller.

Monopoly

A loose, subjective measure of how well off an individual or a society is, mainly in terms of want satisfaction through goods and services.

Standard of living

This early business development system is a method of manufacturing in which an entrepreneur distributes raw materials to various homes, where families process them into finished goods to be offered for sale by the entrepreneur.

Domestic system

This early business development system is a system of manufacturing in which all the materials, machinery, and workers required to manufacture a product are assembled in one place.

Factory

This early business development system displays the separation of a manufacturing process into distinct tasks and the assignment of different tasks to different individuals

specialization

What environments is today’s competitive business world affected by?

1. Competitive environment

2. Global environment

3. Technological environment

4. Economic environment

What is the ability to create and maintain conditions under which present and future generations can exist in productive harmony, and permit fulfilling the social, economic, and other requirements of future and present generations?

sustainability

What is the study of right and wrong and of the morality of the choices

individuals make?

ethics

What is the application of moral standards to business situations?

Business ethics

Relationships among co-workers often create ______ problems

ethical

Knowingly taking someone else’s words, ideas, or other original material without acknowledging the source.

Plagiarism

When business people take advantage of a situation for their own personal interest rather than for the employer’s interest.

Conflict of Interest

False and misleading advertising is ______ &_______

illegal, unethical

What are the three factors that affect ethical behavior?

Individual, Social, Opportunity

What role does the government play in encouraging ethics?

By enacting more stringent regulations

What role does individual companies play in encouraging ethics?

By encouraging “code of ethics”

What is code of ethics?

A guide to acceptable and ethical behavior as defined by the organization.

Employees with high personal ethics may take a controversial step called _______

Whistle-blowing

What is the informing the press or government officials about unethical practices within one’s organization

Whistle blowing

What are the guidelines for making ethical decisions.

1. Listen and learn

2. Identify the ethical issue

3. Create and analyze options

4. Identify the best option from your point of view

5. Explain your decision and resolve any differences that arise.

The recognition that business activities have an impact on society and the consideration of that impact in business decision making.

Social responsibility

Adopting a strategic approach to fulfilling economic, ethical, environmental, and social responsibilities.

Corporate citizenship

During the first quarter of the 20th century, protection of workers and consumers was ______.

minimal

A Latin phrase meaning “let the buyer beware” (a doctrine consumers generally subject to)

Caveat emptor

The __________ collapse (October 29, 1929) triggered the Great Depression, and public pressure mounted for the government to “do something” about the economy and worsening social conditions.

Stock market

Name some early government regulations that affected American business.

Pure food and drug act, FTC act

What are the two views of social responsibility?

Economic model and socioeconomic model

What is the economic model of social responsibility?

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

What is the socioeconomic model of social responsibility?

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

Would this be a pro or con of social responsibility…

“Business is a part of our society, so it cannot

ignore social issues”

Pro

Would this be a pro or con of social responsibility…

“ Corporate time, money, and talent should be used to maximize profits, not to solve society’s problems”

Con

Would this be a pro or con of social responsibility…

“ Social problems affect society in general, so individual businesses should not be expected to solve these problems”

Con

All activities undertaken to protect the rights of consumers.

Consumerism

The fundamental issues pursued by the consumer movement fall into three categories:

1. Environmental protection

2. Product performance and safety

3. information disclosure

What are the basic rights of consumers:

1. Right to safety

2. Right to be informed

3. Right to choose

4. Right to be heard

5. Right to consumer education

6. Right to service

Many believe businesses have a basic responsibility to contribute to the general well-being of the public.

Public health

A plan designed to increase the number of employees from underrepresented groups at all levels within an organization.

Affirmative action

Affirmative action programs have been plagued by two problems:

Quotas and lack of support by some business people

A government agency with the power to investigate complaints of employment discrimination and the power to sue firms that practice it.

Equal Employment opportunity Commission

Workers with little education or vocational training and a long history of unemployment

Hard core unemployed

Companies have a responsibility to the environment by showing concern for waste produced by _____ and _____

businesses, society

The contamination of water, air, or land through the actions of

people in an industrialized society.

Pollution

_______ and _______ play a crucial role in pollution control

Legislation, regulations

The process of creating making, delivering, and promoting products that are environmentally safe.

Green marketing

All business activities that involve exchanges across national boundaries

international business