SEVI Business Foundations Exam 1 (Halsell)

Stakeholders

People who have an interest in or are affected by a business such as customers, employees, suppliers, and local communities.

Trade surplus

When exports are greater than imports.

Balance of Trade (BOT)

The difference between a country's exports and imports of goods and services.

Shareholders

Individuals or companies that own shares of stock in a corporation.

Ethical dilemma

A situation in which a difficult choice has to be made between two courses of action, either of which entails transgressing a moral principle.

Triple Bottom Line

A framework that includes people, planet, and profit, emphasizing the importance of social and environmental impacts in addition to profit.

People (Social Impact)

Includes employee well-being, fair wages, labor rights, community engagement, social responsibility, diversity, equity, inclusion, customer satisfaction, product safety, and ethical business practices.

Planet (Environmental Impact)

Includes sustainable resource use (e.g., renewable energy, water conservation), waste reduction and recycling initiatives, carbon footprint and greenhouse gas emissions, pollution control, and biodiversity protection.

Global trade

Crucial to the U.S. economy, accounting for about 27% of GDP in 2022, with exports alone making up 11% of GDP in 2023.

Trade deficit

When a nation's imports are greater than its exports.

Tariff

An import duty, also known as a tax.

Non-tariff barriers

Include embargoes and quotas.

Balance of payments

A record of international trade and the flow of financial transactions made between a country's residents and the rest of the world.

Embargo

A trade restriction imposed by the government on the exchange of goods or services with a particular country or countries.

Import quota

A type of trade restriction that sets a limit on the quantity of particular goods being imported into a country during a given period of time.

Absolute quota

The maximum number of specific goods permitted to enter a country during a specific time period.

Tariff rate quota

A two-tiered quota system that allows a specified quantity of product to be imported at a lower tariff rate.

Absolute advantage

The ability of a country or business to produce certain products more efficiently than its competitors.

Comparative advantage

The ability of a nation to produce a product at a lower opportunity cost compared to another nation.

Cultural competence

The set of values, behaviors, attitudes, and practices that enables individuals and organizations to interact effectively with people across different cultures.

Denial

When people don't believe or recognize that cultural differences exist.

Defense/reversal

When people recognize cultural differences exist but feel threatened by these differences (defense). In contrast, reversal takes place when people criticize their own culture in favor of another culture.

Minimization

When people are aware of cultural differences but focus on the similarities between them rather than the differences.

Acceptance

When people have a deep understanding and appreciation of their own and others' cultural identities and perceptions.

Adaptation

When people change their reasoning, behavior, and actions to new and different cultures.

Integration

When people have a deep understanding of one or more cultures and successfully integrate them into their own identity.

Hofstede's Model of Cultural Dimensions

Geert Hofstede's Cultural Dimensions Theory identifies six key cultural differences based on research from IBM employees in 53 countries.

Individualism vs. Collectivism

Focus on personal freedom and self-reliance vs. prioritizing group welfare and responsibilities.

Power Distance

Acceptance of unequal power distribution (high) vs. expectation of equality (low).

Uncertainty Avoidance

Preference for structure and predictability (high) vs. comfort with ambiguity and change (low).

Competition vs. Cooperation

Emphasis on achievement and success (competitive) vs. quality of life and collaboration (cooperative).

Long-Term vs. Short-Term Orientation

Focus on future planning and perseverance (long-term) vs. tradition and present concerns (short-term).

Indulgence vs. Restraint

Valuing pleasure and enjoyment (indulgent) vs. strict social norms limiting gratification (restraint).

Meyer's Cultural Map

Erin Meyer's Cultural Map includes a Communication Scale that categorizes cultures based on their communication styles.

Low-Context Cultures

Communication is explicit, direct, and clear, relying on precise words rather than shared context (e.g., U.S., Germany, Netherlands).

High-Context Cultures

Communication is implicit, indirect, and layered, depending on nonverbal cues, shared understanding, and relationships (e.g., Japan, China, Middle East).

Entrepreneurial Mindset

A way of thinking that embraces opportunity recognition, innovation, resilience, and risk-taking to create value.

Fixed Mindset

Belief that abilities and intelligence are static. Example: 'I'm just not good at math.'

Growth Mindset

Belief that abilities can develop through effort. Example: 'If I practice, I'll get better at math.'

Grit

Perseverance and passion for long-term goals, pushing through challenges without giving up.

Theory of Effectuation

Developed by Saras Sarasvathy, this theory describes how entrepreneurs make decisions in uncertain conditions using four principles.

Bird-in-Hand

Start with what you have (skills, resources, networks).

Affordable Loss

Focus on what you can afford to lose rather than potential gains.

Lemonade Principle

Leverage unexpected events as opportunities.

Crazy Quilt

Build partnerships rather than relying on competitive predictions.

VUCA Model

Describes the modern business environment as: Volatility - Rapid, unpredictable change; Uncertainty - Lack of clear outcomes; Complexity - Many interconnected variables; Ambiguity - Unclear cause-and-effect relationships.

Deliberate Practice

Focused, structured effort to improve specific skills through feedback and repetition.

Relevance to Growth & Entrepreneurial Mindset

Encourages continuous improvement and resilience, key for both entrepreneurs and learners seeking success.

Job Creation

Small businesses employ nearly half of the U.S. workforce.

Innovation

They drive new product development and industry growth.

Economic Growth

Contributes to 44% of U.S. GDP and stimulates local economies.

Market Competition

Encourage better products and services through competition.

Sole Proprietorship

One owner, unlimited liability, taxed as personal income.

Partnership

Two or more owners, unlimited liability (except for LLPs), taxed as personal income.

Corporation (C-Corp)

Limited liability, double taxation (corporate and personal tax).

S-Corporation

Limited liability, no double taxation (profits pass through to owners).

Limited Liability Company (LLC)

Limited liability, no double taxation.

B-Corporation

Limited liability, prioritizes social/environmental impact.

Business Opportunity

An idea is a true business opportunity if it solves a real problem or fulfills a need, has a viable market willing to pay, is financially feasible and scalable, and aligns with the entrepreneur's skills/resources.

Idea Classification Matrix

Innovation: A new, market-changing idea (e.g., Uber disrupting taxis); Improvement: Enhancing an existing product/service (e.g., wireless earbuds); Invention: A new creation without a proven market (e.g., early electric cars before demand existed); Irrelevant: An idea without market value (e.g., a phone case that melts in heat).

4 Pathways to Opportunity Recognition

Discovery: Finding opportunities through existing market trends; Creation: Actively shaping an opportunity through innovation; Enhancement: Improving existing products/services; Exploration: Testing new ideas based on market needs.

Business Model

A business model outlines how a company creates, delivers, and captures value. It describes the core aspects of a business, including how it operates, generates revenue, and serves customers.

Common Elements of a Business Model

1. Problem: The issue the business aims to solve; 2. Solution: The product/service provided to solve the problem; 3. Key Resources: Essential assets (e.g., people, technology, equipment); 4. Key Activities: Core actions needed to deliver the value proposition; 5. Key Partners: External companies or individuals that help the business; 6. Customer Segments: The different groups of customers the business serves; 7. Customer Relationships: The type of relationship the business establishes with each segment; 8. Channels: How the business delivers the product or service to customers; 9. Revenue Model: How the business generates income (e.g., subscriptions, sales); 10. Cost Structure: The costs involved in running the business.

Customer Value Proposition (CVP)

The unique value the business offers to solve customer problems.

Customer Value Proposition (CVP)

A statement that explains why customers should choose your product or service. It focuses on the unique benefits customers will receive, solving their pain points or fulfilling their needs better than competitors.

Distributor

Sells products from manufacturers to retailers or directly to consumers. Often operates as a middleman in the supply chain.

Retailer

Sells goods directly to end customers, either through physical stores or online platforms.

Franchising

A business model where a company (the franchisor) allows others (franchisees) to operate businesses using its brand, products, and business system in exchange for a fee or percentage of sales.

Subscription

Customers pay a recurring fee (monthly, yearly) to access a product or service (e.g., streaming services like Netflix, subscription boxes).

Aggregator

A business that collects and organizes content or services from various sources to provide them to consumers, typically through a platform (e.g., Uber, Airbnb).

Advertising

Revenue is generated by offering free products/services to users and earning money through advertisements displayed to the users (e.g., Google, Facebook).

Data Licensing/Selling

A company collects data and sells it to other businesses for analysis, marketing, or other purposes (e.g., social media platforms selling user data).

Software as a Service (SaaS)

Provides software applications on a subscription basis, usually hosted on the cloud, with customers accessing the software over the internet (e.g., Salesforce, Dropbox).

Utility and Usage

Customers pay based on how much they use a service, often seen in industries like utilities (water, electricity), telecommunications, or cloud computing.

Professional

Provides specialized expertise or services to clients for a fee (e.g., lawyers, consultants, accountants).

Licensing

A business sells the rights to use its intellectual property (e.g., patents, trademarks, software) to another party in exchange for a fee or royalty.

Freemium

Offers a basic service for free, but charges for premium features, functionalities, or content (e.g., LinkedIn, Spotify).

Eco-preneurship

Refers to entrepreneurs who focus on sustainable and environmentally friendly practices. These businesses aim to solve ecological problems while creating value, such as producing green products, reducing waste, or using renewable resources.

Mission

The mission of a business defines its core purpose and focus. It explains why the business exists, what it aims to achieve, and how it serves its customers or society.

Vision

The vision describes where the company aims to be in the future. It's a long-term aspiration and reflects the company's desired impact or position in the marketplace.

Industry

An industry refers to a group of businesses that operate in the same sector and produce similar products or services (e.g., the technology industry, the automotive industry).

Market

A market is a group of potential customers who have similar needs or desires, and who may buy a company's products or services (e.g., the luxury car market).

Strategy

A strategy is a plan of action designed to achieve specific business goals, often involving competition, innovation, marketing, and resource allocation.

Competitive Advantage

Competitive advantage is a condition that allows a company to perform better than its competitors in the market.

Cost Leadership

Achieving the lowest cost in the industry while maintaining acceptable quality, aiming to attract price-sensitive customers (e.g., Walmart).

Differentiation

Offering unique products or services that are valued by customers, allowing the company to charge a premium price (e.g., Apple).

Cost Focus (Niche)

Focusing on a specific segment of the market and achieving cost leadership within that niche (e.g., Ryanair in the budget airline sector).

Differentiation Focus (Niche)

Offering unique products or services to a specific market segment and charging a premium price (e.g., Tesla's electric cars for environmentally conscious consumers).

PESTLE Analysis

PESTLE analysis helps businesses evaluate external factors affecting their strategy.

Political Factor

Government policies, regulations, and stability (e.g., trade tariffs).

Economic Factor

Economic conditions like inflation, unemployment, and economic growth (e.g., interest rates).

Social Factor

Social trends and demographic factors (e.g., changing consumer behaviors, aging populations).

Technological Factor

Innovations and technological advancements (e.g., automation, digital transformation).

Legal Factor

Laws and regulations that affect the business environment (e.g., labor laws, intellectual property rights).

Environmental Factor

Environmental and ecological factors (e.g., climate change, sustainability practices).

Scenario Planning

Scenario planning is a tool used to prepare for possible future events by considering various scenarios and their potential impacts.

SWOT Analysis

SWOT analysis examines both internal and external factors that could affect a business's strategy.

Strengths

Internal capabilities that provide an advantage (e.g., strong brand recognition).

Weaknesses

Internal limitations that hinder performance (e.g., lack of experienced staff).

Opportunities

External factors that could benefit the business (e.g., emerging markets, new technologies).