KSB 100 Exam 1

industry

breaks down sectors and then breaks down into businesses

types of Revenue Streams

• Direct to consumer sales

• Advertising revenue

• Subscription models

• Licensing

profit

selling a good or service for more than it cost to make/market it

non-profit organizations

a business not for money, but for social/educational services

for-profit organizations

A business that makes profit but also has a social mission

business participants

• owners

• customers

• managers

• operation manager

• accountants

• financial managers

business activities

• management

• operations

• marketing

• accounting

• finance

operations

converting resources into goods and services

marketing

decides on how to best promote product and keep customers

accounting

prepare financial statements or reports on cost of material used in production process

finance

planning for, obtaining, and managing a company's funds

external forces that influence businesses

politics, economy, social, technology, legal, environment, consumer trends, and public pressure to act as good citizens

how does government project itself into businesses?

statutes, departments (labor debt, energy debt, etc), agencies (CSC, federal communications commission, etc), taxes, common law courts, executive orders

how do businesses respond to government's role in businesses?

trade associations, lobbying (giving into government), campaign donations, taxes, or adjust and move on

external social factors that affect a business

age (difference of how businesses/industries will market to different generations and what products serve different generation's needs)

external environmental factors that affect a business

climate, weather, pollution, and availability of oil, gas, etc

• ex: decrease in fuel prices might better affect a hotel industry because more people will travel because gas is cheaper

external technology factors that affect a business

technology effects how we ship (ex: amazon), how get around (gps), and the way we live at home (smart fridges)

corporate social responsibility (CSR)

• donating money (philanthropy)

• treating employees fairly (ethical labor practice)

• reducing carbon footprint (environmental)

• attend volunteer events

economics

study of the production, distribution, and consumption of goods and services

households role in economy

provide resources (factors of production) and consume goods and services

business' role in economy

buy resources and produce and sell goods and services

economic System

a society (households, businesses, and government) makes decisions about distributing resources to produce products and about distributing those products

pure capitalism

businesses are privately owned

pure socialism

government owned business

• ex: postal office, utilities, banking, and healthcare are government owned

mixed market economy

relies on both markets and the government to allocate resources (this is the US economic system)

perfect competition

many consumers buying a standardized product from numerous small businesses

demand

quantity of a product that people are willing to buy depends on its price

demand curve

shows the quantity of a product that'll be demanded at diff prices

supply

quantity of a product that sellers are willing to sell at various prices

supply curve

ex: shows the quantity of apples that farmers would be willing to sell at different prices, regardless of demand

equilibrium price

price where buyers are willing to buy at the same amount sellers are willing to sell

monopolistic competition

many sellers offer differientiated products (products that differ slightly but serve similar purposes)

• ex: pepsi and coke

oligopoly (fewer sellers)

each seller supplies a large portion of all the products sold in the market place

• ex: automobiles and airplanes

monopoly

one seller in the market

natural monopolies

inhibit competition but are legal because they're important to society (include public

utilities, such as electricity and gas suppliers)

legal monopoly

arises when a company receives a patent giving it exclusive use of an invented product or process for a limited time, general 20 years

3 goals that all economies share

• growth

• high employment

• price stability

GDP (gross domestic product)

market value of all goods and services produced by the economy in a given year (if gdp rises, economy grows. if gdp decreases, economy contracts)

recession

slowdown in economic activity (3-5 years)

depression

if recession lasts a long time (a decade or so)

full employment

occurs when everyone who wants a job has one (this leads to more spending money for goods and services which increases economy)

unemployment rate

percentage of labor force that's unemployed and actively seeking for work

price stability

average of prices for goods and services don't change or change very little

inflation

when overall prices go up

deflation

when overall prices go down

CPI (consumer price index)

measures inflation by determining the chagnge in prices of a hypothetical basekt of goods brought by a typical household

economic indicator

statistic that offers valuable info about the economy

logging indicators

statistics that report the status of the economy a few months in the past

leading indicators

predicts the status of a economy 3-12 months in the future

monetary policy

government exerts its power to regulate the money supply and level of interest rates

fiscal policy

uses its powers to tax and to spend

national debt

cumulative sum of deficits, money owned by the federal government

import

when countries buy goods and services from other countries

export

when countries sell their products ot other countries

absolute advantage

a nation has this when they are the only source of a product or can make more of product with using the same or fewer resources than other countries (climate and soil can change this for a nation)

comparative advantage

when a country can produce a product at a lower oppurtunity cost compared to another nation

oppurtunity costs

a country specializes in a product, it must sacrifice the production of another product

balance of trade

subtracting the value of its imports from the value of its exports

trade surplus

country sells/exports more products than it buys

trade deficit

country buys/imports more products that it sells (the US has this)

balance of payments

difference between the total flow of money coming into a country and the total of money going out

international licensing agreement

allows a foreign company to sell the products of a producer in exchange for royalty fees

• ex: mcdonald's changes their menu or products to fit the demand in a specific country

international franchise

a company grants a foreign company the rights to use its brand name and sells its products/services

international contract manufacturing/outsourcing

when compnaies manufacture their products in countries where labor costs are lower

strategic alliance

agreement between 2 companies (or a company and a nation) to pool resources to achieve business goals that benefit both partners

foreign direct investment

formal establishment of business operations on foreign soil

foreign subsidary

Independent company owned by a foreign firm (called its parent)

multinational corporation (MNC)

company that operates in many countries

joint venture

business arrangement in which 2 or more parties agree to pool their resources for the purpose of accomplishing a specific task

offshoring

a company sets up facilities in a foreign country that replaces US manufacturing facilities to produce goods that'll be sent back to the US for sale

challenges for successful international business deals are

• language

-time and sociability ("time is money" isn't universal)

• different communication styles (body language, voice pitch, greetings, etc)

• laws and regulations

• understanding local language and market

pros of protectionsim, tariffs, and subsidies

• protects specific industries

• protects new/struggling industries