The Business Environment

Business

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

Goods

Tangible products.

Services

Intangible products.

Entrepreneur

A person who risks time and money to start and manage a business.

Revenue

Represents the funds an enterprise receives in exchange for its goods or services.

Profit

What's left (hopefully) after all the bills are paid or the cost of doing business.

Stakeholders

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

Functional Areas of Business

Introduction to the various activities in which businesspeople engage.

Management

Managers are responsible for the work performance of other people.

Operations Manager

The person who designs and oversees the transformation of resources into goods or services.

Marketing

Everything that a company does to identify customers' needs and design products to meet those needs.

Four P's of Marketing

Price, Product, Promotion, Place.

Accounting

Managers need accurate, relevant and timely financial information, which is provided by accountants.

Financial Accountants

Prepare financial statements to help users assess the financial strength of the company.

Managerial Accountants

Prepare information for internal use only, such as reports on the cost of materials used in the production process.

Finance

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

Financial Managers

Address questions such as how much money the company needs.

Types of Businesses

Includes hotels, airlines, law firms, hospitals, and various products like Mac, iPhone, iPod, iPad, and Apple Watch.

Not-for-Profit (Nonprofit)

Organizations like United Way of America and Habitat for Humanity that provide services without profit motive.

Car Dealership

Sells goods (cars) and provides services (automobile repairs).

Colleges and Universities

Provide educational services.

Globalization

The spread of products, technology, information, and jobs across national borders and cultures, fostering interdependence of nations through free trade.

Absolute Advantage

A nation has an absolute advantage if it is the only source of a particular product or can produce more of a product using fewer resources than other countries.

Comparative Advantage

Exists when a country can produce a product at a lower opportunity cost compared to another nation.

Opportunity Cost

The products that a country must forego making in order to produce something else, often associated with specialization.

Licensing Agreements

An international agreement allowing a foreign company (the licensee) to sell the products of a producer (the licensor) or to use its intellectual property in exchange for royalty fees.

Franchises

An agreement where a company (the franchiser) grants a foreign company (the franchisee) the right to use its brand name and sell its products or services, with the franchisee responsible for operations.

Market Growth

Strategies aimed at expanding revenue by reaching new global markets.

Balance Payments

A financial statement that summarizes a country's transactions with the rest of the world, including trade, investment, and transfer payments.

Trade

The exchange of goods and services between countries, critical for economies.

Consumer

An individual who purchases goods and services for personal use.

International student

A student who is studying in a country other than their home country.

Future manager

An individual preparing for a managerial role, potentially dealing with international colleagues, suppliers, and customers.

Audit

A systematic examination of financial records to ensure accuracy and compliance.

Planning

The process of setting goals and outlining steps to achieve them in a business context.

Analyst

A professional who evaluates data and trends to inform business decisions.

Budget

A financial plan that outlines expected revenues and expenditures over a specific period.

Consultant

An expert who provides professional advice in a particular area of business.

Research and Development

The activities associated with the innovation and improvement of products and services.

Plant and Equipment Investments

Financial expenditures made by a company to acquire or upgrade physical assets used in production.

Revenue Expansion

The process of increasing the income generated from business activities.

Licensing

Sign a contract with a company in another country to give them the right to manufacture your product.

Franchising

Most often used in restaurants and hotels, permits the franchisee to use brand name and other aspects of the business model.

Pros of Franchising

Expertise, Marketing, and sometimes financial help from the parent; nationally known name, but you own the outlet and therefore the profits.

Cons of Franchising

Big upfront investment in time and money; share profit through royalties; mistakes of others may impact the whole chain.

Contract Manufacturing

A form of outsourcing where a U.S. company contracts with a local company in a foreign country to manufacture one of its products.

Joint Venture

Typically results in the formation of a new company jointly owned by the companies involved.

Strategic Alliance

Involves two companies pooling limited resources to work on a given opportunity.

Foreign Direct Investment (FDI)

The formal establishment of business operations on foreign soil—the building of factories, sales offices, and distribution networks to serve local markets.

Offshoring

Occurs when facilities set up in the foreign country replace U.S. manufacturing facilities and are used to produce goods that will be sent back to the United States for sale.

Outsourcing

Obtaining any product or service from an outside party rather than making the product or performing the service internally.

Trade Controls

Includes subsidies, tariffs, quotas, embargoes, and dumping.

Subsidies

Government support that helps a certain group or product more cheaply by giving them financial help to defray their costs.

Quotas

Imposes limits on the quantity of a good that can be imported over a period of time.

Embargo

An extreme form of quota that bans the import or export of certain goods to or from a specific country.

General Agreement on Tariffs and Trade (GATT)

An international treaty aimed at reducing trade barriers.

World Trade Organization (WTO)

An organization that regulates international trade.

International Monetary Fund (IMF)

Provides financial support for emerging economies.

World Bank

Provides financial and technical assistance to developing countries.

North American Free Trade Association (NAFTA)

A trading bloc that promotes free trade between the U.S., Canada, and Mexico.

European Union (EU)

A political and economic union of member states located primarily in Europe.