Mega Version - FBLA Introduction to Business Procedures

Business

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

What are the four resources a business needs in order to be successful?

Human resources, material resources, informational resources, and financial resources.

What do manufacturing businesses do?

They process various materials.

What do service businesses do?

They provide services.

(Used as it is purchased)

(Ex: Haircuts, legal advice, tax preparation, etc.)

What do marketing intermediaries do?

Buy products and resell them (retailers).

Intermediary

Go-between; mediator.

Are businesses that understand customer needs, and work to satisfy those needs successful?

Yes

Profit

The remains after all business expenses have been deducted from sales revenue.

What is the formula for profit?

Sales revenue - expenses

Economics

The study of how wealth is created and distributed.

Microeconomics

The study of the decisions made by individuals and businesses.

Macroeconomics

The study on how the aggregate economy behaves.

(Ex: Inflation, price levels, rate of growth, national income, GDP, and changes in unemployment.)

Economy

The system through which a society creates and distributes wealth.

Capitalism

A system in which individuals own and operate the majority of businesses that provide goods and services.

Socialism

A system in which the government owns and controls the means of production.

Communism

A system where factors of production are owned and directed by the state.

What type of economy is the U.S.?

Capitalist

Why is the U.S. a mixed economy?

They include both capitalism and socialism.

What do businesses purchase after they sell their goods and services?

Factors of production.

Factors of Production

Land, labor, and capital.

What does the government do in exchange for taxes?

They provide public services not provided by businesses.

(Ex: Law Enforcement, Public Education)

Command Economy

An economic system in which the government controls a country's economy.

What type of economies are in command economy?

Socialism and communism.

Competition

Competing on sales for potential customers.

Pure Competition

Large number of small that businesses that sell the same type of products with the same characteristics.

What are some characteristics of a pure competition?

- It is easy to enter leave the market

- All prices are basically the same

Supply

Quantity of a product producers are willing to sell.

Demand

Quantity of a product buyers are willing to purchase.

Market Price (equilibrium)

The price at which the amount that buyers wish to buy equals the amount that sellers wish to sell.

Monopoly Competition

A one seller market.

What are some characteristics of a monopoly competition?

- No competition

- Great degree of power

- Power of pricing

- Hard to enter and leave the mark

Monopolistic Competition

A large number of small businesses that sell similar products.

What are some characteristics of a monopolistic competition?

- Similar products, different characteristics.

- Good degree of information (not perfect though).

- Most common type of market.

- Easy to enter and leave the market.

Oligopoly

A few large business that sell identical or very similar products.

(Ex: Automobiles, oil industries, tire companies, etc.)

What are some characteristics of a oligopoly competition?

- Sizable investment needed to enter.

- Compete on price and characteristics.

Barter System

A system in which people buy and sell goods by exchanging one item for another; no money is involved.

Domestic System

The manufacture of goods in the household setting; a production system that gave way to the factory system.

Factory System

A method of production that brought many workers and machines together into one place.

Specialization

In production, a system in which each worker performs a single part of an entire process.

Service Economy

An economy in which more effort is devoted to the production of services than to the production of goods.

Ethics

A system of moral principles.

Business Ethics

The application of moral standards to business situations.

Fairness and Honesty

Business people are expected to refrain from knowingly deceiving, misrepresenting, or intimidating others.

Organizational Relationships

Business people should put the welfare of others and the company above their own welfare.

Conflict of Interest

Situation in which an employee must choose between a business's welfare and personal gain.

Communications

Business communications that are false, misleading, or deceptive are both illegal and unethical.

What are some examples of external influence that encourage ethical behavior?

- Governmental

- Trade Association

What are some examples of internal influence that encourage ethical behavior?

- Code of Ethics

- Employee Training

Whistle-Blowing

Informing the press or government officials about unethical practices within one's organization.

Code of Ethics

A set of guidelines for maintaining ethics in the workplace.

Social Responsibility

The duty to do what is best for the good of society.

Note: Social responsibility costs money, but is also good for business.

Caveat Emptor

"Let the buyer beware."

Why do people think businesses should engage in social responsibility?

- Business is a part of society. Therefore, they cannot ignore social issues.

- Businesses have the resources to tackle social issues.

- Businesses can create a stable environment for long-term profitability.

- It prevents increased government intervention.

Why don't people think businesses should engage in social responsibility?

- The focus should be on providing a return on investments.

- Business resources should be used to maximize profits, not solve social issues.

- Problems affect society in general, so businesses should not be expected to solve them.

- Social issues are the responsibility of government officials.

The Right to Safety

A product must be safe and should warn us of dangers.

The Right to be Informed

Consumers have access to complete information about a product before they buy it.

The Right to Choose

Consumers should have access to a variety of products and services at competitive prices.

The Right to be Heard

Consumers have the right to complain about a product and to be listened to.

The Right to Consumer Education

The right to be fully informed about their rights as consumers.

The Right to Courteous Service

Consumers are entitled to convenience, courtesy, and responsiveness from manufacturers and sellers.

Minorities

A group of people with physical or cultural traits different from those of the dominant group in the society.

Affirmative Action Programs (AAP)

A program that requires companies doing business with the federal government hire minority, female, and handicapped employees.

Pollution

Contamination of Earth's land, water, and air.

Environmental Protection Agency (EPA)

A federal agency that enforces laws affecting human and environmental health.

What are some land pollution problems?

- How to restore contaminated land.

- How to protect unpolluted land.

- Shortage of landfill space for waste disposal.

- Incinerators help solve the landfill problem, but produce toxic ash.

- Other causes include strip-mining, cutting of forests, and using agriculture land for housing and industry.

Incinerators

Facilities that burn trash at high temperatures.

What is a noise pollution problem?

Excessive noise due to traffic, aircraft, and machinery.

What are some water pollution problems?

- High levels of pollutants still remain.

- Cleanup is complicated and costly.

- Acid rain from sulfur emissions of industrial smokestacks.

What are some air pollution problems?

- Aviation emissions of carbon dioxide are contributing to global warming.

- Weather and geography contribute to air pollution.

How do you develop a program for social responsibility?

1. Secure the commitment of top executives.

2. Plan the program.

3. Appoint a top-level executive as director to implement the plan.

4. Prepare a social audit.

Social Audit

A report of what the organization has done and is doing with regard to social issues.

International Business

A business that buys, sells, and trades across national boundaries.

Absolute Advantage

The ability to produce something more efficiently than any other nation.

Comparative Advantage

The ability to produce a good at a lower cost than another nation.

Exporting

Selling or shipping materials to other nations.

Importing

Taking in materials into one's own country.

Balance of Trade

The difference between a country's total exports and total imports.

NOTE: The U.S. has a HORRIBLE balance of trade.

Is it good or bad if exports are greater than imports?

Good

Is it good or bad if imports are greater than exports?

Bad

Tariff

Tax on a foreign product entering the country.

Revenue Tariffs

Generate income for the government.

Ex: Barbados has no rice growers. So, they have a tariff of 40% on rice imported from South Korea.

Protective Tariffs

Taxes placed on foreign goods, making them less attractive to consumers and thus protecting domestic industries from foreign competition

Dumping

Selling large quantities of goods in another country below prices in the home market.

Nontariff Barriers

Nontax policies that governments enact to discourage imports.

Import Quota

A nontariff barrier that limits the amount of a good that can be imported.

Embargo

A nontariff barrier that halts trading with a particular nation or in a particular product.

Foreign Exchange Control

A nontariff barrier that restricts foreign currency.

Currency Devaluation

A nontariff barrier that lowers the value of a nation's currency relative to the currencies of other nations.

Bureaucratic Red Tape

The overwhelming amount of government rules, regulations, and paperwork.

Steps in Entering International Markets:

1. Find product

2. Find foreign markets for the products

3. Find out how to sell in each priority market

4. Set export prices and payment terms, methods, and techniques

5. Estimate resource requirements and returns.

6. Establish overseas distribution network.

7. Determine shipping, traffic, and documentation procedures and requirements.

8. Promote and sell (of course get paid).

9. Continuously analyze current marketing, economic, and political situations.

Licensing

Agreement where one firm permits another to produce & market its product and use its brand name in return for payment.

What are the advantages for licensing?

Expansion with little investment.

What are the disadvantages for licensing?

- Image impacted if standards not upheld.

- Original producer does not gain foreign marketing experience.

Joint Venture

Partnership set up for a specific purpose for a short period of time.

NOTE: A 3rd party is created.

What are the advantages of a joint venture?

- Immediate market knowledge.

- Reduced risk.

- Control over the product.

What are the disadvantages of a joint venture?

- Complexity of agreements.

- High level of commitment required of all parties.

Strategic Alliance

An alliance formed as a part of a plan with important aims.

NOTE: This does not create a 3rd party.

Trading Companies

Firms that develop international trade and serve as intermediaries between international businesses.

NOTE: Take title to products and move them from one country to another. Or, they just act as a trader.

Totally Owned Facilities

Firm's own production and marketing facilities in one or more foreign nations.

What is the benefit of having a totally owned facility?

There is a complete control over operations.