Business Economics, Trade, Ethics & Ownership Key Terms

Specialization

The increased efficiency and productivity that results when workers focus on specific tasks

Domestic System

A method of manufacturing where work is done at home rather than in a central factory or shop

Command System

An economic system where the government owns and centrally controls the factors of production

Laissez Faire

An economic philosophy calling for minimal government interference in the free market

Gross Domestic Product (GDP)

The total dollar value of all final goods and services produced within a country in a given period

Inflation

An economic condition characterized by rising general price levels, which reduces the purchasing power of money

Deflation

A general decline in prices, often caused by a reduction in the supply of money and credit

Business Cycle

The recurring fluctuation of the economy between periods of expansion (growth) and contraction (recession)

Monetary Policy

Actions taken by the Federal Reserve to regulate the nation's money supply and interest rates

Fiscal Policy

Government efforts to influence the economy through taxation and public spending

Supply and Demand

The economic force that determines market price based on what producers supply and consumers demand

Equilibrium Price

The market price where the quantity of goods demanded equals the quantity supplied

Capitalism

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

Factors of Production

The basic economic resources used to create goods and services: land, labor, capital, and entrepreneurship

Opportunity Cost

The value of the next best alternative that is given up when making an economic choice

Absolute Advantage

The ability of a country to produce a specific product more efficiently than any other country

Comparative Advantage

The ability of a country to produce a specific product at a lower opportunity cost than another country

Balance of Trade

The total value of a country's exports minus the total value of its imports

Trade Deficit

A situation where a country imports more goods and services than it exports

Trade Surplus

A situation where a country exports more goods and services than it imports

Tariff

A tax levied by a government on imported goods

Quota

A government-imposed legal limit on the quantity of a specific product that can be imported

Embargo

A complete government-mandated ban on trade with a specific country or product

Licensing

A contractual agreement where one firm permits another to produce and market its product for a fee or royalty

Franchising

An agreement where a business sells the rights to use its name and business model to a local operator

Multinational Enterprise

A company that operates on a worldwide scale without significant ties to any one nation

Protectionism

The practice of shielding domestic industries from foreign competition through trade barriers

Joint Venture

A partnership formed by two or more business entities to undertake a specific economic activity together

Countertrade

A complex system of international bartering where goods and services are exchanged for other goods and services

Dumping

Selling products in a foreign market at prices below those charged in the home country or below cost

Ethics

The standards of moral behavior accepted by society as right versus wrong

Business Ethics

The application of moral standards to business situations

Bribes

Payments or gifts given to improperly influence a decision or action

Code of Ethics

A formal corporate document that outlines management's expectations and ethical standards for employees

Social Responsibility

A business's obligation to maximize its positive impact and minimize its negative impact on society

Consumerism

Activities undertaken by individuals and groups to protect consumer rights and safety

Economic Model of Social Responsibility

The view that a business's sole social obligation is to maximize profits for shareholders

Socio-Economic Model of Social Responsibility

The view that businesses have an expanded duty to help society and improve overall social well-being

Whistleblowing

An employee's disclosure to government authorities or the media of illegal or unethical practices within a firm

Corporate Philanthropy

Charitable donations and supportive actions made by businesses to non-profit organizations and communities

Green Marketing

Developing and promoting products that are environmentally safe and ecologically sustainable

Conflict of Interest

A situation where a person's private interests interfere with their professional duties

Ethics Officer

A corporate executive appointed to guide ethical decisions, oversee compliance, and train employees

Sustainability

The capacity to endure and operate in a manner that does not deplete resources for future generations

Fair Trade

A social movement aiming to help producers in developing countries achieve better trading conditions and fair prices

Sole Proprietorship

A business owned and operated by a single individual with unlimited liability

Partnership

A legal form of business owned by two or more people

General Partner

A partner who assumes full, unlimited personal liability for the debts and obligations of a partnership

Limited Partner

A partner who invests money in a business but has liability limited only to their financial investment

Articles of Partnership

A legal document that outlines the financial and managerial terms of a partnership

Corporation

A legal entity separate from its owners, with the power to own property, enter contracts, and sue or be sued

Stockholder

An owner of shares of stock in a corporation

Board of Directors

A group elected by stockholders to oversee major company policies, strategies, and top management

Closed Corporation

A corporation whose stock is owned by a select few people and is not traded publicly

Open Corporation

A corporation whose stock is bought and sold on public stock exchanges

S-Corporation

A corporation taxed as a partnership, limited to 100 U.S. resident shareholders, avoiding double taxation

Limited Liability Company (LLC)

A business structure that combines corporate limited liability with partnership-style tax benefits

Not-for-Profit Corporation

A corporation organized to provide social, educational, or charitable services rather than financial profit

Limited Liability

A legal status ensuring owners are only liable for corporate debts up to the amount of their personal investment

Double Taxation

A corporate disadvantage where profits are taxed at the corporate level and then taxed again as personal dividend income

Horizontal Merger

A merger between two companies in the same industry making similar products

Vertical Merger

A merger between companies at different stages of production in the same industry

Conglomerate Merger

A merger between companies in completely unrelated industries

Acquisition

The purchase of one company by another, usually through buying a controlling interest in its stock

Proxy

A legal authorization giving a shareholder's voting rights to another party

Entrepreneurship

The process of accepting the risks of starting and running a business

Small Business

A business independently owned and operated, not dominant in its field, and meeting size thresholds

Business Plan

A detailed written document describing a business's nature, target market, strategy, and financials

Venture Capitalists

Investors or firms that provide capital to high-potential new businesses in exchange for equity

Angel Investors

Wealthy private individuals who invest their own money in early-stage startups

Small Business Administration (SBA)

A U.S. government agency that advises small businesses and guarantees loans

Intrapreneurship

The act of behaving like an entrepreneur while working within a large organization

Microbusiness

An extremely small business enterprise that typically operates with five or fewer employees

Business Incubator

A facility that offers low-cost workspace, shared equipment, and advisory services to startup companies

Crowdfunding

Raising small amounts of capital from a large number of individuals, typically via internet platforms

Score Program

An SBA-sponsored organization providing free counseling and mentorship from retired executives

Franchise Agreement

A written contract specifying the legal obligations and responsibilities of the franchisor and franchisee

Franchisee

A person or group that buys the right to operate a location under a franchisor's brand and business model

Franchisor

A company that grants the rights to use its trade name, brand, and operating system to external operators

Equity Financing

Funds raised through selling ownership shares in the business to investors

Management

The process used to accomplish organizational goals through planning, organizing, leading, and controlling

Planning

The management function of anticipating trends and determining strategies to achieve goals

Organizing

The management function of designing structure and aligning systems and resources

Leading

The management function of creating a vision, guiding, training, and motivating employees

Controlling

The management function of establishing performance standards and taking corrective action

Vision

An encompassing explanation of why an organization exists and where it aims to go

Mission Statement

An outline of an organization's fundamental purposes, core goals, and customer offerings

SWOT Analysis

A planning tool used to evaluate an organization's Strengths, Weaknesses, Opportunities, and Threats

Autocratic Leadership

A leadership style where managers make decisions without consulting employees

Participative Leadership

A leadership style where managers and employees work collaboratively to make decisions

Free-Rein Leadership

A leadership style where managers set objectives and employees are free to accomplish them as they see fit

Strategic Planning

Long-term planning conducted by top executives to determine major goals and resource strategies

Tactical Planning

Short-range planning conducted by middle managers to implement specific aspects of the strategic plan

Operational Planning

Setting work standards and detailed operational schedules for daily/weekly departmental tasks

Contingency Planning

Developing alternative plans to be executed if primary strategies fail or unexpected events occur

Technical Skills

The ability to perform tasks within a specific discipline or professional department

Human Relations Skills

The ability to communicate, motivate, collaborate, and build strong relationships with people

Conceptual Skills

The mental capacity to view the organization as a whole and grasp interrelationships among parts

Organization Chart

A visual device showing reporting relationships and division of work within a firm

Line Organization

An organization with direct, two-way lines of authority running from top to bottom