Economics, Management, and Organizational Structures: Key Concepts and Frameworks

Define money

Anything people generally accept as payment for goods and services.

How does a barter system work?

Trading goods/services directly without money; still exists today in limited forms (e.g., informal exchanges).

Ramifications of a falling dollar

The dollar buys fewer goods/services, reducing purchasing power.

Role of the Federal Reserve

Central bank of the U.S. that stabilizes the monetary/financial system.

Overarching goals of the Federal Reserve

Control inflation, stabilize prices, promote employment, regulate financial institutions.

Discount rate

Rate the Fed charges banks. Higher rate = higher consumer loan costs; lower rate = lower loan costs.

Purpose of FDIC

Insures bank deposits up to $250,000.

Role of the World Bank

Lends money to developing nations to improve productivity and living standards.

Role of the IMF

Stabilizes exchange rates and supports international monetary cooperation.

What is Bitcoin?

A decentralized digital currency with no central authority; difficult to value.

Key steps in structuring an organization

Division of labor, teams, resources, tasks, procedures, adjustments.

Fayol: Unity of command

Each worker reports to one manager.

Fayol: Unity of direction

Align goals and strategies across the organization.

Fayol: Hierarchy of authority

A clear chain of command.

Fayol: Orderliness

Proper arrangement of people, places, and things.

Fayol: Division of labor

Specialization improves efficiency.

Fayol: Subordination of individual interests

Organization's goals > individual goals.

Fayol: Authority and responsibility

Managers must have authority to give orders.

Fayol: Centralization vs decentralization

Balance depends on the situation.

Fayol: Communication channels

Clear formal lines of communication.

Fayol: Fair compensation

Employees should be paid fairly.

Fayol: Equity

Fair treatment leads to loyalty and productivity.

Fayol: Esprit de corps

Spirit of pride, unity, and enthusiasm.

Weber's philosophy of management

Hierarchical structure, strict rules, impersonal, strong supervision.

Purpose of an organization chart

Shows hierarchy, roles, authority, and communication lines.

Centralized decision making

Decisions made at top; pros: consistency; cons: slow, less local knowledge.

Decentralized decision making

Decisions made lower; pros: flexible; cons: inconsistent decisions.

Span of control

Number of subordinates a manager supervises.

Trend in span of control

Wider spans, fewer middle managers.

Tall organization

Many layers; centralized; bureaucratic.

Flat organization

Few layers; decentralized; faster communication.

Departmentalization

Grouping jobs by product, geography, process, function, or customer.

Line positions

Directly involved in core business operations.

Staff positions

Provide support/advice to line positions.

Matrix organization

Employees report to two managers (functional + project).

Advantages of matrix structure

Flexibility, teamwork, creative solutions, efficient use of resources.

Disadvantages of matrix structure

Costly, confusing loyalties, requires good interpersonal skills.

Virtual corporation

Networked companies that share skills/resources without being bound by traditional structures.

Benchmarking

Comparing your practices against industry leaders.

Core competencies

Areas a company performs best.

Most likely functions to outsource

Weaknesses or non-core functions.

Least likely functions to outsource

Core strengths.

Clockspeed

Speed of change in external environment and ability of an organization to adapt.

Types of supply chain flows

Physical, financial, information.

Goals of supply chains

Efficiency (low cost) and effectiveness (high service).

Objectives of process management

Quality, process design, capacity, inventory.

Characteristics of lean manufacturing

Reduce cost, eliminate waste, reduce redundancy.

Mass customization

Producing standardized components then customizing for customers.

Operations as a transformation system

Inputs → converted into outputs (goods/services).

Products vs services

Products = tangible & storable; services = intangible & consumed immediately.

Value frontier

Curve showing tradeoff between value (willingness to pay) and cost.

Value - Cost = Profit

More value created → higher profit margin & competitive advantage.

Porter's Value Chain

Primary (operations, marketing, supply chain) + support activities (finance, IT).

How firms create competitive advantage

Lower cost, higher quality, or both.

Is competitive advantage sustainable?

No—competitors imitate quickly.

Definition of marketing

Promoting, distributing, and selling products/services using the 4Ps.

Evolution of marketing

Production → Selling → Marketing → Customer Relationship Era.

Marketing concept

Consumer orientation, system integration, profit orientation.

Four Ps of marketing

Product, Price, Place, Promotion.

Brand name

Word, symbol, logo, or sound identifying a product.

Intermediaries

Middlemen that move goods efficiently; add value via utility.

Promotion mix

Advertising, personal selling, sales promotion, publicity, direct marketing.

Primary vs secondary data

Primary = collected firsthand; secondary = existing data.

Marketing environment

Social, economic, technological, competitive, regulatory factors.

Environmental scanning

Monitoring the environment to detect threats/opportunities.

Segmentation

Dividing the market into groups.

Targeting

Selecting which segments to serve.

Segmentation variables

Demographic, geographic, psychographic, benefit, usage.

Consumer vs industrial markets

Consumers = individuals; industrial = businesses purchasing inputs.

Differentiation

Making a product distinct to reduce price elasticity.

Brand equity

Value added by brand recognition.

IMC

Integrated Marketing Communications—consistent message across channels.

Personal selling

Direct interaction between salespeople and customers.

Public relations

Managing the public image of an organization.

Examples of sales promotion

Coupons, discounts, BOGO, contests, promo pricing.

Word-of-mouth promotion

Consumer sharing information; effective due to trust.

Quality design vs conformance quality

Design = planning; conformance = meeting the plan.

Evolution of quality

Inspection → statistical control → TQM → continuous improvement → customer focus.

Product quality dimensions

Performance, durability, features, reliability, etc.

Service quality dimensions

Reliability, responsiveness, tangibles, empathy, assurance.

Availability, reliability, maintainability

Three abilities affecting quality performance.

Objective vs subjective quality

Products = objective; services = subjective.

Costs of quality

Prevention, appraisal, internal failure, external failure.

Highest cost of quality

External failure (e.g., recalls, complaints).

Free trade

Unrestricted trade allowing nations to exploit comparative advantage.

Advantages of free trade

Lower prices, more choices, higher efficiency.

Disadvantages of free trade

Job loss in some sectors, dependency, competitive pressure.

Balance of trade

Exports vs imports.

Trade surplus

Exports > imports.

Trade deficit

Exports < imports.

Foreign Direct Investment (FDI)

Buying permanent assets/businesses in another country.

Risks of FDI

Political risk, currency risk, cultural issues.

Trade protectionism

Government actions to limit imports.

Pros of protectionism

Protects local jobs/industries.

Cons of protectionism

Higher prices, inefficiency, violates comparative advantage.

Tariffs, embargoes, quotas

Tools used to restrict trade.

Purpose of GATT and WTO

Reduce trade barriers and resolve trade disputes.

Marketing intermediaries

Partners performing outsourced functions to add value.

Reasons for outsourcing

Cost, expertise, efficiency; risks = dependency.

Channel of distribution

Path a product follows from producer to consumer.