Business Midterm

Profit-Making Business

motive is making a profit (earning more revenue than expenses)

non-profit organization

A business whose goal is to provide a service rather than to make a profit, such as the American Red Cross.

for-profit social enterprise

A business that, beyond the profit motive, has a social mission built into its business model.

Socialism

A system in which society, usually in the form of the government, owns and controls the means of production.

Capitalism

An economic system based on private ownership of capital

mixed market economy

economic system that combines both private ownership and government ownership of the means of production

perfect competition

exists when there are many consumers buying a standardized product from numerous small businesses.

demand curve

a graph of the relationship between the price of a good and the quantity demanded

supply curve

a curve that shows the relationship between the price of a product and the quantity of the product supplied.

equilibrium price

the price that balances quantity supplied and quantity demanded

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

Oligopoly

A market structure in which a few large firms dominate a market

Monopoly

A market in which there are many buyers but only one seller.

natural monopoly

a market that runs most efficiently when one large firm supplies all of the output without competition

legal monopoly

monopoly in which one seller supplies a product or technology to which it holds a patent.

GDP

Gross Domestic Product- the total market value of all final goods and services produced annually in an economy

Recession

A slowdown in a nation's economy

Depression

A long-term economic state characterized by unemployment and low prices and low levels of trade and investment

Inflation

A general and progressive increase in prices

Deflation

A situation in which prices are declining

CPI

(consumer price index) a measure of the overall cost of the goods and services bought by a typical consumer

Lagging Economic Indicators

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

leading economic indicators

predict the status of the economy three to twelve months in the future

monetary policy

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

fiscal policy

the government uses its power to tax and to spend.

absolute advantage

the ability to produce a good using fewer inputs than another producer

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

opportunity cost

whatever must be given up to obtain some item

balance of trade

the difference between a country's total exports and total imports

trade surplus

when a country exports more than it imports

trade deficit

situation in which a country imports more than it exports

balance of payments

the difference between the flow of money into and out of a country

International Licensing Agreement

Agreement that allows a foreign company to sell a domestic company's products or use its intellectual property in exchange for royalty fees.

International Franchise Agreement

a company (the franchiser) grants a foreign company (the franchisee) the right to use its brand name and to sell its products or services

International contract manufacturing

Practice by which a company produces goods through an independent contractor in a foreign country.

Strategic alliance

A long-term partnership between two or more companies established to help each company build competitive market advantages.

Joint ventures

alliances where the partners fund a separate entity (partnership or corporation) to manage their joint operations

Foreign direct investment

Investment made by a foreign company in the economy of another country.

offshoring

Moving operations from the country where a company is headquartered to a country where pay rates are lower but the necessary skills are available.

foregin subsidiary

a company owned in a foreign country by another company, called the parent company

multinational corporation

An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management

high-context culture

cultures in which personal and family connects have an effect on most interactions

low-context culture

culture where personal life isn't discussed

exchange rate

the price of one currency in terms of another

Foreign Corrupt Practices Act

U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions.

subsides

government payments given to certain industries to help offset some of their costs

trade controls

Government policies that restrict free trade.

protecionism

Trade that enables quotas and tariffs to protect one domestic economy

Tariffs

Taxes on imported goods

Quota

A limit placed on the quantities of a product that can be imported

Embargo

A ban on trade

Dumping

Selling goods in another country below market prices

General Agreement on Tariffs and Trade (GATT)

International trade agreement that encourages free trade by regulating and reducing tariffs and provides a forum for resolving trade disputes.

World Trade Organization (WTO)

International organization that monitors trade policies and whose members work together to enforce rules of trade and resolve trade disputes.

International Monetary Funds (IMF)

International organization sets up to lend money to countries with troubled economics

World Bank

an international bank that offers low-interest loans, advice, and information to developing nations

trading bloc

A group of neighboring countries that promote trade with each other and erect barriers to limit trade with other blocs

USA-Mexico-Canada Agreemnet

agreement among the governments of the USA, Mexico, Canada to open their borders to unrestricted trade

European Union

association of European countries that joined together to eliminate trade barriers among themselves

Entrepreneur

A person who organizes, manages, and takes on the risks of a business.

Small Business Administration (SBA)

A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans.

small business

one that is independently owned and operated for profit and is not dominant in its field

good producing sector

all businesses that produce tangible goods

service-producing sector

all businesses that provide services but don't make tangible goods

business plan

a formal written document that describes the nature of a business and how it will operate

Franchise

A business established or operated under an authorization to sell or distribute a company's goods or services in a particular area

Sole Proprietorship

A business owned by one person

unlimited liability

the responsibility of business owners for all of the debts of the business

partnership

a business owned by two or more people

limited partnership

A partnership with one or more general partners and one or more limited partners.

Corporation

legal entity that is entirely separate form the parties who own it and that is responsible for its own debts

shareholder

A person who invests in a corporation by buying stock and is a partial owner

stock

A share of ownership in a corporation.

board of directors

a group of persons elected by the stockholders to manage a corporation

dividends

earnings distributed to stockholders

limited liability

Legal condition under which an owner or investor can't lose more than the amount invested.

privately held corporation

Corporation that restricts the transferability of its stock.

public corporation

a corporation whose stock anyone may buy, sell, or trade

manager

a person who has the upper hand; a person who is in charge of someone or something

Managemnet

The process of accomplishing the goals of an organization through the effective use of people and other resources.

role of planning

planning, organizing, directing, controlling

Strategic Planning

Process of establishing an overall plan or course of action for an organization.

SWOT analysis

strengths, weaknesses, opportunities, threats

objectives

Specific, short-term statements detailing how to achieve the organization's goals.

tactical plans

short-range plans designed to implement the activities and objectives specified in the strategic plan

operational plans

detailed actions steps to be taken by individuals or groups to implement tactical plans

contingency planning

process of identifying sources of action to e taken in the event that a business is adversely affected by a change

crisis management

organization's methods for dealing with emergencies

Top Managers

top of the management hierarchy who are responsible for the health and performance of the organization

Middle Managers

implement the policies and plans of the top managers above them and supervise and coordinate the activities of the first-line managers below them

First Line Manager

a manager who coordinates and supervises the activities of operating employees

organization structure

a framework that enables managers to divide responsibilities, ensure employee accountability, and distribute decision-making authority

Reconstructing

thinking about a problem in a new way in order to solve it

Specialization

A focus on a particular activity or area of study

Departmentalization

the grouping of jobs into working units usually called departments, units, groups, or divisions

Functional Organization

An organizational structure in which staff is grouped by areas of specialization and the project manager has limited authority to assign work and apply resources.

divisional organization

Form of organization that groups people into several smaller, self-contained units, or divisions, which are accountable for their own performance.

customer division

Organizational structure that groups employees into customer-based business segments.

product division

Organizational structure made up of divisions based on product lines.

geographical division

Organizational structure that groups people into divisions based on location.