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Value
The relationship between price of a good/service and benefits offered to customer.
Business
Any organization or activity that provides goods/services in effort to earn a profit.
Profit
Money a business earns in sales (revenue), minus expenses, such as cost of goods and the cost of salaries.
Loss
When a business incurs expenses that are greater than its revenue.
What must businesses do?
Seek opportunities and avoid pitfalls
Evaluate risks
Understand their market
Adhere to ethical practices
Meet their goal of generating profits while delivering value to customers
Entrepreneurs
People who risk their time, money, and other resources to start and manage a business.
Standard of living
The quality and quantity of goods and services available to a population
Quality of life
The overall sense of well-being experienced by either an individual or a group
Industrial Revolution
Mid-1700s to the mid-1800s, technological advances fueled rapid industrialization in America
Entrepreneurship Era
In the second half of the 1800s, large-scale entrepreneurs emerged and built business empires.
Production Era
In early 1900s businesses refined production process and created greater effciencies.
Marketing Era
After WWII, businesses began to develop brands to help consumers understand the differences around different products.
Relationship Era
Today, firms aim to build long-term relationships with customers.
Nonprofits
Businesslike establishments that employ people and produce goods and services with the fundamental goal of contributing to the community rather than generating financial gain. Health, human services, art, religion, culture.
Factors of production
Four fundamental elements, NATURAL RESOURCES, CAPITAL, HUMAN RESOURCES, ENTREPRENEURSHIP, that businesses need to achieve their objectives.
Natural resources
Inputs that offer value in their natural state
Capital
Synthetic resources that a business needs to produce goods or services
Human resources
Physical, intellectual, and creative contributions of everyone who works within an economy.
Entrepreneurship in FOP
Process of creating opportunities by harnessing other factors of production
BE: The economic environment
Gov. take active steps to reduce the risks of business, stabilize the economy, and induce growth. Affected by corruption, ethical lapses.
BE: The competitive environment
Companies develop long-term, mutually beneficial relationships with customers. Speed to market provides competitive advantage.
Speed to market
The rate at which a new product moves from conception to commercialization.
BE: The technological environment
Impact of digital technology has transformed businesses
Business technology
Any tools, especially computers, telecommunications, and other digital products, businesses use to become more efficient and effective.
E-commerce
Business transactions conducted online, typically via the internet.
BE: The social environment
Embodies the values, atitiudes, customs, and beliefs shared by groups of people
Demographics
The measurable characteristics of a population. These factors include population size, density, and traits of age, gender, and race.
Social trends
Diversity
Aging population
Rising worker expectations
Ethics and social responsibility
BE: The global environment
Technology and free trade have blurred lines between individual economies in the world.
Free Trade
An international economic and political movement designed to help goods and services flow more freely across international boundaries.
General Agreement on tarriffs and trade (GATT)
An international trade agreement that has taken bold steps to lower tariffs and promote free trade worldwide
The workforce advantage
Finding and holding best talent contributes to a firm’s competitive edge
Investing in worker satisfaction yields tangible bottom-line results.
Excellent product and superb top management also play major roles in employee satisfaction
Economy
A financial and social system of how resources flow through society, from production to distribution, to consumption
Economics
Study of the choices that people, companies, and governments make in allocating society’s resources
Macroeconomics
Study of a country’s overall economic dynamics: employment rate, gross domestic products, taxation policies.
Microeconomics
Study of small economic units such as individual consumers, families, and individual businesses.
Subprime mortgage loans
Granted to borrowers with low credit scores, and provided lenders higher return than many other investments.
Troubled Assets Relief Program (TARP)
Introduced as an economic bailout play.
Fiscal Policy
Government efforts to influence the economy through taxation and spending. Designed to encourage growth, boost employment, curb inflation.
Budget Surplus
Overage that occurs when revenue is higher than expenses over a given period of time.
Budget Deficit
Shortfall that occurs when expenses are higher than revenue over a given period of time.
Federal debt
Sum of all money that fed government has borrowed over the years and not yet repaid.
Monetary Policy
Fed Reserve decisions that shape the economy by influencing interest rates and the supply of money.
Federal Reserve
Bailing out shaky firms during financial crisis
Providing banking services for member banks and the fed government
Managing the US monetary policy.
Money Supply
Total amount of money within the overall economy
M1 Money Supply
All currency plus checking accounts and travelers checks. Easy
M2 Money Supply
All of M1 money s, plus most savings accounts, money market accounts, and certificates of deposit.
Open Market Operations
Fed reserve function of buying and selling government securities, which include treasury bonds, notes, and bills.
Discount Rate
The rate of interest that the fed reserve charges when if loans funds to banks.
Reserve requirement
A rule set by the fed, which specifies minimum amount of reserves (or funds) a bank must hold, expressed as a percentage of the bank’s deposits.
Free market system
An economic system where prices and production are determined by supply and demand, minimal government intervention.
Economic system
A structure system for allocating limited resources.
Capitalism
An economic system, also known as the private enterprise or free market system, based on private ownership, economic freedom, and fair competition.
Fundamental rights of capitalism
Right to own business and keep after-tax profits
Right to private property
Right to free choice
Right to fiar competition.
Pure competition
A market structure with many competitors selling virtually identical products. Barriers to entry low.
Monopolistic competition
A market structure with many competitors selling differentiated products, barriers to entry low.
Oligopoly
A market structure with only a handful of competitors selling products that can be similar or different. Barriers to entry high.
Monopoly
A market structure with one producer completely dominating the industry, leaving no room for any significant competitors. Barriers to entry virtually insurmountable.
Supply
The quantity of products that producers are willing to offer for sale at different market prices.
Supply curve
Graphed relationship between price and quantity from a supplier standpoint.
Demand
The quantity of products that consumers are willing to buy at different market prices.
Demand Curve
Graphed relationship between price and quantity from a customer standpoint.
Equilibrium Price
The constant interaction between the supply and demand helps determine the market price in any given category. Price point at which the quantity demanded of a product equals the quantity supplied.
Socialism
Eco. sys. based on principle that the gov. should own and operate key enterprises that directly affect public welfare.
Communism
Eco. and poli. sys. that calls for public ownership of virtually all enterprises, under the directions of a strong central government.
Mixed economies
Eco. that embody elements of both planned and market-based economic systems.
Privatization
The process of converting gov-owned businesses to private ownership.
GDP
Total value of all final goods and services produced within a nation’s physical boundaries over a given period of time. Meas. economic performance of indiv. nations, and compares growth among nations.
Unemployment rate
Percentage of people in the labor force over the age of 16 who do not have jobs and are actively seeking employment.
Contraction
Period of economic downturn, marked by rising unemployment and failing business production.
Recession
Economic downturn marked by a decrease in the GDP for two consecutive quarters.
Producer Price Index
A measure of inflation that evaluates the change over time in the prices that business pay each other for goods/services on a weighted average.
Productivity
The basic relationship between the production of goods and services (output) and the resources needed to produce them (input). Output/input=productivity
Key reasons for internation trade
Access to factors of prod, reduced risk, inflow of innovation.
Access to factors of production
IT helps even out some of the resource imbalances among nations.
Reduced Risk
GT reduces dependence on one economy, lowering the risk for multinational firms.
Inflow of innovation
IT is a source of new ideas for companies.
Opportunity cost
Opportunity of giving up the second-best choice when making a decision.
Absolute advantage
Benefit a country has in a given industry when it can produce more of a product than other nations using the same amount of resources.
Comparative advantage
Benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries.
Balance of trade
Basic measure of the difference in value between a nation’s exports and imports, inc. both goods and services.
Trade surplus
Overage that occurs when the total value of a nation’s exports is higher than the total value of its imports.
Trade deficit
Shortfall that occurs when the total value of a nation’s imports is higher than the total value of its exports.
Balance of payments surplus
Overage that occurs when more money flows into a nation that out of that nation.
Balance of payments deficit
Shortfall that occurs when more money flows out a nation than into that nation.
Exchange rate
Measurment of the value of one nation’s currency relative to the currency of other nations. When dollar is strong than euro, US firms and European exporters benefit.
Countertrade
IT that involves the barter of products for products rather than for currency.
Foreign outsourcing
Contracting with foreign suppliers to produce prod, usually at a fraction of the cost of domestic prod. (Contract manufacturing)
Foreign Licensing and Foreign Franchising
Next level of commitment to IM, a firm (franchisor) grants authority to a foreign firm (franchisee) for rights to produce and market its products/services in a specific geographic area. Allows expansion into foreign markets-little to no investment.
