Converting inputs (labor, materials, money, information, and so forth) into outputs (intangible or tangible).
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Marketing
Identify customers' needs (i.e. market research) and design products to meet those needs.
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Finance
Involves planning for, obtaining, and managing a company's funds.
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Management
Involves planning for, organizing, leading, and controlling a company's resources so that it can achieve its goals
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Accounting
Measure, summarize and communicate financial and managerial information and advise other managers on financial matters.
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Stakeholder
Those with a legitimate interest in the success or failure of the business and the policies it adopts.
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External Factors
Such as economy, government, consumer trends, technological developments, public pressure
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Economics
The study of the production, distribution, and consumption of goods and services.
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Factors of production
Resources used to produce something
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Resources
The inputs used to produce outputs (goods and services).
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Goods
Materials that satisfy human wants and provide utility.
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Services
Consumed at the point of sale (food, dentists, etc.)
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Planned System
The government exerts control over the allocation and distribution of all or some goods and services.
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Socialism
Industries that provide essential services, such as utilities, banking and health care, may be government owned.
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Free Market System (Capitalism)
The economic system in which most businesses are owned and operated by individuals.
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Private Property Rights
Business owners can expect to own their land, building, machines, etc., and keep the majority of their profits, except for taxes.
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Mixed Market Economy
Relies on both markets and the government to allocate resources.
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Privatization
Convert businesses previously owned by the government to private ownership.
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Nationalization
Taking control of industries, such as oil and media.
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Perfect Competition
Many small companies sell identical products. The price is determined by supply and demand.
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Four Types of Competition:
Perfect, Monopolistic, Oligopoly, Monopoly
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Supply
The quantity of a product that sellers are willing to sell at various prices.
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Demand
The quantity of a product that buyers are willing to purchase at various prices.
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Shortage
Don't produce enough of a product to satisfy demand.
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Surplus
Sellers supply more of a product than buyers are willing to purchase.
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Budget Surplus
If the Govt. takes in more money (thru taxes) than it spends on goods and services
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Budget Deficit
If the Govt. spends more than it takes in (thru taxes) from goods and services
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Monopoly Competition
There is only one seller in the market.
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Oligopoly Competition
Few Sellers, since cost to enter is HIGH and each seller supplies a large portion of all the products sold in the marketplace.
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Monopolistic Competition
Still have many sellers, don't sell identical products (differentiated AKA Coke & Pepsi: Both soda, not the same)
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Differentiated Products
Products that differ somewhat, or are perceived to differ, even though they serve a similar purpose
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Business Cycle
The economic ups and downs resulting from expansion and contraction. Usually three to five years.
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Consumer Price Index
Measure inflation rate by determining price changes of a hypothetical basket of goods, such as food, housing, clothing, etc. bought by a typical household.
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Inflation
When the overall price level goes up
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Deflation
When the overall price level goes down (rare)
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Financial Accountants
Prepare financial statements to help others, both inside and outside the organization, access the financial strength of the company.
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Managerial Accountants
Prepare information, such as reports on the cost of materials used in the production process, for internal use only.
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Economic System
The means by which a society (households, businesses and government) make decisions about allocating resources to produce products and about distributing this products.
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Leading economic indicators
Indicators that predict the status of the economy three to twelve months into the future
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Economic indicator
Statistic that provides valuable information about the economy
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Lagging economic indicators
Statistics that report the status of the economy a few months in the past
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Laissez-Faire
Leaving things alone.
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Two categories of Monopolies:
Natural and Legal
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Natural Monopoly
Include public utilities, such as electricity and gas stations. They are regulated and cannot control their own prices. Required to serve all customers
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Legal Monopoly
Arises when a company receives a patent giving it exclusive use of an invented product or process, usually for around 20 years
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GDP (Gross Domestic Product)
The market value of all goods and services produced by the economy in a given year, produced domestically (In the USA).
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Economic Goals:
growth, high employment, price stability
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Prosperity
The economy expands, unemployment is low, income rises, and consumers buy more products.
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Price Stability
When the average of the prices for goods
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and services either doesn't change
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or changes very little
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Recession
GDP decreases, unemployment rises, and people have less money to spend, business revenues decline.
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Globalization of Business
No national economy produces all the goods and services that its people need. Therefore, we have importers and exporters.
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Importing
Buy goods and services from other countries.
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Exporting
Sell products to other nations.
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Comparative Advantage
When a country can produce a product at a lower opportunity cost compared to another nation.
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Opportunity Cost
The products that a country must forego making in order to produce something else
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Absolute Advantage
It's the only source of a particular product or it can make more a product using fewer resources than other countries.
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Balance of Trade
Subtracting the value of a country's imports from the value of its exports
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Trade Surplus
The amount by which the value of a country's exports exceeds the cost of its imports.
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Trade Deficit
Buy far more goods from the rest of the world than we sell overseas (USA)
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Multinational Corporation
Corporate organization that owns or controls production of goods or services in two or more countries other than their home country
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Balance of Payments
The difference, over a period of time, between the total flow of money coming into a country and the total flow of money going out
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Licensing Agreements
Allows a company to sell the products of a producer or to use its intellectual property in exchange for what is known as royalty fees
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International Contract Manufacturing
Many U.S. companies manufacture their products in countries where labor costs are lower
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Franchises
A company grants a foreign company the right to use its brand name and to sell its products or services
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Joint Venture
Alliances where the partners fund a separate entity (perhaps a partnership or a corporation) to manage their joint operation
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Strategic Alliance
An agreement between 2 companies (or a company/nation) to pool resources to achieve business goals that benefit both partners
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Foreign Direct Investment (FDI)
Establishment of business operations on foreign soil - the building of factories, sales offices, etc to serve local markets in a nation other than the company's home country (most expensive)
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Foreign Subsidiary
An independent company owned by a foreign firm (called the parent). Gives the parent company full access to local markets but also exempts it from any laws or regulations that may hamper the activities of foreign firms
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Quotas
Imposes limits on the quantity of a good that can be imported over a period of time
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Embargo
An extreme form of quota, which, for economic or political reasons, bans the import or export of certain goods to or from a specific country
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International Monetary Fund
Loans money to countries with troubled economies
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Subsidies
The government payments that you give to the farmers to help offset some of their costs of production
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Protectionism
Protect domestic industries by reducing foreign competition
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Tariff
Taxes on imports
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Dumping
The practice of selling exported goods below the price that producers would normally charge in their home markets (and often the cost of producing the goods)
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North American Free Trade Association
Agreement among the governments of US, Canada and Mexico to open their borders to unrestricted trade
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Two ways to provide financial assistance to developing countries:
International Monetary Fund, World Bank
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World Bank
Important source of economic assistance for poor and developing countries
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Supply curve is positive or negative?
Positive
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Demand curve is positive or negative?
Negative
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Explain demand curve (P & Q)
As P goes up, Q goes down. As P goes down, Q goes up
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Explain supply curve (P & S)
As P goes up, S goes up. As P goes down, S goes down
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P is _ axis
Y
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Q is _ axis
X
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Determinants of Supply (cause shift to left, decreasing)
Input prices, technology, number of sellers, production expectation
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Determinants of Demand (cause shift to right, increasing)
Income, Prices of related goods, number of buyers, consumer expectation
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Culture Difference Examples
Language, concept of time, company structure, values, communication
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Two legal systems:
Accounting laws, corruption
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Equilibrium.
When supply and demand curves meet.
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Entreprenuer
Those who take the risks and reap the rewards associated with starting a new business enterprise
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Sole Proprietorship
A business owned by a single person.
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Advantages of Sole Proprietorship:
No paperwork, easy, full control, tax through taxation
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